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

                                   FORM 10-KSB
                                 AMENDMENT NO. 3

[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)
<TABLE>
<CAPTION>

                     NEVADA                                     13-3389415
<S>                                             <C>
 (State or other jurisdiction of incorporation) (I.R.S. Employer Identification Number)
</TABLE>

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

                    Issuer's telephone number (505) 248-0000

      Securities registered under Section 12(b) of the Exchange Act:

      None

      Securities registered under Section 12(g) of the Exchange Act

      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, and for the
purpose of this computation only, on the assumption that all of the registrant's
directors and officers are affiliates) was approximately  $7.68 million on March
31, 2005.

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


<PAGE>

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

                                TABLE OF CONTENTS

PART I  .......................................................................1
   FORWARD-LOOKING STATEMENTS..................................................1
   ITEM 1.  DESCRIPTION OF BUSINESS............................................1
   ITEM 2.  DESCRIPTION OF PROPERTY............................................5
   ITEM 3.  LEGAL PROCEEDINGS..................................................6
   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................6

PART II .......................................................................7
   ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...........7
   ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..........9
   ITEM 7.  FINANCIAL STATEMENTS..............................................14
   ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
              AND FINANCIAL DISCLOSURE........................................15
   ITEM 8A.  CONTROLS AND PROCEDURES..........................................15

PART III .....................................................................16
   ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS;
              COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT...............16
   ITEM 10.  EXECUTIVE COMPENSATION...........................................17
   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...........................23
EXHIBIT 31.1..............................................................31.1-1
EXHIBIT 31.2..............................................................31.2-1
EXHIBIT 32.1..............................................................32.1-1
EXHIBIT 32.2..............................................................32.2-1
FINANCIAL STATEMENTS.........................................................F-1


                                        i
<PAGE>

                                     PART I

                                INTRODUCTORY NOTE

FORWARD-LOOKING STATEMENTS

      This  Form  10-KSB  contains  "forward-looking   statements"  relating  to
Nexicon,  Inc.,  formerly  Cyco.net,  Inc. (the  "Company")  which represent the
Company's  current  expectations  or  beliefs  including,  but not  limited  to,
statements concerning the Company's operations, performance, financial condition
and growth. For this purpose,  any statements contained in this Form 10-KSB that
are not statements of historical fact are  forward-looking  statements.  Without
limiting the generality of the foregoing,  words such as "may",  "anticipation",
"intend", "could", "estimate", or "continue" or the negative or other comparable
terminology  are  intended  to  identify   forward-looking   statements.   These
statements by their nature involve substantial risks and uncertainties,  such as
credit  losses,  dependence  on management  and key  personnel,  variability  of
quarterly  results,  and the  ability  of the  Company  to  continue  its growth
strategy and  competition,  certain of which are beyond the  Company's  control.
Should one or more of these  risks or  uncertainties  materialize  or should the
underlying assumptions prove incorrect, actual outcomes and results could differ
materially from those indicated in the forward-looking statements.

      Any  forward-looking  statement  speaks  only as of the date on which such
statement  is made,  and the  Comany  undertakes  no  obligation  to update  any
forward-looking statement or statements to reflect events or circumstances after
the date on  which  such  statement  is made or to  reflect  the  occurrence  of
unanticipated  events.  New  factors  emerge  from  time to  time  and it is not
possible for  management to predict all of such  factors,  nor can it assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

      Nexicon,  Inc.,  formerly Cyco.net,  Inc. 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  in  a  court  of  law.  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,  in a stock for stock purchase. On November 15, 2004, Nexicon, Inc.
purchased  all  of  the  outstanding   common  stock  of  Pluto   Communications
International,  AS, a Norwegian  corporation,  in a stock for stock purchase. On
March 17, 2005,  Nexicon,  Inc.  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 the Company has in 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 at approximately
$15,213.

CORE BUSINESS

      The Company's wholly owned subsidiaries are Orion Security Services,  Inc.
("OSSI"),  which provides secure computer  network and management  solutions and
video surveillance systems via satellite  communication and Pluto Communications
International,   AS  ("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)
Surveillance System.


