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

                                 AMENDMENT NO. 2
                                       TO
                                   FORM 10-QSB


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


                  For the quarterly period ended March 31, 2005


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


         For 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             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

       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 118,344,445, par value $0.001 per share, shares of common stock
outstanding as of May 5, 2005.

<PAGE>

                                     PART I


FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                                       2
<PAGE>

                                  NEXICON, INC.
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2005
                                   (Restated)
                                   (unaudited)

                                     ASSETS
CURRENT ASSETS

    Cash                                                           $    596,732
    Restricted cash                                                      11,075
    Receivables, net of allowance for doubtful
         accounts of $2,364                                              59,098
    Receivables - related parties                                         8,369
    Receivable - AIC                                                     54,674
    Interest receivable - AIC                                               382
    Financing costs                                                     117,600
    Prepaid expense                                                       3,552
                                                                   ------------
     Total current assets                                               851,482
                                                                   ------------
PROPERTY AND EQUIPMENT, net of
  accumulated depreciation of $136,508                                   13,757
                                                                   ------------
OTHER ASSETS
  Financing cost, net                                                    13,000
  Investment in Mercury                                                 147,851
  Deposit                                                                 3,649
                                                                   ------------
                                                                        164,500
                                                                   ------------
                                                                   $  1,029,739
                                                                   ============
                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
  Accounts payable and accrued expenses                            $    660,814
  Accrued expenses - shareholders                                       381,738
  Deferred gain                                                          37,563
  Net liabilities of discontinued operations                            362,605
                                                                   ------------
     Total current liabilities                                        1,442,720
                                                                   ------------

DERIVATIVE FINANCIAL INSTRUMENTS                                      1,855,892
                                                                   ------------
STOCKHOLDERS' (DEFICIT)
   Common stock, $0.001 par value, 500,000,000 shares
     authorized, 111,282,238 shares issued and
     outstanding                                                        111,283
   Additional paid-in capital                                        13,405,670
   Treasury stock, 15,000,000 shares at par value                        15,000
   Deferred stock compensation                                         (285,374)
   Stock subscription receivable                                     (2,800,000)
   Accumulated (deficit)                                            (12,871,880)
                                                                   ------------

                                                                     (2,425,301)
   Other comprehensive income:
   Currency translation adjustment                                      156,428
                                                                   ------------
                                                                     (2,268,873)
                                                                   ============
                                                                   $  1,029,739
                                                                   ============

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

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                               Three Months Ended March 31,
                                                               2005                    2004
                                                             (Restated)           (Restated)
                                                            -------------        -------------
<S>                                                     <C>                     <C>
Revenues                                                    $      32,059        $          --
                                                            -------------        -------------
Cost of goods sold                                                 24,598                   --
General and administrative expenses                               612,338              560,881
Non-cash compensation-general and administrative                  258,622              248,250
                                                            -------------        -------------
(Loss) from operations                                           (863,499)            (809,131)
                                                            -------------        -------------
Other income (expense):
   Interest income                                                  1,367                   --
   Derivative instruments expense                                (240,144)                  --
   Non-cash interest expense                                      (29,400)                  --
   Interest expense                                                    --                 (571)
                                                            -------------        -------------
                                                                 (268,177)                (571)
Net (loss) before income tax                                   (1,131,676)            (809,702)

Income tax (benefit)                                              (17,000)             (29,000)
                                                            -------------        -------------
(Loss) before discontinued operations                          (1,114,676)            (780,702)
Discontinued operations:
  (Loss) on sale of assets of discontinued operations             (14,110)                  --
  Net (loss) from discontinued operations, net
    of income taxes of $17,000 and $29,000 respectively           (68,128)            (114,049)
                                                            -------------        -------------
Net (loss)                                                     (1,196,914)            (894,751)

Other comprehensive income

  Foreign currency translation adjustment                          29,198                   --
                                                            -------------        -------------
Net comprehensive (loss)                                    $  (1,167,716)       $    (894,751)
                                                            =============        =============

