UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 AMENDMENT NO. 1
                                       TO
                                   FORM 10-QSB


      (MARK ONE)

|X|   Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange
      Act of 1934

                  For the quarterly period ended June 30, 2005

|_|   Transition report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934

               For the transition period from _______ to _______.

                             Commission file number
                                    000-30244
                                    ---------

                                  NEXICON, INC.
                                  -------------
                 (Name of small business issuer in its charter)

                   Nevada                                      13-3389415
                   ------                                      ----------
(State or Other Jurisdiction of Incorporation               (I.R.S. Employer
              or Organization)                             Identification No.)

          400 Gold SW, Suite 1000,
               Albuquerque, NM                                   87102
               ---------------                                   -----
  (Address of principal executive offices)                     (Zip code)

                                 (505) 248-0000
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months, and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|

      Indicate by check mark whether the registrant is an accelerated filed (as
defined in Rule 12b-2 of the Exchange Act).

      Yes |_| No |X|

      Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

      Yes |_| No |X|

      There were 114,812,402, par value $0.001 per share, shares of common stock
outstanding as of August 15, 2005.

<PAGE>

                                     PART I

FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<PAGE>

                                  NEXICON, INC.
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2005
                                   (Restated)
                                   (unaudited)

<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                         <C>
CURRENT ASSETS
  Cash                                                                      $     24,968
  Restricted cash                                                                    878
  Receivables, net of allowance for doubtful accounts of $1,373                   19,635
  Receivables - related parties                                                    5,474
  Receivable - AIC                                                                54,674
  Interest receivable - AIC                                                          382
  Prepaid expense                                                                  3,173
                                                                            ------------

    Total current assets                                                         109,184
                                                                            ------------

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $131,021               36,854
                                                                            ------------

OTHER ASSETS
  Investment in Mercury                                                          147,851
  Deposit                                                                          3,895
                                                                            ------------
                                                                                 151,746
                                                                            ------------
                                                                            $    297,784
                                                                            ============

                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
  Accounts payable and accrued expenses                                     $    598,668
  Accrued expenses - shareholders                                                377,771
  Deferred gain                                                                   37,563
  Net liabilities of discontinued operations                                     308,801
                                                                            ------------

    Total current liabilities                                                  1,322,803
                                                                            ------------

 DERIVATIVE FINANCIAL INSTRUMENTS                                              2,368,640
                                                                            ------------

STOCKHOLDERS' (DEFICIT)
  Common stock, $0.001 par value, 500,000,000 shares authorized,
    122,306,945 shares issued and outstanding                                    122,307
  Additional paid-in capital                                                  13,727,762
  Deferred stock compensation                                                    (26,753)
  Stock subscription receivable                                               (2,800,000)
  Accumulated (deficit)                                                      (14,541,310)
                                                                            ------------
                                                                              (3,517,994)
  Other comprehensive income:
    Currency translation adjustment                                              124,335
                                                                            ------------
                                                                              (3,393,659)
                                                                            ------------
                                                                            $    297,784
                                                                            ============
</TABLE>

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

                                       2
<PAGE>

                                  NEXICON, INC.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                  Three Months Ended June 30,       Six Months Ended June 30,
                                                     2005            2004             2005              2004
                                                  (Restated)      (Restated)       (Restated)       (Restated)
                                                -------------    -------------    -------------    -------------
<S>                                             <C>              <C>              <C>              <C>
Revenues                                        $      24,255    $          --    $      56,314    $          --
                                                -------------    -------------    -------------    -------------

Cost of goods sold                                     18,454               --           42,853               --
General and administrative expenses                   502,200          519,784        1,114,737        1,080,665
Non-cash compensation-general and
  administrative                                      266,621          214,726          525,243          462,976
                                                -------------    -------------    -------------    -------------

(Loss) from operations                               (763,020)        (734,510)      (1,626,519)      (1,543,641)
                                                -------------    -------------    -------------    -------------

Other income (expense):
  Interest income                                         113            4,047            1,480            4,047
  Non-cash interest expense                          (130,600)              --         (160,000)              --
  Derivative instruments expense                     (546,152)        (156,100)      (1,002,791)        (156,100)
  Interest expense                                         --             (578)              --           (1,149)
                                                -------------    -------------    -------------    -------------
                                                     (676,639)        (152,631)      (1,161,311)        (153,202)
                                                -------------    -------------    -------------    -------------
Net (loss) before income tax                       (1,439,659)        (887,141)      (2,787,830)      (1,696,843)

Income tax (benefit)                                   (4,000)         (38,000)         (21,000)         (67,000)
                                                -------------    -------------    -------------    -------------

(Loss) before discontinued operations              (1,435,659)        (849,141)      (2,766,830)      (1,629,843)

Discontinued operations:
  Gain (loss) on sale of assets of
    discontinued operations                                --           29,286          (14,110)          29,286
  Net (loss) from discontinued operations,
    net of income taxes                               (17,276)        (150,400)         (85,404)        (264,450)
                                                -------------    -------------    -------------    -------------
Net (loss)                                         (1,452,935)        (970,255)      (2,866,344)      (1,865,007)

Other comprehensive (loss)
  Foreign currency translation adjustment             (32,093)              --           (2,895)              --
                                                -------------    -------------    -------------    -------------

Net comprehensive (loss)                        $  (1,485,028)   $    (970,255)   $  (2,869,239)   $  (1,865,007)
                                                =============    =============    =============    =============

Weighted average shares outstanding (basic
  and diluted)                                    118,049,914       92,144,691      119,036,303       91,232,956
                                                =============    =============    =============    =============

Net (loss) per common share-basic and diluted
  (Loss) from operations                        $       (0.01)   $       (0.01)   $       (0.02)   $       (0.02)
  (Loss) from discontinued operations                   (0.00)           (0.00)           (0.00)           (0.00)
                                                -------------    -------------    -------------    -------------
                                                $       (0.01)   $       (0.01)   $       (0.02)   $       (0.02)
                                                =============    =============    =============    =============
</TABLE>

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

                                       3
<PAGE>

                                  NEXICON, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                    Six Months Eended
                                                         June 30,
                                                --------------------------
                                                    2005           2004
                                                 (Restated)     (Restated)
                                                -----------    -----------
<S>                                             <C>            <C>
Cash flows from operating activities:
  Net cash (used in) operating activities       $(1,304,607)   $  (673,100)
                                                -----------    -----------

Cash flows from investing activities:
  Deposit on stock investment                            --        (29,915)
  Deferred offering costs                                --        (25,318)
  Purchase of property and equipment                (39,109)       (12,995)
                                                -----------    -----------

    Net cash (used in) investing activities         (39,109)       (68,228)
                                                -----------    -----------

Cash flows from financing activities
  Proceeds from sale of common stock                 90,000        528,400
  Proceeds from notes payable                     1,250,000        260,447
                                                -----------    -----------

    Net cash provided by financing activities     1,340,000        788,847
                                                -----------    -----------

Net increase (decrease) in cash                      (3,716)        47,519

Beginning cash balance                               29,562          9,299
                                                -----------    -----------

Ending cash balance                             $    25,846    $    56,818
                                                ===========    ===========
</TABLE>

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

                                       4
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2005

(1) Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America ("GAAP") for interim financial information and Item 310(b) of
Regulation S-B. They do not include all of the information and footnotes
required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year. For further information, refer to the
audited financial statements of Nexicon, Inc. (the "Company") as of December 31,
2004, and for the two years then ended, including notes thereto, included in the
Company's Form 10-KSB.

