BICO INC/PA (Form: 10KSB, Received: 05/23/2005 12:20:44)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Fiscal Year Ended 12/31/04 Commission File Number 0-10822

BICO, Inc.

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1229323
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

1 Wakonda, Dove Canyon, California 92679

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (949) 367-1362

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

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

Common Stock, $.0001 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ___No _ X _

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

The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 10, 2005: Common Stock, $.0005 par value -- $14,433,395

As of May 10, 2005, there were 28,866,789,945 shares of common stock, par value $.0001 per share, issued and outstanding.

Exhibit index is located on page 18

Table of Contents

Part I……………………………………………………………………………..........................................................................................................................................................................	1
Item 1 - Description of Business………....…………………………………..........................................................................................................................................................................	1
Overview….…………………………………..……………………………….........................................................................................................................................................................	1
Merger with cXc Services, Inc…………...…………………………………........................................................................................................................................................................	2
Principal Products and Services………...………………………………..........................................................................................................................................................................	2
Markets and Distribution…………………………………………………..........................................................................................................................................................................	4
Distribution………………………………………………………………….........................................................................................................................................................................	5
Competitive Overview……………………………………………………...........................................................................................................................................................................	5
Intellectual Property………………………………………………………..........................................................................................................................................................................	6
Need For Governmental Approval………………………………………..........................................................................................................................................................................	6
Going Concern Considerations…………………………………………...........................................................................................................................................................................	6
Risk Factors………………………………………………………………............................................................................................................................................................................	6
Item 2 - Description of Property……………………….........................................................................................................................................................................................................	9
Item 3 - Legal Proceedings…………………………………………………...........................................................................................................................................................................	9
Item 4 - Submission of Matters to a Vote of Security Holders……………......................................................................................................................................................................	9
Part II…………………………………………………………………………….......................................................................................................................................................................	9
Item 5 - Market for Common Equity and Related Stockholder Matters……....................................................................................................................................................................	9
Item 6 - Management's Discussion and Analysis or Plan of Operation……....................................................................................................................................................................	10
Overview……………………………………………………………………........................................................................................................................................................................	10
a. Plan of Operation……………….…………………………………..............................................................................................................................................................................	10
b. Financial Condition and Results of Operations……………………...........................................................................................................................................................................	11
c. Off-balance Sheet Arrangements…………………………………...............................................................................................................................................................................	12
Item 7 - Financial Statements………………………………………………..........................................................................................................................................................................	F1
Item 8 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure………………………………………………………..................................	13
Item 8A - Controls and Procedures………………………………………….......................................................................................................................................................................	13
Part III………………………………………………………………………………...................................................................................................................................................................	13
Item 9 - Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act…………………....…..........................................	13
Item 10 - Executive Compensation…………………………………………….......................................................................................................................................................................	15
Item 13 - Exhibits……………………………………………………………….........................................................................................................................................................................	18
Item 14 - Principal Accountant Fees and Services…………………………........................................................................................................................................................................	19

Part I

Item 1 - Description of Business

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-KSB (this "Form 10 K"), including statements under "Item 1. Description of Business," and "Item 6. Management's Discussion and Analysis", constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the "Reform Act"). Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "should", or "anticipates", or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of BICO, Inc. ("BICO", "the Company", "we", "us" or "our") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. References in this Form 10-KSB, unless another date is stated, are to December 31, 2004.

Overview

BICO, Inc. was incorporated in the Commonwealth of Pennsylvania in 1972 as Coratomic, Inc. Before closing down all operations in February, 2003, the Company’s primary business was the development of new devices and technologies, which included environmental and medical products. On March 18, 2003 the Company filed a voluntary petition for Chapter 11 bankruptcy with the United States Bankruptcy Court for the Western District of Pennsylvania. As part of the bankruptcy court supervised reorganization, all of the Company’s existing operations were either sold or closed and all assets were liquidated to raise cash for expenses related to the bankruptcy and pay creditors. By the end of the reorganization the Company had no employees, no operations and no assets, all of its prior businesses were gone, as were the subsidiaries thorough which some of the Company’s operations had been conducted.

The Company’s plan of reorganization, as approved in the bankruptcy proceeding, called for BICO to merge with cXc Services, Inc., (“CXC”) a privately held Delaware corporation formed in 2003 to introduce and commercialize a video webphone in the United States. This video webphone is now the sole business of the Company. The material changes which occurred in the bankruptcy and the merger with CXC have resulted in the Company completing its reorganization and exiting the bankruptcy proceeding as a startup business, and our success will depend upon our ability to attract adequate funding to support the new business. This business is comprised of two elements, the first being the sale of the webphone internet appliances, the equipment, and the second being the sale of advertising and other content over the webphones and sale of related fee based services like telephone and internet services. CXC was a start-up business at the time it merged into BICO, and had no sales or other source of revenue. CXC possessed an exclusive distribution agreement with Amstrad, plc, the developer of the video webphone CXC desired to commercially introduce to the US market. This exclusivity agreement lapsed in January 2005.

M erger with cXc Services, Inc.

BICO entered a Joint Plan of Reorganization (the Plan) which was accepted by our creditors, and confirmed by the Bankruptcy Court on September 23, 2004 (effective December 7, 2004) subject to our becoming current on our SEC reporting, which we did. Under the Plan CXC merged into BICO and BICO was the surviving entity. BICO obtained 100% of the assets of CXC, including the exclusive distribution rights in North America to Amstrad’s model E3 em@iler webphone and management expertise. In return, the shareholders of CXC received full voting, convertible, Series M Preferred Stock in BICO. The preferred stock was convertible at a future date into an amount of common stock equal to 49.6% of the total authorized common stock by BICO, but does not provide CXC holders with any priority over the common shareholders upon liquidation, nor any dividend or disbursement priority. In a related subsequent event, the holders of preferred stock approved a change in the conversion ratio by which the preferred stock would be exchanged for common stock and reduced the proportionate ownership of the Company they would hold on conversion from 49.6% of the total authorized common stock (an amount equal to 79.8% of the shares outstanding on a fully diluted basis at November 4, 2004, the merger date, including certain shares reserved for payment of services subsequent to our reorganization) to less than 1% of the total authorized common stock (an amount equal to 4.84% of shares outstanding on a fully diluted basis at November 4, 2004, the merger date). The former shareholders of CXC now hold all three positions on the Board of Directors of BICO. BICO continues business operations as a publicly traded company with continuing limited infusions of capital from selling additional common shares and cash received from the settlement of certain claims during the first quarter of 2005.

CXC was a private company based in Dove Canyon, California. CXC was located by the Plan proponent, PHD Capital (PHD and CXC had no prior dealings). Neither CXC, nor any of its principals, had any prior dealings with BICO or its subsidiaries.

Principal Products and Services

Webphone Internet Appliance

The em@iler E3 ’ (“E3”) manufactured by Amstrad plc, is the initial webphone appliance in BICO’s strategy to deliver a personal communication center to the consumer as well as providing specialized business applications. Whether the communication needs of the users are complex or simple, for home, the office or in a hotel room, the webphone has the required features and some additional benefits to make the webphone attractive and desirable.

BICO plans to distribute webphones from a variety of OEM manufacturers including Amstrad, although its initial offering is expected to be the E3 manufactured by UK based Amstrad, the developer and manufacturer of the E3 webphone. The E3 combines effective e-mail management, SMS messaging, built-in video camera for video conferencing and snapshots, built-in voice mail, and full duplex hands-free telephone usage, while offering quick Internet connectivity, utilizing Microsoft’s Mobile Explorer™ browser at a very affordable price. The E3 also features a ½ VGA sized color viewing screen and its simplicity makes it user-friendly and easy to operate. The E3 will be marketed and sold throughout North America under a trademark to be selected as soon as practical .

Although the exclusive distribution agreement between the Company and Amstrad has lapsed, we believe that once the Company has obtained funding, Amstrad will enter into a commercial supply relationship with us for its E3 product and subsequent models. We have had discussions with alternate suppliers of webphones in the event the E3 is not available from Amstrad. Obtaining alternate products would extend the approximately 5 month lead time from first order placement to delivery of webphones by up to 6 months.

The current E3 product is expected to be supplemented with additional models manufactured either by Amstrad or other suppliers and provide an internet connection utilizing a high speed or broadband connection. The benefits of the broadband model, among others, will be elimination of the need to dial up over a telephone line to connect to the internet service provider, higher speed downloading and uploading of email, web content, and higher quality video transmission for video conferencing. The addition of VoIP capability or voice over internet protocol telephony capability is an additional choice for a future model as more voice communication migrates to the internet from traditional long distance carriers. Discussions with potential suppliers of these future products have been initiated, but no specific proprietary product development work has been commenced. Subject to the availability of financing, it is our intent to incorporate high-speed or broadband with enhanced video and VoIP capabilities in our product offering in the next 12 months.

The original version of the E3 was developed for the British market which has different electrical and telephone specifications than the United States. Amstrad has engineered a US compliant version of the E3 which has received formal approval from the United States Federal Communications Commission and Underwriters Laboratories for commercial sale in the United States.

Network Support Services

BICO will manage and maintain the required server environment to support advertising downloading, e-mail, SMS text and MMS messaging, and fax storage and routing. This function will be physically outsourced to a vendor whose core competency will be ensuring the proper scalability and system integrity.

BICO’s primary role in supporting interaction with vendors, providers, and customers will be to provide the initial dial-up ISP service (through a third party supplier) that can manage the traffic (speed and capacity) and ensure interface compatibility with content and the web appliance. BICO will offer technical support to content and solution development for vendors and providers as well as manage and monitor the real-time flow of daily information and updates necessary to service the customer.

BICO’s strategy is to provide the expertise and perform the duties necessary to ensure that the webphone not only remains current with vendor partners’ business objectives but also works to promote such objectives and the growth of the business. We will support technical expertise on staff to monitor and direct the efforts of our vendor partners.

Advertising Publishing Services

Advertisements are downloaded from the server into the webphone’s local memory each time it dials in (automatically) to retrieve new email messages and software upgrades. Therefore, the advertisements rotate on the screen while the device is offline providing a large advantage over Internet banner advertising, which requires that a user be at their computer, connected to the World Wide Web, and surf to a particular Web site in order to view a particular advertiser’s ad.

Webphone advertising is inexpensive to produce and individual advertisements can be added quickly to the server and updated regularly to make sure they are always fresh with the current promotion. Since BICO manages the advertisement server, ads can be scheduled to rotate on the screen during certain times of the day, as well as target different demographics; advertisements can even be targeted at an individual household, depending on the users’ interests.

CPM, the cost per thousand impressions, is the most widely used metric when comparing advertising rates over different mediums: it measures the cost for 1,000 people to see an advertisement. BICO will initially charge for a full “unit” or “block” of time approximately $1/month per phone that is activated and scrolling advertisements, a highly competitive CPM rate of $2.78.

Markets and Distribution

Market

The primary initial markets for webphones are multi-housing and hospitality industries. The webphone delivers content and other fee-based services, including ISP, telephone services, video conferences, and e-commerce fulfillment directly to its appliances. Much like a magazine publication sells advertising space based on its circulation and readership, the BICO WebPhone business relies on generating advertising revenue from regional, national and local merchants who service apartment communities, and have the willingness to place ads on the screen of the WebPhone.

BICO believes the webphone is a highly innovative, easy-to-use, device that provides users with fast and convenient Internet access. It also provides advertisers and e-commerce businesses with a new way to reach consumers. BICO intends to become primarily an advertising media publisher for specialized Internet appliances as well as a value added reseller of Internet appliances, telephone services, video interface, and Internet commerce fulfillment. The webphone is already a success in the UK, is compact and suitable for placement in any prominent area in the home with the full functionality of a high-end telephone and quick Internet connection time, since it does not need to “boot up” like a PC.

Dependent on the availability of financing, the initial deployment of the webphones (scheduled for later this year) will utilize a “forced distribution” strategy by focusing on large strategic sponsors like apartment communities, cable companies; and telephone companies.

Initially, webphones will be provided free of charge to each household by a sponsor, which in turn will receive a percentage of the revenues generated from ads scrolling on every activated phone’s screen and from other activities such as telephone services and e-commerce. Dial-up ISP service will be included along with up to eight e-mail accounts and “smart cards” for each account. All the consumer has to do is plug it in and use it. Upon the initial registration session, BICO will have captured enough household information to offer advertisers target-marketing opportunities for delivering their message and report on related activity.

The objective is to pragmatically establish an installed base as quickly as possible with sponsors and the infomercial that will draw local and regional advertisers. As the base expands, national advertisers will be drawn to the unique “virtual bill board” the webphone offers.

The Company believes the webphone offers advertisers unparalleled access to the kitchen counters and family rooms of their target consumers, plus the unique capability and convenience for these consumers to respond directly to an ad on the same device on which it appears - whether it be purchasing goods or requesting services. At the push of a button, consumers can talk to a live person, send e-mail, or visit a website to obtain information or complete a transaction, unlike any other form of advertising available to advertisers. In addition, BICO optimizes the timing in which advertisers reach their targeted audiences via the webphone.

BICO projects a substantial market for the dial-up model of the E3. However to ensure our offering continues to meet the needs of our strategic sponsors and consumers BICO plans to introduce a broadband version of the webphone within the next twelve months. This model may also incorporate within its technology “stand-alone” support for VoIP telephone services.

Distribution

BICO will utilize a “forced-distribution” channel strategy by deploying to specific target populations in conjunction with strategic sponsors. The deployment of the first quantity of phones will mirror in many ways the initial publication of a new magazine. BICO will develop a circulation base by giving inducements for the various sponsors to purchase large quantities of webphones, which will then be distributed by the Sponsor to its captive constituency. The sponsor will “force” distribution by giving a webphone to each of its members or in many cases, actually placing a webphone in the consumer’s apartment home. This strategy will allow BICO to deploy phones to homogenous target groups and thereby build specific advertising target bases as quickly as possible. For the support of the strategic sponsors, BICO will share with the sponsors a portion of the net revenue generated from the selling of rotating display-advertising space. Key sponsor categories include the Multi-Housing Industry (MHI), hotels, telecommunications firms, other service providers, and affinity groups. BICO is initially focusing on the MHI, hotels and communications providers as its lead strategic sponsors.

The apartment industry alone represents a significant opportunity comprised of over 20 million homes housing over 40 million residents. Since the webphone is able to bring low cost Internet access to these millions of households not yet connected, as well as the incremental convenience it provides those already online, the phones have received very strong interest from apartment property managers and owners who are enthusiastic about the phone’s capability to attract new renters and the substantial potential for generating ancillary income from advertising and e-commerce activities conducted on the phones.

We have not yet made any sales of the webphone, advertising or ancillary services. We have entered into conditional agreements to run pilot programs in which we will distribute webphones to various apartment communities for 90 or 120 day trial periods during which the residents and owners/managers evaluate the desirability and value of the webphones and services offered over them. Upon successful completion of these pilot programs we expect to receive both orders for commercially meaningful quantities of webphones and positive coverage in multi-family industry and advertising media due to the progressive nature of the webphones and the service offering they enable.

Competitive Overview

We are not aware of any device which possesses the combination of features included in the E3 and would therefore be a direct product competitor. The primary competitors of the Company’s webphone product are traditional telephones which are used for the vast majority of hard wired telephone installations in apartments, hotels and businesses. Other competitive products are the array of devices which perform the other major functions of the webphone such as a personal computers, personal digital assistants (“PDA”) or full featured mobile phones which allow different combinations of web access, text messaging, email exchange, transaction fulfillment, web browsing, etc. Many of the devices with which the webphone competes for a portion of its capabilities are more costly than the webphone, take up a greater amount of desk space and have different combinations of functions, some of which the webphone does not possess, such a computing. Some of these devices offer desirable attributes which the webphone does not posses, such as portability or calendar functions. Those devices offering video conferencing tend to be for a single purpose and more expensive than our product

The webphone and our approach to utilizing its combination of features to capitalize on the sale of advertising and other value added services such as transaction fulfillment, ISP services, and telephone services is unique. The webphones capacity to allow 3 immediate means of response to an advertisement is also unique and an important part of its value.