                                        1
<PAGE>

      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 IP
network.  With  Internet  inspired  threats  on  the  increase,  government  and
commercial   enterprises  are  able  to  now  gain  full  control  of  their  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  7  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.

      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 has  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 can use a variety of  communication  channels such as ISDN,
IP, PSTN (Public Switched Telephone Networks),  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.


                                        2
<PAGE>

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 inhouse.

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.

      The Company  believes the revenue  assurance  module of the Charon Billing
and OSS will create a competitive advantage for the Company.

COMPETITION

      Our competitors  have  substantially  greater  resources that we do, and a
large market  presence.  These  companies  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.

GOVERNMENT REGULATION

      The Company does not know of any government  regulations concerning either
of its products.

EMPLOYEES

      Nexicon,  Inc. currently has three full-time and one part-time employee in
Albuquerque,  NM.  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,  Inc.  formerly  Cyco.net,  Inc. 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


                                        3
<PAGE>

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, Inc.) 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 filing  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 $5,488,455 and $4,902,363,  respectively. In addition
the  Company  is  subject to legal  action.  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,  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.

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  Nexicon 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 $1,029,045 at December 31, 2004, which
means that our current  liabilities  exceeded our current assets on December 31,
2004 by $1,029,045.  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.


                                        4
<PAGE>

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

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.  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.

      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.


                                        5
<PAGE>

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  on-line  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  California  filed a civil  action in the
Superior  Court of  California,  County  of San  Diego,  against  the  Company's
subsidiary  Cyco.net,  Inc,  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  alleged  false or  misleading  advertising
under  California  Business  and  Profession  Code  17500 and  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.  This  action was  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
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 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.

      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.


                                        6
<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 "CYKE.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.  An  additional
8,799,833 shares were issued in exchange for services valued at $2,016,384,  the
fair  market  value of the  shares on the date the  Company  agreed to issue the
stock.  Included in those issued for services  were  3,800,000  shares issued to
employees of the Company at a value of $760,000.  Deferred stock compensation at
December  31,  2004 was  $543,996  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 in exchange for 35% of
Central's issued and outstanding common stock.


                                        7
<PAGE>

      On November 15,  2004,  Nexicon,  Inc.  purchased  all of the  outstanding
common  stock of 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. In the stock for stock purchase,
Nexicon, Inc. issued 5,010,496 shares of common stock in exchange for all of the
issued and outstanding common stock of Pluto Communications International, AS.

      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:

                          NUMBER                                      NUMBER
NAME                      OF SHARES      NAME                         OF 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,  Nexicon  entered  into  a  Standby  Equity  Distribution
Agreement with Cornell Capital Partners,  LP. This agreement replaces the Equity
Line of Credit  Agreement  entered  into in  September  2001.  Pursuant  to this
agreement,  Nexicon may, at its discretion for up to 2 years, periodically issue
and sell shares of common stock for a total purchase price of $20.0 million.  If
Nexicon  requests an advance under the Standby  Equity  Distribution  Agreement,
Cornell Capital Partners, LP 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 5 days immediately
following  the notice date.  Cornell  Capital  Partners,  L. intends to sell any
shares purchased under the Standby Equity  Distribution  Agreement at the market
price. 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.  The  registration  statement  became  effective on
August 11, 2004.  Effective  March 23, 2004,  upon the  execution of the Standby
Equity Distribution  Agreement,  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.
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,  Nexicon,  Inc.  purchased  all of the  outstanding
common stock of Orion Security Services, Inc. ("OSSI"), a Wisconsin corporation.
In the stock for stock  purchase,  Nexicon,  Inc.  issued  50,000,000  shares of
common stock in exchange for all of the issued and  outstanding  common stock of
Orion  Security  Services,  Inc. The shares were at valued $0.09 per share,  the
fair market value at November 19, 2003.

      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:


                                       8
<PAGE>

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

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

      Effective  July 1,  2003,  Nexicon  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 Nexicon'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.

