Edgar Filing: HOMECOM COMMUNICATIONS INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

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(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 0-29204

HomeCom Communications, Inc.
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(Exact name of registrant specified in its charter)

Delaware 58-2153309
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Building 12, Suite 110
3495 Piedmont Road
Atlanta, Georgia 30305
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(Address of principal executive offices and zip code)

Registrant's Telephone Number, Including Area Code:
(404) 237-4646

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of exchange on which registered
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Common Stock, par value $0.0001 per share OTC-BB

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X / No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / X /

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes / / No /X/

The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant, based upon the average of the closing bid
and ask quotations for the Common Stock on March 26, 2004 as reported on the OTC
Bulletin Board, was approximately $931,000. The shares of Common Stock held by
each officer and director and by each person known to us who owns 5% or more of
the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

As of March 26, 2004, Registrant had outstanding 14,999,157 shares of
Common Stock.

TABLE OF CONTENTS

Item No. Description Page No.
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PART I
1. BUSINESS.................................................... 1
2. PROPERTIES.................................................. 14
3. LEGAL PROCEEDINGS........................................... 15
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 15

PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS......................................... 16
6. SELECTED FINANCIAL DATA..................................... 16
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 17
8. FINANCIAL STATEMENTS........................................ 23
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 42
9A. CONTROLS AND PROCEDURES..................................... 42

PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 43
11. EXECUTIVE COMPENSATION...................................... 46
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 48
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 50
14. PRINCIPAL ACCOUNTING FEES AND SERVICES...................... 51

PART IV
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K......................................................... 52
SIGNATURES.................................................. 59

iii

PART I

Item 1. BUSINESS

FORWARD-LOOKING STATEMENTS

This Form 10-K contains certain statements, such as statements regarding
HomeCom's future plans, that constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1934, as amended, including certain
statements contained under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" concerning our expectations, beliefs, or
strategies regarding increased future revenues and operations, and certain
statements contained under "Business" concerning our future business plans. When
used in this Form 10-K, the words "expects", "believes," "intends,"
"anticipates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected or implied
by such forward-looking statements. Such risks and uncertainties include things
such as our ability to obtain additional financing, the commercial viability of
the technologies that we license from Eurotech, our ability to market the
technologies that we license from Eurotech, changes in the value and condition
of our assets, the loss of key personnel, whether we are able to complete the
proposed transactions described in this form 10-K, a change in control of the
Company or changes in financial markets and general economic conditions.

HISTORY AND RECENT DEVELOPMENTS

Recent Developments

Stockholder's Meeting

On March 22, 2004 HomeCom Communications held a Special Meeting of the
Stockholders at which the following proposals were approved by the stockholders:
(1) a proposal to sell substantially all of the assets of HomeCom's hosting and
website maintenance business to Tulix Systems, Inc., an entity in which Timothy
R. Robinson, Gia Bokuchava and Nino Doijashvili, who are directors and officers
of HomeCom, are the sole shareholders, directors and officers; (2) a proposal to
amend HomeCom's Certificate of Incorporation to change the name of the company
to "Global Matrechs, Inc."; (3) a proposal to amend HomeCom's Certificate of
Incorporation to increase the number of shares of common stock that HomeCom is
authorized to issue from 15,000,000 to 300,000,000; (4) a proposal to amend
HomeCom's Certificate of Incorporation to allow fewer than all of the
stockholders to approve actions by written consent without a stockholder
meeting; (5) a proposal to effect a reverse split of HomeCom's common stock at a
ratio of between 1-for-5 and 1-for-15, if and when (but not later than December
31, 2004) the Board of Directors determines that such a reverse split is in the
best interests of HomeCom; (6) proposals to amend the Certificates of
Designations, Preferences and Rights of HomeCom's Series B, Series C, Series D
and Series E preferred stock to delete the mandatory conversion provisions of
those series; and, (7) a proposal to elect Michael Sheppard, Timothy R.
Robinson, Gia Bokuchava, Nino Doijashvili, and Randolph A. Graves, Jr. to serve
on HomeCom's Board of Directors.

Asset Purchase Agreement with Tulix

On March 27, 2003, we entered into an Asset Purchase Agreement (the "Sale
Agreement") with Tulix Systems, Inc. ("Tulix"), a company in which Gia
Bokuchava, Nino Doijashvili and Timothy R. Robinson, who are officers and
directors of the Company, are officers, directors and founding shareholders.

Under the Sale Agreement, Tulix will purchase the assets used in the
operation of our hosting and web site maintenance business, including
intellectual property, equipment, contracts, certain accounts receivable in an
aggregate amount of approximately $70,000, and cash of $50,000 (the "Asset
Sale"). As consideration for these assets, Tulix will:

o issue to us shares of Tulix common stock that will represent 15% of
the outstanding shares of Tulix;

o issue to us a secured promissory note (the "Note") for a principal
amount of $70,000 (subject to adjustment as described below) that will
bear interest at an annual rate of 7%, will be secured by certain
assets of Tulix that are transferred to Tulix as part of the Asset
Sale, and will mature one year after the closing of the Asset Sale
(the principal amount of the note may be increased at closing pursuant
to the terms of the Agreement); and,

o assume certain obligations of ours, including certain accounts payable
related to ongoing operations (these accounts payable consist
primarily of bills for utilities and are likely to be approximately
$5,000, with the exact amount to be determined at closing).

The note to be issued by Tulix to the Company will be for a principal
amount of $70,000, subject to adjustment as described below. If the sum of the
cash and accounts receivable of the Company (as determined in accordance with
GAAP in a manner consistent with the Company's past practices) on the day that
we complete the Asset Sale is less than $325,053 (subject to certain
adjustments), the principal amount of the Note will be increased by an amount
equal to the difference between $325,053 (as adjusted) and the sum of the
Company's cash and accounts receivable on the closing date. To the extent that
the sum of cash and accounts receivable on the day that we complete the Asset
Sale is more than $325,053 (as adjusted), the excess will be divided evenly
between the Company and Tulix. The Note will bear interest at a rate of 7% per
year and will mature on the one year anniversary of the Closing of the Asset
Sale. Interest will be due and payable at maturity. The Note will be secured by
the intellectual property, contracts, accounts receivable and equipment
(including computer hardware, computer software, office furniture and fixtures)
transferred to Tulix in the Asset Sale. The aggregate value of the assets that
secure the Note is estimated to be approximately $170,000. As the holder of a
secured note, the Company will be entitled to the rights of a secured creditor
in the event that Tulix defaults on the Note. While we do not expect that Tulix
will default on the Note, our status as a secured creditor gives us rights to
the collateral that an unsecured creditor would not have. This protection could
be lessened over time if the value of the collateral decreases. The working
capital adjustment described above is based on a dollar amount of $325,053
because that amount represents the sum of the Company's cash and accounts
receivable on the date that we and Tulix entered into the Sale Agreement. The
parties have agreed that this amount will be reduced by the actual amount of
certain agreed upon expenditures made by the Company prior to closing, including
accounting fees, legal fees, vendor bills, local taxes and other expenditures.
To the extent that there is excess cash and accounts receivable, the parties
have agreed to evenly divide the amount of the excess primarily to provide
management with an incentive to increase the working capital prior to closing.

In connection with the Asset Sale, the Sale Agreement provides that we will
enter into a Shareholders' Agreement with Tulix, Mr. Robinson, Mr. Bokuchava and
Ms. Doijashvili. The Shareholders' Agreement would give the Company certain
rights as a holder of Tulix stock for a period of five years. These rights
include rights of co-sale, rights of first refusal, anti-dilution rights and
rights to inspect the books and records of Tulix. The co-sale rights will give
us (and the other Tulix shareholders) the right to participate in any sales,
subject to certain exclusions, of Tulix stock by other Tulix shareholders. The
rights of first refusal granted to us in the Shareholders' Agreement will
require that Tulix give us (and the other Tulix shareholders) the right to
purchase any securities, subject to certain exclusions, that it intends to offer
to third parties before it offers those securities to third parties. The
anti-dilution rights contained in the Shareholders' Agreement require Tulix to
grant us additional shares of common stock any time, subject to certain
exclusions, it issues shares of common stock to other persons so that our
aggregate ownership interest in Tulix is generally not diluted. Finally, the
Shareholders' Agreement gives us the right to inspect the books and records of
Tulix, subject to the specific terms of the Shareholders' Agreement.

The parties intend to complete the Asset Sale if (i) it is approved by the
Company's stockholders as required under Delaware law (this approval was
obtained at the Special Meeting of Stockholders on March 22, 2004) and (ii) the
other conditions to closing set forth in the Sale Agreement are satisfied or
waived. These conditions include, among others, the requirement that all third
parties who have a contractual right to approve the assignment of their
contracts to Tulix must consent to such assignment. The Company believes that

the only material third party consent that will be required by this provision is
that of the Company's landlord for its principal offices as 3495 Piedmont Road,
and our landlord has indicated that it may be willing to cancel our lease and
enter into a new lease with Tulix upon completion of the Asset Sale. These
conditions also include a condition in favor of Tulix that Roadrunner, the
largest customer of the hosting and website maintenance business, not have
notified HomeCom or Tulix that it intends to terminate its relationship with
HomeCom or Tulix, that it does not intend to transfer its business to Tulix upon
completion of the Asset Sale, or that it intends to materially change the amount
of business that it does with HomeCom or Tulix. As such, we can offer no
assurance that the Asset Sale will be completed. Neither we nor Tulix is under
any obligation to pay any type of termination fee if we do not complete the
Asset Sale, and there are no other deal protection measures. The Sale Agreement
also contains a release from Tulix pertaining to certain matters and mutual
releases with Mr. Robinson, Mr. Bokuchava and Ms. Doijashvili regarding certain
employment matters. We expect to close the transaction with Tulix in May of
2004.

Description of Business

On May 22, 2003, we completed the transaction with Eurotech pursuant to
which we now license the EKOR, HNIPU, EMR/AC, Rad-X, Firesil, LEM and RBHM
technologies from Eurotech. If we complete the Asset Sale to Tulix, our
remaining assets will consist of the technologies that we license from Eurotech
and the assets related thereto, the cash and accounts receivable of our hosting
and website maintenance business that we do not transfer to Tulix, and the note
and stock that Tulix issues to us in the Asset Sale. Our liabilities after the
completion of the Asset Sale will consist of all liabilities currently reflected
on our financial statements other than the liabilities that Tulix assumes from
us (and possibly some liabilities that Tulix does assume from us, in the event
that we remain obligated for such liabilities despite our attempted assignment
of those liabilities to Tulix), as well as any liabilities that we incur in
connection with the business associated with the licensed technologies,
including the $460,000 that we have borrowed under our credit agreement with
McNab LLC.

We have created an unincorporated division, which we call the Licensed
Technologies Division, to run the business related to the technologies that we
license from Eurotech. Mr. Sheppard and Dr. Graves serve as vice presidents of
the Licensed Technologies Division. The unincorporated division structure allows
us to operate the business within a single entity. It does, however, also
present risks. These include the risk that liabilities associated with the
technologies that we license from Eurotech may attach to the assets of our
hosting and website maintenance business, thereby jeopardizing the potential
sale to Tulix or making us liable to Tulix following the closing, and the risk
that liabilities related to the hosting and website maintenance business could
attach to the technologies that we license from Eurotech.

History

HomeCom was organized in 1994 to provide complex web-based software
applications and integration services to businesses seeking to take advantage of
the Internet. Over time, we evolved into a Web design, financial applications
and solutions provider to the financial services market, including banking,
insurance, securities brokerage firms and other financially oriented web
portals.

Prior to and during 2000, we derived revenue from, among other sources,
professional web development services, software licensing, application
development, insurance and securities sales commissions, and hosting and
transactions fees. However, following our various divestitures, including those
identified below and including the sales of our InsureRate division and our
Internet banking operations during 2001, we derived revenue only from hosting
and web site maintenance services.

On April 16, 1998, we acquired all of the outstanding capital stock of The
Insurance Resource Center, Inc. ("IRC") for 351,391 shares of our common stock.
IRC provided Internet development and hosting services to the insurance industry
and was incorporated into our FAST group. We wrote off the remaining goodwill
for IRC during 1999.

On June 9, 1998, we sold substantially all of the assets of our HostAmerica
Internet network outsourcing services division to Sage Acquisition Corp.
("Sage") for cash of $4,250,000 and Sage's assumption of approximately $250,000
of unearned revenue. We recorded a gain on the sale of approximately $4,402,000.
This transaction allowed us to further consolidate our business focus on the
financial services market.

On March 24, 1999, we acquired all of the outstanding shares of First
Institutional Marketing, Inc. ("FIMI") and certain of its affiliates for
1,252,174 shares of common stock. In addition, we entered into employment
agreements for an initial term of three years with the three principals of FIMI,
calling for them to continue in their roles for the acquired companies. Prior to
the closing of the acquisition, we loaned the shareholders of FIMI $370,000
("FIMI notes"). The FIMI notes were to be repaid in either cash or common stock
and were collateralized by common stock. We also granted these FIMI shareholders
300,000 warrants to acquire shares of our common stock at an exercise price of
$3.74 per share. Vesting of the warrants was contingent upon FIMI meeting
certain operating goals.

On April 23, 1999, we acquired all the outstanding shares of Ganymede
Corporation for total consideration of 185,342 shares of common stock and
$100,000 cash. Ganymede was a Chicago-based web site developer for financial
institutions. In addition, we entered into employment agreements with the three
principals of Ganymede, calling for them to continue in their then current roles
for the acquired company. Each subsequently resigned.

On October 1, 1999 we sold our security consulting and integration service
operations in exchange for $200,000 in cash, certain security audit rights and
shares of a non-public entity originally valued at approximately $823,000, and
entered into a joint marketing program with the acquirer.

On January 31, 2001, we sold substantially all of the assets of FIMI and
its affiliates to Digital Insurance, Inc. ("Digital") for approximately $458,000
in cash and the assumption of certain liabilities. In connection with the sale,
the FIMI principals surrendered the shares of common stock that collateralized
the FIMI notes and forfeited their warrants.

On March 15, 2001, we sold substantially all of the assets used in our
Internet banking operations to Netzee, Inc. The sale generated net proceeds to
HomeCom of approximately $407,000.

On March 27, 2003, we entered into an agreement to sell substantially all
of the assets of our hosting and website maintenance business to Tulix. See
"Recent Developments," above.

On May 22, 2003, the Company completed a transaction with Eurotech, Ltd.
("Eurotech"). The Company had entered into a License and Exchange Agreement with
Eurotech and, with respect to Articles V and VI thereof, Polymate, Ltd. and
Greenfield Capital Partners LLC, on March 27, 2003 (as amended, the "Exchange
Agreement"). In connection with the completion of the transaction, the Company
entered into a License Agreement, dated May 22, 2003 with Eurotech (as amended,
the "License Agreement"). Pursuant to the Exchange Agreement and the License
Agreement, Eurotech has licensed to the Company its rights to the EKOR, HNIPU,
Electro Magnetic Radiography/Acoustic Core (EMR/AC), Rad-X, Firesil, LEM and
Rapidly Biodegradable Hydrophobic Material (RBHM) technologies, which are more
fully described herein. In exchange for the licenses of these technologies, the
Company (i) issued to Eurotech 11,250 shares of Series F Convertible Preferred
Stock and 1,069 shares of Series G Convertible Preferred Stock, both of which
were new series of the Company's preferred stock, and (ii) will pay Eurotech a
royalty of seven percent (7%) on net sales generated by the licensed
technologies and a royalty of four percent (4%) on net sales generated by
products and services that are improvements on the licensed technologies. The
License Agreement provides that the licenses granted to the Company thereunder
will become terminable at the option of Eurotech (i) if the Company has not
effected a commercial sale of any licensed technology or improved licensed
technology by April 1, 2006, and (ii) in certain other circumstances. In
connection with this transaction, we issued 1,500 shares of Series F Convertible
Preferred Stock to Polymate and 750 shares of Series F Convertible Preferred
Stock to Greenfield (Polymate was issued shares as partial consideration for
Polymate's agreement to modify its rights to receive royalties from Eurotech;
Greenfield was issued shares as consideration for its acting as an advisor to
the Company and participating in the negotiation of the transaction with
Eurotech on behalf of the Company). The holders of the outstanding shares of
Series F Preferred Stock cancelled their outstanding shares of Series F
Preferred Stock in exchange for the right to receive shares of Series H
Convertible Preferred Stock, which we issued to them on September 30, 2003.

In connection with the closing of the transaction with Eurotech, McNab LLC,
the holder of the outstanding shares of the Company's Series C, Series D and
Series E Preferred Stock, has agreed to accept payment for approximately $2.0
million of penalties that may be owed to it in shares of common stock instead of
cash. These penalties are attributable to the Company's failure to register the
resale of the shares of Common Stock into which those shares of Preferred Stock
are convertible, as the Company was required to do by its agreements with the
holders of those Preferred Shares.

The Exchange Agreement provides that, during the period prior to closing of
the Asset Sale, the financial needs of the hosting and web site maintenance
business will be funded by the operations of that business, while the finances
relating to the new licensed technologies will be kept separate. On May 22,
2003, we executed a note in favor of McNab LLC, which is one of our preferred
shareholders that, as amended, provides that we may borrow up to $460,000 for
use solely in connection with the technologies that we have licensed from
Eurotech. Advances under this agreement, which advances are secured, pursuant to
a security agreement, by the assets of the Company other than the assets that we
intend to transfer to Tulix in the Asset Sale, bear interest at a rate of 10%
per annum and mature on December 31, 2004. We had borrowed $255,000 under this
agreement as of December 31, 2003 and have borrowed an additional $205,000 since
that date under subsequent addenda.

Shares of Series H Convertible Preferred Stock are convertible into shares
of common stock at a conversion rate of 10,000 shares of common stock per share
of Series H Preferred Stock, subject to adjustment as set forth in the
Certificate of Designations governing the Series H Preferred Stock. As such, the
13,500 shares of Series H Preferred Stock issued to Eurotech, Polymate and
Greenfield will become convertible into 135,000,000 shares of common stock. The
Series H Certificate of Designations, however, provides that no holder of Series
H Shares may convert Series H Shares into shares of common stock if such
conversion would result in that holder beneficially owning more than 9.9% of the
outstanding shares of common stock (excluding, for purposes of the calculation,
any unconverted Series H Shares). In addition, the Certificate of Designations
provides that the shares of Series H Preferred Stock will only become
convertible at such time as the Company has a sufficient number of authorized
but unissued shares of common stock available to support the conversion of the
outstanding shares of all series of preferred stock. Currently, the Company has
only 15,000,000 shares of authorized common stock, of which 14,999,157 shares
have been issued and are outstanding. Our stockholders have approved a proposal
to amend our Certificate of Incorporation to, among other things, increase the
number of shares of common stock that we are authorized to issue to 300,000,000
shares.

Pursuant to the License Agreement, the Company issued 1,069 shares of
Series G Convertible Preferred Stock to Eurotech. Each share of Series G
Convertible Preferred Stock is convertible into a number of shares of common
stock determined by dividing $1,000 by a number equal to 82.5% of the average
closing price of the common stock over the preceding five business days. The
Series G Certificate of Designations, however, provides that no holder of Series
G Shares may convert Series G Shares into shares of common stock if such
conversion would result in that holder owning more than 9.9% of the outstanding
shares of common stock (excluding, for purposes of the calculation, any
unconverted Series G Shares).

The Company has agreed to enter into a commercially reasonable registration
rights agreement with Eurotech, Polymate and Greenfield pursuant to which the
Company would grant both demand and piggyback registration rights to those
entities.

In anticipation of the transaction, Lawrence Shatsoff and David Danovitch
resigned from the Company's Board of Directors, and Don V. Hahnfeldt, formerly a
director, the President and Chief Executive Officer of Eurotech and a
shareholder of Eurotech, and Randolph A. Graves, Jr., a director and the Chief
Financial Officer and Vice President of Eurotech and a shareholder of Eurotech,
were elected to fill these vacancies on the Company's Board of Directors. The
Board of Directors also appointed Mr. Hahnfeldt and Dr. Graves to serve as
officers of the new division that we created in connection with the license of
the above-referenced technologies from Eurotech. Mr. Hahnfeldt has subsequently
resigned his positions as an officer and director of HomeCom.

If we complete the Tulix transaction, we expect Mr. Robinson, Mr. Bokuchava
and Ms. Doijashvili to resign from the Board of Directors, although they have
indicated a willingness to remain on the Board of Directors for a short
transition period if requested.

Products and Services

Currently, we have two operating businesses: our hosting and web site
maintenance business, which we intend to sell to Tulix and is presented as a
discontinued operation, and the business that we conduct in connection with the
technologies that we license from Eurotech. These technologies are described
below.