The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. Intercompany transactions and balances have been
eliminated in consolidation.

The financial statements for the 2005 periods have been restated to reflect the
correction of an error as discussed below. No other changes have been made.

Derivative financial instruments

The Company does not use derivative instruments to hedge exposures to cash flow,
market or foreign currency risks.

Derivative financial instruments are initially measured at their fair value. For
derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported as
charges or credits to income. For option-based derivative financial instruments,
the Company uses the Black-Scholes option pricing model to value the derivative
instruments.

The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is reassessed at the end of each
reporting period. Derivative instrument liabilities are classified in the
balance sheet as current or non-current based on whether or not net-cash
settlement of the derivative instrument could be required within 12 months of
the balance sheet date.

Restatement and Correction of an Error

The Company is in the process of amending its annual report for the year ended
December 31, 2004, and quarterly report for the quarter ended March 31, 2005, to
reflect the accounting for the convertible debentures and unsecured promissory
notes in connection with the Company's financing transactions with Cornell
Capital Partners, LLP ("Cornell"). In October 2005, the staff (the "Staff") of
the United States Securities and Exchange Commission (the "SEC") issued a
comment letter concerning the accounting for convertible debt instruments that
are subject to a registration rights agreements and/or that have embedded
derivative instruments. The Company has re-evaluated its debt agreements in
light of the issues raised by the Staff in accordance with EITF 00-19 and has
concluded that there are embedded derivative instruments that are required to be
bifurcated and accounted for as derivative liabilities (see Note 7). The Company
is responding to comments provided by the Staff in connection with the Company's
December 31, 2004, Form 10-KSB and subsequent filings under the Securities Act
of 1934, as amended.

The accompanying financial statements have been restated to reflect the above
correction. The adjustments increased the net loss for the three months and six
months ended June 30, 2005, as previously reported from $(942,465) and
$(1,922,884) to $(1,452,935) and $(2,866,344) or $(..01) and $(.02) per share.
In addition, the liability for convertible debentures previously reported on the
balance sheet was reduced $1,380,000 to $0, the amount reported on the balance
sheet for derivative instruments was increased from $0 to $2,368,640 and the
amount reported on the balance sheet for accrued interest decreased from $61,559
to $0.

                                       5
<PAGE>

Reclassification

Certain amounts from the six months ended June 30, 2004, financial statements
have been reclassified to conform to current period presentation.

 (2) Going Concern

The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.

The Company has experienced losses from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature. For the
six months ended June 30, 2005, the Company incurred a net (loss) of
($2,866,344). At June 30, 2005, the Company had a working capital (deficit) of
($1,213,619) and stockholders' (deficit) of ($3,393,659).

The Company's ability to continue as a going concern is contingent upon its
ability to secure financing and attain profitable operations. In addition, the
Company's ability to continue as a going concern must be considered in light of
the problems, expenses and complications frequently encountered by entrance into
established markets and the competitive environment in which the Company
operates. The Company through its wholly-owned subsidiary, Pluto Communications
International, AS ("Pluto") and its "Charon" Billing and Operational Support
System sales, in conjunction with ComSecure(C) Controller sales, through its
wholly-owned subsidiary Orion Security Systems, Inc. ("OSSI"), hopes to attain
profitable operations.

The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.

(3) Earnings Per Share

The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards No. 128, "Earnings per Share." Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During the periods presented, common stock equivalents were not
considered, as their effect would be anti-dilutive.

(4) Stockholders' (Deficit)

During the six months ended June 30, 2005, the Company issued 3,500,000 shares
of its common stock for cash of $90,000. In addition the Company issued 400,000
shares to employees as compensation valued at the market price on the date of
issue of $8,000 (which is included in non-cash compensation - general and
administrative), 1,979,167 shares in connection with the conversion of $45,000
worth of debentures, and 11,933,540 shares in connection with the Standby Equity
Distribution Agreement discussed in Note 7.

Effective March 3, 2005, the Company issued an additional unsecured promissory
note to Cornell in the amount of $1,000,000 in connection with the 2004 Standby
Equity Distribution Agreement, and received net proceeds of $915,099, after
payment of financing costs of $84,901. The loan is evidenced by a promissory
note dated March 3, 2005, which bears interest at a rate of 12% per annum and is
due within 296 days of the execution of the note (December 24, 2005), unless
otherwise mutually extended. As a condition precedent to the loan, the Company
agreed to issue and hold in escrow 40,000,000 shares of its common stock to be
released in connection with repayment of the loan (see Note 7).

During the six months ended June 30, 2005, the Company recorded an aggregate of
$525,243 in stock compensation expense consisting of the $8,000 described above,
and the balance relating to the amortization of previously deferred financial
consulting and media relations agreements entered into in 2004, over the terms
of the respective agreements.

(5) Discontinued Operations

On March 17, 2005, the Company decided to discontinue operations of its OSSI
SatSecure(C) Systems business, pursuant to the terms of a Stock Repurchase
Agreement. The Company agreed to repurchase 15,000,000 shares of its common
stock held by the President of OSSI and issued an unsecured promissory note for
$240,000 covering previously accrued wages and expenses. The note is payable as
$20,000 at closing and $220,000 payable in successive $20,000 increments on or
before the 15th of the month for 11 consecutive months. This individual also
received equipment located in the OSSI facility with a net book value of
$15,213. In addition, the Company relinquished all right, title and interest in
any agreements associated with the SatSecure(C) technology and to various
associated trade names. Accordingly, all revenues and associated costs related
to the SatSecure(C) product are reflected as discontinued operations in the
accompanying financial statements. The Company has recorded a loss on the
disposal of assets of discontinued operations in the amount of $23,472, in
connection with this transaction, which is presented net of $9,362 of previously
deferred gain on the sale of the Company's Internet tobacco products division.

                                       6
<PAGE>

Operating results of discontinued operations for the three months and six months
ended June 30, 2005, and 2004, are shown separately in the accompanying
statements of operations.

Net sales and net income (loss) from discontinued operations are as follows for
the three month and six month periods:

                      2005                      2004
             ----------------------    ----------------------
Net sales    $      --    $      --    $      --    $      --
             ---------    ---------    ---------    ---------
Net (loss)   $ (17,276)   $ (85,404)   $(150,400)   $(264,450)
             =========    =========    =========    =========

Net assets and liabilities of discontinued operations, which were included in
the Stock Repurchase Agreement, were as follows as of June 30, 2005:

      Property and equipment - net                   $     352
      Deposits                                          11,179
      Accounts payable and accrued expenses           (137,977)
      Notes payable and accrued interest - related    (160,000)
      Accrued expenses - shareholder                   (22,355)
      Net liabilities of discontinued operations     $(308,801)

(6) Contingent Liabilities

On January 28, 2003, the Company was named in a civil suit filed by the City of
New York as one of approximately a dozen defendants who engaged in the business
of Internet online cigarette sales. The suit alleges that the Company failed to
report the names and addresses of its customers to taxing authorities. The
extent of the City's damages is to be determined at trial.