Weighted average shares
  outstanding (basic and diluted)                             120,011,970           89,892,030
                                                            =============        =============

Net (loss) per common share-basic and diluted
   (Loss) from operations                                   $       (0.01)       $       (0.01)
   Income from discontinued operations                                 --                   --
   Foreign currency translation adjustment                             --                   --
                                                            -------------        -------------
                                                            $       (0.01)       $       (0.01)
                                                            =============        =============
</TABLE>

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

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED MARCH 31,
                                                            2005            2004
                                                         (Restated)       (Restated)
                                                        -----------      -----------
<S>                                                     <C>             <C>
Cash flows from operating activities:
Net cash (used in) operating activities                 $  (680,256)     $  (343,759)
                                                        -----------      -----------
Cash flows from investing activities:
   Purchase property and equipment                          (21,499)         (11,949)
                                                        -----------      -----------
          Net cash (used in) investing activities           (21,499)         (11,949)
                                                        -----------      -----------
Cash flows from financing activities
   Proceeds from sale of common stock                        30,000          443,881
   Proceeds from notes payable                            1,250,000               --
                                                        -----------      -----------
          Net cash provided by financing activities       1,280,000          443,881
                                                        -----------      -----------
          Net increase in cash                              578,245           88,173
Beginning cash balance                                       29,562            9,299
                                                        -----------      -----------
Ending cash balance                                     $   607,807      $    97,472
                                                        ===========      ===========
</TABLE>

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

                                        5

<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                 MARCH 31, 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. ("Nexicon" or 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, to reflect the accounting for the convertible debentures and
unsecured promissory notes in connection with the Company's financing
transactions with Cornell Capital Partners, LP ("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 ended
March 31, 2005, as previously reported from $(980,419) to $(1,196,914) or $(.01)
per share. In addition, the liability for convertible debentures and note
payable to Cornell previously reported on the balance sheet was reduced
$1,550,000 to $0, the amount reported on the balance sheet for derivative
instruments was increased from $0 to $1,855,892 and the amount reported on the
balance sheet for accrued interest decreased from $32,441 to $0.


Reclassification

Certain amounts from the three months ended March 31, 2004, financial statements
have been reclassified to conform to current period presentation.

                                       6

<PAGE>

(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
three months ended March 31, 2005, the Company incurred a net (loss) of
($1,196,914). At March 31, 2005, the Company had a working capital (deficit) of
($591,238) and stockholders' (deficit) of ($2,268,873).

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 subsidiary, Pluto Communications
International, AS ("Pluto") and through 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 quarter ended March 31, 2005, the Company issued an aggregate of
500,000 shares of its common stock for cash in the amount of $30,000, 416,667
shares in connection with the conversion of $20,000 worth of debentures, and
5,871,845 shares in connection with the Standby Equity Distribution Agreement
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 (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. As of March 31, 2005, $250,000 has been paid on the
promissory notes. Stock compensation expense was $258,622, and amortization of
financing costs as non-cash interest expense amounted to $29,400, for the
quarter ended March 31, 2005.

(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 tradenames. 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.

Operating results of discontinued operations for the three months ended March
31, 2005 and 2004 are shown separately in the accompanying statements of
operations.


                                       7
<PAGE>

Net sales and net income (loss) from discontinued operations are as follows:


                                    2005                        2004
                                 ----------                  ----------
     Net sales                   $       --                  $       --
                                 ==========                  ==========
     Net (loss)                  $  (68,128)                 $ (114,049)
                                 ==========                  ==========

Net assets and liabilities of discontinued operations, which were included in
the Stock Repurchase Agreement, were as follows as of March 31, 2005:

Property and equipment - net                                          $     370
Deposits                                                                 11,179
Accounts payable and accrued expenses                                  (131,799)
Notes payable and accrued interest - related                           (220,000)
Accrued expenses - shareholder                                          (22,355)
                                                                      ---------
   Net liabilities of discontinued operations                         $(362,605)
                                                                      =========

(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 McLean,
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
                                                 =========

Financing Agreements with Cornell

The Company entered into the following financing agreements with Cornell in 2004
and 2005:

Standby Equity Distribution Agreement

On March 23, 2004, the Company and Cornell entered into a Standby Equity
Distribution Agreement ("SEDA"), pursuant to which the Company may, at its
discretion, periodically issue and sell to Cornell, up to $20,000,000 of the
Company's common stock. The previous Equity Line of Credit agreement was
terminated upon execution of the SEDA. As a condition precedent to the execution
of the 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 SEDA. The commitment period for the 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, August 11, 2004.