      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 (the "1933 Act"), and Regulation D promulgated  under the
1933 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 1933 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

      The  following   information  should  be  read  in  conjunction  with  the
consolidated  financial  statements of Nexicon and the notes  thereto  appearing
elsewhere  in this  filing.  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 ($5,488,455) and ($4,902,363),  respectively.  At December 31, 2004,
the Company had a working capital  (deficit) of $(1,029,045)  and  stockholders'
(deficit) of $(1,611,250). In addition the Company is subject to legal action.

      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  Nexicon 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.


                                       9
<PAGE>

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,
and deferred offering costs.

      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.

      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.  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 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.

      REVENUE  RECOGNITION.  Prior to July 1, 2003, the Company's sole source of
revenue was the sale of cigarettes through its primary website (Nexicon),  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.

      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.


                                       10
<PAGE>

      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, 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.

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:

      o     Partnering with major integrators.

      o     Pursuing  product   certification   and  pilot  program   evaluation
            contracts.

      o     Continuing funding efforts.

RESULTS OF OPERATIONS

      Effective  July 1, 2003,  Nexicon,  Inc.  sold its tobacco  operations  to
American Indian CigCo, LLC. 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 2 notes payable as follows: (1) 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 (2)
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.

      On November 19, 2003,  Nexicon,  Inc.  purchased  Orion Security  Systems,
Inc., 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 $.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 the Company has in  agreements  associated  with the
"SatSecure"  technology and to the tradenames "Orion Security  Services,  Inc.",
"OSSI",  "Ossi-Secure",   "SatSecure",  "SatWatch"  and  "RECON  9000"  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.


                                       11
<PAGE>

      On November 15, 2004, the Company purchased all of the outstanding  common
stock of 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,  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 100% 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 attributable
to the sale of a  SatSecure  System  which  has been  included  in  discontinued
operations.

      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  attributable to the sale of a SatSecure  System which has been included in
discontinued operations.

      General and  administrative  expenses for the year ended December 31, 2004
were $1,471,697,  which 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
were $723,527, which 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.

      The  increase of $748,170  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.

      Research and development  costs for the year ended December 31, 2004, were
$75,138.

      For the year ended December 31, 2004,  purchased  research and development
was  $601,260  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. In addition the Company recorded an
impairment of the Central Solutions, Inc. investment of $902,000.


      Non-cash  stock  compensation  for the year ended  December  31,  2004 was
$1,850,105.  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.

      Nexicon  had an  operating  loss of  $4,759,976  for the 12  months  ended
December 31, 2004,  compared to $5,223,527 in the comparable period in the prior
year.

      Other income and (expense) for the year ended December 31, 2004,  resulted
in net expense of ($2,745) which  included  interest  income of $7,510,  gain on
sale of Cyconet of $75,716  offset by  interest  expense of ($771) and  non-cash
interest  expense of  ($85,200).  Other income and (expense) for the same period
last year resulted in net income of $56,394 which  included  interest  income of
$5,100, gain on sale of Cyconet of $53,897 and interest expense of ($2,603).


                                       12
<PAGE>

      Net income (loss) from discontinued operations for the year ended December
31,  2004 and 2003 was a (loss) of  ($972,734)  net of income tax  (benefit)  of
($247,000)  and income of $362,770  net of income tax of $99,000,  respectively.
This relates primarily to Nexicon's former cigarette  business which was sold in
July 2003 and in 2004 Nexicon's sale of the SatSecure product line.

      Nexicon had a net loss for the year ended December 31, 2004 of $5,488,455,
compared  to a net  loss of  $4,902,363  for the  same  period  last  year.  The
comprehensive net loss for the year ended December 31, 2004, was $5,444,133.

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 in the year ended December 31, 2004.  Cash used in operations  consisted
of a net loss of $5,488,455, 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,  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.