Intellectual Property

The Company’s intellectual property consists of its business plan and certain proprietary technical knowledge regarding the network and security operations of the Amstrad E3 webphone appliance and its programming. This knowledge is important to the Company and its ability to execute its business plan. The Company holds no trademarks, patents or other protected intellectual property in the electronics and telecommunications industry.

All of the intellectual property formerly held by BICO has been disposed of in the bankruptcy reorganization.

Need For Governmental Approval

All electronic telephony products distributed in the United States must first obtain U.S. Federal Communication Commission (FCC) approval. The Company, working with Amstrad, obtained this approval for distributing the E3 webphone in the United States on December 9, 2004, and obtained Underwriters Laboratories approval for US and Canadian distribution in August, 2004.

Going Concern Considerations

At December 31, 2004, and for the fiscal year then ended, we had a net loss and negative working capital, which raise substantial doubt about our ability to continue as a going concern, and which caused our independent auditors to qualify their report on our financial statements. Our ability to continue operations will depend on positive cash flow from future operations and on our ability to raise additional funds through equity or debt financing. If we are unable to raise or obtain needed funding, we may be forced to discontinue operations.

Risk Factors

Risk Factors Related to Our Finances

If BICO Fails To Raise Additional Financing, We May Not Be Able To Fund Our Ongoing Operations And Implement Our Business Plan . The Company requires additional capital to support strategic acquisitions and its current expansion plans. The Company needs to raise approximately $8,000,000. Should the Company not be able to raise capital as required, the Company may need to delay, curtail or scale back some or all of its expansion plans. Any additional financing may involve dilution to the Company's then-existing shareholders.

If BICO Does Not Have Sufficient Capital, It May Not Be Able To Secure Webphone Inventory To Meet Growth Projections: The webphone manufacturer (Amstrad) presently requires a Letter of Credit for the full amount of each order be in place prior to their purchasing the component parts necessary to build each order. BICO projects that letter of credit requirements will be as high as $23 million by the end of Year One and over $30 million in Year Two. Insufficient capital for L/Cs would potentially limit BICO’s projected rate of growth.

BICO has Historically Lost Money; If Losses Continue In The Future, It May Cause Us To Curtail Operations . BICO emerged from bankruptcy in the fourth quarter of 2004. Future losses are likely to occur, as we are dependent on raising money to pay for our operations. No assurances can be given that we will be successful in reaching or maintaining profitable operations. Accordingly, we may experience liquidity and cash flow problems. If our losses continue, our ability to operate may be severely impacted.

BICO Has No Operating History In Our Industry Which Makes It Difficult To Forecast Our Future Results . As a result of our limited operating history, our historical financial and operating information is of limited value in predicting our future operating results. We may not accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and, therefore, we may fail to make accurate financial forecasts. Our current and future expense levels are based largely on our investment plans and estimates of future revenue. As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfall, which could force us to curtail or cease our business operations.

Risk Factors Related to Our Operations

If BICO Cannot Maintain Its Single Equipment Supplier, It Will Delay Implementation Of Our Business Plan. We currently rely on our relationship with Amstrad plc as the sole provider of our equipment to ensure that BICO receives webphones (manufactured in Asia) in a timely manner and that they are fully compatible with the United States telephone and Internet service. Should that relationship not continue, the identification of a new supplier will delay the implementation of our business plan.

BICO’s Business Plan Is Dependent On Advertising Revenue Which Is Unpredictable. A large portion of anticipated revenue from this venture is earned from selling advertising space on the webphone screen. There is very little data regarding effectiveness of advertising on this type of media, which may make advertisers reluctant to spend a portion of their ad budget with BICO if they elect to advertise, there is no guarantee on the response rate that they will receive.

Advertising Content May Be Technically Difficult To Target And Manage. Maintaining secure and timely advertising, configuration and authentication servers will be a large and important undertaking. Advertisers may want to change their offerings on a daily basis, or target different ads to different regions of the country or different demographics. Having a system flexible enough to support their ad schedules will increase revenues and provide a level of comfort for our advertisers. Additionally, keeping user information secure is critical to ensure consumer trust and avoid negative publicity, due to many consumers’ fears about providing personal information over the Internet.

BICO’s Key Deployment Strategy Depends on Strategic Sponsors Outside of BICO Control. In relying on strategic sponsors to distribute webphones to their constituents, BICO has little control over the pace and volume of its distribution. The Multi-Housing Industry (MHI), for example, has been traditionally risk-adverse, and therefore may delay deployments across their entire property portfolio until a long test period has been completed. Changes in the telecommunications regulatory market could change the profit equation for cable companies and telecom providers in the middle of our initial deployments.

If BICO’s Business Develops More Slowly Than Anticipated, We May Have To Curtail Certain Operations. Sluggish sales of the webphone may pose a problem for the business in two ways. If fewer webphones are deployed, less advertising revenue will be achieved. Furthermore, with less of a “circulation base” out in the population, it may be more difficult to secure advertisers to put their offerings on the webphone screen.

If BICO Is Not Able To Secure Competitive Pricing Arrangements, We May lose Market Share . BICO is a small company with little or no leverage with its various suppliers of goods and outsourced services. The Company’s projected profit margins may not be achievable if the Company cannot secure favorable pricing arrangements. Should such an event occur and management chose not to offer competitive prices, we could lose our market share. If we chose to compete, the reduction in profit margins could have a material adverse effect on our business and operations.

If BICO Is Unable To Respond To The Rapid Changes In Technology And Services Which Characterize Our Industry, Our Business And Financial Condition Could Be Negatively Affected . Our business is directly impacted by changes in the telephone and Internet communications industry. The telephone and Internet communication products and services industry is subject to rapid technological change, frequent new product and service introductions and evolving industry standards. Changes in technology could affect the market for our products, accelerate the obsolescence of our inventory and necessitate changes to our product line. We believe that our future success will depend largely on our ability to anticipate or adapt to such changes, to offer on a timely basis, services and products that meet these evolving standards and demand of our customers, and our ability to manage and maximize our product inventory and minimize our inventory of older and obsolete products. We cannot offer any assurance that we will be able to respond successfully to these or other technological changes, or to new products and services offered by our current and future competitors, and cannot predict whether we will encounter delays or problems in these areas, which could have a material adverse affect on our business, financial condition and results of operations.

BICO Has No Product Exclusivity . The Company does not have any exclusive agreements to market various Internet appliances. The Company has no control over its suppliers to ensure that they will provide product in a timely manner, nor continue to supply product to BICO at all. In addition, these suppliers could choose to enter into an exclusivity agreement with another distributor at any time in the future. Should such an event occur, the Company’s ability to provide products to its customers could be severely impacted.

Risk Factors Related to Our Stock

BICO’s Common Stock May Be Affected By Limited Trading Volume And May Fluctuate Significantly, Which May Affect Our Shareholders' Ability To Sell Shares Of Our Common Stock. Prior to this filing, there has been a limited public market for our common stock and there can be no assurance that a more 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. These fluctuations may also cause short sellers to enter the market from time to time in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our stock will be stable or appreciate over time. These factors may negatively impact shareholders' ability to sell shares of our common stock.

BICO’s Common Stock Is Deemed To Be "Penny Stock," Which May Make It More Difficult For Investors To Sell Their Shares Due To Suitability Requirements . Our common stock is deemed to be "penny stock" as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended. 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.

Item 2 - Description of Property

The Company does not currently own or lease any real property. An office has been provided to the Company at no cost by one of its executive officers. Once we obtain funding sufficient to support the initial purchase of product and building of the administrative and technical infrastructure necessary to support operations, we will lease necessary office space in the Orange County, California area. We do not anticipate any need for purchasing real property or leasing office or other space greater than would be necessary to house our executive and administrative offices. We do not anticipate manufacturing any product or performing warranty or repair service operations in-house.

Item 3 - Legal Proceedings

We are not presently involved in any legal proceedings nor are any legal proceedings known to be threatened. The recent bankruptcy disposed of all liabilities which predated the bankruptcy filing, and no legal actions since that time are currently pending or threatened.

Item 4 - Submission of Matters to a Vote of Security Holders

No matters were presented to a vote of securities holders.

Part II

Item 5 - Market for Common Equity and Related Stockholder Matters

The Company's common stock is quoted on the OTC Bulletin Board under the symbol BIKO.

The following table sets forth the range of high and low bid information for the Company's common stock for each quarterly period in 2004 and 2003. These quotations are believed to be representative inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.

		Bid
	High		Low
4th Quarter 2004	$.0021		$.0005
3rd Quarter 2004	$.0018		$.0008
2nd Quarter 2004	$.0017		$.0007
1st Quarter 2004	$.0015		$.0009

4th Quarter 2003	$.0014		$.0001
3rd Quarter 2003	$.0029		$.0003
2nd Quarter 2003	$.0030		$.0001
1st Quarter 2003	$.0110		$.0004

Sources: QuoteMedia.com

As of May 10, 2005, the Company had approximately 6,870 Shareholders of Record.

We have never paid a cash dividend and do not anticipate doing so in the foreseeable future.

We have no equity compensation plans which authorize the issuance of shares, nor are their any individual compensation arrangements which authorize issuance of shares.

Recent sales of unregistered securities: none other than common shares issued to claimants and interest holders in the bankruptcy proceedings which were exempt from registration pursuant to 11 U.S.C. §1145(a) under Section 5 of the Securities Act of 1933.

In connection with the merger transaction of CXC into BICO, shares of Series M Preferred Stock were issued to the former holders of CXC common stock in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933.

During the period from November 4, 2004 to December 31, 2004 BICO issued 1,244,462,560 shares of common stock under a facility put in place prior to the Bankruptcy by the company and J. P. Carey Asset Management LLC for sale into the market place. 1,194,462,560 were sold for a total of $500,000 at an average price of $0.0043. The remaining 50,000,000 shares were issued and held in an account related specifically to the facility mentioned above.. Price will be set and proceeds from the sale of these shares will be determined and transferred to the company at the time of sale.

Item 6 - Management's Discussion and Analysis or Plan of Operation

This report contains forward looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those set forth under "Factors that may affect future results" in this Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report. The following discussion and analysis should be read in conjunction with "Selected Financial Data" and the Company's financial statements and notes thereto included elsewhere in this report.

Overview

As part of the Company’s bankruptcy reorganization plan, it merged with cXc Services, Inc. (a privately held Delaware corporation), abandoned the Company’s original bio-technology business plan, and adopted the business plan of cXc Services. Under this new business plan, BICO is now focused on being both a distributor of Internet appliances and an advertising and content publisher, primarily focused on the multi-housing and hospitality industries. It delivers content and other fee-based services, including ISP, telephone services, video conferences, and e-commerce fulfillment directly to its appliances. Much like a magazine publication sells advertising space based on its circulation and readership, the BICO WebPhone business relies on generating advertising revenue from regional, national and local merchants who service apartment communities, and have the willingness to place ads on the screen of the WebPhone.

a.	Plan of Operation

BICO, Inc. has raised $500,000 through private placement issuance of common stock during the 4 ^th Quarter 2004 to support operations. An additional $130,000 has been received during the 1 ^st Quarter of 2005. The Company’s continued operation is dependent on raising sufficient funds through the sources available to it, primarily issuance of stock either through private placement or a facility in place prior to the merger with J. P. Carey Asset Management and Perrin, Holden and Davenport Capital Corp. (PHD),to support its base-level ongoing monthly expenses, which are approximately $120,000, per month, and raise the estimated capital required to advance its business plan through making an initial purchase of webphones, build the infrastructure of servers and programming necessary to support the deployment of thousands of webphones and provide internet access, create and download advertising content and support the full range of functions of the webphones over the internet. We will need to raise short term funds promptly in order to remain in business and the estimated $8,000,000 necessary to implement our business plan within the next 3 - 6 months. This requirement consists of $4,000,000 to support the acquisition of product, $2,000,000 to complete the infrastructure needed to support the installed webphone base, and approximately $2,000,000 to ensure the timely availability of next generation product discussed previously.

Shortly after obtaining sufficient go-forward funding, we will procure our initial supply of webphones to support the various pilot deployments we already have commitments for in the multi-housing industry, and begin building out our network and service infrastructures to support these and future deployments. Once funding is secure, we anticipate entering into joint research projects with selected business partners to develop the next generation of webphones which will provide high speed internet access and VoIP capabilities. We expect to have these products developed and available for market within 12 months of initiating development work. In addition, should appropriate strategic or tactical business combination opportunities be presented to the Company, we would consider undertaking such a transaction if it were a positive value-added proposition for the shareholders.

The primary purchases the Company intends to make over the next year are the purchase of webphones to conduct pilot programs to validate our business model and contract for the servers and programming necessary to support deployment of webphones.

The number of employees will ramp up as financing makes funds available to implement our business plan and we expect that within 12 months of obtaining substantial funding we would have between 53 and 100 employees. At December 31, 2004 the company had 5 employees.

b.	Financial Condition and Results of Operations

The Company emerged from almost 21 months in Chapter 11 bankruptcy on December 7, 2004 (“Effective Date”) reorganized as a new business. No business activity, product or services previously offered exist in BICO’s new efforts. The operations and markets are completely different. The board of directors and the management team are completely different. Under these circumstances comparisons to past periods provide limited benefit to communicating the company’s financial condition or results of operation. (See Item 1 - Description of Business)

Upon emergence from bankruptcy on the Effective Date, BICO adopted “fresh start” accounting and reporting, which resulted in material adjustments to the historical carrying amounts of our assets and liabilities (see Note B-Basis of Presentation and Significant Accounting Policies). As a result, the historical financial data of the company prior to and during bankruptcy (“Predecessor”) may not be entirely comparable to the historical financial data of the company after emerging from bankruptcy (“Successor”) and may be of limited value in evaluating our financial and operating prospects in the future.

The Company’s continued operation is dependent on raising sufficient funds through the sources available to it, primarily issuance of stock either through private placement or a facility in place prior to the merger with J. P. Carey Asset Management and Perrin, Holden and Davenport (PHD), to support its base-level ongoing monthly expenses until funding sufficient to fully implement our new business plan is secured.

Funds have been used to support the costs associate with the merger with cXc Services and instituting the company’s business plan.

The primary use of funds during 2004 has been focused primarily on emerging from bankruptcy, consummating the merger with cXc Services, Inc., and launching the Company’s new business plan.

During the successor period the Company incurred $195,229 in General and Administrative expenses primarily for new business development and organization related costs. During the Predecessor period the Company had $496,355 in General and Administrative expenses primarily in bankruptcy related cost and merger related costs.

During the Successor period the Company did not generate sales revenue, the Predecessor period had only $7,500 in sales revenue, all of which was generated prior to the merger with cXc Services, Inc.

Accounts Payable at December 31, 2004 was $133,978. Approximately $31,000 represented consolidation and reorganization related Legal expenses, slightly more than $28,000 was accrued compensation deferred by management, almost $25,000 represented a State of Pennsylvania tax liability claim that survived the bankruptcy, and just under $25,000 due to the Company’s Transfer Agent related to the issuance of shares to unsecured creditors and former preferred share holders resulting from the court approved re-organization plan.

The largest item in the Statement of Operations is reorganization expenses at $7,150,000. This represents the calculated value of shares awarded to Perrin, Holden & Davenport (PHD) - 5,000,000,000 at $0.0011 per share; JP Carey, LLC - 1,000,000,000 at $0.0011 per share; and Anthony Paterra - 500,000,000 at $0.0011 per share for services provided as stipulated in the court approved reorganization plan using the implied price on the date the court approved the reorganization plan.

c.	Off-balance Sheet Arrangements

BICO, Inc. has no off-balance sheet arrangements.

Item 7 - Financial Statements

The information below presents financial data of the Company as of and for the 2 years ended December 31, 2004. The historical financial data for December 31, 2004 and for the year ended December 31, 2003, the period from January 1, 2004 to December 7, 2004, and the period from December 8, 2004 to December 31, 2004 should be read in conjunction with accompanying notes.

The consolidated financial statements of Predecessor for the period from January 1, 2003 to December 7, 2004 were prepared while the Company was still involved in Chapter 11 proceedings and, accordingly, were prepared in accordance with Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”). As a result, the historical financial data for such periods does not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that would have resulted if Predecessor were deemed not to have been continuing as a going concern.