                                       8
<PAGE>

The Company is obligated to pay a cash commitment fee to Cornell equal to 5% of
each advance, payable directly from the gross proceeds of each advance.
Effective March 23, 2004, upon the execution of the SEDA, the Company issued
490,000 shares of its common stock to Cornell at $0.48 per share, or $235,200.
The "Commitment" shares were valued at the fair market value of the shares at
March 23, 2004, the date of execution of the SEDA, and are capitalized as
financing costs and amortized as interest expense over the two-year commitment
period of the SEDA. During the quarter ended March 31, 2005, $29,400 was
expensed as non-cash interest expense leaving a balance of $130,600 to be
amortized.

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 SEDA, as the
purchase price of the shares will fluctuate based on the prevailing market
conditions. In addition, 5,871,845 shares of the Company's common stock with a
fair market value of $253,427 were issued pursuant to the SEDA, which was used
for partial repayment of the promissory notes.

Promissory Notes

During the quarter ended March 31, 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. 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.

Securities Purchase Agreement

In May 2004, the Company entered into a Securities Purchase Agreement, 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 worth of
debentures. The investor converted $95,000 worth of the debentures for 1,096,855
shares of the Company's common stock. At March 31, 2005, the balance of the
debentures was $405,000 and the accrued interest was $17,927.

The debentures bear interest at 5% per annum and are secured by a security
agreement covering substantially all business assets. Principal plus accrued
interest is 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 entitles 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 $.001 par value common stock (the "Conversion Shares"), 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 is payable at maturity or conversion, either in cash
or shares of the Company's common stock, at the Holder's option. If payment is
made in the form of common stock, the value will be calculated based on the
quoted closing bid price on the day the payment is due, or the day of payment,
if later than the due date.

The Company, at its option, may redeem all or a portion of the outstanding
debentures at a rate of 120% of the amount redeemed plus interest. In the event
of redemption, the Holder will receive a warrant to purchase 50,000 shares of
the Company's common stock for every $100,000 redeemed, on a pro-rata basis.
Such warrants will be exercisable on a cash basis, at 120% of the quoted closing
bid price on the closing date. The warrants will have "piggy back" and demand
registration rights and will remain in effect for two years after the closing
date. The Company was required to register the resale of the Conversion Shares
under the Securities Act of 1933, as amended, pursuant to the terms of an
Investor Registration Rights Agreement, attendant to the Debenture Agreement.
Any discounts from the fair market value related to the above conversions will
be charged to interest at the time of conversion.

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.

                                       9
<PAGE>

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.

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.


                                       10
<PAGE>


At March 31, 2005, the following derivative liabilities and embedded derivative
instruments were outstanding:


<TABLE>
<CAPTION>
                                                                                            Value -
                                                                           Value -          March 31,
Issue Date       Expiry Date                                               Issue Date       2005
-----------------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>
05-07-2004       05-07-2006    $250,000 convertible debentures             $  251,435      $     1,364

06-30-2004       06-30-2006    $100,000 convertible debentures                144,251              910

08-13-2004       08-13-2006    $150,000 convertible debentures                152,102            4,102

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          154,725

03-08-2005       03-08-2007    $1,000,000 unsecured promissory notes          539,330          488,458

Fair value of bifurcated embedded derivative instrument liabilities
  associated with the above convertible notes                                              $ 1,206,333
                                                                                           -----------

Total derivative financial instruments                                                     $ 1,855,892
                                                                                           ===========
</TABLE>


