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

                                 AMENDMENT NO. 4
                                       TO
                                   FORM 10-KSB

|X|   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934

                   For the fiscal year ended December 31, 2004

|_|   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 incorporation)              (I.R.S. Employer
                                                         Identification Number)

           400 GOLD SW, SUITE 1000
           ALBUQUERQUE, NEW MEXICO                                87102
           -----------------------                                -----
   (Address of principal executive offices)                    (Zip code)

                                                             (505) 248-0000
                                                             --------------
                                                           (Issuer's telephone
                                                                 number)

Securities registered under Section 12(b) of the Exchange Act: Common Stock,
$0.001 par value

Securities registered under Section 12(g) of the Exchange Act: None

               Title of each class Common Stock, $0.001 par value
               --------------------------------------------------

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation SB contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|

The registrant's operating revenues for its most recent fiscal year were:
$495,990.

The aggregate market value of the registrant's voting and non-voting common
equity held by non-affiliates (computed based on the average bid and asked price
of the registrant's Common Stock on the bulletin board), was $7,680,000 on March
31, 2005.

The number of shares of Common Stock outstanding as of March 31, 2005 was
111,282,750.

Documents incorporated by reference: None

Transitional Small Business Disclosure Format: |_| Yes |X| No

<PAGE>

                FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004
                                TABLE OF CONTENTS

PART I.........................................................................2
   ITEM 1.   DESCRIPTION OF BUSINESS...........................................2
RISKS RELATED TO OUR BUSINESS..................................................4
   ITEM 2.   DESCRIPTION OF PROPERTY...........................................6
   ITEM 3.   LEGAL PROCEEDINGS.................................................6
   ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............6
PART II........................................................................8
   ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..........8
   ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........10
   ITEM 7.   FINANCIAL STATEMENTS.............................................16
   ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
             AND FINANCIAL DISCLOSURE.........................................16
   ITEM 8A.  CONTROLS AND PROCEDURES..........................................16
   ITEM 8B.  OTHER INFORMATION................................................16
PART III......................................................................17
   ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
             PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.......17
   ITEM 10.  EXECUTIVE COMPENSATION...........................................18
   ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT AND RELATED STOCKHOLDER MATTERS.......................19
   ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................20
   ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.................................21
   ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES...........................22
SIGNATURES....................................................................23
FINANCIAL STATEMENTS.........................................................F-1

                                       1
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

      Overview

      Nexicon, Inc., formerly Cyco.net, Inc. ("Nexicon" or the "Company"), is
the successor corporation to AVE, Inc. The Company was an e-commerce business
until July 2003 when it sold the assets of its cigarette e-tail business. This
decision was made after several states filed civil lawsuits against the New
Mexico subsidiary involved in the sale of cigarettes over the Internet. The
Company's management felt that although the Company had a meritorious defense it
would be much too costly to defend its position in a court. The Company chose to
pursue other business opportunities and on November 19, 2003, Nexicon, Inc.
purchased all of the outstanding common stock of Orion Security Services, Inc.,
a Wisconsin corporation ("OSSI"), in a stock-for-stock purchase. On November 15,
2004, Nexicon purchased all of the outstanding common stock of Pluto
Communications International, AS, a Norwegian corporation ("Pluto"), in a
stock-for-stock purchase. On March 17, 2005, Nexicon agreed to repurchase 15
million shares of the Company's common stock held by Robert Demson in exchange
for all right, title, and interest that Mr. Demson had in certain agreements
associated with the "SatSecure" technology and to the tradenames "Orion Security
Services, Inc.", "OSSI", "Ossi-Secure", "SatSecure", "SatWatch" and "RECON 9000"
(collectively, "Tradenames"), and all equipment, computers and furniture valued,
in the aggregate, at approximately $15,213.

      Core Business

      The Company's wholly-owned subsidiaries are OSSI, which provides secure
computer network and management solutions and video surveillance systems via
satellite communication and Pluto, which provides all-in-one or issue-specific
management solutions for computer network control, cyber security, operational
support systems and billing systems.

      OSSI's operations are in Oakton, Virginia and it was organized to deliver
two products; a new network security and management control system, OSSI
ComSecure(C) Controller and an innovative, manned or unmanned, mobile
video-voice-data and alarm transfer surveillance system, OSSI SatSecure(C).

      Pluto's operations are in Oslo, Norway. Pluto has developed a new billing
software. The Charon Billing System features low cost ownership, full
integration, high volume growth, total control of subscribers at all times and
handles the requirements of multinational service providers.

      OSSI ComSecure(C) Controller

      The ComSecure(C) Controller is designed to give a global network
enterprise full control of all traffic, devices and subscribers within an
intellectual property ("IP") network. With Internet inspired threats on the
increase, government and commercial enterprises are able to now gain full
control of their information technology ("IT") infrastructure, maximizing
network performance and simultaneously offering an enhanced user experience.
This all-in-one rack mount device changes the way network security and
management is accomplished by managing what goes on both inside and outside the
network, by eliminating damaging content from ever entering the network and by
automating tasks for enhanced network performance.

      By managing and inspecting every IP packet, through all seven layers
traversing the network, ComSecure(C) Controller does not allow IP packets
containing unauthorized or malicious code to penetrate an enterprise.

      The ComSecure(C) Controller breaks the network processing bottleneck and
increases total performance by executing tasks previously performed by firewalls
and routers, and by eliminating the need for additional control boxes such as
authentication servers, packet shapers, monitoring devices, intrusion detection
and protection servers and access control systems.

      The Company is focused on two markets, consisting of the public and
private sectors. The Company is working to establish relationships with key
departments and agencies within the U.S. Government where we believe the
ComSecure(C) Controller will be deemed of strategic value and with integrator
partners that control the delivery mechanisms to government and commercial
clients.

                                       2
<PAGE>

      The ComSecure(C) Controller is a patent pending complete network control
device designed to give the administrator full control of all traffic, devices
and subscribers in an IP network.

      OSSI SatSecure(C) Surveillance System

      OSSI introduced a surveillance technology in a rugged transceiver
board-level design that delivers bi-directional video, audio, alarm/sensor and
data transfer between virtually any two locations on earth with exceptional
quality in limited bandwidth environments from 9.6 to 384 KBPS. The SatSecure(C)
Surveillance System could use a variety of communication channels such as ISDN,
IP, Public Switched Telephone Networks ("PSTN"), INMARSAT SatPhones (64 KBPS)
and GSM phones (9.6 KBPS) to transfer and remotely control video, audio,
alarm/sensor and data between two units at different locations. As of March
2005, Nexicon no longer sells SatSecure.

      Charon Billing System

      The Charon Billing System consists of several standalone modules that can
be delivered separately or combined for maximum operational advantages. These
modules are grouped into three main brand names: CHARON, CERBERUS and MINOS.
Each branded module is divided into segments focusing on different markets.
Operators and service providers can therefore use our system for other products
and services, and bundle products to increase revenue. Each module has
capabilities for the respective market segment, enabling it to be adapted to
suit several needs for multi-operational products and service.

      The Charon Billing System offers a scalable range of billing and customer
care solutions. All systems are tested to ensure they capture and process all
detail records at a wide rate. We believe the result is that service providers
and network operators can trust Charon Billing Systems and Customer Care
Solutions.

      The Charon Billing Systems support the billing processes for mobile,
wireline, satellite, internet, and energy. Offering flexibility, reliability and
scalability, Charon is a constantly evolving, open, client/server system that
meets the needs of customers ranging from low volume start-ups to high volume
Tier-1 operators.

      Sources Of Supply

      Nexicon expects to contract with third party manufacturers to produce the
ComSecure(C) Controller. The Charon Billing products are developed and
maintained in house.

      Industry

      The Company will be entering the highly competitive industry of computer
network security with the ComSecure(C) Network Controller. Currently there are
several options for protecting a secure computer network. Most are comprised of
a group of components that collectively form a barrier between networks,
commonly referred to as "firewalls". Firewalls, which are not standardized,
usually consist of several layers of applications and hardware that work to
ensure that no single point of vulnerability exists. Firewalls often consist of
a bastion host, proxy servers, packet screening tools, multiple routers, a
"demilitarized zone", virus detection and intrusion detection devices. Currently
there are several large corporations that provide these services to the market,
including Cisco Systems, Nortel Networks, Check Point Software, and IBM.

      Competition

      Our competitors have substantially greater resources that we do, and a
large market presence. These competitors also have name and brand recognition
which often implies reliability to the customer. Currently, most network
security platforms are made up of several different devices and software, which
are often manufactured by different companies. We believe this translates into
customers having compatibility issues, and or the exclusion of one or more
levels of protection which will ultimately leave their network vulnerable to
attack. The ComSecure(C) Controller breaks the network processing bottleneck and
increases total performance by executing tasks previously performed by firewalls
and routers, and by eliminating the need for additional control boxes such as
authentication servers, packet shapers, monitoring devices, intrusion detection
and protection servers and access control systems. This all-in-one system
results in a smaller footprint, increased performance and capability and a
significantly lower cost of ownership. The Charon Billing Systems support the
billing processes for mobile, wireline, satellite, internet, and energy. Charon
is a constantly evolving, open, client/server system that meets the needs of
customers ranging from low volume start-ups to very high volume Tier-1
operators.

                                       3
<PAGE>

      Employees

      Nexicon, Inc. currently has three full-time and one part-time employee in
Albuquerque, New Mexico. Pluto in Norway has six full-time employees. OSSI had
six full-time employees through March 2005. Operations for OSSI have been moved
to Nexicon's headquarters in Albuquerque.

      Company History

      Nexicon is the successor to Deluxe Onyx Company, a company incorporated in
1921 and which produced motion pictures. In 1987, Deluxe Onyx Company changed to
Walsh Communications Group, Inc. and moved its domicile to Nevada. On May 4,
1990, its name was changed to AVE, Inc. AVE, Inc. was inactive from 1990 to
April 1997 when it began to seek to acquire an operating business. In December
1997, AVE, Inc. acquired Digital Manufacturing Inc. in a reverse merger. Digital
Manufacturing Inc. produced an antenna that could be re-engineered to operate in
the home satellite frequency spectrum. In February 1999, AVE, Inc. sold its
antenna business.

      On July 22, 1999, AVE, Inc. acquired Cyco.net, Inc. of Albuquerque, New
Mexico in a transaction accounted for as a recapitalization of Cyco.net, Inc.
Cyco.net was established in December 1998 to develop a network of web-based
companies. Under the terms of the agreement, AVE, Inc. changed its name to
Cyco.net, Inc. Mr. R. Gene Klawetter, former Chairman and CEO of AVE, Inc.
became a director of Cyco.net, Inc. George Sullivan, former AVE Vice President
of Operations resigned, as did Henri Hornby, former Director of AVE, Inc. In the
transaction, Cyco.net, Inc. shareholders received 2.08 shares of AVE (now
Nexicon) for each share of Cyco.net, Inc. stock. This provided the former AVE
shareholders with 15% ownership interest in the surviving company and Cyco.net
shareholders with 85% ownership interest of the surviving company. Effective
January 2005, Cyco.net, Inc. changed its name to Nexicon, Inc.

                          RISKS RELATED TO OUR BUSINESS

      We are subject to various risks that may materially harm our business,
financial condition and results of operations. An investor should carefully
consider the risks and uncertainties described below and the other information
in this Report before deciding to purchase our common stock. If any of these
risks or uncertainties actually occurs, our business, financial condition or
operating results could be materially harmed. In that case, the trading price of
our common stock could decline.

      We Have Historically Lost Money And Losses May Continue In The Future

      We have historically lost money. 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. In the years ended December 31, 2004 and
2003, we had net losses of $5,929,891 and $4,902,363, respectively. In addition
the Company is subject to legal action. On January 28, 2003, the Company's
subsidiary Cyco.net, Inc. was named in a civil action filed in the United States
District Court Southern District of New York 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 Cyco.net, Inc. failed to report the names
and addresses of its customers to taxing authorities. The extent of the City's
damages are to be determined at trial.

      Future losses are likely to occur. Accordingly, we may experience
significant liquidity and cash flow problems because historically our operations
have not been profitable. No assurances can be given that we will be successful
in reaching or maintaining profitable operations.

      We May Need To Raise Additional Capital To Finance Operations

      We have relied on significant external financing to fund our operations.
Such financing has historically come from a combination of borrowings, the
convertible debentures and notes to Cornell Capital Partners, LP ("Cornell"),
and sale of common stock from third parties and funds provided by certain
officers and directors. We cannot assure you that financing, whether from
external sources or related parties, will be available if needed or on favorable
terms. Our inability to obtain adequate financing will result in the need to
curtail business operations. Any of these events would be materially harmful to
our business and may result in a lower stock price. We will need to raise
additional capital to fund our anticipated future expansion. Among other things,
external financing may be required to cover our operating costs.

                                       4
<PAGE>

      We Have Been The Subject Of A Going Concern Opinion From Our Independent
      Auditors, Which Means That We May Not Be Able To Continue Operations
      Unless We Obtain Additional Funding

      Our independent auditors have 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. Our ability to obtain additional funding will determine our
ability to continue as a going concern. Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty. We
expect to be able to continue operations for 12 months with the cash currently
on hand, borrowings and sales of common stock through Cornell Capital and cash
anticipated from our operations. The Company purchased two wholly-owned
subsidiaries, OSSI and Pluto, and through sales of their products hopes to
attain profitable operations.

      We Are Subject To A Working Capital Deficit, Which Means That Our Current
      Assets On December 31, 2004 Were Not Sufficient To Satisfy Our Current
      Liabilities

      We had a working capital deficit of $879,045 at December 31, 2004, which
means that our current liabilities exceeded our current assets on December 31,
2004 by $879,045. Current assets are assets that are expected to be converted to
cash within one year and, therefore, may be used to pay current liabilities as
they become due. Our working capital deficit means that our current assets on
December 31, 2004 were not sufficient to satisfy all of our current liabilities
on that date.

      Our Obligations Under The Secured Convertible Debentures Are Secured By
      All Of Our Assets Which Cause Our Operations To Cease If We Default

      Our obligations under the secured convertible debentures, issued to
Cornell are secured by all of our assets. As a result, if we default under the
terms of the secured convertible debentures, Cornell could foreclose its
security interest and liquidate all of our assets. This would cause our
operations to cease.

      Our Common Stock May Be Affected By Limited Trading Volume And May
      Fluctuate Significantly

      There has been a limited public market for our common stock and there can
be no assurance that an active trading market for our common stock will develop.
An absence of an active trading market could adversely affect our shareholders'
ability to sell our common stock in short time periods, or possibly at all. Our
common stock has experienced, and is likely to experience in the future,
significant price and volume fluctuations which could adversely affect the
market price of our common stock without regard to our operating performance. In
addition, we believe that factors such as quarterly fluctuations in our
financial results and changes in the overall economy or the condition of the
financial markets could cause the price of our common stock to fluctuate
substantially.

      Our Common Stock Is Deemed To Be "Penny Stock," Which May Make It More
      Difficult For Investors To Sell Their Shares Due To Suitability
      Requirements

      Our common stock is deemed to be "penny stock" as that term is defined in
Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). These requirements may reduce the potential market for our
common stock by reducing the number of potential investors. This may make it
more difficult for investors in our common stock to sell shares to third parties
or to otherwise dispose of them. This could cause our stock price to decline.
Penny stocks are stock:

o     With a price of less than $5.00 per share;

o     That are not traded on a "recognized" national exchange;

o     Whose prices are not quoted on the NASDAQ automated quotation system
      (NASDAQ listed stock must still have a price of not less than $5.00 per
      share); or

o     In issuers with net tangible assets less than $2.0 million (if the issuer
      has been in continuous operation for at least three years) or $5.0 million
      (if in continuous operation for less than three years), or with average
      revenues of less than $6.0 million for the last three years.

