**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 **Washington,
DC 20549**
 
 **Form
10-KSB**
 
 ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
fiscal year ended December 31, 2004
 Commission
file number 333-45678
 
 **SEQUIAM
CORPORATION**
 (Name of
small business issuer in its charter)
 
 California
    33-0875030(State
      or other jurisdiction of incorporation)
    (IRS
      Employer Identification No.)300 SUNPORT LANE,
      ORLANDO, FLORIDA****
    32809(Address
      of principal executive offices)
    (Zip
      Code)
 
 Issuers
telephone number (407) 541-0773
 
 Securities
registered pursuant to Section 12(b) of the Exchange Act: None
 
 Securities
registered pursuant to Section 12(g) of the Exchange Act: 
None
 
 
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. x
Yes oNo
 
 Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB x
 
 Issuer's
revenues for its most recent fiscal year: $265,494.
 
 The
aggregate market value of the Common Stock held by nonaffiliates of the
Registrant as of March 1, 2005, was approximately $8,997,439 based upon the
closing price of the Registrant's Common Stock on such date.
 
 There
were 49,985,774 shares of Common Stock outstanding as of March 1,
2005.
 
 Documents
incorporated by reference.
 Transitional
Small Business Disclosure Format (Check one): Yes o;
No x
  
 
  TABLE OF CONTENTS
 
 PART
      IITEM
      1.
    DESCRIPTION OF BUSINESS
    3ITEM
      2.
    DESCRIPTION OF PROPERTY
    13ITEM
      3.
    LEGAL PROCEEDINGS
    14ITEM
      4.
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
    14PART
      IIITEM
      5.
    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS
    14ITEM
      6.
    MANAGEMENT'S DISCUSSION AND ANALYSIS
    15ITEM
      7.
    FINANCIAL STATEMENTS
    23MANAGEMENT'S
      PLANS
    12ITEM
      8.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND FINANCIAL DISCLOSURE
    23ITEM
      8A
    CONTROLS AND PROCEDURES
    23ITEM
      8B
    OTHER INFORMATION
    23PART
      IIIITEM
      9
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
      PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT.
    23ITEM
      10.
    EXECUTIVE COMPENSATION
    26ITEM
      11
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    29ITEM
      12
    CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS
    30ITEM
      13.
    EXHIBITS AND REPORTS ON FORM 8-K
    31ITEM
      14.
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    35
  1
 *Table of Contents*
  **INTRODUCTORY
NOTE**
 
 This
Report and other Company communications and statements may contain
"forward-looking statements," including statements about our beliefs, plans,
objectives, goals, expectations, estimates and intentions. These statements are
subject to significant risks and uncertainties and are subject to change based
on various factors, many of which are beyond our control. For information
concerning these factors and related matters, see Item 5, "Management's
Discussion and Analysis."
  2
 *Table of Contents*
  **PART
I**
 
 **ITEM 1.**
    **DESCRIPTION
      OF BUSINESS**
 
 **Overview**
 
 We were
incorporated in California on September 21, 1999 as Wedge Net Experts, Inc. On
or about May 1, 2002, we changed our name to Sequiam Corporation and changed our
stock symbol from “WNXP” to “SQUM.OB”. On May 19, 2004, our common stock was
formally listed on the Frankfurt Stock Exchange under the symbol RSQ. We believe
that listing our shares of common stock on the Frankfurt Stock Exchange will
increase our profile with investors, both institutional and retail, in Germany
and across Europe.
 
 Until the
acquisition of Smart Biometrics, Inc. in 2003, we were primarily focused on
developing a portfolio of Internet and print enterprise-wide software products
and developing custom software, databases and websites for businesses. We also
operated as an Internet Service Provider and provided Internet access and web
site hosting for our customers who required those services. During this period,
our business was operated under one operating segment through our subsidiaries:
Sequiam Software, Inc. and Sequiam Communications, Inc.
 
 In 2003,
we decided to expand our portfolio of product offerings by biometric technology
products. The expansion into the biometric technology industry was based on our
belief that the terrorist events of September 11, 2001 and the increased focus
on national and personal security created an increased demand for biometric
technology solutions. Because of these national and global issues, and because
of our existing expertise in software design and development, we believed that
we were uniquely positioned to enter the biometric industry. Furthermore, our
Chief Technology Officer, Alan McGinn, played an instrumental role in connection
with the research and development of the BioVault TM while
associated with Smart Biometrics, Inc.
 
 Today,
our operations are divided into two distinct operating segments: Information
Management and Safety and Security. Our Information Management segment utilizes
our custom software skills, our contacts with the world sports communities and
interactive web-based technologies. We formed our Safety and Security segment
after our acquisition of Smart Biometrics, Inc. and Fingerprint Detection
Technologies, Inc. Through these acquisitions, we acquired: (a) a fingerprint
biometric access control system, which will be a key feature in our future
product offerings; and (b) a fingerprint detection system which we believe
represents a new advancement in that science.
 
 Our
Information Management segment consists of the following subsidiaries: (a)
Sequiam Software, Inc.; (b) Sequiam Sports, Inc.; and (c) Sequiam Education,
Inc. Our Safety and Security segment consists of the following subsidiaries: (a)
Sequiam Biometrics, Inc.; and (b) Fingerprint Detection Technologies,
Inc.
 
 **Development
of the Business**
 
 **Information
Management Segment**
 
 Three
principal shareholders, N icholas
VandenBrekel, Mark Mroczkowski and James Rooney, formed Sequiam Software, Inc.
(formerly Sequiam, Inc.) on January 23, 2001, to research, develop, produce and
market a document management software product. From its inception until April 1,
2002, Sequiam Software, Inc.’s sole business activity was the development of its
software product, Sequiam Document Management System, also referred to as
Sequiam DMS.
 
 **Acquisition
of Brekel Group, Inc.** In 2002,
we acquired 99.38% of the issued and outstanding common stock of Brekel Group,
Inc. We acquired Brekel Group, Inc. for its expertise in digital on-demand
publishing and printing and the innovations that it brings to our document
management, Internet remote print and print on-demand software applications. We
also acquired Brekel Group, Inc. for its contract with the World Olympians
Association and its Internet and ExtraNet expertise and product development
gained from that project (as more fully described below under the heading
“Sequiam Communications, Inc.”). Today, the business of Brekel Group, Inc. is
conducted by our subsidiary Sequiam Sports, Inc., which is part of our
Information Management segment.
  3
 *Table of Contents*
  **Acquisition
of the Assets of W.M.W. Communications, Inc.** Effective
November 1, 2002, we acquired all of the assets of W.M.W. Communication, Inc.,
doing business as Access Orlando. We accounted for this transaction as an
acquisition of the business of W.M.W. Communications, Inc. We acquired W.M.W.
Communications, Inc. for its Internet Remote Print, commonly referred to as
“IRP” and Internet Remote Print Duplicator, commonly referred to as
“IRPlicator,” software products. IRP is a software product that allows computer
users to print remotely to any printer via the Internet. Because IRP is highly
complementary to the Sequiam DMS product, we have integrated the two products.
W.M.W. Communications, Inc. also acted as an Internet Service Provider, which we
incorporated into our business. Through our Internet hosting and collocation
services, we host third-party web content on either our server located at our
remote network operations center, or on the third party’s server that is located
at our remote network operations center. Today, our subsidiary Sequiam Software,
Inc. conducts the business of W.M.W. Communication, Inc. which is part of our
Information Management segment.
 
 **Acquisition
of the Assets of Telepartners, Inc.** On June
1, 2003, we acquired substantially all of the assets of Telepartners, Inc.
located in West Palm Beach, Florida. We accounted this transaction as an
acquisition of the business of Telepartners, Inc. Telepartners, Inc. developed
supplemental educational products for schoolchildren in grades 1 through 12. The
major asset acquired from Telepartners, Inc. was the Extended ClassroomTM
software, which is a supplemental, educational program consisting of a video
lesson library containing the same lesson concepts that are taught in our public
school classrooms in the United States. Each lesson summary has been produced in
high quality and digitally mastered, allowing for Internet and television
broadcast distribution as well as being offered in CD and video formats. Today,
our subsidiary Sequiam Education, Inc., conducts the business of Telepartners,
Inc. **** and which
is part of our Information Management segment.
 
 **Safety
and Security Segment**
 
 **Acquisition
of the Assets of Smart Biometrics, Inc.** On May 9,
2003, we acquired substantially all of the assets of Smart Biometrics, Inc.
located in Sanford, Florida. We accounted for this transaction as an acquisition
of the business of Smart Biometrics, Inc. Smart Biometrics, Inc. is engaged in
the development of biometric technologies. The BioVaultTM technology, which is a
secure access denial device that utilizes biometric technology and protocols to
recognize a person’s fingerprint to unlock, was the major asset of Smart
Biometrics, Inc. Today, our subsidiary Sequiam Biometrics, Inc., conducts the
business of Smart Biometrics, Inc. which is a part of our Safety and Security
segment.
 
 **Acquisition
of Fingerprint Detection Technologies, Inc** ***.*** **** On
September 11, 2003, we acquired 100% of the issued and outstanding shares of
common stock of Fingerprint Detection Technologies, Inc., a Florida corporation.
Fingerprint Detection Technologies, Inc. has the rights to develop and market a
patented and proprietary technology for fingerprint analysis using a
light-emitting diode, or LED, intense headband light source. Because Fingerprint
Detection Technologies, Inc. had no operating history and had not generated any
revenues, we accounted for the acquisition as a purchase of its assets. Today,
Fingerprint Detection Technologies, Inc. is one of our subsidiaries and is part
of our Safety and Security segment.
 
 The
following chart reflects an overview of our corporate organization (including
jurisdictions of incorporation and percentages owned by the parent corporation)
as of September 30, 2004.
 
 
  4
 *Table of Contents*
  **Products**
 
 **Information
Management Segment**
 
 **A.**
    **Sequiam
      Software, Inc.**
 
 Sequiam
Software, Inc. is focused on the following products:
 
 **Sequiam
IRP**
 
 The IRP
software (sometimes marketed as Print It, 123!) enables users to print or copy
documents from their computer or scanner to printers at remote sites using the
Internet with a simple “point and click” procedure. Although the software is
highly complex in its construction, it is very simple to use. Computer users are
generally able to point and click to print a document to their desktop or
network printer. IRP allows computer users to point and click to print a
document to a printer at a remote location such as a corporate high-speed print
facility, a commercial printer at another office, a hotel, a convention center,
or to any other location that has a printer.
 
 IRP
allows users to manage incoming print jobs and provide for easy account
reporting. IRP also works with any MS Office or other Windows program just like
any other printer on a Windows 95/98/NT/2000/XP computer. Because IRP documents
use standard PostScript language, documents submitted to the server may be sent
to any compatible print or output device. Documents may be sorted and grouped by
features in the Java based Print Manager to allow maximum efficiency when
printing. Also, IRP can extract raw print data from a printed document for
import into other existing applications. As of September 30, 2004, we have not
received any revenue from the sale of IRP.
 
 **Sequiam
IRPlicator**
 
 IRPlicator
(sometimes marketed as Scan It, 123!) is a software system used to scan
documents from a variety of scanning devices and send the scanned documents to
the IRP Document Manager. The IRPlicator software runs on any Windows 95, 98,
NT, 2000 or XP based computer. The IRPlicator software interfaces to the
scanning device through the commonly used Twain or ISIS software interface. The
IRPlicator software may use the scanning device’s user interface or in most
cases will allow operation of the scanning device without the use of the
scanning device’s user interface. The IRPlicator’s output postscript contains no
other formatting commands other than the data itself to allow for commands to be
sent to the output device independent of, and not in conflict with, the
postscript data.
 
 There are
currently two versions of the IRPlicator: (a) IRPlicator Print Shop; and (b) IRP
Remote Copy. IRPlicator Print Shop uses a custom print spooler to send document
data to the IRP Document Manager simultaneously while other documents are
continuously being scanned. This high-volume approach is designed for the busy
print shop. The IRP Remote Copy software is usually located at a remote location
along with the remote scanning device(s). Documents scanned using this version
of IRPlicator are sent immediately after scanning from the remote location to
the IRP Document Manager.
 
 Four
customers (two county school districts and two state universities) currently use
the IRP and IRPlicator software products. We have not recognized any revenue
from these sales because they were all made prior to our acquisition of the IRP
and IRPlicator software from W.M.W. Communications, Inc. In each of these cases,
the software was deployed together with a dedicated server and backup systems
for the installation. Since acquisition, we have focused on making improvements
to the product and creating another version of the software that is deployed
entirely through the Internet. This version of the software is designed for
smaller users who do not have sufficient volume to require on site
servers.
 