                                     11
<PAGE>

(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 March 31, 2005 and 2004,
the total reportable segment information is as follows:

<TABLE>
<CAPTION>
                                                    Billing                                                      Total
                                                   Solutions           Network                                    as
                                                    Systems            Security            Corporate           Reported
                                                  -----------         -----------         -----------         -----------
<S>                                               <C>                 <C>                 <C>                 <C>
For the three months ended March 31, 2005:
Reportable segments
       External revenues                          $    32,059         $        --         $        --         $    32,059
       Depreciation and amortization                   13,646                 581                 233              14,460
       Operating (loss)                              (182,635)            (98,043)           (582,821)           (863,499)
       Assets                                         133,923                  --             895,816           1,029,739
       Capital expenditures
       (disposals)                                         --             (21,499)                 --             (21,499)

For the three months ended March 31, 2004:
Reportable segments
       External revenues                          $        --         $        --         $        --         $        --
       Depreciation and amortization                       --                 662                 133                 795
       Operating (loss)                                    --            (218,698)           (590,433)           (809,131)
       Assets                                              --              62,590             250,786             313,376
       Capital expenditures
       (disposals)                                         --             (11,949)                 --             (11,949)
</TABLE>


External revenues for groups of similar products and services, consisted
principally of the ComSecure(C) network security system, ($0) and telephone
billing systems ($32,059). The security segment is operating and has derived its
revenues in the United States during the three months ended March 31, 2004, and
had no revenues in 2003. The Billing solutions systems segment is operating in
Norway and has derived its revenues in Norway and Sweden in 2004 and had no
revenues in 2003.

(9)  Subsequent Events

Subsequent to March 31, 2005, the Company issued 1,000,000 shares of its common
stock for cash in the amount of $20,000. The Company issued 6,061,695 shares of
common to Cornell Capital Partners in connection with the SEDA (see Note 7).


                                       12
<PAGE>

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

FORWARD-LOOKING STATEMENTS

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. ("Nexicon" or the "Company") decided to
discontinue operations of its Orion Security Services ("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 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 tradenames. 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 Communications 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 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.

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.


                                       13
<PAGE>

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 three months ended March 31, 2005, the Company incurred a net (loss)
of ($1,196,914). At March 31, 2005, the Company had a working capital (deficit)
of $(591,238) and stockholders' (deficit) of $(2,268,873). 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'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 subsidiary, Pluto and through its
"Charon" Billing and Operational Support System sales, in conjunction with
ComSecure(C) Controller sales, through its wholly-owned subsidiary OSSI, 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 March 31, 2005 Compared With The Three Months Ended March 31,
2004

Revenues during the three months ended March 31, 2005, were $32,059 due to
Charon billing system sales, as compared to $0 for the same period in 2004, an
increase of $32,059.

Cost of goods sold during the three months ended March 31, 2005 was $24,598 as
compared to $0 for the same period in 2004, an increase of $24,598. 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 first quarter ended March 31, 2005
were $612,338, as compared to $560,881 for the same period last year. The
increase of approximately $51,457 or 9.2% was primarily due to decreases in
advertising of $10,653, in professional fees of $113,311 and offset by increases
in payroll expense of $133,338, in rent of $13,855, in depreciation of $13,667,
in travel of $744 and in utilities, telephone and other miscellaneous expenses
of $13,817.

During the three months ended March 31, 2005, the major components of general
and administrative expenses were approximately $300,388 in payroll expenses,
$205,090 in professional fees, $21,876 in rent, $14,460 in depreciation, $36,829
in travel, $8,892 in telephone, and $24,803 in utilities and other miscellaneous
expenses.

During the three months ended March 31, 2004, the major components of general
and administrative expenses were approximately $10,653 in advertising, $167,050
in payroll expenses, $318,401 in professional fees, $8,021 in rent, $793 in
depreciation, $36,085 in travel, $6,610 in telephone, $5,554 in general
liability insurance and $7,714 in utilities and other miscellaneous expenses.