      Nexicon's  primary  need for cash during the next 12 months are to satisfy
current  liabilities  of  $1,260,650,  as well as to support  Nexicon's  current
operations.  Nexicon's current operations are expected to be $170,000 per month,
including  payroll,  rent,  utilities and litigation costs.  Nexicon in the next
twelve  months  expects  to  receive  the  balance  of  $64,036  of the  current
receivable  from ACC and  hopes to  attain  profitable  operations  through  its
ComSecure Controller and Charon Billing System sales. However, Nexicon 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  Standby  Equity
Distribution Agreement, Nexicon does not have any commitments for financing.

      In  March  2004,  Nexicon  entered  into  a  Standby  Equity  Distribution
Agreement with Cornell Capital Partners,  LP. This agreement replaces the Equity
Line of Credit  Agreement  entered  into in  September  2001.  Pursuant  to this
agreement,  Nexicon may, at its discretion for up to 2 years, periodically issue
and sell shares of common stock for a total purchase price of $20.0 million.  If
Nexicon  requests an advance under the Standby  Equity  Distribution  Agreement,
Cornell Capital Partners, LP 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 5 days immediately
following the notice date.  Cornell Capital  Partners,  L.P. intends to sell any
shares purchased under the Standby Equity  Distribution  Agreement 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
Standby Equity Distribution  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 were issued.
In  addition,  the  Company  issued  two  promissory  notes to  Cornell  Capital
Partners,  LP  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,
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.


                                       13
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

      In December 2004,  the Financial  Accounting  Standards  Board 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
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.

ITEM 7.  FINANCIAL STATEMENTS

      The  responses to this item are  submitted  in a separate  section of this
Annual Report on Form 10-KSB. See Index to the Financial Statements on page F-1.


                                       14
<PAGE>

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

      There  were no  changes  in  accountants  or any  disagreements  with  our
accountants on accounting and financial disclosures.

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   Chief  Executive   Officer  and  Chief  Financial   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
provide a reasonable  level of assurance of achieving the  Company's  disclosure
control  objectives.  The Company's Chief Executive  Officer and Chief Financial
Officer have  concluded  that the Company's  disclosure  controls and procedures
are, in fact,  effective  at this  reasonable  assurance  level as of the period
covered. In addition, the Company reviewed its internal controls, and there have
been no  significant  changes in its internal  controls or in other factors that
could  significantly  affect those controls subsequent to the date of their last
evaluation  or from the end of the  reporting  period  to the date of this  Form
10-KSB.

      (B)   CHANGES IN INTERNAL CONTROLS:

      In  connection  with the  evaluation of the  Company's  internal  controls
during the  Company's  fourth  fiscal  quarter  ended  December  31,  2004,  the
Company's  Chief Executive  Officer and Chief Financial  Officer have determined
that there are no changes to the  Company's  internal  controls  over  financial
reporting that has materially  affected,  or is reasonably  likely to materially
effect, the Company's internal controls over financial reporting.


                                       15
<PAGE>

                                    PART 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 files 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 Officern 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.


                                       16
<PAGE>

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 has been filed with the Securities and Exchange  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
NAME AND                            SALARY       BONUS     COMPENSATION   AWARD(S)       SARS     PAYOUTS   COMPENSATION
                                    ------       -----     ------------   --------     -------  ---------   ------------
PRINCIPAL POSITION        YEAR       ($)          ($)          ($)           ($)         (#)        ($)         ($)
------------------        ----       ---          ---          ---           ---         ---        ---         ---
<S>                       <C>       <C>          <C>       <C>            <C>            <C>        <C>     <C>
Richard Urrea,
Chief Executive            2004      $108,634         --        --            --          --        --             --
Officer,
President and Director     2003       $42,100    $75,000(3)     --            --          --        --             --
                           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.


                                       17
<PAGE>

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.