F-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

BICO, Inc.

We have audited the accompanying balance sheet of BICO, Inc., (the "Company") as of December 31, 2004 (Successor Company balance sheet), and the related statements of operations, stockholders’ equity (deficit) and cash flows for the period from December 8, 2004 to December 31, 2004 (Successor Company operations), for the period from January 1, 2004 to December 7, 2004, and the year ended December 31, 2003 (Predecessor Company operations). 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

On December 7, 2004, the Bankruptcy Court entered an order confirming the plan of reorganization which became effective on December 8, 2004. Accordingly, the accompanying financial statements have been prepared in conformity with AICPA Statement of Position 90-7, Financial Reporting for Entities in Reorganization Under the Bankruptcy Code, for the Successor Company as a new entity with assets, liabilities, and a capital structure having carrying values not comparable with prior periods as described in Note B.

In our opinion, the Successor Company financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2004, and the results of its operations and its cash flows for the period from December 8, 2004 to December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the Predecessor Company financial statements referred to above present fairly, in all material respects, the results of the Predecessor Company’s operations and its cash flows for the period from January 1, 2004 to December 7, 2004, and for the year ended December 31, 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 described in Note B, the Company's continued operation is dependent on raising sufficient funds through sources available to it to support its base-level monthly expenses and to advance its business plan. This condition raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Goff Backa Alfera & Company, LLC

Pittsburgh, Pennsylvania

May 20, 2005

F-

BICO, Inc. Balance Sheet at December 31, 2004

ASSETS

CURRENT ASSETS
Cash and equivalents	$ 73,016
Other current assets	5,962

TOTAL CURRENT ASSETS	78,978

FIXED ASSETS
Furniture and equipment	2,830
Accumulated depreciation	(282)

TOTAL FIXED ASSETS	2,548

TOTAL ASSETS	$ 81,526


LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES
Accounts payable	$ 133,978

TOTAL CURRENT LIABILITIES	133,978

STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, par value $.0001 per share, authorized 250,000,000,000 shares
at Dec. 31, 2004 outstanding, 27,934,732,782	2,793,473
Convertible preferred stock, par value $.0001 per share, authorized 150,000,000
shares issuable in series, outstanding 125,470,031	12,547
Additional paid-in capital	(2,663,469)
Accumulated deficit	(195,003)
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)	(52,452)

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIENCY)	$ 81,526

The accompanying notes are an integral part of these statements.

F-

BICO, Inc. Statements of Operations


	Successor	Predecessor
	December 8 to	January 1 to	Year Ended
	December 31,	December 7,	December 31
	2004	2004	2003
Revenues
Net sales	$ -	$ 7,500	$ 625,231

Costs and expenses
Cost of products sold	-	-	258,319
General and administrative	195,229	496,355	750,524
	195,229	496,355	1,008,843
Loss from operations	(195,229)	(488,855)	(383,612)

Other (income) and expense
Forgiveness of debt	-	(928,188)	(1,292,335)
Gain on sale of ViaCirq	-	-	(1,061,254)
Interest income	(226)	-	-
Gain on sale of Diasense	-	(264,773)	-
Interest expense	-	-	42,694
Reorganization expense	-	7,150,000	-
	(226)	5,957,039	(2,310,895)

Net income (loss)	$(195,003)	$ (6,445,894)	$1,927,283


Loss per common share - Basic:
Net Loss	$ (0.00)	$ (0.00)	$ (0.00)
Less: Preferred stock dividends	(0.00)	(0.00)	(0.00)

Net loss attributable to
common stockholders:	$ (0.00)	$ (0.00)	$ (0.00)

Loss per common share - Diluted:
Net Loss	(0.00)	(0.00)	(0.00)
Less: Preferred stock dividends	(0.00)	(0.00)	(0.00)

Net loss attributable to
common stockholders:	$ (0.00)	$ (0.00)	$ (0.00)

The accompanying notes are an integral part of these statements.

F-

BICO, Inc. Statement of Stockholders' Equity (Deficiency)
	Preferred Stock		Common Stock		Additional	Accumulated
	Shares	Amount	Shares	Amount	Paid-in Capital	Deficit	Total
Predecessor:

Balance at December 31, 2002	10,836	$ 108,357	7,138,933,167	$ 713,893,312	$ (444,039,721)	$ (279,779,924)	$ (9,817,976)

Conversion of Preferred Stock	(10,836)	(108,357)	248,574,648	24,857,466	(24,749,109)
Net income	-	-	-	-	-	1,927,283	1,927,283
Balance at December 31, 2003	-	$ -	7,387,507,775	$ 738,750,778	$ (468,788,830)	$(277,852,641)	$ (7,890,693)
Change in par value	-	-	-	(736,014,027)	736,014,027	-	-
Net loss	-	-	-	-	-	(6,445,894)	(6,445,894)
Stock issued for services	-	-	6,500,000,000	650,000	6,500,000		7,150,000
Fresh start adjustments	-	-	(20,000,000)	(2,000,000)	(282,438,221)	284,298,535	(139,686)
Predecessor balance at December 7, 2004	-	-	13,867,507,775	1,386,751	(8,713,024)	-	(7,326,273)

Successor:

Preferred stock to cXc shareholders	125,470,031	12,547	-	-	87,453	-	100,000
Stock issued to creditors	-	-	12,822,762,447	1,282,276	5,586,548	-	6,868,824
Issuance of common stock	-	-	1,244,462,560	124,446	375,554	-	500,000
Net loss	-	-	-	-	-	(195,003)	(195,003)

Balance at December 31, 2004	125,470,031	$ 12,547	27,934,732,782	$ 2,793,473	$ (2,663,469)	$ (195,003)	$ (52,452)

The accompanying notes are an integral part of these statements.

F-

BICO, Inc. Statement of Cash Flows


		Successor		Predecessor
		December 8 to		January 1 to		Year Ended
		December 31,		December 7,		December 31
		2004		2004		2003
Cash flows used by operating activities:
Net income (loss)	$ (195,003)		$ (6,445,894)		$ 1,927,283
Adjustments to reconcile net loss to net
cash used by operating activities :
Depreciation	282		-		-
Unrelated investors' interest in subsidiaries	-		-		(1,440)
Stock issued in exchange for services	-		7,150,000		-
Decrease in accounts receivable	-		-		50,096
(Increase) in prepaid expenses	(532)		(5,400)		-
Increase (decrease) in accounts payable	(5,585)		99,837		-
Increase (decrease) in other liabilities	-		(1,285,276)		42,694
Debt forgiveness	-		-		(1,292,335)
Increase (decrease) in liabilities in excess of assets held for sale	-		(184,773)		125,116
Gain on sale of assets held for sale	-		-		(1,061,254)

Net cash flow used by operating activities	(200,838)		(671,506)		(209,840)

Cash flows from investing activities:
Proceeds from liabilities in excess of assets sold	-		-		530,000
Purchase of property, plant and equipment	(2,250)		(570)		-
Payments received on notes receivable	-		-		46,338
Purchase of exclusivity license	-		(100,000)		-

Net cash provided (used) by investing activities	(2,250)		(100,570)		576,338

Cash flows from financing activities:
Proceeds from stock offering	250,000		250,000		-
Proceeds from sale of cXc stock	-		100,000		-
Net cash provided by financing activities	250,000		350,000		-

Net increase (decrease) in cash	46,912		(422,076)		366,498

Cash and cash equivalents, beginning of period	26,104		448,180		81,682

Cash and cash equivalents, end of year	$ 73,016		$ 26,104		$ 448,180

The accompanying notes are an integral part of these statements.

F-

BICO, Inc. Statements of Cash Flows (Continued)
	Year ended December 31,
Supplemental Information:	2004	2003

Interest paid	-	-

Supplemental schedule of non-cash
investing and financing activities:


Conversion of preferred stock for common stock	-	$ 24,857,466

Reduction of Additional paid in capital
created by application of Fresh Start Accounting	$ 284,298,535	-

Write off of accumulated deficit as a result
of Fresh Start Accounting	$ 282,438,221	-

Change in par value of common stock	$ 736,014,027	-

Change in Additional paid in capital as a result of
change in par value of common stock	$ 736,014,027	-

Settlement of liabilities through common stock issuance	$ 6,868,824	-

Preferred stock issued to cXc shareholders	$ 100,000	-

The accompanying notes are an integral part of these statements. BICO, Inc.

F-

Notes to Financial Statements

NOTE A - BACKROUND AND ORGANIZATION

BICO, Inc. (“BICO”) was incorporated in the Commonwealth of Pennsylvania in 1972 as Coratomic, Inc. Before closing down all operations in February2003, the Company's primary business was the development of new devices and technologies, which included environmental and medical products. On March 18, 2003 the Company filed a voluntary petition for Chapter 11 bankruptcy with the United States Bankruptcy Court for the Western District of Pennsylvania. As part of the bankruptcy court supervised reorganization, all of the Company's existing operations were either sold or closed and all assets were liquidated to raise cash for expenses related to the bankruptcy and pay creditors. By the end of the reorganization the Company had no employees, no operations and no assets, all of its prior businesses were gone, as were the subsidiaries thorough which some of the Company's operations had been conducted.

The Company's plan of reorganization, as approved in the bankruptcy proceeding, called for BICO to merge with cXc Services, Inc., a privately held Delaware corporation formed in 2003 to introduce and commercialize a video webphone in the United States. This video webphone is now the sole business of the Company. The material changes which occurred in the bankruptcy and the merger with cXc have resulted in the Company completing its reorganization and exiting the bankruptcy proceeding as a startup business, and our success will depend upon our ability to attract adequate funding to support the new business. This business is comprised of two elements, the first being the sale of the webphone internet appliances, the equipment, and the second the sale of advertising and other content over the webphones and sale of related fee based services like telephone and internet services. cXc Services, Inc. ("CXC")was a start-up business at the time it merged into BICO, and had no sales or other source of revenue. CXC possessed an exclusive distribution agreement with Amstrad, plc, the developer of the video webphone CXC desired to commercially introduce to the US market. This exclusivity agreement lapsed in January 2005.

BICO entered a Joint Plan of Reorganization (the Plan) which was accepted by our creditors, and confirmed by the Bankruptcy Court on September 23, 2004 subject to our becoming current on our SEC reporting, which we did. Under the Plan, CXC merged into BICO and BICO was the surviving entity. BICO obtained 100% of the assets of CXC, including the exclusive distribution rights in North America to Amstrad's model E3 em@iler webphone and management expertise. In return, the shareholders of CXC received full voting, convertible Series M Preferred Stock in BICO. The preferred stock was convertible at a future date into an amount of common stock equal to 49.6% of the total authorized common stock by BICO, but does not provide CXC holders with any priority over the common shareholders upon liquidation, nor any dividend or is disbursement priority. In a related subsequent event, the board of directors and the holders of preferred stock approved a change in the conversion ratio by which the preferred stock would be exchanged for common stock and reduced the proportionate ownership of the Company they would hold on conversion from 49.6% of the total authorized common stock (an amount equal to 79.8% of the shares outstanding on a fully diluted basis at November 4, 2004, the merger date, including certain shares reserved for payment of services subsequent to our reorganization) to less than 1% of the total authorized common stock (an amount equal to 4.94% of shares outstanding on a fully diluted basis at November 4, 2004, the merger date). The former shareholders of CXC now hold all three positions on the Board of Directors of BICO. BICO continues business operations as a publicly traded company with continuing limited infusions of capital from selling additional common shares and cash received from the settlement of certain claims during the first quarter of 2005.

NOTE B - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Going Concern Basis

The accompanying Financial Statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business, and in accordance with SOP-7.

BICO, Inc. has raised $500,000 through private placement issuance of common stock during 2004 through private placements to investors. We have only sufficient cash on hand to pay expenses arising within the next quarter. The Company’s continued operation is dependent on raising sufficient funds through the sources available to it, primarily issuance of stock either through private placement or a facility in place prior to the merger with J.P. Carey Asset Management and Perrin, Holden and Davenport (PHD) to support its base-level ongoing monthly expenses, which are approximately $120,000 per month, and raise the estimated capital required to advance its business plan through making an initial purchase of webphones, build the infrastructure of servers and programming necessary to support the deployment of thousands of webphones and provide internet access, create and download advertising content and support the full range of functions of the webphones over the internet. We will need to raise short term funds promptly in order to remain in business and the estimated $8,000,000 necessary to implement our business plan within the next 3-6 months. This requirement consists of $4,000,000 to support the acquisition of product, $2,000,000 to complete the infrastructure needed to support the installed webphone base, and approximately $2,000,000 to ensure the timely availability of next generation product.

Fresh Start Accounting

The Company implemented "fresh start" accounting and reporting in accordance with the American Institute of Certified Public Accountants ("AICPA") Statement of Position No. 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7") upon its emergence from bankruptcy on December 7, 2004, the date of the final order by the Bankruptcy Court. Fresh start accounting required the Company to allocate the reorganization value to its assets and liabilities based upon their estimated fair values. The determination of fair value of assets and liabilities is subject to significant estimation and assumptions. The accumulated deficit as of December 7, 2004 was eliminated. Although not required by SOP90-7 prior period operating results were presented to help explain the effects of “fresh start” accounting.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at acquisition to be cash equivalents.

Income (Loss) Per Common Share

Net income (loss) per common share is based upon the weighted average number of common shares outstanding. The income (loss) per share does not include common stock equivalents since the effect would be anti-dilutive. The weighted average shares used to calculate the loss per share amounted to 10,244,793,988 for the period ended December 7, 2004, 17,677,043,711 for the period ended December 31, 2004 and 7,357,012,122 for the year ended December 31, 2003. The net income (losses) attributable to common shareholders for the periods ended December 7, 2004 and December 31, 2004 were ($6,445,894) and ($195,003) respectively and the net income for the year ended December 31, 2003 was $1,927,283.

Income Taxes

The Company previously adopted Statement of Financial Accounting Standards No. 109 (FAS 109), Accounting for Income Taxes, which requires the asset and liability method of accounting for income taxes. Enacted statutory tax rates are applied to temporary differences arising from the differences in financial statement carrying amounts and the tax bases of existing assets and liabilities.

Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company has stated liabilities subject to compromise based upon estimated settlement amounts.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash investments at commercial banks. Cash and cash equivalents are temporarily invested in interest bearing accounts in financial institutions, and such investments may be in excess of the FDIC insurance limit.

Comprehensive Income

The Company's consolidated net income (loss) is the same as comprehensive income required to be disclosed under Statement of Financial Accounting Standards No. 130.

Forgiveness of Debt

On December 7, 2004 the Bankruptcy Court issued its final order and the Company emerged from Chapter 11 bankruptcy. As a result of the bankruptcy all liabilities subject to compromise were settled. Reduction in liabilities as a result of the bankruptcy proceedings were recognized as Forgiveness of Debt in the Statements of Operations.

NOTE C - SALE OF ASSETS

In October 2003 the Company sold its equity and debt interest in subsidiaries ViaCirq, Inc, and Viatherm, Inc. to an unrelated party for $300,000. A gain of $1,061,254 was recognized in the fourth quarter of 2003 as a result of this sale.

In July 2004 the Company sold its equity and debt interest in subsidiary

Diasense, Inc. to an unrelated party for $80,000 and recognized a net gain of $264,773 at that time.

NOTE D - BUSINESS SEGMENTS

Because the Company discontinued all other operations, there was only one operating segment, "Biomedical Devices," in 2003. This segment was discontinued in 2004 and the Company commenced development of operations in the areas of the sale of webphone internet appliances.

NOTE E - STOCKHOLDERS' EQUITY

Preferred Stock

The Board of Directors of the Company may issue up to 150,000,000 shares of preferred stock in series, which would have rights as determined by the Board.