Other income and (expense) for the quarter ended March 31, 2005, included
interest income of $1,367, derivative instruments expense $(240,144) and,
non-cash interest expense of $(29,400). Interest (expense) of $(571) was
recorded in the prior year.

Net loss from discontinued operations for the periods ended March 31, 2005 and
2004, were $82,238 and $114,049, respectively.

The Company had a net loss of $1,196,914 for the three months ended March 31,
2005, compared to net loss of $894,751 for the same period last year, an
increase of $302,163 or 33.8%. The Company recorded a net comprehensive loss of
$1,167,716 for the three months ended March 31, 2005.


                                       14
<PAGE>

Liquidity and Capital Resources

For the quarter ended March 31, 2005, cash used in operations was $680,256, as
compared to $343,759 for the same period in 2004. For the quarter ended March
31, 2005, cash used in investing activities was $21,499, as compared to $11,949
for same period of 2004. The increase in 2005 was attributable to an increase in
the purchase of property and equipment. For the quarter ended March 31, 2005,
cash provided by financing activities was $1,280,000, as compared to $443,881
for the same period in 2004. The increase in 2005 was attributable to an
increase in proceeds from notes payable of $1,250,000 offset by a decrease in
proceeds from sale of stock of $413,881. There was a net increase in cash of
$578,245 for the quarter ended March 31, 2005, as compared to $88,173. The
Company had cash-on-hand of $607,807 as of March 31, 2005.

The Company's primary need for cash during the next 12 months is to satisfy
current liabilities of $1,442,720, as well as to support the Company's current
operations. As of March 31, 2005, the Company had a working capital (deficit) of
($591,238). 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 twelve months expects to receive the balance of $54,674 of the
current receivable from AIC and hopes to achieve profitable operations through
sales of its ComSecure(C) Controller and Charon billing system. However, the
Company will need to raise additional capital to finance growth. Such capital is
expected to come from the sale of securities, including the sale of common stock
under the Standby Equity Distribution Agreement.

In March 2004, the Company entered into a Standby Equity Distribution Agreement
with Cornell Capital Partners, LP ("Cornell"). This agreement replaces the
Standby Equity Distribution Agreement (the "SEDA") entered into in September
2001. Pursuant to this agreement, the Company may, at its discretion for up to 2
years, periodically issue and sell shares of common stock for a total purchase
price of $20.0 million. If the Company requests an advance under the 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 our common stock is traded for the five days immediately following the
notice date. Cornell intends to sell any shares purchased under the SEDA at the
market price.

Subsequent to March 31, 2005, the Company issued 1,000,000 shares of its common
stock for cash in the amount of $20.000. In addition, 6,061,695 shares were
issued in connection with the SEDA.

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.


                                       15
<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 March 31, 2005, the Company issued an aggregate of
500,000 shares of its common stock for cash of $30,000.

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. 40,000,000 shares were issued and held in escrow in
connection with the $1,000,000 promissory note.

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                  Share Exchange Agreement dated as of June 16, 2004       Incorporated by reference to Exhibit 99.1 to
                      between the Company and Pluto Communications             the Company's current report on Form 8K filed
                      International A.S.                                       on March 2, 2004

10.2                  Amendment to Share Exchange Agreement between the        Incorporated by reference to Exhibit 99.2 to
                      Company and Pluto Communications International A.S.      the Company's current report on Form 8K filed
                      dated as of November 15, 2004                            on March 2, 2005

10.3                  Repurchase Agreement dated as of March 17, 2005          Incorporated by reference to Exhibit 99.1 to
                      between Nexicon and Robert Demson                        the Company's current report on Form 8K filed
                                                                               on March 19, 2005

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

                                       16
<PAGE>


(b)   Reports of Form 8-K

         On March 2, 2005, the Company filed a current report on Form 8K
announcing the acquisition of Pluto Communications International AS, on November
17, 2004.

         On March 19, 2005, the Company filed a current report on Form 8K
announcing the repurchase of common stock.


                                       17
<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



                                       18