EKOR(TM)

EKOR(TM) was developed jointly by scientists at the I.V. Kurchatov
Institute, or Kurchatov, and members of the Euro-Asian Physical Society, or
EAPS, both based in Moscow, Russia. EKOR(TM) is a brand name for a family of
materials designed for long-term isolation of hazardous and radioactive
materials. As a silicon-based elastomer, EKOR's adhesive properties allow it to
stick to a wide variety of wet or dry surfaces and materials. When applied,
EKOR(TM) materials surround and immobilize radioactive or hazardous debris
ranging from fine dust to large pieces of equipment and, in combination with
their fire-resistant and water-proof properties, prevent such debris from
migrating by water or as air-borne particles. EKOR(TM) materials also possess
other highly desirable performance characteristics such as chemical resistance,
fire resistance, heat resistance, and resistance to environmental aging and
degradation from radiation. In addition to its unique combination of performance
characteristics, EKOR(TM) comes in multiple product forms and can be applied
using specified methods for waste-coating and encapsulation. We believe that
this allows EKOR(TM) to be used as a solution for a broad spectrum of nuclear
and hazardous waste management problems.

The EKOR(TM) product family's performance characteristics and flexibility
of form make it a tool for a broad spectrum of applications. There are currently
five basic forms of EKOR(TM):

1. Sealer Plus, which can be sprayed to coat containers or cover
contaminated surfaces;

2. Foam, which is pumped in a range of densities to fill crevices, ducts
or pipes;

3. Grout, applied in a pour and mix method, which can be used to make
shapes for shielding or to macroencapsulate items to form an
unleachable monolith for transportation or disposal;

4. Matrix, applied in a pour and mix method, which can be used to
microencapsulate radioactive or hazardous wastes to form an
elastomeric monolith for transportation or disposal; and

5. StoneStore, applied in a pour and mix method, which can be used to
microencapsulate highly radioactive waste and will form a ceramic
monolith for permanent disposal. StoneStore is still in the research
and development stage.

In tests conducted at Kurchatov, EKOR(TM) has been shown to be highly
resistant to radiation and structural degradation from exposure to radiation. It
has also proven to be fire resistant, waterproof, and capable of being
formulated in densities that display considerable structural strength and
weight-bearing properties of 100 pounds per square inch.

Marketing of EKOR

Eurotech has described its efforts to market EKOR(TM) and the other
licensed technologies in its public filings. These descriptions are summarized
in this report. EKOR(TM)'s acceptance into nuclear waste management has been
slower than Eurotech anticipated. Eurotech has stated that it believes that
significant technical issues remain, including those dealing with the residue
from production of nuclear weapons and the disposal of nuclear fuel being
discharged from nuclear power plants. With respect to residue from the
production of nuclear weapons, the technical issues relate to the fact that the
residue could take a number of forms (liquid, wet slurry, partially dried

sludge, calcined salts, etc.) and have a variety of ph factors. The amount of
waste that EKOR can effectively encapsulate differs depending on the form and ph
factor of the waste. Thus, each project must be addressed separately, and we
will need to develop the appropriate form of EKOR on a project-by-project basis.
We do not believe, however, that this issue will be a significant issue for us,
as we have learned that the modification of EKOR is not as resource-intensive as
expected and can be accomplished relatively efficiently. For example, a sheet
form of EKOR was recently developed for use in a project with INEEL. With
respect to the technical issues that Eurotech perceived with respect to the
disposal of nuclear fuel being discharged from nuclear power plants, we do not
intend to market EKOR for this purpose. We and Eurotech believe that EKOR(TM) is
a technologically advanced material that has properties that make it a superior,
cost effective and safer isolation technology for some non-radioactive hazardous
materials and a unique sealant for potential applications in the construction
industry.

In 2001, Eurotech successfully replicated the formula for EKOR(TM) to make
EKOR(TM) products in the United States. In March 2001, the EKOR(TM) family of
products was presented to waste management professionals at the annual Waste
Management Symposium in Tucson, Arizona. As a result of the interest generated
at the symposium, Eurotech presented EKOR(TM) for use in a variety of
applications at Department of Energy ("DOE") sites to various waste management
professionals. Specifically, Eurotech had discussions with the Savannah River
Site (or SRS, near Aiken, South Carolina), Oak Ridge National Laboratory (or
ORNL, in Oak Ridge, Tennessee), Fernald Closure Site (in Fernald, Ohio),
Battelle Memorial Institute (or BMI, in Columbus, Ohio), Rocky Flats
Environmental Testing Site (or RFETS, near Denver, Colorado), Los Alamos
National Laboratory (or LANL, Los Alamos, New Mexico), Lawrence Livermore
National Laboratory (or LLNL, Livermore, California), Hanford Reservation
(Richland, Washington) and Idaho National Engineering & Environmental Laboratory
(or INEEL, Idaho Falls, Idaho). Eurotech has also had a number of meetings with
DOE staff at their headquarters in Washington, D.C. and Germantown, Maryland.
Eurotech has also introduced EKOR(TM) to companies doing project and management
work at DOE and commercial sites, and has arranged demonstrations at SRS, ORNL,
BMI, INEEL and at its production facility in California for staff from RFETS and
ORNL. Early demonstrations of the Sealer product, as a solution that required
mixing of a paste and catalyst and significant monitoring of specialized
application equipment, revealed that the Sealer product needed further
development to be more user-friendly. The Sealer product is a paste, with the
consistency of thick brick mortar. While this thickness enables Sealer to be
applied to vertical walls, tanks, drums, and ceilings, a sprayable version of
Sealer, or even a thinner paste version that could be more easily applied, would
be more user-friendly. To address this issue, Eurotech developed Sealer Plus,
which Eurotech introduced in November 2001 and initially demonstrated at BMI in
January 2002. Sealer Plus is a low viscosity version of EKOR Sealer that can be
sprayed with high-pressure paint spray equipment. The demonstration led BMI to
incorporate it into its planning for decommissioning work at BMI and West
Valley, although BMI has not yet purchased any EKOR for these sites. We seek to
further develop Sealer to make the Sealer more easily applied in a foam
consistency, which we believe will make Sealer more user-friendly. The
demonstration of EKOR(TM) Grout at INEEL enabled Eurotech to demonstrate its
ability to operate in an underwater environment. INEEL has certain components
that are being stored underwater because of their behavior when exposed to air.
Due to the success of this demonstration, EKOR(TM) Grout was selected as a
technology participant in INEEL's Large Scale Demonstration & Deployment
Project, or LSDDP, originally scheduled to start in October 2001 but currently
on hold. HomeCom is currently preparing specially-requested samples for further
testing at INEEL.

During 2002, EKOR(TM) was selected as an approved waste stabilization
material at multiple DOE sites. This selection means that EKOR has passed the
applications testing necessary to be judged usable on specific forms of waste at
specific sites. For example, Battelle Memorial Institute, Columbus, Ohio, under
a site decommissioning contract from the DOE, applied EKOR(TM) within a series
of reactor drain pipes to immobilize residual radioactive contamination, to
protect workers, the public and the environment during facility sectioning and
disposal. EKOR(TM) is actively being considered by the Pacific Northwest
National Laboratory, a DOE national laboratory, to stabilize Alpha Dust in the
H-Basin Fuel Pool, which will provide protection to workers during facility
decommissioning. EKOR(TM) is also under consideration by BNFL, Inc, to stabilize
radioactive contamination in waste disposal tanks at the DOE Mound Site near
Miamisburg, Ohio and in Sellafield, England, which BNFL uses as a primary waste
disposal site. EKOR(TM) has been tested at the DOE Argonne National Laboratory
to immobilize surrogate radioactive calcined waste and salts. Initial evaluation
of EKOR(TM) is promising for High Level Waste Immobilization.

During 2003, the Company manufactured a number of samples for potential
customers in the European community. The Company is currently seeking a
commercial partner with which to manufacture, market and deliver EKOR.

We intend to market EKOR(TM) for use in nuclear waste encapsulation and
nuclear debris fixation for nuclear cleanup projects, nuclear facility
decontamination and decommissionings, and nuclear waste transportation and
disposal. As part of this strategy, we intend to seek affiliations and joint
ventures with large prime contractors in the nuclear industry on a project by
project basis. While we see opportunities for EKOR and the other technologies,
however, we can offer no assurance that our efforts will be more successful, or
as successful as Eurotech's efforts.

HNIPU

HNIPU is a hybrid polyurethane that does not involve the toxic isocyanates
utilized in the production of conventional polyurethane and that has lower
permeability and greater chemical resistance qualities as compared to
conventional polyurethane. We believe that these advanced characteristics, in
addition to the potential reduced risk from the elimination of isocyanates in
its production, make HNIPU superior to conventional polyurethanes in connection
with their use in a number of industrial application contexts such as
manufacturing automotive components, paints, foams, plastics and truck bed
liners; aerospace sealants, industrial adhesives, coatings, flooring, glues;
industrial equipment and machinery; and consumer goods such as appliances,
footwear, furniture and plastic products. Because of HNIPU's lower permeability
and improved chemical resistance, we think that industrial paints and coatings
are a potential target market for HNIPU.

Marketing of HNIPU

On November 17, 2003, HomeCom entered into an agreement with Environmental
Friendly Materials, GMBH ("EFM"), a German company, for the manufacture and sale
of HNIPU for the European marketplace. EFM has been given non-exclusive license
to manufacture and distribute HNIPU and intends to manufacture it at various
locations across Europe. EFM has told us that it anticipates beginning
production in the fourth quarter of 2004.

Because HNIPU represents a new class of polymer compounds closely related
to polyurethanes, we expect that a variety of products will emerge from the
development of variations and improvements to the existing HNIPU binders that
have worldwide industrial applications. For this reason, we intend to seek to
license HNIPU to large industrial polymer and chemical manufacturers who can
sell the various HNIPU binders to international industrial manufacturers. The
focus will be to transfer the existing binder product technologies under
licensing agreements from the laboratory to the manufacturer. We intend to
follow up on existing agreements, current evaluations, and active discussion for
HNIPU binder production.

EMR/AC

Eurotech licenses certain rights to Acoustic Core and Electromagnetic
Radiography for specific markets, consisting of (i) illicit material detection,
(ii) above surface or subsurface nuclear or other hazardous material
remediation, (iii) marine dredging sites (inland and ocean) and (iv) oil
exploration, from Trylon Metrics, Inc. pursuant to an agreement dated July 2001,
as amended in October 2001. Eurotech licenses the illicit materials detection
application to another company and licenses the remaining three applications to
HomeCom.

Both technologies use a non-contact inspection methodology that creates
signals that are then interpreted by a digital analyzer that allows
identification of elemental or compound materials from their empirically
determined properties. Acoustic Core is used in applications that are
predominately wet (i.e., riverbeds, wetlands, etc.) and EMR is used in dry
environments. Completed research and development studies have verified that
Acoustic Core and EMR can identify materials by their acoustic or
electromagnetic signatures, but the feature of these technologies that we

believe is unique is their ability to map in three dimensions the existence of
target materials at extremely low concentrations at depths of up to 300 feet.
The capabilities of these technologies complement the EKOR(TM) product line by,
for example, allowing tanks of waste to be monitored for leaks and the leaks,
when discovered, targeted for repair. Acoustic Core and EMR may have
applications in markets that involve subsurface evaluation, from contamination
discovery and monitoring to resource discovery.

Both Acoustic Core and EMR have been tested at DOE sites (Oak Ridge and
INEEL) on a variety of materials. Sandia National Laboratory conducted an
in-depth evaluation of the science behind these technologies in 1999 and
concluded that they provide a unique capability to identify and map in three
dimensions low levels of material concentration at substantial depths. We
believe that these products are more cost effective than other current methods.
During the fourth quarter of 2001, Eurotech submitted several proposals to the
DOE for evaluation of areas of potential contamination and to commercial
entities being pressured by the EPA for potential subsurface contamination, but
these technologies have not been selected for inclusion in currently funded
programs to date.

Marketing of EMR/AC

In conjunction with the marketing of EKOR(TM), we intend to market
EMR/AC(TM) to a variety of facilities requiring detection of nuclear waste
contaminants and other environmentally hazardous substances in subsurface soil
and ground water resulting from leaking storage tanks or toxic chemical spills.
We are currently seeking a manufacturing partner for EMR/AC, and we are waiting
until we find such a partner to pursue our marketing strategy for EMR/AC.

RAD-X

Rad-X is a technology intended for use as an interior fire-resistant
fixative for equipment or facilities with contaminated surfaces. Rad-X differs
from EKOR(TM) Sealer Plus in that it is not weather-resistant and does not have
the chemical, radiation and aging resistance needed for long-term protection.
Rad-X provides a low-cost fixative for surfaces that are scheduled for
disassembly or dismantlement and need strong adhesion (glue-down of contaminated
particles that could become airborne) and fire-resistance properties. Rad-X was
first marketed in 2001.

Marketing of Rad-X

According to Eurotech's public filings, Eurotech has invested less than
$20,000 in the creation of the Rad-X product line. Rad-X was initially created
for feasibility testing at DOE's Rocky Flats Environmental Testing Site, or
RFETS, and was delivered in late September 2001. Testing of Rad-X at other
laboratories occurred in November 2001. This testing confirmed its fire and
smoke resistance properties. We believe that Rad-X can satisfy proposed DOE
fire/smoke criteria for certain specialized applications. Eurotech has marketed
Rad-X in connection with EKOR(TM) at DOE sites that performed decommissioning or
hazardous material management in 2002, and we intend to continue this strategy.
We are currently seeking a manufacturing partner for Rad-X, and we are waiting
until we find such a partner to pursue our marketing strategy for Rad-X. While
sales of Rad-X during 2003 were $7,801, representing 94.6% of the 2003 revenue
for the Licensed Technologies Division (this excludes the revenue of our hosting
and website maintenance business, which is presented as discontinued
operations), sales of Rad-X during 2003 consisted primarily of sales of samples.

RAPIDLY BIODEGRADABLE HYDROPHOBIC MATERIAL ("RBHM")

RBHM is a new, hydrophobic (water resistant), strong, cheap, and completely
biodegradable cellulose-based composite material. RBHM is intended to improve
the properties of both paper and plastic packaging materials. The material can
be used as a commodity in trade, industry, and agriculture for a wide range of
applications. To date, most attempts to produce biodegradable products for
consumers have focused on developing plastics that could biodegrade. RBHM takes
a different approach - making cellulose-based material with the same physical
properties as plastic, except the material biodegrades completely in the same
time as regular paper bags.

RBHM consists of cellulose (paper) and biodegradable organic additives.
Biodegradation of RBHM occurs in wet soil through normal enzymatic action of
various microorganisms - fungi and bacteria. We believe that the main advantages
of RBHM are:

o Strength. RBHM's strength characteristics, especially combined with
low elongation and acquired water resistance of the material, make
RBHM unique and desirable for packaging applications.

o Water Resistance. RBHM keeps water resistance for one week. Most of
the existing biodegradable packaging products are not hydrophobic at
all and will fail if wetted during use.

o Biodegradable Nature. Enzymes begin breaking down RBHM in the presence
of moisture in natural environments such as soil. Then microorganisms
decompose the material with rapidly occurring metabolic reactions.
RBHM is completely converted into carbon dioxide, water, and biomass
in two to three months in wet soil.

o Reproducible Natural Raw Materials. RBHM uses cellulose, a widely
available and renewable raw material.

o Relatively Low Cost. The main obstacle to widespread use of
biodegradable polymers has been cost. Biodegradable polymers are
traditionally significantly more expensive than commodity polymers.
The high costs involved in the production of biodegradable polymers
means that they cannot compete favorably with conventional polymers.
This high cost has deterred the widespread adoption of biodegradable
plastics in major consumer applications. At an additional cost of less
than 10%, and sometimes less depending on the type of material
treated, materials treated with RBHM provide plastic-like performance
and are biodegradable.

We believe that there is a large number of potential applications for a
technology like RBHM. Because RBHM can be applied on sheets, films and fibers,
it is suitable for a range of single-use products, including, among others,
grocery and waste bags, the top, and back sheets of disposable diapers, and
disposable eating utensils.

Marketing of RBHM

Eurotech has marketed RBHM through its web site during 2001 and 2002. We
intend to use the same strategy for marketing RBHM. We are currently seeking a
manufacturing partner for RBHM, and we are waiting until we find such a partner
to pursue our marketing strategy for RBHM.

LIQUID EBONITE MATERIAL ("LEM")

LEM is a synthetic liquid rubber with enhanced mechanical, permeability and
anti-corrosive qualities as compared to conventional sheet rubber coverings. In
laboratory testing, coverings made with LEM, as compared to conventional sheet
rubber coverings, have displayed greater resistance to harsh chemicals such as
acids, alkalis and benzene, and have been successfully applied to intricate and
complex surfaces such as sieve meshing. Based on the physical and chemical
properties of LEM, and on the basis of such tests, we believe that LEM coverings
are capable of providing superior protection to small-diameter piping and to the
intricate parts of pumps, fans, and centrifuge rotors. LEM can be applied to
form surface coverings using standard coating techniques, including spraying and
dipping.

Marketing of LEM

Eurotech has marketed LEM through its web site during 2001 and 2002. We
intend to use the same strategy for marketing LEM. We are currently seeking a
manufacturing partner for LEM, and we are waiting until we find such a partner
to pursue our marketing strategy for LEM.

FIRESIL(TM) - FIRE PROTECTION ORGANOMINERAL COATING - FIRE-STOP FOR RESIDENTIAL
AND COMMERCIAL APPLICATION

Firesil(TM) is an environmentally compatible fire-stop material with good
adhesion properties to hydrophilic and hydrophobic surfaces and exhibits strong
fire resistance, thermostability, and water resistance characteristics.

Marketing of FIRESIL(TM)

We intend to market Firesil(TM) directly to corporations that are
prospective candidates for sub-licensing the technology. Eurotech has held
discussions with U.S. government agencies and insurance companies. Firesil(TM)
was tested by an accredited lab to ASTM protocol and passed such tests. We are
currently seeking a manufacturing partner for Firesil(TM), and we are waiting
until we find such a partner to pursue our marketing strategy for Firesil(TM).

Competition

The licensed technologies are targeted at highly competitive markets. Due
to the nature and size of some of the markets and some of the projects for which
the licensed technologies may be applicable, there are sometimes other
competitors who may have significantly greater name recognition and greater
financial and other resources than we do. Many of these competitors also have
technologies that are very competitive with the licensed technologies. For
example, EKOR(TM) is a composite material based on a silicone polymer that is
different from other silicones produced by manufacturers such as GE Silicones
and Dow Corning, but the products produced by those manufacturers compete with
EKOR(TM). As another example, some of the major producers of polyurethanes used
in coatings and finishes, sealants and adhesives, which products may compete
with the HNIPU technology, include Akzo Nobel, Dow Chemical and Kansai.

Intellectual Property Rights

In accordance with industry practice, we have relied primarily on a
combination of copyright, patent and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect the proprietary
rights related to our hosting and website maintenance business. We have sought
to protect our software, documentation and other written materials principally
under trade secret and copyright laws, which afford only limited protection. We
have tried to use non-disclosure and confidentiality agreements with employees,
vendors, contractors, consultants and customers to address these concerns.

We do not believe that the products used in our hosting and website
maintenance business infringe the proprietary rights of third parties. There can
be no assurance, however, that third parties will not claim infringement by us
with respect to our products. In addition, Web site developers such as ours face
potential liability for the actions of customers and others using their
services, including liability for infringement of intellectual property rights,
rights of publicity, defamation, libel, fraud, misrepresentation, unauthorized
computer access, theft, tort liability and criminal activity under the laws of
the United States, various states and foreign jurisdictions.

Intellectual Property Rights with Respect to the Technologies that we License
from Eurotech

General

Many entities, including some developing technologies similar to ours, now
have and may in the future obtain patents and other intellectual property rights
that cover or affect products or services directly or indirectly related to the
technologies that we license from Eurotech. In general, if a court determines
that one or more of the licensed technologies infringes on intellectual property
held by others, we would be required to cease infringing on intellectual
property held by others, we would be required to cease developing or marketing
those products or to obtain licenses to develop and market those products from
the holders of the intellectual property, or to redesign those products in such

a way as to avoid infringing the patent claims. If a competitor holds
intellectual property rights, the entity might be predisposed to exercise its
right to prohibit our use of its intellectual property in our products and
services, thus impacting our competitive position.

We cannot assure you that we are aware of all patents and other
intellectual property rights that the licensed technologies may potentially
infringe. In addition, patent applications in the United States are confidential
until the Patent and Trademark Office issues a patent and, accordingly, we
cannot evaluate the extent to which the licensed technologies may infringe
claims contained in pending patent applications. Further, it is often not
possible to determine definitively whether a claim of infringement is valid,
absent protracted litigation, which we may not have the resources to pursue.