                                       5
<PAGE>

      Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.

      We Could Fail To Attract Or Retain Key Personnel

      Our success largely depends on the efforts and abilities of key executives
and consultants, including Richard Urrea, our Chief Executive Officer, President
and sole director. The loss of the services of Mr. Urrea could materially harm
our business because of the cost and time necessary to replace and train a
replacement. Such a loss would also divert management attention away from
operational issues. We do not presently maintain a key-man life insurance policy
on Mr. Urrea.

ITEM 2. DESCRIPTION OF PROPERTY

      On April 1, 2004, the Company moved its executive offices to 400 Gold SW,
Suite 1000, Albuquerque, New Mexico 87102. Nexicon entered into a two-year lease
contract with a monthly basic lease payment of $1,400. On January 28, 2004,
Nexicon entered into a three-year lease contract for the operations of OSSI at
8280 Greensboro Dr, McLean, Virginia 22102. The basic monthly lease payment is
$5,590.

ITEM 3. LEGAL PROCEEDINGS

      On January 28, 2003, the Company's subsidiary Cyco.net, Inc. was named in
a civil action filed in the United States District Court Southern District of
New York 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 Cyco.net, Inc. failed to report the names and addresses of its customers to
taxing authorities. The extent of the City's damages are to be determined at
trial.

      On April 1, 2003, the State of Washington filed a civil action in the
State of Washington, King County Superior Court against the Company's subsidiary
Cyco.net, Inc. alleging sales of cigarettes to minors, deceptive failure to file
Jenkins Act reports and inform Washington consumers that they are required to
pay sales taxes to the State of Washington. Based on the factual assertions, the
suit's four counts alleged unfair business practice, unfair method of
compensation and misrepresentation. The suit sought injunctive relief
restraining Cyco.net, Inc. from continuing to engage in unlawful conduct,
restitution to consumers and civil penalties of up to $2,000 per violation, plus
attorneys' fees and costs. In March 2004, the parties agreed to settle for
$10,000.

      On April 1, 2003, the State of Oregon filed a civil action in the State of
Oregon, Marion County against the Company's subsidiary Cyco.net, Inc. alleging
the sale of one carton of cigarettes to a minor using her mother's name and
credit card, in violation of State Unlawful Trade Practices Act. The suit sought
to enjoin Cyco.net, Inc. from doing business in Oregon, $25,000 and attorney's
fees. This suit was settled for $2,000.

      On July 10, 2003, the State of Vermont filed a civil action in the State
of Vermont, Chittenden County against the Company's subsidiary Cyco.net, Inc.
alleging the sale of cigarettes to a minor, deceptive failure to file Jenkins
Act reports and inform Vermont consumers that they are required to pay sales
taxes to the State of Vermont. The suit sought to enjoin the Company from doing
business in Vermont, pay civil penalties of up to $10,000 for each sale to a
minor, plus attorney's fees and costs. This suit was settled in April 2004 for
$4,000.

      During 2003, the State District Court of Travis County, Texas, alleged
that the Company did not take effective measures to prevent the sale of tobacco
products to minors in violation of the Texas Deceptive Trade Practices -
Consumer Protection Act. This suit was settled in September 2004 for $3,000.

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

      On June 9, 2004, a majority of the security holders of the Company voted
to amend the Company's Articles of Incorporation to increase the number of
shares of authorized common stock from 100,000,000 to 500,000,000. Those voting
in favor of the amendment were 57,476,000.

                                       6
<PAGE>

      On January 25, 2005, a majority of the security holders of the Company
voted to amend the Articles of Incorporation to change the name of the Company
to Nexicon, Inc. Those voting in favor of the amendment were 57,476,000.

                                       7
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Nexicon's common stock has been quoted on the Over-the-Counter Bulletin
Board maintained by the NASD under the symbol "NXCN.OB".

      The following table sets forth the range of high and low bid quotations
for each calendar quarter for Nexicon's common stock for the prior two years.

                                                       BID PRICE PER SHARE
                                                     ------------------------
                                                      HIGH              LOW
                                                     -------          -------
      January 2, 2003 - March 28, 2003               $0.0500          $0.0400
      April 1, 2003 - June 30, 2003                  $0.0100          $0.0050
      July 1, 2003 - September 30, 2003              $0.0100          $0.0050
      October 1, 2003 - December 31, 2003            $0.4800          $0.0100

      January 2, 2004 - March 31, 2004               $1.2300          $0.2500
      April 1, 2004 - June 30, 2004                  $0.4700          $0.1800
      July 1, 2004 - September 30, 2004              $0.4000          $0.1800
      October 1, 2004 - December 31, 2004            $0.2200          $0.0700

      Jan 2, 2005 - March 31, 2005                   $0.1100          $0.0300

      The above prices were obtained from Nasdaq, Inc. The quotations represent
inter-dealer quotations, without retail mark-up, markdown or commission, and may
not necessarily represent actual transactions.

      As of March 31, 2005, Nexicon believes there were approximately 584
holders of record of our common stock.

      We have not paid dividends in the past on any class of stock and we do not
anticipate paying dividends in the foreseeable future.

      Recent Sales Of Unregistered Securities

      During the year ended December 31, 2004, the Company issued 6,600,000
shares of common stock for cash consideration of $587,800. The Company issued
8,799,833 shares for services valued at $2,560,380, the fair value of the shares
on the date the Company agreed to issue them, of which $1,850,105 was expensed
as non-cash stock compensation (general and administrative), $166,279 was
expensed as part of discontinued operations and $543,996 has been deferred to be
amortized over the terms of certain consulting agreements.

      Effective December 10, 2004, the Company entered into a marketing and
distribution agreement with Central Solutions, Inc. ("Central"), a Delaware
corporation, whereby the Company granted Central the right to market, distribute
and support any and all technology directly or indirectly controlled, licensed,
owned joint ventured or otherwise approved for the Company, exclusively in the
healthcare markets in the U.S. and Canada. In connection with this, the Company
issued 10,000,000 shares of its restricted common stock valued at fair market
value of $902,000 in exchange for 35% of Central's issued and outstanding common
stock.

      On November 15, 2004, Nexicon, Inc. purchased all of the outstanding
common stock of 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. In the
stock-for-stock purchase, Nexicon issued 5,010,496 shares of common stock valued
at fair market value of $518,352 in exchange for all of the issued and
outstanding common stock of Pluto.

      Nexicon acquired the stock of Pluto from the following people in exchange
for the number of shares of Nexicon's common stock set forth opposite their
names:

                                       8
<PAGE>

                          NUMBER OF                         NUMBER OF
NAME                        SHARES   NAME                     SHARES
-----------------------   ---------  --------------------   ---------
Teigland Eiendom AS       1,117,043  Nordea Liv Norge AS      155,400
Mercury Mobile AS           827,820  Holberg @                133,980
Frank Mjos                  656,250  Tommy Eide               105,000
Toman Invest AS             388,500  Lie Invest AS             38,850
Tommy Stiansen              262,500  Rune Svendsen             34,965
Reidar Asphaug              262,500  Jens Petter Teigland      31,248
Svein Erik Fauskanger       262,500  Vest Kapital AS           26,250
Eiendomsgruppen Vest AS     242,498  Anders Giske               7,770
Holberg Norden              235,200  Eivind B0e                 5,250
Holberg Norge               216,972                         ---------
                                     Total Shares           5,010,496
                                                            =========

      In May 2004, the Company entered into a Securities Purchase Agreement,
whereby up to $500,000 of 5% secured, convertible debentures may be 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 $75,000 worth of the
debentures for 679,855 shares of its common stock. At December 31, 2004, the
balance of the debentures was $425,000 and the accrued interest was $12,801.

      In March 2004, the Company entered into a Standby Equity Distribution
Agreement ("SEDA") with Cornell. This agreement replaces the Equity Line of
Credit Agreement entered into in September 2001. Pursuant to this agreement, the
Company may, at its discretion for up to two years, periodically issue and sell
shares of common stock for a total purchase price of $20 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. On June 10, 2004, the Company
filed a registration statement on Form SB-2 under the Securities Act of 1933, as
amended, for the registration of 69,513,810 shares of the Company's common
stock. The registration statement became effective on August 11, 2004. 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, plus 20,833 shares of
its common stock to Newbridge Securities Corporation, the placement agreement,
at $0.48 per share, for its advisory services in connection with the SEDA. The
total fees of $245,000 are capitalized as financing costs net of $85,200
amortization of non-cash interest expense in the accompanying financial
statements, in the amount of $160,000 at December 31, 2004.

      On November 19, 2003, the Company purchased all of the outstanding common
stock of OSSI. In the stock-for-stock purchase, the Company issued 50,000,000
shares of common stock in exchange for all of the issued and outstanding common
stock of OSSI. The shares were at valued $0.09 per share, the fair market value
at November 19, 2003.

      The Company acquired the stock of OSSI from the following people in
exchange for the number of shares of Nexicon's common stock set forth opposite
their names:

      Name:                        No. of Shares:
      --------------------         --------------
      Robert V.  Demson                26,000,000
      Francisco Urrea, Jr.             20,000,000
      Paul B.  Goldberg                 1,800,000
      Harry A.  Montefusco              1,800,000
      John F.  Morrison                   400,000
                                   --------------
      Total Shares                     50,000,000
                                   ==============

      In October 2003, the Company issued 1,000,000 shares of common stock to
Francisco Urrea, Jr., a former director, for consulting fees.

      Effective July 1, 2003, the Company agreed to sell its Internet tobacco
products business to American Indian CigCo, LLC ("AIC"). In conjunction with
this sale, AIC agreed to purchase 2,000,000 shares of the Company's common stock
for $2,800,000 payable in the form of a promissory note bearing interest at 7%
per year. Interest payments are due annually commencing July 31, 2004 and the
principal is due July 31, 2008. In November 2004, the agreement was amended to
effect monthly interest-only payments at an annual rate of 4.223%, commencing
December 31, 2004, with the principal due on or before December 31, 2009, at
AIC's option. To date, AIC has paid no interest on the note.

                                       9
<PAGE>

      In August 2002, Nexicon issued a total of 5,000,000 shares of common stock
valued at $150,000 as follows: 1,000,000 shares each to Richard Urrea, Daniel
Urrea, Brent Wolford, Lynnette Budagher and Trey Urrea.

      With respect to the sale of unregistered securities referenced above, all
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"), and Regulation D
promulgated under the Securities Act. In each instance, the purchaser had access
to sufficient information regarding Nexicon so as to make an informed investment
decision. More specifically, Nexicon had a reasonable basis to believe that each
purchaser was either an accredited investor as defined in Regulation D of the
Securities Act or otherwise had the requisite sophistication to make an
investment in Nexicon's common stock.

ITEM 6. 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 "Risks Related
to our Business" section of this Report. 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 decided to discontinue operations of its 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 the 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 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.

      The following information should be read in conjunction with the
consolidated financial statements of Nexicon and the notes thereto which
accompany this Report. Statements in this Management's Discussion and Analysis
or Plan of Operation and elsewhere in this filing that are not statements of
historical or current fact constitute forward-looking statements.

      Going Concern

      The Company has experienced losses from operations as a result of its
investment in attempting to achieve its operating plan, which is long-range in
nature. For the years ended December 31, 2004 and 2003 the Company incurred net
losses of $5,929,891 and $4,902,363, respectively. At December 31, 2004, the
Company had a working capital deficit of $879,045 and stockholders' deficit of
$1,863,652. In addition, the Company is subject to legal action. On January 28,
2003, the Company's subsidiary Cyco.net, Inc. was named in a civil action filed
in the United States District Court Southern District of New York 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 Cyco.net, Inc. failed
to report the names and addresses of its customers to taxing authorities. The
extent of the City's damages are to be determined at trial.

                                       10
<PAGE>

      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 two wholly-owned subsidiaries, OSSI and Pluto,
and through sales of their products hopes to attain profitable operations.

      Our independent auditors have 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. Our ability to obtain additional funding will determine our
ability to continue as a going concern. 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.

      Critical Accounting Policies

      Nexicon's consolidated financial statements and related public financial
information are based on the application of accounting principles generally
accepted in the United States ("GAAP"). GAAP requires the use of estimates,
assumptions, judgments and subjective interpretations of accounting principles
that have an impact on the assets, liabilities, revenue and expense amounts
reported. These estimates can also affect supplemental information contained in
our external disclosures including information regarding contingencies, risk and
financial condition. We believe our use of estimates and underlying accounting
assumptions adhere to GAAP and are consistently and conservatively applied. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. Actual results may
differ materially from these estimates under different assumptions or
conditions. We continue to monitor significant estimates made during the
preparation of our financial statements.

      Our significant accounting policies are summarized in Note 1 of our
consolidated financial statements. While all these significant accounting
policies impact its financial condition and results of operations, the Company
views certain of these policies as critical. Policies determined to be critical
are those policies that have the most significant impact on the Company's
consolidated financial statements and require management to use a greater degree
of judgment and estimates. Actual results may differ from those estimates. Our
management believes that given current facts and circumstances, it is unlikely
that applying any other reasonable judgments or estimate methodologies would
cause a material effect on our consolidated results of operations, financial
position or liquidity for the periods presented in this report.

      Our critical accounting policies are organization, revenue recognition,
deferred offering costs, and derivative instruments.

      Organization. Nexicon is the successor to Cyco.Net, Inc, (formerly AVE,
Inc. and operates through its wholly-owned subsidiaries, Cyco.net, a New Mexico
corporation, OSSI, a Wisconsin corporation, and Pluto, a Norwegian corporation,
discussed below.

      Prior to July 1, 2003, the Company's primary line of business was the sale
of cigarettes through three websites to customers in the United States.
Effective July 1, 2003, the Company sold its Internet tobacco products division.

      On November 19, 2003, the Company purchased all of the outstanding common
stock of OSSI whose primary line of business is the sale of its SatSecure(C)
System and ComSecure(C) Controller, which are designed to provide bi-directional
video, audio, data and alarm transfer between a wide variety of locations,
including but not limited to land based positions, airborne aircraft, ships at
sea, and a command and control center. In December 2004, management of the
Company resolved to dispose of the SatSecure(C) division of OSSI. As of March
2005, the Company no longer sells SatSecure(C).

      On November 15, 2004, the Company acquired all of the outstanding common
stock of Pluto, which provides a variety of billing and customer care solutions
for telecommunication carriers and other network service providers via its
Charon billing and customer care real-time client/server system. The Charon
system provides a high-end Operational Support System ("OSS") and billing system
to improve customer service.

      Revenue recognition. Prior to July 1, 2003, the Company's sole source of
revenue was the sale of cigarettes through its primary website ("Nexicon.com"),
which was designed as an "e-zine", and two ancillary websites (cycocigs.com and
aabakismokes.com). The terms of sale were FOB shipping point and the Company
recorded revenue from cigarette sales when the product shipped. Effective July
1, 2003, the Company sold its Internet tobacco products division, accordingly
revenues and costs associated with the internet tobacco products division are
presented as discontinued operations.