In connection with the Company’s reorganization under Chapter 11 BICO obtained 100% of the assets of CXC. In return, the former shareholders of CXC received full voting, convertible, Series M Preferred Stock in BICO. The preferred stock was convertible at a future date into an amount of common stock equal to 49.6% of the total authorized common stock by BICO, but does not provide CXC holders with any priority over the common shareholders upon liquidation, nor any dividend or disbursement priority. In a related subsequent event, the board of directors and the holders of preferred stock approved a change in the conversion ratio by which the preferred stock would be exchanged for common stock and reduced the proportionate ownership of the Company they would hold on conversion from 49.6% of the total authorized common stock (an amount equal to 79.8% of the shares outstanding on a fully diluted basis at November 4, 2004, the merger date, including certain shares reserved for payment of services subsequent to our reorganization) to less than 1% of the total authorized common stock (an amount equal to 4.94% of shares outstanding on a fully diluted basis at November 4, 2004, the merger date).

Common Stock

In accordance with BICO’s reorganization under Chapter 11 the Company’s authorized number of common stock shares was increased to 250 billion and the par value was amended to $.0001. Also, in accordance with the reorganization, 6.5 billion shares were to be issued to consultants for services related to reorganization and approximately 12.8 billion shares were issued to settle claims of former creditors and preferred shareholders. Although all shares to be issued have been recorded and reflected in the accompanying financial statements, there were 1 billion shares to reorganization plan recipient J.P. Carey Asset Management LLC remaining to be issued at December 31, 2004.

During the period from November 4, 2004 to December 31, 2004 BICO issued 1,244,482,560 shares of common stock through a series of private placement to raise $500,000. An additional 50,000,000 shares were issued and held in an account related to a specific facility previously put in place by the company and J.P. Carey Asset Management LLC for sale into the market place. Proceeds from the sale of these shares are transferred to the company at the time of sale.

NOTE F - INCOME TAXES

As of December 31, 2004, the Company had available approximately $165,000,000 of net operating loss carry-forwards for federal income tax purposes. These carry-forwards are available, subject to ownership change and other limitations, to offset future taxable income, and expire in tax years 2005 through 2024. The Company also has research and development credit carry-forwards available to offset federal income taxes of approximately $1,569,000, subject to ownership change and other limitations, expiring in tax years 2005 through 2021.

The Company has not reflected any future income tax benefits for these temporary differences or for net operating loss and credit carry-forwards because of the uncertainty as to realization. Accordingly, the adoption of FAS 109 had no effect on the financial statements of the Company.

NOTE G - COMMITMENTS AND CONTINGENCIES

Litigation

The Company is not presently involved in any legal proceedings nor are any legal proceedings known to be threatened. The recent bankruptcy disposed of all liabilities which predated the bankruptcy filing, and no new legal actions have arisen since.

Employment Agreements

BICO accepted pre-existing and approved employment contracts with cXc Services for Messrs. Greenwood, DiCamillo, Hannesson and Rundles. Each contract contained a provision that if the company was unable to make payments under each respective contract due to insufficient funds or the expectation of insufficient funds, the company was not obligated to make the payments but the company would be obliged to accrue any such missed payments and pay them when it could prudently do so. The Company notified the effected executives on January 27, 2005. It may not be able to make payments under their respective employment contracts.

NOTE H - RELATED PARTY TRANSACTIONS

During 2004, the Company made payments and incurred expenses for services of certain members of its Board of Directors, Legal expenses were incurred in the amount of $51,571 to Mr. Hannesson’s legal firm and network and server related expenses of $2,145 were incurred for services provided by Mr. DiCamillo. Also, Mr. Raznick and Mr. Greenwood were reimbursed for $62,000 and $9,648, respectively, for expenses incurred relative to legal, market research, office and other items.

NOTE I - SUBSEQUENT EVENTS

On March 30, 2005, BICO entered into a Settlement Agreement and Mutual General Releases with Kenneth F. Raznick, Chairman of the Board of Directors of BICO, Susan Raznick, Mr. Raznick’s spouse, RFK Investments, LLC, a Michigan limited liability company wholly owned by Mr. Raznick, Richard M. Greenwood, Chief Executive Officer, President and member of the Board of Directors of BICO, Mark DiCamillo, Executive Vice President and Chief Operating Officer of BICO, Richard Rundles, Executive Vice President, Real Estate Distribution Development, John D. Hannesson, formerly Executive Vice President of Law and Administration of BICO, Perrin, Holden & Davenport Capital Corp., Jody Eisenman, principal of Perrin Holden & Davenport Capital, and Nelson Braff, principal of Perrin Holden & Davenport Capital.

The Settlement Agreement was entered into in connection with resolution of certain issues arising from the merger of CXC into BICO and the provision of funding for BICO subsequent to the merger. The Settlement Agreement provides for: (i) an agreement by the parties for a reduction in the conversion ratio of the Series M Preferred Stock of BICO from one share of Series M Preferred Stock convertible into one thousand (1000) shares of common stock of BICO to one share of Series M Preferred Stock convertible in to thirteen and fifteen one-hundredths (13.15) shares of common stock of BICO and to seek consent for such reduction from the Series M Preferred Stock holders and the members of the Board of BICO; (ii) a cash payment to BICO from Mr. Raznick in the amount of $117,500; (iii) the resignation of Mr. Raznick as a member and Chairman of the Board of Directors of BICO; and (iv) various releases of claims among the parties.

F-

Item 8 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 8A - Controls and Procedures

Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and our Principal Accounting Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and the Principal Accounting Officer concluded that our disclosure controls and procedures are effective, in all material respects, with respect to the recording, processing, summarizing, and reporting, within the time periods specified in the Securities and Exchange Commission’s rules and forms, of information required to be disclosed by us in the reports that we file or submit under the Exchange Act.

There were no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation referred to above.

Part III

Item 9 - Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act

Directors and Executive Officers

Name	Age	Title	Tenure
Richard Greenwood	57	Chairman & Secretary President Acting Chief Financial Officer, Principal Accounting Officer	3/30/05 to date 11/3/04 to date 11/30/04 to date
Irvin E. Kebler	45	Director	11/3/04 to date
Mark DiCamillo	49	Director Executive V.P., Chief Operating Officer	3/3/05 to date 11/3/04 to date
Richard Rundles	55	Executive V.P.	11/3/04 to date
Ken Raznick	58	Chairman	11/3/04 - 3/30/05
John Hannesson	53	Executive V.P., Secretary	11/3/04 - 3/11/05
William J. Shea	51	Executive V.P.	11/3/04 - 4/11/05

Richard Greenwood : President & CEO and Member of the Board of Directors. Mr. Greenwood has over 25 years experience in consumer and financial services including senior executive positions at some of the nation's largest financial institutions. Greenwood held various treasury positions at Citibank, including Treasurer for the USA consumer business and the bank's European and African consumer banking group, representing businesses in sixteen countries. Greenwood was also the CFO of California Federal Bank and Valley National. At both Institutions, he led the capital and funding efforts as well as implementing effective risk management systems during their respective recovery from troubled real estate loan portfolios. Greenwood was appointed CEO by Bank Plus/Fidelity Federal Bank. As CEO, Greenwood raised over $300 million and was responsible for implementing a program that restructured or eliminated $1,500,000,000 in problem loans as well as restructuring the organization of the company and its work force. . Greenwood was President & CEO of Predictive Data, Inc., a privately held company that services the Multi-housing industry with financial products, from 1999 - 2000. Prior to co-founding cXc, Greenwood was President & CEO of Hagenuk CPS/USA, a privately held manufacturer and distributor of webphones and smart card systems and technologies over the period of 2000 - 2002. From 2002 to the formation of cXc Services, Greenwood has worked with Raznick to promote the commercialization of the webphone concept. Greenwood has been on the boards of Treasury Services Inc. and Americash. Greenwood has also been an active board member and Chairman of the Association of Financial Services Holding Companies (Washington D.C.), Western League of Community Banks (Sacramento), and served two years as President of SONET -ALLTEL Information Services Users Group.

Irvin E. Kebler : Member of the Board of Directors has served as the Chief Operating Officer for The Eyde Company since joining the company in 2000. Eyde is a private real estate development company headquartered in East Lansing, Michigan. Mr. Kebler is also President of Utica Park, Inc., an entity which serves as the general partner for Utica Park Place, LP, which owns and manages an approximate 450,000 square foot retail shopping center in Utica, Michigan. Mr. Kebler was previously in commercial banking for approximately 15 years with Wells Fargo Bank in Southern California and Michigan National Bank in Farmington Hills, Michigan. Mr. Kebler is a graduate of Michigan State University's School of Business (Finance).

Mark DiCamillo : Executive Vice President, and Chief Operating Officer (Mr. DiCamillo was appointed as a member of the Board of Directors of BICO to replace Mr Raznick on March 30, 2005). Mr. DiCamillo is a leading expert in webphone systems and technologies and has successfully managed Internet screen phone deployments with iBank at the Mall of America, Illinois Power in Champaign, Illinois, and Portland General Electric in Portland, Oregon. Prior to joining cXc Services, from 1995 - 2003 Mr. DiCamillo was COO of HomeAccess MicroWeb, Inc., a software developer and systems provider for Internet Appliances. Since 2003 DiCamillo has been VP & Chief Operating Officer of Once Upon a Family, LLC, a producer and distributor of consumer products. Mr. DiCamillo is a licensed engineer and has held engineering, marketing and management positions with Ford Motor Company, Mattel Toys, Amhdahl Computers and Philips Electronics.

Richard Rundles: Executive Vice President, Business Development. Mr. Rundles has over 25 years of experience in corporate real estate and has held various senior-level management positions. Most recently, Rundles served as Executive Vice President and Chief Operating Officer at Predictive Data, Inc. where he successfully developed and introduced Deposit Saver, a new security deposit program for the Multi-Housing Industry. At Trammell Crow Company, Rundles served as Senior Vice President - West Region for their “Corporate Services” business practice. Prior to that, Rundles was the founder and CEO of Corporate Facilities Services, a full-service real estate services and development company acquired by Trammell Crow Company. Rundles also served as First Vice President and Division Head of Real Estate & Property Management at California Federal Bank. Rundles is on the Board of Directors for the National Association of Corporate Real Estate Executives - Los Angeles Chapter and the Advisory Council of the National Multi-Housing Council.

Ken Raznick : Chairman of the Board of Directors. Mr. Raznick has spent almost 30 years in the commercial real estate field, playing a key role in developing over 25 million square feet of shopping centers and other industrial space. In 1974, Raznick began his own company, The Kenneth Raznick Company, developing many neighborhood shopping centers. Raznick founded The New Center Company in 1983, and numerous major retailers have looked to Raznick for expertise in all phases of site selection and development throughout the country such as Walmart, Home Depot, K mart, AMC Theaters, Office Max, Toys `R' Us, T. J. Maxx, and Circuit

City. (Mr. Raznick stepped down as Chairman and Director March 30, 2005)

John Hannesson: Executive Vice President, Administration & Law, Secretary. Mr. Hannesson spent over 15 years as vice president, general counsel and secretary for two NYSE listed multinational corporations, BWIP Holding, Inc. (formerly Borg Warner Industrial Products, Inc.) and Overhead Door Corporation. Since 1998 Mr. Hannesson has been in the private practice of corporate law.

Compliance with Section 16(a) Of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, and the rules there under require the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish the Company with copies. Based solely on its review of the copies of the Section 16(a) forms received by it, or written representations from certain reporting persons, the Company believes that, during the last

fiscal year, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with, except that the Form 3 initial filing was filed late by Messrs Greenwood, DiCamillo, Raznick and Hannesson.

Audit Committee Information

BICO’s Board of Directors does not have a separate Audit Committee. The entire Board acts as the Audit Committee. Messrs Greenwood, Kebler (independent director) and DiCamillo have extensive financial experience and each qualify as a financial expert as that term is defined in Item 401(e) of Regulation S-B of the Securities and Exchange Commission. BICO will seek additional qualified outside directors such that a majority of the board will be outside directors once we have raised funds to execute our business plan. Once in place, the Audit committee and Compensation committee with be chaired by an independent director.

Code of Ethics

The Company has adopted a Policy Statement on Business Ethics and Conflicts of Interest, which was approved by the Board of Directors, applicable to all employees, which is attached as an exhibit to this report.

Item 10 - Executive Compensation

The following table sets forth all compensation paid or accrued by the Company during the last three years to its executive officers.

Name				Other		Securities		All other
And				Annual	Restricted	Underlying	LTIP	Compen-
Principal		Salary	Bonus	Compen- sation($)	Stock	Options/	Payouts	sation
Position	Year	($)	($)	Compen- sation($)	Awards($)	SARs (#)	($)	($)

Richard M. Greenwood President, CEO & CFO	2004	40,000	0	0	0	0	0	0
Richard M. Greenwood President, CEO & CFO	2003	0	0	0	0	0	0	0
(3)	2002	0	0	0	0	0	0	0

Mark DiCamillo Executive Vice President & COO	2004	36,458	0	0	0	0	0	0
Mark DiCamillo Executive Vice President & COO	2003	0	0	0	0	0	0	0
(3)	2002	0	0	0	0		0	0

Richard L. Rundles Executive Vice President, Sales	2004	31,250	0	0	0	0	0	0
	2003	0	0	0	0	0	0	0
	2002	0	0	0	0		0	0
(3)
Kenneth F. Raznick Chairman	2004	48,000	0	0	0	0	0	0
	2003	0	0	0	0	0	0	0
(2)	2002	0	0	0	0	0	0	0

Anthony Paterra, Former CEO (1) (3)	2004 2003 2002	112,500 0 0	0 0 0	0 0 0	0 0 0	0 0 0	0 0 0	550,000 0 0

William J. Shea Executive Vice President, Advertising	2004	29,167	0	0	0	0	0	0
	2003	0	0	0	0	0	0	0
	2002	0	0	0	0	0	0	0

(3) (5)
John D. Hannesson Executive Vice President, Admin & Law, Secretary	2004	29,167	0	0	0	0	0	0
(3) (4)	2003	0	0	0	0	0	0	0
	2002	0	0	0	0	0	0	0

Notes:

Mr. Paterra served as a Director of BICO, Inc. Prior to the company filing for bankruptcy. At that time the court appointed Mr. Paterra Trustee and CEO of BICO, a position he held until the merger with cXc Services was completed November 4, 2004. Mr. Paterra resigned as CEO and Director of BICO on November 4, 2004. Mr. Paterra agreed to provide certain consulting assistance after BICO’s bankruptcy plan was approved and the merger was completed, as consideration he received 500,000,000 restricted shares of common stock when the Bankruptcy court approved the Second Amended Plan October 18, 2004. Restrictions on 25% are removed April 13, 2005, another 25% is removed July 13, 2005, and the remaining restrictions are removed October 13, 2005.

2.	Mr. Raznick received $62,000 in reimbursements for certain merger related expenses. On March 30, 2005 Mr. Raznick terminated his employment and resigned his positions as a director and chairman pursuant to an agreement with the Company.

Mr. Paterra received $821.20 in expense reimbursements in FY 2004, Mr. Greenwood received $ 10,512.73 in expense reimbursements in FY 2004, Mr. DiCamillo received $ 5,532.57 in expense reimbursements in FY 2004. Mr. Rundles received $ 7.909.00 expense reimbursements in FY 2004, Mr. Shea received $ 2,940.70 expense reimbursements in FY 2004, Mr. Hannesson received $1,002.66 in expense reimbursements in FY 2004.

4.	Mr. Hannesson provided certain organization and merger related legal services prior to becoming an executive of BICO, Inc. for which BICO compensated him $24,823.88 for those services.

5.	On April 11, 2005 BICO, Inc. entered into an agreement which terminated Mr. Shea’s employment contract. The company paid Mr. Shea a one time payment of $17,500 at that time and agreed to a further payment contingent upon obtaining funding.

No Option/SAR grants or exercises or Long-Term Incentive Plan awards or exercises to or by any director, officer or employee occurred in the fiscal year ended December 31, 2004

BICO accepted pre-existing and employment contracts with cXc Services for Messrs. Greenwood, DiCamillo, Hannesson and Rundles. Each contract contained a provision that if the Company was unable to make payments under the contracts due to insufficient funds or the expectation of insufficient funds the Company was not obligated to make the payments but the Company would be obliged to accrue any such missed payments and pay them when it could prudently do so. The Company notified all executives on January 27, 2005 that it may not be able to make payments under the employment contracts.

There is no program in place to compensate Directors for their services.