We cannot estimate the extent to which we may be required in the future to
obtain licenses with respect to patents held by others and the availability and
cost of any such licenses. Those costs, and their impact on our financial
position, could be material. Damages in patent infringement cases can also
include a tripling of actual damages in certain cases. To the extent that we are
required to pay royalties to third parties to whom we are not currently making
payments, these increased costs of doing business could negatively affect our
liquidity and operating results.

In addition, there may be entities developing and marketing technologies
which infringe on patents and intellectual property rights held by us. Patent
infringement claims are protracted and costly. We may not have the resources to
adequately protect our intellectual property. Any expenditures to pursue
intellectual property rights by us could negatively affect us.

EKOR Intellectual Property Rights

The Euro-Asian Physical Society (EAPS) has patented EKOR(TM) in the U.S.,
Russia, and other industrialized countries. On March 23, 1999, the U.S. Patent
and Trademark Office issued to EAPS Patent No. 5,886,060 on the process for
manufacturing one of the EKOR(TM) compound variants. Pursuant to sub-license
agreement, Eurotech became the exclusive global licensee of all right, title and
interest (inclusive of all patent and other intellectual property rights now or
in the future) in EKOR(TM). We are a licensee of Eurotech. As a regular part of
our business activities, we plan to submit patent applications to protect our
developed intellectual property. We do not know if additional proprietary
technology that we develop relating to EKOR(TM) will prove patentable. Eurotech
has applied for trademark protection for the mark "EKOR" with the U.S. Patent
and Trademark Office.

HNIPU Intellectual Property Rights

U.S. Patent Number 6120905 for HNIPU network polymers and composites formed
therefrom was issued on September 19, 2000. Patents for this technology have
also been issued in Europe (EP 1088021, PCT WO 9965969) and Australia (4441099).
These patents have been assigned to Eurotech. The method of synthesis of
cyclocarbonates and nonisocyanate or hybrid nonisocyanate network polyurethanes
is patent applied for in the United States, which application has been assigned
to Eurotech. We are a licensee of Eurotech. As a regular part of our business
activities, we intend to submit patent applications to protect our developed
intellectual property, improvements and extensions, although we do not know
whether any technologies that we develop will be patentable.

EMR/AC Intellectual Property Rights

U.S. Patent Number 4,922,467 for Acoustic Detection Apparatus (Acoustic
Core) was issued to David Caulfield on May 1, 1990 and subsequently assigned to
Ocean Data Equipment Corporation. This patent was significantly improved, for
which U.S. Patent Number 6,545,945 was issued on April 8, 2003. Electromagnetic
Radiography technology has been protected under trade secret laws. The worldwide
exclusive licensing rights to these technologies for the detection of nuclear
and hazardous materials at nuclear remediation and marine dredging sites, and
for oil exploration, were obtained by Eurotech and, except to the extent related
to the illicit materials detection application of these technologies, were
subsequently licensed to HomeCom.

RAD-X Intellectual Property Rights

Eurotech has protected its interest in Rad-X by treating the formulation as
proprietary property and entering into confidentiality agreements with its
partners.

RBHM Intellectual Property Rights

Rademate, an entity in which Eurotech is an investor, was issued U.S.
Patent #6294265 for "Hydrophobic biodegradable cellulose-containing material"
for RBHM on September 25, 2001. Rademate has one application with the Israeli
Patent Office (126306), dated September 23, 1998, which is pending. Eurotech has
licensed to us the intellectual property rights that it has in RBHM.

LEM Intellectual Property Rights

Eurotech has acquired the intellectual property rights associated with U.S.
Patent #6303683 (issued October 16, 2001) for Liquid Ebonite mixtures and
coatings, and concretes formed therefrom and an application filed under the
Patent Cooperation Treaty (PCT/US99/16883) on July 26,1999 by Dr. Figovsky, the
inventor of these technologies. We are a licensee of Eurotech.

FIRESIL Intellectual Property Rights

Eurotech has acquired the formula for Firesil(TM) from Dr. Figovsky, its
inventor, in 2000. Eurotech terminated previously initiated patent applications
and has elected to protect this formula as a trade secret. Eurotech owns the
federally registered trademark "Firesil". We are a licensee of Eurotech.

Sales and Marketing

We currently have no active marketing strategies or plans for the hosting
and website maintenance business. The marketing strategies for the technologies
that we license from Eurotech are described within the descriptions of those
technologies set forth above.

Employees

As of December 31, 2003, we had nine full-time employees and consultants,
including Mr. Sheppard and Dr. Graves, who work exclusively with our Licensed
Technology Division. If we complete the Asset Sale, we expect that all seven of
the employees who work with the hosting and website maintenance business,
including Mr. Robinson, Mr. Bokuchava and Ms. Doijashvili, will resign from
their positions with us and go to work for Tulix.

Customers

The Company has manufactured numerous samples of EKOR and HNIPU for
potential customers in the European and American markets. On November 17, 2003,
we entered into an agreement for the manufacture and distribution of HNIPU with
EFM. EFM has told us that it anticipates being in production by the fourth
quarter of 2004.

Insurance

We maintain liability and other insurance that we believe to be customary
and generally consistent with industry practice. We believe that such insurance
is adequate to cover potential claims relating to our existing business
activities.

Government Regulation

Except with regard to insurance and securities sales, as discussed below,
we do not believe that our hosting and website maintenance business is currently
subject to direct regulation by any government agency, other than regulations
applicable to businesses generally, and also believe that there are currently
few laws or regulations directly applicable to Web site service companies. The
Federal Communications Commission is studying the possible regulation of the
Internet. Any such regulations adopted by the Federal Communications Commission
may adversely impact the manner in which we conduct our business, our financial
condition and our operating results. Moreover, the applicability to the Internet
of existing laws governing issues such as property ownership, libel, and
personal privacy is uncertain. We cannot predict the impact, if any, that future
regulation or regulatory changes may have on our business. In addition, Web site
developers such as us face potential liability for the actions of customers and
others using their services, including liability for infringement of
intellectual property rights, rights of publicity, defamation, libel, fraud,
misrepresentation, unauthorized computer access, theft, tort liability and
criminal activity under the laws of the U.S., various states and foreign
jurisdictions. Any imposition of liability could have a material adverse effect
on us.

In addition, our network services are transmitted to our customers over
dedicated and public telephone lines. These transmissions are governed by
regulatory policies establishing charges and terms for communications. Changes
in the regulatory environment relating to the telecommunications and media
industry could have an effect on our business, including regulatory changes
which directly or indirectly affect use or access of the Internet or increase
the likelihood or scope of competition from regional telephone companies, could
have a material adverse effect on us.

Of course, if the Asset Sale is completed, the matters discussed above
could adversely affect the value of our stock in Tulix.

The use of EKOR(TM) is subject to U.S. environmental safety laws and
regulations pertaining to the safe use and containment of hazardous and nuclear
waste. Based on the results of tests conducted by Eurotech, we believe that the
EKOR(TM) compounds meet current applicable regulations for safe use, containment
and storage of hazardous and nuclear materials. It is, however, possible that
more stringent or different standards may be adopted or applied in the future
that might influence the intended use for EKOR(TM), and it is also possible that
the standards, if adopted or applied, may materially increase the cost to us of
using EKOR(TM) compounds or prevent their use altogether. We are not aware of
any other U.S. or foreign laws or regulations that significantly hinder the
marketing, sale, or use of EKOR(TM) based materials.

The manufacture of HNIPU and operation of EMR/AC(TM) equipment is not
expected to be impacted adversely by government regulations. HNIPU's MDDS
identifies the limited risks associated with the manufacture, handling and
application of the non-isocyanate polyurethane. OSHA outlines operational
regulations as related to acoustic frequencies and power levels as might be
applied to EMR/AC(TM) operations.

The manufacture and use of HNIPU is subject to U.S. environmental safety
laws and regulations pertaining to the safe use of chemicals and polymeric
materials. While HNIPU does not use highly toxic compounds like isocyanates, it
is still subject to governmental regulations, but based on preliminary
assessments by Eurotech we believe that HNIPU compounds will meet current and
future regulations. If we are successful in licensing various HNIPU binders to
chemical and polymer manufacturers, we expect that the licensees will bear the
costs of applying for governmental approvals required for manufacturing and
industrial usage. We are not aware of any other U.S. or foreign laws or
regulations that significantly hinder the marketing, sale, or use of HNIPU based
materials.

Item 2. PROPERTIES

As of December 31, 2003, we occupied approximately 7,000 square feet in one
office building in Atlanta, Georgia under a lease expiring in October 2004. This
facility serves as our headquarters and computer center. Our landlord has
indicated that it will cancel our lease and enter into a new lease with Tulix
upon completion of the Asset Sale, subject to the landlord's completion, to its

satisfaction, of due diligence regarding Tulix. The cancellation of our lease
would be more favorable to us than an arrangement by which we sublet the
property to Tulix because we would no longer be party to the lease and therefore
would no longer be responsible for any lease payments if Tulix were to fail to
pay.

Our Licensed Technology Division will be managed from offices that we
currently lease on a month-to-month basis in Ridgefield, Connecticut. We believe
that we will be able to find suitable facilities following the completion of the
Asset Sale with no material adverse effect on the Company.

We have abandoned an office in New York City where we used to occupy
approximately 3,400 square feet under a lease that expired in January 2003. As
of December 31, 2003 we have an accrual for real estate disposition liabilities
of approximately $81,000, which we believe will be sufficient to settle all
obligations related to the closing and abandonment of our offices in New York.

Item 3. LEGAL PROCEEDINGS

On or about February 8, 2002, we received a complaint filed by Properties
Georgia OBJLW One Corporation in the State Court of Fulton County, Georgia on
December 6, 2001, alleging that we defaulted on our lease in Building 14 at 3495
Piedmont Road, Atlanta, Georgia 30305. The complaint sought damages in the
amount of $141,752 plus interest of $23,827, plus attorneys' fees and court
costs. On December 18, 2002 we reached a settlement with Properties Georgia
OBJLW One Corporation in the amount of $135,000, consisting of one payment of
$30,000 paid at that time, followed by seven monthly payments of $15,000 to be
made from February thru August, 2003. We have complied with this agreement and
have paid the full amount of the settlement.

We are not a party to any other material legal proceedings. From time to
time, we are involved in various routine legal proceedings incidental to the
conduct of our business.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We did not submit any matters to a vote of security holders during the
fourth quarter of 2003.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our Common Stock has been quoted on the OTC Bulletin Board under the symbol
"HCOM" since December 8, 2000. Prior to that date it was quoted on the Nasdaq
SmallCap Market. The following table shows for the periods indicated the range
of high and low bid prices as quoted on the OTC Bulletin Board. The quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.

2002: High Low
----- ---- ---
First quarter $ .010 $ .010
Second quarter .028 .003
Third quarter .005 .003
Fourth quarter .006 .001

2003:
-----
First quarter $ .100 $ .001
Second quarter .070 .030
Third quarter .085 .036
Fourth quarter .070 .016

2004:
-----
First quarter (through March 26, 2004) $ .160 $ .040

Holders of Record

We had approximately 113 holders of record of our Common Stock as of March
26, 2004.

Dividends

We have not paid any cash dividends on our capital stock to date and do not
foresee that we will have earnings with which to pay dividends in the
foreseeable future. Our board of directors would determine the amount of future
dividends, if any, based upon our earnings, financial condition, capital
requirements and other conditions.

Item 6. SELECTED FINANCIAL DATA

The following selected financial data of HomeCom Communications, Inc.
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
related notes.

Year Ended December 31,
----------------------------------------------------------------------------
1999 2000 2001 2002 2003
------------ ------------ ------------ ------------ ------------

Statement of Operations Data(1)
Revenues $ -- $ -- $ -- $ -- $ 8,246
Cost of revenues -- -- -- -- 8,731
------------ ------------ ------------ ------------ ------------
Gross profit -- -- -- -- (485)
------------ ------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing
Product development
General and administrative 1,597,209 1,192,406 286,949 187,449 325,281
Depreciation and amortization 1,757,124 1,605,345 -- -- 115,059
Asset Impairment -- 1,436,078 493,905 52,584 --
------------ ------------ ------------ ------------ ------------
Total operating expenses 3,354,333 4,233,829 (780,851) 240,033 440,340
------------ ------------ ------------ ------------ ------------
Operating loss (3,354,333) (4,233,829) (780,851) (240,033) (440,825)
Other expenses (income):
Gain on sale of division
Interest expense (income) 32,583 (5,981) -- -- 480,135
Other expense (income), net (103,175) (90,793) (146,362) (26,637) (91,826)
------------ ------------ ------------ ------------ ------------
Loss from continuing operations before income taxes (3,283,741) (4,137,055) (634,489) (213,396) (829,134)
Income tax provision (benefit) -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Loss from continuing operations (3,283,741) (4,137,055) (634,489) (213,396) (829,134)
Gain (Loss) from discontinued operations (7,037,048) (2,223,295) (212,515) 118,001 176,008
Cumulative effect of change in accounting principle,
net of tax -- -- -- -- (802,730)

Gain (loss) on disposal of business segment 1,144,591 (3,000,377) 394,453 -- (125,030)
------------ ------------ ------------ ------------ ------------
Net Loss (9,176,198) (9,360,727) (452,461) (95,395) (1,580,886)
Deemed preferred stock dividend (2,557,466) (1,526,728) (708,778) (706,733) (336,361)
------------ ------------ ------------ ------------ ------------
Loss applicable to common shareholders $(11,733,664) $(10,887,455) $(1,161,239) $ (802,128) $ (1,917,247)
============ ============ ============ ============ ============
Gain (Loss) per common share--basic and diluted
Continuing operations $ (0.923) $ (0.662) $ (0.136) $ (0.061) $ (0.078)
Cumulative effect of a change in
accounting principle, net of tax -- -- -- -- (0.053)
Discontinued operations (0.932) (0.611) 0.018 0.008 0.003
------------ ------------ ------------ ------------ ------------
Total $ (1.855) $ (1.273) $ (0.118) $ (0.053) $ (0.128)
============ ============ ============ ============ ============
Weighted average common shares outstanding 6,324,791 8,549,693 9,869,074 14,999,157 14,999,157
============ ============ ============ ============ ============

----------------------------------------------------------------------
1999 2000 2001 2002 2003
----------- ----------- ----------- ----------- -----------
Balance Sheet Data:
Working capital (deficit) $ 1,033,802 $ (823,406) $ (960,154) $(1,705,568) $(2,461,688)
Total assets 10,535,718 2,528,973 665,391 507,554 1,350,281
Long-term obligations 315,275 357,757 -- -- 6,697,133
Total liabilities 2,930,600 2,298,013 1,533,124 2,109,069 9,505,057
Redeemable Preferred Stock 1,624,920 251,750 251,750 251,750 --
Stockholders' equity (deficit) 5,980,198 (20,790) (1,119,483) (1,853,265) (8,154,776)

(1) The Consolidated Statement of Operations data for all prior years are
restated for discontinued operations.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

General

Except for historical information contained herein, some matters discussed
in this report constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward looking statements include,
but may not be limited to, those statements regarding the Company's
expectations, beliefs, intentions, or strategies regarding the future. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. Specifically, the
Company's statements with respect to, among other things, the completion of the
sale of assets to Tulix, the viability of and plans for the technologies that we
license from Eurotech, and our ability or inability to continue as a going
concern are forward-looking statements. The Company notes that a variety of risk
factors could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements including, among other things, our ability
or inability to complete the transaction with Tulix, our ability to obtain
additional financing, the commercial viability of the technologies that we
license from Eurotech, our ability to market these technologies, and other
factors discussed in this report and in our other securities filings.

Historically, we developed and marketed specialized software applications,
products and services that enabled financial institutions and their customers to
use the Internet and intranets/extranets to obtain and communicate important
business information, conduct commercial transactions and improve business
productivity. We provided Internet/intranet solutions in three areas: (i) the
design, development and integration of customized software applications,
including World Wide Web site development and related network outsourcing; (ii)
the development, sale and integration of our existing software applications into
the client's operations; and, (iii) security consulting and integration
services. In October 1999, we sold our security consulting and integration
services operations and entered into a joint marketing program with the
acquiror. During 2001, we sold our remaining software applications businesses.
Currently, we derive revenue primarily from professional web development
services and hosting fees. On March 23, 2001, we announced our intentions to
wind down our operations. On March 27, 2003 we entered into an agreement to sell
substantially all of the assets used in our web development, hosting and website
maintenance business to Tulix. Accordingly, results of operations from the
Internet Services unit have been shown as discontinued operations. Certain
revenues and expenses have been reclassified for the periods presented.

Currently, we are licensing the EKOR, HNIPU, EMR/AC, Rad-X, Firesil, LEM
and RBHM technologies from Eurotech. We intend to use these licenses to derive
revenue by partnering with other technology firms to sell raw materials to
producers or to sublicense the technologies and collect royalties and/or
licensing fees.

On May 22, 2003, we completed the licensing transaction with Eurotech. If
we complete the Asset Sale, we will sell the assets of our hosting and website
maintenance business to Tulix. Following the Asset Sale, our assets will consist
of the technologies that we license from Eurotech and the assets related
thereto, the cash and accounts receivable of our hosting and website maintenance
business that we do not transfer to Tulix, and the note and stock that Tulix
issues to us in the Asset Sale. Our liabilities after the completion of the
Asset Sale will consist of all liabilities currently reflected on our financial
statements other than the liabilities that Tulix assumes from us (and possibly
some liabilities that Tulix does assume from us), as well as any liabilities
that we incur in connection with the business that we establish with respect to
the licensed technologies, including the $460,000 that we have borrowed under
our credit agreement. We have created an unincorporated division, which we call
the Licensed Technologies Division to run the business related to the
technologies that we license from Eurotech. Mr. Sheppard and Dr. Graves serve as
vice presidents of the Licensed Technologies Division.

Our revenues and operating results have varied substantially from period to
period, and should not be relied upon as an indication of future results.

Results of Operations

Year Ended December 31, 2002 as Compared to Year Ended December 31, 2003

Revenues. Revenues for the Licensed Technologies division were $8,246 for
the year ending December 31, 2003. Revenues consisted of $7,801 for the sale of
RAD-X and $445 for the sale of EKOR. The Licensed Technologies unit did not
begin operation until the first quarter of 2003.

Cost of Revenues. Cost of revenues includes costs of raw materials
including handling and freight charges. Costs of revenues were $8,731 for the
year ending December 31, 2003. The Licensed Technologies unit did not begin
operation until the first quarter of 2003.

Gross Profit. Gross losses for the year ending December 31, 2003 were $485.
These losses were a result of product cost and handling exceeding the value of
revenue generated. The Licensed Technologies unit did not begin operation until
the first quarter of 2003.

Sales and Marketing. The Company ceased all sales and marketing efforts
related to our Internet Services Division in 2001. There were no such
expenditures in 2002 or 2003. As of the end of 2003 there have been no
expenditures for sales and marketing related to the Licensed Technologies
Division.

Product Development. The Company ceased all product development efforts
related to our Internet Services Division in 2001. There were no such
expenditures in 2002 or 2003. As of the end of 2003 there have been no
expenditures for product development related to the Licensed Technologies
Division.

General and Administrative. General and administrative expenses include
salaries for administrative personnel, insurance and other administrative
expenses, as well as expenses associated with maintaining the corporation's
records and reporting in compliance with its status as a public corporation.
General and administrative expenses increased from $187,449 in 2002 to $325,281
in 2003. The increase is due to the additional expenses associated with the
launch of the Licensed Technologies Division.

Depreciation and Amortization. With the write down of the carrying value of
all fixed assets in the fourth quarter of 2000, the Company has suspended
depreciation of its remaining assets in anticipation of a sale. Amortization
expense of $115,059, which represents seven months of amortization of the
intangible Licensed Technologies, was recognized in the year ending December 31,
2003.

Interest Expense. Interest expense for the year ending December 31, 2003
consisted of $10,668 in interest expense on the notes related to the Licensed
Technologies Division, $150,273 in interest charges on the Series B, C, D and E
preferred stock and $319,194 in penalty interest on the Series B, C, D, and E
preferred stock.

Other income. Other income for the year ending December 31, 2003 consisted
of $4,597 in interest earned on money market accounts, $18,388 in the reversal
of accruals related to defaults on the lease for our Atlanta offices during the
first quarter of 2001, and $68,841 in the reversal of accruals related to
defaults on leases of capital equipment during the third quarter of 2001 which
were resolved at a lower cost than estimated.

Discontinued Operations. The company recorded net income of $176,008 in the
year ending December 31, 2003 for its discontinued Internet Services unit. This
compares to net income of $118,001 in the year ending December 31, 2002. This
increase of $58,007 was due primarily to growth in hosting revenue due to
Roadrunner, and reductions in the cost of internet network services.