                                       11
<PAGE>

      Effective November 19, 2003 through November 14, 2004, the Company's sole
source of revenue was the sale of the SatSecure(C) and ComSecure(C) systems
discussed above. The terms of sale are FOB shipping point and the Company
records revenue when the product is shipped. In December 2004, the Company
determined to dispose of the SatSecure(C) division of its business, which was
consummated in March 2005. Accordingly, the revenues and costs associated with
the SatSecure(C) division are presented as discontinued operations in the
accompanying financial statements.

      In November 2004, the Company through Pluto, added the service revenues
from the sale of the Charon Billing and OSSI in Norway and Sweden. Revenues are
recognized at the completion of the related services, and where they are earned.

      Deferred offering costs. The Company defers costs associated with the
raising of capital until such time as the offering is completed, at which time
the costs are charged against the capital raised. Should the offering be
terminated the costs are charged to operations during the period when the
offering is terminated.

      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 on 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.

      Plan Of Operation

      In the next 12 months, Nexicon plans to pursue sales of its two products;
ComSecure(C) Controller and Charon Billing System, by: (i) partnering with major
integrators; (ii) pursuing product certification and pilot program evaluation
contracts; and (iii) continuing funding efforts.

      Results Of Operations

      Effective July 1, 2003, Nexicon, Inc. sold its tobacco operations to AIC.
In conjunction with this sale, AIC agreed to purchase 2,000,000 shares of the
Company's common stock. The purchase price aggregated $3,000,000 in the form of
two notes payable as follows: (i) payment for the assets of the business in the
form of a note in the amount of $200,000 payable in 12 equal monthly
installments of $16,667 commencing on August 1, 2003; and (ii) payment for the
2,000,000 common shares is payable in the form of a $2,800,000 note with
interest at 7% per annum, on an interest only basis. The interest payments were
originally due annually commencing on August 31, 2004 and the principal balance
was due on July 31, 2008. Accrued interest receivable of $294,000 has not been
reflected in the accompanying financial statements, as recognition will occur as
proceeds are received. In November 2004, the agreement was amended to effect
monthly interest-only payments at an annual rate of 4.223%, commencing December
31, 2004, with the principal due on or before December 31, 2009, at AIC's
option. To date, AIC has paid no interest on the note.

      Because the sale of the business and the common shares were made to a
thinly capitalized entity and significant uncertainties exist related to the
collectibility of the amounts due, the gain from the sale of the business will
be deferred until such time as the proceeds are collected or until such time as
the cash flows from the operating activities of the business sold are sufficient
to fund the debt service. The deferred portion of the gain on the sale of the
business aggregating $46,925 at December 31, 2004 is reflected as deferred
revenue.

      On a go forward basis, revenues and expenses from tobacco sales will be
shown as operating results of discontinued operations and are shown separately
in the accompanying statements of operations.

                                       12
<PAGE>

      On November 19, 2003, Nexicon purchased OSSI, a corporation in the
development stage, which provides secure computer network and management
solutions, and video surveillance systems via satellite communication. The
business combination has been accounted for as a purchase. The results of
operations of OSSI have been included in the accompanying financial statements
since the effective date of the acquisition. In exchange for all of the issued
and outstanding common shares of OSSI, the Company issued 50,000,000 shares of
its common stock valued at $4,500,000. The shares were valued at $0.09 per
share, the fair market value at November 19, 2003. As of December 31, 2003, the
Company recorded a loss on asset impairment related to this investment, in the
amount of $4,500,000, which was charged to operations.

      On March 17, 2005, the Company agreed to repurchase 15 million shares of
the Company's common stock held by Robert Demson in exchange for all right,
title, and interest that he had in agreements associated with the "SatSecure"
technology and to the Tradenames, and all equipment, computers and furniture
valued at approximately $15,213. The results of operations of OSSI related to
SatSecure have been accounted for as discontinued operations in the accompanying
financial statements.

      On November 15, 2004, the Company purchased all of the outstanding common
stock of 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. Pursuant
to a Share Exchange Agreement between the Company and Pluto dated June 16, 2004
and amended on November 15, 2004, the Company issued 5,010,496 shares of common
stock to Pluto in exchange for all of the issued and outstanding common stock of
Pluto. Pluto will continue its operations in Norway and will operate as a
wholly-owned subsidiary of the Company. The results of operations of Pluto from
November 15, 2004 through December 31, 2004 are included in the accompanying
financial statements.

      Results Of Operations For Year Ended December 31, 2004 Compared To The
      Year Ended December 31, 2003

      Revenues for the year ended December 31, 2004 were $495,990 and was
attributable to sale of a ComSecure System and billing revenues from the Charon
Billing system. Revenues for the year ended December 31, 2003 were $54,264 and
was attributable to the sale of a SatSecure System which has been included in
discontinued operations. The difference in revenues from 2003 to 2004 was
$441,726.

      Cost of goods sold for the year ended December 31, 2004 was $355,766 and
was attributable to the sale of a ComSecure System and billing revenues from the
Charon Billing system. Cost of goods sold for the year ended December 31, 2003
were $12,759 and was attributable to the sale of a SatSecure System which has
been included in discontinued operations. The difference in cost of goods sold
from 2003 to 2004 was $343,007.

      General and administrative expenses for the year ended December 31, 2004
and 2003 were $1,471,697 and $723,527, respectively. The increase of $748,170 or
103% in general and administrative expenses in the year ended December 31, 2004,
was primarily due to the operations of OSSI for 10 months of the year and to the
operations of Pluto for 1 1/2 months. General and administrative expenses for
the year ended December 31, 2004 primarily consisted of $17,961 in advertising,
$665,914 in payroll expenses, $396,741 in professional fees, $51,532 in rent,
$22,829 in amortization and depreciation, $58,841 bad debt expense, $186,529 in
travel expense and $71,350 in miscellaneous other expenses. General and
administrative expenses for the year ended December 31, 2003 primarily consisted
of $10,060 in advertising, $429,721 in payroll expenses, $197,277 in
professional fees, $15,666 in rent, $11,012 in amortization and depreciation,
$12,500 for website maintenance, $12,232 in travel expense and $35,059 in
miscellaneous other expenses.

      Research and development costs for the year ended December 31, 2004, were
$75,138 as compared to $0 in the prior year. For the year ended December 31,
2004, purchased research and development was $1,503,260 as compared to $0 in the
prior year, The cost was non-cash as common stock was issued in lieu of cash.
The Company recorded purchased research and development pursuant to the write
down of its investment in Pluto of $601,260 and an impairment of the Central
investment of $902,000.

      Non-cash stock compensation for the year ended December 31, 2004 was
$1,850,105 as compared to $0 in the same period last year. The Company issued
stock in lieu of cash for various services included in this was stock issued to
employees valued at $760,000 other services were valued at $1,090,105.

      During the year ended December 31, 2003, the Company recorded a loss on
asset impairment related to the purchase of OSSI, as discussed above, in the
amount of $4,500,000, which was charged to operations.

                                       13
<PAGE>

      Nexicon had an operating loss of $5,279,893 for the 12 months ended
December 31, 2004, compared to $5,221,030 in the comparable period in the prior
year, an increase of $58,863 or 11%.

      Other income and (expense) for the year ended December 31, 2004, resulted
in net expense of ($519,897) which included interest income of $7,510, offset by
derivative expense of ($441,436), interest expense of ($771), and non-cash
interest expense of ($85,200). Other income and (expense) for the same period in
2003 resulted in net income of $2,497 which included interest income of $5,100
and interest expense of ($2,603). The difference in other income (expense) from
2003 to 2004 was $522,394.

      Net income (loss) from discontinued operations for the year ended December
31, 2004 and 2003 was a (loss) of ($897,018) net of income tax (benefit) of
($247,000) and income of $417,667 net of income tax of $99,000, respectively.
This relates primarily to the Company's former cigarette business which was sold
in July 2003 and in 2004 the Company's sale of the SatSecure product line.

      Nexicon had a net loss for the year ended December 31, 2004 of 5,929,891,
compared to a net loss of $4,902,363 for the same period last year, an increased
loss of $1,027,528 or 20%. The comprehensive net loss for the year ended
December 31, 2004, was $5,885,569.

      Liquidity And Capital Resources

      For the year ended December 31, 2004, cash used in operations was
$1,406,298, cash used in investing activities was $135,955, and cash provided by
financing activities was $1,562,516. This resulted in a net increase in cash of
$20,263 or 453% in the year ended December 31, 2004. Cash used in operations
consisted of a net loss of $5,929,891, a decrease in deferred gain of sale of
discontinued operations of $75,716, an increase in receivables of $20,138 and an
increase in other assets of $5,451, which was partially offset by amortization
and depreciation expenses of $22,829, non-cash interest of $85,200, loss on
impairment of $902,000, derivative instruments expense of $441,436, common stock
issued for services of $2,451,365, a currency translation adjustment of $44,322,
an increase in accounts payable of $407,575, an increase in net liabilities of
discontinued operations of $170,834 and an increase in related party accrued
expenses of $99,337. Cash used by investing activities consisted of purchase of
property and equipment of $12,994, the purchase of an interest in Mercury Mobile
of $147,851 offset by cash received in the Pluto acquisition of $24,890. Cash
provided by financing activities consisted of proceeds from the sale of common
stock of $587,800, proceeds from notes and debentures of $900,000, proceeds from
American Indian CigCo receivable of $75,716 offset by payment of related party
note of $1,000. As of December 31, 2004, Nexicon had cash on hand of $29,562.

      The Company's primary need for cash during the next 12 months are to
satisfy current liabilities of $1,110,650, as well as to support the Company's
current operations. The Company's current operations are expected to be $170,000
per month, including payroll, rent, utilities and litigation costs. The Company
in the next 12 months expects to receive the balance of $64,036 of the current
receivable from ACC and hopes to attain profitable operations through its
ComSecure(C) Controller and Charon billing system sales. 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. Other than the SEDA with
Cornell, the Company does not have any commitments for financing.

      In March 2004, the Company entered into the SEDA with Cornell. This
agreement replaces the Equity Line of Credit Agreement entered into in September
2001. Pursuant to the SEDA, the Company may, at its discretion for up to two
years, periodically issue and sell shares of common stock for a total purchase
price of $20 million. If Nexicon 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.

      The Company cannot predict the total 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. During the year ended December 31, 2004, 2,177,290 shares of
the Company's common stock were issued. In addition, the Company issued two
promissory notes to Cornell totaling $400,000. As of December 31, 2004, the
balance was $150,000 and the accrued interest was $3,096.

      In May 2004, the Company entered into a Securities Purchase Agreement with
Cornell, whereby up to $500,000 of 5% secured, convertible debentures may be
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 $75,000 worth
of the debentures for 679,855 shares of its common stock. At December 31, 2004,
the balance of the debentures was $425,000 and the accrued interest was $12,801.

                                       14
<PAGE>

      Recent Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board (the "FASB")
issued FASB Interpretation Number 46-R "Consolidation of Variable Interest
Entities". FIN 46-R, which modifies certain provisions and effective dates of
FIN 46, sets for the criteria to be used in determining whether an investment is
a variable interest entity should be consolidated. These provisions are based on
the general premise that if a company controls another entity through interests
other than voting interests, that the company should consolidate the controlled
entity. The Company currently has no investments that qualify for consolidation
under the provisions of FIN 46-R.

      In November 2004, the FASB issued SFAS 151, "Inventory Costs." SFAS 151
amends the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage) under the guidance in ARB 43,
Chapter 4, "Inventory Pricing." Paragraph 5 of ARB 43, Chapter 4, previously
stated that "...under some circumstances, items such as idle facility expense,
excessive spoilage, double freight, and rehandling costs may be so abnormal as
to require treatment as current period charges...." This Statement requires that
those items be recognized as current-period charges regardless of whether they
meet the criterion of "so abnormal." In addition, this Statement requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.
Management does not expect adoption of SFAS 151 to have a material impact on the
Company's financial statements.

      In December 2004, the FASB issued SFAS 152, "Accounting for Real Estate
Time-Sharing Transactions." The FASB issued this Statement as a result of the
guidance provided in AICPA Statement of Position ("SOP") 04-2, "Accounting for
Real Estate Time-Sharing Transactions." SOP 04-2 applies to all real estate
time-sharing transactions. Among other items, the SOP provides guidance on the
recording of credit losses and the treatment of selling costs, but does not
change the revenue recognition guidance in SFAS 66, "Accounting for Sales of
Real Estate," for real estate time-sharing transactions. SFAS 152 amends
Statement 66 to reference the guidance provided in SOP 04-2. SFAS 152 also
amends SFAS 67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects", to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate time-sharing transactions. SFAS 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited. Management does not expect adoption of SFAS 152 to have a material
impact on the Company's financial statements.

      In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary
Assets," an amendment to Opinion No. 29, "Accounting for Nonmonetary
Transactions." Statement 153 eliminates certain differences in the guidance in
Opinion No. 29 as compared to the guidance contained in standards issued by the
International Accounting Standards Board. The amendment to Opinion No. 29
eliminates the fair value exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. Such an exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 is effective for
nonmonetary asset exchanges occurring in periods beginning after June 15, 2005.
Earlier application is permitted for nonmonetary asset exchanges occurring in
periods beginning after December 16, 2004. Management does not expect adoption
of SFAS 153 to have a material impact on the Company's financial statements.

      In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment." SFAS
123(R) amends SFAS 123, "Accounting for Stock-Based Compensation," and APB
Opinion 25, "Accounting for Stock Issued to Employees." SFAS 123(R) requires
that the cost of share-based payment transactions (including those with
employees and non-employees) be recognized in the financial statements. SFAS
123(R) applies to all share-based payment transactions in which an entity
acquires goods or services by issuing (or offering to issue) its shares, share
options, or other equity instruments (except for those held by an ESOP) or by
incurring liabilities (1) in amounts based (even in part) on the price of the
entity's shares or other equity instruments, or (2) that require (or may
require) settlement by the issuance of an entity's shares or other equity
instruments. This statement is effective (1) for public companies qualifying as
United States Securities and Exchange Commission ("SEC" or the Commission" small
business issuers, as of the first interim period or fiscal year beginning after
December 15, 2005, or (2) for all other public companies, as of the first
interim period or fiscal year beginning after June 15, 2005, or (3) for all
nonpublic entities, as of the first fiscal year beginning after December 15,
2005. Management is currently assessing the effect of SFAS No. 123(R) on the
Company's financial statements.

                                       15
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

      The responses to this Item are submitted in a separate section of this
Report. See Index to the Financial Statements on page F-1 hereto.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      None.

ITEM 8A. 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 Exchange Act 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 year, 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.

ITEM 8B. OTHER INFORMATION

      None.

                                       16
<PAGE>

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

      Nexicon's present directors and executive officers are as follows:

NAME                  AGE       POSITION
----                  ---       --------
Richard Urrea         40        Chief Executive Officer, President and Director
Daniel Urrea          33        Chief Financial Officer

      The directors and executive officers of Nexicon are not directors or
executive officers of any company that file reports with the SEC, nor have they
been involved in any bankruptcy proceedings, criminal proceedings, any
proceeding involving any possibility of enjoining or suspending Nexicon's
directors and officers from engaging in any business, securities or banking
activities, and have not been found to have violated, nor been accused of having
violated, any federal or state securities or commodities laws.

      The following is a brief description of the background of the directors
and executive officers of Nexicon.