 To date,
users of the system have realized dramatic print cost savings. In the example of
the school districts, print volumes of as much as 10,000,000 images per month in
over 100 schools and administrative offices have been redirected from desktop
printers to the District’s central print facility at an average savings of
$0.045 per image or $450,000 per month. In one such school district, demand
exceeded the print facility’s capacity such that they were again required to use
the IRP software to outsource the overflow to a commercial print
company.
  5
 *Table of Contents*
  We began
receiving annual support revenue from these installations in the first quarter
of 2003. Pricing for the Internet product will be based upon usage charges. Our
targeted customers are large organizations with in-house print facilities and
commercial digital printers who wish to use the technology to drive more
customer business to their facility.
 
 We have
focused on refining the IRP and IRPlicator software products, including the
development of an internet-only enabled version that does not require an on-site
server installation. We have also focused on integrating Sequiam DMS into the
IRP products by incorporating both software programs into one product working
together. We have done this by integrating the document management aspects of
Sequiam DMS into the unique print capabilities of our IRP products.
Additionally, we have allowed Danka Corporation to extensively test the product
and we have expended additional effort to incorporate certain changes suggested
by them. We are now actively marketing the product to potential value-added
resellers using our existing resources. We intend to expand our sales and
marketing efforts using the proceeds from our transaction with Laurus Master
Fund, Ltd. As of September 30, 2004, we have not received any revenue from the
sale of IRPlicator but have received $5,200 for the continued maintenance of our
existing IRPlicator customers.
 
 **Book
It, ROVER!**
 
 Book It,
ROVER! is a web-based application service that provides destination promotion
agencies (e.g. chambers of commerce and convention and visitor bureaus) with a
tool that is capable of providing full booking service to visitors exploring
their websites. Convention and visitor bureaus, tourist development boards and
other destination promotion entities are discovering the opportunity and
advantages of providing a booking service creating revenue from their existing
web site.
 
 Many
agencies currently offer hotel bookings on their website through consolidators
or resellers. Book it, ROVER! is a departure from this model which puts control
of inventory and pricing structures back into the hands of the hotelier. Book
it, ROVER! allows travelers to purchase attraction tickets, make reservations
for activities and restaurants, make transportation arrangements and fully plan
an itinerary for the visitors’ stay. Book it, ROVER! provides the flexibility to
target specific information and resources to leisure travelers and
business/convention travelers and planners. Book it, ROVER! will also allow the
destination promotion agency to market its’ members goods and services directly
to the desired audience, based on current objectives and
initiatives.
 
 Book It,
ROVER! brings hotels, motels, restaurants, attractions, activities, air lines
and rental car companies within the same geographic area together with the
marketing programs of the area promotional agency and allows visitors to book
their reservations and plan their total visitation experience without ever
leaving the organization’s website.
 
 Book It,
ROVER! allows organizations to turn their “billboard” website into an open
ticket window, offering a revenue source not available in the past, while
providing members a tool to increase sales without giving up control of their
inventory or diluting their price structure. **** Book
it, **** ROVER!
allows one-stop shopping and immediate buying opportunities for interested
visitors right from the existing website. On August 19, 2004, however, we
entered into an exclusive three-year agreement with the National Rifle
Association of America to deploy and integrate Book It, Rover! under the brand
name NRA-TRAVEL.COM to manage a travel affinity program available to all members
of the National Rifle Association of America. Under the terms of the agreement,
we will collect travel operator commissions and then provide a quarterly
affinity royalty to the National Rifle Association of America based on the total
amount of travel volume. In addition, we must pay the National Rifle Association
of America a minimum royalty of $140,000 per year. We launched NRA-TRAVEL.COM on
October 1, 2004. As of September 30, 2004, we have not generated any revenue
from the use of Book it, **** ROVER!
 
 **Access
Orlando**
 
 We
provide web-hosting services to more than 90 customers in the Central Florida
area using the Access Orlando trade name at www.ao.net. As of September 30,
2004, we have generated revenues of $63,877 from our web-hosting services.
  6
 *Table of Contents*
  **Sequiam
Software**
 
 We also
provide high-end web development and custom software and database development to
medium-sized businesses, local governments and non-profit organizations under
the Sequiam Software brand name. Currently, our custom software is focused on
information management. As of September 30, 2004, we have generated revenues of
$29,098 from our custom software and web development services.
 
 **B.**
    **Sequiam
      Sports, Inc.**
 
 Sequiam
Sports, Inc. is focused on the following web development products and
services:
 
 **World
Olympians Association**
 
 We
developed the Internet site and Extranet for the World Olympians Association in
connection with a contract entered into on December 5, 2001. IOC President, Juan
Antonio Samaranch, created the World Olympians Association following the
Centennial Olympic Congress, Congress of Unity, held in Paris in 1994. It is a
global organization representing Olympians. The World Olympians Association was
founded to involve the nearly 100,000 Olympians around the world in the
activities of the Olympic Movement. The World Olympians Association is the
“Fourth Pillar” of the Olympic Community and is supported by the IOC Athletes’
Advisory Commission.
 
 The scope
of the World Olympians Association Extranet is intended to encompass the full
digital media program of the World Olympians Association, including the delivery
of editorial content, on-line membership services, support of World Olympians
Association sponsor/partner programs and electronic commerce. In connection with
our contract, we implemented the worldwide database for the official website of
the Community of Olympic Athletes. Under the terms of our contract with the
World Olympians Association, we are developed the Extranet at our own cost and
expense, and will receive 35% of all sponsorship revenues in addition to 35% of
any merchandizing sales prices less fixed costs. The World Olympians Association
has committed to provide support in integrating our relationship within the
Olympic family, including the International Olympic Committee, various national
Olympic committees, official sponsors of the Olympic Games, and the World
Olympians Association’s membership. As these relationships develop, we expect to
invest more resources into the development of Internet solutions for these
entities. We expect to earn a 35% share of the merchandising and sponsorship
income derived from the website. Because the World Olympians Association
provides the products to be sold on the website and follow-up regarding
sponsorship opportunities, the World Olympians Association is responsible for
generating revenue.
 
 The World
Olympians Association has not been effective at generating any revenue. As a
result, we have not derived any revenue from our relationship with the World
Olympians Association. Regardless, we continue to provide email services for the
electronic newsletters “ Olympian
Insight ,” a
weekly electronic publication sent to Olympic athletes and “ Olympian
Roundup ,” a
monthly electronic publication sent to Olympic athletes, because we believe that
our association with the Olympics will be beneficial to future business and we
believe in the Olympic ideals. In addition, Internet services to publishers and
printers are an integral part of our information management business, and we
believe our relationship with the World Olympians Association will generate new
business for us.
 
 As an
extension of the World Olympians Association Extranet project, we formed a
limited liability company with Pachyderm Press, the publisher of “ World
Olympian ”
magazine, in January 2003. The name of the company was Olympian Publications,
LLC. In February 2003, Olympian Publications, LLC became the publisher of
“ World
Olympian ”
magazine. Because Pachyderm Press failed to perform under our agreement,
effective April 8, 2003, we terminated our agreement with Pachyderm Press,
dissolved Olympian Publications, LLC, and ceased publication of “ World
Olympian ”
magazine. Olympian Publications, LLC never consummated any
transactions.
 
 **C.**
    **Sequiam
      Education, Inc.**
 
 **Extended
Classroom**
 
 Sequiam
Education, Inc. is focused on the Extended Classroom educational product. The
Extended Classroom is a series of 300 internet-based educational supplement
videos for grades 1-12 students and their parents. Written and delivered by
full-time teachers, these Lesson Concept Summaries cover language arts, math,
science and social studies. Furthermore, the Extended Classroom is designed to
meet curriculum standards and correspond to homework assignments. The videos
average two minutes in length, and include test preparation tools and quizzes
that help parents and teachers assess students’ progress and achievement levels.
These results are accessed via a unique data retrieval system. The Lesson
Concept Summaries are delivered via the Internet, and are available on a compact
disc form for homes without broadband access. The videos are digitally mastered
and also available for television broadcast. As of September 30, 2004, we have
not generated any revenue from the sale of the Extended
Classroom.
  7
 *Table of Contents*
  **Safety
and Security Segment**
 
 **A.**
    **Sequiam
      Biometrics, Inc.**
 
 Sequiam
Biometrics, Inc. is focused on the BioVault TM , the
Q300 products and most recently, the SEQUIAM-BIOLOCK.
 
 **BioVault** **TM**
 
 We market
a personal access denial device called BioVault Ô that
uses patent-pending fingerprint recognition technology as the sole means to
control access, and requires no key, card or combination. The
BioVault Ô is
constructed of heavy-duty 12-gauge steel. The BioVault Ô can be
plugged into a house AC current or run independently on three D-cell batteries
for up to one year, and is the only access denial device currently on the market
with no manual override system. The BioVault Ô uses the
same non-volatile memory as cell phones to retain fingerprint information in the
absence of any power source. When power is low, the BioVault Ô signals
the user like a smoke detector.
 
 The
BioVault Ô measures
12.5 inches wide, by 17 inches long, by 3.5 inches deep, and provides room for
two handguns plus ammunition, or valuables such as jewelry, stock certificates
and other documents. The BioVault Ô is easy
to program and stores up to 15 authorized fingerprints. We believe that handgun
owners are the largest market for this product, and our marketing campaign
employs a video with a TV personality and a police academy instructor. Through
our agreement with T&N Enterprises, we have developed a relationship with
the National Rifle Association for the sale of the BioVault Ô through
the National Rifle Association web site. As of September 30, 2004, we have
generated $56,783 in revenues from sales of the BioVault Ô .
 
 **Q300**
 
 In the
first quarter of 2004, we licensed our biometric technology to Security
Marketing Group, LLC. Security Marketing Group, LLC has used that technology to,
with our assistance, design a product similar to the BioVault Ô but
different in design and target market. This redesigned product is the Q300. As
of September 30, 2004, we have generated $32,500 in revenues from the licensing
of the Q300 to Security Marketing Group, LLC.
 
 **SEQUIAM-BIOLOCK**
 
 On May
14, 2004, we introduced the SEQUIAM-BIOLOCK, a biometric door locking
technology. The SEQUIAM-BIOLOCK has been designed to interface with any remote
keyless entry system. When a valid fingerprint is detected on the biometric
sensor, it opens up the lock. We plan to generate revenues from licensing the
SEQUIAM-BIOLOCK. At this
time, we have not licensed this technology.
 
 **B.**
    **Fingerprint
      Detection Technologies, Inc.**
 
 Fingerprint
Detection Technologies, Inc. is focused on our BritePrint  technology.
 
 **BritePrint**
 
 The
BritePrint technology is a light-emitting, diode-based, headband-mounted light
source developed to enhance the detection of dusted latent fingerprints. The
BritePrint system offers a low-cost, hands-free device to be used during the
investigative process by law enforcement. This technology, when used in
conjunction with traditional dust detection methods, reveals otherwise invisible
fingerprints, footprints, and other latent markings at crime scenes and may save
valuable time in the investigative process.
  8
 *Table of Contents*
  Using an
array of light emitting diodes, or LED, the BritePrint device emits
wavelength-specific light of sufficient intensity to cause areas brushed with a
dye to visibly fluoresce. Wearing light-filtering goggles to make the markings
easily detectable to the human eye (orange goggles in the case where rhodamine
6G dye is used), an analyst can quickly proceed with the on-site identification
and analysis of the markings. Video cameras can be fitted with specially colored
lenses or other optical scanning devices to provide additional possibilities for
recording critical crime scene evidence.
 
 We
acquired the BritePrint technology from the Westinghouse Savannah River Company
under the terms of a license agreement. Westinghouse Savannah River Company is
recognized as a world-class center of excellence for the development and
application of unique and innovative science and technology solutions.
Westinghouse Savannah River Company is the applied research and development
laboratory for the U.S. Department of Energy. The inventor of the BritePrint
technology is Eliel Villa-Aleman. As of September 30, 2004, we have not
generated any revenue from sales of the BritePrint and are currently looking to
license this product.
 
 **Market
for our Products and Services**
 
 We have
had no significant sales from our primary products during 2003 as much of the
year was spent acquiring, redeveloping and preparing our products for sale.
Sales and marketing efforts began in the fourth quarter of 2003. Sales for most
of 2003 were derived from secondary services such as our Internet Service
Provider, web development and custom software development. We did sell one-time
web development and custom software development services to various customers
during 2003, for total sales of $338,549. During the fourth quarter of 2003 the
BioVault Ô generated sales of $47,621 and $56,783 for the nine-months ended September 30,
2004. This is attributable to our marketing efforts with the National Rifle
Association. These sales totals were far less than expected in spite of very
favorable feedback from the National Rifle Association email campaigns conducted
during the fourth quarter of 2003. We believe that the high retail price of the
BioVault Ô was an
impediment to its sales. As a result we have changed our marketing strategy
regarding the BioVault Ô . We
developed a less expensive version of the BioVault Ô and
helped develop an alternate version of the BioVault Ô ; the
Q300. In the first quarter of 2004, we licensed the Q300 to Security Marketing
Group, LLC, an experienced consumer products company. The license to Security
Marketing Group, LLC includes a $2 million license fee payable in installments
through December 31, 2004, an eight percent equity stake in Security Marketing
Group, LLC, and a $20 per unit royalty. We also redesigned and reduced the cost
of the original BioVault Ô . We are
currently in discussions to license that product to another consumer products
marketing company.
 