Cumulative Effect of a Change in Accounting Principle. As described in note
6 to the consolidated financial statements the Company has reflected the
adoption of SFAS 150 effective July 1, 2003 as a cumulative effect of a change
in accounting principle. The net impact was $802,730.

Year Ended December 31, 2001 as Compared to Year Ended December 31, 2002

Revenues. The Licensed Technologies unit did not begin operation until the
first quarter of 2003.

Cost of Revenues. The Licensed Technologies unit did not begin operation
until the first quarter of 2003.

Gross Profit. The Licensed Technologies unit did not begin operation until
the first quarter of 2003.

Sales and Marketing. The Company ceased all significant sales and marketing
efforts during 2001. There were no sales and marketing expenditures in 2002.

Product Development. The Company ceased all product development efforts
during 2001. There were no product development expenditures in 2002.

General and Administrative. General and administrative expenses include
salaries for administrative personnel, insurance and other administrative
expenses, as well as expenses associated with maintaining the corporation's
records and reporting in compliance with its status as a public corporation.
General and administrative expenses decreased from $286,946 in 2001 to $187,449
in 2002. The decrease was due to continued reduction in personnel and a
reduction in professional fees.

Asset Impairment Charge. We incurred an asset impairment charge of $52,584
in association with the write down of the fair market value of our fixed assets
to current market levels.

Other Income. Other income consists of miscellaneous amounts received which
are outside the normal course of operations. Other income decreased from
$146,362 in 2001 to $26,637 in 2002. The decrease is primarily due to the
absence of any significant income outside of normal operations. Approximately
$20,600 of the miscellaneous income was attributable to the dismissal of the
lawsuit pursued by Creditor's Adjustment Bureau on behalf of Siemen's ICN and
the resultant adjustment to expenses which had been accrued.

Discontinued Operations. The company recorded net income of $118,001 in the
year ending December 31, 2002 for its discontinued Internet Services unit. This
compares to a net loss of $212,515 in the year ending December 31, 2001. This
increase of $330,516 was due to growth in hosting revenue due to Roadrunner,
combined with continued reductions in personnel.

LIQUIDITY AND CAPITAL RESOURCES

General

Our sources of capital are extremely limited. We have incurred operating
losses since inception and as of December 31, 2003, we had an accumulated
deficit of $27,376,572 and a working capital deficit of $2,461,688. On March 23,
2001, we announced our intentions to wind down operations. If we complete the
Tulix transaction, our primary assets will include cash and accounts receivable
that we do not transfer to Tulix, the assets that we license from Eurotech, the
Tulix Note and shares of Tulix stock.

On May 22, 2003, we executed a note in favor of McNab LLC, one of our
preferred shareholders that, as amended, provides that we may borrow up to
$460,000 for use solely in connection with the technologies that we have
licensed from Eurotech. Advances under this agreement, which advances are
secured by a security agreement, bear interest at a rate of 10% per annum and
mature on December 31, 2004. As of December 31, 2003, we had borrowed $255,000
under this agreement. Since December 31, 2003, we have borrowed another $205,000
from this lender under subsequent addenda.

On September 30, 2003, we entered into a Private Equity Credit Agreement
with Brittany Capital Management LLC ("Brittany"), which currently owns 37.6% of
the outstanding shares of our common stock. Pursuant to this agreement, the
Company has agreed to issue and sell to Brittany up to $10,000,000 worth of the
Company's common stock over the next three years. The Company may sell these
shares to Brittany from time to time, in its discretion, subject to certain
minimum and maximum limitations. Prior to any sales, however, the Company is
required to file a registration statement with, and have such registration
statement declared effective by, the Securities and Exchange Commission relating
to the shares to be issued. The number of shares of common stock to be purchased
by Brittany at any time will be determined by dividing (i) the dollar amount
requested by the Company by (ii) the market price of the common stock, less a
discount of 9% of the market price. The Company is required to sell at least
$1,000,000 worth of common stock to Brittany under the agreement. If the Company
does not do so, the agreement provides that the Company will pay penalties to
Brittany. The amount of the penalties will equal to 91% of the difference
between $1,000,000 (the minimum amount of common stock that the Company is
required to sell to Brittany under the agreement) and the amount of common stock
actually sold to Brittany during the term of the agreement. The Company has
agreed that, no later than December 31, 2004, it will reserve and keep available
for issuance a number of shares of common stock sufficient to enable it to
fulfill its obligations under this agreement. The agreement provides that the
number of shares to be purchased by Brittany in any particular sale shall not
exceed a number of shares that would cause Brittany to own more than 9.9% of the
then-outstanding shares of common stock. Also, in connection with this
agreement, the Company has entered into a Registration Rights Agreement with
Brittany pursuant to which the Company has agreed to register, within 150 days
after the Company's Certificate of Incorporation is amended to increase the
number of authorized shares of common stock to at least 150,000,000 shares, at
least 20,000,000 shares of common stock, subject to increases if the number of
shares of common stock sold under the Private Equity Credit Agreement exceeds
20,000,000 shares. If, by December 31, 2004, the registration statement has not
been declared effective, then the Private Equity Credit Agreement and the
Registration Rights Agreement will terminate and the Company will be required to
pay Brittany the penalties described above.

We can provide no assurance that the financing sources described above, or
any other financing that we may obtain in the future (if we are able to obtain
financing from any other sources, and we can provide no assurances that we will
be able to obtain any such financing), will enable us to sustain our operations.
The aforementioned factors raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements included herein have
been prepared assuming the Company is a going concern and do not include any
adjustments that might result should the Company be unable to continue as a
going concern.

Net cash used in operating activities was $321,595 for the year ended
December 31, 2003. Funds necessary for operations were provided by the use of
funds on deposit at the end of 2003 and $255,000 in funds borrowed through
financing activities.

We spent $21,929 and $38,378 during 2003 and 2002, respectively, for the
purchase of capital equipment. These amounts were expended primarily for
computer equipment, communications equipment and software necessary for us to
maintain the operating integrity of our Network Operations Center for the
continued provision of services to our existing customers. Our commitments as of
December 31, 2003 consist of our lease on our Atlanta, Georgia facility.

Recently Issued Accounting Standards

See Note 1 to Notes to Consolidated Financial Statements for a complete
discussion of recently issued accounting standards and their expected impact on
our consolidated financial statements.

Tabular Disclosure of Contractual Obligations

Contractual Obligations Payments due by period
----------------------
Less than
Total 1 year(1)
-------- ---------
Long -Term Debt Obligations
None
Capital (Finance) Lease Obligations
None
Operating Lease Obligations
None
Purchase Obligations
None
Other Long-Term Liabilities Reflected on the
Company's Balance Sheet under the GAAP of
the primary financial statements:
McNab LLC $255,000 $255,000
-------- --------
Total $255,000 $255,000
======== ========

(1) We have no contractual obligations that extend further than one year.

Item 8. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

Report of Independent Accountants 24
Consolidated Balance Sheets as of December 31, 2002 and 2003 25
Consolidated Statements of Operations for Each of the Three
Years in the Period Ended December 31, 2003 26
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for Each of the Three Years in the Period Ended
December 31, 2003 27
Consolidated Statements of Cash Flows for Each of the Three
Years in the Period Ended December 31, 2003 28
Notes to Consolidated Financial Statements 29

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Homecom Communications, Inc.

We have audited the accompanying consolidated balance sheets of HomeCom
Communications, Inc. and subsidiaries as of December 31, 2003 and 2002 and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the years ended December 31, 2003, 2002 and 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement and presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of HomeCom
Communications, Inc. and subsidiaries as of December 31, 2003 and 2002 and the
results of its operations and its cash flows for the years ended December 31,
2003, 2002 and 2001 in conformity with accounting principles generally accepted
in the United States of America .

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has experienced recurring losses and negative
cash flows since its inception and has an accumulated deficit. The Company is
dependent on continued financing from investors to sustain its activities and
there is no assurance that such financing will be available. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/Sherb & Company, LLC
-----------------------
Sherb & Company, LLC
Certified Public Accountants
New York, New York
May 12, 2004

HOMECOM COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS

December 31,
----------------------------
2002 2003
------------ ------------
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 160,342 $ 71,818
Accounts receivable, net 243,159 274,418
------------ ------------
Total current assets 403,501 346,236
Prepaid expenses 20,358 27,257
Furniture, fixtures and equipment, net 83,695 105,624
Intangible assets, net -- 871,164
------------ ------------
Total assets $ 507,554 $ 1,350,281
============ ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,109,069 $ 2,807,924
------------ ------------
Total current liabilities 2,109,069 2,807,924
Note payable -- 255,000
Convertible preferred stock (See note 6) -- 6,442,133
------------ ------------
Total liabilities 2,109,069 9,505,057
------------ ------------
Redeemable Convertible Preferred stock, Series B, $.01 par value,
125 shares authorized, 125 shares issued and 17.8 shares
outstanding at December 31, 2002, convertible, participating
(See Note 7) 251,750 --
------------ ------------

STOCKHOLDERS' DEFICIT:
Common stock, $.0001 par value, 15,000,000 shares authorized,
14,999,157 shares issued and outstanding at December 31, 2002
and 2003, respectively 1,500 1,500
Preferred stock, Series C, $.01 par value, 175 shares issued and
authorized, 90.5 shares outstanding at December 31, 2002,
convertible, participating (See Note 8) 1 --
Preferred stock, Series D, $.01 par value, 75 shares issued and
authorized, 1.3 shares outstanding at December 31, 2002,
convertible, participating (See Note 9) 1 --
Preferred stock, Series E, $.01 par value, 106.4 shares issued
and authorized, 106.4 shares outstanding at December 31, 2002,
convertible, participating (See Note 10) 1 --
Preferred stock, Series H, $.01 par value, 13,500 shares
authorized, 13,500 shares issued and outstanding as of at
December 31, 2003, convertible, participating; $13,500,000
liquidation value at December 31, 2003 -- 135
Treasury stock, 123,695 shares at December 31, 2003 (8,659) (8,659)
Additional paid-in capital 23,949,577 19,228,820
Accumulated deficit (25,795,686) (27,376,572)
------------ ------------
Total stockholders' deficit (1,853,265) (8,154,776)
------------ ------------
Total liabilities and stockholders' deficit $ 507,554 $ 1,350,281
============ ============

The accompanying notes are an integral part of these consolidated financial statements.

HOMECOM COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,
--------------------------------------------
2001 2002 2003
------------ ------------ ------------

Revenues $ -- $ -- $ 8,246
Cost of revenues -- -- 8,731
------------ ------------ ------------
GROSS PROFIT -- -- (485)
------------ ------------ ------------

OPERATING EXPENSES:
Sales and marketing
Product development
General and administrative 286,946 187,449 325,281
Depreciation and amortization -- -- 115,059
Asset impairment charge 493,905 52,584 --
------------ ------------ ------------
Total operating expenses 780,851 240,033 440,340
------------ ------------ ------------
OPERATING LOSS (780,851) (240,033) (440,825)

OTHER INCOME
Interest expense -- -- 480,135
Other income (146,362) (26,637) (91,826)
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (634,489) (213,396) (829,134)

INCOME TAX PROVISION (BENEFIT)
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (634,489) (213,396) (829,134)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
NET OF TAX -- -- (802,730)
GAIN (LOSS) ON DISPOSAL OF DISCONTINUED BUSINESS
SEGMENT 394,543 -- (125,030)
GAIN (LOSS) FROM DISCONTINUED OPERATIONS (212,515) 118,001 176,008
------------ ------------ ------------
NET LOSS (452,461) (95,395) (1,580,886)

DEEMED PREFERRED STOCK DIVIDEND (708,778) (706,733) (336,361)
------------ ------------ ------------
LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (1,161,239) $ (802,128) $ (1,917,247)
============ ============ ============

GAIN (LOSS) PER SHARE--BASIC AND DILUTED
CONTINUING OPERATIONS $ (0.136) $ (0.061) $ (0.078)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX -- -- (0.053)
DISCONTINUED OPERATIONS 0.018 0.008 0.003
------------ ------------ ------------
TOTAL $ (0.118) $ (0.053) $ (0.128)
============ ============ ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 9,869,074 14,999,157 14,999,157
============ ============ ============

The accompanying notes are an integral part of these consolidated financial statements.

HOMECOM COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

For Each of the Three Years in the Period Ended December 31, 2003

Preferred Stock Common Stock Treasury
Shares Amount Shares Amount Stock
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2000 200 $ 3 9,359,156 $ 936 $ --

Receipt of Treasury stock -- -- -- -- (8,659)
Conversion of Series C
preferred stock to
common shares (2) -- 5,640,000 564 --
Penalties on preferred
stock -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2001 198 3 14,999,157 1,500 (8,659)

Penalties on preferred stock -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2002 198 3 14,999,157 1,500 (8,659)

Issuance of Series H
preferred stock (see
note 11) 13,500 135 -- -- --
Reclassification of
preferred stock (see
note 6) (198) (3) -- -- --
Penalties on preferred
stock -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2003 13,500 $ 135 14,999,157 $ 1,500 $ (8,659)
============ ============ ============ ============ ============

Table continues below.

Additional Total
Paid-In Subscriptions Accumulated Stockholders'
Capital Receivable Deficit Deficit
------------ ------------ ------------ ------------
Balance, December 31, 2000 $ 25,226,101 $ 0 $(25,247,830) $ (20,790)

Receipt of Treasury stock -- -- -- (8,659)
Conversion of Series C
preferred stock to
common shares (564) -- -- --
Penalties on preferred
stock (637,573) -- -- (637,573)
Net loss -- -- (452,461) (452,461)
------------ ------------ ------------ ------------
Balance, December 31, 2001 24,587,964 0 (25,700,291) (1,119,483)

Penalties on preferred stock (638,387) -- -- (638,387)
Net loss -- -- (95,395) (95,395)
------------ ------------ ------------ ------------
Balance, December 31, 2002 $ 23,949,577 0 (25,795,686) (1,853,265)

Issuance of Series H
preferred stock (see
note 11) -- -- -- 135
Reclassification of
preferred stock (see
note 6) (4,401,563) -- -- (4,401,566)
Penalties on preferred
stock (319,194) -- -- (319,194)
Net loss -- -- (1,580,886) (1,580,886)
------------ ------------ ------------ ------------
Balance, December 31, 2003 $ 19,228,820 $ 0 $(27,376,572) $ (8,154,776)
============ ============ ============ ============

The accompanying notes are an integral part of these consolidated financial statements.

HOMECOM COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,
-----------------------------------------
2001 2002 2003
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (452,461) $ (95,395) $(1,580,886)
Adjustments to reconcile net loss to cash used in operating activities:
Cumulative effect of a change in accounting principle -- -- 802,730
Write down of investment, fixed assets and intangibles 477,759 52,584 --
Provision for bad debts 37,472 (24,813) 3,499
Deferred rent expense 2,698 (5,480) --
Change in operating assets and liabilities:
Accounts receivable 24,433 (64,202) (34,758)
Prepaid expenses -- (20,358) (6,899)
Accounts payable and accrued expenses (982,431) (56,962) 619,749
Loss on sale of division -- -- (125,030)
----------- ----------- -----------
Net cash used in operating activities (892,530) (214,626) (321,595)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures and equipment (15,679) (38,378) (21,929)
Proceeds from sale of divisions 864,603 -- --
----------- ----------- -----------
Net cash provided by (used in) investing activities 848,924 (38,378) (21,929)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (63,764) -- --
Issuance of Note Payable -- -- 255,000
----------- ----------- -----------
Net cash provided by (used in) financing activities (63,764) -- 255,000
----------- ----------- -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS $ (107,370) $ (253,004) (88,524)
CASH AND CASH EQUIVALENTS at beginning of year 520,716 413,346 160,342
----------- ----------- -----------
CASH AND CASH EQUIVALENTS at end of year $ 413,346 $ 160,342 $ 71,818
=========== =========== ===========

Supplemental Data:

Year 2003

Preferred stock issued for acquisition of technology licenses, $986,223

Accrued penalty on preferred stock, $638,388

Year 2001

1.63 shares of preferred stock were converted into 5,640,000 shares of common
stock. 123,695 shares of common stock were returned to the Company and
classified as treasury stock (See Note 12).

The accompanying notes are an integral part of these consolidated financial statements.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business and Basis of Presentation--Going Concern

Historically, HomeCom Communications, Inc. (the "Company") developed and
marketed specialized software applications, products and services to enable
financial institutions and their customers to use the Internet and
intranets/extranets to obtain and communicate important business information,
conduct commercial transactions and improve business productivity. Revenue was
derived from professional web development services, software licensing,
application development, insurance and securities sales commissions, hosting
fees and transactions fees.

On May 22, 2003, the company completed a transaction with Eurotech, Ltd.
("Eurotech") to license certain technologies related to hazardous materials
handling, electromagnetic radiography, and chemical processing. Currently, we
license the EKOR, HNIPU, EMR/AC, Rad-X, Firesil, LEM and RBHM technologies from
Eurotech. We intend to use these licenses to derive revenue by partnering with
other technology firms to sell raw materials to producers to manufacture,
distribute and sell or to sublicense these technologies and collect royalties
and/or licensing fees.

The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplate the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred significant losses since its incorporation,
resulting in an accumulated deficit at December 31, 2003 of approximately $27
million. The Company continues to experience negative cash flows from operations
and is dependent on continued financing from investors to sustain its
activities. There is no assurance that such financing will be available. These
factors raise substantial doubt about the Company's ability to continue as a
going concern.

Asset Impairment

The Company evaluates the recoverability and carrying value of its
long-lived assets at each balance sheet date, based on guidance in SFAS No. 144,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. Among other factors considered in such evaluation is the
historical and projected operating performance of business operations, the
operating environment and business strategy, competitive information and market
trends. The Company recognized a charge of $52,584 and $493,905 during the years
ending December 31, 2002 and 2001 respectively for asset impairment.

Intangible Assets

Intangible assets represent the technologies licensed from Eurotech. These
licenses were valued at $986,223 and are being amortized on a straight line
basis over five years. The current intangible balance of $871,164 represents the
original valuation less $115,059 amortized through December 31, 2003.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, subsequent to acquisition, after the
elimination of all significant intercompany accounts and transactions.

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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statements of cash flows, management considers all
highly liquid investments with a maturity of three months or less when purchased
to be cash equivalents.

Accounts Receivable, Net

Accounts receivable are shown net of the allowance for doubtful accounts.

Allowance for Doubtful Accounts
Three Years ended December 31, 2003

Description Balance at Additions (Reductions) Deductions Balance at
Beginning of Charged to Costs and (A/R Written Off End of Period
Period Expenses to Bad Debt)
-------------------- ------------ ---------------------- ---------------- -------------

Year Ending 12/31/01 $ (31,075) $ (52,321) $ 14,850 $(68,546)
Year Ending 12/31/02 $ (68,546) $ (21,113) $ 45,926 $(43,733)
Year Ending 12/31/03 $ (43,733) $ (10,479) $ 6,980 $(47,232)

Furniture, Fixtures and Equipment, Net

Furniture, fixtures and equipment are recorded at cost less accumulated
depreciation, which is computed using the straight-line method over the
estimated useful lives of the related assets. Furniture and fixtures are
depreciated over a 5 year life; computer equipment is depreciated over a 3 year
life. Assets recorded under capital leases are amortized over the shorter of
their useful lives or the term of the related leases using the straight-line
method. Maintenance and repairs are charged to expense as incurred. Upon sale,
retirement or other disposition of these assets, the cost and the related
accumulated depreciation are removed from the respective accounts and any gain
or loss on the disposition is included in income. The company has suspended
depreciation of its assets related to its Internet Services unit.

Fair Value of Financial Instruments

The carrying amounts of the Company's financial instruments approximates
fair value.

Revenue Recognition

Revenue from the sale of products related to our licensed technology is
recognized upon shipment of the product provided that title passes, the price is
fixed or determinable and collection of the receivable is probable.

Advertising Expenses

Advertising costs are expensed when incurred. No advertising expenses were
incurred for the years ended December 31, 2001, 2002 or 2003.

Income Taxes

The Company accounts for income taxes using the asset and liability method
as described by Statement of Financial Accounting Standards No. 109, Accounting
For Income Taxes ("SFAS No. 109").

Under SFAS 109 the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

The Company provides a valuation allowance for deferred tax assets which
are determined by management to be below the threshold for realization
established by SFAS 109.

Basic and Diluted Loss Per Share

Basic and diluted loss per share are calculated according to the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("FAS 128"). Due to the net loss position of the Company for each of the three
years in the period ending December 31, 2003, the numerator and denominator are
the same for both basic and diluted loss per share.

The table below illustrates the calculation of the loss per share amounts
attributable to continuing and discontinued operations applicable to common
shareholders.