      Richard Urrea has been President and Chief Executive Officer of Nexicon
since inception in January 1999 and has been our sole director since December
2004. He served as President of Sycom International, Inc. from 1997 to 1999.
Sycom is a data communications company. Mr. Urrea led the company from start up
through national marketing plan and implementation of its manufacturing plan.
The company currently manufactures its products and markets them throughout the
U.S. and is in the process expanding into foreign markets. From 1996 to 1997,
Mr. Urrea was President of Klaire International Ltd., an export company
distributing automotive parts in Mexico. From 1995-1996, Mr. Urrea served as the
managing member of Toltec Fruit, L.C., a limited liability company involved in
the importation of fruit into the United States from Mexico and South America.
From 1993 to 1995, Mr. Urrea worked on the development and marketing plan for
Septima Enterprises Inc. From 1991 to 1993, Mr. Urrea managed the Albuquerque
Office of White Discount Securities. In 1990, Mr. Urrea was contract
administrator for Foresight, Inc., an Albuquerque, laser-optics, government
contractor. In 1989, Mr. Urrea served as marketing director for HDI System, Inc.
where he devised and implemented an international marketing plan for an ignition
system for marine application. In 1985 and 1986, Mr. Urrea owned and operated
Shannon Euro Motorcars, a European automobile importing and maintenance company.
Mr. Urrea sold the business in 1986 to attend Baylor University. Mr. Urrea
received his Bachelor of Business Administration in Marketing and Business
Broadcasting from Baylor University's Hankammer School of Business in 1989.

      Daniel Urrea has been Chief Financial Officer with Nexicon since inception
in January 1999. Prior to his involvement with the Nexicon, Mr. Urrea worked
with Sycom International, manufacturer and distributor of Radio Telemetry Units.
During that time Mr. Urrea was responsible for the maintenance of the accounting
records for the company, and was instrumental in the development of the
company's business plan. Before this, Mr. Urrea worked for Klaire International,
an exporter of automotive accessories to Mexico, in the same capacity. From
January 1996 thorough August 1996 Mr. Urrea worked with Equinox International,
an international marketing and distribution company, where he was involved in
sales and talent recruiting activities. In the Spring of 1995, Mr. Urrea
received a Bachelors in Business Administration with a concentration in Finance
from the Anderson Schools of Management at the University of New Mexico. Mr.
Urrea has also spent several months out of the country where he studied business
and other cultures.

      Family Relationships

      Richard Urrea, our President, Chief Executive Officer and sole director,
is the brother of Daniel Urrea, our Chief Financial Officer.

      Committees

      Nexicon's Board of Directors serves as the audit committee. The Board of
Directors does not have a "financial expert" due to the lack of capital needed
to attract a qualified expert.

                                       17
<PAGE>

      Director Compensation

      Nexicon's directors do not receive any compensation for their services as
such. Nexicon does periodically reimburse directors for out-of-pocket expenses
they incur in fulfilling their duties as such.

      Code Of Ethics

      On April 8, 2004, the Board of Directors of the Company adopted a written
Code of Ethics designed to deter wrongdoing and promote honest and ethical
conduct, full, fair and accurate disclosure, compliance with laws, prompt
internal reporting and accountability to adherence to the Code of Ethics. This
Code of Ethics was filed with the Commission as an Exhibit to the Company's Form
10-KSB for the year ended December 31, 2003.

ITEM 10. EXECUTIVE COMPENSATION

      The following table shows all the cash compensation paid by Nexicon, as
well as certain other compensation paid or accrued, during the fiscal years
ended December 31, 2004, 2003 and 2002 to Nexicon's three highest paid executive
officers. No restricted stock awards, long-term incentive plan payouts or other
types of compensation, other than the compensation identified in the chart
below, were paid to these executive officers during these fiscal years. Except
as indicated below, no executive officer earned a total annual salary and bonus
for any of these years in excess of $100,000.

<TABLE>
<CAPTION>
                                        ANNUAL COMPENSATION                             LONG-TERM COMPENSATION
                         ---------------------------------------------     -----------------------------------------------
                                                                            AWARDS                   PAYOUTS
                                                                           --------                  --------
                                                               OTHER      RESTRICTED
                                                               ANNUAL       STOCK       OPTIONS/       LTIP       ALL OTHER
                                    SALARY        BONUS     COMPENSATION   AWARD(S)       SARS       PAYOUTS    COMPENSATION
                                   --------     --------     ---------     --------     --------     --------     --------
NAME AND PRINCIPAL
POSITION                 YEAR         ($)          ($)          ($)           ($)          (#)         ($)           ($)
------------------       ----      --------     --------     ---------     --------     --------     --------     --------
<S>                      <C>       <C>          <C>          <C>           <C>          <C>          <C>          <C>

Richard Urrea,
Chief Executive          2004      $108,634           --            --           --           --           --           --
Officer, President       2003      $ 42,100      $75,000(3)         --           --           --           --           --
and Director             2002      $110,750           --            --      $30,000(1)        --           --           --

Daniel Urrea,            2004      $ 49,896           --            --           --           --           --           --
Chief Financial Officer  2003      $ 30,333      $75,000(3)         --           --           --           --           --
And Secretary/Treasurer  2002      $ 57,822           --            --      $30,000(1)        --           --           --

Robert V Demson,         2004      $206,250           --            --           --           --           --           --
Chief Operating Officer  2003      $156,000(2)        --            --           --           --           --           --
OSSI                     2002      $ 54,000(2)
</TABLE>

(1)   These represent 1,750,000 shares of common stock issued to each of Richard
      Urrea and Daniel Urrea. These shares were valued at $0.03 per share on the
      date of grant.
(2)   During the years ended December 31, 2003 and 2002, Robert Demson's salary
      was accrued.
(3)   A bonus of $75,000 each was accrued for Richard Urrea and Daniel Urrea for
      reduced salaries paid in the year ended December 31, 2003.

----------

      Employment Agreements

      Effective January 1, 2004, Nexicon entered into a 5-year employment
agreement with Richard Urrea. Mr. Urrea is employed as the President and Chief
Executive Officer of Nexicon. Mr. Urrea's annual salary is $120,000. Mr. Urrea
is also entitled to discretionary bonuses to be determined by the Company's
board of directors and the use of a Company car.

      Effective January 1, 2004, Nexicon entered into a 5-year employment
agreement with Daniel Urrea. Mr. Urrea is employed as the Chief Financial
Officer of Nexicon. Mr. Urrea's annual salary is $90,000. Mr. Urrea is also
entitled to discretionary bonuses to be determined by the Company's board of
directors and the use of a Company car.

      Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Exchange Act and the rules promulgated thereunder
require Nexicon's officers and directors, and persons who beneficially own more
than 10% of a registered class of Nexicon equity securities, to file reports of
ownership and changes in ownership with the SEC and to furnish the Company with
copies thereof.

      Based on its reviews of the copies of the Section 16(a) forms received by
it, or written representations from certain reporting persons, Nexicon believes
that, during the last fiscal year, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with and filed timely.

                                       18
<PAGE>

      Securities Authorized For Issuance Under Equity Compensation Plan

      The following table sets forth the securities that have been authorized
under equity compensation plans as of December 31, 2004.

<TABLE>
<CAPTION>
                                                                                                      NUMBER OF
                                                                                                      SECURITIES
                                                                                                      REMAINING
                                                                                                    AVAILABLE FOR
                                                                  NUMBER OF                        FUTURE ISSUANCE
                                                                SECURITIES TO                        UNDER EQUITY
                                                               BE ISSUED UPON   WEIGHTED-AVERAGE     COMPENSATION
                                                                 EXERCISE OF     EXERCISE PRICE         PLANS
                                                                 OUTSTANDING     OF OUTSTANDING       (EXCLUDING
                                                                  OPTIONS,          OPTIONS,          SECURITIES
                                                                WARRANTS AND      WARRANTS AND       REFLECTED IN
                                                                   RIGHTS            RIGHTS          COLUMN (A))
                                                               --------------   ----------------   ---------------
                                                                     (A)              (B)                (C)
                                                               --------------   ----------------   ---------------
<S>                                                            <C>              <C>                <C>
Equity compensation plans approved by security holders                750,000              $0.08           750,000
Equity compensation plans not approved by security holders                  0              $   0                 0
                                                               --------------   ----------------   ---------------
TOTAL                                                                 750,000              $0.08           750,000
                                                               ==============   ================   ===============
</TABLE>

      No options/SARS have been granted to the named officers and directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

      Voting Securities And Principal Holders Thereof

      The following table sets forth, as of March 31, 2005, information with
respect to the beneficial ownership of our common stock by (i) persons known by
us to beneficially own more than five percent of the outstanding shares, (ii)
each director, (iii) each executive officer and (iv) all directors and executive
officers as a group.

<TABLE>
<CAPTION>
                                                     COMMON STOCK BENEFICALLY OWNED
                                                     ------------------------------
NAME/ADDRESS                                             NUMBER        PERCENT(1)
-----------------------------                        -------------   --------------
<S>                                                  <C>             <C>
Daniel Urrea                                             5,046,000             4.53%
3009 Charleston NE
Albuquerque, New Mexico 87110

Richard Urrea                                            4,721,000             4.24%
600 Alcalde SW #4D
Albuquerque, New Mexico 87104

ALL OFFICERS AND DIRECTORS                               9,767,000             8.78%
AS A GROUP (2 ABOVE PERSONS)

Robert V Demson                                         11,000,000             9.88%
11702 Saddle Crescent Circle
Oakton, Virginia 22124

Central Solutions Inc.                                  10,000,000             8.97%
10 East Baltimore Street, Suite 1404
Baltimore, Maryland 21202

Mathew Urrea - Tres Santos Limited Partnership (2)      10,000,000             8.97%
7850 Jefferson NE Suite 140
Albuquerque, New Mexico 87109

Mathew Urrea - Urrea Family Limited Partnership (2)      8,000,000             7.12%
7850 Jefferson NE Suite 140
Albuquerque, New Mexico 87109
</TABLE>

                                       19
<PAGE>

----------
(1)   Applicable percentage of ownership is based on 111,282,750 shares of
      common stock outstanding as of March 31, 2005, together with applicable
      options for each shareholder. Beneficial ownership is determined in
      accordance with the rules of the Commission and generally includes voting
      or investment power with respect to securities. Shares of common stock
      subject to options that are currently exercisable or exercisable within 60
      days of March 31, 2005 are deemed to be beneficially owned by the person
      holding such options for the purpose of computing the percentage of
      ownership of such person, but are not treated as outstanding for the
      purpose of computing the percentage ownership of any other person. The
      common stock is the only outstanding class of equity securities of
      Nexicon.

(2)   Mathew Urrea is the Trustee for and has beneficial ownership of the common
      stock held by the Urrea Family through these two partnerships. Mathew
      Urrea is a brother to Richard Urrea and Daniel Urrea.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      During the years ended December 31, 2004 and 2003, the Company paid $0 and
$12,500, respectively, in consulting fees to related parties for services.

      At December 31, 2004, the Company has recorded notes payable and accrued
interest payable to the president of its subsidiary OSSI, in the aggregate
amount of $21,741, including interest of $8,741. In addition, the Company owes
this individual $249,276 including $210,000 of prior year accrued and unpaid
wages, $19,022 of current year accrued wages and $20,054 of expense
reimbursement. All of these liabilities are included in Net Liabilities of
Discontinued Operations related to the SatSecure(C) System division at December
31, 2004, and payment of these obligations is incorporated into the Stock
Repurchase Agreement.

      Accrued expenses - related party includes an aggregate of $300,000 of
unpaid prior year bonuses to employees and the Company's website designer, all
of whom are also shareholders, plus $93,380 of current year accrued wages and
$5,957 of expense reimbursements payable to the Company's
employees/shareholders.

      During the year ended December 31, 2004, the Company paid $100,200 to its
affiliate Mercury, as well as $74,864 to a company affiliated with certain
shareholders, for the cost of materials related to its ComSecure(C) Controller
product, which amounts are included in cost of goods sold.

      On November 19, 2003, Nexicon purchased all of the outstanding common
stock of OSSI. In the stock for stock purchase, Nexicon issued 50,000,000 shares
of common stock in exchange for all of the issued and outstanding common stock
of OSSI.

      Nexicon acquired the stock of OSSI from the following people in exchange
for the number of shares of Nexicon's common stock set forth opposite their
names:

      Name:                             No. of Shares:
      --------------------             ---------------
      Robert V.  Demson                     26,000,000
      Francisco Urrea, Jr.                  20,000,000
      Paul B.  Goldberg                      1,800,000
      Harry A.  Montefusco                   1,800,000
      John F.  Morrison
                                               400,000

      Total Shares                          50,000,000
                                       ===============

                                       20
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT NO.    DESCRIPTION                                  LOCATION
-----------    -----------                                  --------
<S>            <C>                                          <C>
10.1           Standby Equity Distribution Agreement        Incorporated by reference to Exhibit 10.15 to the
               dated as March 2004 between Cyco.net and     Company's Annual Report on Form 10KSB as filed
               Cornell Capital Partners, LP                 with the Securities and Exchange Commission on
                                                            April 13, 2004

10.2           Registration Rights Agreement dated as of    Incorporated by reference to Exhibit 10.15 to the
               March 2004 between Cyco.net and Cornell      Company's Annual Report on Form 10KSB as filed
               Capital Partners, LP                         with the Securities and Exchange Commission on
                                                            April 13, 2004

10.3           Placement Agent Agreement dated as of        Incorporated by reference to Exhibit 10.15 to the
               March 2004 between Cyco.net and Cornell      Company's Annual Report on Form 10KSB as filed
               Capital Partners, LP                         with the Securities and Exchange Commission on
                                                            April 13, 2004

10.4           Employment Agreement dated as of January     Incorporated by reference to Exhibit 10.15 to the
               1, 2004 between Cyco.net and Richard Urrea   Company's Annual Report on Form 10KSB as filed
                                                            with the Securities and Exchange Commission on
                                                            April 13, 2004

10.5           Employment Agreement dated as of January     Incorporated by reference to Exhibit 10.15 to the
               1, 2004 between Cyco.net and Daniel Urrea    Company's Annual Report on Form 10KSB as filed
                                                            with the Securities and Exchange Commission on
                                                            April 13, 2004

10.6           Securities Purchase Agreement dated as of    Incorporated by reference to Exhibit 10.20 to the
               May 2004 between Cyco.net and Cornell        Company's Quarterly Report on Form 10QSB as filed
               Capital Partners, LP                         with the Securities and Exchange Commission on
                                                            May 18, 2004

10.7           Secured Debenture dated as of May 2004       Incorporated by reference to Exhibit 10.21 to the
               given by Cyco.net to Cornell Capital         Company's Quarterly Report on Form 10QSB as filed
               Partners, LP                                 with the Securities and Exchange Commission on
                                                            May 18, 2004

10.8           Investor Registration Rights Agreement       Incorporated by reference to Exhibit 10.22 to the
               dated as of May 2004 between Cyco.net and    Company's Quarterly Report on Form 10QSB as filed
               Cornell Capital Partners, LP                 with the Securities and Exchange Commission on
                                                            May 18, 2004

10.9           Share Exchange Agreement between             Incorporated by reference to Exhibit 10.24 to the
               Cyco.net, Inc. and the board of directors    Company's Report on Form 8K as filed with the
               of Pluto Communications International, AS    Securities and Exchange Commission on
                                                            November 19, 2004.

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

                                       21
<PAGE>

      (b) Reports on Form 8-K:

      On February 2, 2004, Nexicon filed an Amendment to its current report on
Form 8-K, (originally filed on December 4, 2003), to file the financial
statements in connection with the Company's acquisition of OSSI.

      On November 15, 2004, Nexicon filed a current report on Form 8-K
announcing the acquisition of Pluto.