Item 11. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters

The following table sets forth information regarding beneficial ownership as of May 10, 2005 of the Company's common stock by any person who is known to the Company to be the beneficial owner of more than 5% of the Company's voting securities and by each director and officer of the Company.

	Beneficial	Percentage
Name	Ownership	of Class
Common Stock Jody Eisenman Nelson Braff All directors/officers as a group	2,388,262,408 2,367,000,000 0	8.87% 8.79% 0%
Series M Preferred Stock Kenneth Raznick, Chairman, Director Richard Greenwood, President & CEO, Director Irvin Kebler, Director Mark DiCamillo, EVP & COO Richard Rundles, EVP, Sales John Hannesson, EVP, Law, Administration, Secretary All directors/officers as a group	49,540,587 10,037,602 3,764,101 7,528,202 5,018,801 2,509,401 78,398,694	39.48% 8.00% 3.00% 6.00% 4.00% 2.00% 62.48%

On March 30, 2005 as part of a settlement between the Company, PHD and others (including Mr. Raznick, Mr. Greenwood, Mr. Kebler, Mr. DiCamillo, Mr. Rundles and Mr. Hannesson), the original exchange rate for the Series Preferred Shares issued to cXc Services, Inc. shareholders, one share of Series M for 1,000 shares of BICO, Inc. common, was adjusted downward such that every share of Series M Preferred converted into 13.15 shares of common. Under the original conversion ratio on a fully diluted basis Series M would convert into 81.79% of BICO, inc. ownership (as part of the cXc Services group Mr. Raznick, Mr. Greenwood, Mr. DiCamillo, Mr. Rundles and Mr. Hannesson were beneficial owners of 62.80% of issued common stock at 12/31/04 when converted). After the settlement Series M Preferred (cXc Services ownership) on a fully diluted basis reduced to 5.58% (as part of the cXc Services group Mr. Raznick, Mr. Greenwood, Mr. Kebler, Mr. DiCamillo, Mr. Rundles and Mr. Hannesson would be beneficial owners of 3.48% of issued common stock at 12/31/04 when converted)

Item 12. Certain Relationships and Related Transactions

See Notes to Financial Statements Note H

Item 13 - Exhibits

3(a)	Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on March 20, 1972 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(b)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on May 8, 1972 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(c)	Restatement of Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on June 19, 1975 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(d)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on February 4, 1980 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(e)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on March 17, 1981 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(f)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on January 27, 1982 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(g)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on November 22, 1982 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(h)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on October 30, 1985 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(i)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on October 30, 1986 (filed with Form S-1 Registration Statement filed December 1, 1992)
3(j)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on December 28, 1992 (filed with Amendment No. 1 to Form S-1 Registration Statement filed February 8, 1993)
3(k)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on February 7, 2000 (filed with Form 10-K for the fiscal year ended December 31, 1999)
3(l)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on June 14, 2000 (filed with Form S-1 Registration Statement filed July 9, 2001)
3(m)	Amendment to Articles of Incorporation as filed with the Secretary of State of the Commonwealth of Pennsylvania on November 30, 2001 (filed with Form 10-K for the fiscal year ended December 31, 2001)
3.(n)	Amended and Restated Articles of Incorporation of BICO, Inc. as filed with the Secretary of State of the Commonwealth of Pennsylvania (filed with Form 8-K filed November 12, 2004)
3.(o)	Certificate of Designation of Series M Preferred Stock as filed with the Secretary of State of the Commonwealth of Pennsylvania (filed with Form 8-K filed November 12, 2004)
3(p)	Amended and Restated Certificate of Designation of Series M Preferred Stock as filed with the Secretary of State of the Commonwealth of Pennsylvania (filed with Form 8-K filed April 1, 2005)
3(q)	By-Laws of BICO (as filed with Form S-1 Registration Statement filed December 1, 1992)
3(r)	Joint Second Amended Plan of Reorganization dated August 3, 2004 (filed with Form 8-K filed November 12, 2004)
3(s)	Order Approving Joint Second Amended Plan of Reorganization dated October 14, 2004 (filed with Form 8-K filed November 12, 2004)
10	Material Contracts
10(a)	Employment Agreement with Richard M. Greenwood dated October 1, 2004 (filed herewith)
10(b)	Employment Agreement with Mark DiCamillo dated October 1, 2004 (filed herewith)
10(c)	Employment Agreement with Richard Rundles (filed herewith)
10(d)	Policy Statement on Business Ethics and Conflicts of Interest (filed herewith)
31.1	Certification of Chief Executive Officer Under Section 302 (filed herewith)
31.2	Certification of Acting Chief Financial Officer and Acting Principal Accounting Officer Under Section 302 (filed herewith)
32.1	Certification of Chief Executive Officer Under Section 906 (filed herewith)
32.2	Certification of Acting Chief Financial Officer and Acting Principal Accounting Officer Under Section 906 (filed herewith)

Item 14 - Principal Accountant Fees and Services

The following table sets forth fees billed to the Company by our auditors during the fiscal years ended December 31, 2004 and 2003:

	DECEMBER 31, 2004	DECEMBER 31, 2003

1. Audit Fees	$ 25,728.00	$ 8,000.00

2. Audit Related Fees	0.00	0.00

3. Tax Fees	0.00	0.00

4. All Other Fees	0.00	0.00

Total Fees	$ 25,728.00	$ 8,000.00

Audit fees consist of fees billed for professional services rendered for the audit of the Company's consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Goff Backa Alfera & Company, LLC in connection with statutory and regulatory filings or engagements.

Audit-related fees consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements, which are not reported under "Audit Fees." There were no Audit-Related services provided in fiscal 2004 or 2003.

Tax fees consists of fees billed for professional services for tax compliance, tax advice and tax planning.

All other fees consist of fees for products and services other than the services reported above. There were no management consulting services provided in fiscal 2004 or 2003.

SIGNATURES

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

BICO, INC..

Signature	Title	Date

/s/ Richard M. Greenwood Richard M. Greenwood	Chief Executive Officer; President; Acting Chairman of the Board; Director; and acting Chief Financial Officer and Principal Accounting Officer	May 23, 2005

/s/ Irvin E. Kebler Irvin E. Kebler	Director	May 23, 2005

/s/ Mark DiCamillo Mark DiCamillo	Director; Executive V.P.; Chief Operating Officer	May 23, 2005

Exhibit 14

POLICY STATEMENT

BUSINESS ETHICS AND CONFLICTS OF INTERESTS

I. INTRODUCTION; CERTIFICATE OF COMPLIANCE

This Policy Statement on Business Ethics and Conflicts of Interests is being issued to employees of BICO, Inc. ("BICO" or the "Company") to confirm the Company's commitment to conduct business in an ethical manner and in full compliance with applicable law. It is the Company's expectation that our employees will read and become familiar with the principles expressed in this Policy Statement, and that those principles will be adhered to by all employees in the discharge of their responsibilities. Employees will be required from time to time to affirm their understanding of these principles and their agreement to adhere to them, by signing the Certificate of Compliance that appears at the end of this Policy Statement, and returning it to management.

II. SUMMARY OF PRINCIPLES; SPECIAL SITUATIONS

BICO employees are expected to comply with all laws governing its operations, and to conduct business in accordance with the highest ethical standards. BICO asks the same high standard of conduct of its employees on or off its property. The following is a summary of principles which guide BICO's business practices under these policies. Although we believe that these principles will address almost every situation, it may be appropriate to consult with management even when a gift or other item falls within the guidelines. That might be the case when the kind of service provided to BICO by the outside party is particularly sensitive, or when a gift or entertainment item might be very unusual under the circumstances. In such cases, BICO requires that the employee either get advance approval from management, or, where advance approval is not practical, the employee should request approval to retain the item in question.

1. Employees shall not be involved in any activity, including personal investment, which is or gives the appearance of conflict of interest with the business of BICO. Outside business interests require the prior approval of BICO.

2. Employees dealing with contractors, carriers, suppliers, consultants, customers and other persons having business with the company, shall conduct such activities in the best interests of BICO, without favor or preference.

3. Gifts, hospitality (meals and the like), entertainment or anything of value, beyond commonly recognized limits, shall not be accepted by employees or their family members from any person who has business dealings with BICO. Gifts, hospitality and entertainment which, because of their nature or value, might reasonably be expected to influence the employee's independent judgment, are beyond acceptable limits. Such value will be measured by the usual

standard of living of both the employee and the other person.

4. Under no circumstances may cash payments be made to customers. Other gifts, favors and entertainment extended to customers are to be limited in kind and value. The terms of a customer's employee gift policy will be honored by BICO without exception.

5. Employees in a subordinate/supervisory relationship are not to exchange favors or gifts which could, or appear, to give rise to an obligation. Employees may not use Company property as gifts for other employees.

6. The Company's property (supplies, personal computers, etc.) is to be used by employees only for the Company's business purposes. Company property may not be sold or otherwise disposed of, except in the ordinary course of business. All employees will be expected to properly account for all Company property for which they are responsible.

7. Employees shall not use BICO's proprietary information or trade secrets, other than as required by BICO.

8. BICO independently and unilaterally determines the prices and terms of sale of its products. Employees shall not make any agreement with a competitor affecting the prices, terms, or conditions of sale of BICO products in relation to those of a competitor. Employees shall not exchange information with respect to prices, cost, or other aspects of competition with any BICO competitor, or with any other person.

III. FINANCIAL INTERESTS IN OUTSIDE BUSINESSES

1. A conflict of interest exists if an employee, or an immediate family member of an employee, has a significant financial interest in a competitor of BICO, or which has business dealings with BICO. A "significant financial interest" is one which is so substantial to the employee that it might appear to create a potential risk of interference with the employee's

independent exercise of judgment in the best interest of BICO.

2. Before an employee or immediate family member acquires a financial interest (or if such person already has an interest) which appears to create a possible conflict of interest, the employee should promptly disclose the facts in writing to management, so that a determination can be made as to whether a conflict of interest does exist. The employee will be expected to take whatever action is determined by BICO to be appropriate to resolve any conflict

which it finds to exist.

IV. OTHER INVOLVEMENT IN OUTSIDE BUSINESSES

1. A conflict of interest exists if an employee engages as a director, officer, employee, promoter or consultant in an outside business which (a) is a competitive business, or (b) has business dealings with BICO in which the employee participates or is able to exert influence, or (c) interferes with the employee's obligation to devote full time and attention to his or her job responsibilities, or (d) operates in a manner which reflects adversely upon BICO. A conflict of interest may also arise when an immediate family member is a director, officer, employee, or consultant with a company which is a competitive business, or which has business dealings with BICO in which the employee participates or is able to exert influence.

2. Before an employee or immediate family member becomes involved in an outside business (or if such person already is involved) which creates a possible conflict of interest, the employee should promptly disclose the facts in writing to management, so that a determination can be made as to whether a conflict of interest does exist. The employee will be expected to take whatever action is determined by BICO to resolve any conflict which it finds to exist.

V. RECEIPT OF EMPLOYMENT-RELATED GIFTS

A. General

1. No employee or immediate family member may accept from any person or company which has business dealings with BICO, gifts or gratuities (including favors, consideration, discounts, and the like, which are not generally available to all BICO employees) which go beyond common courtesies usually associated with accepted business practice.

2. In no event may a BICO employee accept in any one year from any person which has business dealings with BICO, a gift or series of gifts which the employee should reasonably believe has a value exceeding $300.

3. No employee may accept cash or cash equivalents (gift certificates, credits, etc.) of any amount from any person which has business dealings with BICO.

4. In those circumstances where the nature of the relationship with the third party is unusually sensitive or the gift in question seems extraordinary, the employee must either obtain advance approval from management, or, where advance approval is not practical, the employee must request approval to retain the item in question.

B. Entertainment

1. No employee or immediate family member may accept, from any person having business dealings with BICO, entertainment which goes beyond common courtesies usually associated with accepted business practice.

2. Employees may accept invitations to lunch, dinner, or other social events (ball games, concerts, etc.) as an expression of normal business courtesy, provided that they are not intended to induce special consideration or advantage.

3. In those circumstances where the nature of the relationship with the third party is unusually sensitive or the event in question seems extraordinary, the employee must obtain advance approval from management.

C. Gifts Between Employees

Employees in a subordinate/supervisory relationship are not to exchange favors or gifts which could or appear to give rise to an obligation.

VI. Relationships With Customers

A. General

It is recognized that business practices and common courtesy sometimes require that gifts, favors, and entertainment be extended to present or prospective customers. These occasions are strictly limited and may not involve secret commissions, hidden gratuities, or payments to third parties who might have influence on such customers.

B. Gifts, Favors, and Entertainment

Gifts, favors, and entertainment may be extended to any customer or prospective customer, only if all of the following conditions are met:

1. They are not in violation of any applicable law.

2. They are not for the purpose of securing a preferential customer action, but rather are given as a courtesy for a courtesy received, or to build goodwill, much as one would do socially.

3. They are not in violation of generally accepted ethical standards.

4. They are of such limited value, and are in such form, that they cannot be construed as a bribe or payoff.

5. The customer has not advised that it has a policy against or otherwise limits receipt of gifts, favors, and entertainment by its employees and agents. Any such customer policy must be adhered to strictly.

6. Public disclosure of the facts surrounding them would not embarrass BICO or the customer in any way.

CERTIFICATE OF COMPLIANCE

I have read and understand the BICO, Inc. Policy Statement on Business Ethics and Conflicts of Interests. This will confirm that I will adhere in all respects to the principles and rules contained in the Policy Statement. If I am in doubt about whether any given proposed conduct will be in compliance with such principles and rules, I will seek (and follow) guidance as required by the Policy Statement. I further confirm my understanding that any failure to comply with these principles and rules will subject me to disciplinary action, up to and including dismissal from employment with the Company.

I certify to the Company that I am not in violation of the Policy Statement, unless I have noted such violation in a signed Statement of Exceptions attached to this Certificate.

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

(Signature)

Name: ______________________

(Please Print)

Position _____________________

Location _____________________

Date ________________________

[ ] A Statement of Exceptions is attached.

[ ] No Statement of Exceptions is attached.

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard M. Greenwood, certify that:

1. I have reviewed this annual report on Form 10-KSB of BICO, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 20, 2005

/s/Richard M. Greenwood

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Richard M. Greenwood, Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard M. Greenwood, certify that:

1. I have reviewed this annual report on Form 10-KSB of BICO, Inc.;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date: May 20, 2005

/s/Richard M. Greenwood

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

Richard M. Greenwood

Acting Principal Accounting Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of BICO, Inc. (the "Company") on Form 10-KSB for the period ending December 31, 2003, as filed with the Securities and Exchange Commission (the "Report"), the undersigned, Richard M. Greenwood, Chief Executive Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 20, 2005

/s/ Richard M. Greenwood

Richard M. Greenwood, Chief Executive Officer

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of BICO, Inc. (the "Company") on Form 10-KSB for the period ending December 31, 2003, as filed with the Securities and Exchange Commission (the "Report"), the undersigned, Richard M. Greenwood, Acting Principal Accounting Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 20, 2005

/s/ Richard M. Greenwood

Richard M. Greenwood, Acting Principal Accounting Officer

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of October 1, 2004, by and between cXc Services, Inc. a Delaware corporation (the "Company"), and Richard M. Greenwood ("Executive").

W I T N E S E T H:

WHEREAS, the Company desires to secure the services of Executive and to enter into an agreement embodying the terms of such employment (the "Agreement"); and

WHEREAS, Executive desires to accept such employment and enter into such Agreement;

WHEREAS, the Company is a “start-up” company and to date the Company has not generated any revenue or cash flows;

WHEREAS, the Company has not yet raised working capital or successfully introduced or gained market acceptance of the Company’s products and services in North America;

WHEREAS, the financial obligation of the Company to Executive for compensation, benefits, perquisites and expenses as described herein is conditioned solely upon the Company’s ability to successfully generate revenue, cash flows and working capital;

WHEREAS, the Company’s ability to successfully generate revenue, cash flows and working capital is subject to risks and uncertainties that may cause the Company’s results to differ materially from expectations.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Company and Executive here-by agree as follows:

1 . Employment .

a . Agreement to Employ . Upon the terms and subject to the conditions of this Agreement, the Company hereby employs Executive and Executive hereby accepts employment by the Company. Executive's duties shall be primarily performed at the Company's headquarters in Orange County, California.

b . Term of Employment . Except as provided in Paragraph 7, the Company shall employ Executive for the period commencing on October 1, 2004 (the "Commencement Date") and ending on the second anniversary of the Commencement Date. The term of Executive's employment hereunder shall thereafter be automatically extended, upon the same terms and condi-tions, for succes-sive periods of one year each, unless either party, at least 180 days prior to the expiration of the original term or any extended term, shall give written notice to the other of its intention not to renew such employ-ment. The period during which Executive is employed pursuant to this Agreement shall be referred to as the "Employ-ment Period".