 We had no
sales from our redesigned IRP products available over the Internet on a
transaction fee basis. In the first quarter 2004, however, we entered into a
pilot program to deploy our IRP products with AlphaGraphics, Inc., an
international chain of 320 franchised print shops. This pilot program will
involve the identification, pursuit, sales and service of a number of target
accounts. We anticipate that the pilot program will last 90 days. Thereafter we
may choose to expand the pilot program to other target accounts on a national
basis. The term of this arrangement is one year. We also entered into pilot
programs with another county school system and community college.
 
 We have
no historical financial or market information regarding potential sales for the
assets acquired from Smart Biometrics, Inc. and Telepartners, Inc. because both
companies were development stage companies and neither company had any operating
revenue. Furthermore, we only began to receive operating revenue from our IRP
software products in the second quarter of 2004. Our market estimates for our
products and services are based primarily on our own market research, market
estimates provided to us by Danka Corporation, and market estimates for the sale
of the BioVaultTM provided to us by the National Rifle Association.
 
 Our
management believes that the market for our IRP products and services includes
small, medium and large corporations across all industry segments and non-profit
and governmental entities.
  9
 *Table of Contents*
  We are
targeting our sales of IRP products primarily to leading suppliers in aerospace,
banking, financial services, healthcare, hospitality, insurance, manufacturing,
mining, education, the public sector, telecommunications, and
transportation.
 
  **Distribution
of our Products and Services**
 
 Our
products and services are just now coming to market after a lengthy development
period and, to date, have been sold directly by us and, prior to its
acquisition, W.M.W. Communications, Inc. We intend to sell our IRP and
IRPlicator products through “Value Added Resellers,” distributors and marketing
alliances and through our own direct sales efforts.
 
 **Value
Added Resellers** . We plan
to form additional relationships with Value Added Resellers that are software
companies and print equipment manufacturers and distributors. Under a typical
agreement, the Value Added Reseller will sell our software products in
conjunction with their own products.  In some instances, a Value Added
Reseller might convert our products to their own private-label.  VII, Inc.,
a government contractor, is a current Value Added Reseller, offering our
products to a variety of federal government agencies and other government
contractors.   Under the typical Value Added Reseller agreement, we expect
to grant the Value Added Reseller a non-exclusive license to resell certain of
our software products. In addition, we will permit the Value Added Reseller to
sublicense our software products to its own customers. The Value Added Reseller
will earn revenue from the sublicenses it grants to its existing customers. As
of September 30, 2004, no revenues have been received from VII, Inc.
 
 **Distributors** . We plan
to form relationships with distributors that have experience selling technology
products in geographic areas where we do not have a physical presence. We
currently have one distributor, BioMet Access Company, LLC in Missouri, that
markets and sells biometric products, including the BioVaultTM, through a network
of approximately 200 dealers, partners and consultants. We intend to grant our
distributors a non-exclusive license to sell certain of our software products in
these geographic areas. We will also permit the distributor to grant sublicenses
to use our software products.  The distributor will earn revenue from the
sublicenses it grants. As of September 30, 2004, we have received $4,273 revenue
from BioMet Access Company, LLC for sales of the BioVaultTM.
 
 We have
an agreement with the National Rifle Association to help distribute the
BioVaultTM. The National Rifle Association acts only as a sales agent and will
not purchase any of our products directly. The National Rifle Association offers
our BioVaultTM in its online store and catalog and has estimated that we will be
able to sell approximately 50,000 units over the twelve months following the
second quarter 2004. As of September 30, 2004, we have generated little revenue
from this relationship because the National Rifle Association had not completed
or commenced its overall marketing plan. The National Rifle Association expects
to accelerate its marketing efforts in 2005 when we introduce a new version of
the BioVault which will be redesigned to their specifications.
 
 **Alliance
Partners** . Our
“Alliance Partners” will be companies that provide both technology and
management consulting and implementation services, but typically will not
actually sell software.  Alliance Partners who recommend our products as a
service to their clients, should often provide great influence on sales. 
We will not maintain a formal financial relationship with our Alliance Partners
nor will our Alliance Partners receive fees in exchange for recommending our
products. In return for these referrals, we will, if the occasion arises, refer
management consulting services to our Alliance Partners. For example, Danka
Corporation has recommended our IRP and IRPlicator software products to
companies in a variety of industries, primarily healthcare and education. As a
result, two educational institutions have agreed to use IRP beginning in the
second quarter of 2004. As of September 30, 2004, we have not received
significant revenues from our Alliance Partners, but we have contracts and
commitments from two state universities and school systems as a result of their
referrals.
 
 **Sequiam
Associate Partners** . We will
enter into independent contractor relationships with individuals and
organizations working in a self-determined territory. These independent
contractors will earn a commission based upon the sales value of the products
they sell. We seek candidates with a strong background in our key markets. Based
on their background, these candidates can leverage prior market experience and
business relationships, which should allow them to identify, qualify and
penetrate key accounts for the sale of our products. The Roosevelt Group, Inc.,
William J. Metzger, Realvest, Inc., T&N Enterprises, Inc., and the Quasar
Group, Inc. are some of our associate partners at this time. As of September 30,
2004, we have not received significant revenues from these partners; however, we
have begun a pilot project with AlphaGraphics, Inc. that is currently underway
as a result of the efforts of the Roosevelt Group, Inc.
  10
 *Table of Contents*
  We have
taken the following steps to establish relationships with other value-added
resellers, distributors and alliance and associate partners:
 
 ·
    We
      have one full-time employee for each of our segments whose job it is to
      seek out new value-added resellers, distributors and alliance and
      associate partners.
 
 ·
    We
      are also active in recruiting new selling and referral sources through our
      networks and by advertising.
 
 We also
plan to license our print software, educational and biometrics technologies to
companies with greater selling resources and experience then us. We are in
discussions with various companies to license our Internet Remote Print software
products, Extended Classroom educational product, the original BioVaultTM,
BritePrint and other adaptations of our biometrics technologies. In the first
quarter of 2004 we licensed an adaptation of the BioVaultTM known as the Q300 to
Security Marketing Group, LLC for a $2 million license fee and a $20 per unit
royalty.
 
 We
launched our web site (www.sequiam.com) in 2001 to provide customer leads and to
promote our products and services over the Internet. Our web site is also used
to provide current customers with information on new products and services,
product training dates and company-sponsored seminars. Historically,
approximately 100% of our annual revenues have been received through direct
sales efforts. We plan to expand those efforts through other distribution
channels in 2004. Information contained on our website should not be considered
part of this prospectus.
 
 **Competition**
 
 **Sequiam
IRP and IRPlicator** . **** We are
unaware of competitors whose products perform all of the functions performed by
our software products.  We compete in the market for integrated document
management and Internet remote print software with other software companies
whose products are used to image, print and manage documents. Our management
believes that our products are competitive due to features such as ease of
deployment, low overhead and administration, ease of use, integrated application
suite, and appeal to broad user requirements.
 
 **Book
It, ROVER!** We are
aware of only one company, TravelHero, which directly competes with us in
offering reservation systems directly to Convention and Visitors Bureaus. The
competing product only provides for hotel reservations and does not include
restaurants, attractions, events, sports facilities and entertainment, as does
Book It, ROVER! Additionally, Book It, ROVER! has a built-in web wizard
developer. We also provide hosting for those business members of the Convention
and Visitors Bureau wishing to participate in the system but who are not yet
online. Established in 1995, TravelHero is a content and technology provider for
the travel industry, offering turnkey reservation solutions for destination
marketing organizations. TravelHero claims to be the online reservation partner
for www. *NASCAR* .com, as
well as over 85 official visitor bureaus and lodging associations. We are
presently responding to requests for proposals from two Convention and Visitors
Bureaus for the implementation of Book It, ROVER!
 
 **Access
Orlando** . **** Our
competition with web site development and web site hosting business is from a
variety of small to medium-sized industry specialists and generalists. Our
managed hosting services involve hosting website either on our server or on a
customer’s server stored at our office. Competitors in Orlando are largely small
to mid-sized (6 to 20 staff) companies including; Sales & Marketing
Technologies, Xenedev Development Services, Web-Solvers, Digital Planet,
Bridgemore Technologies and Atlantic.net. Additionally, dozens of
cottage-industry development companies consume a small amount of the market’s
development and hosting demand. We do not plan to grow this product offering as
we do not consider it part of our core business. We use these revenues to offset
our own web hosting and Internet access costs for internal use, and in support
of IRP, IRPlicator and Book It, ROVER!
 
 **Sequiam
Software** . **** Our
competition with custom software development business is from a variety of
small, medium-sized and large competitors. We do not actively compete in this
market but rather provide custom software applications to our existing customers
as an accommodation when it benefits our relationship with them or otherwise
presents an opportunity to develop new applications with greater market
potential.
  11
 *Table of Contents*
  **Extended
Classroom** . **** Numerous
companies compete in this market. The top four successful companies with similar
goals and markets are Riverdeep, Brainpop, Testbuddy, and Esylvan. Their
programs are content rich, very well researched and designed with maximum
student interaction in mind. The Brainpop model seems to be the most effective
and possibly the most successful with a low-priced model of only $34.95 per year
for a family and less than $200 per year for a school. Brainpop appears to
be used in 15% of America’s schools and used by approximately two million
children. We do not plan to compete in the open market with these firms but are
searching instead for a strategic partner who can deploy our product as part of
a broader program. As of September 30, 2004, we have not found such a strategic
partner for our Extended Classroom product.
 
 **World
Olympians Association** . **** A
competing web-development company based in Europe has posted an alternative web
site for the World Olympians Association. This competitor claims that it was
granted permission to post this web site by the World Olympians
Association.
 
 **BioVault** **Ô** . The
single competitor for the BioVaultTM is 9g Products’ flagship product, the
INPRINTTM. Using fingerprint technology, the INPRINTTM securely stores jewelry,
handguns, valuables, important documents, medications, and personal information
and is similar in purpose and operation to the BioVault Ô .
INPRINTTM is less expensive than the BioVault Ô and, in
our opinion is also less well constructed and a less substantial product in
general. The INPRINTTM is constructed of aluminum and uses weaker hinges and
locking mechanisms than the BioVaultTM, which uses all steel construction. 9g
Products Inc. was founded in 2002 and its only product is the
INPRINTTM.
 
 **BritePrint** .
SceneScope, first marketed by SPEX in 1997, has been sold to dozens of U.S. law
enforcement agencies at all levels. It has been sold worldwide to most national
police agencies. The SceneScope Imager uses intensified ultra violet reflectance
instead of fluorescence as in Forensic Light Sources. The System can detect
fingerprints on most non-porous surfaces prior to any treatment or after a
cyanoacrylate (Superglue) fuming. **** Fuming is
required when preliminary examination yields no results.
 
 Our
patent pending, BritePrint technology is a light-emitting, diode-based,
headband-mounted, light source developed to enhance the detection of dusted
latent fingerprints. The BritePrint system offers the potential of a low-cost,
hands-free device to be used during the investigative process. This technology,
when used in conjunction with traditional dust detection methods, reveals
otherwise invisible fingerprints, footprints, and other latent markings at crime
scenes and may save valuable time in the investigative process and is less
expensive than competing methods.
 
 Advantages
of the BritePrint
technology over competing methods are as follows:
 
 ·
    Enables
      advanced real-time field detection and
analysis
 ·
    Light-emitting
      diode technology for brighter illumination
 ·
    Cost
      effective
 ·
    Self-powered
      and easily portable
 ·
    Hands-free
      operation
 
 **Our
Customers**
 
 We
provide internet access and web-hosting services for over 700 customers. 
In the past, several of our customers have ordered additional software and
services, occurring within a non-predictable time frame, that is, from a few
months of the original order up to a year or more after that order.  The
additional orders typically have been either custom programming projects or the
purchase of new products as these become available.  No single customer
accounted for more than 10% of our revenues during 2003.
 