      On December 23, 2004, Nexicon filed a current report on Form 8-K
announcing the resignation of Francisco Urrea, Jr., a director of Cyco.net.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Audit fees. The aggregate fees billed for professional services rendered
was $35,254 and $15,575 for the audit of the Company's annual financial
statements for the fiscal years ended December 31, 2004 and 2003, respectively,
and the reviews of the financial statements included in the Company's Forms
10-QSB and 8-K for those fiscal years.

      Audit-related fees. The aggregate fees billed in each of the last two
fiscal years for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit or review of the
Company's financial statements and not reported under the caption "Audit Fee."

      Tax fees. No fees were billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice and tax planning services.

      All other fees. Other than the services described above, the aggregate
fees billed for services rendered by the principal accountant was $0 and $0,
respectively, for the fiscal years ended December 31, 2004 and 2003. These fees
related to the review of the Company's Registration Statement.

      Audit committee policies and procedures. The Board of Directors performs
the duties of an audit committee. The Board of Directors must pre-approve all
auditing services and permitted non-audit services (including the fees and terms
thereof) to be performed for Nexicon by its independent auditors, subject to the
de minimus exceptions for non-audit services described in Section 10A(i)(1)(B)
of the Exchange Act, which should be nonetheless be approved by the Board of
Directors prior to the completion of the audit. Each year the independent
auditor's retention to audit our financial statements, including the associated
fee, is approved by the committee before the filing of the previous year's
annual report on Form 10-KSB. At the beginning of the fiscal year, the Board of
Directors will evaluate other known potential engagements of the independent
auditor, including the scope of work proposed to be performed and the proposed
fees, and approve or reject each service, taking into account whether the
services are permissible under applicable law and the possible impact of each
non-audit service on the independent auditor's independence from management. At
each such subsequent meeting, the auditor and management may present subsequent
services for approval. Typically, these would be services such as due diligence
for an acquisition, that would not have been known at the beginning of the year.

      Since May 6, 2003, the effective date of the Commission rules stating that
an auditor is not independent of an audit client if the services it provides to
the client are not appropriately approved, each new engagement of Stark Winter
Schenkein & Co., LLP, has been approved in advance by the Board of Directors,
and none of those engagements made use of the de minimus exception to the
pre-approval contained in Section 10A(i)(1)(B) of the Exchange Act.

                                       22
<PAGE>

                                   SIGNATURES

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

                                  NEXICON, INC.

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

                                  By:      /s/ Daniel Urrea
                                           ----------------
                                           Daniel Urrea
                                           Chief Financial Officer

      In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Date: February 10, 2006           By:      /s/ Richard Urrea
                                           -----------------
                                           Richard Urrea
                                           Director

                                       23
<PAGE>

                                  NEXICON, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

Report of Independent Auditors                                               F-1

Consolidated Balance Sheet                                                   F-2

Consolidated Statements of Operations                                        F-3

Consolidated Statements of Changes in Stockholders' (Deficit)                F-4

Consolidated Statements of Cash Flows                                        F-6

Notes to Consolidated Financial Statements                                   F-8

                                      F-i
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors Nexicon, Inc.

      We have audited the accompanying consolidated balance sheet of Nexicon,
Inc. (formerly Cyco.Net, Inc.) as of December 31, 2004, and the related
consolidated statements of operations, stockholders' (deficit), and cash flows
for the two years ended December 31, 2004 and 2003. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nexicon, Inc. as of December
31, 2004, and the results of its operations, and its cash flows for the two
years ended December 31, 2004 and 2003, in conformity with accounting principles
generally accepted in the United States of America.

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has working capital and stockholders' deficits. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also discussed
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Stark Winter Schenkein & Co., LLP
Denver, Colorado
April 14, 2005 (except for Note 18, February 8, 2006)

                                      F-1
<PAGE>

                                  NEXICON, INC.

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2004

                                   (Restated)

                                     ASSETS
CURRENT ASSETS
  Cash                                                             $      5,874
  Restricted cash                                                        23,688
  Receivables, net of allowance for doubtful
  accounts of $40,297                                                    11,813
  Receivables - related parties                                           8,325
  Receivable - ACC                                                       64,036
  Financing costs                                                       117,600
  Prepaid expense                                                           269
                                                                   ------------
    Total current assets                                                231,605
                                                                   ------------

PROPERTY AND EQUIPMENT, net of accumulated
  depreciation of $127,196                                               24,628
                                                                   ------------

OTHER ASSETS
  Financing cost, net                                                    42,400
  Investment in Mercury                                                 147,851
  Deposits                                                                7,087
                                                                   ------------
    Total other assets                                                  197,338
                                                                   ------------
                                                                   $    453,571
                                                                   ============
                    LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
  Accounts payable and accrued expenses                            $    664,388
  Accrued expenses - shareholders                                       399,337
  Deferred gain                                                          46,925
                                                                   ------------
    Total current liabilities                                         1,110,650
                                                                   ------------

DERIVATIVE FINANCIAL INSTRUMENTS                                        827,402
                                                                   ------------

NET LIABILITIES OF DISCONTINUED OPERATIONS                              379,171
                                                                   ------------

STOCKHOLDERS' (DEFICIT)
  Common stock, $0.001 par value, 500,000,000
    shares authorized, 119,494,238 shares issued
    and outstanding                                                     119,494
  Additional paid-in capital                                         12,908,586
  Deferred stock compensation                                          (543,996)
  Stock subscription receivable                                      (2,800,000)
  Accumulated (deficit)                                             (11,674,966)
                                                                   ------------
                                                                     (1,990,882)
                                                                   ------------
  Other comprehensive income:
    Currency translation adjustment                                     127,230
                                                                   ------------
                                                                     (1,863,652)
                                                                   ------------

                                                                   $    453,571
                                                                   ============

        See accompanying notes to the consolidated financial statements.

                                      F-2
<PAGE>

                                  NEXICON, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                            YEAR ENDED
                                                           DECEMBER 31,
                                                   -----------------------------
                                                       2004            2003
                                                    (Restated)
                                                   ------------    ------------

REVENUES                                           $    495,990    $         --
                                                   ------------    ------------

COSTS OF GOODS SOLD                                     355,766              --
                                                   ------------    ------------

GROSS PROFIT                                            140,224              --
                                                   ------------    ------------

OTHER COSTS AND EXPENSES
  General and administrative                          1,471,697         723,527
  Research and development                               75,138              --
  Purchased research and development                    601,260              --
  Non-cash stock compensation - general
    and administrative                                1,850,105              --
  Loss on asset impairment                              902,000       4,500,000
                                                   ------------    ------------
                                                      4,900,200       5,223,527
                                                   ------------    ------------

OPERATING INCOME (LOSS)                              (4,759,976)     (5,223,527)
                                                   ------------    ------------

OTHER INCOME (EXPENSE)
  Interest income                                         7,510           5,100
  Interest expense                                         (771)         (2,603)
  Interest expense - non cash                           (85,200)             --
  Derivative instruments expense                       (441,436)             --
                                                   ------------    ------------
                                                       (519,897)          2,497
                                                   ------------    ------------

(LOSS) BEFORE INCOME TAXES (BENEFIT)                 (5,279,893)     (5,221,030)

INCOME TAXES (BENEFIT)                                 (247,000)         99,000
                                                   ------------    ------------

(LOSS) BEFORE DISCONTINUED OPERATIONS                (5,032,873)     (5,320,030)

DISCONTINUED OPERATIONS
  Gain on sale of assets of discontinued
    operations                                           75,716          53,897
  Net income (loss) from discontinued
    operations, net of income taxes (benefit)
    of ($247,000) and $99,000, respectively            (972,734)        363,770
                                                   ------------    ------------
                                                       (897,018)        417,667

NET (LOSS)                                           (5,929,891)     (4,902,363)

OTHER COMPREHENSIVE INCOME
  Foreign currency translation adjustment                44,322              --
                                                   ------------    ------------

NET COMPREHENSIVE (LOSS)                           $ (5,885,569)   $ (4,902,363)
                                                   ============    ============

WEIGHTED AVERAGE SHARES OUTSTANDING -
  BASIC AND DILUTED                                  96,573,504      39,499,292
                                                   ============    ============

NET (LOSS) PER COMMON SHARE
  (Loss) from operations                           $      (0.05)   $      (0.13)
  Income from discontinued operations                     (0.01)           0.01
  Foreign currency translation adjustment                    --              --
                                                   ------------    ------------
                                                   $      (0.06)   $      (0.12)
                                                   ============    ============

        See accompanying notes to the consolidated financial statements.

                                      F-3
<PAGE>

                                  NEXICON, INC.

                CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)

                     YEARS ENDED DECEMBER 31, 2003 AND 2004

<TABLE>
<CAPTION>
                                                   Common Stock
                                           ---------------------------
                                                                          Additional       Deferred         Stock
                                                                           Paid in           Stock       Subscription
                                              Shares         Amount        Capital       compensation     Receivable
                                           ------------   ------------   ------------    ------------    ------------
<S>                                        <C>            <C>            <C>             <C>             <C>
Balance at December 31, 2002               $ 31,496,419   $     31,496   $    668,309    $         --    $         --
Shares issued  at $.005 per share,
  pursuant to Equity Line of Credit
  draw                                        1,219,512          1,220          4,228              --              --
Shares issued for stock
  subscription at $1.40 per share             2,000,000          2,000      2,798,000      (2,800,000)
Shares issued for services at $.01
  per share                                   1,000,000          1,000          9,000              --              --
Shares issued at OSSI purchase at
  $.09 per share                             50,000,000         50,000      4,218,432              --              --
Purchase of OSSI                                     --             --             --              --              --
Net (loss) for the year                              --             --             --              --              --
                                           ------------   ------------   ------------    ------------    ------------
Balance at December 31, 2003                 85,715,931         85,716      7,697,969              --      (2,800,000)
Shares issued  for cash at $.05 -
  $.17 per share                              6,600,000          6,600        581,200              --              --
Shares issued  at $.07 - $.21 per
  share, pursuant to Equity Line of
  Credit repayments                           2,177,290          2,177        247,823              --              --
Shares issued  at $.07 - $.17 per
  share, pursuant to debenture
  conversions including embedded
  derivative instruments                        679,855            680        263,354              --              --
Shares issued for services at $.12
  - $.61 per share                            8,799,833          8,800      2,551,580        (543,996)             --
Shares issued for financing costs,
  pursuant to debenture issue at
  $.48 per share                                510,833            511        244,689              --              --
Shares issued at Pluto purchase at
  $.12 per share,                             5,010,496          5,010        513,342              --              --
Liabilities assumed at Pluto
  purchase                                           --             --        (83,371)             --              --
Shares issued at Central Solutions
  investment at $.12 per share
  pursuant to stock purchase
  agreement                                  10,000,000         10,000        892,000              --              --
Currency translation adjustment                      --             --             --              --              --
Net (loss) for the year                              --             --             --              --              --
                                           ------------   ------------   ------------    ------------    ------------
Balance at December 31, 2004                119,494,238   $    119,494   $ 12,908,586    $   (543,996)   $ (2,800,000)
                                           ============   ============   ============    ============    ============
</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                                                                               Currency
                                                              Accumulated    Translation
                                                               (Deficit)      Adjustment        Total
                                                             ------------    ------------   ------------
<S>                                                          <C>             <C>            <C>
Balance at December 31, 2002                                 $   (842,712)   $         --   $   (142,907)
  Shares issued  at $.005 per share, pursuant to Equity
    Line of Credit draw                                                --              --          5,448
  Shares issued for stock subscription at $1.40 per share              --              --             --
  Shares issued for services at $.01 per share                         --              --         10,000
  Shares issued at OSSI purchase at $.09 per share                     --              --      4,268,432
  Purchase of OSSI                                                     --              --             --
  Net (loss) for the year                                      (4,902,363)             --     (4,902,363)
                                                             ------------    ------------   ------------
Balance at December 31, 2003                                   (5,745,075)             --       (761,390)
  Shares issued  for cash at $.05 - $.17 per share                     --              --        587,800
  Shares issued  at $.07 - $.21 per share, pursuant to
    Equity Line of Credit repayments                                   --              --        250,000
  Shares issued  at $.07 - $.17 per share, pursuant to
    debenture conversions including embedded derivative
    instruments                                                        --              --        264,034
  Shares issued for services at $.12 - $.61 per share                  --              --      2,016,384
  Shares issued for financing costs, pursuant to debenture
    issue at $.48 per share                                            --              --        245,200
  Shares issued at Pluto purchase at $.12 per share,                   --          82,908        601,260
  Liabilities assumed at Pluto purchase                                --              --        (83,371)
  Shares issued at Central Solutions investment at $.12
    per share pursuant to stock purchase agreement                     --              --        902,000
  Currency translation adjustment                                      --          44,322         44,322
  Net (loss) for the year                                      (5,929,891)             --     (5,929,891)
                                                             ------------    ------------   ------------
Balance at December 31, 2004                                 $(11,674,966)   $    127,230   $ (1,863,652)
                                                             ============    ============   ============
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                      F-5
<PAGE>

                                  NEXICON, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                             DECEMBER 31,
                                                     --------------------------
                                                         2004           2003
                                                      (Restated)
                                                     -----------    -----------
<S>                                                  <C>            <C>
OPERATING ACTIVITIES
  Net (loss)                                         $(5,929,891)   $(4,902,363)
  Adjustments to reconcile net (loss) to net cash
   (used in) operating activities:
    Amortization                                              --         10,000
    Depreciation                                          22,829          1,283
    Non-cash interest expense                             85,200             --
    Loss on asset impairment                             902,000      4,500,000
    Gain on sale of assets of discontinued
      operations                                         (75,716)       (53,897)
    Derivative instruments expense                       441,436
    Common stock issued for services and other
      non-cash items, net of deferred compensation     2,451,365         10,000
    Currency translation adjustment                       44,322             --
  Changes in assets and liabilities:
    (Increase) decrease in receivables                   (20,138)        25,292
    Decrease in inventory                                     --         22,576
    (Increase) in other assets                            (5,451)            --
    Increase in accounts payable and accrued
      expenses                                           407,575         23,180
    Increase in net assets of discontinued
      operations                                         170,834        208,337
    Increase in accounts and notes payable to
      related party                                           --            612
    Increase in accrued expenses - related party          99,337        106,400
                                                     -----------    -----------
      Net cash (used in) operating activities         (1,406,298)       (48,580)
                                                     -----------    -----------

INVESTING ACTIVITIES
  (Purchase) disposal of property and equipment          (12,994)         9,342
  Acquisition of Mercury                                (147,851)            --
  Cash received in Pluto acquisition                      24,890             --
  Cash received in OSSI acquisition                           --          1,057
                                                     -----------    -----------
    Net cash provided by (used in) investing
      activities                                        (135,955)        10,399
                                                     -----------    -----------

FINANCING ACTIVITIES
  Proceeds from sale of common stock                     587,800          5,448
  Payments on notes payable - related party               (1,000)       (17,500)
  Proceeds from notes and debentures                     900,000             --
  Proceeds from receivable - ACC                          75,716         53,897
                                                     -----------    -----------
    Net cash provided by financing activities          1,562,516         41,845
                                                     -----------    -----------

    Net increase in cash                                  20,263          3,664

CASH AT BEGINNING OF YEAR                                  9,299          5,635

CASH AT END OF YEAR                                  $    29,562    $     9,299
                                                     ===========    ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for interest                             $        --    $        --
                                                     ===========    ===========
  Cash paid for income taxes                         $        --    $        --
                                                     ===========    ===========
</TABLE>

                                      F-6
<PAGE>

<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                             DECEMBER 31,
                                                     --------------------------
                                                         2004           2003
                                                      (Restated)
                                                     -----------    -----------
<S>                                                  <C>            <C>
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH
 FINANCING AND INVESTING ACTIVITIES
  Issuance of stock for services                     $        --    $    10,000
                                                     ===========    ===========
  Account receivable - ACC, net of discount
    of $6,351                                        $        --    $  (193,649)
                                                     ===========    ===========
  Stock subscription receivable                      $        --    $(2,800,000)
                                                     ===========    ===========
  Sale of net assets of discontinued operations      $        --    $    17,112
                                                     ===========    ===========
  Issuance of stock for purchase of assets           $        --    $ 4,268,432
                                                     ===========    ===========
  Issuance of common stock for financing costs       $   245,200    $        --
                                                     ===========    ===========
  Issuance of common stock for conversion of debt    $   325,000    $        --
                                                     ===========    ===========
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                      F-7
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Nexicon, Inc. (the "Company") is the successor to Cyco.Net, Inc, (formerly AVE,
Inc. a Nevada corporation) and operates through its wholly owned subsidiaries,
Cyco.net (a New Mexico corporation), Orion Security Systems ("OSSI", a Wisconsin
corporation), and Pluto Communications International, AS ("Pluto", a Norwegian
corporation), discussed below.