- -

2 . Position and Duties .

During the Employment Period, Executive shall serve as President and Chief Executive Officer, reporting directly to the Board of Directors of the Company (the "Board"), and in such other position or positions with the Company as the Board and the Executive shall agree upon from time to time. During the Employment Period, Executive shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the corporation and shall have the duties, responsibilities and obligations customarily assigned to individuals serving in the position or positions in which Executive serves hereunder. During the Employment Period, for as long as the Company is privately held, the Executive shall be elected and continued as a member of ( i ) the Board and ( ii ) the Executive Committee of the Board, if any. In the event the Company becomes subject to the reporting requirement prescribed by the Securities Exchange Act of 1934, or merges into an entity which is so subject, and the majority shareholders of the Company prior to the merger continue to be the majority shareholders subsequent to the merger, the Company shall use its best efforts to have Executive elected and continued as a member of ( i ) the Board and ( ii ) the Executive Committee of the Board. Executive shall devote substantially all of his time to the services required of him hereunder, except during those periods when the Company is unable to fulfill its financial obligations to the Executive as described herein, and provided that nothing contained herein shall preclude Executive from ( i ) serving on the board of directors of any business corpora-tion with the consent of the Board (which will not be unreasonably withheld), ( ii ) serving on the board of, or working for, any charitable or community organization or ( iii ) pursuing his personal financial and legal affairs, so long as such activities, individually or collectively, do not in the opinion of the Board materially interfere with the per-formance of Execu-tive's duties hereunder. Executive represents and warrants that his employ-ment hereunder and compliance by him with the terms and condi-tions of this Agreement does not conflict with or result in the breach of any agreement to which he is a party or by which he may be bound. The Company represents and warrants that this Agreement has been authorized by due corporate action and that the terms and conditions of this Agreement will not conflict with or result in the breach of any agreement to which it is a party or by which it may be bound.

3 . Compensation .

a . Base Salary . During the Employment Period, the Company shall pay Executive a base salary at the annual rate of $192,000. The Board shall annually review Executive's base salary in light of the base salaries paid to other executive officers of the Company, the base salaries of chief executive officers of comparable corporations and the performance of Executive, and the Board may, in its sole and absolute discretion, increase such base salary by an amount it determines to be appropriate, but shall not decrease Executive’s base salary. Any such increase shall not reduce or limit any other obligation of the Company hereunder. Executive's annual base salary payable hereunder, as it may be increased from time to time, is referred to herein as "Base Salary". The Company shall pay Executive his Base Salary in accordance with the Company's normal payroll practices.

b . Incentive Compensation . Beginning with calendar year 2004, for each calendar year ending during the Employment Period, Executive shall have the opportunity to receive an annual bonus (prorated for the partial year 2004 and any partial year in which Executive’s employment terminates, if otherwise payable pursuant to this agreement), with a target bonus opportunity of not less than 100% of such Base Salary. Such bonus shall be based upon Executive's attainment of performance objectives established by the Company’s Board for such calendar year and shall be subject to the terms and conditions of the Company's then current incentive compensation programs, practices and policies, as the same may be amended by the Board from time to time. Any bonus payable under this Paragraph 3(b) shall be paid to Execu-tive at the same time as bonuses are paid to other execu-tive officers of the Company, but in no event later than 90 days after the close of the calendar year for which the bonus is payable.

4 . Stock Option Grants .

a . Grant . On the Commencement Date, Executive shall not be awarded any options to purchase shares of the Company’s common stock.

b . Future Grants . Executive shall be eligible to participate in any equity plan or program adopted by the Company, at a level commensurate with his position as determined by the Board and on terms no less favorable than those offered to any other executive officer of the Company.

c. Terms of the Option . Unless otherwise required by law, any stock options granted to Executive in the future, shall have a term of ten years from the date of grant and shall become exercisable in increments of 1/3 on each of the first three anniversaries of the date of their grant. If Executive's employment with the Company terminates due to his death or a Termination due to Disability or for Good Reason (as defined below) or if there shall occur a Change in Control (as defined below) during the Employment Period, any options shall vest and become exercisable under the terms of the option plan. Except as otherwise provided in this Section 4, Executive's rights and obligations in respect of options shall be determined pursuant to the terms of an option agreement to be executed by Executive and the Company.

5 . Stock Ownership .

Initial Stock Purchase . Concurrent with the execution of this agreement, the Company shall offer to sell and Executive shall purchase 4,000 shares of the Common Stock of the Company for a purchase price of $8,000.00, (the “Stock”). The terms under which the Executive shall purchase the Stock shall be described in a definitive Subscription Agreement, and shall not be subject to limitations on transferability and resale except as are required for compliance with federal and state securities laws.

6 .

Benefits, Perquisites and Expenses .

a . Benefits . During the Employ-ment Period, Execu-tive shall be eligi-ble to participate in ( i ) each welfare benefit plan sponsored or maintained by the Company, includ-ing, without limitation, each group life, hospitalization, medical, dental, health, accident or disability insurance or similar plan or program of the Company, and ( ii ) each pen-sion, profit sharing, retirement, deferred compensa-tion or savings plan sponsored or maintained by the Company, includ-ing any supplemental executive retirement plan, in each case, whether now existing or established hereafter, to the extent that Executive is eligible to participate in any such plan under the generally applicable provisions thereof. The Company is not required by this Agreement to provide and maintain any such plans for the benefit of employees generally or Executive specifically, and if such plans are adopted, the Company may amend or terminate any such plan in its discretion. In addition to the benefits provided pursuant to the plans described herein, Executive shall be entitled to a Company paid annual medical examination of the type provided by executive health providers such as the UCI Executive Health Program, Scripps Institute or a comparable provider of Executive’s choice.

In addition, during any period where Executive will not be covered by a medical and dental plan maintained by the Company, or is not eligible to participate fully in any medical or dental plan maintained by the Company because of any required waiting period for eligibility or any exclusion with respect to any pre-existing conditions, the Company shall also advance to the Executive the cost of paying for independent medical and dental insurance or for any COBRA continuation coverage available to him under his prior employer's medical and health plans.

b . Perquisites . Executive shall receive those perquisites and other personal benefits made available to the Company's senior executives from time to time. Without limiting the generality of the foregoing, Executive shall be entitled to four weeks vacation each year.

c . Financial Planning and Tax Preparation . During the Employment Period, the Company will reimburse Executive for the cost of financial planning and tax preparation by persons or firms of his choosing of up to an aggregate amount of $10,000 per annum.

d. Company Car . During the Employment Period, the Company shall not provide Executive with the use of an automobile or an automobile allowance, unless such perquisites are offered to other executives, in which event, Executive shall be entitled to a comparable benefit.

e Business Expenses . During the Employment Period, the Company shall pay or reim-burse Executive for all reasonable expenses in-curred or paid by Executive in the performance of Executive's duties hereunder, upon presentation of expense statements or vouchers and such other information as the Company may require and in accordance with the generally applicable policies and procedures of the Company.

f. Indemnification . The Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company, Executive shall be indemnified and held harmless by the Company to the fullest extent legally per-mitted or authorized by the Company's certificate of incor-poration or bylaws or resolutions of the Board or, if greater, by the laws of the State of Delaware, against all cost, expense, liability and loss (including, without limi-tation, all costs pertaining to the Executive’s defense, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) as reasonably incurred or suffered by Executive in connection therewith. The Company agrees to purchase, continue and maintain a directors' and officers' liability insurance policy covering Executive. Executive shall be extended an Indemnification Agreement in the form attached as Exhibit 6 at the time this Employment Agreement is executed.

7 . Termination of Employment .

a . Early Termination of the Employment Period . Notwithstanding Paragraph 1(b), the Employment Period shall end upon the earliest to occur of ( i ) a termination of Executive's employment on account of Executive's death, ( ii ) a Termination due to Disability, ( iii ) a Termination for Cause, ( iv ) a Termination Without Cause, ( v ) a Termination for Good Reason or ( vi ) a Voluntary Termination.

b . Benefits Payable Upon Termination . Following the end of the Employment Period pursuant to Paragraph 7(a), Executive (or, in the event of his death, his surviving spouse, if any, or his estate) shall be paid the type or types of compensation determined to be payable in accordance with the following table at the times established pursuant to Paragraph 7(c):

Basis of Termination	Accrued Bonus	Severance Benefit	Non-renewal Benefit
Death	Not Payable	Not Payable	Payable
Disability	Not Payable	Not Payable	Payable
Cause	Not Payable	Not Payable	Not Payable
Without Cause	Payable	Payable	Not Payable
Good Reason	Payable	Payable	Not Payable
Voluntary	Payable	Not Payable	Not Payable
Non-Renewal	Not Payable	Not Payable	Payable

c . Timing of Payments . Earned Salary shall be paid in a single lump sum as soon as required by law, but in no event more than 10 days follow-ing the end of the Employment Period. Accrued Bonus shall be payable at the same time as annual bonuses are paid to other officers of the Company generally for the calendar year in which Executive's employment terminates. Vested benefits shall be payable in accordance with the terms of the plan, policy, practice, program, contract or agreement under which such benefits have accrued. The Severance Benefit shall be paid in a single lump sum payment not later than 30 days after the date of Executive's termination.

d. Definitions . For purposes of Para-graphs 7 and 8, capitalized terms have the follow-ing meanings:

"Accrued Bonus" means a pro-rated amount equal to the product of ( i ) the annual incentive compensation Executive would have been entitled to receive under Paragraph 3(b) for the calendar year in which his active service for the Company terminates pursuant to Paragraph 7(a) had he remained employed for the entire year and assuming that the performance requirements to receive a bonus at (but not above) target for such year had been met, multiplied by ( ii ) a fraction, the numerator of which is equal to the number of days in such calendar year occurring on or prior to the- termination of Executive's active service for the Company and the denominator of which is 365.

“Change of Control”. For the purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if:

(i) any Person (as defined below) has acquired, "beneficial ownership" (within the meaning of Rule 13d-3, as promulgated under Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of securities of the Company representing 50% or more of the combined Voting Power (as defined below) of the Company's securities;

(ii) within any 24 month period, the persons who were directors of the Company imme-diately before the beginning of such period (the "Incum-bent Di-rectors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of any successor to the Company, provided that any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director ( A ) was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incum-bent Directors either actually or by prior operation of this Section 2(a)(ii) and ( B ) was not designated by a person who has entered into an agreement with the Company to effect a Corporate Event, as described in Section 2(a)(iii); or

(iii) the stockholders of the Company approve a merger, consolidation, share exchange, division, sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Event"), as a result of which the shareholders of the Company immediately prior to such Corporate Event shall not hold, directly or indirectly, immediately following such Corporate Event a majority of the Voting Power of ( x ) in the case of a merger or consolidation, the surviving or resulting corporation, ( y ) in the case of a share exchange, the acquiring corporation or ( z ) in the case of a division or a sale or other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the relevant Corporate Event, holds more than 10% of the consolidated assets of the Company immediately prior to such Event.

"Earned salary" means any Base Salary earned, but unpaid, for services rendered to the Company on or prior to the date on which the Employment Period ends (other than Base Salary deferred pursuant to Executive's election, under the terms of any deferred compensation plan maintained by the Company.

“Person”. For purposes of a Change in Control, "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act, as supplemented by Section 13(d)(3) of the Exchange Act; provided, however, that Person shall not include ( i ) the Company or any subsidiary of the Company or ( ii ) any employee benefit plan sponsored by the Company or any subsidiary of the Company.

“Non-renewal Benefit” means an amount equal to the Executive’s Base Salary for a period of twelve (12) months, plus an amount equal to the bonus which Executive would have been entitled to at target performance for the current performance period.

"Severance Benefit" means two times an amount equal to the sum of: (i) Executive’s Base Salary for one year; plus (ii) the average of the bonus paid for the two prior years on an annualized basis, or the bonus for which Executive is eligible in the year of Termination, at target, whichever is higher. Additionally, until the second anniversary of the date of Executive's termination of employment or such earlier date as he shall become eligible for benefits under the plan or program of a subsequent employer, Executive shall also be eligible to continue to participate in the welfare benefit plans and programs (excluding the long-term disability plan, the sick-pay plan and vacation accruals) generally made available to employees of the Company and in which he participated immediately prior to the termination of his employment on the same terms and conditions as would have applied had Executive continued to be employed.

"Termination for Cause" means a termination of Exec-utive's employment by the Company due to ( i ) Execu-tive's conviction of a felony or misdemeanor involving moral turpitude or the entering by Executive of a plea of nolo contendere to a felony or misdemeanor charge involving moral turpitude, ( ii ) Executive's gross neglect, willful malfeasance or willful gross miscon-duct in connection with his employment hereunder, unless Executive reasonably believed in good faith that such act or nonact was in or not opposed to the best interests of the Company, ( iii ) a sub-stantial and continual refusal by Executive in breach of this Agree-ment to perform the duties, responsibilities or obligations assigned to Executive pursuant to the terms hereof, provided that such duties, responsibilities or obli-gations are con-sistent with his positions as Chief Executive Officer and are otherwise lawful and appro-priate and Executive has been given not less than thirty (30) days written notice and an opportunity to cure his non-performance, or ( iv ) any other material breach by Executive of any material provision of this Agreement which is no less substantial than those specifically described above and which has a material adverse effect on the financial performance or reputation of the Company.

"Termination due to Disability" means a termina-tion of Executive's employment by the Company because Executive has been in-capable of substantially fulfilling the positions, duties, responsibilities and obligations set forth in this Agreement because of physical, mental or emotional incapacity re-sulting from injury, sickness or disease for a period of ( i ) at least five consecutive months or ( ii ) more than seven months in any twelve month period. The Company and Executive shall agree on the identity of a physician to resolve any question as to Executive's disability. If the Company and Executive cannot agree on the physician to make such determination, then the Company and Executive shall each select a physician and those physi-cians shall jointly select a third physician, who shall make the determination. The determination of any such physician shall be final and con-clusive for all purposes of this Agree--ment. Executive or his legal representative or any adult member of his immedi-ate family shall have the right to pre-sent to such physician such information and argu-ments as to Executive's disability as he, she or they deem appropri-ate, including the opinion of Executive's personal physician.

"Termination for Good Reason" means a termination of Executive's employment by Executive following: ( i ) a reduction in Executive's annual Base Salary or incentive compensation opportunity, ( ii ) failure to continue Executive as the Company's president and chief executive officer without Executive’s written consent, other than in connection with a Termination for Cause or a Termination due to Disability, ( iii ) a material reduction in Executive's positions, duties and responsibilities from those described in Section 2 hereof or the assignment to Executive of any duties inconsistent with his position or experience, ( iv ) the relocation of Executive's office to a location more than 25 miles from Aliso Viejo, California or ( v ) any other material breach of this Agree-ment by the Company. Notwithstanding the foregoing, a termination shall not be treated as a Termination for Good Reason ( i ) if Executive shall have consented in writing to the occurrence of the event giving rise to the claim of Termination for Good Reason or ( ii ) unless Executive shall have delivered a written notice to the Board within sixty (60) days of his having actual knowledge of the occurrence of one of such events stating that an event or circumstance constituting Good Reason has occurred and requesting a cure by the Company, such notice to specify the factual basis for what event or circumstance constitutes Good Reason, and such event, if capable of being cured, shall not have been cured within 30 days of the receipt of such notice. Executive may thereafter terminate his employment for Good Cause, or at Executive’s election, continue with his employment for a further period of up to six (6) months within which Executive shall be required to submit a final written notice of his election to terminate his employment for Good Reason if Executive chooses to do so. The failure of Executive to submit a final written notice of termination for Good Reason within six (6) months shall act as a waiver of the specific event or circumstance which constituted Good Reason as identified in Executive’s initial written notice.