(7) Commitments

Operating lease

On January 29, 2004, the Company entered into an operating lease agreement for
office space for its subsidiary, OSSI. The term commences February 1, 2004 and
continues through April 30, 2007. The Company remains liable on the OSSI lease
through its term and is actively pursuing a sublessee, since the McClean,
Virginia operations have been discontinued. Effective April 1, 2004, the Company
entered into an operating lease agreement for its corporate headquarters in
Albuquerque, New Mexico, commencing April 1, 2004 and continuing through March
31, 2006.

Future minimum lease payments pursuant to these agreements are as follows:

     Year ended
     December 31              Amount
     --------------------    --------
     2005                    $ 16,769
     2006                      87,781
     2007                      24,253
                             --------
                             $128,803
                             ========


                                       7
<PAGE>

Financing agreements with Cornell Capital Partners, LP

The Company entered into the following financing agreements with Cornell in
2004, all of which have since been mutually terminated pursuant to the
Termination Agreement dated June 23, 2005.

2004 Transactions

      o     The 2004 Securities Purchase Agreement. On May 5, 2004, the Company
            entered into a Securities Purchase Agreement with Cornell (the "2004
            Securities Purchase Agreement") pursuant to which the Company could
            sell to Cornell, and Cornell could purchase from the Company, up to
            $500,000 of secured convertible debentures pursuant to the terms
            contained in the secured debentures the Company issued in 2004. The
            2004 Securities Purchase Agreement, along with all other financing
            agreements that the Company entered into with Cornell, were mutually
            terminated by Nexicon and Cornell pursuant to that certain
            Termination Agreement dated June 23, 2005.

      o     The 2004 Standby Equity Distribution Agreement. On March 23, 2004,
            the Company entered into the 2004 Standby Equity Distribution
            Agreement (the "2004 SEDA") with Cornell. Pursuant to the 2004 SEDA,
            the Company could, at its discretion, periodically sell to Cornell
            shares of the Company's common stock for a total purchase price of
            up to $20,000,000. For each share of common stock purchased under
            the 2004 SEDA, Cornell would pay the Company 99% of the lowest
            volume weighted average price of the Company's common stock on the
            Over-the-Counter Bulletin Board or other principal market on which
            the Company's common stock is traded for the five trading days
            immediately following the notice date. Further, Cornell would retain
            a fee of 5% of each advance under the 2004 SEDA. In connection with
            the 2004 SEDA, Cornell received a one-time commitment fee in the
            form of 490,000 shares of the Company's common stock issued on June
            14, 2004. The Company has drawn down an amount equal to $1,650,000
            under the 2004 SEDA. The 2004 SEDA was mutually terminated by the
            Company and Cornell pursuant to the Termination Agreement dated June
            23, 2005.

      o     The 2004 Secured Convertible Debentures (Refinanced as the 2005
            Secured Convertible Debentures). The 2004 Secured Convertible
            Debentures accrued interest at 5% per annum and were secured by a
            Security Agreement covering substantially all business assets.
            Principal plus accrued interest was either payable in full two years
            after the date of issue, or convertible at the holder's option, into
            shares of the Company's common stock. The conversion provision
            entitled the holder at any time, and from time to time, to convert
            all or any part of the principal plus accrued interest into the
            Company's common stock, at a per share price equal to the lesser of
            an amount equal to (i) 120% of the quoted closing bid price of the
            stock on the date of the debenture, or (ii) 80% of the lowest quoted
            closing bid price during the five trading days immediately preceding
            the conversion date. Interest was payable at maturity or conversion,
            either in cash or shares of the Company's common stock, at the
            holder's option. Cornell purchased a Secured Convertible Debenture
            in the principal amount of $250,000 from the Company on May 5, 2004,
            and a second Secured Convertible Debenture in the principal amount
            of $250,000 on August 12, 2004 (the "2004 Secured Convertible
            Debentures"). Both 2004 Secured Convertible Debentures were mutually
            terminated by the Company and Cornell pursuant to the Termination
            Agreement. However, the principal amount of $250,000 under the 2004
            Secured Convertible Debenture issued on August 12, 2004 and an
            amount equal to $130,000 under the 2004 Secured Convertible
            Debenture issued on May 5, 2004, were refinanced as the 2005 Secured
            Convertible Debenture in the amount of $380,000 entered into by the
            Company and Cornell on July 7, 2005, the terms of which are
            described below.

Pursuant to that certain Registration Statement on Form SB-2, which the Company
filed with the SEC on August 4, 2004 (File No. 333-116409) (the "2004
Registration Statement"), the Company registered 69,000,000 shares under the
2004 SEDA and the Company issued 490,000 shares to Cornell as a one-time
commitment fee pursuant to the 2004 SEDA. The "commitment" shares were valued at
$.78 per share, or $235,200, the fair market value of the shares at March 23,
2004, the date of execution of the 2004 SEDA, and were capitalized as financing
costs and amortized as interest expense over the two-year commitment period of
the SEDA. Due to the termination of the 2004 SEDA, the remaining balance of the
financing costs has been expensed including $160,000 charged to non-cash
interest expense.


                                       8
<PAGE>

2005 Transactions

The Company entered into the following financing agreements with Cornell Capital
Partners in 2005:

      o     The 2005 Securities Purchase Agreement. On July 5, 2005, the Company
            entered into a Securities Purchase Agreement with Cornell (the "2005
            Securities Purchase Agreement"), dated and effective as of June 24,
            2005. Pursuant to the 2005 Securities Purchase Agreement, the
            Company may sell to Cornell, and Cornell may purchase from the
            Company, up to $380,000 of secured convertible debentures pursuant
            to the terms contained in the 2005 Secured Convertible Debentures
            described below.

      o     The 2005 Standby Equity Distribution Agreement. On July 5, 2005, the
            Company entered into the 2005 Standby Equity Distribution Agreement
            with Cornell, dated and effective as of June 24, 2005 (the "2005
            SEDA"). Pursuant to the 2005 SEDA, the Company may, at its
            discretion, periodically sell to Cornell shares of the Company's
            common stock for a total purchase price of up to $20,000,000. For
            each share of common stock purchased under the 2005 SEDA, Cornell
            will pay the Company 99% of the lowest volume weighted average price
            of the Company's common stock on the Over-the-Counter Bulletin Board
            or other principal market on which the Company's common stock is
            traded for the five trading days immediately following the notice
            date. Further, Cornell will retain a fee of 5% of each advance under
            the 2005 SEDA. In light of the limitations contained in the 2005
            Standby Equity Distribution Agreement, the Company would need to
            submit a $300,000 advance request approximately every six trading
            days for 24 months in order to attain the full $20,000,000 available
            under the 2005 SEDA; however, the Company does not currently have
            sufficient shares given the current price of its stock to permit the
            delivery of the securities required to obtain the maximum
            $20,000,000 available under the 2005 SEDA.

            As a condition precedent to the execution of the 2005 SEDA, the
            Company and Cornell entered into a Registration Rights Agreement,
            whereby the Company has agreed to provide certain registration
            rights under the Securities Act of 1933, as amended, related to the
            shares issuable under the 2005 SEDA. The commitment period for the
            2005 SEDA extends through the earlier of such time as Cornell has
            made aggregate advances of $20,000,000 or two years from the
            effective date of the Registration Statement.