Prior to July 1, 2003, the Company's primary line of business was the sale of
cigarettes through three websites to customers in the United States of America.
Effective July 1, 2003, the Company sold its internet tobacco products division,
as more fully discussed in Notes 6 and 12.

On November 19, 2003, the Company purchased all of the outstanding common stock
of Orion Security Systems, Inc., a Wisconsin corporation whose primary line of
business is the sale of its SatSecure(C) System and ComSecure(C) Controller,
which are designed to provide bi-directional video, audio, data and alarm
transfer between a wide variety of locations, including but not limited to land
based positions, airborn aircraft, ships at sea, and a command and control
center (see Note 13). In December 2004, management of the Company resolved to
dispose of the SatSecure(C) division of OSSI, as more fully discussed in Notes 6
and 12.

On November 15, 2004, the Company acquired all of the outstanding common stock
of Pluto Communications International, AS, a Norwegian corporation which
provides a variety of billing and customer care solutions for telecommunication
carriers and other network service providers via its "Charon" billing and
customer care real-time client/server system. The "Charon" system provides a
high-end Operational Support System ("OSS") and billing system to improve
customer service (see Note 13).

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS

Investments in which the Company has a 20% to 50% interest are carried at cost,
adjusted for the Company's proportionate share of their undistributed earnings
or loss.

RECLASSIFICATIONS

Certain amounts presented in the previous year's financial statements have been
reclassified to conform to the current year presentation. In addition, $902,000
previously classified as purchased research and development has been
reclassified to properly reflect the nature of the charge to operations (see
Note 13).

RESTATEMENT AND CORRECTION OF AN ERROR

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.

                                      F-8
<PAGE>

The Company has amended its annual report for the year ended December 31, 2004,
and quarterly reports for the quarters ended March 31, 2005 and June 30, 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
4). 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 year ended December
30, 2004, as previously reported from $(5,488,455) to $(5,929,891) or $(0.06)
per share. In addition, the liability for convertible debentures and notes
payable to Cornell previously reported on the balance sheet was reduced $575,000
to $0, the amount reported on the balance sheet for derivative instruments was
increased from $0 to $827,402.

REVENUE RECOGNITION

Prior to July 1, 2003, the Company's sole source of revenue was the sale of
cigarettes through its primary website (cyco.net), which has been designed as an
"e-zine", and two ancillary websites (cycocigs.com and aabakismokes.com). The
terms of sale were FOB shipping point and the Company recorded revenue from
cigarette sales when the product shipped. As discussed in Notes 6 and 12,
effective July 1, 2003, the Company sold its internet tobacco products division,
accordingly revenues and costs associated with the internet tobacco products
division are presented as discontinued operations.

Effective November 19, 2003 through November 14, 2004, the Company's sole source
of revenue was the sale of the SatSecure(C) and ComSecure(C) systems discussed
above. The terms of sale are FOB shipping point and the Company records revenue
when the product is shipped. In December 2004, the Company determined to dispose
of the SatSecure(C) division of its business, which was consummated in March
2005 (see Note 12). Accordingly, the revenues and costs associated with the
SatSecure(C) division are presented as discontinued operations in the
accompanying financial statements.

In November 2004, the Company through Pluto, its wholly-owned Norwegian
subsidiary, added the service revenues from the sale of the "Charon" Billing and
Operational Support Systems in Norway and Sweden. Revenues are recognized at the
completion of the related services, when they are earned (see Note 13).

DISCOUNT AND FEES RELATED TO THE EQUITY LINE OF CREDIT

The discount and any related fees on the shares issued pursuant to the equity
line of credit agreement or the standby equity distribution agreement described
in Note 3 are treated as though they were commissions and are deducted from
additional paid in capital at the time the shares are issued.

INVENTORY

Inventory, consisting of products available for sale, is stated at the lower of
cost or market. Cost is determined on a first-in, first-out basis.

ADVERTISING

The Company expenses all costs of advertising as incurred. Advertising costs
included in general and administrative expenses aggregated $10,653 in 2004 and
$10,060 in 2003.

CASH AND CASH EQUIVALENTS

For purposes of balance sheet classification and the statements of cash flows,
the Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.

TRADE AND OTHER RECEIVABLES

Trade receivables and other current receivables are stated on the balance sheet
at estimated net realizable value. Accounts receivable are comprised of balances
due from customers net of estimated allowances for uncollectible accounts. In
determining collectibility, historical trends are evaluated and specific
customer issues are reviewed to arrive at appropriate allowances. During 2004,
an allowance of $40,297 was recorded.

                                      F-9
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 2004. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash and
cash equivalents, receivables, accounts payable and accrued expenses, and notes
payable. Fair values were assumed to approximate carrying values for these
financial instruments because they are short term in nature, their carrying
amounts approximate fair values, or they are receivable or payable on demand.
The fair value of long-term debt is based on current rates at which the Company
could borrow funds with similar remaining maturities.

PROPERTY AND EQUIPMENT

Property and equipment consists of furniture and office equipment, is stated at
cost and is being depreciated using the straight-line method over the estimated
economic lives of 3 to 5 years.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company periodically reviews the carrying amount of property, plant and
equipment and its identifiable intangible assets to determine whether current
events or circumstances warrant adjustments to such carrying amounts. If an
impairment adjustment is deemed necessary, such loss is measured by the amount
that the carrying value of such assets exceeds their fair value. Considerable
management judgment is necessary to estimate the fair value of assets;
accordingly, actual results could vary significantly from such estimates. Assets
to be disposed of are carried at the lower of their financial statement carrying
amount or fair value less costs to sell. The Company recorded impairment losses
during 2004 and 2003, as discussed in Note 13.

DERIVATIVE 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,
we use 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.

DEFERRED OFFERING COSTS

The Company defers costs associated with the raising of capital until such time
as the offering is completed, at which time the costs are charged against the
capital raised. Should the offering be terminated the costs are charged to
operations during the period when the offering is terminated.

                                      F-10
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NET (LOSS) PER COMMON SHARE

The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards ("SFAS") 128, "Earnings Per Share". Basic
earnings (loss) per common share calculations are determined by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings (loss) per common share
calculations are determined by dividing net income (loss) by the weighted
average number of common shares and dilutive common share equivalents
outstanding. During the periods when they are anti-dilutive, common stock
equivalents, if any, are not considered in the computation.

STOCK-BASED COMPENSATION

The Company accounts for equity instruments issued to employees for services
based on the fair value of the equity instruments issued and accounts for equity
instruments issued to other than employees based on the fair value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably measurable.

The Company accounts for stock based compensation in accordance with SFAS 123,
"Accounting for Stock-Based Compensation." The provisions of SFAS 123 allow
companies to either expense the estimated fair value of stock options or to
continue to follow the intrinsic value method set forth in Accounting Principles
Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") but
disclose the pro forma effects on net income (loss) had the fair value of the
options been expensed. The Company has elected to continue to apply APB 25 in
accounting for its stock option incentive plans.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred.

IN PROCESS RESEARCH AND DEVELOPMENT

The Company charges the cost of the purchased research and development acquired
as part of an acquisition to operations if the acquired assets have no allocable
items to be allocated to, technological feasibility has not yet been established
and there is no alternative future use (see Note 13).

SEGMENT INFORMATION

The Company follows Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS No.
131"). This statement establishes standards for the reporting of information
about operating segments in annual and interim financial statements. Operating
segments are defined as components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief operating
decision maker(s) in deciding how to allocate resources and in assessing
performance. SFAS No. 131 also requires disclosure about products and services,
geographic areas and major customers. The application of SFAS No. 131 did not
affect results of operations or financial position but does require the
disclosure of segment information as presented in Note 16. The Company currently
operates in two business segments, and will evaluate additional segment
disclosure requirements as it expands operations.

                                      F-11
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

CONCENTRATIONS

There have been a number of adverse legislative, regulatory, political and other
developments concerning the tobacco industry that have received widespread media
attention. These developments have negatively affected the perception of
potential and current customers with respect to the tobacco industry, and
therefore had a significant influence in the Company's decision to sell its
internet tobacco products division as discussed in Notes 6 and 12.

TRANSLATION OF FINANCIAL STATEMENTS

The Company's wholly-owned subsidiary Pluto (Note 13) operates in Norway. The
financial statements are translated from a functional currency (the Norwegian
Kroner) which is not the U.S. dollar, in the following manner: assets and
liabilities at the year-end rate; stockholders' (deficit) at historical rates
and results of operations at the daily average exchange rates for the period.

COMPREHENSIVE INCOME

The Company follows SFAS 130, "Reporting Comprehensive Income". SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in the financial statements.

RECENT PRONOUNCEMENTS

In December 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation Number 46-R "Consolidation of Variable Interest Entities" ("FIN
46-R"), which modifies certain provisions and effective dates of FIN 46, and
sets forth the criteria to be used in determining whether an entity is a
variable interest entity that should be consolidated. These provisions are based
on the premise that if a company controls another entity through interests other
than voting interests, that company should consolidate the controlled entity.
The Company currently consolidates an entity under the provisions of FIN 46-R.

In November 2004, the FASB issued SFAS 151, "Inventory Costs." SFAS 151 amends
the accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage) under the guidance in ARB 43, Chapter 4,
"Inventory Pricing." Paragraph 5 of ARB 43, Chapter 4, previously stated that
"...under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges...." This Statement requires that those
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal." In addition, this Statement requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.
Management does not expect adoption of SFAS 151 to have a material impact on the
Company's financial statements.

In December 2004, the FASB issued SFAS 152, "Accounting for Real Estate
Time-Sharing Transactions." The FASB issued this Statement as a result of the
guidance provided in AICPA Statement of Position (SOP) 04-2, "Accounting for
Real Estate Time-Sharing Transactions." SOP 04-2 applies to all real estate
time-sharing transactions. Among other items, the SOP provides guidance on the
recording of credit losses and the treatment of selling costs, but does not
change the revenue recognition guidance in SFAS 66, "Accounting for Sales of
Real Estate," for real estate time-sharing transactions. SFAS 152 amends
Statement 66 to reference the guidance provided in SOP 04-2. SFAS 152 also
amends SFAS 67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects", to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate time-sharing transactions. SFAS 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited. Management does not expect adoption of SFAS 152 to have a material
impact on the Company's financial statements.

                                      F-12
<PAGE>

                                 NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary Assets,"
an amendment to Opinion No. 29, "Accounting for Nonmonetary Transactions."
Statement 153 eliminates certain differences in the guidance in Opinion No. 29
as compared to the guidance contained in standards issued by the International
Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair
value exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets that do
not have commercial substance. Such an exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. SFAS 153 is effective for nonmonetary asset exchanges occurring
in periods beginning after June 15, 2005. Earlier application is permitted for
nonmonetary asset exchanges occurring in periods beginning after December 16,
2004. Management does not expect adoption of SFAS 153 to have a material impact
on the Company's financial statements.

In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment." SFAS
123(R) amends SFAS 123, "Accounting for Stock-Based Compensation," and APB
Opinion 25, "Accounting for Stock Issued to Employees." SFAS 123(R) requires
that the cost of share-based payment transactions (including those with
employees and non-employees) be recognized in the financial statements. SFAS
123(R) applies to all share-based payment transactions in which an entity
acquires goods or services by issuing (or offering to issue) its shares, share
options, or other equity instruments (except for those held by an ESOP) or by
incurring liabilities (1) in amounts based (even in part) on the price of the
entity's shares or other equity instruments, or (2) that require (or may
require) settlement by the issuance of an entity's shares or other equity
instruments. This statement is effective (1) for public companies qualifying as
SEC small business issuers, as of the first interim period or fiscal year
beginning after December 15, 2005, or (2) for all other public companies, as of
the first interim period or fiscal year beginning after June 15, 2005, or (3)
for all nonpublic entities, as of the first fiscal year beginning after December
15, 2005. Management is currently assessing the effect of SFAS No. 123(R) on the
Company's financial statements.

NOTE 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
years ended December 31, 2004 and 2003 the Company incurred net (losses) of
($5,929,891) and ($4,902,363), respectively. At December 31, 2004, the Company
had a working capital (deficit) of $(879,045) and stockholders' (deficit) of
$(1,863,652). In addition the Company is subject to legal action (see Note 11).

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. As discussed in Note 13, 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.

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.

                                      F-13
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 3. FINANCING AGREEMENTS WITH CORNELL

STANDBY EQUITY DISTRIBUTION AGREEMENT

On August 16, 2001 the Company entered into an Equity Line of Credit agreement
with Cornell Capital Partners, L.P. ("Cornell") which would have enabled the
Company to periodically issue and sell up to 40,000,000 shares of common stock
for a total purchase price of $5,000,000. As of December 31, 2003, the Company
had requested one advance under the terms of the Equity Line of Credit,
resulting in the issuance of 1,219,512 shares of common stock, for net cash
proceeds of $5,448.

On March 23, 2004, the Company and Cornell entered into a Standby Equity
Distribution Agreement ("Standby Agreement"), 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 Standby Agreement. As a condition precedent to
the execution of the Standby Agreement, 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 Standby Agreement. The commitment period for the
Standby Agreement 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 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, to be
held in escrow, pursuant to the Escrow Agreement entered into with Cornell.
Effective March 23, 2004, upon the execution of the Standby Agreement, the
Company issued 490,000 shares of its common stock to Cornell at $.48 per share,
$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 Standby Agreement, and
are capitalized as financing costs and amortized as interest expense over the
two year commitment period of the Standby Agreement. Interest expense associated
with the financing costs amounted to $245,200 for the year ended December 31,
2004, at which date the unamortized balance of the financing costs was $160,000.
An additional $10,000 of the Company's common stock was issued to Newbridge
Securities Corporation ("Newbridge"), valued at the fair market value of the
shares as of March 23, 2004 (20,833 shares at $0.48 per share).

On June 10, 2004, the Company filed a registration statement on Form SB-2 under
the Securities Act of 1933, as amended, for the registration of 69,513,810
shares of the Company's common stock. The registration statement became
effective on August 11, 2004.

As of December 31, 2004, the Company has issued 510,833 shares of its common
stock to Cornell and Newbridge, with an aggregate value of $245,200 in
connection with these agreements.