 **Intellectual
Property**
 
 Our
patents pending for “BioVault Ô “ and
“BritePrint” were recently denied. We have resubmitted our patent applications
with the United States Patent Office. We have not sought patent protection for
any of our software products due to the length of the patent application
procedure and the necessity to continually develop and improve our software
products. We feel the risk of loss due to piracy is somewhat mitigated because
our software is only offered as an application service provider via the
Internet. We plan to make patent applications in 2004 for some of the software.
We will register as prior art in the Software Patent Institute database any of
our methods whose patentability time bar has expired, to prevent anyone else
from patenting those methods.
  12
 *Table of Contents*
  We have
registered “Sequiam”, “IRP”, “Book it, ROVER!”, “Smart Biometrics”, “BioVault”
and “QuestPrint” (as trademarks) with the U.S. Patent and Trademark
Office.
 
 Contracts
under which we license the use and/or sale of our products include
confidentiality clauses to protect our products and any information in
connection with them.
 
 Despite
these precautions, it may be possible for unauthorized third parties to copy
certain portions of our products or to obtain and use information that we regard
as proprietary. There can be no assurance that our efforts will provide
meaningful protection for our proprietary technology against others who
independently develop or otherwise acquire substantially equivalent techniques
or gain access to, misappropriate, or disclose our proprietary
technology.
 
 **Research
and Development Activities**
 
 **Sequiam
Software** . **** We
incurred and capitalized software development costs in 2004 and 2003, a total of
$-0- and $4,206, respectively.  None of these costs were borne directly by
any customer. With respect to IRP, we do not expect to continue to maintain our
prior level of investment in developmental activities consistent with our 2002
or 2003 research and development expenses, as the product is complete and
marketable.
 
 **Sequiam
Biometric, Inc** *.* **** We
acquired both the “BioVaultTM” and “BritePrint” technology. Accordingly, we had
no significant research and development costs associated with these products
other than normal adaptations for alternate uses of the biometrics. We do not
expect research and development costs to be significant during 2004 and the
foreseeable future. We are more focused on licensing our products to companies
who manufacture and sell products that will employ our
technologies.
 
 **Our
Employees**
 
 As of
December 1, 2004, we curtailed operations by reducing our staff from 24
full-time employees to five full-time salaried employees, two part-time hourly
employees, four full-time unpaid employees and three commission only
salespersons. Five of these employees worked in sales and marketing; six worked
in product development and support; and three provided general administrative
services. No employees are represented by a labor union, and we consider our
relations with employees to be good.
 
 **Dependence
on Key Management Personnel**
 
 We
believe that our continued success depends to a significant extent upon the
efforts and abilities of its senior management. In particular, the loss of
Nicholas H. VandenBrekel, our President and Chief Executive Officer, Mark L.
Mroczkowski, our Senior Vice President and Chief Financial Officer, or Alan
McGinn, the Chief Technology Officer of Sequiam Software, Inc., could have a
material adverse effect on our business. We have employment contracts with each
of these officers, which are more fully described under the heading
“Management.”
 
  **ITEM 2.**
    **DESCRIPTION
      OF PROPERTY**
 
 Our
corporate headquarters are located at 300 Sunport Lane, Orlando, Florida
32809.  On July 1, 2001, the Brekel Group, Inc., prior to our acquisition,
entered into a lease agreement to rent approximately 60,000 square feet of
combined office and manufacturing space through June 30, 2011. Effective July 1,
2002, we entered into a lease forbearance agreement for 10,000 square feet of
the same space for the remaining term of the lease.  Because we determined
to cease Brekel’s print and publishing operations before we acquired it,
effective July 1, 2002, Brekel entered into a lease forbearance agreement for
10,000 square feet of the same space for the remaining term of the lease. In
April 2004, we signed a new lease agreement and note payable with the landlord
that supercedes and replaces the lease forbearance agreement described
above.
  13
 *Table of Contents*
  The lease
is for 24,085 square feet and is effective July 1, 2004 for a period of
seventy-two (72) months beginning July 1, 2004 and ending on June 30, 2010. The
note payable was fixed at $1,600,000 together with interest thereon at a simple
interest rate equal to six percent (6%) per annum. Commencing on August 1, 2004
and continuing on the first (1st) day of each month thereafter through and
including June 1, 2010, we are scheduled to pay to Lender payments consisting of
principal and interest in the amount of $26,517 per month. Payments on the note
commence July 1, 2004, through June 1, 2010.
 
 **ITEM 3.**
    **LEGAL
      PROCEEDINGS**
 
 Sequiam
Sports, Inc. (formerly known as Brekel Group, Inc.) entered into a note payable
with Xerox Corporation in November 2000 to finance equipment. Sequiam Sports,
Inc. also entered into a Document Services Agreement with Xerox Corporation on
November 1, 1999, commencing April 1, 2000. During the 63-month term of the
Agreement ending June 30, 2005, Xerox agreed to provide equipment and services
in accordance with specified performance standards. Those standards include,
among other things, a performance satisfaction guaranty by Xerox. Under the
terms of that guaranty, Sequiam Sports, Inc. may terminate the agreement without
incurring any early termination charges. Sequiam Sports, Inc. gave proper notice
of such termination in March 2001. On September 3, 2002, Xerox did, contrary to
the contract, assert its claim for early termination charges and for monthly
minimum service charges on billings made after the termination date. On June 29,
2004, Xerox Corporation filed a lawsuit in the Circuit Court in and for Pinellas
County, State of Florida. The amount in controversy is $1,573,668.85. We dispute
these claims and believe them to be without merit.
 
 No other
material legal proceedings are currently pending or threatened against
us.
 
 
 **ITEM 4.**
    **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS**
 
 No
matters were submitted to a vote of security holders during the fourth quarter
of fiscal year 2004 through the solicitation of proxies or
otherwise.
 
 **PART
II**
 
 **ITEM 5.**
    **MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS**
 
 (a) On
September 11, 2001, our Form SB-2 became effective, and our stock has been
quoted on the NASD OTC Bulletin Board since February 8, 2002. Our common stock
is currently traded under the symbol SQUM. The table below sets forth the OTC
market quotations, which reflect inter-dealer prices, retail mark-up, markdown
or commission and may not necessarily represent actual
transactions.
 
 Market
      PricesQuarter
    
    2004
    
    2003High
    
    Low
    
    High
    
    LowFirst
      quarter
    
    $
    0.83
    
    $
    0.30
    
    $
    1.53
    
    $
    0.36Second
      quarter
    
    
    0.71
    
    
    0.32
    
    
    1.24
    
    
    0.42Third
      quarter
    
    
    0.52
    
    
    0.23
    
    
    0.95
    
    
    0.32Fourth
      quarter
    
    
    0.44
    
    
    0.23
    
    
    0.51
    
    
    0.15
 
 As a
result of current trading prices, our common stock may be subject to the penny
stock rules under the Securities Exchange Act of 1934. Unless an exemption from
those rules is available, broker-dealers making a market in the common stock
will be required to provide disclosure to their customers on the risks
associated with the common stock, its investment suitability for the customer,
information on bid and ask prices for the common stock and information about any
compensation the broker-dealer will receive for a transaction in the common
stock. The application of these rules will likely reduce market-making
activities in the common stock by impairing its liquidity.
  (b) As of
January 7, 2005, there were 206 holders of record of our common stock. In
addition, as of February 9, 2005, there were 446 beneficial holders whose stock
is held in the name of broker-dealers or banks.
  14
 *Table of Contents*
  (c) We
have not paid and, in the foreseeable future, we do not intend to pay any
dividends. There are no restrictions that limit the ability to pay dividends on
common equity and none that are likely to do so in the future.
 
 (d) For
information regarding our existing securities authorized for issuance under
equity compensation plans, please see Item 11 below beginning on page .
 
 Below
is a summary of the unregistered sale of securities made during the fourth
quarter of 2004.
 
 Common
Stock . We did
not sell any unregistered securities during the fourth quarter of
2004.
 
 **ITEM 6.**
    **MANAGEMENT'S
      DISCUSSION AND ANALYSIS**
 
 Management's
discussion and analysis (“MD&A”) provides supplemental information, which
sets forth the major factors that have affected the Company's financial
condition and results of operations and should be read in conjunction with the
Consolidated Financial Statements and related notes. The MD&A is divided
into subsections entitled “Forward Looking Statements,” “Introduction,” “Results
of Operations,” “Liquidity and Capital Resources,” “Off-Balance Sheet
Arrangements,” and “Accounting Policies.” Information therein should facilitate
a better understanding of the major factors and trends that affect the Company's
earnings performance and financial condition, and how the Company's performance
during 2004 **** compares
with prior years.
 
 **Forward
Looking Statements**
 
 Management’s
Discussion and Analysis 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, as well as historical information. Although we believe
that the expectations reflected in these forward-looking statements are
reasonable, we can give no assurance that the expectations reflected in these
forward-looking statements will prove to be correct. Our actual results could
differ materially from those anticipated in forward-looking statements as a
result of certain factors. Forward-looking statements include those that use
forward-looking terminology, such as the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,”
“should,” and similar expressions, including when used in the negative. Although
we believe that the expectations reflected in these forward-looking statements
are reasonable and achievable, these statements involve risks and uncertainties
and no assurance can be given that actual results will be consistent with these
forward-looking statements.
 
 All
forward-looking statements attributable to us are expressly qualified in their
entirety by these and other factors. We undertake no obligation to update or
revise these forward-looking statements, whether to reflect events or
circumstances after the date initially filed or published, to reflect the
occurrence of unanticipated events or otherwise.
 
 **Introduction**
 
 The
following discussion and analysis summarizes the significant factors affecting:
(i) our consolidated results of operations for Fiscal 2004 compared to Fiscal
2003; and (iii) financial liquidity and capital resources.  This discussion
and analysis should be read in conjunction with our consolidated financial
statements and notes included in this prospectus.
 
 We are an
information management, software and security technology company specializing in
biological identification security systems and web-based application services
for the business, education and travel industries. Our business is divided into
two operating segments: (a) Safety and Security; and (b) Information
Management.
 
 We derive
or plan to derive our revenues from five sources: (i) the sale and licensing of
our software products; (ii) consulting, custom software services and web
development services; (iii) maintenance agreements in connection with the sale
and licensing of software products; (iv) Internet access and web hosting
services. We have not yet generated revenue from the sale and licensing of our
software products; and (v) the sale and licensing of our biometric products.
Software license revenue will be recognized when all of the following criteria
have been met: (a) there is an executed license agreement and software has been
delivered to the customer, (b) the license fee is fixed and payable within
twelve months, (c) collection is deemed probable, and (d) product returns are
deemed reasonably estimable. Maintenance revenues are recognized ratably over
the term of the maintenance contract, typically 12 to 36 months. Internet access
and web-hosting services are recognized over the period the services are
provided, typically month-to-month.
  15
 *Table of Contents*
  The
following table shows the proportion of total revenues by segment in each of the
last two fiscal years and the nine-month period ended September 30,
2004.
 
 **Period**
    
    **Safety
      and Security**
    
    **Information
      Management**Fiscal
      year ended December 31, 2003
    
    $
    47,620
    
    $
    338,549Fiscal
      year ended December 31, 2004
    
    $
    99,765
    
    $
    165,729
 
 **Results
of Operations**
 
 **Fiscal
2004 compared to Fiscal 2003.** Unless
otherwise noted, references to 2004 represent the year ended December 31,
2004 and references to 2003 represent the year ended December 31,
2003.
 
 The
following table sets forth information regarding our financial results for 2004
and 2003.
  2004
      Amount
    
    2003
      AmountRevenue
    
    $
    265494
    
    $
    386,170Costs
      of services and product sales
    
    $
    957,741
    
    $
    1,072,731Selling,
      general and administrative
    
    $
    3,230,937
    
    $
    3,448,502Interest
      expense
    
    $
    1,349,836
    
    $
    368,663Net
      losses
    
    $
    5,928,302
    
    $
    4,690,188
 **Revenues**
 
 We derive
or plan to derive our revenues from five sources: (i) the sale and licensing of
our biometric and software products; (ii) user fees for online Application
Service Provider (“ASP”) services; (iii) consulting, custom software and web
development services; (iv) maintenance agreements in connection with the sale
and licensing of software products; and (v) Internet access and web hosting
services. Biometric and Software license revenue will be recognized when all of
the following criteria have been met: (a) there is an executed license agreement
and the technology or the software has been delivered to the customer, (b) the
license fee is fixed and payable within twelve months, (c) collection is deemed
probable, and (d) product returns are deemed reasonably estimable. Revenue from
ASP services are recognized as the transactions are processed by the system.
Maintenance revenues are recognized ratably over the term of the maintenance
contract, typically 12 months. Custom software development and web development
services are typically performed over a period ranging from a few days to a few
weeks and revenue is recognized upon completion of the project. Consulting
service revenues are recognized when services are performed. Internet access and
web-hosting services are recognized over the period the services are provided,
typically month-to-month. Total revenue decreased by $120,676 or 31% to $265,494
for the year ended December 31, 2004, from $386,170 for the year ended December
31, 2003.
 