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
                                                                 NUMBER                            FOR FUTURE
                                                             OF SECURITIES                          ISSUANCE
                                                              TO BE ISSUED    WEIGHTED-AVERAGE    UNDER EQUITY
                                                             UPON EXERCISE    EXERCISE PRICE    COMPENSATION PLANS
                                                             OF OUTSTANDING   OF OUTSTANDING       (EXCLUDING
                                                                OPTIONS,         OPTIONS,          SECURITIES
                                                              WARRANTS AND     WARRANTS AND         REFLECTED
                                                                 RIGHTS           RIGHTS         IN 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 have been granted to the named officers and directors.



                                       18
<PAGE>

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.

                                                              COMMON STOCK
                                                           BENEFICIALLY OWNED
                                                        ------------------------
NAME/ADDRESS                                             NUMBER      PERCENT (1)
----------------------------------------------          ----------   -----------
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
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                               9,766,000      8.78%
AS A GROUP (2 PERSONS)

----------
(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.


                                       19
<PAGE>

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  Controller
product, which amounts are included in cost of goods sold.


      On November 19,  2003,  Nexicon,  Inc.  purchased  all of the  outstanding
common stock of Orion Security Services, Inc. ("OSSI"), a Wisconsin corporation.
In the stock for stock  purchase,  Nexicon,  Inc.  issued  50,000,000  shares of
common stock in exchange for all of the issued and  outstanding  common stock of
Orion Security Services, Inc.

      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


                                       20
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

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

<TABLE>
<CAPTION>

EXHIBIT NO.   DESCRIPTION                                              LOCATION
----------    ----------------------------------------------------     ---------------------------------------------
<S>           <C>                                                      <C>
2.1           Acquisition Agreement between AVE and DMI                Incorporated by reference to Exhibit 2.1 to
                                                                       the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

3.1           Certificate of Amendment to Change name to AVE, Inc.     Incorporated by reference to Exhibit 2.7 to
              dated May 7, 1990                                        the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

3.2           Certificate of Agreement of Merger of DeLuxe Onyx        Incorporated by reference to Exhibit 2.8 to
              Company dated January 23, 1987                           the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001
3.3           Certificate Amending Certificate of Incorporation        Incorporated by reference to Exhibit 2.10 to
              dated January 23, 1987                                   the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001
3.4           Articles in Incorporation of Cyco.net, Inc. the Wholly   Incorporated by reference to Exhibit 21.1 to
              Owned Subsidiary of Cyco.net, Inc. (formerly Ave, Inc.)  the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

3.5           Certificate of Amendment to Articles of Cyco.net, Inc.   Incorporated by reference to Exhibit 21.2 to
              to change name from Ave, Inc. to Cyco.net, Inc.          the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

3.6           Certificate of Amendment to Articles of Cyco.net, Inc.   Incorporated by reference to Exhibit 21.3 to
                                                                       the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

3.7           By-Laws of Cyco.net, Inc.                                Incorporated by reference to Exhibit 21.5 to
                                                                       the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

3.8           Certificate of Amendment to Articles of Incorporation    Incorporated by reference to Exhibit 3.11 to
              of Cyco.net, Inc. filed with Nevada Secretary of State   Cyco.net's Registration Statement on Form SB-2
              on August 9, 2001                                        filed with the Securities and Exchange
                                                                       Commission on September 13, 2001

4.1           Stock Specimen                                           Incorporated by reference to Exhibit 2.4 to
                                                                       the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

10.1          Promissory note from Cyco.net, Inc. to Francisco         Incorporated by reference to Exhibit 99 to the
              Urrea, Jr.                                               Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001
</TABLE>


                                       21
<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.   DESCRIPTION                                              LOCATION
----------    ----------------------------------------------------     ---------------------------------------------
<S>           <C>                                                      <C>
10.2          Asset Purchase and Investment agreement dated            Incorporated by reference to Exhibit 10.11 to
              June 13, 2003 between Cyco.net, Inc. and                 the Company's Quarterly Report on Form 10QSB
              American Indian Cigco, LLC.                              as filed with the Securities and Exchange
              American Indian Cigco, LLC.                              Commission on August 19, 2003.