Year Ended December 31,
--------------------------------------------
2001 2002 2003
------------ ------------ ------------

Loss from continuing operations $ (634,489) $ (213,396) $ (829,134)
Less: Cumulative effect of change in accounting principle,
net of tax -- -- (802,730)
Less: Deemed Preferred stock dividend (708,778) (706,733) (336,361)
------------ ------------ ------------
Loss from continuing operations applicable to common
shareholders (1,343,267) (920,129) (1,968,225)
Discontinued operations 182,028 118,001 50,978
------------ ------------ ------------
Net loss applicable to common shareholders $ (1,161,239) $ (95,395) $ (1,917,247)
============ ============ ============
Weighted average common shares outstanding--
Basic and diluted 9,869,074 14,999,157 14,999,157
------------ ------------ ------------
Loss per share--continuing operations $ (0.136) $ (0.061) $ (0.078)
Gain per share--discontinued operations 0.018 0.008 0.003
------------ ------------ ------------
Loss per share--before cumulative effect of accounting
principle (0.118) (0.053) (0.066)
Loss per share--cumulative effect of a change in accounting
principle, net of tax -- -- (0.053)
------------ ------------ ------------
$ (0.118) $ (0.053) $ (0.128)
============ ============ ============

The Company has not declared or paid any dividends to the shareholders of
the Preferred Stock. However, the Preferred Stock possesses conversion rights
(the "Beneficial Conversion Feature") that are analogous to dividends.
Accordingly, the Beneficial Conversion Feature has been accounted for as a
Deemed Preferred Stock Dividend. (See footnotes 7, 8, 9 and 10). Historically
the Company accrued penalty interest related to the failure to register common
stock as required by various private placement agreements and prior to adoption
of SFAS 150, "Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity", on July 1, 2003, this penalty interest was
accounted for as a deemed preferred stock dividend as well (see footnote 6).

Recently Issued Accounting Standards

In December 2003, the FASB issued Interpretation No. 46 (as revised),
"Consolidation of Variable Interest Entities." Implementation of the provisions
of FIN 46 is effective for the first reporting period after March 15, 2004. FIN
46 requires the consolidation of entities that are controlled by a company
through interests other than voting interests. Under the requirements of this
interpretation, an entity that maintains a majority of the risks or reward
associated with VIEs , also known as Special Purpose Entities, is viewed to be
effectively in the same position as the parent in a parent-subsidiary
relationship. The Company has determined that it has not created or entered into
any VIEs that would require consolidation. The Company believes the adoption of
the provisions of FIN 46 in the first quarter of 2004 will have no impact on its
results of operations, cash flows or financial position.

In April 2003, the FASB issued Statement No. 149, "Amendment of Statement
No. 133 on Derivative Instruments and Hedging Activities" (SFAS No. 149). This
Statement amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133. The provisions of this
Statement are effective for all derivatives and hedging activity that the
Company enters into after June 30, 2003. The adoption of this Statement had no
impact on the Company's results of operations, cash flows or financial position.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS No. 146), which addresses the
recognition, measurement, and reporting of costs associated with exit or
disposal activities and supercedes EITF No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)" (EITF 94-3). The
fundamental difference between SFAS No. 146 and EITF 94-3 is the requirement
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred rather than at the date an entity
commits to an exit plan, which by itself, does not create an obligation that
meets the definition of a liability. SFAS No. 146 also requires that the initial
measurement of a liability be recorded at fair value. The provisions of this
statement are effective for exit or disposal activities that are initiated after
December 31, 2002, with an early application encouraged. The adoption of this
statement had no impact on the Company's results of operations, cash flows or
financial position.

Stock Based Compensation

The Company applies the intrinsic value method, Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), in
accounting for employee stock-based compensation arrangements. The Company has
included the pro-forma disclosures required under SFAS No. 123, "Accounting for
Stock-Based Compensation". Non-employee stock compensation arrangements are
accounted for under FAS 123 and EITF 96-18, "Accounting for Equity Instruments
that are Issued to Other than Employees, or in Conjunction with Selling Goods or
Services."

Based on calculations using the Black-Scholes option-pricing model, the
weighted average grant date fair value of options and warrants was $0, $0 and $0
in 2001, 2002 and 2003, respectively. The fair value has been estimated using
the following assumptions used for grants in 2001, 2002 and 2003, respectively:
no dividend yield for all periods; an expected life of 5 years for all periods;
volatility of 106%, 110% and 110%; and weighted average risk free interest rates
was not applicable.

The pro forma impact on the Company's net loss per share had compensation
cost for all of the Company's stock-based compensation plans been recorded at
the date of grant based on the method prescribed by SFAS No. 123 is shown below:

Year Ended December 31,
---------------------------------------
2001 2002 2003
----------- --------- -----------
Loss applicable to common shareholders:
As reported $(1,161,239) $(802,128) $(1,917,247)
Pro forma (1,073,237) (971,837) (2,010,388)
Basic and diluted loss per share:
As reported (0.118) (0.053) (0.128)
Pro forma (0.109) (0.065) (0.134)

Other Matters

Certain prior year amounts have been reclassified to conform to current
year presentation.

2. FURNITURE, FIXTURES AND EQUIPMENT, NET

Furniture, fixtures and equipment, net, are comprised of the following as
of:

December 31,
---------------------
2002 2003
-------- --------
Furniture and fixtures $ 29,525 $ 17,715
Computer equipment 106,754 87,909
-------- --------
136,279 105,624
Less: write down to fair value less costs to sell 52,584
-------- --------
$ 83,695 $105,624
======== ========

During the year ending December 31, 2002 Furniture, Fixtures and Equipment
was adjusted to reflect estimated realizable value pending sale.

3. INTANGIBLE ASSETS

Intangible assets consist of the following:

December 31,
2003
---------
Licensed Technology Rights 986,223
Amortization to date (115,059)
---------
$ 871,164
=========

The technologies licensed from Eurotech were valued at $986,223 and are
being amortized on a straight line basis over five years. The current intangible
balance of $871,164 represents the original valuation less $115,059 amortized
through December 31, 2003.

4. SEGMENT INFORMATION

On March 27, 2003, we entered into an asset purchase agreement to sell the
remaining assets of the Company's Internet Services segment. With the entrance
into the licensing agreement with Eurotech on May 22, 2003 this segment,
Licensed Technologies, has become the Company's only operating segment.

The Internet Services segment contributed a loss of $212,000 for the year
ending December 31, 2001, a gain of $118,001 in the year ending December 31,
2002 and a gain of $176,008 in the year ending December 31, 2003.

5. COMMITMENTS AND CONTINGENCIES

The Company leases office space and equipment under non-cancelable
operating lease agreements expiring through 2003. The Company has previously
entered into capital leases of computer equipment. Future minimum lease payments
under operating leases are $170,758 for the year ending December 31, 2004.

As of March 26, 2004 we occupy approximately 7,000 square feet in one
office building in Atlanta, Georgia under a lease expiring in October 2004. This
facility serves as our headquarters and computer center. We have abandoned an
office in New York City where we used to occupy approximately 3,400 square feet
under a lease that expired in January 2003.

As of December 31, 2003 we have an accrual for real estate disposition
liabilities of approximately $81,317, which we believe will be sufficient to
settle all obligations related to the closing and abandonment of our offices in
New York.

Rental expense under operating leases was approximately $150,307, $157,772
and $177,825 for the years ended December 31, 2001, 2002 and 2003 respectively.

Various legal proceedings may arise in the normal course of business.
Additionally, the Company's software and equipment are vulnerable to computer
viruses or similar disruptive problems caused by customers or other Internet
users. Computer viruses or problems caused by third parties could lead to
interruptions, delays or cessation in service to the Company's customers.
Moreover, customers of the Company could use computer files and information
stored on or transmitted to Web server computers maintained by the Company to
engage in illegal activities that may be unknown or undetectable by the Company,
including fraud and misrepresentation, and unauthorized access to computer
systems of others. Furthermore, inappropriate use of the Internet by third
parties could also jeopardize the security of customers' confidential
information that is stored in the Company's computer systems. Any such actions
could subject the Company to liability to third parties. The Company does not
have errors and omissions, product liability or other insurance to protect
against risks caused by computer viruses or other misuse of software or
equipment by third parties. Although the Company attempts to limit its liability
to customers for these types of risks through contractual provisions, there can
be no assurance that these provisions will be enforceable. Management does not
believe that there are currently any asserted or unasserted claims that will
have a material adverse effect on the financial position, results of operations
or cash flows of the Company.

6. EQUITY AND CONVERTIBLE DEBT TRANSACTIONS

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 establishes standards for classification and measurement in the
statement of financial position of certain financial instruments with
characteristics of both liabilities and equity. It requires classification of a
financial instrument that is within its scope as a liability (or an asset in
some circumstances). SFAS No. 150 is effective for 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. For financial
instruments created before the issuance date of this statement, transition shall
be achieved by reporting the cumulative effect of a change in accounting
principle by initially measuring the financial instrument at fair value. We
adopted SFAS 150 on July 1, 2003.

Since the Series B, C, D, E and G Preferred Stock represent financial
instruments that embody unconditional obligations that will be settled with a
variable number of the Company's common equity shares, based on a fixed monetary
amount that was known at inception, the Company reclassified its Series B, C, D,
E and G Preferred Stock as a long term liability and recorded a loss of $802,730
as a cumulative effect of a change in accounting principle. We recorded each
series of Preferred Stock at its liquidation value as of July 1, 2003. The
Company believes that this represents the fair value of the obligation.
Preferred stock classified as a liability is reflected in the following table.

Series December 31, 2003
------ -----------------

Preferred B $ 432,283
Preferred C 2,235,834
Preferred D 31,639
Preferred E 2,673,377
Preferred G 1,069,000
----------
Total preferred stock $6,442,133
==========

In accordance with the terms of the private placement agreements underlying
our Series B, C, D, E, and G Preferred Stock, penalties accrue at the rate of 2%
per 30 day period of the outstanding purchase price of the unregistered
securities. Prior to the adoption of SFAS No. 150, these penalties were recorded
as deemed dividends in the amounts of $637,572, $638,387 and $319,194 for the
years ended December 31, 2001, 2002 and 2003 respectively. Since the adoption of

SFAS No. 150, and for the period from July 1, 2003 until December 31, 2003, the
Company has recorded $319,194 in interest expense related to the penalty and
$150,273 in interest expense related to the required increase in stated value as
called for in the conversion rate calculation of the Series B, C, D and E
Preferred stock.

At December 31, 2003, 142,000 warrants were outstanding at a weighted
average exercise price of $5.05.

7. ISSUANCE OF SERIES B PREFERRED STOCK

The Company issued Series B Preferred Stock totaling $2,500,000 on March
25, 1999 (the "Issuance Date"). The Series B Preferred Stock investors were
issued 125 shares of preferred stock, having a stated value of $20,000 per
share, and 225,000 warrants to purchase common stock at $5.70 per share. The
Company paid offering costs of $216,250 cash plus 25,000 warrants to purchase
common stock at $5.70 per share, resulting in net proceeds to the Company of
$2,283,750 for the preferred shares and warrants.

The Series B Preferred Stock bears no dividends and is convertible at the
option of the holder at the earlier of 90 days after issuance or the effective
date of a registration statement covering the shares. The warrants are
exercisable at any time and expire five years from the date of issuance.

The Series B Preferred Stock is convertible into common stock at a
conversion price equal to the lower of (a) the average of the closing price for
four consecutive trading days in the twenty-five consecutive trading days ending
one day prior to the conversion date ($4.86 at the Issuance date) and (b) $5.23.
The number of common shares into which the Series B Preferred Stock is
convertible is determined by dividing the stated value of the Series B Preferred
Stock, increased by 5% annually, by the conversion price. As the Series B
Preferred Stock was to be automatically convertible on March 24, 2002, the most
beneficial conversion ratio was determined to include the additional common
shares attributable to the 5% annual increase for the three year period ending
in 2002. After adjustment for this additional benefit the $4.86 conversion price
is reduced to $4.23, the most beneficial conversion price at the Issuance Date.

In determining the accounting for the beneficial conversion feature, the
Company first allocated the net proceeds of $2,283,750 to the preferred stock
and the warrants based on their relative fair values at the Issuance Date,
resulting in $1,766,217 assigned to the preferred stock and $517,533 assigned to
the warrants as of March 24, 1999. The Company then allocated $899,284 of the
Series B net proceeds to additional paid in capital for the beneficial
conversion feature. The beneficial conversion feature will be recognized as a
deemed dividend to the preferred shareholders over the minimum period in which
the preferred shareholders can realize that return. Approximately $18,000 and
$2,672 of the beneficial conversion was amortized in 2000 and 2001,
respectively. During 1999, 10 shares of Series B Preferred Stock were converted
into 63,317 shares of common stock. During 2000, 97.19 shares of Series B
Preferred Stock were converted into 902,307 shares of common stock.

The Company has the option to redeem the Series B Preferred Stock after 110
days for 120% of face value. Additionally, if the Company has issued common
stock upon conversion of the Series B Preferred Stock such that 19.99% of the
common stock outstanding is held by the preferred shareholders, the Company must
obtain approval of the shareholders before any more preferred shares can be
converted. If such approval is not obtained within 60 days of notice, the
preferred shareholders may require the Company to repurchase the remaining
Series B Preferred Stock at 120% of face value. Historically the Series B
Preferred Stock was presented outside of permanent equity as the outcome of the
shareholder vote, and possible redemption, was outside of the control of the
Company.

In March of 2002, the outstanding shares of our Series B preferred stock
were scheduled to convert automatically into shares of common stock, pursuant to
the Certificate of Designations governing our Series B preferred stock; however,
because we did not have a sufficient number of authorized shares of Common Stock
available for issuance upon conversion of these shares of Series B preferred
stock, no shares of Series B preferred stock have been converted. These
provisions have subsequently been waived by the holders of the Series B
preferred stock (see note 15).

8. ISSUANCE OF SERIES C PREFERRED STOCK

On July 28, 1999, the Company completed a private placement of $3,500,000
principal amount of the Company's Series C Convertible Preferred Stock, par
value $.01 per share (the "Series C Preferred Stock") and warrants to acquire up
to 59,574 shares of Common Stock (the "Series C Preferred Warrants"). The Series
C Preferred Stock has an initial stated value of $20,000 per share, which stated
value increases at the rate of 6% per year (such stated value, as increased from
time to time, is referred to as the "Series C Stated Value"). Each Series C
Preferred Share is convertible, from and after 120 days following the date of
issuance, at the option of the holder, into such number of shares of Common
Stock as is determined by dividing the Series C Stated Value by the lesser of
(a) $5.875, and (b) 82.5% of the average of the closing bid prices for the five
trading days preceding the date of conversion. Any Series C Preferred Stock
issued and outstanding on July 22, 2002 to automatically be converted into
Common Stock at the conversion price then in effect.

In determining the accounting for the beneficial conversion feature, the
Company first allocated the net proceeds of $3,323,748 to the preferred stock
and the warrants based on their relative fair values at the Issuance Date,
resulting in $3,170,904 assigned to the preferred stock and $152,844 assigned to
the warrants as of July 27, 1999. The Company then allocated $1,678,505 of the
Series C net proceeds to additional paid in capital for the beneficial
conversion feature. The beneficial conversion feature will be recognized as a
deemed dividend to the preferred shareholders over the minimum period in which
the preferred shareholders can realize that return. Approximately $72,000 and
$190 of the beneficial conversion was amortized in 2000 and 2001, respectively.
During 1999, 37.5 shares of Series C Preferred Stock were converted into 281,460
shares of common stock. During 2000, 45.4 shares of Series C Preferred Stock
were converted in to 802,056 shares of common stock. During 2001, 1.63 shares of
Series C Preferred Stock was converted into 5,640,000 shares of Common Stock.

The Company has the right, in its sole discretion, to redeem, from time to
time, any or all of the Series C Preferred Stock; provided that certain
conditions are met, including the availability of cash, credit or standby
underwriting facilities available to fund the redemption at 120% of the original
purchase price.

In July 2002, the outstanding shares of our Series C preferred stock were
scheduled to convert automatically into shares of common stock, pursuant to the
Certificate of Designations governing our Series C preferred stock; however,
because we did not have a sufficient number of authorized shares of common stock
available for issuance upon conversion of these shares of Series C preferred
stock, no shares of Series C preferred stock have been converted. These
provisions have subsequently been waived by the holders of the Series C
preferred stock (see note 15).

The Series C Preferred Warrants expire on July 27, 2004 and have an
exercise price of $7.34 per share, subject to adjustment under certain
circumstances.

9. ISSUANCE OF SERIES D PREFERRED STOCK

On September 28, 1999, the Company completed a private placement of
$1,500,000 principal amount of the Company's Series D Convertible Preferred
Stock, par value $.01 per share (the "Series D Preferred Stock") and warrants to
acquire up to 25,000 shares of Common Stock (the "Series D Preferred Warrants").
The Series D Preferred Stock has an initial stated value of $20,000 per share,
which stated value increases at the rate of 6% per year (such stated value, as
increased from time to time, is referred to as the "Series D Stated Value").
Each Series D Preferred Share is convertible, from and after 120 days following
the date of issuance, at the option of the holder, into such number of shares of
Common Stock as is determined by dividing the Series D Stated Value by the
lesser of (a) $5.875, and (b) 82.5% of the average of the closing bid prices for
the five trading days preceding the date of conversion. Any Series D Preferred
Stock issued and outstanding on September 22, 2002 was to automatically be
converted into Common Stock at the conversion price then in effect.

In determining the accounting for the beneficial conversion feature, the
Company first allocated the net proceeds of $1,423,750 to the preferred stock
and the warrants based on their relative fair values at the Issuance Date,

resulting in $1,387,477 assigned to the preferred stock and $36,273 assigned to
the warrants as of September 28, 1999. The Company then allocated $642,084 of
the Series D net proceeds to additional paid in capital for the beneficial
conversion feature. The beneficial conversion feature will be recognized as a
deemed dividend to the preferred shareholders over the minimum period in which
the preferred shareholders can realize that return. Approximately $280,000 and
$281,000 of the beneficial conversion was amortized in 1999 and 2000,
respectively. During 2000, 73.7 shares of Series D Preferred Stock were
converted into 589,573 shares of common stock.

The right of the holders of the Series D Preferred Stock to convert their
shares is also subject to the following restrictions: (i) during the period
beginning on the issuance date through the following 90 days, each holder may
not convert more than 25% of the Series D Preferred Stock purchased by such
holder; (ii) during the period beginning on the issuance date through the
following 120 days, each holder may not convert more than 50% of the Series D
Preferred Stock purchased by such holder; and (iii) during the period beginning
on the issuance date through the following 150 days, each holder may not convert
more than 75% of the Series D Preferred Stock purchased by such holder. At any
time after the issuance date, the Company shall have the right, in its sole
discretion, to redeem, from time.

In September 2002, the outstanding shares of our Series D preferred stock
were scheduled to convert automatically into shares of common stock, pursuant to
the Certificate of Designations governing our Series D preferred stock; however,
because we did not have a sufficient number of authorized shares of common stock
available for issuance upon conversion of these shares of Series D preferred
stock, no shares of Series D preferred stock have been converted. These
provisions have subsequently been waived by the holders of the Series D
preferred stock (see note 15).

10. ISSUANCE OF SERIES E PREFERRED STOCK

On April 14, 2000, the Company completed a private placement of $2,127,000
principal amount of the Company's Series E Convertible Preferred Stock, par
value $.01 per share (the "Series E Preferred Stock") and warrants to acquire
66,667 shares of common stock (the "Series E Preferred Warrants"). The Series E
Preferred Stock has an initial stated value of $20,000 per share, which stated
value increases at the rate of 8% per year. Each Series E Preferred Share is
convertible 120 days following the date of issuance, at the option of the
holder, into such number of shares of common stock as is determined by dividing
the Series E Stated Value by the lesser of (a) $3.53, or (b) 82.5% of the
average of the closing bid prices for the five trading days preceding the date
of conversion. Any Series E Preferred Stock issued and outstanding on April 14,
2003 were to automatically be converted into Common Stock at the conversion
price then in effect. These provisions have now been waived by the holders of
the Series E preferred stock (see note 15).

Pursuant to certain registration rights granted to the investors in the
private placement, we are obligated to file a registration statement under the
Securities Act of 1933 with respect to a minimum of 1,808,293 shares of common
stock issueable upon conversion of the Series E Preferred Stock and exercise of
the Series E Preferred Warrants. The Company is obligated to pay penalties if
the Registration Statement is not filed and/or declared effective within the
specified time periods. As of March 12, 2003, such registration statement has
not been declared effective and penalties are owed to the Series E Preferred
Stock holders.