The Company cannot predict the total number of shares to be issued or the gross
proceeds to be derived from the sale of such shares pursuant to the Standby
Agreement, as the purchase price of the shares will fluctuate based on the
prevailing market conditions. During the year ended December 31, 2004, 2,177,290
shares of the Company's common stock with a fair market value of $250,000 were
issued, pursuant to the Standby Agreement. In addition, the Company issued two
unsecured promissory notes to Cornell, bearing interest at 12% per annum,
totaling $400,000, and due within one year. The Company received $363,843, net
of financing costs in the amount of $36,157. As of December 31, 2004, after
repayments of $250,000, the balance due is $150,000 and the accrued interest is
$3,096. Subsequent to year end, this obligation and the associated accrued
interest were paid in full.

                                      F-14
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

Subsequent to December 31, 2004, the Company entered into additional 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 net of
financing costs of $109,868. The Company has repaid $300,000 of these promissory
notes. In addition, pursuant to the Standby Agreement, the Company issued an
additional 7,579,034 shares of its common stock for gross proceeds of $300,000,
which was used for partial repayment of the promissory notes. An additional
40,000,000 shares were issued and held in escrow in connection with the
$1,000,000 promissory note, effective March 3, 2005, as more fully discussed in
Note 17.

DEBENTURE AGREEMENT

In May 2004, the Company entered into a Securities Purchase Agreement, whereby
up to $500,000 of 5% secured, convertible debentures may be 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 $75,000 worth of the debentures for
679,855 shares of the Company's common stock. At December 31, 2004, the balance
of the debentures was $425,000 and the accrued interest was $12,801.

The debentures bear interest at 5% per annum and are secured by a security
agreement covering substantially all business assets. Principal plus accrued
interest are 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 agreement, 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.

Subsequent to December 31, 2004, the Company converted an additional $20,000
worth of debentures, resulting in the issuance of 417,000 shares of its common
stock (see Note 16).

NOTE 4. DERIVATIVE INSTRUMENTS

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.

                                      F-15
<PAGE>

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.

At December 31, 2004, the following derivative liabilities and embedded
derivative instruments were outstanding:

<TABLE>
<CAPTION>
                                                                                            Value -
                                                                           Value - Issue    December 31,
Issue Date       Expiry Date                                               Date             2004
---------------- ------------- ----------------------------------------    ---------------- ---------------
<S>              <C>                                                       <C>              <C>
05-07-2004       05-07-2006    $250,000 convertible debentures                  $  251,435         $   858

06-30-2004       06-30-2006    $100,000 convertible debentures                     144,251             520

08-13-2004       08-13-2006    $150,000 convertible debentures                     152,102           2,665

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         145,047
</TABLE>

                                      F-16
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                       <C>
Fair value of bifurcated embedded derivative instrument liabilities
associated with the above convertible notes                                    678,312
                                                                          ------------

Total derivative financial instruments                                    $    827,402
                                                                          ============

Secured Convertible Debentures; 5% per annum; due May 7, 2006             $    250,000
Less: face amount of Debentures converted                                      (75,000)
                                                                          ------------
                                                                               175,000
Less: unamortized bifurcated embedded derivative instruments                  (175,000)
                                                                          ------------
                                                                          $         --
                                                                          ------------

Secured Convertible Debentures; 5% per annum; due June 30, 2006           $    100,000
Less: unamortized bifurcated embedded derivative instruments                  (100,000)
                                                                          ------------
                                                                          $         --
                                                                          ------------

Secured Convertible Debentures; 5% per annum; due August 13, 2006         $    150,000
Less: unamortized bifurcated embedded derivative instruments                  (150,000)
                                                                          ------------
                                                                          $         --
                                                                          ------------

Unsecured Promissory Notes; 12% per annum; due August 30, 2006            $    250,000
Less: face amount of Promissory Notes converted                               (250,000)
                                                                          ------------
                                                                          $         --
                                                                          ------------

                                                                          ------------
Unsecured Promissory Notes; 12% per annum; due November 30, 2006          $    150,000
                                                                          ------------
Less: unamortized bifurcated embedded derivative instruments                  (150,000)
                                                                          ------------
                                                                          $         --
                                                                          ------------

                                                                          ------------

Total carrying value at December 31, 2004                                 $         --
                                                                          ============
</TABLE>

                                      F-17
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 5. STOCKHOLDERS' (DEFICIT)

On June 9, 2004, the Company filed an Amendment to its Articles of Incorporation
to increase its authorized capital to 500,000,000 shares of $.001 par value
common stock.

During the year ended December 31, 2004, the Company issued a total of
33,778,307 shares of its common stock. The Company issued 6,600,000 shares for
cash of $587,800. The Company issued 8,799,833 shares for services valued at
$2,560,380, the fair value of the shares on the date the Company agreed to issue
them, of which $1,850,105 was expensed as non-cash stock compensation (general
and administrative), $166,279 was expensed as part of discontinued operations
and $543,996 has been deferred to be amortized over the terms of certain
consulting agreements discussed more fully in Note 15. The Company issued
510,833 shares to Cornell and Newbridge, with at a value of $245,200, $85,200
was expensed as non-cash interest and $160,000 was recorded as financing costs
to be amortized over the terms of the agreement in connection with the Standby
Agreements in Note 3. An additional 2,177,290 shares were issued in connection
with the payment of $250,000 in promissory notes discussed in Note 3, and
679,855 shares were issued in connection with the conversion of $75,000 worth of
convertible debentures, as described in Note 4. The Company issued 5,010,496
shares for the purchase of Pluto valued at $601,260 and 10,000,000 shares for an
investment in Central Solutions valued at $902,000.

On June 10, 2004 the Company filed a registration statement on Form SB-2 under
the Securities Act of 1933, for the registration of 69,513,810 shares of the
Company's common stock. Of these, 60,513,810 shares are offered pursuant to the
terms of the Standby Agreement discussed in Note 3 and 900,000 shares are for
the Secured Debentures discussed in Note 4. The registration statement became
effective on August 11, 2004.

In connection with the acquisition of Pluto, effective November 15, 2004, the
Company issued 5,010,496 shares of its common stock for all of the issued and
outstanding shares of Pluto. The shares were valued at their fair market value
as of November 15, 2004 (see Note 13).

Effective December 10, 2004 the Company issued 10,000,000 shares of its common
stock in exchange for 35% of the issued and outstanding shares of Central
Solutions, Inc. ("Central"). The shares were valued at their fair market value
as of December 10, 2004 (see Note 13). The investment in Central is accounted
for under the equity method of accounting.

Subsequent to December 31, 2004, and as more fully described in Note 12, on
March 17, 2005, the Company entered into a Stock Repurchase Agreement with the
President of wholly-owned subsidiary OSSI, pursuant to which the Company agreed
to repurchase 15,000,000 shares of the Company's common stock in exchange for
$20,000 in cash and a promissory note in the amount of $220,000, plus all
equipment, furniture and computers located in the OSSI offices in McClean,
Virginia, as well as relinquishing all right title and interest the Company
might have in certain agreements related to the SatSecure(C) technology and
various associated tradenames.

Subsequent to December 31, 2004, the Company issued 5,338,000 shares of its
common stock, for cash of $230,000, debenture conversion of $20,000, and in
connection with the Standby Agreement (see Note 16).

During the periods covered by these financial statements the Company has issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the issuances
if such exemptions were found not to apply and this could have a material
negative impact on the Company.

                                      F-18
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 6. DISCONTINUED OPERATIONS

Effective July 1, 2003 the Company reached an agreement to sell its Internet
tobacco products division (See Note 12). The Company agreed to dispose of the
division due to the lack of working capital required to resolve the litigation
issues as discussed in Note 11.

In December 2004, the Company, through its wholly-owned subsidiary OSSI, decided
to discontinue its SatSecure(C) Systems division, pursuant to the terms of a
Stock Repurchase Agreement with the President of OSSI, which was consummated on
March 17, 2005 (see Note 12).

Operating results of discontinued operations for the years ended December 31,
2004 and 2003 are shown separately in the accompanying statements of operations.

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

                                                      2004              2003
                                                  ------------      ------------
Net sales                                         $    174,810      $  2,887,704
                                                  ============      ============
Net income (loss)                                 $   (972,734)     $    362,770
                                                  ============      ============

Assets related to discontinued operations, which were included in the sale, were
as follows as of December 31, 2003:

Inventory                                                           $      2,070
Property and equipment - net                                               3,295
Intangible assets - net                                                   11,746
                                                                    ------------
  Net assets of discontinued operations                             $     17,111
                                                                    ============

Net liabilities of discontinued operations, which were included in the Stock
Repurchase Agreement, were as follows as of December 31, 2004:

Property and equipment - net                                       $     16,020
Deposits                                                                 11,179
Accounts payable and accrued expenses                                  (135,353)
Notes payable and accrued interest - related                            (21,741)
Accrued expenses - shareholder                                         (249,276)
                                                                   ------------
  Net liabilities of discontinued operations                       $   (379,171)
                                                                   ============

                                      F-19
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 7. RELATED PARTY TRANSACTIONS

During the years ended December 31, 2004 and 2003, the Company paid $0 and
$12,500, respectively, in consulting fees to related parties for services.

At December 31, 2004, the Company has recorded notes payable and accrued
interest payable to the president of its subsidiary OSSI, in the aggregate
amount of $21,741, including interest of $8,741. In addition, the Company owes
this individual $249,276 including $210,000 of prior year accrued and unpaid
wages, $19,022 of current year accrued wages and $20,054 of expense
reimbursement. All of these liabilities are included in Net Liabilities of
Discontinued Operations related to the SatSecure(C) System division at December
31, 2004 (see Note 6), and payment of these obligations is incorporated into the
Stock Repurchase Agreement discussed in Notes 5 and 12.

Accrued expenses - related party includes an aggregate of $300,000 of unpaid
prior year bonuses to employees and the Company's website designer, all of whom
are also shareholders, plus $93,380 of current year accrued wages and $5,957 of
expense reimbursements payable to the Company's employees/shareholders.

During the year ended December 31, 2004, the Company paid $100,200 to its
affiliate Mercury (Note 14), as well as $74,864 to a company affiliated with
certain shareholders, for the cost of materials related to its ComSecure
Controller product, which amounts are included in cost of goods sold.

NOTE 8. INCOME TAXES

The Company accounts for income taxes under SFAS 109, "Accounting for Income
Taxes", which requires use of the liability method. SFAS 109 provides that
deferred tax assets and liabilities are recorded based on the differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes, referred to as temporary differences. Deferred tax
assets and liabilities at the end of each period are determined using the
currently enacted tax rates applied to taxable income in the periods in which
the deferred tax assets and liabilities are expected to be settled or realized.

The types of temporary differences between the tax basis of assets and their
financial reporting amounts that give rise to a significant portion of the
deferred tax asset are as follows:

                                                      Reconciling       Tax
                                                         Item          Effect
                                                     ------------   ------------
Net operating loss carryforward                      $  4,617,000   $  1,570,000
                                                     ============   ============

A capital loss carryforward of $25,000 expired in 2004 and the net operating
loss carryforward will expire through 2024.

The deferred tax asset has been fully reserved as of December 31, 2004. The
change in the valuation allowance for the deferred tax asset during the year
ended December 31, 2004 was an increase of $292,000. The principal difference
between the net operating loss for financial reporting purposes and income tax
purposes results from non-cash interest and services.

                                      F-20
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 9. STOCK BASED COMPENSATION

STOCK OPTIONS

The Company has a compensatory stock option plan. Under the plan, the Company
may grant options for up to 4,000,000 shares of common stock. The exercise price
of each option shall be determined by the Compensation Committee or by the CEO
with reference to factors such as current fair market value of the common stock,
net book value per share, regular or other remuneration already being received
by the optionee. The maximum term of the options is five years and they vest on
the date granted. All options outstanding at December 31, 2004 have been granted
to employees.

Summarized information relative to the Company's stock option plan is as
follows:

                                                                      Weighted
                                                                       Average
                                                      Number of       Exercise
                                                       Shares          Price
                                                    ------------    ------------

Outstanding at January 1, 2004                         1,350,000    $       0.08
Granted                                                       --              --
Exercised                                                     --              --
Forfeited                                               (600,000)             --
                                                    ------------    ------------

Outstanding at December 31, 2004                         750,000    $       0.08
                                                    ============    ============

An option for 600,000 shares expired in 2004 and an option for 750,000 shares
expires in 2006.

The effect of applying SFAS 123 pro forma net (loss) is not necessarily
representative of the effects on reported net income (loss) for future years due
to, among other things, the vesting period of the stock options and the fair
value of additional stock options in future years.

NOTE 10. STOCK PURCHASE WARRANT

During the year ended December 31, 2001 the Company issued a stock purchase
warrant, exercisable for 300,000 shares of common stock, expiring on August 16,
2006. The exercise price of the warrant is the lower of (i) 120% of the closing
price of the Company's stock on August 16, 2001, or (ii) the lowest price at
which the Company issues or sells common stock subsequent to August 16, 2001.
After such adjustment, the number of shares is also adjustable by the former
exercise price multiplied by the number of shares divided by the new exercise
price.

During the year ended December 31, 2002 the Company was required to change the
terms of the warrant. As of December 31, 2004 the warrant is exercisable into
1,440,000 shares of common stock at $0.03 per share. The warrant expires on
August 16, 2006.

                                      F-21
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 11. CONTINGENT LIABILITY

On April 1, 2003, the State of California filed a civil action in the Superior
Court of California, County of San Diego, against the Company's subsidiary,
alleging sales of cigarettes to minors, deceptive failure to file Jenkins Act
reports and inform California consumers that they are required to pay sales
taxes to California. Based on these factual assertions, the suit's three counts
allege false or misleading advertising under California Business and Profession
Code 17500: failure to notify California purchasers of their obligations under
California Revenue and Business and Professions Code 17200. The suit sought
injunctive relief and assessment of civil penalties of $2,500 for each
violation, and the State of California settled for $25,000 in May 2004.

On April 1, 2003, the State of Washington filed a civil action in the State of
Washington, King County Superior Court against the Company's subsidiary alleging
sales of cigarettes to minors, deceptive failure to file Jenkins Act reports and
inform Washington consumers that they are required to pay sales taxes to the
State of Washington. The suit's four counts alleged unfair business practice,
unfair method of compensation and misrepresentation. The suit sought injunctive
relief restraining Nexicon, Inc. from continuing to engage in unlawful conduct,
restitution to consumers and civil penalties of up to $2,000 per violation, plus
attorneys' fees and costs. Subsequent to December 31, 2005, the parties agreed
to settle for $10,000, which funds were released from escrow on April 15, 2006.

On April 1, 2003, the State of Oregon filed a civil action in the State of
Oregon, Marion County against the Company's subsidiary alleging the sale of one
carton of cigarettes to a minor using her mother's name and credit card, in
violation of State Unlawful Trade Practices Act. The suit sought to enjoin the
Company from doing business in Oregon, and was settled out of court, in the fall
of 2003, for $2,000, with no admission of liability.

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 are engaged in the
business of internet online tobacco sale. 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 yet to be determined at trial.

On July 10, 2003, the State of Vermont, filed a civil action in Chittenden
County against the Company's subsidiary, alleging the sale of cigarettes to a
minor in violation of seven Vermont Statutes, deceptive failure to file Jenkins
Act reports and inform the Vermont consumers they are required to pay Vermont
sales taxes. The suit sought to enjoin the Company from doing business in the
State of Vermont, pay civil damages of up to $10,000 for each sale to a minor,
plus attorney's fees and expenses. The State of Vermont settled for $4,000 in
April 2004.