 Sales of
biometric products were $99,765 in 2004 an increase of $52,145 (110%) over 2003
sales of $47,620. Included in those sales were $32,500 in license fees and
BioVault product sales of $67,265 in 2004 compared to $47,620 in 2003 an
increase of $19,645(41%). BioVault sales are described below. Biometric and
software and license fee revenues were unchanged at $-0- for both 2004 and 2003.
During 2004 and 2003 we re-developed IRP and IRPlicator from server based
products into an ASP model for use over the Internet and for marketing purposes
we renamed the products PrintIt!123 and ScanIt!123, respectively. We began
generating revenues from the sale of our IRP suite of software products in the
second quarter of 2004 and recorded $36,200 in ASP service fees in 2004 compared
to none in 2003.
  16
 *Table of Contents*
  Other
sales for 2004 and 2003 included consulting, custom software services and web
development services totaling $41,821 and $138,512 a decrease of $96,691 or 70%;
maintenance agreements in connection with the sale and licensing of software
products, sold by WMW prior to Sequiam's purchase of the software on November 1,
2002, were unchanged at $5,200 for both 2004 and 2003; and Internet access and
web-hosting services totaling $82,508 and $182,408 for 2004 and 2003
respectively, a decrease of $99,900 or 55%.
 
 Sales of
the BioVault have been less than our original estimates for several reasons. The
National Rifle Association (“NRA”) with whom we have a marketing agreement did
launch an Internet and email-marketing campaign for the product as agreed. The
feedback we received from consumers was that the product was priced too
expensively, was not attractive and lacked certain functions that users wanted
in the electronics. As a result, we have redesigned the product as the BioVault
2.0 with improved features, more attractive styling and we reduced the selling
price from $599 to $299. In exchange the NRA has agreed to use a more proactive
marketing approach by the selling the product directly to their membership
through their 52,000 firearms instructors many of whom will act as sales agents.
The first deliveries of that product will begin late in the second quarter of
2005 when the design and tooling process is complete and manufacturing can
begin. The NRA estimates a backlog of demand at around 10,000
units.
 
 Sales of
the BioLock, a residential biometric door lock will begin in the third quarter
of 2005 when the design and tooling process is complete and manufacturing can
begin. We have backorders for approximately 15,000 units of that
product.
 
 Our IRP
software allows users to print directly to remote printers thereby solving the
connectivity problem and allowing large organizations to realize savings that
run into many thousands of dollars per month by moving printing from convenience
printers that cost $0.05 to $0.08 cost to high volume digital machines either
owned in-house or outsourced that cost $0.01 to $0.02 per page. We think that
trend will continue, and as a result, more competitors will enter the
market.
 
 To date,
users of our IRP system sold prior to our acquisition of W.M.W. Communications
have realized significant print cost savings. In the example of the two school
district clients, print volumes of as much as 10,000,000 images per month in
over 100 schools and administrative offices have been redirected from desktop
printers to the District’s central print facility at an average savings of
$0.045 per image or $450,000 per month. In one such school district demand
exceeded the print facility’s capacity and as a result, they were required to
use the IRP software to outsource the overflow to a commercial print
company.
 
 Each of
the four installations was sold prior to our acquisition of W.M.W.
Communications at an average price of $40,000 per system with annual support
provided at $5,200 per year. Pricing for the Internet product PrintIt!123 and
ScanIt!123 is based upon usage charges ranging from $0.0025 to $0.01 per image
processed depending upon volume and application. Targeted customers are large
organizations with in-house print facilities and commercial digital printers who
wish to use the technology to drive more customer business to their facility. In
2004 we entered into an agreements with AlphaGraphics, Inc., and Sir
Speedy/PIP  leading
global suppliers of strategic sourcing for business copying and printing
services, to test IRP in a pilot programs in a select number of its print shops
and with certain of its commercial clients. We also signed reseller agreement
with Danka Office Systems, Blackboard, Inc. in 2004 and IKON Office Solutions in
2005.
 
 The trend
in Internet access is towards broadband access. Dial up service will eventually
become obsolete. As a result, we have seen the revenues from our Access Orlando
brand steadily decline. We sold the dial-up portion of that business to a large
Internet access provider. We acquired that business from WMW Communications, but
we did not consider it to be a part of our long-term business plan. In the
information Management segment of the business, we expect to concentrate on the
ASP products PrintIt!123 and ScanIt!123, software, database and web development
products.
 
 We have
an agreement with the World Olympians Association (“WOA”) to publish and host
their website. We have a right to earn a 35% share of the merchandising and
sponsorship income derived from the website. The responsibility for revenue
generation rests with the WOA and they have not been effective at revenue
generation and to date, we have not received any revenues from our agreement.
Regardless, we continue to provide website development and hosting services to
the WOA. Sequiam also produces “Olympian Insight” the electronic news
communication for all Olympians worldwide and provides Olympians with worldwide
personal email services. We continue to perform our duties because we believe
that our association with the Olympics will be beneficial  to future
business and because we believe in the Olympic ideals.
  17
 *Table of Contents*
  **Operating
Expenses**
 
 Cost of
services increased by $22,557 (2.4%), from $935,184 for the year ended December
31, 2003 to $957,741 for the year ended December 31, 2004. This increase is due
to a full year’s amortization of Intellectual properties acquired during 2003
actual expenditures to deliver the cost of services decreased $106,659 (18%)
from $580,412 in 2003 to $473,753 in 2004, largely due to staff reduction and
related personnel costs. Depreciation and amortization included on cost of
services increased $277,208 (78%) from $354,772 in 2003 to $631,980 in
2004. We see
no upward trend in this cost as we have the infrastructure needed to carry on
our business.
 
 
 Cost of
product sales increased $52,145 (110%) from $47,620 in 2003 to $99,765 in 2004
due to the increase sales of product.
 
 Selling,
general and administrative expenses decreased $216,565 (6%) from $3,448,502 in
2003 to $3,230,937 in 2004. We decreased our overhead expenditures such as
salaries, wages and benefits for administrative and, computer maintenance and
supplies. We maintained professional services such as legal and accounting fees,
and corporate travel expenses at constant levels. We increased expenditures for
sales and marketing including advertising, production of marketing materials,
and participation in trade show activities as we completed the development of
our software products. Also included in selling general and administrative
expenses in 2004 is $570,450 and in 2003 is $1,759,445 of non-cash expenses
related to investment banking, investor relations, consulting, legal and
research and development expenses.
 
 
 We had
grown from twelve employees at December 31, 2002 to seventeen at December 31,
2003, largely as a result of the acquisition of WMW Communications, Smart
Biometrics, and Telepartners. During 2004 we consolidated the operations of
those companies with ours and made certain reductions in personnel as a result.
After we received the loan from Laurus, we increased our Sales and marketing
staff in an attempt to get our ASP service launched and generate sales. We hired
two executives, four salespersons and two technical support field
representatives. We could not generate sales rapidly enough to cover the
additional expenses before our cash reserves were depleted. At the end of
November we laid off seven of the eight new hires, two administrative staff, and
three technical staff members reducing our numbers to eight full time and one
part-time staff. We retain some of the former staff as contractors, on an as
needed basis. The addition of the employees has negatively impacted liquidity
and cash flow for the year ended December 31 2004 and 2003. We can further
expect that payroll will be a burden through 2005 as we attempt to raise the
additional capital necessary to get our products to market. Payroll expense as a
percentage of revenue will diminish dramatically after we establish a regular
sales cycle of our products because our ongoing support costs will be minimal
compared to our original development costs. We expect to distribute our products
through channel sales and other resellers. As a result, we do not expect large
increases in personnel and related expenses as we go to market with our
products.
 
 The
Company currently operates without directors’ and officers’ insurance and
property, casualty and general liability insurance and is at risk for those
types of losses.
 
 **Interest
Expense**
 
 Interest
expense increased by $981,173, from $368,663 in 2003 to $1,349,836 in 2004, as a
result of an increase in loans from shareholders, a note payable related to
leasehold improvements acquired from Brekel Group in July 2002 the debenture
issued to La Jolla Cove Investors, four loan agreements with Lee Harrison
Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen a loan
agreement with Eagle Financial, LLC and the $2 million loan agreement with
Laurus Master Fund. Included in interest expense is a non-cash charge of
$1,156,996 for accretion of debt discount as a result of capitalizing, and then
amortizing over the life of the loan the fair value of warrants for common stock
issued in connection with the various loan agreements and the beneficial
conversion feature of convertible notes. We expect to see a decrease in interest
expense as we convert or replace debt with equity and accrete or write off the
remaining debt discount of $332,633.
  18
 *Table of Contents*
  **Net
Losses**
 
 Sequiam
Corporation incurred net losses of $5,847,017 and $4,690,188 for the years ended
December 31, 2004 and 2003, respectively, an increase of $1,156,829 (25%). The
significant increase was due largely to the increase in interest expense and
non-cash and non-recurring expenses for investment banking, consulting and other
services acquired in exchange for stock totaling $543,602 together with $206,082
of additional losses on impairment of intangible assets, and debt restructure
charges of $111,742 and increases in depreciation and amortization of $107,781.
We expect to incur additional net losses through the second quarter of 2005 as
we continue to get our biometrics products into production and continue to
introduce our software products to the marketplace. We expect to cash flow the
business beginning late in the second quarter and progressing into the beginning
the third quarter using proceeds from the sales our products. The Company
presently requires sales of approximately $200,000 per month to provide a
positive cash flow.
 
 **Liquidity
and Capital Resources**
 
 **General**
 
 Our
principal use of cash in our operating activities is for selling general and
administrative expenses.  Our principal source of liquidity has
historically been from financing activities.  We believe that cash provided
by our operating and financing activities will no longer provide adequate
resources to satisfy our working capital, liquidity and anticipated capital
expenditure requirements at the present time. At this time, our lack of
sufficient financing to implement our business plan, and our expectation of
continued operating losses for the foreseeable future raises doubt about our
ability to continue as a going concern. Our ability to continue as a going
concern is heavily dependant upon our ability to obtain additional capital to
sustain operations. Although we are presently attempting to secure additional
financing to continue our operations, there is no assurance additional capital
will be available on acceptable terms, if at all.
 ****
 **Operating
Activities**
 
 Cash and
cash equivalents decreased by $151,450 to $-0-as of December 31, 2004, from
$151,450 as of December 31, 2003. Net cash used in operating activities was
$2,787,421 for the year ended December 31, 2004, as a result of the net loss
during the period of $5,928,302 increases in accounts receivable of $32,454 and
increases in accrued expenses of $64,998, which was partially offset by
increases in cash overdraft, accounts payable and accrued shareholder salaries
totaling $292,271 and non-cash expenses and losses totaling $2,833,269. Net cash
used by investing activities was $130,080 for the year ended December 31, 2004
consisting of purchases of equipment of $25,042, product development costs of
$34,509 for the BioVault 2.0 and $70,529 of payments for the acquisition of WMW
Communications.
 
 **Investing
and Financing Activities**
 
 Net cash
provided by financing activities was $2,766,051 for the year ended December 31,
2004. Proceeds from sales of common stock accounted for $863,475, short-term
debt increased by $1,325,000 and was offset by repayments of $501,810, long-term
debt increased by $2,000,000 for the Laurus Master Fund loan. Repayments of
long-term debt to Laurus and on the Forbearance Agreement totaled $266,007. We
capitalized loan costs totaling $246,250, repaid shareholder loans in the amount
of $346,349.
 
 Current
liabilities of $5,090,636 exceed current assets of $136,236 by $4,954,400. Of
that amount, $1,698,743 is owed to shareholders as loans and accrued but unpaid
salaries under employment agreements. The officers of the Company are dedicated
to its business plan and will place no undue demands on its working capital.
They expect payment from future cash flows or equity capital infusions.
 
 Prior to
our acquisition of the Brekel Group, Inc., effective July 1, 2001, the Brekel
Group, Inc. entered into an operating lease agreement to rent approximately
60,000 square feet of combined office and manufacturing space through June 30,
2011.  Because we determined to cease Brekel’s print and publishing
operations before we acquired it, effective July 1, 2002, Brekel entered into a
lease forbearance agreement for 10,000 square feet of the same space for the
remaining term of the lease. In April 2004, we entered into a new lease
agreement and note payable with the landlord that supercedes and replaces the
lease forbearance agreement entered into by the Brekel Group, Inc. effective
July 1, 2002 prior to its acquisition by us.
  19
 *Table of Contents*
  The new
lease for 24,085 square feet is effective July 1, 2004 for a period of
seventy-two months beginning July 1, 2004 and ending on June 30, 2010. The note
payable was fixed at $1,600,000 together with interest thereon at a simple
interest rate equal to six percent per annum. Commencing on August 1, 2004 and
continuing on the first day of each month thereafter through and including June
1, 2010, we are scheduled to pay to Lender payments consisting of principal and
interest in the amount of $26,517 per month.
 