10.3          Five Year Capital Note dated June 13, 2003,              Incorporated by reference to Exhibit 10.13 to
              among Cyco.net, Inc., American Indian Cigco, LLC         the Company's Quarterly Report on Form 10QSB
              and CigCo-Epic Venture.                                  as filed with the Securities and Exchange
                                                                       Commission on August 19, 2003

10.4          Purchase Agreement dated November 19, 2003 between       Incorporated by reference to Exhibit 10.11 to
              Cyco.net, Inc. and Orion Security Services, Inc.         the Company's 8K dated November 19, 2003 filed
                                                                       with the Securities and Exchange Commission on
                                                                       December 4, 2003.

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

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

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

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

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

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

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

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


                                       22
<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.   DESCRIPTION                                              LOCATION
----------    ----------------------------------------------------     ---------------------------------------------
<S>           <C>                                                      <C>
10.13         Share Exchange Agreement between Cyco.net, Inc.          Incorporated by reference to Exhibit 10.24 to
              and the board of directors of Pluto                      the Company's Report on Form 8K as filed with
              Communications International, AS                         the Securities and Exchange Commission on
                                                                       November 19, 2004.

14.1          Code of Ethics                                           Incorporated by reference to Exhibit 14.1 to
                                                                       the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 13, 2004

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

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

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

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

      (b)   On  November  15,  2004,  Nexicon,  Inc.  filed a report  on Form 8K
announcing the acquisition of Pluto Communications International, AS.

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 8K 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 Securities  Exchange Act of 1934, 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


                                       23
<PAGE>

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  Securities  and  Exchange
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 Securities Exchange Act of 1934.


                                       24
<PAGE>

                                   SIGNATURES

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


                                        NEXICON, INC.

Date:  September 15, 2005               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:  September 15, 2005                  By: /s/ RICHARD URREA
                                           -------------------------------------
                                           Richard Urrea
                                           Director


                                       25

<PAGE>
                                  NEXICON, INC.
                                TABLE OF CONTENTS


                                                                            PAGE

Report of Independent Auditors                                                 1

Consolidated Balance Sheet                                                     2

Consolidated Statements of Operations                                          3

Consolidated Statements of Changes in Stockholders' (Deficit)                  4

Consolidated Statements of Cash Flows                                          5

Notes to Consolidated Financial Statements                                  6-21


<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.


StarkoWinteroSchenkein & Co., LLP
Denver, Colorado
April 14, 2005


                                      F-1
<PAGE>

                                  NEXICON, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2004

                                     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
   Notes payable - Cornell Partners                                     150,000
   Accrued expenses - shareholders                                      399,337
   Deferred gain                                                         46,925
                                                                   ------------
      Total current liabilities                                       1,260,650
                                                                   ------------
CONVERTIBLE DEBENTURES                                                  425,000
                                                                   ------------
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                                        12,719,552
   Deferred stock compensation                                         (543,996)
   Stock subscription receivable                                     (2,800,000)
   Accumulated (deficit)                                            (11,233,530)
                                                                   ------------
                                                                     (1,738,480)
                                                                   ------------
   Other comprehensive income:
       Currency translation adjustment                                  127,230
                                                                   ------------
                                                                     (1,611,250)
                                                                   ------------
                                                                   $    453,571
                                                                   ============

        See accompanying notes to the consolidated financial statements.


                                      F-2
<PAGE>

                                         NEXICON, INC.
                             CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                   ----------------------------
                                                                       2004            2003
                                                                   ------------    ------------
<S>                                                                <C>             <C>
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)
   Gain on sale of assets of discontinued operations                     75,716          53,897
                                                                   ------------    ------------
                                                                         (2,745)         56,394
                                                                   ------------    ------------
(LOSS) BEFORE INCOME TAXES (BENEFIT)                                 (4,762,721)     (5,167,133)

INCOME TAXES (BENEFIT)                                                 (247,000)         99,000
                                                                   ------------    ------------
(LOSS) BEFORE DISCONTINUED OPERATIONS                                (4,515,721)     (5,266,133)

DISCONTINUED OPERATIONS
   Net income (loss) from discontinued operations, net of income
     taxes (benefit) of ($247,000) and $99,000, respectively           (972,734)        362,770
                                                                   ------------    ------------
NET (LOSS)                                                           (5,488,455)     (4,903,363)

OTHER COMPREHENSIVE INCOME
   Foreign currency translation adjustment                               44,322              --
                                                                   ------------    ------------
NET COMPREHENSIVE (LOSS)                                           $ (5,444,133)   $ (4,903,363)
                                                                   ============    ============
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)
                                                                   ============    ============
</TABLE>

                See accompanying notes to the consolidated financial statements.