            The Company cannot predict the number of shares to be issued, or the
            gross proceeds to be derived from the sale of such shares pursuant
            to the 2005 SEDA, as the purchase price of the shares will fluctuate
            based on the prevailing market conditions. To date 11,933,540 shares
            of the Company's common stock with a fair market value of $410,208
            were issued pursuant to the Standby Equity Distribution Agreement of
            2004, which was used for partial repayment of the promissory notes.

      o     The 2005 Secured Convertible Debenture (the Refinanced 2004 Secured
            Convertible Debentures). On July 5, 2005, the Company issued the
            2005 Secured Convertible Debenture, effective as of June 24, 2005,
            in the principal amount of $380,000 (the "2005 Secured Convertible
            Debenture"). The Company refinanced the outstanding principal under
            the 2004 Secured Convertible Debentures as the 2005 Secured
            Convertible Debenture, which is convertible at the holder's option
            any time up to maturity at a conversion price per share equal to
            $0.01. At maturity, the remaining unpaid principal and accrued
            interest under the 2005 Secured Convertible Debenture shall be, at
            the Company's option, either paid or converted into shares of common
            stock at a conversion price equal to $0.01. The 2005 Secured
            Convertible Debenture is secured by substantially all of the
            Company's assets, and accrues interest at a rate of 5% per year and
            has a 2-year term. The 2004 Secured Convertible Debentures were
            mutually terminated by the Company and Cornell pursuant to the
            Termination Agreement; however, the principal amounts and accrued
            interest outstanding under the 2004 Secured Convertible Debenture
            are now subject to the terms and conditions contained in the 2005
            Secured Convertible Debentures.

            In May 2004, the Company entered into a Securities Purchase
            Agreement, whereby $500,000 of 5% secured, convertible debentures
            were issued Cornell (see above). During the year ended December 31,
            2004, the Company received net proceeds of $369,323 after payment of
            expenses in the amount of $130,677 from the sale of $500,000 of
            debentures. During the period ended June 30, 2005, the investor
            converted $45,000 of the debentures into 1,979,167 shares of the
            Company's common stock. At June 24, 2005, the balance of the
            debentures was $380,000 and the accrued interest was $22,896.

On July 14, 2005 the Company filed a Registration Statement on Form SB-2 with
the SEC in which, 164,000,000 shares are being registered under the 2005 SEDA,
36,000,000 shares are being registered under the Secured Convertible Debentures,
and an additional 5,828,496 shares are being registered on behalf of other
stockholders.


                                       9
<PAGE>

Promissory Notes

During the period ended June 30, 2005, the Company entered into unsecured
promissory notes bearing interest at 12% per annum and due November 26, 2005 in
the aggregate amount of $1,250,000 (see Note 5). The Company received $1,140,132
after payment of financing costs of $109,868. As a condition precedent to the
loan, the Company agreed to issue and hold in escrow 40,000,000 shares of its
common stock to be released in connection with repayment of the loan. 40,000,000
shares were issued and held in escrow in connection with the $1,000,000
promissory note. The notes are held by Cornell.

Financial Instruments

The carrying value of the Company's financial instruments, including cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value because of the short maturities of those instruments.
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of convertible notes, notes payable and
related party balances also approximates fair value.

The Company reviews the terms of convertible debt and equity instruments the
Company issues to determine whether there are embedded derivative instruments,
including the embedded conversion option, that are required to be bifurcated and
accounted for separately as a derivative financial instrument. When the risks
and rewards of any embedded derivative instrument are not "clearly and closely"
related to the risks and rewards of the host instrument, the embedded derivative
instrument is generally required to be bifurcated and accounted for separately.
If the convertible instrument is debt, or has debt-like characteristics, the
risks and rewards associated with the embedded conversion option are not
"clearly and closely" related to that debt host instrument. The conversion
option has the risks and rewards associated with an equity instrument, not a
debt instrument, because its value is related to the value of the Company's
common stock. Nonetheless, if the host instrument is considered to be
"conventional convertible debt" (or "conventional convertible preferred stock"),
bifurcation of the embedded conversion option is generally not required.
However, if the instrument is not considered to be conventional convertible debt
(or conventional convertible preferred stock), bifurcation of the embedded
conversion option may be required in certain circumstances. Generally, where the
ability to physical or net-share settle the conversion option is deemed to be
not within the control of the Company, the embedded conversion option is
required to be bifurcated and accounted for as a derivative financial instrument
liability.

In connection with the sale of convertible debt and equity instruments, the
Company may also issue freestanding options or warrants. Additionally, the
Company may issue options or warrants to non-employees in connection with
consulting or other services they provide. Although the terms of the options and
warrants may not provide for net-cash settlement, in certain circumstances,
physical or net-share settlement is deemed to not be within the control of the
Company and, accordingly, the Company is required to account for these
freestanding options and warrants as derivative financial instrument
liabilities, rather than as equity.

Derivative financial instruments are initially measured at their fair value. For
derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported as
charges or credits to income. For option-based derivative financial instruments,
the Company uses the Black-Scholes Option Pricing Model to value the derivative
instruments.

In circumstances where the embedded conversion option in a convertible
instrument is required to be bifurcated and there are also other embedded
derivative instruments in the convertible instrument that are required to be
bifurcated, the bifurcated derivative instruments are accounted for as a single,
compound derivative instrument.

When the embedded derivative instrument is to be bifurcated and accounted for as
a liability, the total proceeds received are first allocated to the fair value
of the bifurcated derivative instrument. If freestanding options or warrants
were also issued and will be accounted for as derivative instrument liabilities
(rather than as equity), the proceeds are next allocated to the fair value of
those instruments. The remaining proceeds, if any, are then allocated to the
convertible instrument itself, usually resulting in that instrument being
recorded at a discount from its face amount. In circumstances where a
freestanding derivative instrument is to be accounted for as an equity
instrument, the proceeds are allocated between the convertible instrument and
the derivative equity instrument, based on their relative fair values.

To the extent that the fair values of the bifurcated and/or freestanding
derivative instrument liabilities exceed the total proceeds received, an
immediate charge to income is recognized, in order to initially record the
derivative instrument liabilities at their fair value. The discount from the
face value of the convertible debt instrument is amortized over the life of the
instrument through periodic charges to income, using the effective interest
method. When the instrument is convertible preferred stock, the periodic
amortization of the discount is charged directly to retained earnings.


                                       10
<PAGE>

The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of
each reporting period. Derivative instrument liabilities are classified in the
balance sheet as current or non-current based on whether or not net-cash
settlement of the derivative instrument could be required within 12 months of
the balance sheet date.