 Rental
expense for the years ended December 31, 2004 and 2003 was $137,903 and
$125,508, respectively. The original amount of the note of $1,600,000 represents
$893,112 of deferred rent and $706,888 of tenant improvements. The December 31,
2004 balance of $1,525,376 is included $234,181 in current portion of long-term
debt and $1,290,558 in long-term debt. The new minimum future rentals required
under the operating lease and the maturities of the long-term note payable are
as follows:
 
 Year
    
    Rentals
    
    Maturities2005
    
    $
    193,564
    
    $
    234,1812006
    
    
    206,773
    
    
    248,6242007
    
    
    210,993
    
    
    263,9592008
    
    
    215,319
    
    
    280,2392009
    
    
    219,753
    
    
    297,524Thereafter
    
    
    110,999
    
    
    200,849$
    1,157,401
    
    $
    1,525,376
 
 During
the year ended December 31, 2004, we incurred a net loss of $5,847,017 and used
$2,787,421 of cash in operating activities. As of December 31, 2004, we had an
accumulated deficit of $12,448,858, total stockholders' deficit of $4,876,774,
and negative working capital of $4,954,400.
 
 In the
last quarter of 2004 we curtailed operations and borrowed $150,000 in short term
loans. We continued operations on a curtailed basis in the first quarter of 2005
and the officers of the company loaned additional funds to the Company as
needed.
 
 Since
December 31, 2003, we sold securities in six separate private placements. As a
result, we have received during the year ended September 30, 2004 total net
proceeds of $793,817 and most of this amount is reflected as additional paid-in
capital in our financial statements for the period ended September 30, 2004. We
also received $400,000 of proceeds from a loan in January 2004, $775,000 in
September 2004, and $2,000,000 from a secured convertible term note described
below.
 
 On
September 7, 2004, we entered into a loan agreement with Eagle Financial, LLC,
for a principal loan amount of $200,000 under a promissory note bearing interest
at eight percent (8%). The principal becomes due on March 7, 2005 and the
interest is due monthly. In connection with this loan, the Company issued one
warrant to the holder to purchase 400,000 shares of its common stock at an
exercise price of $0.66 per share.
 
 On
September 30, 2004, we entered into a loan agreement with Lee Harrison Corbin,
Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a
principal loan amount of $500,000 under a promissory note bearing interest at
five percent (5%). In connection with this loan, the Company issued one warrant
to the holder to purchase 1,300,000 shares of its common stock at an exercise
price of $0.66 per share. The principal and interest become due on March 30,
2005.
 
 On
September 30, 2004, we entered into a loan agreement with Lee Harrison Corbin
for a principal loan amount of $75,000 under a promissory note bearing interest
at five percent (5%). In connection with this loan, the Company issued one
warrant to the holder to purchase 195,000 shares of its common stock at an
exercise price of $0.66 per share. The principal and interest become due on
March 30, 2005.
  20
 *Table of Contents*
  On April
27, 2004, pursuant to a Securities Purchase Agreement dated as of the same date,
we completed the sale of a secured convertible term note with Laurus Master
Fund, Ltd. The note has a term of three years and accrues interest at an annual
rate equal to the “prime rate” (4.25% at September 30, 2004) published in the
Wall Street Journal plus 2%. The note is convertible into shares of our common
stock at a conversion price of $0.66 per share as amended.
 
 In
connection with the sale of the note, we issued the purchaser a common stock
purchase warrant to purchase up to 666,666 shares of our common stock at prices
ranging from $0.83 per share to $1.16 per share as amended. Also in connection
with the sale of the note, we agreed to register for resale the shares of common
stock into which the note is convertible and the warrant is exercisable.
 
 Effective
October 27, 2004, we entered into an Amendment and Waiver to Securities Purchase
Agreement and Related Agreements with Laurus Master Fund, Ltd. amending the
following agreements previously entered into by us and Laurus on April 27, 2004:
(a) the securities purchase agreement; (b) secured convertible term note; (c)
the common stock purchase warrant; and (d) the registration rights agreement.
This agreement was entered into in reliance upon exemptions from registration
pursuant to Section 3(a)(9) of the Securities Act of 1933, as
amended.
 
 Pursuant
to this agreement, Laurus: (a) waived our technical default of Section 6.12(f)
of the Securities Purchase Agreement for failing to obtain their approval of the
recent financing transactions described above; and (b) in satisfaction of due
and unpaid fees of $49,333, incurred by us for failing to cause this
registration statement registering the shares underlying the secured convertible
term note and the common stock purchase warrant to be declared effective by the
SEC by August 30, 2004, we issued to Laurus a warrant to purchase 470,000 shares
of our common stock at an exercise price of $0.33 per share.
 
 Pursuant
to this agreement, Laurus will not require us to make principal or interest
payments under the secured convertible term note until May 2, 2005. Thereafter,
we promised to pay Laurus $75,758 per month, together with any accrued and
unpaid interest, until the maturity date of the secured convertible term note.
The secured convertible term note was further amended by decreasing the fixed
conversion price of the secured convertible term note from $0.66 per share to
$0.33 per share.
 
 
 The
securities purchase agreement was amended to permit us to incur unsecured
subordinated indebtedness in the aggregate principal amount not to exceed
$1,025,000, so long as such indebtedness is subordinated to the our debt to
Laurus. The $875,000 in additional financing, as more fully described below and
in: (a) the Form 8-K filed with the SEC on September 13, 2004; and (b) the Form
8-K filed with the SEC on October 4, 2004, is included in this
amount.
 
 The
common stock purchase warrant was amended by decreasing the exercise price of
the common stock purchase warrant to equal as follows: (a) $0.41 for the first
222,222 shares; (b) $0.50 for the next 222,222 shares; and (c) $0.58 for any
additional shares acquired under the common stock purchase warrant.
 
 The
registration rights agreement was amended to lengthen the date that our
registration statement registering the shares underlying the secured convertible
term note and each of the common stock purchase warrants must be declared
effective by the SEC from August 30, 2004 to December 19, 2004.
 
 The
proceeds from the Laurus transaction will not be adequate to support our
operations while we build sales revenues from our products. The proceeds from
the Laurus transaction have been completely exhausted. As a result, we now need
to obtain additional financing to continue our operations. As of the date of
this registration statement, although we have engaged investment bankers to
raise additional capital, we have been unable to secure such additional capital.
In addition to our efforts to obtain additional permanent financing, we obtained
an additional $775,000 in short-term loans in September 2004 and an additional
$100,000 in November 2004.
  21
 *Table of Contents*
  On
December 1, 2004, we reduced our staff from 24 full-time salaried and one
part-time hourly employees to four full-time salaried, and two part-time hourly
and four full-time unpaid employees and three commission only salespersons. We
also terminated three contractors. These and other changes have reduced our
monthly cash requirements to approximately $165,000. We estimate that we will
require approximately $1,980,000 to fund our operations for the next 12 months.
 
 The
combination of increasing sales, reduced expenses and short-term loans will
allow us to continue operations until such time as additional permanent
financing can be obtained and then until sales levels allow us to draw the
remaining $1,000,000 available under the Laurus agreement. To the extent this
occurs, we will likely be obligated to file a registration statement with the
SEC, which we believe, depending on the length of the registration process, may
distract management and divert company resources away from our core operating
activities. We believe that, to the extent obtained and cleared by the SEC, such
financing will be adequate to support our operations until fully supported by
revenues. However, at this time, our lack of sufficient financing to implement
our business plan, and our expectation of continued operating losses for the
foreseeable future raises substantial doubt about our ability to continue as a
going concern. Our ability to continue as a going concern is heavily dependant
upon our ability to obtain additional capital to sustain operations. Although we
are presently attempting to secure additional financing to continue our
operations, there is no assurance additional capital will be available on
acceptable terms, if at all.
 
 
 **Application
of Critical Accounting Policies**
 
 We
utilize certain accounting policies and procedures to manage changes that occur
in our business environment that may affect accounting estimates made in
preparation of our financial statements. These estimates relate primarily to our
allowance for doubtful accounts receivable and the recognition and measurement
of potential impairment on long-lived and intangible assets. Our strategy for
managing doubtful accounts includes stringent, centralized credit policies and
collection procedures for all customer accounts. We utilize a credit risk rating
system in order to measure the quality of individual credit transactions. We
strive to identify potential problem receivables early, take appropriate
collection actions, and maintain adequate reserve levels. Management reviews its
long-lived and intangible assets for impairment whenever changes in
circumstances or other events indicate potential impairment. Management has
determined that the allowance for doubtful accounts and impairment losses are
adequate at December 21, 2004.
 
 **Recent
Accounting Pronouncements**
 
 In
December 2004, the Financial Accounting Standards Board (FASB) revised Statement
of Financial Accounting Standard No. 123 "Share-Based Payment" (SFAS 123R). SFAS
123R requires Companies to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value
of the award. The cost will be recognized over the period during which an
employee is required to provide service in exchange for the award (usually the
vesting period). Changes in fair value during the requisite service period will
be recognized as compensation cost over that period. The grant date fair value
of employee share options and similar instruments will be estimated using
option-pricing models adjusted for the unique characteristics of those
instruments (unless observable market prices for the same or similar instruments
are available). If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the
fair value of the modified award over the fair value of the original award
immediately before the modification This statement is effective for the first
reporting period beginning after June 15, 2005. In the opinion of management,
the adoption of this statement will not have a significant impact on the
Company's consolidated financial statements.
 
 Off-Balance
Sheet Arrangements
 
 We do not
currently have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to our
stockholders.
  22
 *Table of Contents*
  **ITEM 7.**
    **FINANCIAL
      STATEMENTS**
 
 
 
  
 SEQUIAM
CORPORATION AND SUBSIDIARIES
 
 **Consolidated
Financial Statements**
 
 *For
the years ended December 31, 2004 and 2003*
 
 
  23
 *Table of Contents*
  Sequiam
Corporation and Subsidiaries
 
 Consolidated
Financial Statements
 
 For the
years ended December 31, 2003 and 2002
 
 
 **Contents**
 
 
 Reports
      of Independent Registered Certified Public Accounting Firm
    F-2Consolidated
      Financial Statements:Balance
      Sheets
    F-3Statements
      of Operations
    F-4Statements
      of Shareholders’ Deficit
    F-4Statements
      of Cash Flows
    F-6Notes
      to Consolidated Financial Statements
    F-7
  
 F-2
 *Table of Contents*
  Sequiam
Corporation and Subsidiaries
 Consolidated
Balance Sheets
 December
      31,2004
    
    2003Assets:Current
      assetsCash
    
    $
    -
    
    $
    151,450Receivables,
      net of allowance for bad debts of $3,390 and $3,000
    
    
    39,111
    
    
    7,047Prepaid
      expenses
    
    
    97,125
    
    
    21,067Equipment
      held for sale
    
    
    -
    
    
    40,706Total
      current assets
    
    
    136,236
    
    
    220,270Property
      and equipment, net
    
    
    1,303,757
    
    
    1,174,866Software
      development costs, net
    
    
    -
    
    
    108,916Acquired
      software, net
    
    
    163,200
    
    
    230,400Intellectual
      properties, net
    
    
    644,896
    
    
    985,645Product
      development costs
    
    
    34,509
    
    
    -Loan
      costs, net
    
    
    224,252
    
    
    -Deposits
      and other assets
    
    
    8,805
    
    
    22,788Total
      assets
    
    $
    2,515,655
    
    $
    2,742,885Liabilities
      and shareholders’ deficitCurrent
      liabilities:Bank
      overdraft
    
    $
    24,165
    
    $
    -Amount
      due for acquisition
    
    
    -
    
    
    70,529Notes
      and debentures payable
    
    
    1,692,077
    
    
    592,322Accounts
      payable
    
    
    706,966
    
    
    573,860Accrued
      expenses
    
    
    96,299
    
    
    181,301Deferred
      revenue
    
    
    6,000
    
    
    -Deferred
      rents
    
    
    26,141
    
    
    -Current
      portion of long-term debt
    
    
    840,245
    
    
    95,131Loans
      from shareholders
    
    
    348,951
    
    
    695,300Accrued
      shareholders’ salaries
    
    
    1,349,792
    
    
    1,214,792Total
      current liabilities
    
    
    5,090,636
    
    
    3,423,235Long-term
      debt
    
    
    2,301,793
    
    
    1,175,933Total
      liabilities
    
    
    7,392,429
    
    
    4,599,168Commitments
      and contingenciesShareholders’
      deficit:Preferred
      shares, par value $.001; 50,000,000 shares authorized; none
      issued
    
    
    -
    
    
    -Common
      shares, par value $.001; 100,000,000 shares authorized; 47,965,604 and
      43,863,218 shares issued and outstanding
    
    
    47,966
    
    
    43,863Additional
      paid-in capital
    
    
    7,524,118
    
    
    4,701,695Accumulated
      deficit
    
    
    (12,448,858
    )
    