                                              F-3
<PAGE>

<TABLE>
<CAPTION>
                                                            NEXICON, INC.
                                          CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
                                               YEARS ENDED DECEMBER 31, 2003 AND 2004

                                                                   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                                 679,855            680         74,320              --             --

  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   $ 12,719,552    $   (543,996)  $ (2,800,000)
                                                          ============   ============   ============    ============   ============
</TABLE>

<PAGE>


<TABLE>
                                                                          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                                       --            --        75,000

  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                                    (5,488,455)           --    (5,488,455)
                                                          -------------   -----------  ------------
Balance at December 31, 2004                               $(11,233,530)  $   127,230  $ (1,611,250)
                                                          =============   ===========  ============

                  See accompanying notes to the consolidated financial statements.
</TABLE>

                                                F-4
<PAGE>

                                                 NEXICON, INC.
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                                     --------------------------
                                                                                         2004           2003
                                                                                     -----------    -----------
<S>                                                                                  <C>            <C>
OPERATING ACTIVITIES
       Net (loss)                                                                    $(5,488,455)   $(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)
             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 provided by (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 (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 (used in) financing activities                 1,562,516         41,845
                                                                                     -----------    -----------
                         Net increase (decrease) 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                                              $        --    $        --
                                                                                     ===========    ===========

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    $        --
                                                                                     ===========    ===========

                        See accompanying notes to the consolidated financial statements.
</TABLE>

                                                      F-5
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

NOTE 1. 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).

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.


                                      F-6
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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.

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.


                                      F-7
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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.

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-8
<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.

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


                                      F-9
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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
($5,488,455) and ($4,902,363),  respectively.  At December 31, 2004, the Company
had a working capital (deficit) of $(1,048,067) and  stockholders'  (deficit) of
$(1,611,250). 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.

NOTE 3.  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


                                      F-10
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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 $75,200 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.

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.

NOTE 4.  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


                                      F-11
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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 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  6,600,000 shares of
common stock for cash consideration of $587,800.  An additional 8,799,833 shares
were issued in exchange for services valued at $2,016,384, the fair market value
of the shares on the date the  Company  agreed to issue the stock.  Included  in
those  issued for  services  were  3,800,000  shares  issued to employees of the
Company at a value of $760,000.  An additional  2,177,290  shares were issued in
connection  with the Standby  Agreement  discussed  in Note 3 and an  additional
679,855 issued in connection with the conversion of $75,000 worth of convertible
debentures,  as described in Note 4. Deferred stock compensation at December 31,
2004  was  $543,996  to be  amortized  over  the  terms  of  certain  consulting
agreements discussed more fully in Note 15.

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.


                                      F-12
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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.

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-13
<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.

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:

                                        Number of    Weighted Average
                                         Shares       Exercise 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
                                       ==========    ================


                                      F-14
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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.

NOTE 11.  CONTIGENT 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 in April 15, 2004.

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.


                                      F-15
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 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.


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 tradenemes.  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-16
<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, Nexicon,  Inc. 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.

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.


                                      F-17
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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)
                                                         ============

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-18
<PAGE>

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.

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


                                      F-19
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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>
                                                       Network
                                                       Security
                                                       and
                                        Billing        Video                         Total
                                        Solutions      Serveillance                  as
                                        Systems        Systems        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                                    --           8296         144260        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.


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).


                                      F-20
<PAGE>

                                  NEXICON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

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.


                                      F-21