At June 30, 2005, the following derivative liabilities and embedded derivative
instruments were outstanding:

<TABLE>
<CAPTION>
                                                                           Value -                 Value -
Issue Date       Expiry Date                                               Issue Date          June 30, 2005
-----------------------------------------------------------------------------------------------------------------
<S>              <C>           <C>                                         <C>                 <C>
05-07-2004       05-07-2006    $250,000 convertible debentures             $  251,435           $     1,997

06-30-2004       06-30-2006    $100,000 convertible debentures                144,251                 1,591

08-13-2004       08-13-2006    $150,000 convertible debentures                152,102                 6,313

08-30-2004       08-30-2006    $250,000 unsecured promissory notes            216,835                    --

11-30-2004       11-30-2006    $150,000 unsecured promissory notes            112,662                    --

01-19-2005       01-19-2007    $250,000 unsecured promissory notes            179,005                    --

03-08-2005       03-08-2007    $1,000,000 unsecured promissory notes          539,330               580,781

Fair value of bifurcated embedded derivative instrument liabilities associated with the
above convertible notes                                                                           1,777,959
                                                                                                -----------

Total derivative financial instruments                                                          $ 2,368,640
                                                                                                ===========
</TABLE>


(8)  Reportable Segments

The Company has two reportable segments, billing solutions systems and network
security and video surveillance systems. The accounting policies of the segments
are substantially the same as those of the Company. All revenues generated in
the segments are external.

For the three months ended June 30, 2005 and 2004, the total reportable segment
information is as follows:

<TABLE>
<CAPTION>
For the three months ended June 30, 2005:    Billing
                                            Solutions    Network                   Total as
                                             Systems     Security     Corporate    Reported
                                            ---------    ---------    ---------    ---------
<S>                                         <C>          <C>          <C>          <C>
  Reportable segments
    External revenues                       $  24,255    $      --    $      --    $  24,255
    Depreciation and amortization                 870           --          233        1,103
    Operating (loss)                         (142,736)     (34,140)    (586,144)    (763,020)
For the three months ended June 30, 2004:
  Reportable segments
    External revenues                       $      --    $      --    $      --    $      --
    Depreciation and amortization                  --          702          267          969
    Operating (loss)                               --     (122,078)    (612,432)    (734,510)
</TABLE>


                                       11
<PAGE>

External revenues for groups of similar products and services, consisted
principally of the ComSecure(TM) network security system, ($0) and telephone
billing systems ($24,255). The security segment is operating and has derived its
revenues in the United States during the three months ended June 30, 2005, and
had no revenues in 2004. The billing solutions systems segment is operating in
Norway and has derived its revenues in Norway and Sweden in 2005 and had no
revenues in 2004.

For the six months ended June 30, 2005 and 2004, the total reportable segment
information is as follows:

<TABLE>
<CAPTION>
                                             Billing
                                            Solutions          Network                             Total as
                                             Systems           Security         Corporate          Reported
For the six months ended June 30, 2005:   --------------    --------------    --------------    --------------
<S>                                       <C>               <C>               <C>               <C>
  Reportable segments
    External revenues                     $       56,314    $           --    $           --    $       56,314
    Depreciation and amortization                 14,516               582               466            15,563
    Operating (loss)                            (325,371)         (132,183)       (1,168,965)       (1,626,519)
    Assets                                        74,937                --           222,847           297,784
    Capital expenditures (disposals)              39,109           (23,058)               --            16,051
For the six months ended June 30, 2004:
  Reportable segments
    External revenues                     $           --    $           --    $           --    $           --
    Depreciation and amortization                     --             1,364               400             1,764
    Operating (loss)                                  --          (340,776)       (1,202,865)       (1,543,641)
    Assets                                            --                --           224,885           224,885
    Capital expenditures                              --                --                --                --
</TABLE>

External revenues for groups of similar products and services, consisted
principally of the ComSecure(TM) network security system, ($0) and telephone
billing systems ($56,314). The security segment is operating and has derived its
revenues in the United States during the six months ended June 30, 2005, and had
no revenues in 2004. The billing solutions systems segment is operating in
Norway and has derived its revenues in Norway and Sweden in 2005 and had no
revenues in 2004.

(9) Subsequent Events

Subsequent to June 30, 2005, the Company issued 1,000,000 shares of its common
stock for cash in the amount of $20,000.

On July 13, 2005, Nexicon, Inc., entered into a Service Agreement (the "Service
Agreement") with the Motion Picture Association of America (the "MPAA"), dated
July 8, 2005, pursuant to which the Company will supply the MPAA with the
Company's line of next-generation intelligence and data mining services
worldwide. The initial term of the Service Agreement is six months and is
renewable for a successive 6-month period unless either party provides the other
party with 30 days' prior written notice.

On July 22, 2005, Nexicon, Inc. and Central Solutions, Inc. agreed to terminate
the Investment, Marketing and Distribution Agreement entered into on December
10, 2004. As a result of terminating said agreement, the Company will return its
35% ownership interest in Central Solutions and Central Solutions will return
the 10,000,000 shares of the Company's common stock received per said agreement.


                                       12
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-Looking Statements and Associated Risks. This Report contains
forward-looking statements. Such forward-looking statements include statements
regarding, among other things, (a) our projected sales and profitability, (b)
our growth strategies, (c) anticipated trends in our industry, (d) our future
financing plans, (e) our anticipated needs for working capital, (f) our lack of
operational experience, and (g) the benefits related to ownership of our common
stock. Forward-looking statements, which involve assumptions and describe our
future plans, strategies, and expectations, are generally identifiable by use of
the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend," or "project" or the negative of these words or other
variations on these words or comparable terminology. These forward-looking
statements are based largely on our company's expectations and are subject to a
number of risks and uncertainties, including those described in "Business Risk
Factors" of our Form 10-KSB for the year ended December 31, 2004. Actual results
could differ materially from these forward-looking statements as a result of
changes in trends in the economy and our company's industry, demand for our
products, competition, reductions in the availability of financing and
availability of raw materials, and other factors. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this Report will in fact occur as projected.

Overview

On March 17, 2005, Nexicon, Inc., (the "Company") decided to discontinue
operations of its Orion Security Services, Inc. ("OSSI") business, pursuant to
the terms of a Stock Repurchase Agreement. The Company agreed to repurchase
15,000,000 shares of its common stock held by the President of OSSI and issued
an unsecured promissory note for $240,000 payable as $20,000 at closing and a
note payable for $220,000 covering previously accrued wages and expenses. The
note is payable in successive $20,000 increments on or before the 15th of each
month for 11 consecutive months. This individual also received equipment located
in the OSSI facility with a net book value of $15,213. In addition, the Company
relinquished all right, title and interest in any agreements associated with the
SatSecure(C) technology and to various associated trade names. Accordingly, all
revenues and associated costs related to the SatSecure(C) product are reflected
as discontinued operations in the accompanying financial statements. The Company
recorded a loss on the disposal of assets of discontinued operations in
connection with this transaction, in the amount of $23,472, which is presented
net of $9,362 of previously deferred gain on the sale of the Company's Internet
tobacco products division. Effective November 15, 2004, the Company entered into
a share exchange agreement with Pluto International, AS ("Pluto"), a Norwegian
company, that provides a range of billing and customer care solutions for
telecommunication carriers and service providers via their "Charon" billing and
customer care real-time, client/server system. The business combination has been
accounted for as a purchase. The results of operations of Pluto, AS have been
included in the accompanying financial statements since the effective date of
the acquisition.

Critical Accounting Policies

Derivative instruments

In connection with the sale of debt or equity instruments, the Company may sell
options or warrants to purchase its common stock. In certain circumstances,
these options or warrants may be classified as derivative liabilities, rather
than as equity. Additionally, the debt or equity instruments may contain
embedded derivative instruments, such as conversion options, which in certain
circumstances may be required to be bifurcated from the associated host
instrument and accounted for separately as a derivative instrument liability.