"Termination Without Cause" means any termination of Executive's employment by the Company other than ( i ) a Termination due to Death or Disability or ( ii ) a Termination for Cause.

"Vested benefits" means amounts which are vested or which Executive is otherwise entitled to receive under the terms of or in accordance with any plan, policy, practice or program of, or any contract or agreement with, the Company, at or sub-sequent to the date of his termination without regard to the performance by Executive of further services or the resolution of a contingency.

"Voluntary Termination" means any termination of Executive's employment on his own initiative (other than a termination due to death, a Termination due to Disability or a Termination for Good Reason) upon 30 days' advance written notice to the Company of such termination.

“Voting Power”. A specified percentage of "Voting Power" of a company shall mean such number of the Voting Securities as shall enable the holders thereof to cast such percentage of all the votes which could be cast in an annual election of directors (without consideration of the rights of any class of stock other than the common stock of the company to elect directors by a separate class vote); and "Voting Securities" shall mean all securities of a company entitling the holders thereof to vote in an annual election of directors (without consideration of the rights of any class of stock other than the common stock of the company to elect directors by a separate class vote).

e. Full Discharge of Company Obligations . The amounts payable to Executive pursuant to this Paragraph 7 following termination of his employment (including amounts payable with respect to Vested Benefits) shall be in full and complete satisfaction of Executive's rights under this Agreement and any other claims he may have in respect of his employment by the Company or any of its subsidiaries other than claims for common law torts or under other contracts between Executive and the Company or its subsidiaries. Such amounts shall constitute liquidated damages with respect to any and all such rights and claims and, upon Executive's receipt of such amounts, the Company shall be released and discharged from any and all liability to Executive in connection with this Agreement or otherwise in connection with Executive's employment with the Company and its subsidiaries.

f. No Mitigation; No Offset . In the event of any termination of employment under this Paragraph 7, Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain except as specifically provided in this Paragraph 7.

g. Notice of Termination Any termination by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9(j). For purposes of this Agreement, a "Notice of Termination" means a written notice given, in the case of a termination for Cause, within 30 business days of the Company's having actual knowledge of the events giving rise to such termination, and in the case of a termination for Good Reason, within 120 days of the Executive's having actual knowledge of the events giving rise to such termination, and which ( i ) indicates the specific termination provision in this Agree-ment relied upon, ( ii ) sets forth in reason-able detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the pro-vision so indicated, and ( iii ) if the termination date is other than the date of receipt of such notice, specifies the termination date of the Executive's employment (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder.

(h) Limit on Payments by the Company .

(i) Application of Section 7(h). In the event that any amount or benefit paid or distributed to the Executive pursuant to this Agree-ment, taken together with any amounts or bene-fits otherwise paid or distributed to the Executive by the Company or any affiliated company (collec-tively, the "Covered Payments"), would be an "excess parachute payment" as defined in Section 280G of the Code and would thereby subject the Executive to the tax (the "Excise Tax") imposed under Section 4999 of the Code (or any similar tax that may hereaf-ter be imposed), the provisions of this Section 7(e) shall apply to determine the amounts payable to Executive pursuant to this Agreement.

(ii) Calculation of Benefits . Immediately following delivery of any Notice of Termination, the Company shall notify the Executive of the aggregate present value of all termination benefits to which he would be entitled under this Agreement and any other plan, program or arrangement as of the projected Date of Termination, together with the projected maximum payments, determined as of such projected Date of Termination that could be paid without the Executive being subject to the Excise Tax.

(iii) Imposition of Payment Cap . If the aggregate value of all compensation payments or benefits to be paid or provided to the Executive under this Agreement and any other plan, agreement or arrangement with the Company exceeds the amount which can be paid to the Executive without the Executive incurring an Excise Tax, then the amounts payable to the Executive under this Section 7 shall be reduced (but not below zero) to the maximum amount which may be paid hereunder without the Executive becoming subject to such an Excise Tax (such reduced payments to be referred to as the "Payment Cap"). In the event that the Executive receives reduced payments and benefits hereunder, the Executive shall have the right to designate which of the payments and benefits otherwise provided for in this Agreement that he will receive in connection with the application of the Payment Cap.

(iv) Application of Section 280G . For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax,

(A) ( x ) whether Covered Payments are "parachute payments" within the meaning of Section 280G of the Code, and ( y ) whether there are "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be determined in good faith by the Com-pany's independent certi-fied public accountants appointed prior to the Effective Date (the "Ac-countants") or tax coun-sel selected by such Accountants, and

(B) the value of any non-cash benefits or any deferred payment or benefit shall be deter-mined by the Accountants in accordance with the principles of Section 280G of the Code.

(v) Adjustments in Respect of the Payment Cap . If the Executive receives reduced payments and benefits under this Section 7(e)(or this Section 7(e) is determined not to be applicable to the Executive because the Accountants conclude that Executive is not subject to any Excise Tax) and it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding (a "Final Determination") that, notwithstanding the good faith of the Executive and the Company in applying the terms of this Agreement, the aggregate "parachute payments" within the meaning of Section 280G of the Code paid to the Executive or for his benefit are in an amount that would result in the Executive's being subject to an Excise Tax, then any amounts actually paid to or on behalf of the Executive which are treated as excess parachute payments shall be deemed for all purposes to be a loan to the Executive made on the date of receipt of such excess payments, which the Executive shall have an obligation to repay to the Company on demand, together with interest on such amount at the applicable Federal rate (as defined in Section 1274(d) of the Code) from the date of the payment hereunder to the date of repayment by the Executive. If the Executive receives reduced payments and benefits by reason of this Section 7(e) and it is established pursuant to a Final Determination that the Executive could have received a greater amount without exceeding the Payment Cap, then the Company shall promptly thereafter pay the Executive the aggregate additional amount which could have been paid without exceeding the Payment Cap, together with interest on such amount at the applicable Federal rate (as defined in Section 1274(d) of the Code) from the original payment due date to the date of actual payment by the Company.

8. Non-exclusivity of Rights . Except as expressly provided herein, nothing in this Agreement shall prevent or limit the Executive's continu-ing or future participation in any benefit, bonus, incen-tive or other plan or program provided by the Company or any of its affiliated companies and for which the Executive may quali-fy, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have under any other agree-ments with the Company or any of its affiliated companies, including employment agreements or stock option agreements. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its affiliated companies at or sub-sequent to the Date of Termination shall be payable in accordance with such plan or program.

9. Noncompetition and Confidentiality .

a . Noncompetition . During the period in whic h Executive is employed by the Company or any of its subsidiaries, Executive shall not become associated with any entity, whether as a prin-cipal, partner, employee, consultant or shareholder (other than as a holder of not in excess of 1% of the outstanding voting shares of any publicly traded company), that is active-ly engaged in competition with the business of the Company in the United States of America.

b . Confidentiality . Without the prior written consent of the Company, except ( i ) in the course of carrying out his duties hereunder or ( ii ) to the extent required by an order of a court having competent jurisdic-tion or under subpoena from an appropriate government agency, Executive shall not disclose any trade se-crets, customer lists, drawings, designs, information regarding product develop-ment, marketing plans, sales plans, manufacturing plans, management organization information (including data and other informa-tion relating to members of the Board of Directors and manage-ment), operating policies or manuals, business plans, financial records or other financial, commercial, business or techni-cal information relating to the Company or any of its subsidiaries or information designated as confidential or proprietary that the Company or any of its subsidiaries may receive belonging to suppliers, customers or others who do business with the Company or any of its subsidiaries (collectively, "Confidential Information") to any third person unless such Confi-dential Information has been previously disclosed to the public by the Company or is in the public dom-ain (other than by reason of Executive's breach of this Section 8(b)).

c . Company Property . Promptly following Execu-tive's termination of employment, Executive shall return to the Company all property of the Company, and all copies thereof in Executive's possession or under his control, ex-cept that Executive may retain his personal notes, diaries, Rolodexes, calendars and correspondence.

d . Non-Solicitation of Employees . During the period in which Executive is employed by the Company and any of its subsidiaries, and for the one year following any termination of employment by the Executive, Executive shall not directly or indirectly, except in the course of carrying out his duties hereunder, induce any employee of the Company or any of its subsidiaries to terminate employ-ment with such entity, and shall not directly or indirect-ly, either individually or as owner, agent, em-ployee, consultant or otherwise, solicit the employment of any person who is employed by the Company or a sub-sidiary thereof.

e . Injunctive Relief with Respect to Cov-enants . Executive acknowledges and agrees that the covenants and obligations of Executive with respect to noncompetition, nonsolicitation, confidentiality and Company property relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause the Company irreparable injury for which adequate remedies are not available at law. There-fore, Executive agrees that the Company shall be entitled to seek an injunction, restraining order or such other equitable relief (without the requirement to post bond) restraining Executive from committing any violation of the coven-ants and obligations contained in this Paragraph 9. These injunctive remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity.

10. Miscellaneous .

a . Survival . Paragraphs 6(f)(relating to indemnification), 7 (relating to early termination), 9 (relating to noncompetition, nonsolicitation and confidentiality) and 10(o) (relating to governing law), shall survive the termination hereof, whether such termination shall be by expiration of the Employment Period or an early termination pursuant to Paragraph 7 hereof.

b . Binding Effect . This Agreement shall be binding on, and shall inure to the benefit of, the Company and any person or entity that succeeds to the interest of the Com-pany (regardless of whether such succession does or does not occur by operation of law) by reason of a merger, consolida-tion or reorganization involv-ing the Company or a sale of all or substantially all of the assets of the Company, pro-vided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obli-gations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of as-sets as described in the preceding sentence, it shall use its reasonable best efforts to cause such as-signee or trans-feree to expressly assume the liabilities, obligations and duties of the Company hereunder. This Agree-ment shall also inure to the benefit of Executive's heirs, executors, admin-i-strators and legal repre-senta-tives and beneficiaries as provided in Paragraph 10(f).

c . Assignment . Except as provided under Paragraph 10(b), neither this Agreement nor any of the rights or obligations here-under shall be assigned or delegated by any party hereto without the prior written consent of the other party.

d . Entire Agreement . This Agreement con-stitutes the entire agreement between the parties hereto with respect to the matters referred to herein. No other agreement relating to the terms of Executive's employment by the Company, oral or otherwise, shall be binding between the parties unless it is in writing and signed by the party against whom enforcement is sought. There are no promises, representations, inducements or statements between the parties other than those that are expressly contained herein. Executive acknowledges that he is entering into this Agreement of his own free will and accord, and with no duress, that he has been represented and fully advised by competent counsel in entering into this Agreement, that he has read this Agreement and that he under-stands it and its legal consequences.

e . Severability; Reformation . In the event that one or more of the provisions of this Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. In the event any of Paragraph 8(a), (b) or (c) is not enforce-able in accordance with its terms, Executive and the Com-pany agree that such Paragraph shall be reformed to make such Paragraph enforceable in a manner which provides the Company the maximum rights permitted at law.

f . Beneficiaries/References . Executive shall be entitled, to the extent permitted under any applicable law and the terms of any applicable plan, to select and change a beneficiary or beneficiaries to re-ceive any compensation or benefit payable hereunder following Executive's death by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agree-ment to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representa-tive.

g . Waiver . Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or dif-ferent from the breach or default waived. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its or his rights hereunder on any occasion or series of occasions.

h. Arbitration . The Company and Executive agree that any claim, dispute or controversy arising under or in connection with this Agreement, or otherwise in connection with Executive's employment by the Company (including, without limitation, any such claim, dispute or controversy arising under any federal, state or local statute, regulation or ordinance or any of the Company's employee benefit plans, policies or programs) shall be resolved solely and exclusively by binding arbitration. The arbitration shall be held in the city of Irvine, California (or at such other location as shall be mutually agreed by the parties). The arbitration shall be conducted in accordance with the then current rules for the handling of employment related claims (the "Rules") of JAMS (“JAMS”) in effect at the time of the arbitration, except that the arbitrator shall be selected by alternatively striking from a list of five arbitrators supplied by JAMS. All fees and expenses of the arbitration provider and arbitrators, including a transcript if either requests, shall be borne by the Company.

If Executive prevails as to any material issue presented to the arbitrator, the entire cost of such proceedings (including, without limitation, Executive's reasonable attorneys fees and other expenses) shall be borne by the Company. If Executive does not prevail as to any material issue, each party will pay for the fees and expenses of its own attorneys, experts, witnesses, and preparation and presentation of proofs and post-hearing briefs (unless the party prevails on a claim for which attorney's fees are recoverable under the Rules). Any action to enforce or vacate the arbitrator's award shall be governed by the Federal Arbitration Act, if applicable, and otherwise by applicable state law. If either the Company or Executive pursues any claim, dispute or controversy against the other in a proceeding other than the arbitration provided for herein, the responding party shall be entitled to dismissal or injunctive relief regarding such action and recovery of all costs, losses and attorney's fees related to such action.

h . Notices . Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered personally, by courier service, by registered mail, return receipt requested, or by telecopy and shall be effective upon actual receipt by the party to which such notice shall be directed, and shall be ad-dressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof).

If to the Company:

cXc Services, Inc.

1 Wakonda

Dove Canyon, California 92679

Attention: President and Chief Executive Officer

If to Executive:

Richard M. Greenwood

25822 Elderbrook Lane

Laguna Hills, California 92653

i . Amendments . This Agreement may not be altered, modified or amended except by a written instru-ment signed by each of the parties hereto.

j . Headings . Headings to paragraphs in this Agreement are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation hereof.

k . Counterparts . This Agreement may be ex-ecuted in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

l . Withholding . Any payments provided for herein shall be reduced by any amounts required to be withheld by the Company from time to time under applicable Federal, State or local income or employment tax laws or similar statutes or other provisions of law then in effect.

m . Governing Law . This Agreement shall be governed by the laws of the State of California, without reference to principles of conflicts or choice of law under which the law of any other jurisdiction would apply.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and Executive has hereunto set his hand as of the day and year first above written.

CXC SERVICES, INC..

WITNESS:

__________________ By: ____________________________

WITNESS:

__________________ _____________________________

Richard M. Greenwood

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of October 1, 2004, by and between cXc Services, Inc. a Delaware corporation (the "Company"), and Mark DiCamillo ("Executive").

W I T N E S E T H:

WHEREAS, the Company desires to secure the services of Executive and to enter into an agreement embodying the terms of such employment (the "Agreement"); and

WHEREAS, Executive desires to accept such employment and enter into such Agreement;

WHEREAS, the Company is a “start-up” company and to date the Company has not generated any revenue or cash flows;

WHEREAS, the Company has not yet raised working capital or successfully introduced or gained market acceptance of the Company’s products and services in North America;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Company and Executive here-by agree as follows:

1 . Employment .

2 . Position and Duties .

During the Employment Period, Executive shall serve as Executive Vice President and Chief Operating Officer, reporting directly to the Chief Executive Officer of the Company (“CEO”), and in such other position or positions with the Company as the Board of Directors (“Board”) and the Executive shall agree upon from time to time. During the Employment Period, Executive shall be the chief operating officer of the corporation and shall, subject to the control of the board of directors and the CEO, have general supervision, direction and control of the operational aspects of the business and shall have the duties, responsibilities and obligations customarily assigned to individuals serving in the position or positions in which Executive serves hereunder. Executive shall devote substantially all of his time to the services required of him hereunder, except during those periods when the Company is unable to fulfill its financial obligations to the Executive as described herein, and provided that nothing contained herein shall preclude Executive from ( i ) serving on the board of directors of any business corpora-tion with the consent of the Board (which will not be unreasonably withheld), ( ii ) serving on the board of, or working for, any charitable or community organization or ( iii ) pursuing his personal financial and legal affairs, so long as such activities, individually or collectively, do not in the opinion of the Board materially interfere with the per-formance of Execu-tive's duties hereunder. Executive represents and warrants that his employ-ment hereunder and compliance by him with the terms and condi-tions of this Agreement does not conflict with or result in the breach of any agreement to which he is a party or by which he may be bound. The Company represents and warrants that this Agreement has been authorized by due corporate action and that the terms and conditions of this Agreement will not conflict with or result in the breach of any agreement to which it is a party or by which it may be bound.