During 2003, the State District Court of Travis County, Texas alleged that the
Company did not take effective measures to prevent the sale of tobacco products
to minors, in violation of the Texas Deceptive Trade Practices - Consumer
Protection Act. This case was settled in September 2004 for $3,000.

In the remaining City of New York case, the Company has contested the
allegations and believes it has meritorious defenses. It is uncertain what
affect the Company's sale of its Internet tobacco products will have on the
pending lawsuit. Outside counsel for the Company has advised that at this stage
in the proceedings they cannot offer an opinion as to the probable outcome of
the case.

                                      F-22
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 12. SALE OR DISPOSITION OF BUSINESS

INTERNET TOBACCO PRODUCTS

Effective on July 1, 2003 the Company agreed to sell its Internet tobacco
products business to American CigCo, LLC (ACC). In conjunction with this
purchase ACC agreed to purchase 2,000,000 shares of the Company's common stock.

The purchase price aggregated $3,000,000 in the form of 2 notes payable as
follows:

o     Payment for the assets of the business in the form of a note in the amount
      of $200,000 payable in 12 equal monthly installments of $16,667 commencing
      on August 1, 2003. The balance of the note is $64,036 at December 31,
      2004.

o     Payment for the 2,000,000 common shares is payable in the form of a
      $2,800,000 note with interest at 7% per annum, on an interest only basis.
      The interest payments are due annually commencing on July 31, 2004 and the
      principal balance is due on July 31, 2008. Accrued interest receivable of
      $98,000 has not been reflected in the accompanying financial statements,
      as recognition will occur as proceeds are received.

Because the sale of the business and the common shares were made to a thinly
capitalized entity and significant uncertainties exist related to the
collectibility of the amounts due, the gain from the sale of the business will
be deferred until such time as the proceeds are collected or until such time as
the cash flows from the operating activities of the business sold are sufficient
to fund the debt service. The deferred portion of the gain on the sale of the
business aggregating $46,925 at December 31, 2004 is reflected as deferred
revenue (see discontinued operations at Note 6).

In addition, interest income from the $2,800,000 note receivable will be
recognized as the proceeds are collected and the unpaid portion of the principal
balance will be recorded as a reduction of stockholders' equity.

SATSECURE(C) SYSTEMS

In December 2004, the Company decided to discontinue operations of its OSSI
SatSecure(C) Systems business, pursuant to the terms of a Stock Repurchase
Agreement which was consummated March 17, 2005. The Company agreed to repurchase
15,000,000 shares of its common stock held by the president of OSSI for a total
purchase price of $240,000 payable as $20,000 at closing and a note payable for
$220,000 payable in successive $20,000 increments on or before the 15th of the
month for 11 consecutive months, plus equipment located in the OSSI facility
with a net book value of $16,020, which is included in net liabilities of
discontinued operations at December 31, 2004. 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 (Note 6).

                                      F-23
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 13. ACQUISITION OF ASSETS AND LOSS ON ASSET IMPAIRMENT

OSSI

Effective November 19, 2003, the Company entered into a merger agreement with
Orion Security Services, Inc. ("OSSI"), a Wisconsin corporation in the
development stage, that provides secure computer network and management
solutions, and video surveillance systems via satellite communication. The
business combination has been accounted for as a purchase. The results of
operations of OSSI have been included in the accompanying financial statements
since the effective date of the acquisition. In exchange for all of the issued
and outstanding common shares of OSSI, the Company issued 50,000,000 shares of
its common stock valued at $4,500,000. The shares were valued at $.09 per share,
the fair market value at November 19, 2003. As of December 31, 2003, the Company
recorded a loss on asset impairment related to this investment, in the amount of
$4,500,000, which was charged to operations.

The purchase price was allocated as follows:

Current assets                                                     $      1,057
Property and equipment                                                    9,613
Current liabilities                                                    (242,238)
                                                                   ------------
Net liabilities acquired                                           $   (231,568)
                                                                   ============

The assets acquired and liabilities assumed were recorded at the historical
basis of OSSI. The excess of the purchase price paid over the value of the
assets acquired was recorded as impairment of assets of $4,500,000 in 2003.

PLUTO

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. Pursuant to a Share Exchange Agreement between
the Company and Pluto, Inc., dated June 16, 2004, and amended on November 15,
2004, to change the date of Closing to the date thereof, the Company issued
5,010,496 shares of common stock to Pluto in exchange for all of the issued and
outstanding common stock of Pluto, which consists of 2,385,950 shares of common
stock. The business combination has been accounted for as a purchase. The shares
were valued at $.12 per share, the fair market value at November 15, 2004
($601,260). The results of operations of Pluto have been included in the
accompanying financial statements since the effective date of the acquisition.
Pluto will continue its operations in Norway and will operate as a 100% wholly
owned subsidiary of the Company.

                                      F-24
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

The purchase price was allocated as follows:

Current assets                                                     $     93,327
Property and equipment                                                   37,283
Other assets                                                              7,221
Current liabilities                                                    (221,202)
                                                                   ------------
Net liabilities acquired                                           $    (83,371)
                                                                   ============

The assets acquired and liabilities assumed were recorded at fair value which
equal the historical cost basis of Pluto, translated from the functional
currency of Norwegian Kroner into U.S. dollars as of the date of acquisition,
November 15, 2004. Included in restricted cash, is $23,688 temporarily
restricted to cover a portion of the Pluto employees' payroll tax withholdings,
as required by Norwegian law. Since the funds are periodically remitted to the
related taxing authorities, this amount is presented as a current asset at
December 31, 2004. The excess of the purchase price paid over the value of the
assets acquired, has been recorded as purchased research and development in the
amount of $601,260 and charged to operations during the period ended December
31, 2004. (see below).

The Company purchased the rights to the billing system in development by Pluto.
Although the billing system was generating revenues in Europe, it had not been
developed to be marketed to the Company's target market in the United States at
the purchase date. The fair value of the shares issued to effect the acquisition
was used to determine the consideration paid for the assets acquired. Based upon
this the Company allocated $601,260 of the purchase price to acquired In-Process
Research and Development.

This acquired research and development represents products currently under
development that have not yet been proven to be commercially feasible in the
United States and have no alternative future use. To date although there have
been sales of the product in Europe they have not produced significant gross
margins and there have been no sales in the United States. Future projected cash
flows of the European sales discounted to the present value using a reasonable
discount rate yields a nominal value and no future cash flows can be predicted
in the United States with reasonable reliability. Therefore no value was
assigned to the products under development as there remained a substantial
amount of development to be done, the related risks of further development, the
Company's lack of funds or commitment for funds for development.

The following unaudited summarized pro forma information assumes the acquisition
had occurred on January 1, 2004:

Net sales                                                          $    731,385
                                                                   ============

Net (loss)                                                         $ (6,039,227)
                                                                   ============

(Loss) per share:  basic and diluted                               $      (0.06)
                                                                   ============

                                      F-25
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

CENTRAL SOLUTIONS

Effective December 10, 2004, the Company entered into a marketing and
distribution agreement with Central Solutions, Inc. ("Central"), a Delaware
corporation, whereby the Company granted Central the right to market, distribute
and support any and all technology directly or indirectly controlled, licensed,
owned joint ventured or otherwise approved for the Company, exclusively in the
healthcare markets in the U.S. and Canada. In connection with this, the Company
issued 10,000,000 shares of its restricted common stock in exchange for 35% of
Central's issued and outstanding common stock. Central was a dormant and
inactive entity at the acquisition date. The excess of the purchase price paid
over the value of the assets acquired, has been determined to be impaired at
December 31, 2004, because of the non performance by Central under the terms of
the agreement and the fair value of the shares issued of $902,000 has been
charged to operations.

MERCURY MOBILE

Effective May 18, 2004, the Company entered into a Stock Purchase Agreement with
Mercury Mobile AS ("Mercury"), a Norwegian Corporation, whereby the Company
purchased 58,845 shares (2.5% of the then issued and outstanding Mercury shares)
of Mercury for cash in the amount of $147,851. Management of the Company
believes this investment to be fully realizable, therefore no impairment has
been recorded as of December 31, 2004. During the year ended December 31, 2004,
the Company paid $100,200 to Mercury for certain materials related to its
ComSecure Controller product, which amount is included in cost of goods sold
(see Note 7).

NOTE 14. EXCLUSIVE PURCHASE AND SUPPLY AGREEMENT

Effective October 27, 2003, the Company through its wholly-owned subsidiary
OSSI, entered into an exclusive purchase and supply agreement for certain
specialized equipment, with the manufacturer, a foreign entity. The term of the
agreement extends through December 31, 2006 and provides for two automatic
two-year extensions. The agreement calls for an annual minimum purchase quota of
(pound)160,000, denominated in UK Pounds. Pursuant to the terms of the Stock
Repurchase Agreement discussed in Note 12., this agreement transferred to the
president of OSSI, therefore as of March 17, 2005, the Company has no further
obligation under this agreement.

NOTE 15. COMMITMENTS

EMPLOYMENT AGREEMENTS

As a condition to the OSSI stock purchase agreement (Note 13), effective January
1, 2004, the Company has negotiated an employment agreement with the
CEO/President of OSSI. The agreement provides for an annual salary of $225,000
through December 31, 2008. Effective March 17, 2005, this individual has
resigned, as a condition to the Stock Repurchase Agreement and discontinued
operations related to the OSSI SatSecure(C) Systems division (see Notes 6 and
12). Payment of prior amounts owed to him for accrued salary and expenses are
incorporated into the payment structure of the Stock Repurchase Agreement.

Effective January 1, 2004, the Company has entered into employment agreements
with its three employees. The agreements call for aggregate annual salaries of
$294,000, through December 31, 2008. At December 31, 2003, $93,380 is included
in accrued expenses, related to these employment agreements.

                                      F-26
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

DISTRIBUTOR AGREEMENT

Effective January 1, 2004, the Company, through its wholly-owned subsidiary
OSSI, entered into an exclusive distributor agreement with a foreign entity. As
per the terms of the agreement, OSSI is granted an exclusive license to
distribute, promote, sell, install, service and otherwise maintain and reproduce
by its own means, certain surveillance equipment to the U.S. government as well
as non-exclusive rights to certain equipment for both the U.S. governmental and
commercial entities. The term of the agreement extends to December 31, 2007 and
provides for an automatic two-year renewal period. The agreement calls for the
sale of a minimum of fifty licenses, of which at least five must be "Advanced".
The cost per license for both the Advanced and Basic systems is, $80,000 and
$40,000, respectively, with annual support agreement costs of $20,000 and
$10,000, respectively.

OPERATING LEASES

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, VA
operations have been discontinued (see Notes 6 and 12). Effective April 1, 2004,
the Company entered into an operating lease agreement for its corporate
headquarters in Albuquerque, NM, 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           $     85,720
2006                 87,781
2007                 24,253
               ------------
               $    197,754
               ============

Aggregate rent expense amounted to $74,040 and $18,968 for the years ended
December 31, 2004 and 2003, respectively, of which $22,508 and $3,302,
respectively are included in discontinued operations (Note 6) and $51,532 and
$15,666, respectively, are included in general and administrative expenses.

CONSULTING AGREEMENTS

Effective June 1, 2004, the Company entered into an agreement for financial
consulting services. As consideration for the services, the Company issued
3,000,000 shares of its restricted common stock to this individual. The shares
were valued at the fair market value of the stock on the effective date of the
agreement, and will have piggy-back registration rights for a period of three
years. As of December 31, 2004, $667,342 has been expensed as stock compensation
and $472,658 is reflected as deferred stock compensation. In addition, the
Company has agreed to issue 1,500,000 and 1,500,000 additional shares to the
consultant at September 1, 2005 and 2006, respectively, at prices to be
determined in the future, based on the then fair market value of the stock.

Effective June 14, 2004, the Company entered into a one year agreement for
research and public relations services to be provided through June 15, 2005. As
consideration for these services, the Company issued 186,000 shares of its
restricted common stock. The shares were valued at the fair market value of the
stock on the effective date of the agreement. As of December 31, 2004, $33,673
has been expensed as stock compensation and $20,267 is reflected as deferred
stock compensation.

                                      F-27
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

Effective November 3, 2004, the Company entered into a twelve month agreement
for investor /media relations consulting services to be provided through
November 30, 2005 and continuing on a month to month basis thereafter. The
agreement calls for monthly payments of $7,500 plus approved expenses. As a
condition to the agreement, the Company issued 499,500 shares of its restricted
common stock to the consultant. The shares were valued at the fair market value
of the stock on the effective date of the agreement. As of December 31, 2004,
$8,869 has been expensed as stock compensation and $51,071 is reflected as
deferred stock compensation. In addition, the Company has agreed to issue the
consultant 45,500 shares of its restricted common stock per month, throughout
the term of the engagement. Further, and subject to certain performance
objectives, the consultant will be eligible for a discretionary bonus of up to
1,000,000 shares. In the event the Company files a registration statement, the
consultant shares will have "piggy-back" and demand registration rights.

NOTE 16. 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 described in the summary of significant
accounting policies, as presented in Note 1. All revenues generated in the
segments are external. For the years ended December 31, 2004 and 2003, the total
reportable segment information is as follows:

<TABLE>
<CAPTION>
                                           Billing
                                          Solutions        Network                        Total as
                                           Systems        Security        Corporate       Reported
                                        ------------    ------------    ------------    ------------
<S>                                     <C>             <C>             <C>             <C>
For the year ended December 31, 2004:
  Reportable segments
    External revenues                   $     47,480    $    448,510    $         --    $    495,990
    Depreciation and amortization             17,644           4,318             867          22,829
    Operating (loss)                        (202,979)       (545,026)     (4,011,971)     (4,759,976)
    Assets                                    73,756           3,265         376,550         453,571
    Capital expenditures                       2,000          10,994              --          12,994

For the year ended December 31, 2003:
  Reportable segments
    External revenues                   $         --    $         --    $         --    $         --
    Depreciation and amortization                 --             271           1,012           1,283
    Operating (loss)                              --              --      (5,223,527)     (5,223,527)
    Assets                                        --           8,296         144,260         152,556
    Capital expenditures                          --         (15,621)          6,279          (9,342)
</TABLE>

External revenues for groups of similar products and services, consisted
principally of the ComSecure(TM) network security system, ($448,510) and
telephone billing systems ($47,480). The security segment is operating and has
derived its revenues from a single customer in the United States during the year
ended December 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.

                                      F-28
<PAGE>

                                  NEXICON, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004

NOTE 17. SUBSEQUENT EVENTS

STOCK ISSUANCE

Subsequent to December 31, 2004, the Company issued an aggregate of 500,000
shares of its common stock for cash in the amount of $30,000, 417,000 shares in
connection with the conversion of $20,000 worth of debentures, as well as
7,579,034 shares in connection with the Standby Agreement (Note 3).

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 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 and per the Standby Agreement, 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.

NOTE 18. RESTATEMENT AND CORRECTION OF AN ERROR

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.

The Company has amended its annual report for the year ended December 31, 2004,
and quarterly reports for the quarters ended March 31, 2005 and June 30, 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
4). 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 year ended December
30, 2004, as previously reported from $(5,488,455) to $(5,929,891) or $(0.06)
per share. In addition, the liability for convertible debentures and notes
payable to Cornell previously reported on the balance sheet was reduced $575,000
to $0, the amount reported on the balance sheet for derivative instruments was
increased from $0 to $827,402.

                                      F-29