The identification of, and accounting for, derivative instruments is complex.
The Company's derivative instrument liabilities are re-valued at the end of each
reporting period, with changes in the fair value of the derivative liability
recorded as charges or credits to income, in the period in which the changes
occur. For options, warrants and bifurcated conversion options that are
accounted for as derivative instruments liabilities, the Company determines the
fair value of these instruments using the Black-Scholes Option Pricing Model.
That model requires assumptions related to the remaining term of the instruments
and risk-free rates of return, the Company's current common stock price and
expected dividend yield, and the expected volatility of the Company's common
stock price over the life of the option. The Company has estimated the future
volatility of its common stock price based the history of the Company's stock
price. The identification of, and accounting for, derivative instruments and the
assumptions used to value them can significantly affect the Company's financial
statements.


                                       13
<PAGE>

Going Concern

The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.

The Company's independent auditors added an explanatory paragraph to their audit
opinions issued in connection with the years ended December 31, 2004 and 2003
financial statements, which states that the Company has suffered recurring
losses from operations and has working capital and stockholder deficits. These
factors raise substantial doubt about the Company's ability to continue as a
going concern.

The Company has experienced losses from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature. For the
year ended December 31, 2004, the Company incurred a net loss of $5,929,891 and
for the six months ended June 30, 2005, the Company incurred a net loss of
$2,866,344. At June 30, 2005, the Company had a working capital deficit of
$1,213,619 and stockholders' deficit of $3,393,659. In addition the Company is
subject to legal action. Specifically, on January 28, 2003, the Company was
named in a civil suit filed by the City of New York as one of approximately a
dozen defendants who engaged in the business of Internet online cigarette sales.
The suit alleges that the Company failed to report the names and addresses of
its customers to taxing authorities. The extent of the City's damages is to be
determined at trial. The Company's ability to continue as a going concern is
contingent upon its ability to secure financing and attain profitable
operations. In addition, the Company's ability to continue as a going concern
must be considered in light of the problems, expenses and complications
frequently encountered by entrance into established markets and the competitive
environment in which the Company operates. The Company purchased a wholly-owned
Pluto International AS, and through its "Charon" Billing and Operational
Support System sales in conjunction with ComSecure(C) Controller and network
security sales, hopes to attain profitable operations.

Notwithstanding the foregoing, there can be no assurances that the Company will
be successful in its attempts to raise sufficient capital essential to its
survival. To the extent that the Company is unable to raise the necessary
operating capital it will become necessary to curtail operations. Additionally,
even if the Company raises operating capital, there can be no assurances that
the net proceeds will be sufficient enough to enable us to develop its business
to a level where the Company will generate positive cash flows. These matters
raise substantial doubt about the Company's ability to continue as a going
concern.

The accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.

Results of Operations

Three Months Ended June 30, 2005 Compared With The Three Months Ended June 30,
2004

Revenues during the three months ended June 30, 2005, were $24,255 due to Charon
billing system sales ("Billing"), as compared to $0 for the same period in 2004,
an increase of $24,255 or 100%. There were no security or surveillance system
("Security") revenues for the three months ended June 30, 2005 or 2004.

Cost of goods sold during the three months ended June 30, 2005 was $18,454 and
solely attributable to Billing systems, as compared to $0 for the same period in
2004, an increase of $18,454 or 100%. Cost of goods sold includes the salaries
of the individuals dedicated to the Charon billing system. The Company believes
that adding more customers to the Charon system should not increase the cost of
goods sold on an ongoing basis.

General and administrative expenses for the three months ended June 30, 2005
were $502,200, consisting of $34,140 for Security, $148,537 for Billing and
$319,523 for corporate expenses, as compared to $519,784 for the same period
last year. The decrease of approximately $17,584 or 3.4% was primarily due to
decreases in professional fees of $136,527, offset by increases in payroll
expense of $82,559, in rent of $9,460, in travel of $7,663 and in utilities,
telephone and other miscellaneous expenses of $19,261.

During the three months ended June 30, 2005, the major components of general and
administrative expenses were approximately $233,119 in payroll expenses,
$157,470 in professional fees, $26,540 in rent, $1,103 in depreciation, $48,845
in travel, $9,331 in telephone, and $25,792 in utilities and other miscellaneous
expenses. By comparison, during the three months ended June 30, 2004, the major
components of general and administrative expenses were approximately $150,560 in
payroll expenses, $293,998 in professional fees, $17,080 in rent, $1,154 in
depreciation, $41,182 in travel, $5,444 in telephone and $10,366 in utilities
and other miscellaneous expenses.


                                       14
<PAGE>

General and administrative non-cash compensation for the three months ended June
30, 2005 and 2004, were $266,621 and $214,726, respectively, an increase of
$51,895 or 24.2%.

Other income and (expense) for the three months ended June 30, 2005, was
$(676,639) which included interest income of $113, non-cash interest expense of
$(130,600) and derivative instruments expense of $(546,152). Interest income of
$4,047, derivative instruments expense of $(156,100) and interest (expense) of
$(578) for a total of $(152,631) was recorded in the comparative period in the
prior year.

Net loss from discontinued operations for the three months ended June 30, 2005
and 2004, was $17,276 and $121,114, respectively, a decrease of $103,838 or
85.7%.

The Company had a net loss of $1,452,935 for the three months ended June 30,
2005, compared to net loss of $970,255 for the same period last year, an
increase of $482,680 or 49.7%. The loss for the three months ended June 30, 2005
consisted of operating losses of $142,736 related to Billing, $34,140 from
Security operations and $586,144 in general corporate expenses in addition to
other expense of $676,639, income tax benefit of $4,000 and loss from
discontinued operations of $17,276. In connection with this, the Company
advanced funds in the amount of $142,445 and $101,120 to its Billing and
Security segment operations, respectively, during the three months ended June
30, 2005. The 2004 loss was attributable to Security operations in the amount of
$122,078 and general corporate expenses of $612,432, in addition to other
expense of $152,631, tax benefit of $38,000 and loss from discontinued
operations of $150,401. In connection with this, the Company advanced $531,133
to its Security segment operations for the three months ended June 30, 2004.
There were no Billing operations for the three months ended June 30, 2004. The
Company recorded a net comprehensive loss of $1,485,028 for the three months
ended June 30, 2005. The difference of $(32,093), to arrive at comprehensive
income for the period ended June 30, 2005, is comprised of the foreign currency
translation adjustment attributable to the Billing segment.

Six Months Ended June 30, 2005 Compared With The Six Months Ended June 30, 2004

Revenues during the six months ended June 30, 2005, were $56,314 due to Billing
Systems, as compared to $0 for the same period in 2004, an increase of $56,314.
There were no Security revenues for the six months ended June 30, 2005 or 2004.

Cost of goods sold during the six months ended June 30, 2005 was $42,853 as
compared to $0 for the same period in 2004, an increase of $42,853. Cost of
goods sold includes the salaries of the individuals dedicated to the Charon
billing system. Adding more customers to the Charon system should not increase
the cost of goods sold on an on-going basis.