At any time after the issuance date, the Company shall have the right, in
its sole discretion, to redeem, from time to time, any or all of the Series E
Preferred Stock; provided that certain conditions are met, including the
availability of cash, credit or standby underwriting facilities available to
fund the redemption. The redemption price will be calculated as (i) 105% of the
original purchase price for the first 30 days following the issuance date; (ii)
110% of the original purchase price for the next 90 days thereafter and (iii)
120% of the original purchase price after 120 days from the issuance date.

In determining the accounting for the beneficial conversion feature, the
Company first allocated the net proceeds of $1,855,426 to the Series E Preferred
Stock and the Series E Preferred Warrants based on their relative fair values at
the issuance date, resulting in $1,791,211 assigned to the Series E Preferred
Stock and $64,215 assigned to the Series E Preferred Warrants as of April 14,
2000. The Company then allocated $1,059,347 of the Series E Preferred Stock net

proceeds to additional paid in capital for the beneficial conversion feature.
The beneficial conversion feature will be recognized as a deemed dividend to the
preferred shareholders over the minimum period in which the preferred
shareholders can realize that return. $1,058,656 had been amortized as of
December 31, 2003.

The Series E Preferred Warrants expire on April 14, 2005 and have an
exercise price of $3.35 per share, subject to adjustment under certain
circumstances.

11. EUROTECH TRANSACTION AND ISSUANCE OF SERIES F, G AND H PREFERRED STOCK

On May 22, 2003, the Company entered into a License and Exchange Agreement
with Eurotech. Under the provisions of that agreement the Company issued two
series of preferred stock in consideration for the licensing arrangement.

On May 22, 2003, the Company issued 13,500 shares of the Company's Series F
Convertible Preferred Stock, par value $.01 per share. Each Series F Share was
convertible into 10,000 shares of common stock and has a stated value of $1,000
per share. The holders of the outstanding shares of Series F Preferred Stock
have cancelled and surrendered their Series F Shares and have been subsequently
issued shares of Series H Preferred Stock.

On September 30, 2003, the Company issued 13,500 shares of the Company's
Series H Convertible Preferred Stock, par value $.01 per share. Each Series H
Share is convertible into 10,000 shares of common stock and has a stated value
of $1,000 per share; provided, however, that no holder of Series H shares may
convert Series H shares into shares of common stock if the aggregate shares of
common stock beneficially owned by such holder and its affiliates would exceed
9.9% of the outstanding shares of common stock following such conversion
(excluding, for purposes of the calculation, the unconverted Series H Shares).

On May 22, 2003, the Company issued 1,069 shares of the Company's Series G
Convertible Preferred Stock, par value $.01 per share. The Series G shares have
a stated value of $1,000 per share. Each Series G Preferred Share is
convertible, from and after 120 days following the date of issuance, at the
option of the holder, into such number of shares of Common Stock as is
determined by dividing $1,000 per share by a number equal to 82.5% of the
average of the closing bid prices for the five trading days preceding the date
of conversion. No holder of Series G Shares may convert Series G Shares into
shares of common stock if the aggregate shares of Common Stock beneficially
owned by such holder and its affiliates would exceed 9.9% of the outstanding
shares of Common Stock following such conversion (excluding, for purposes of the
calculation, the unconverted Series G Shares). The Series G Preferred Stock has
no mandatory conversion date. In determining the accounting for the beneficial
conversion feature, the Company allocated $986,223 to the preferred stock based
on its relative fair value at the Issuance Date. The Company then allocated
$236,190 of the Series G value to additional paid in capital for the beneficial
conversion feature. The beneficial conversion feature will be recognized as a
deemed dividend to the preferred shareholders over the minimum period in which
the preferred shareholders can realize that return beginning on the date when
the shares are first convertible. No beneficial conversion has been amortized as
series G preferred stock is not convertible until sufficient new common stock
has been authorized and registered to provide for conversion of all other
preferred stock in preference to series G shares.

12. STOCK OPTION PLANS

The Company's Employee Stock Option Plan (the "Stock Option Plan") was
adopted by the Company's stockholders in September 1996. Shares of common stock
may be sold or awarded to officers, key employees and consultants. On March 3,
1999 at a Special Meeting of Stockholders, the Company's stockholders approved
an amendment to the Stock Option Plan which increased the number of shares
reserved for issuance under the Stock Option Plan to 2,000,000. Options granted
under the Stock Option Plan may be either (i) options intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code or (ii)
non-qualified stock options.

The options granted to purchase shares under the Stock Option Plan. The
options vest 25% per year and expire ten years after the grant date. The
exercise price of the options was at or above the fair market value of the stock
on the grant date.

The Company's Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") was adopted by the Company's stockholders in September 1996. Shares of
common stock may be sold or awarded to directors who are not officers or
employees of the Company ("Non-Employee Directors"). The Company has reserved
300,000 shares of common stock for issuance under the Directors' Plan.

The Directors' Plan provides for the automatic granting of an option to
purchase 10,000 shares of common stock to each Non-Employee Director who is
first appointed or elected to the Board of Directors. Also, each Non-Employee
Director is automatically granted an option to purchase 5,000 shares of common
stock on the date of each annual meeting of the Company's stockholders.
Furthermore, the Directors' Plan allows the Board of Directors to make
extraordinary grants of options to Non-Employee Directors.

Option activity under all of the stock option plans is summarized as
follows:

Year Ended December 31,
---------------------------------------------------------------------------------
2001 2002 2003
---------------------------------------------------------------------------------
Weighted-Average Weighted-Average Weighted-Average
Shares Exercise Shares Exercise Shares Exercise
Price Price Price
---------------------------------------------------------------------------------

Outstanding at beginning of year $ 791,644 $2.75 389,085 $2.31 387,419 $2.32
Granted 0 0.00 0 0.00 0 0.00
Exercised 0 0.00 0 0.00 0 0.00
Forfeited (402,559) 2.87 (1,666) 0.59 0 0.00
--------- --------- ---------
Outstanding at end of year 389,085 2.31 387,419 2.32 387,419 2.32
========= ========= =========
Options exercisable at year end 239,081 3.32 329,419 2.61 387,419 2.32
========= ========= =========
Shares available for future grant 1,610,915 1,612,581 1,612,581
========= ========= =========
Weighted-average fair value
of options granted during
the year at the shares'
fair value $ 0.00 $ 0.00 $ 0.00
========== ========= =========

The following table summarizes information about fixed options outstanding at
December 31, 2003.

Weighted Average
Remaining Contractual
Exercise Prices Shares Life
--------------- ---------- ---------------------
$0.59-0.75 231,095 6.2
$2.18-4.55 95,687 5.3
$6.00-6.13 60,637 4.4
----------
387,419 5.3
==========

13. ACQUISITIONS, DIVESTITURES AND DISCONTINED OPERATIONS

FIMI/InsureRate

On March 24, 1999, the Company acquired First Institutional Marketing,
Inc., and certain of its affiliates ("FIMI") of Houston, Texas for total
consideration of $4,236,104, consisting of 1,252,174 shares of common stock. The
acquisition was accounted for as a purchase transaction. The value of the shares
was determined by using the average closing stock price of the two days before
and after the definitive agreement was publicly announced. The resulting
intangible assets were being amortized over a period of approximately 3 to 7
years. Prior to the closing of the acquisition, the Company loaned the
shareholders of FIMI $370,000 ("FIMI notes"). The notes were to be repaid in
either cash or common stock and were collateralized by common stock.
Additionally, the principal shareholders of FIMI were granted 300,000 warrants
to acquire HomeCom common stock at an exercise price of $3.74 per share. Vesting
of the warrants was contingent upon FIMI meeting certain operating goals as
defined in the agreement.

On January 31, 2001, the Company sold substantially all of the assets of
FIMI and its affiliates to Digital Insurance, Inc. ("Digital") for approximately
$458,000 in cash and the assumption of certain liabilities. Additionally, the
FIMI notes were defaulted on and were exchanged for 123,695 shares of Company
common stock that collateralized the notes. This Common stock was returned to
the Company and has been treated as Treasury stock. It has been valued at
$8,659, or $0.07 per share, the fair market value at closing. Additionally, the
warrants were forfeited. The purchase price was established through arms' length
negotiations between the Company and Digital.

The Company has removed the results of this discontinued operation from the
continuing operations of the Company for all periods presented. The Company
recorded a loss of approximately $3 million on the sale of the assets of FIMI in
2000.

Internet Banking

On March 15, 2001, the Company sold substantially all of the assets of its
Internet Banking group to Netzee, Inc. ("Netzee") for $406,603 in cash. The
purchase price was established through arms' length negotiations between the
Company and Netzee. The Company has removed the results of this discontinued
operation from the continuing operations of the Company for all periods
presented. The Company recorded a gain of $394,543 on the sale of the Internet
Banking group in 2001.

Internet Services

The assets and liabilities of the Internet Services division are considered
held for sale. The following is a representation of the portion of the balance
sheet as of December 31, 2003 that is attributable to the division being sold.

ASSETS

CURRENT ASSETS
Cash and cash equivalents 50,000
Accounts receivable, net 70,000
-------
Total current assets 120,000
Furniture, fixtures and equipment held for sale 105,624
-------
Total assets 225,624
=======

LIABILITIES

CURRENT LIABILITIES:
Accounts payable and accrued expenses 5,000
-------
Total current liabilities 5,000
-------
Total liabilities 5,000
=======

The income from the segment held for sale is presented as the Internet
Services segment in footnote 4 to the Financial Statements. The portion of
Accounts Receivable that will be transferred to Tulix is subject to adjustment
in accordance with the provisions of the purchase agreement.

14. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows, as of:

December 31,
-----------------------------------------
2001 2002 2003
----------- ----------- -----------
Temporary differences:
Allowance for uncollectibles $ 27,000 $ 17,000 $ 19,000
Capital losses 167,000 167,000 167,000
Accrued legal fees 24,000 18,000 19,000
Deferred rent expense 96,000 83,000 33,000
Cash to accrual adjustment 35,000 0 0
Estimated loss on segment disposal 0 0 50,000
Net operating loss carryforward 7,644,000 7,849,000 8,001,000
----------- ----------- -----------
Deferred tax asset 7,993,000 8,134,000 8,289,000
Valuation allowance (7,975,000) (8,010,000) (8,083,000)
----------- ----------- -----------
Net deferred tax asset 18,000 124,000 206,000

Depreciation (18,000) (124,000) (206,000)
----------- ----------- -----------
Deferred tax liability (18,000) (124,000) (206,000)
----------- ----------- -----------
Net deferred tax asset (liability) $ -- $ -- $ --
=========== =========== ===========

At December 31, 2003, the Company had net operating loss carryforwards for
income tax purposes of approximately $20 million which begin to expire in 2011.
Realization of these assets is contingent on having future taxable earnings. In
addition, certain stock transactions during 1997 resulted in the Company
incurring an ownership change as defined in Internal Revenue Code Section 382.
The result of this ownership change is to substantially limit the future
utilization of the Company's net operating loss carryforwards as of the change
date. Certain stock transactions occurring in 1998 and 1999 may have resulted in
the Company incurring an ownership change, which may result in a limitation on
the Company's future utilization of net operating loss carryforwards generated
in 1998 and 1999. Based on the cumulative losses in recent years and the
limitation and the use of the Company's net operating losses management believes
that a full valuation allowance should be recorded against the deferred tax
asset.

The difference between the expected income tax benefit and the actual time
benefit computed by using the federal statutory rate of 35% is as follows:

Estimated income tax benefit at statutory federal $(553,000)
rate (79,000)
State income taxes, net of federal benefit 559,000
Permanent differences 73,000
---------
Change in valuation allowance
$ --
=========

15. SUBSEQUENT EVENT

On March 22, 2004 HomeCom Communications held a Special Meeting of the
Stockholders where the following proposals were approved by the stockholders:
(1) a proposal to sell substantially all of the assets of HomeCom's hosting and
website maintenance business to Tulix Systems, Inc., an entity in which Timothy
R. Robinson, Gia Bokuchava and Nino Doijashvili, who are directors and officers
of HomeCom, are the sole shareholders, directors and officers; (2) a proposal to
amend HomeCom's Certificate of Incorporation to change the name of the company
to "Global Matrechs, Inc."; (3) a proposal to amend HomeCom's Certificate of
Incorporation to increase the number of shares of common stock that HomeCom is
authorized to issue from 15,000,000 to 300,000,000; (4) a proposal to amend
HomeCom's Certificate of Incorporation to allow fewer than all of the
stockholders to approve actions by written consent without a stockholder
meeting; (5) a proposal to effect a reverse split of HomeCom's common stock at a
ratio of between 1-for-5 and 1-for-15, if and when (but not later than December

31, 2004) the Board of Directors determines that such a reverse split is in the
best interests of HomeCom; (6) proposals to amend the Certificates of
Designations, Preferences and Rights of HomeCom's Series B, Series C, Series D
and Series E preferred stock to delete the mandatory conversion provisions of
those series; and, (7) a proposal to elect Michael Sheppard, Timothy R.
Robinson, Gia Bokuchava, Nino Doijashvili, and Randolph A. Graves, Jr. to serve
on HomeCom's Board of Directors. Approval of the stockholders is one of the
prerequisites to HomeCom taking the actions set forth in the proposals.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Change in and Disagreements

Disclosure omitted pursuant to Instruction 1 of Item 304 of Regulation S-K.

Item 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Our principal
executive officer, who is also our principal financial officer, after evaluating
the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange
Act")) as of December 31, 2003, has concluded that our disclosure controls and
procedures are effective based on his evaluation of the controls and procedures
required by paragraph (b) of the Exchange Act Rules 13a-15 or 15d-15.

(b) Changes in Internal Controls over Financial Reporting. No changes in
our internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15
occurred during our last fiscal quarter that have materially affected or are
reasonably likely to materially affect, our internal control over financial
reporting.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Identification of Directors, Executive Officers and Significant Employees

The names and ages of the directors and executive officers of the Company
as of December 31, 2003 and certain information about them are set forth below.

Name Age Position
---- --- --------

Gia Bokuchava, Ph.D 39 Chief Technical Officer and Director
Timothy R. Robinson 40 Executive Vice President, Chief Financial Officer and Director
Nino Doijashvili, Ph.D. 41 Director of Technical Services and Director
Randolph Graves 64 Director, Vice President of License Technologies Division
Michael Sheppard 55 Director, Vice President of License Technologies Division

The Board is divided into three classes, each of which serves a three-year
term. The Class I director (Ms. Doijashvili) was to serve until the 2001 Annual
Meeting of Stockholders. However, because we never had a 2001 Annual Meeting of
Stockholders, she remains on the Board of Directors. The Class II directors (Dr.
Bokuchava and Mr. Robinson) were to serve until the 2002 Annual Meeting of
Stockholders. However, because we never had a 2002 Annual Meeting of
Stockholders, they remain on the Board of Directors. The Class III directors
(Mr. Sheppard and Dr. Graves, formerly Messrs. Sax and Ellsworth) were to serve
until the 2000 Annual Meeting of Stockholders. However, because we never held
the 2000 Annual Meeting of Stockholders, these individuals remain on the Board
of Directors, as well. Please note, however, that we expect Mr. Robinson, Mr.
Bokuchava and Ms. Doijashvili to resign from the Board of Directors if we
complete the sale of assets to Tulix, although they have indicated a willingness
to remain on the Board for a short transition period if requested.

On March 21, 2003, Mr. Danovitch and Mr. Shatsoff resigned from the Board
of Directors. The remaining members of the Board of Directors appointed Don V.
Hahnfeldt and Dr. Randolph A. Graves, Jr. to fill the vacancies created by the
resignations of Mr. Danovitch and Mr. Shatsoff, respectively, in anticipation of
our transaction with Eurotech. Upon closing of our transaction with Eurotech and
pursuant to the terms of our agreement with Eurotech, Mr. Hahnfeldt and Dr.
Graves, who were directors, officers and shareholders of Eurotech, were
appointed to serve as Vice Presidents of our Licensed Technology Division. Mr.
Hahnfeldt has subsequently resigned from his position as an officer and director
of the company.

Background of our Directors and Executive Officers

Gia Bokuchava, Ph.D., has served as our Chief Technical Officer since
August 1995. Dr. Bokuchava served as a visiting professor at Emory University
from September 1994 until August 1995 and was employed by the National Library
of Medicine, assisting in the development of Internet based applications, from
January 1995 until August 1995. From July 1990 until September 1994, Dr.
Bokuchava was the Director of The Computer Center at the Institute of Mechanical
Engineering at Georgia Technical University, Tblisi, Georgia (formerly a part of
the Soviet Union). Dr. Bokuchava has taught computer science as a visiting
associate professor at the Universities of Moscow and China. Dr. Bokuchava
received a doctorate in Theoretical Physics from Georgia Technical University,
Tblisi, in 1990. Dr. Bokuchava has been a member of the Board of Directors since
September 1996.

Timothy R. Robinson has served as our Executive Vice President, Chief
Financial Officer since August 2000. Prior to joining the Company, Mr. Robinson
served as Vice President and Chief Financial Officer of Tanner's Restaurant
Group, Inc. from December of 1996 until January of 2000. Mr. Robinson, a
Certified Public Accountant, served as a senior manager with the firm that is
now known as PricewaterhouseCoopers, LLP from June 1986 to December 1996. Mr.
Robinson graduated from Georgia State University with a Bachelor of Business
Administration, Accounting. Mr. Robinson has been a member of the Board since
March 2001.

Nino Doijashvili, Ph.D., has served as our Director of Technical Services
since December of 1997. Prior to that Dr. Doijashvili served as one of our
Senior Software Engineers from September 1995 until December 1997. Dr.

Doijashvili served as a visiting professor at Emory University from February
1995 until September 1995. From September 1989 until February 1995, Dr.
Doijashvili was an Associate Professor at the Georgia Technical University,
Tbilisi, Georgia (formerly a part of the Soviet Union) teaching CAD/CAM systems
and computer science. Dr Doijashvili received a doctorate in Computer Science
from Moscow Technical University, Russia in February 1989. Dr. Doijashvili has
been a member of the Board since April 2001.

Randolph A. Graves, Jr., DSc. has served as a Vice President of our
Licensed Technology Division since May 2003. In addition, Dr. Graves is the
Chief Financial Officer of Eurotech, Ltd., a position that he has held since
November 2002. Prior to this Dr. Graves was the Vice President for Technology,
focusing on technology evaluation, acquisition strategy, and analysis of
commercial competitiveness. Dr. Graves served as the Chairman and CEO of
Eurotech from May 1995 until January 1998 and was a member of the Board of
Directors from the date of Eurotech's incorporation until January 1998, from
February 1999 to July 2001, and has again served as a director since August 2001
to the present. He has also served in several other capacities for Eurotech over
the past three years. Dr. Graves also serves as a director of DayStar
Technologies, Inc. Dr. Graves has over thirty-five years experience with
technology development, management and application. He served twenty-six years
with NASA, finishing his career as a Senior Executive at NASA Headquarters. He
has served on numerous managerial and technical panels and committees including
a member of the White House's Federal Coordinating Council on Science
Engineering and Technology Subcommittee on High Performance Computing and as
NASA's member of NATO's Advisory Group on Aerospace Research and Development
Fluid Dynamics Panel. He is currently a member of George Washington University's
National Advisory Council for the School of Engineering Applied Science. Dr.
Graves was awarded a Sloan Fellowship at Stanford University's Graduate School
of Business in 1982. He also received NASA's Exceptional Performance Award for
his managerial activities at NASA Headquarters. Dr. Graves has been a member of
the Board since March 2003.

Michael Sheppard has served as a Vice President of our Licensed Technology
Division since May 2003. Mr. Sheppard was the COO and President of Technest
Holdings, Inc. Mr. Sheppard joined Technest in 1997, and headed up the
day-to-day strategy of Technest. He resigned from Technest in December 2002.
Prior to joining Technest, Mr. Sheppard was the Chief Operating Officer of
Freelinq Communications, a provider of real time video-on-demand via ATM/XDSL
technology. Mr. Sheppard has also acted as the Chief Executive Officer and Chief
Operating Officer of several early stage development companies, overseeing the
development of a corporate infrastructure for each company. From 1980 to 1992,
Mr. Sheppard served as the President of Lee America, a Westward Communications
Company whose North American holdings included Panavision, Inc. Mr. Sheppard has
an extensive background in the entertainment industry and received a BA and an
MFA in film from New York University. Mr. Sheppard has been a member of the
Board since November 2001.

Committees of the Board of Directors; Nominations by Stockholders; Code of
Ethics

Historically, the Board of Directors had four standing committees: a
Compensation Committee, an Audit Committee, a Strategic Planning Committee and
an Executive Committee. The Compensation Committee provided recommendations to
the Board of Directors concerning salaries and incentive compensation for
officers and employees of the Company. The Audit Committee recommended our
independent auditors and reviewed the results and scope of audit and other
accounting-related services provided by such auditors. The Strategic Planning
Committee was authorized to work with our investment bankers to identify and
evaluate strategic alternatives for us. The Executive Committee had day-to-day
executive decision-making authority on behalf of the Company, subject to the
overall review and approval of the Board of Directors.