    (6,601,841
    )Total
      shareholders’ deficit
    
    
    (4,876,774
    )
    
    (1,856,283
    )Total
      liabilities and shareholders’ deficit
    
    $
    2,515,655
    
    $
    2,742,885
 *See
accompanying notes to consolidated financial statements*
  F-3
 *Table of Contents*
  Sequiam
Corporation and Subsidiaries
 Consolidated
Statements of Operations
 
 Years
      ended December 31,2004
    
    2003RevenuesServices
    
    $
    165,729
    
    $
    338,550Product
      sales
    
    
    99,765
    
    
    47,620Total
      revenues
    
    
    265,494
    
    
    386,170Costs
      and expenses:Cost
      of services
    
    
    957,741
    
    
    935,184Cost
      of product sales
    
    
    215,613
    
    
    137,547Selling,
      general and administrative
    
    
    3,230,937
    
    
    3,448,502(Gain)
      loss on sale of equipment
    
    
    (146
    )
    
    18,304Loss
      on impairment ofequipment
      held for sale
    
    
    40,706
    
    
    75,000Loss
      on impairment of intangible assets
    
    
    206,082
    
    
    -Loss
      on debt settlement
    
    
    111,742
    
    
    93,1584,762,675
    
    
    4,707,695Loss
      from operations
    
    
    (4,497,181
    )
    
    (4,321,525
    )Interest
      expense
    
    
    (1,349,836
    )
    
    (368,663
    )Net
      loss
    
    $
    (5,847,017
    )
    $
    (4,690,188
    )Net
      loss per common share:Basic
      and diluted
    
    $
    (0.13
    )
    $
    (0.12
    )Shares
      used in computation of net loss per common share -Basic
      and diluted weighted average shares outstanding
    
    
    46,271,637
    
    
    38,285,976
 
 *See
accompanying notes to consolidated financial statements*
  F-4
 *Table of Contents*
  Sequiam
Corporation and Subsidiaries
 Consolidated
Statements of Shareholders’ Deficit
 Years
Ended December 31, 2003 and 2002
 Common
      SharesShares
      Outstanding
    
    Par
      Value
    
    Additional
      Paid-in
      Capital
    
    Accumulated
      Deficit
    
    TotalBalance
      at December 31, 2002
    
    
    35,462,609
    
    $
    35,463
    
    $
    42,565
    
    $
    (1,911,653
    )
    $
    (1,833,625
    )Correction
      of transfer agent error
    
    
    (17,000
    )
    
    (17
    )
    
    17
    
    
    -
    
    
    -Sale
      of common shares
    
    
    3,555,638
    
    
    3,555
    
    
    1,036,946
    
    
    -
    
    
    1,040,501Common
      shares issued for services
    
    
    2,318,500
    
    
    2,319
    
    
    1,757,127
    
    
    -
    
    
    1,759,446Warrants
      issued in connection with loan agreement
    
    
    -
    
    
    -
    
    
    550,000
    
    
    -
    
    
    550,000Common
      shares issued in connection with loan agreement
    
    
    75,000
    
    
    75
    
    
    29,925
    
    
    -
    
    
    30,000Common
      shares issued for acquisition of WMW Communications, Inc.
    
    
    318,471
    
    
    318
    
    
    149,682
    
    
    -
    
    
    150,000Common
      shares issued for acquisition of Smart Biometrics, Inc.
    
    
    1,500,000
    
    
    1,500
    
    
    748,500
    
    
    -
    
    
    750,000Common
      shares issued for acquisition of Telepartners, Inc.
    
    
    165,000
    
    
    165
    
    
    149,768
    
    
    -
    
    
    149,933Common
      shares issued for acquisition of Fingerprint Detection Technologies,
      Inc
    
    
    485,000
    
    
    485
    
    
    237,165
    
    
    -
    
    
    237,650Net
      loss
    
    
    -
    
    
    -
    
    
    -
    
    
    (4,690,188
    )
    
    (4,690,188
    )Balance
      at December 31, 2003
    
    
    43,863,218
    
    
    43,863
    
    
    4,701,695
    
    
    (6,601,841
    )
    
    (1,856,283
    )Shares
      issued to correct error
    
    
    19,047
    
    
    19
    
    
    (19
    )
    
    -
    
    
    -Sale
      of common shares
    
    
    1,993,757
    
    
    1,994
    
    
    759,098
    
    
    -
    
    
    761,092Stock
      options exercised
    
    
    237,500
    
    
    238
    
    
    40,137
    
    
    -
    
    
    40,375Common
      shares issued for services
    
    
    1,752,082
    
    
    1,752
    
    
    568,698
    
    
    -
    
    
    570,450Debt
      settlement
    
    
    100,000
    
    
    100
    
    
    50,900
    
    
    -
    
    
    51,000Warrants
      issued in connection with loan agreements
    
    
    -
    
    
    -
    
    
    1,339,208
    
    
    -
    
    
    1,339,208Warrants
      issued for loan costs
    
    
    -
    
    
    -
    
    
    49,333
    
    
    -
    
    
    49,333Debt
      assumed with the Acquisition of Telepartners
    
    
    -
    
    
    -
    
    
    15,068
    
    
    -
    
    
    15,068Net
      loss
    
    
    -
    
    
    -
    
    
    -
    
    
    (5,847,017
    )
    
    (5,847,017
    )Balance
      at December 31, 2004
    
    
    47,965,604
    
    $
    47,966
    
    $
    7,524,118
    
    $
    (12,448,858
    )
    $
    (4,876,774
    )
 
 *See
accompanying notes to consolidated financial statements*
  F-5
 *Table of Contents*
  Sequiam
Corporation and Subsidiaries
 Consolidated
Statements of Cash Flows
 
 Year
      ended December 31,Cash
      flows from operating activities:
    
    2004
    
    2003Net
      loss
    
    $
    (5,847,017
    )
    $
    (4,690,188
    )Adjustments
      to reconcile net loss to net cash used for operating
      activities:Depreciation
      and amortization
    
    
    560,649
    
    
    452,868Accretion
      of debt discount
    
    
    627,326
    
    
    322,322Accretion
      of beneficial conversion feature
    
    
    458,339
    
    
    -Stock
      options granted to non-employees
    
    
    122,338
    
    
    -Amortization
      of loan costs
    
    
    71,331
    
    
    -(Gain)
      loss on sale of equipment
    
    
    (146
    )
    
    18,304Loss
      on impairment of equipment held for sale
    
    
    40,706
    
    
    75,000Loss
      on impairment of intangible assets
    
    
    206,082
    
    
    -Loss
      on debt settlement
    
    
    56,250
    
    
    93,158Issuance
      of common stock in exchange for services
    
    
    570,450
    
    
    1,759,446Stock
      issued in debt settlement
    
    
    51,000
    
    
    -(Increase)
      Decrease in receivables
    
    
    (32,454
    )
    
    36,094(Decrease)
      increase in allowance for bad debts
    
    
    390
    
    
    (2,000
    )(Increase)
      decrease in prepaid expenses, deposits and other assets
    
    
    (62,075
    )
    
    (36,055
    )Increase
      in bank overdraft
    
    
    24,165
    
    
    -(Decrease)
      increase in accounts payable
    
    
    133,106
    
    
    (15,628
    )(Decrease)
      increase in other accrued expenses
    
    
    64,998
    
    
    (48,700
    )Increase
      in deferred revenue
    
    
    6,000
    
    
    -Increase
      in deferred rents
    
    
    26,141
    
    
    -Increase
      in accrued shareholders salaries
    
    
    135,000
    
    
    360,000Net
      cash used for operating activities
    
    
    (2,787,421
    )
    
    (1,675,379
    )Cash
      flows from investing activities:Equipment
      purchases
    
    
    (25,042
    )
    
    -Proceeds
      from sale of equipment
    
    
    -
    
    
    42,568Payment
      for acquisition of WMW Communications
    
    
    (70,529
    )
    
    (67,928
    )Product
      development costs capitalized
    
    
    (34,509
    )
    
    (4,206
    )Net
      cash used investing activities
    
    
    (130,080
    )
    
    (29,566
    )Cash
      flows from financing activities:Proceeds
      from sales of common stock
    
    
    801,467
    
    
    1,040,501Increase
      in notes and debentures payable
    
    
    1,325,000
    
    
    750,000Repayment
      of notes and debentures payable
    
    
    (501,810
    )
    
    -Proceeds
      from long-term debt
    
    
    2,000,000
    
    
    -Repayment
      of long-term debt
    
    
    (266,007
    )
    
    (20,028
    )Loan
      costs capitalized
    
    
    (246,250
    )
    
    -Payments
      on shareholder loans
    
    
    (346,349
    )
    
    -Net
      cash provided by financing activities
    
    
    2,766,051
    
    
    1,770,473(Decrease)
      Increase in cash
    
    
    (151,450
    )
    
    65,528Cash,
      beginning of period
    
    
    151,450
    
    
    85,922Cash,
      end of period
    
    $
    -
    
    $
    151,450
 *See
accompanying notes to consolidated financial statements*
  F-6
 *Table of Contents*
  Sequiam
Corporation and Subsidiaries
 Notes to
Consolidated Financial Statements
 
 For the
years ended December 31, 2004 and 2003
 
 **1.
Summary of Business and Significant Accounting Policies**
 
 Description
of Business and Acquisitions
 
 Sequiam
Corporation ("Sequiam" or the "Company") through its wholly owned subsidiaries,
develops, markets, and supports a portfolio of Biometric fingerprint unlocking
devices that enable users to gain access to using their personal identity and
Internet and print enterprise-wide software products that enable users to
acquire, manage, personalize, and present information. In addition, the Company
provides application service provider ("ASP") hosting of Internet-enabled
solutions, Internet service provider ("ISP") including Internet access and
hosting, consulting, application integration, and custom web development and
software development services. ASP and ISP hosting is performed using the
Company's software and facilities to provide processing, print, mail, archival,
and Internet delivery of documents for customers who outsource this activity.
 
 The
Company's operations are divided into two distinct operating segments:
Information Management and Safety and Security. The Information Management
segment includes the Company's Internet Remote Print ("IRP") suite of software
products and interactive web-based technologies obtained by the acquisition of
WMW Communications, Inc. and Telepartners, Inc (see below), as well as its ASP,
ISP and other custom web development and software development services as
described above. The Company's Safety and Security segment was formed upon the
acquisition of the assets of Smart Biometrics, Inc. and Fingerprint Detection
Technologies, Inc. (see below). The Company acquired from Smart Biometrics, Inc.
fingerprint biometric access control systems technology and a secure safe called
BioVault(TM). This biometric technology will be a key feature in the Company's
future product offerings. The “BritePrint” fingerprint detection technology that
the Company acquired from UTEK Corporation (“UTEK”) provides improved
fingerprint detection.
 
 Effective
April 1, 2002, Sequiam Corporation (f/k/a Wedge Net Experts, Inc.), through its
wholly owned subsidiary, Sequiam Acquisitions, Inc., merged with Sequiam, Inc.
and Sequiam Acquisitions, Inc. survived the merger. Sequiam Acquisitions, Inc.
changed its name to Sequiam Software, Inc. on May 1, 2002. Pursuant to the
merger agreement, Sequiam Corporation issued 20,000,000 shares of common stock
in exchange for all of the outstanding shares of common stock of the Company,
consisting of 20,000,000 shares. Additionally, pursuant to the merger agreement,
500,000 shares of Sequiam Corporation's common stock were returned to treasury
and cancelled. As a result, the former shareholders of the Company obtained
82.53% of the voting rights of Sequiam Corporation. The transaction was
accounted for as a recapitalization of Sequiam Corporation and the results of
operations and cash flows presented herein prior to the merger are those of
Sequiam, Inc. Sequiam, Inc. was incorporated in Delaware on January 23, 2001
(date of inception) to research, develop, produce and market a document
management software product.
 
 During
2002, the Company acquired Brekel Group, Inc. and WMW Communication, Inc. and
began offering web development, Internet and web hosting and custom software
development, while continuing its software development activities. During 2003,
the Company acquired the assets of Smart Biometrics Inc., Telepartners, Inc. and
Fingerprint Detection Technologies, Inc. as more fully described
below.
 