General and administrative expenses for the six months ended June 30, 2005 were
$1,114,737, consisting of $132,183 for Security, $338,832 for Billing and
$643,722 for corporate expenses, as compared to $1,080,665 for the same period
last year. The increase of approximately $34,072 or 3.2% was primarily due to
decreases in advertising of $10,655, and professional fees of $242,077, offset
by increases in payroll expense of $179,564, in rent of $26,303, in depreciation
of $13,799, in travel of $19,543, in telephone of $12,880 and in utilities,
telephone and other miscellaneous expenses of $34,715.

During the six months ended June 30, 2005, the major components of general and
administrative expenses were approximately $499,703 in payroll expenses,
$372,563 in professional fees, $51,404 in rent, $15,563 in depreciation, $97,332
in travel, $23,747 in telephone, and $54,425 in utilities and other
miscellaneous expenses. By comparison during the three months ended June 30,
2004, the major components of general and administrative expenses were
approximately $10,653 in advertising, $320,139 in payroll expenses, $614,640 in
professional fees, $25,101 in rent, $1,764 in depreciation, $77,790 in travel,
$10,867 in telephone and $19,711 in utilities and other miscellaneous expenses.

General and administrative non-cash compensation for the six months ended June
30, 2005 and 2004, were $525,243 and $462,976 respectively, an increase of
$62,267 or 13.4%.

Other income and (expense) for the six months ended June 30, 2005, was
$(1,161,311) which included interest income of $1,480, derivative instruments
expense of ($1,002,791) and non-cash interest expense of ($160,000). Interest
income of $4,047, derivative instruments expense of ($156,100) and interest
(expense) of $(1,149) for a total of $(153,202) was recorded in the prior year.


                                       15
<PAGE>

Net loss from discontinued operations for the periods ended June 30, 2005 and
2004, were $99,514 and 235,164, respectively, a decrease of $135,650 or 57.7%.

The Company had a net loss of $2,866,344 for the six months ended June 30, 2005,
compared to net loss of $1,865,007 for the same period last year, an increase of
$1,001,337 or 53.6%. The loss for the six months ended June 30, 2005 consisted
of operating losses of $325,371 related to Billing, $132,183 from Security
operations and $1,168,965 in general corporate expenses in addition, to other
expense of $1,161,311, income tax benefit of $21,000 and loss on discontinued
operations of $99,514. In connection with this, the Company advanced funds in
the amount of $375,458 and $268,142 to its Billing and Security segment
operations, respectively, during the six months ended June 30, 2005. The 2004
loss was attributable to Security operations in the amount of $340,776 and
general corporate expenses of $1,202,865 in addition to other expense of
$153,202, tax benefit of $67,000 and loss on discontinued operations of
$235,164. In connection with this, the Company advanced $531,133 to its Security
segment operations for the period ended June 30, 2004. There were no Billing
operations for the six months ended June 30, 2004. The Company recorded a net
comprehensive loss of $2,869,239 for the six months ended June 30, 2005. The
difference of $(2,895), to arrive at comprehensive income for the period ended
June 30, 2005, is comprised of the foreign currency translation adjustment
attributable to the Billing segment.

Liquidity and Capital Resources

During the period ended June 30, 2005 as compared to the same period in 2004,
cash used in operations was $1,304,607 and $673,100, respectively. Cash used in
investing activities for the periods ended June 30, 2005 and 2004 was $39,109
and $68,228, respectively. The reduction in cash used in 2005 was attributable
to an increase in the purchase of property and equipment and no deposit on
investment or deferred offering costs paid as in the six months ended June 30,
2004. For the six months ended June 30, 2005, cash provided by financing
activities was $1,340,000, as compared to $788,847 for the same period in 2004.
The increase in 2005 was attributable to an increase in proceeds from notes
payable of $989,553 offset by a decrease in proceeds from sale of common stock
of $438,400. There was a net decrease in cash of $3,716 for the period ended
June 30, 2005, as compared to an increase of $47,519 for the same period in
2004. Nexicon had cash-on-hand of $25,846 as of June 30, 2005. Cash on hand,
together with collection of receivables and reductions in expenses, will last
until the end of September 2005.

The Company's primary needs for cash during the next 12 months are to satisfy
current liabilities of $1,322,803, as well as to support the Company's current
operations. As of June 30, 2005, the Company had a working capital (deficit) of
($1,213,619). The Company's current operating expenses are expected to be
$250,000 per month, including payroll, rent, utilities and litigation costs. The
Company in the next 12 months expects to receive the balance of $54,674 of the
current receivable from American Indian Cigco, LLC and hopes to attain
profitable operations through sales of its ComSecure Controller and Charon
billing system. However, until profitable operations are achieved, the Company
will need to raise additional capital to finance its current operations as well
as any growth. Such capital is expected to come from the sale of securities,
including the sale of common stock under the Standby Equity Distribution
Agreement entered into by the Company on July 5, 2005 (the "2005 SEDA").

On July 5, 2005, the Company entered into the 2005 SEDA with Cornell pursuant to
which the Company may, at its discretion, periodically sell to Cornell shares of
the Company's common stock for a total purchase price of up to $20,000,000. For
each share of common stock purchased under the 2005 SEDA, Cornell will pay the
Company 99% of the lowest volume weighted average price of the Company's common
stock on the Over-the-Counter Bulletin Board or other principal market on which
the Company's common stock is traded for the five trading days immediately
following the notice date. Further, Cornell will retain a fee of 5% of each
advance under the 2005 SEDA. In light of the limitations contained in the 2005
SEDA, the Company would need to submit a $300,000 advance request approximately
every nine trading days for 24 months in order to attain the full $20,000,000
available under the 2005 SEDA; however, the Company does not currently have
sufficient shares given the current price of the Company's stock to permit the
delivery of the securities required to obtain the maximum $20,000,000 available
under the 2005 SEDA. The 2005 SEDA replaced the Standby Equity Distribution
Agreement that the Company entered into with Cornell on March 23, 2004 (the
"2004 SEDA") described below pursuant to the terms of the termination agreement
dated June 23, 2005, which was executed by the Company and Cornell (the "June
2005 Termination Agreement").

In March 2004, the Company entered into the 2004 SEDA with Cornell. This
agreement replaced the Standby Equity Distribution Agreement entered into in
September 2001 (the "2001 SEDA"). Pursuant to the 2004 SEDA, the Company could,
at its discretion for up to two years, periodically issue and sell shares of
common stock for a total purchase price of $20,000,000. As the Company requested
an advance under the 2004 SEDA, Cornell will purchase shares of common stock for
99% of the volume weighted average price on the Over-the-Counter Bulletin Board
or other principal market on which the Company's common stock was traded for the
five days immediately following the notice date. Cornell intends to sell any
shares purchased under the 2004 SEDA.


                                       16
<PAGE>

In May 2004, the Company entered into a Securities Purchase Agreement (the "2004
SPA") whereby $500,000 of 5% secured, convertible debentures were issued. During
the year ended December 31, 2004, the Company received net proceeds of $369,323
after payment of expenses in the amount of $130,677 from the sale of $500,000 of
debentures. During the six months ended June 30, 2005, the investor converted
$45,000 worth of the debentures for 1,979,167 shares of the Company's common
stock. At June 24, 2005, the balance of the debentures was $380,000 and the
accrued interest was $22,896. On June 23, 2005, the 2004 SPA was terminated and
on June 24, 2005 the Company entered into a new Securities Purchase Agreement
(the "2005 SPA") whereby the Company refinanced the outstanding principal under
the 2004 Secured Convertible Debentures as the 2005 Secured Convertible
Debentures in the amount of $380,000, which is convertible at the holder's
option any time up to maturity at a conversion price per share equal to $0.01.
At maturity, the remaining unpaid principal and accrued interest under the 2005
Secured Convertible Debenture shall be, at the Company's option, either paid or
converted into shares of common stock at a conversion price equal to $0.01. The
debentures bear interest at 5% per annum and are secured by a security agreement
covering substantially all business assets.