3 . Compensation .

a . Base Salary . During the Employment Period, the Company shall pay Executive a base salary at the annual rate of $175,000. The Board shall annually review Executive's base salary in light of the base salaries paid to other executive officers of the Company, the base salaries of chief operating officers of comparable corporations and the performance of Executive, and the Board may, in its sole and absolute discretion, increase such base salary by an amount it determines to be appropriate, but shall not decrease Executive’s base salary. Any such increase shall not reduce or limit any other obligation of the Company hereunder. Executive's annual base salary payable hereunder, as it may be increased from time to time, is referred to herein as "Base Salary". The Company shall pay Executive his Base Salary in accordance with the Company's normal payroll practices.

b . Incentive Compensation . Beginning with calendar year 2004, for each calendar year ending during the Employment Period, Executive shall have the opportunity to receive an annual bonus (prorated for the partial year 2004 and any partial year in which Executive’s employment terminates, if otherwise payable pursuant to this agreement), with a target bonus opportunity of not less than 65% of such Base Salary. Such bonus shall be based upon Executive's attainment of performance objectives established by the Company’s Board for such calendar year and shall be subject to the terms and conditions of the Company's then current incentive compensation programs, practices and policies, as the same may be amended by the Board from time to time. Any bonus payable under this Paragraph 3(b) shall be paid to Execu-tive at the same time as bonuses are paid to other execu-tive officers of the Company, but in no event later than 90 days after the close of the calendar year for which the bonus is payable.

4 . Stock Option Grants .

a . Grant . On the Commencement Date, Executive shall not be awarded any options to purchase shares of the Company’s common stock.

5 . Stock Ownership .

Initial Stock Purchase . Concurrent with the execution of this agreement, the Company shall offer to sell and Executive shall purchase 3,000 shares of the Common Stock of the Company for a purchase price of $6,000.00, (the “Stock”). The terms under which the Executive shall purchase the Stock shall be described in a definitive Subscription Agreement, and shall not be subject to limitations on transferability and resale except as are required for compliance with federal and state securities laws.

6 .

Benefits, Perquisites and Expenses .

c. Company Car . During the Employment Period, the Company shall not provide Executive with the use of an automobile or an automobile allowance, unless such perquisites are offered to other executives, in which event, Executive shall be entitled to a comparable benefit.

d Business Expenses . During the Employment Period, the Company shall pay or reim-burse Executive for all reasonable expenses in-curred or paid by Executive in the performance of Executive's duties hereunder, upon presentation of expense statements or vouchers and such other information as the Company may require and in accordance with the generally applicable policies and procedures of the Company.

e Indemnification . The Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company, Executive shall be indemnified and held harmless by the Company to the fullest extent legally per-mitted or authorized by the Company's certificate of incor-poration or bylaws or resolutions of the Board or, if greater, by the laws of the State of Delaware, against all cost, expense, liability and loss (including, without limi-tation, all costs pertaining to the Executive’s defense, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) as reasonably incurred or suffered by Executive in connection therewith. The Company agrees to purchase, continue and maintain a directors' and officers' liability insurance policy covering Executive. Executive shall be extended an Indemnification Agreement in the form attached as Exhibit 6 at the time this Employment Agreement is executed.

7 . Termination of Employment .

Basis of Termination	Accrued Bonus	Severance Benefit	Non-renewal Benefit
Death	Not Payable	Not Payable	Payable
Disability	Not Payable	Not Payable	Payable
Cause	Not Payable	Not Payable	Not Payable
Without Cause	Payable	Payable	Not Payable
Good Reason	Payable	Payable	Not Payable
Voluntary	Payable	Not Payable	Not Payable
Non-Renewal	Not Payable	Not Payable	Payable

d. Definitions . For purposes of Para-graphs 7 and 8, capitalized terms have the follow-ing meanings:

“Change of Control”. For the purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if:

"Termination for Cause" means a termination of Exec-utive's employment by the Company due to ( i ) Execu-tive's conviction of a felony or misdemeanor involving moral turpitude or the entering by Executive of a plea of nolo contendere to a felony or misdemeanor charge involving moral turpitude, ( ii ) Executive's gross neglect, willful malfeasance or willful gross miscon-duct in connection with his employment hereunder, unless Executive reasonably believed in good faith that such act or nonact was in or not opposed to the best interests of the Company, ( iii ) a sub-stantial and continual refusal by Executive in breach of this Agree-ment to perform the duties, responsibilities or obligations assigned to Executive pursuant to the terms hereof, provided that such duties, responsibilities or obli-gations are con-sistent with his positions as Chief Operating Officer and are otherwise lawful and appro-priate and Executive has been given not less than thirty (30) days written notice and an opportunity to cure his non-performance, or ( iv ) any other material breach by Executive of any material provision of this Agreement which is no less substantial than those specifically described above and which has a material adverse effect on the financial performance or reputation of the Company.

"Termination for Good Reason" means a termination of Executive's employment by Executive following: ( i ) a reduction in Executive's annual Base Salary or incentive compensation opportunity, ( ii ) failure to continue Executive as the Company's Executive Vice President and Chief Operating Officer without Executive’s written consent, other than in connection with a Termination for Cause or a Termination due to Disability, ( iii ) a material reduction in Executive's positions, duties and responsibilities from those described in Section 2 hereof or the assignment to Executive of any duties inconsistent with his position or experience, ( iv ) the relocation of Executive's office to a location more than 25 miles from Aliso Viejo, California or ( v ) any other material breach of this Agree-ment by the Company. Notwithstanding the foregoing, a termination shall not be treated as a Termination for Good Reason ( i ) if Executive shall have consented in writing to the occurrence of the event giving rise to the claim of Termination for Good Reason or ( ii ) unless Executive shall have delivered a written notice to the Board within sixty (60) days of his having actual knowledge of the occurrence of one of such events stating that an event or circumstance constituting Good Reason has occurred and requesting a cure by the Company, such notice to specify the factual basis for what event or circumstance constitutes Good Reason, and such event, if capable of being cured, shall not have been cured within 30 days of the receipt of such notice. Executive may thereafter terminate his employment for Good Cause, or at Executive’s election, continue with his employment for a further period of up to six (6) months within which Executive shall be required to submit a final written notice of his election to terminate his employment for Good Reason if Executive chooses to do so. The failure of Executive to submit a final written notice of termination for Good Reason within six (6) months shall act as a waiver of the specific event or circumstance which constituted Good Reason as identified in Executive’s initial written notice.

"Termination Without Cause" means any termination of Executive's employment by the Company other than ( i ) a Termination due to Death or Disability or ( ii ) a Termination for Cause.

(h) Limit on Payments by the Company .

(iv) Application of Section 280G . For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax,

(B) the value of any non-cash benefits or any deferred payment or benefit shall be deter-mined by the Accountants in accordance with the principles of Section 280G of the Code.

- -

Mark DiCamillo

Employment Agreement

9. Noncompetition and Confidentiality .

10. Miscellaneous .

If to the Company:

cXc Services, Inc.

1 Wakonda

Dove Canyon, California 92679

Attention: President and Chief Executive Officer

If to Executive:

Mark DiCamillo

1 Wakonda

Dove Canyon, California 92679

i . Amendments . This Agreement may not be altered, modified or amended except by a written instru-ment signed by each of the parties hereto.

j . Headings . Headings to paragraphs in this Agreement are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation hereof.

k . Counterparts . This Agreement may be ex-ecuted in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and Executive has hereunto set his hand as of the day and year first above written.

CXC SERVICES, INC..

WITNESS:

__________________ By: ____________________________

WITNESS:

__________________ _____________________________

Mark DiCamillo

Exhibit 10(c)

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of October 1, 2004, by and between cXc Services, Inc. a Delaware corporation (the "Company"), and Richard Rundles ("Executive").

W I T N E S E T H:

WHEREAS, the Company desires to secure the services of Executive and to enter into an agreement embodying the terms of such employment (the "Agreement"); and

WHEREAS, Executive desires to accept such employment and enter into such Agreement;

WHEREAS, the Company is a “start-up” company and to date the Company has not generated any revenue or cash flows;

WHEREAS, the Company has not yet raised working capital or successfully introduced or gained market acceptance of the Company’s products and services in North America;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Company and Executive here-by agree as follows:

1 . Employment .

2 . Position and Duties .

During the Employment Period, Executive shall serve as Executive Vice President Real Estate Distribution Development , reporting directly to the Chief Operating Officer (“COO”), and in such other position or positions with the Company as the COO and the Executive shall agree upon from time to time. During the Employment Period, Executive shall be the Executive vice president real estate distribution development of the corporation and shall, subject to the control of the board of directors (“Board”) and the COO, have general supervision, direction and control of the development of distribution channels and sales of the Company’s products to the real estate industry and shall have the duties, responsibilities and obligations customarily assigned to individuals serving in the position or positions in which Executive serves hereunder. Executive shall devote substantially all of his time to the services required of him hereunder, except during those periods when the Company is unable to fulfill its financial obligations to the Executive as described herein, and provided that nothing contained herein shall preclude Executive from ( i ) serving on the board of directors of any business corpora-tion with the consent of the Board (which will not be unreasonably withheld), ( ii ) serving on the board of, or working for, any charitable or community organization or ( iii ) pursuing his personal financial and legal affairs, so long as such activities, individually or collectively, do not in the opinion of the Board materially interfere with the per-formance of Execu-tive's duties hereunder. Executive represents and warrants that his employ-ment hereunder and compliance by him with the terms and condi-tions of this Agreement does not conflict with or result in the breach of any agreement to which he is a party or by which he may be bound. The Company represents and warrants that this Agreement has been authorized by due corporate action and that the terms and conditions of this Agreement will not conflict with or result in the breach of any agreement to which it is a party or by which it may be bound.

3 . Compensation .

a . Base Salary . During the Employment Period, the Company shall pay Executive a base salary at the annual rate of $150,000. The Board shall annually review Executive's base salary in light of the base salaries paid to other executive officers of the Company, the base salaries of officers with similar responsibilities of comparable corporations and the performance of Executive, and the Board may, in its sole and absolute discretion, increase such base salary by an amount it determines to be appropriate, but shall not decrease Executive’s base salary. Any such increase shall not reduce or limit any other obligation of the Company hereunder. Executive's annual base salary payable hereunder, as it may be increased from time to time, is referred to herein as "Base Salary". The Company shall pay Executive his Base Salary in accordance with the Company's normal payroll practices.

b . Incentive Compensation . Beginning with calendar year 2004, for each calendar year ending during the Employment Period, Executive shall have the opportunity to receive an annual bonus (prorated for the partial year 2004 and any partial year in which Executive’s employment terminates, if otherwise payable pursuant to this agreement), with a target bonus opportunity of not less than 75% of such Base Salary. Such incentive payment shall be based upon Executive's attainment of performance objectives based primarily on the sale of product and services as well as such other criteria established by the Company’s Board for such calendar year and shall be subject to the terms and conditions of the Company's then current incentive compensation programs, practices and policies, as the same may be amended by the Board from time to time. Any bonus payable under this Paragraph 3(b) shall be paid to Execu-tive following the company’s calendar quarter on which the incentive payment will be based at the same time as similar payments are paid to other participating employees of the Company, but in no event later than 30 days after the close of the calendar quarter for which the bonus is payable.

4 . Stock Option Grants .

a . Grant . On the Commencement Date, Executive shall not be awarded any options to purchase shares of the Company’s common stock.

5 . Stock Ownership .

Initial Stock Purchase . Concurrent with the execution of this agreement, the Company shall offer to sell and Executive shall purchase 2,000 shares of the Common Stock of the Company for a purchase price of $4,000.00, (the “Stock”). The terms under which the Executive shall purchase the Stock shall be described in a definitive Subscription Agreement, and shall not be subject to limitations on transferability and resale except as are required for compliance with federal and state securities laws.

6 .

Benefits, Perquisites and Expenses .

7 . Termination of Employment .

Basis of Termination	Accrued Bonus	Severance Benefit	Non-renewal Benefit
Death	Not Payable	Not Payable	Payable
Disability	Not Payable	Not Payable	Payable
Cause	Not Payable	Not Payable	Not Payable
Without Cause	Payable	Payable	Not Payable
Good Reason	Payable	Payable	Not Payable
Voluntary	Payable	Not Payable	Not Payable
Non-Renewal	Not Payable	Not Payable	Payable

d. Definitions . For purposes of Para-graphs 7 and 8, capitalized terms have the follow-ing meanings:

“Change of Control”. For the purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if:

"Severance Benefit" means one times an amount equal to the sum of: (i) Executive’s Base Salary for one year; plus (ii) the average of the bonus paid for the two prior years on an annualized basis, or the bonus for which Executive is eligible in the year of Termination, at target, whichever is higher. Additionally, until the first anniversary of the date of Executive's termination of employment or such earlier date as he shall become eligible for benefits under the plan or program of a subsequent employer, Executive shall also be eligible to continue to participate in the welfare benefit plans and programs (excluding the long-term disability plan, the sick-pay plan and vacation accruals) generally made available to employees of the Company and in which he participated immediately prior to the termination of his employment on the same terms and conditions as would have applied had Executive continued to be employed.

"Termination for Good Reason" means a termination of Executive's employment by Executive following: ( i ) a reduction in Executive's annual Base Salary or incentive compensation opportunity, ( ii ) failure to continue Executive as the Company's executive vice president real estate distribution development, or a similar position, without Executive’s written consent, other than in connection with a Termination for Cause or a Termination due to Disability, ( iii ) a material reduction in Executive's positions, duties and responsibilities from those described in Section 2 hereof or the assignment to Executive of any duties inconsistent with his position or experience, ( iv ) the relocation of Executive's office to a location more than 25 miles from Aliso Viejo, California or ( v ) any other material breach of this Agree-ment by the Company. Notwithstanding the foregoing, a termination shall not be treated as a Termination for Good Reason ( i ) if Executive shall have consented in writing to the occurrence of the event giving rise to the claim of Termination for Good Reason or ( ii ) unless Executive shall have delivered a written notice to the Board within sixty (60) days of his having actual knowledge of the occurrence of one of such events stating that an event or circumstance constituting Good Reason has occurred and requesting a cure by the Company, such notice to specify the factual basis for what event or circumstance constitutes Good Reason, and such event, if capable of being cured, shall not have been cured within 30 days of the receipt of such notice. Executive may thereafter terminate his employment for Good Cause, or at Executive’s election, continue with his employment for a further period of up to six (6) months within which Executive shall be required to submit a final written notice of his election to terminate his employment for Good Reason if Executive chooses to do so. The failure of Executive to submit a final written notice of termination for Good Reason within six (6) months shall act as a waiver of the specific event or circumstance which constituted Good Reason as identified in Executive’s initial written notice.

"Termination Without Cause" means any termination of Executive's employment by the Company other than ( i ) a Termination due to Death or Disability or ( ii ) a Termination for Cause.

(h) Limit on Payments by the Company .

(iv) Application of Section 280G . For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax,

(B) the value of any non-cash benefits or any deferred payment or benefit shall be deter-mined by the Accountants in accordance with the principles of Section 280G of the Code.

9. Noncompetition and Confidentiality .

10. Miscellaneous .

If to the Company:

cXc Services, Inc.

1 Wakonda

Dove Canyon, California 92679

Attention: President and Chief Executive Officer

If to Executive:

Richard Rundles

25 Golden Rain

Aliso Viejo, Ca 92656

i . Amendments . This Agreement may not be altered, modified or amended except by a written instru-ment signed by each of the parties hereto.

j . Headings . Headings to paragraphs in this Agreement are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation hereof.

k . Counterparts . This Agreement may be ex-ecuted in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and Executive has hereunto set his hand as of the day and year first above written.

WITNESS: CXC SERVICES, INC.

10/1/04 By: /s/ Richard Greenwood

WITNESS:

10/1/04 /s/ Richard Rundles