With the resignation of the directors and the subsequent appointments to
the Board and resignations from the Board, these committees have been disbanded
and have not been reconstructed upon the filling of vacancies on the Board of
Directors. As such, the Board of Directors does not have any standing
committees, including either an audit committee or a nominating committee.

As we do not have an audit committee, the entire Board of Directors
performs the functions that would normally be delegated to an audit committee.
The Company has determined that its Chief Financial Officer, Timothy R.
Robinson, is an "audit committee financial expert" as that term is defined in
Item 401 of Regulation S-K. Because he is an employee of the Company, however,
he is not independent, as that term is defined in Rule 10A-3 under the
Securities and Exchange Act of 1934, as amended, or in Nasdaq Marketplace Rule
4200(a)(14).

As we do not have a nominating committee, we do not have a charter
governing the nomination of directors, but our Certificate of Incorporation
provides that nominations for the election of directors may be made by the Board
of Directors or by any stockholder of record entitled to vote generally in the
election of directors; provided, however, that any such stockholder may nominate
one or more persons for election as directors at a meeting only if written
notice of such stockholder's intent to make such nomination has been given to
the secretary of the Company in compliance with the Certificate of Incorporation
not later than: (1) with respect to any election of directors to be held at an
annual meeting of stockholders, 90 days in advance of such meeting and (2) with
respect to any election of directors to be held at a special meeting of
stockholders, at the close of business on the seventh day following the date on
which notice of such meeting is first given to stockholders. Such written notice
must contain (1) the names and addresses of the stockholder of record who
intends to make the nomination and of the person nominated, (2) a representation
that the stockholder is a holder of record of shares of the Company entitled to
vote at the meeting and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice, (3) a description of
all arrangements or undertakings between the stockholder and each nominee and
any other person pursuant to which the nomination is to be made by the
stockholder, (4) such other information regarding each nominee as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission as if the nominees were to be
nominated by the Board of Directors, and (5) the consent of each nominee to
serve as a director if elected. Each director participates in the nomination of
directors. Each of our directors is also an employee or officer of the Company
and is therefore not an independent director as that term is defined in Rule
10A-3 under the Securities and Exchange Act of 1934, as amended, or in Nasdaq
Marketplace Rule 4200(a)(14).

The Board of Directors does not provide a process for stockholders to send
communications to the Board of Directors, but the Company's Chief Financial
Officer, who is also one of our directors, can be contacted at the principal
offices of the Company at 3495 Piedmont Road, Building 12, Suite 110, Atlanta,
Georgia 30305. The telephone number at this address is (404) 237-4646. We are a
very small company, and we do not believe it is necessary to have a special
procedure for stockholders to contact the Board of Directors when some of our
directors are so easily accessible already.

The Board of Directors has not yet adopted a Code of Ethics. The Board of
Directors intends to do so following the completion of the sale of assets to
Tulix, as we expect the composition of the Board of Directors to change at such
time or shortly thereafter.

Legal Proceedings

We are not aware of any proceedings in which any of our directors, officers
or holders of five percent of our common stock have a material interest adverse
to us.

Meetings and Attendance

The full Board of Directors met five times during 2003. All of the
directors attended the meetings.

Compensation of Directors

Directors who are not employees of the Company are eligible to receive
$1,000 per Board meeting attended, although we have never made any payments to
our directors for attending meetings, are eligible to receive automatic grants
of stock options under the Company's Non-Employee Directors Stock Option Plan
and may receive additional grants of options under such plan at the discretion
of the Compensation Committee of the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the officers,
directors and persons who own more than ten percent of the Company's stock, to
file reports of ownership and changes of ownership with the Securities Exchange
Commission (SEC). Officers, directors and greater than ten percent owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.

Based solely on its review of the copies of such forms received by it, the
Company believes that, to the best of its knowledge, each of its officers,
directors, and greater than ten-percent owners complied with all section 16(a)
filing requirements applicable to them during the year ended December 31, 2003.

Item 11. EXECUTIVE COMPENSATION

Executive Compensation

The following table sets forth the total compensation paid or accrued by
the Company in 2003 to its Chief Executive Officer and each executive officer of
the Company whose total annual salary and bonus exceeded $100,000 (each, a
"Named Executive Officer"):

SUMMARY COMPENSATION TABLE

Annual Long-Term
Compensation Compensation Awards

Number of
Securities
Other Annual Underlying All Other
Position Year Salary Bonus (1) Compensation Options Compensation
-------- ---- ------ --------- ------------ ------- ------------

Gia Bokuchava, Ph.D 2003 $111,250
Chief Technical Officer 2002 $105,000
and Director 2001 $105,000

Timothy R. Robinson 2003 $135,000
Executive Vice 2002 $135,000
President, Chief 2001 $135,000 $25,000
Financial Officer and
Director

Nino Doijashvili 2003 $108,875
Director of Technical 2002 $102,000
Services and Director 2001 $102,000

Michael Sheppard 2003 $119,000
Vice President of
Licensed Technologies
Division and Director

---------------------
(1) Each of the Company's executive officers also is eligible to receive
cash bonuses to be awarded at the discretion of the Compensation Committee
of the Board of Directors.

No options were granted to or exercised by named executive officers in
2003. The following table sets forth the value of options held by the executive
officers at December 31, 2003:

Option Exercises in Last Fiscal Year and Year-End Option Values

Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Value Options at In-The-Money Options at
Executive Officer on Exercise Realized December 31, 2003 December 31, 2003
----------------- ----------- -------- -------------------------- --------------------------
Unexercisable Exercisable Unexercisable Exercisable
------------- ----------- ------------- -----------
Gia Bokuchava, Ph.D 0 0 0 25,000 $0 $0

Timothy R. Robinson 0 0 0 150,000 $0 $0

Nino Doijashvili 0 0 0 46,428 $0 $0

Employment Contracts and Compensation Policy

We have entered into an employment agreement with Timothy R. Robinson, our
Executive Vice President, Chief Financial Officer and Director. This employment
agreement is subject to early termination as provided therein, including
termination by the Company "for cause," as defined in the employment agreement.
The employment agreement provides for an annual base salary of not less than
$135,000 and for annual bonus compensation up to 30% of base salary. The
employment agreement further provides for a severance payment if termination
occurs for any reason other than for cause, with the minimum amount of such
severance payment to be equal to six months' salary. Further, the employment
agreement provides that any relocation or diminution of title, role or
compensation, as defined in the employment agreement, shall also result in the
payment of a severance amount of not less than six months' salary.

We have entered into an employment agreement with Gia Bokuchava, our Chief
Technical Officer. This employment agreement is subject to early termination as
provided therein, including termination by the Company "for cause," as defined
in the employment agreement. The employment agreement provides for an annual
base salary of not less than $105,000. The employment agreement further provides
for a severance payment if termination occurs for any reason other than for
cause, with the minimum amount of such severance payment to be equal to nine
months' salary. Further, the employment agreement provides that any relocation
or diminution of title, role or compensation, as defined in the employment
agreement, shall also result in the payment of a severance amount of not less
than nine months' salary.

Principal employees of the Company, including executive officers, are
required to sign an agreement with the Company (i) restricting the ability of
the employee to compete with the Company during his or her employment and for a
period of eighteen months thereafter, (ii) restricting solicitation of customers
and employees following employment with the Company, and (iii) providing for
ownership and assignment of intellectual property rights to the Company.

Pursuant to the Tulix Agreement, Mr. Robinson, Mr. Bokuchava, and Ms.
Doijashvili, on the one hand, and HomeCom, on the other hand, have agreed to
release one another from all claims arising out of the three executives'
respective employment with or separation from HomeCom, other than HomeCom claims
arising out of the Tulix Agreement or arising out of any fraud, willful
misconduct or criminal act. As such, the Company does not intend to pursue any
claims against Mr. Robinson, Mr. Bokuchava or Ms. Doijashvili relating to the
non-solicitation or non-competition provisions of their employment agreements.
In addition, the Company does not believe that these individuals will be in
competition with the Company if the Asset Sale is completed, given that Tulix
and the Company will operate in different industries.

There were no changes to the Company's executive compensation policies in
2003.

Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

Historically, the Board of Directors had four standing committees,
including a Compensation Committee. The Compensation Committee provided
recommendations to the Board of Directors concerning salaries and incentive
compensation for officers and employees of the Company.

As described under "Item 10, Directors and Executive Officers of the
Registrant - Committees of the Board of Directors; Nominations by Stockholders;
Code of Ethics," the Compensation Committee has been disbanded and has not been
reconstructed upon the filling of vacancies on the Board of Directors. The
compensation of our executive officers is set by reference to their employment
contracts (as described above) and by the Board of Directors. Mr. Robinson, Mr.
Bokuchava, Ms. Doijashvili and Mr. Sheppard all participated in deliberations
regarding executive compensation during the most recent fiscal year. There were
no changes in the Company's executive compensation policies in 2003.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Securities Authorized for Issuance under Equity Compensation Plans

The following table presents information as of December 31, 2003:

Equity Compensation Plan Information

Number of securities
Number of securities to be Weighted-average exercise remaining available for
issued upon exercise of price of outstanding future issuance under
Plan Category outstanding options, options, warrants and equity compensation plans
warrants and rights rights (excluding securities
reflected in column (a))
------------------------ -------------------------- -------------------------- -------------------------

(a) (b) (c)
Equity Compensation 329,419 $2.61 1,612,581
Plans approved by
security holders...

Equity Compensation N/A N/A N/A
Plans not approved
by security holders...

Total... 329,419 $2.61 1,612,581

Beneficial Ownership of Common Stock

The following tables provide information as of December 31, 2003 concerning
beneficial ownership of Common Stock by (1) each person or entity known by the
Company to beneficially own more than 5% of the outstanding Common Stock, (2)
each director for the Company, (3) each Named Executive Officer, and (4) all
directors and executive officers of the Company as a group. The information as
to beneficial ownership has been furnished by the respective stockholders,
directors, and executive officers of the Company and, unless otherwise
indicated, each of the stockholders has indicated that they have sole voting and
investment power with respect to the shares beneficially owned. This table
excludes holders of our convertible securities who have agreed to limit the
number of shares of common stock that any such shareholders hold at any one time
to not more than 4.99% of the outstanding shares of our common stock.

Amount and Nature of
Title of Class Name of Beneficial Owner (2) Beneficial Ownership (3) Percent of Class
-------------- ---------------------------- ------------------------ ----------------

Common Brittany Capital Management (7) 5,640,000 37.6%
Series H Preferred Eurotech, Ltd. (8) 1,648,077 9.9% (12)
Series H Preferred Polymate, Ltd. (9) 1,648,077 9.9% (12)
Series H Preferred Greenfield Capital Partners LLC (10) 1,648,077 9.9% (12)
Series G Preferred Woodward LLC (11) 1,648,077 9.9% (13)
Common George Bokuchava, Ph.D. (4) 64,559 (1)
Common Nino Doijashvili (6) 50,668 (1)
Common Timothy Robinson (5) 150,000 (1)
---------------------------

(1) Less than 1%.

(2) Except as otherwise noted, the street address of each named beneficial
owner is Building 12, Suite 110, 3495 Piedmont Road, Atlanta, Georgia
30305.

(3) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
of Common Stock beneficially owned, subject to community property laws
where applicable. Shares of Common Stock subject to options that are
currently exercisable or exercisable within sixty days of following the
date of this Report are deemed to be outstanding and to be beneficially
owned by the person holding such options for the purpose of computing the
percentage ownership of such person but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person.

(4) Includes 25,000 shares of Common Stock issuable upon the exercise of
options outstanding at a weighted average exercise price of $4.48 per
share.

(5) Includes 150,000 shares of Common Stock issuable upon the exercise of
options outstanding at an exercise price of $0.75.

(6) Includes 46,428 shares of Common Stock issuable upon exercise of
options outstanding at a weighted average exercise price of $0.59.

(7) The address for Brittany Capital Management is Cumberland House, #27
Cumberland Street, P.O. Box N-10818, Nassau, New Providence Island, The
Bahamas.

(8) The address for Eurotech, Ltd. is 10306 Eaton Place, Suite 220,
Fairfax, Virginia 22030.

(9) The address for Polymate, Ltd. is B'nai Brith 16, Haifa, Israel.

(10) The address for Greenfield Capital Partners LLC is 90 Grove Street,
Suite 206, Ridgefield, Connecticut 06877.

(11) The address for Woodward LLC is c/o Navigator Management Ltd., P.O.
Box 972 Road Town, British Virgin Islands.

(12) The Certificate of Designations for the Series H preferred stock
prohibits any holder of Series H preferred stock from converting shares of
Series H preferred stock into shares of common stock if such conversion
would result in the Series H holder beneficially owning more than 9.9% of
the outstanding shares of common stock (excluding, for purposes of the
calculation, the unconverted Series H shares).

(13) The Certificate of Designations for the Series G preferred stock
prohibits any holder of Series G preferred stock from converting shares of
Series G preferred stock into shares of common stock if such conversion
would result in the Series G holder beneficially owning more than 9.9% of
the outstanding shares of common stock (excluding, for purposes of the
calculation, the unconverted Series G shares).

Currently, there are 17.813 shares of our Series B preferred stock, 90.478
shares of our Series C preferred stock, 1.291 shares of our Series D preferred
stock, 106.35 shares of our Series E preferred stock, 13,500 shares of our
Series H preferred stock and 1,069 shares of our Series G preferred stock
outstanding. All of these shares of preferred stock, other than the shares of
Series H preferred stock and Series G preferred stock, are convertible into
shares of our common stock at any time. If all of these shares were converted
into shares of common stock, we would have an insufficient number of shares of
common stock authorized by our Certificate of Incorporation to support such
conversions.

Changes in Control

The Company is not aware of any arrangements that could result in a change
in control of the Company. However, the recently approved amendment to the
Company's Certificate of Incorporation to increase the number of shares of
common stock that the Company is authorized to issue from 15,000,000 to
300,000,000, once filed, and the subsequent issuance of such shares could result
in a small number of stockholders owning a significant percentage of the
outstanding shares of our common stock. Holders of outstanding shares of
convertible preferred stock will be able to convert their shares of preferred
stock into shares of common stock within prescribed limits (each holder of our
Series B, Series C, Series D and Series E preferred shares is subject to
restrictions in its respective Certificate of Designations regarding the
conversion of preferred shares into common shares if such conversion would
result in that stockholder beneficially owning more than 4.9% of the outstanding
shares of common stock and each holder of our Series G and Series H preferred
stock is prohibited by its respective Certificate of Designations from
converting preferred shares into common shares if such conversion would result
in that stockholder beneficially owning more than 9.9% of the outstanding shares
of common stock) and we may seek to sell shares to Brittany pursuant to our
Private Equity Credit Agreement with Brittany (the Private Equity Credit
Agreement restricts our sales to Brittany if those sales would result in
Brittany owning more than 9.9% of the outstanding shares of our common stock). A
significant number of shares could be issued to a small number of stockholders
within these ownership limitations. Moreover, these ownership restrictions
pertain only to the identified parties and do not apply to someone who acquires
shares of common stock from any of such parties. In addition, if we were to
elect to pay penalties that are owed to the holders of our Series C, Series D
and Series E preferred stock in shares of common stock instead of in cash, we
could become obligated to issue a substantial number of shares to those
shareholders. Thus, the amendment may make it possible for a small number of
stockholders to obtain a significant equity position in, and to exert
significant influence over, the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others

We have entered into an agreement with Tulix to sell substantially all of
the assets used in our hosting and web site maintenance business to Tulix.
Timothy R. Robinson, Gia Bokuchava and Nino Doijashvili, who are officers and
directors of both HomeCom and Tulix, own all of the outstanding stock of Tulix.
For a description of the proposed transaction with Tulix, please see Item 1,
"Recent Developments - Asset Purchase Agreement with Tulix."

We have also closed the transactions contemplated by the Exchange Agreement
and entered into the License Agreement with Eurotech. Dr. Graves (and formerly,
Mr. Hahnfeldt), who was appointed to serve on the Board of Directors of HomeCom
and as an officer of our new Licensed Technologies Division in connection with
the transactions between HomeCom and Eurotech, is an officer, director and
shareholder of Eurotech.

In addition, we have entered into a Private Equity Credit Agreement with
Brittany Capital Management LLC, which beneficially owns 5,640,000 shares of our
common stock, representing approximately 37.6% of the outstanding shares of our
common stock. See "Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources," for a
summary of the Private Equity Credit Agreement.

We have also issued a Secured Promissory Note to McNab LLC, which owns the
outstanding shares of our Series C, Series D, and Series E preferred stock. See
"Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources," for a summary of our
arrangement with McNab LLC.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth fees billed to us by our auditors during the
fiscal years ended December 31, 2003 and December 31, 2002 for: (i) services
rendered for the audit of our annual financial statements and the review of our
quarterly financial statements, (ii) services by our auditor that are reasonably
related to the performance of the audit or review of our financial statements
and that are not reported as Audit Fees, (iii) services rendered in connection
with tax compliance, tax advice and tax planning, and (iv) all other fees for
services rendered.

December 31, December 31,
2003 2002
---- ----

(i) Audit Fees $40,000 $40,000

(ii) Audit Related Fees $0 $0

(iii) Tax Fees $6,000 $6,000

(iv) All Other Fees $0 $0

AUDIT FEES. Consists of fees billed for professional services rendered for
the audit of Homecom Communications, Inc.'s financial statements and review of
the interim consolidated financial statements included in quarterly reports and
services that are normally provided by Sherb & Company, LLC in connection with
statutory and regulatory filings or engagements.

AUDIT-RELATED FEES. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of Homecom Communications, Inc.'s financial statements and are not reported
under "Audit Fees."

TAX FEES. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning.

ALL OTHER FEES. Consists of fees for products and services other than the
services reported above. There were no management consulting services provided
in fiscal 2003 or 2002.

PRE-APPROVAL POLICIES AND PROCEDURES. As described under "Item 10.
Directors and Executive Officers of the Registrant - Committees of the Board of
Directors; Nominations by Stockholders; Code of Ethics," the Company does not
have an audit committee. The Board of Directors has approved Sherb & Company,
LLC to serve as the Company's outside accounting firm. It is the policy of the
Company that all services provided by Sherb & Company, LLC shall be pre-approved
by the Board of Directors. Sherb & Company, LLC will provide the Board of
Directors with an engagement letter outlining the scope of the audit services
proposed to be performed during the fiscal year and the estimated fees for such
services. Pre-approval of audit and permitted non-audit services may be given by
the Board of Directors at any time up to one year before the commencement of
such services by Sherb & Company, LLC. Pre-approval must be detailed as to the
particular services to be provided. Pre-approval may be given for a category of
services, provided that (i) the category is narrow enough and detailed enough
that management of the Company will not be called upon to make a judgment as to
whether a particular proposed service by Sherb & Company, LLC fits within such
pre-approved category of services and (ii) the Board of Directors also
establishes a limit on the fees for such pre-approved category of services.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) List of Financial Statements

(1) Consolidated Balance Sheets as of December 31, 2002 and December 31,
2003.

(2) Consolidated Statements of Operations for years ended December 31,
2001, December 31, 2002 and December 31, 2003.

(3) Consolidated Statement of Changes in Stockholder's Equity (Deficit)
for years ended December 31, 2001, December 31, 2002 and December 31,
2003.

(4) Consolidated Statements of Cash Flows for the years ended December 31,
2001, December 31, 2002 and December 31, 2003.

(B) Exhibits

Exhibit Description
------- ------------------------------------------------------------------------

2.1 --Asset Purchase Agreement, dated January 31,2001, for the Acquisition
of Certain Assets of HomeCom Communications, Inc., InsureRate, Inc. and
FIMI Securities, Inc. by Digital Insurance, Inc. (Incorporated by
reference to Exhibit 2.1 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2000, as filed with the Commission on
April 12, 2001.)

2.2 --Asset Purchase Agreement by and between Netzee, Inc. and HomeCom
Communications, Inc. dated as of March 15, 2001. (Incorporated by
reference to Exhibit 2.2 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2000, as filed with the Commission on
April 12, 2001.)

2.3 --Asset Purchase Agreement by and between HomeCom Communications, Inc.
and Tulix Systems, Inc., dated March 24, 2003. (Incorporated by
reference to Exhibit 2.3 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2002, as filed with the Commission on
April 15, 2003.)

2.4 --License and Exchange Agreement, dated March 27, 2003, by and among
HomeCom Communications, Inc., Eurotech, Ltd. and, with respect to
Articles V and VI thereof, Polymate, Ltd. and Greenfield Capital
Partners LLC. (Incorporated by reference to Exhibit 2.4 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
2002, as filed with the Commission on April 15, 2003.)