Subsequent to June 30, 2005, the Company issued 1,000,000 shares of its common
stock for cash in the amount of $20,000.

ITEM 3 CONTROLS AND PROCEDURES

      (a)   Evaluation of Disclosure Controls and Procedures:

As of the end of the period covered by this Report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
Principal Executive Officer and Principal Accounting Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. The Company's disclosure controls and procedures are designed to
produce a reasonable level of assurance of achieving the Company's disclosure
control objectives. The Company's Principal Executive Officer and Principal
Accounting Officer have concluded that the Company's disclosure controls and
procedures were, in fact, adequate and effective to ensure that material
information relating to the Company that is required to be disclosed by the
Company in reports that it files or submits under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in rules of the SEC and accumulated and communicated to
the Company's management, including its Principal Executive Officer and
Principal Accounting Officer, to allow timely decisions regarding required
disclosure.

      (b)   Changes In Internal Controls Over Financial Reporting

In connection with the evaluation of the Company's internal controls during the
Company's last fiscal quarter, the Company`s Principal Executive Officer and
Principal Accounting Officer have determined that there are no changes to the
Company's internal controls over financial reporting that has materially
affected, or is reasonably likely to materially effect, the Company's internal
controls over financial reporting.


                                       17
<PAGE>

                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

On January 28, 2003, the Company was named in a civil suit filed by the City of
New York as one of approximately a dozen defendants who engaged in the business
of Internet online cigarette sales. The suit alleges that the Company failed to
report the names and addresses of its customers to taxing authorities. The
extent of the City's damages is to be determined at trial.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended June 30, 2005, the Company issued an aggregate of
3,500,000 shares of its common stock for cash in the amount of $90,000, of which
400,000 shares were issued to employees as compensation valued at the market
price on the date of issue of $8,000, 1,979,167 shares were issued in connection
with the conversion of $45,000 worth of debentures, and 11,933,540 shares were
issued in connection with the 2005 SEDA discussed in Note 7.

On January 14, 2005, the Company issued an unsecured promissory note to Cornell
in the amount of $250,000 and received net proceeds of $225,033 after payment of
financing costs of $24,967. Effective March 3, 2005, the Company issued an
additional unsecured promissory note to Cornell in the amount of $1,000,000 and
received net proceeds of $915,099, after payment of financing costs of $84,901.
The loan is evidenced by a promissory note dated March 3, 2005, which bears
interest at a rate of 12% per annum and is due within 296 days of the execution
of the note (November 26, 2005), unless otherwise mutually extended. As a
condition precedent to the loan, the Company agreed to issue and hold in escrow
40,000,000 shares of its common stock to be released in connection with
repayment of the loan.



ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) The following exhibits are filed as part of this filing:

<TABLE>
<CAPTION>
Exhibit No          Description                                          Location
<S>                 <C>                                                  <C>
10.1                Standby Equity Distribution Agreement, dated as of   Incorporated by reference to Exhibit 99.1 to the
                    June 24, 2005, by and between the Company and        Company's Current Report on Form 8-K as filed
                    Cornell Capital Partners, LP                         with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

10.2                Registration Rights Agreement, dated as of June      Incorporated by reference to Exhibit 99.2 to the
                    24, 2005 , by and between the Company and Cornell    Company's Current Report on Form 8-K as filed
                    Capital Partners, LP                                 with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

10.3                Placement Agent Agreement, dated as of June 24,      Incorporated by reference to Exhibit 99.3 to the
                    2005, by and among the Company, Cornell Capital      Company's Current Report on Form 8-K as filed
                    Partners, LP, and Newbridge Securities Corporation   with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

10.4                Amended and Restate Security Agreement, dated as     Incorporated by reference to Exhibit 99.4 to the
                    of June 24, 2005, by and among the Company,          Company's Current Report on Form 8-K as filed
                    Cornell Capital Partners, LP and Newbridge           with the United States Securities and Exchange
                    Securities Corporation                               Commission on July 7, 2005
</TABLE>

                                       18
<PAGE>

<TABLE>
<CAPTION>
Exhibit No          Description                                          Location
<S>                 <C>                                                  <C>
10.5                Securities Purchase Agreement, dated as of June      Incorporated by reference to Exhibit 99.5 to the
                    24, 2005, by and between the Company and Cornell     Company's Current Report on Form 8-K as filed
                    Capital Partners, LP                                 with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

10.6                Secured Convertible Debenture, dated as of June      Incorporated by reference to Exhibit 99.6 to the
                    24, 2005, issued to Cornell Capital Partners, LP     Company's Current Report on Form 8-K as filed
                                                                         with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

10.7                Escrow Agreement, dated as of June 24, 2005, by      Incorporated by reference to Exhibit 99.7 to the
                    and among the Company, Cornell Capital Partners,     Company's Current Report on Form 8-K as filed
                    LP and David Gonzalez                                with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

10.8                Escrow Agreement, dated as of June 24, 2005, by      Incorporated by reference to Exhibit 99.8 to the
                    and among the Company, Cornell Capital Partners,     Company's Current Report on Form 8-K as filed
                    LP and David Gonzalez                                with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

10.9                Warrant, dated as of June 24, 2005, issued to        Incorporated by reference to Exhibit 99.9 to the
                    Cornell Capital Partners, LP                         Company's Current Report on Form 8-K as filed
                                                                         with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

10.10               Termination Agreement, dated June 23, 2005, by and   Incorporated by reference to Exhibit 99.10 to the
                    between the Company and Cornell Capital Partners,    Company's Current Report on Form 8-K as filed
                    LP                                                   with the United States Securities and Exchange
                                                                         Commission on July 7, 2005

31.1                Certification by Chief Executive Officer pursuant    Provided herewith
                    to 15 U.S.C. Section 7241, as adopted pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002

31.2                Certification by Chief Financial Officer pursuant    Provided herewith
                    to 15 U.S.C. Section 7241, as adopted pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002

32.1                Certification by Chief Executive Officer pursuant    Provided herewith
                    to 18 U.S.C. Section 1350, as adopted pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002

32.2                Certification by Chief Financial Officer pursuant    Provided herewith
                    to 18 U.S.C. Section 1350, as adopted pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

      (b)   Reports of Form 8-K:

            None.


                                       19
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed in its behalf
by the undersigned, thereunto duly authorized.

                                           NEXICON, INC.

February 10, 2006                          By:      /s/ Richard A. Urrea
                                                    --------------------
                                                    Richard A. Urrea
                                                    President, Chief Executive
                                                    Officer and Principal
                                                    Executive Officer

February 10, 2006                          By:      /s/ Daniel Urrea
                                                    ----------------
                                                    Daniel Urrea
                                                    Chief Financial Officer
                                                    and Principal Accounting
                                                    Officer


                                       20