2.5 --Amendment No. 1 to License and Exchange Agreement, effective as of
June 27, 2003, by and among HomeCom Communications, Inc., Eurotech,
Ltd., and, solely with respect to Article V and Article XI of the
License and Exchange Agreement, Polymate, Ltd. and Greendfield Capital
Partners LLC. (Incorporated herein by reference to Exhibit 10.6 of Form
10-Q of the Registrant for the quarter ended June 30, 2003, as filed
with the Commission on September 25, 2003.)

3.1 --Restated Certificate of Incorporation of the Registrant. (Incorporated
herein by reference to exhibit of the same number in the Form S-1
Registration Statement of the Registrant (Registration No. 333-12219).)

3.2 --Restated Bylaws of the Registrant. (Incorporated herein by reference
to exhibit of the same number in the Form S-1 Registration Statement of
the Registrant (Registration No. 333-12219).)

3.3 --Certificate of Designation of Series A Convertible Preferred stock.
(Incorporated herein by reference to exhibit of the same number in the
Form S-1/A Registration Statement of the Registrant (Registration No.
333-42599).)

3.4 --Certificate of Designation of Series B Convertible Preferred Stock.
(Incorporated herein by reference to Exhibit 10.49 in the Form 10-K of
the Registrant filed with the Commission on March 31, 1999.)

3.5 --Certificate of Designation of Series C Convertible Preferred Stock.
(Incorporated herein by reference to exhibit of the same number in the
Form S-1 Registration Statement of the Registrant (Registration No.
333-88491).)

3.6 --Certificate of Designation of Series D Convertible Preferred Stock.
(Incorporated herein by reference to exhibit of the same number in the
Form S-1 Registration Statement of the Registrant (Registration No.
333-88491).)

3.7 --Certificate of Designation of Series E Convertible Preferred Stock.
(Incorporated herein by reference to exhibit of the same number in the
Form S-3 Registration Statement of the Registrant (Registration No.
333-38326).)

3.8 --Certificate of Designation of Series F Convertible Preferred Stock.
(Incorporated by reference to Exhibit 3.8 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2002, as filed with
the Commission on April 15, 2003.)

3.9 --Certificate of Designation of Series G Convertible Preferred Stock.
(Incorporated by reference to Exhibit 3.9 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2002, as filed with
the Commission on April 15, 2003.)

3.10 --Certificate of Designation of Series H Convertible Preferred Stock.
(Incorporated herein by reference to Exhibit 3.1 of Form 10-Q of the
Registrant for the quarter ended September 30, 2003, as filed with the
Commission on October 29, 2003.)

4.1 --See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
Incorporation and Bylaws of the Registrant defining rights of the
holders of Common Stock of the Registrant. (Incorporated herein by
reference to exhibit of the same number in the Form S-1 Registration
Statement of the Registrant (Registration No. 333-12219).)

4.2 --Specimen Stock Certificate. (Incorporated herein by reference to
exhibit of the same number in the Form S-1 Registration Statement of the
Registrant (Registration No. 333-12219).)

4.3 --Form of Warrant. (Incorporated herein by reference to exhibit of the
same number in the Form S-1 Registration Statement of the Registrant
(Registration No. 333-12219).)

10.1 --HomeCom Communications, Inc. Stock Option Plan and form of Stock
Option Certificate. (Incorporated herein by reference to exhibit of the
same number in the Form S-1 Registration Statement of the Registrant
(Registration No. 333-12219).)

10.2 --HomeCom Communications, Inc. Non-Employee Directors Stock Option Plan
and form of Stock Option Certificate. (Incorporated herein by reference
to exhibit of the same number in the Form S-1 Registration Statement of
the Registrant (Registration No. 333-12219).)

10.3 --Form of Employment Agreement entered into between the Registrant and
each of its executive officers except Harvey W. Sax. (Incorporated
herein by reference to Exhibit 10.4 of the Form S-1 Registration
Statement of the Registrant (Registration No. 333-12219).)

10.4 --Lease Agreement between Property Georgia OBJLW One Corporation and the
Registrant dated January 22, 1996. (Incorporated herein by reference to
Exhibit 10.5 of the Form S-1 Registration Statement of the Registrant
(Registration No. 333-12219).)

10.5 --Form of Warrant to purchase 200,000 shares of Common Stock at an
exercise price of $4.00 per share issued by the Registrant to First
Granite Securities, Inc. (Incorporated herein by reference to Exhibit
10.24 of the Form S-1 Registration Statement of the Registrant
(Registration No. 333-42599).)

10.6 --Form of Warrant to purchase 200,000 shares of Common Stock at an
exercise price of $6.00 per share issued by the Registrant to First
Granite Securities, Inc. (Incorporated herein by reference to Exhibit
10.25 of the Form S-1 Registration Statement of the Registrant
(Registration No. 333-42599).)

10.7 --Form of Securities Purchase Agreement between the Registrant,
Sovereign Partners, L.P. and Dominion Capital Fund, LTD. dated as of
December 23, 1997. (Incorporated herein by reference to Exhibit 10.26 of
the Form S-1/A Registration Statement of the Registrant (Registration
No. 333-42599).)

10.8 --Form of Registration Rights Agreement between the Registrant,
Sovereign Partners, L.P. and Dominion Capital Fund, LTD. dated as of
December 23, 1997. (Incorporated herein by reference to Exhibit 10.27 of
the Form S-1/A Registration Statement of the Registrant (Registration
No. 333-42599).)

10.9 --Form of Warrant to purchase 18,750 shares of Common Stock issued by
the Registrant to Sovereign Partners, L.P. (Incorporated herein by
reference to Exhibit 10.28 of the Form S-1/A Registration Statement of
the Registrant (Registration No. 333-42599).)

10.10 --Form of Warrant to purchase 56,250 shares of Common Stock issued by
the Registrant to Dominion Capital Fund, LTD. (Incorporated herein by
reference to Exhibit 10.29 of the Form S-1/A Registration Statement of
the Registrant (Registration No. 333-42599).)

10.11 --Form of Warrant to purchase 25,000 shares of Common Stock for an
aggregate purchase price of $92,500 by the Registrant to Hamilton Dorsey
Alston Company. (Incorporated herein by reference to Exhibit 10.34 of
the Form S-1/A Registration Statement of the Registrant (Registration
No. 333-42599).)

10.12 --Form of Warrant to purchase 50,000 shares of Common Stock issued by
the Registrant to The Malachi Group, Inc. (Incorporated herein by
reference to Exhibit 10.37 of the Form S-1 Registration Statement of the
Registrant filed (Registration No. 333-45383).)

10.13 --Letter Agreement, dated April 17, 1998 by and among Sovereign
Partners, L.P., Dominion Capital Fund and HomeCom. (Incorporated herein
by reference to Exhibit 10 of the Form 8-K of the Registrant filed with
the Commission on April 28, 1998.)

10.14 --Securities Purchase Agreement dated as of March 25, 1999 by and among
HomeCom Communications, Inc. and CPR (USA), Inc., Liberty View Funds,
L.P., and Liberty View Fund, L.L.C. (Incorporated herein by reference to
Exhibit 10.50 of the Form 10-K of the Registrant filed with the
Commission on March 31, 1999.)

10.15 --Registration Rights Agreement dated as of March 25, 1999 by and among
HomeCom Communications, Inc. and CPR (USA), Inc., Liberty View Funds,
L.P., and Liberty View Fund, L.L.C. (Incorporated herein by reference to
Exhibit 10.51 of the Form 10-K of the Registrant filed with the
Commission on March 31, 1999.)

10.16 --Transfer Agent Instructions dated as of March 25, 1999. (Incorporated
herein by reference to Exhibit 10.52 of the Form 10-K of the Registrant
filed with the Commission on March 31, 1999.)

10.17 --Transfer Agent Legal Opinion dated as of March 25, 1999. (Incorporated
herein by reference to Exhibit 10.53 of the Form 10-K of the Registrant
filed with the Commission on March 31, 1999.)

10.18 --Warrant Agreement, dated as of March 25, 1999, by and among CPR (USA),
Inc. and HomeCom Communications, Inc. (Incorporated herein by reference
to Exhibit 10.55 of the Registration Statement on Form S-3 of the
Registrant (Registration No. 333-79761).)

10.19 --Warrant Agreement, dated as of March 25, 1999, by and among Liberty
View Fund, L.L.C. and HomeCom Communications, Inc. (Incorporated herein
by reference to Exhibit 10.56 of the Registration Statement on Form S-3
of the Registrant (Registration No. 333-79761).)

10.20 --Warrant Agreement, dated as of March 25, 1999, by and among Liberty
View Funds, L.P. and HomeCom Communications, Inc. (Incorporated herein
by reference to Exhibit 10.57 of the Registration Statement on Form S-3
of the Registrant (Registration No. 333-79761).)

10.21 --Warrant Agreement, dated as of March 25, 1999, by and among J.P.
Turner & Company, L.L.C and HomeCom Communications, Inc. (Incorporated
herein by reference to Exhibit 10.59 of the Registration Statement on
Form S-3 of the Registrant (Registration No. 333-79761).)

10.22 --Securities Purchase Agreement dated as of July 23, 1999 by and among
HomeCom Communications, Inc. and MacNab LLC. (Incorporated herein by
reference to Exhibit 10.65 of the Form S-1 Registration Statement of the
Registrant (Registration No. 333-88491).)

10.23 --Registration Rights Agreement dated as of July 23, 1999 by and among
HomeCom Communications, Inc. and MacNab LLC. (Incorporated herein by
reference to Exhibit 10.66 of the Form S-1 Registration Statement of the
Registrant (Registration No. 333-88491).)

10.24 --Transfer Agent Instructions dated as of September 28, 1999.
(Incorporated herein by reference to Exhibit 10.67 of the Form S-1
Registration Statement of the Registrant (Registration No. 333-88491).)

10.25 --Transfer Agent Legal Opinion dated as of July 23, 1999. (Incorporated
herein by reference to Exhibit 10.68 of the Form S-1 Registration
Statement of the Registrant (Registration No. 333-88491).)

10.26 --Placement Agency Agreement dated as of July 23, 1999 by and between
HomeCom Communications, Inc. and Greenfield Capital Partners.
(Incorporated herein by reference to Exhibit 10.69 of the Form S-1
Registration Statement of the Registrant (Registration No. 333-88491).)

10.27 --Warrant Agreement, dated as of July 23, 1999, by and between HomeCom
Communications, Inc. and MacNab LLC. (Incorporated herein by reference
to Exhibit 10.70 of the Form S-1 Registration Statement of the
Registrant (Registration No. 333-88491).)

10.28 --Securities Purchase Agreement dated as of September 27, 1999 by and
among HomeCom Communications, Inc. and Jackson LLC. (Incorporated herein
by reference to Exhibit 10.71 of the Form S-1 Registration Statement of
the Registrant (Registration No. 333-88491).)

10.29 --Registration Rights Agreement dated as of September 27, 1999 by and
among HomeCom Communications, Inc. and Jackson LLC. (Incorporated herein
by reference to Exhibit 10.72 of the Form S-1 Registration Statement of
the Registrant (Registration No. 333-88491).)

10.30 --Transfer Agent Instructions dated as of September 28, 1999.
(Incorporated herein by reference to Exhibit 10.73 of the Form S-1
Registration Statement of the Registrant (Registration No. 333-88491).)

10.31 --Transfer Agent Legal Opinion dated as of September 28, 1999.
(Incorporated herein by reference to Exhibit 10.74 of the Form S-1
Registration Statement of the Registrant (Registration No. 333-88491).)

10.32 --Placement Agency Agreement dated as of September 27, 1999 by and
between HomeCom Communications, Inc. and Greenfield Capital Partners.
(Incorporated herein by reference to Exhibit 10.75 of the Form S-1
Registration Statement of the Registrant (Registration No. 333-88491).)

10.33 --Warrant Agreement, dated as of September 27, 1999, by and between
HomeCom Communications, Inc. and Jackson LLC. (Incorporated herein by
reference to Exhibit 10.76 of the Form S-1 Registration Statement of the
Registrant (Registration No. 333-88491).)

10.34 --Securities Purchase Agreement dated as of April 14, 2000 by and among
HomeCom Communications, Inc. and McNab LLC. (Incorporated herein by
reference to Exhibit 10.86 of the Form S-3 Registration Statement of the
Registrant (Registration No. 333-38326).)

10.35 --Registration Rights Agreement dated as of April 14, 2000 by and among
HomeCom Communications, Inc. and McNab LLC. (Incorporated herein by
reference to Exhibit 10.87 of the Form S-3 Registration Statement of the
Registrant (Registration No. 333-38326).)

10.36 --Transfer Agent Instructions dated as of April 14, 2000. (Incorporated
herein by reference to Exhibit 10.88 of the Form S-3 Registration
Statement of the Registrant (Registration No. 333-38326).)

10.37 --Transfer Agent Legal Opinion dated as of April 14, 2000. (Incorporated
herein by reference to Exhibit 10.89 of the Form S-3 Registration
Statement of the Registrant (Registration No. 333-38326).)

10.38 --Warrant Agreement, dated as of April 14, 2000, by and between HomeCom
Communications, Inc. and McNab LLC. (Incorporated herein by reference to
Exhibit 10.90 of the Form S-3 Registration Statement of the Registrant
(Registration No. 333-38326).)

10.39 --Employment Agreement between the Registrant and Timothy R. Robinson
dated August 1, 2000. (Incorporated herein by reference to Exhibit 10.86
of the Form 10-K of the Registrant filed with the Commission on April
12, 2001.)

10.40 --Amendment to employment Agreement between Registrant and George
Bokchava dated January 10, 2001. (Incorporated herein by reference to
Exhibit 10.87 of the Form 10-K of the Registrant filed with the
Commission on April 12, 2001.)

10.41 --Separation and Release Agreement, dated March 29, 2001, between
HomeCom Communications, Inc. and Harvey Sax. (Incorporated herein by
reference to Exhibit 10.1 of Form 10-Q of the Registrant filed with the
Commission on May 21, 2001.)

10.42 --License Agreement, dated May 22, 2003, by and between HomeCom
Communications, Inc. and Eurotech, Ltd. (Incorporated by reference to
Exhibit 10.1 of the Registrant's Current Report on Form 8-K, as filed
with the Commission on June 6, 2003.)

10.43 --Secured Promissory Note, dated May 22 2003, by HomeCom Communications,
Inc. in favor of MacNab LLC. (Incorporated by reference to Exhibit 10.2
of the Registrant's Current Report on Form 8-K, as filed with the
Commission on June 6, 2003.)

10.44 --Security Agreement, dated May 22, 2003, by and between HomeCom
Communications, Inc. and MacNab LLC. (Incorporated by reference to
Exhibit 10.3 of the Registrant's Current Report on Form 8-K, as filed
with the Commission on June 6, 2003.)

10.45 --Stock Exchange Agreement, effective as of June 27, 2003, by and among
HomeCom Communications, Inc., Eurotech, Ltd., Greenfield Capital
Partners LLC and Polymate, Ltd. (Incorporated herein by reference to
Exhibit 10.4 of Form 10-Q of the Registrant for the quarter ended June
30, 2003, as filed with the Commission on September 25, 2003.)

10.46 --Amendment No. 1 to License Agreement, effective as of June 27, 2003,
by and among HomeCom Communications, Inc. and Eurotech, Ltd.
(Incorporated herein by reference to Exhibit 10.5 of Form 10-Q of the
Registrant for the quarter ended June 30, 2003, as filed with the
Commission on September 25, 2003.)

10.47 --Private Equity Credit Agreement, dated September 30, 2003, by and
between HomeCom Communications, Inc. and Brittany Capital Management
LLC. (Incorporated herein by reference to Exhibit 10.1 of Form 10-Q of
the Registrant for the quarter ended September 30, 2003, as filed with
the Commission on October 29, 2003.)

10.48 --Registration Rights Agreement, dated September 30, 2003, by and
between HomeCom Communications, Inc. and Brittany Capital Management
LLC. (Incorporated herein by reference to Exhibit 10.2 of Form 10-Q of
the Registrant for the quarter ended September 30, 2003, as filed with
the Commission on October 29, 2003.)

10.49 --License Agreement, dated as of August 15, 2003, by and between HomeCom
Communications, Inc. and Kristul Group.

10.50 --Assignment and Consent Agreement, dated November 17, 2003, by and
among Joseph Kristul, Kristul Group, Environmental Friendly Materials,
GMBH and HomeCom Communications, Inc.

21.1 --List of Subsidiaries. (Incorporated herein by reference to exhibit of
the same number in the Form S-1 Registration Statement of the Registrant
(Registration No. 333-42599).)

31.1 --Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.

32.1 --Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (This certification is not "filed" for purposes of Section 18 of
the Exchange Act [15 U.S.C. 78r] or otherwise subject to the liability
of that section. Such certification will not be deemed to be
incorporated by reference into any filing under the Securities Act or
the Exchange Act, except to the extent that the Company specifically
incorporates them by reference.)

(B) Reports on Form 8-K

We did not file any current reports on Form 8-K during the quarter ended
December 31, 2003.

SIGNATURES

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

HOMECOM COMMUNICATIONS, INC.

BY: /s/ TIMOTHY R. ROBINSON
---------------------------
Timothy R. Robinson
Executive Vice President and Chief
Financial Officer (Principal
Accounting Officer)

DATE: May 12, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ TIMOTHY R. ROBINSON Vice President - Chief Financial May 12, 2004
----------------------- Officer; Director
Timothy R. Robinson

/s/ GIA BOKUCHAVA, PH.D. Chief Technical Officer; Director May 12, 2004
------------------------
Gia Bokuchava, Ph.d.

/s/ NINO DOIJASHVILI, PH.D Director of Technical Services, May 12, 2004
-------------------------- Director
Nino Doijashvili, Ph.d.

/s/ DR. RANDOLPH A. GRAVES, JR. Director May 12, 2004
-----------------------------
Dr. Randolph A. Graves, Jr.

/s/ MICHAEL SHEPPARD Vice President; Director May 12, 2004
--------------------
Michael Sheppard

EXHIBIT INDEX

Exhibit Description
------- ------------------------------------------------------------------------

3.2 --Restated Bylaws of the Registrant. (Incorporated herein by reference
to exhibit of the same number in the Form S-1 Registration Statement of
the Registrant (Registration No. 333-12219).)

4.2 --Specimen Stock Certificate. (Incorporated herein by reference to
exhibit of the same number in the Form S-1 Registration Statement of the
Registrant (Registration No. 333-12219).)

4.3 --Form of Warrant. (Incorporated herein by reference to exhibit of the
same number in the Form S-1 Registration Statement of the Registrant
(Registration No. 333-12219).)

10.16 --Transfer Agent Instructions dated as of March 25, 1999. (Incorporated
herein by reference to Exhibit 10.52 of the Form 10-K of the Registrant
filed with the Commission on March 31, 1999.)

10.17 --Transfer Agent Legal Opinion dated as of March 25, 1999. (Incorporated
herein by reference to Exhibit 10.53 of the Form 10-K of the Registrant
filed with the Commission on March 31, 1999.)

10.34 Securities Purchase Agreement dated as of April 14, 2000 by and among
HomeCom Communications, Inc. and McNab LLC. (Incorporated herein by
reference to Exhibit 10.86 of the Form S-3 Registration Statement of the
Registrant (Registration No. 333-38326).)

10.35 Registration Rights Agreement dated as of April 14, 2000 by and among
HomeCom Communications, Inc. and McNab LLC. (Incorporated herein by
reference to Exhibit 10.87 of the Form S-3 Registration Statement of the
Registrant (Registration No. 333-38326).)

10.36 Transfer Agent Instructions dated as of April 14, 2000. (Incorporated
herein by reference to Exhibit 10.88 of the Form S-3 Registration
Statement of the Registrant (Registration No. 333-38326).)

10.37 Transfer Agent Legal Opinion dated as of April 14, 2000. (Incorporated
herein by reference to Exhibit 10.89 of the Form S-3 Registration
Statement of the Registrant (Registration No. 333-38326).)

10.38 Warrant Agreement, dated as of April 14, 2000, by and between HomeCom
Communications, Inc. and McNab LLC. (Incorporated herein by reference to
Exhibit 10.90 of the Form S-3 Registration Statement of the Registrant
(Registration No. 333-38326).)

10.49 --License Agreement, dated as of August 15, 2003, by and between HomeCom
Communications, Inc. and Kristul Group.

10.50 --Assignment and Consent Agreement, dated November 17, 2003, by and
among Joseph Kristul, Kristul Group, Environmental Friendly Materials,
GMBH and HomeCom Communications, Inc.

21.1 --List of Subsidiaries. (Incorporated herein by reference to exhibit of
the same number in the Form S-1 Registration Statement of the Registrant
(Registration No. 333-42599).)

31.1 --Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.