 Effective
July 19, 2002 (“date of acquisition”), Sequiam Corporation acquired 94.54% of
the issued and outstanding shares of Brekel Group, Inc., a Delaware corporation
("Brekel"), in exchange for 11,522,263 shares of Sequiam Corporation common
stock, pursuant to a Stock Exchange Agreement and Plan of Organization, dated
June 17, 2002 (the “Agreement”). The shares exchanged were at an exchange rate
of 1:1. In connection with the merger, the majority shareholder of Brekel
returned 9,500,000 shares leaving 12,229,594 common shares of Brekel outstanding
before the exchange with Sequiam Corporation. Sequiam Corporation acquired
630,998 or 4.84% of the remaining issued and outstanding common shares of Brekel
on December 16, 2002 for a total of 12,153,261 shares or 99.38% of Brekel’s
issued and outstanding common shares. The acquisition of Brekel was accounted
for as a purchase of the assets and the results of operations of Brekel are
included in the accompanying financial statements since the date of acquisition.
The excess of the purchase price ($13,575,193) over the carrying value of the
net liabilities acquired ($4,554) of $13,579,747 was accounted for as a
constructive dividend to the Brekel shareholders. Goodwill was not recognized on
the transaction because Sequiam and Brekel were under common control. The
purchase was determined based on the 12,153,261 shares issued times $1.12, the
average closing stock price of Sequiam Corporation common stock on and around
June 17, 2002, the date the agreement was signed and agreed to by the majority
shareholders. Under the terms of the agreement, Sequiam repurchased and retired
one million of its common shares from Brekel at par value.
  F-7
 *Table of Contents*
  The
following table summarizes the estimated carrying values of the assets acquired
and liabilities assumed at the date of acquisition.
 
 Current
      and other assets
    
    $
    520,032Equipment
      held for disposal
    
    
    268,456Equipment
      under capital leases held for disposal
    
    
    1,656,009Property
      and equipment
    
    
    1,643,962Total
      assets acquired
    
    
    4,088,459Current
      liabilities
    
    
    2,869,583Long-term
      debt
    
    
    1,223,430Total
      liabilities assumed
    
    
    4,093,013Net
      liabilities acquired
    
    $
    (4,554
    )
 
 Sequiam
acquired Brekel for its expertise in digital on-demand publishing and printing
and the innovations that it brings to our document management Internet remote
print and print on-demand software applications. Sequiam also acquired Brekel
for its contract with the World Olympians Association (“WOA”) and its Internet
and ExtraNet expertise and product development gained from that project. On
November 14, 2002 Sequiam changed Brekel’s name to Sequiam Communications, Inc.
to better represent its role within the Sequiam group.
 
 Brekel
had ceased its print on-demand manufacturing operation that it conducted under
the trade name QuestPrint and publishing operations under the trade name
FirstPublish prior to its acquisition by Sequiam Corporation. As a result
$1,885,936 of equipment was returned to the manufacturer on August 1, 2002 and
the related capital leases of $1,656,009 were written off. The loss on the
return of this equipment to the lessor of $229,927 reduced equipment under
capital leases held for disposal in the Brekel acquisition since the assets were
impaired prior to the acquisition. In addition, Brekel entered into a lease
forbearance agreement and a liability of $893,112 was recognized in accordance
with EITF 95-3 upon the acquisition of Brekel’s assets for lost rents to be paid
to the landlord in the form of a note payable as a result of ceasing Brekel’s
operations (see Note 7).
 
 Effective
November 1, 2002 Sequiam Software, Inc., acquired all of the assets of W.M.W.
Communication, Inc. ("WMW"), doing business as Access Orlando. The purchase
price of $300,000 was to be paid $150,000 in cash and $150,000 in Sequiam common
shares valued at the date of closing, on February 13, 2003. The cash was paid
$55,000 on or before closing ($11,542 prior to December 31, 2002) and
installments of $45,000 and $50,000 were due fifteen and ninety days after the
February 13, 2003 closing date. At December 31, 2003, $70,529 was due to WMW in
connection with this acquisition and was recorded as a current liability in the
accompanying balance sheet. The remaining liability of $70,529 was paid during
2004. The acquisition was accounted for as a purchase of the business of WMW and
the excess of the purchase price over the fair value of the assets acquired of
$288,000 was allocated to the software products Internet Remote Print (IRP) and
Internet Remote Print Duplicator (“IRPlicator”). IRP is a software product that
allows computer users to print remotely to any printer via the
Internet.
 
 Sequiam
acquired Access Orlando because IRP is highly complementary to DMS and Sequiam
has integrated the two products. Like Sequiam, Access Orlando was engaged in
software development, website development, Internet hosting and collocation
services, and is also an Internet service provider (ISP).
 
 On May 9,
2003, Sequiam Biometrics, Inc., a wholly owned subsidiary of Sequiam Corporation
formed on April 21, 2003, acquired substantially all of the assets of Smart
Biometrics, Inc. of Sanford, Florida. In consideration for the assets, Sequiam
Corporation issued a total of 1,500,000 shares or $750,000 of its common stock
to Smart Biometrics, Inc., valued at $.50 per share. Smart Biometrics, Inc. was
engaged in the development of biometric technologies. The assets acquired by
Sequiam Biometrics, Inc. include office equipment and the BioVaultTM technology.
The BioVault is a secure safe that utilizes patent pending technology and
protocols to recognize a person’s fingerprint to unlock. The excess of the
purchase price over the fair value of the office equipment acquired of $50,000
was $700,000 and was allocated to the BioVault technology and is being amortized
over its estimated useful life of five years. Smart Biometrics, Inc. had no
operating history and had not generated any revenues. Accordingly, the
acquisition was accounted for as a purchase of assets.
  F-8
 *Table of Contents*
  On June
1, 2003, Sequiam Education, Inc., a wholly owned subsidiary of Sequiam
Corporation formed on May 30, 2003, acquired substantially all of the assets of
Telepartners, Inc. of West Palm Beach, Florida. In consideration for the assets,
Sequiam Corporation issued a total of 165,000 shares of its common stock to
Telepartners, Inc. valued at the closing market price of its common stock on the
date of acquisition of $.97 per share or $160,000. Telepartners, Inc. was
engaged in the development of supplemental educational products for
schoolchildren in grades 1 through 12. The assets acquired by Sequiam Education,
Inc. include the Extended ClassroomTM software, which is a supplemental,
educational program consisting of a video lesson library of the very lesson
concepts that are taught in our public school classrooms in the United States.
Each lesson summary is produced in high quality and digitally mastered, allowing
for Internet and television broadcast distribution as well as CD and video
formats. The excess of the purchase price over the fair value of the net
liabilities acquired of $10,067 was $149,933 and was allocated to the Extended
Classroom software and is being amortized over its estimated useful life of five
years. Telepartners, Inc. had no operating history and had not generated any
revenues. Accordingly, the acquisition was accounted for as a purchase of its
assets.
 
 On
September 11, 2003, Sequiam Corporation acquired 100% of the issued and
outstanding shares of common stock of Fingerprint Detection Technologies, Inc.,
a Florida corporation (“FDTI”). In consideration for the shares, Sequiam
Corporation issued a total of 485,000 shares of its common stock to UTEK
Corporation (“UTEK”), the parent of FDTI, valued at the closing market price of
its common stock on the date of acquisition of $.49 per share or $237,650. FDTI
has acquired the rights to develop and market a patented and proprietary
technology for fingerprint analysis using an LED intense headband light source.
The purchase price of $237,650 was allocated to acquired intellectual property
and is being amortized over its estimated useful life of five years. FDTI had no
operating history and had not generated any revenues. Accordingly, the
acquisition was accounted for as a purchase of its assets.
 
 **Principles
of Consolidation**
 
 The
consolidated financial statements include the accounts of Sequiam Corporation
and its subsidiaries. All intercompany transactions and accounts have been
eliminated.
 
 **Allowance
for Doubtful Accounts**
 
 The
Company records an allowance for doubtful accounts based on specifically
identified amounts that it believes to be uncollectible. The Company also
records additional allowance based on certain percentages of its aged
receivables, which are determined based on historical experience and our
assessment of the general financial conditions affecting our customer base. If
the Company’s actual collections experience changes, revisions to its allowance
may be required. The Company has a limited number of customers with individually
large amounts due at any given balance sheet date. Any unanticipated change in
one of those customer's credit worthiness or other matters affecting the
collectibility of amounts due from such customers, could have a material affect
on the Company’s results of operations in the period in which such changes or
events occur. After all attempts to collect a receivable have failed, the
receivable is written off against the allowance.
 
 **Property
and Equipment**
 
 Property
and equipment are recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
ranging from three to five years. Expenditures for maintenance and repairs are
charged to expense as incurred. Leasehold improvements are recorded at cost.
Depreciation on leasehold improvements is computed using the straight-line
method over the original term of the lease.
 
 **Intangible
Assets**
  F-9
 *Table of Contents*
  In June
2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (SFAS) No. 142, "Goodwill and Intangible Assets". SFAS No.
142 requires recognized intangible assets determined to have a finite useful
life be amortized over their respectful estimated useful lives and reviewed for
impairment in accordance with SFAS 144, "Accounting for the Impairment and
Disposal of Long-Lived Assets". Any recognized intangible asset determined to
have an indefinite useful life will not be amortized, but instead tested for
impairment in accordance with the Standard until its life is determined to no
longer be indefinite.
 
 Intangible
assets are stated at cost and consist of Software Development Costs, Acquired
Software, and Intellectual Properties and are being amortized over their
estimated useful lives of five years.
 
 **Software
Development Costs**
 
 Costs
incurred to establish technological feasibility of computer software products
are research and development costs and are charged to expense as incurred. No
such costs were expensed during the years ended December 31, 2004 and 2003.
Costs of producing product masters subsequent to technological feasibility are
capitalized. Capitalization of computer software costs ceases when the product
is available for general release to the customers. Capitalized software costs
are amortized using the straight-line method over the estimated useful life of
the products or the gross revenue ratio method, whichever results in the greater
amount of amortization. Amortization expense of $27,228 and $27,229 was recorded
for the years ended December 31, 2004 and 2003, respectively. The unamortized
balance of $81,682 was written off as an impairment loss during
2004.
 
 **Acquired
Software**
 
 In
connection with the acquisition of Access Orlando, the Company acquired Internet
Remote Print software that was assigned a value of $288,000, representing the
excess of the purchase price over the fair value of the tangible assets
acquired. The acquired software is being amortized over its expected useful life
of five years. Amortization expense was $67,200 and $57,600 for the years ended
December 31, 2004 and 2003, respectively.
 
 **Intellectual
Properties**
 
 In
connection with the acquisitions of Smart Biometrics, Inc, Telepartners, Inc.
and Fingerprint Detection Technologies, Inc., the Company acquired intellectual
properties including patents, trademarks, technical drawings, proprietary
software and other knowledge based assets that were assigned values of $700,000,
$160,000 and $237,650, respectively, for a total of $1,097,650, representing the
excess of the purchase price over the fair value of the tangible assets
acquired. The acquired intellectual properties are being amortized over their
expected useful lives of five years. Amortization expense was $231,423 and
$112,005 for the years ended December 31, 2004 and 2003, respectively. The
unamortized balance of $124,400 of the Telepartners, Inc. Intellectual Property
was written off as an impairment loss during 2004.
 
 
 **Product
Development Costs**
 
 The
Company capitalizes product development costs when the projects under
development reach technological feasibility. Capitalization ends when the
product is available for general release to our customers, at which time the
amortization of the capitalized cost begins. Product development costs are
amortized using the straight-line method over the estimated useful life of the
product.
 
 **Revenue
Recognition**
 
 We derive
or plan to derive our revenues from five sources: (i) the sale and licensing of
our biometric and software products; (ii) user fees for online Application
Service Provider (“ASP”) services; (iii) consulting, custom software and web
development services; (iv) maintenance agreements in connection with the sale
and licensing of software products; and (v) Internet access and web hosting
services. Biometric and Software license revenue will be recognized when all of
the following criteria have been met: (a) there is an executed license agreement
and the technology or the software has been delivered to the customer, (b) the
license fee is fixed and payable within twelve months, (c) collection is deemed
probable, and (d) product returns are deemed reasonably estimable. Revenue from
ASP services are recognized as the transactions are processed by the system.
Maintenance revenues are recognized ratably over the term of the maintenance
contract, typically 12 months. Custom software development and web development
services are typically performed over a period ranging from a few days to a few
weeks and revenue is recognized upon completion of the project. Consulting
service revenues are recognized when services are performed. Internet access and
web-hosting services are recognized over the period the services are provided,
typically month-to-month. Cash received from the customers in advance of amounts
earned will be deferred and recorded as a liability.
  F-10
 *Table of Contents*
  **Accounting
for Stock Compensation Plan**
 
 The
Company accounts for its stock option plan using the intrinsic value based
method of accounting, under which no compensation expense is recognized for
stock option awards granted at fair market value. For purposes of pro forma
disclosures under Statement of Financial Accounting Standards No. (“SFAS”) 123,
Accounting for Stock-Based Compensation, as amended by SFAS 148, Accounting for
Stock-Based Compensation - Transition and Disclosure, the estimated fair value
of the stock options is amortized to compensation expense over the options’
vesting period. The following table illustrates the effect on net loss and loss
per share if the fair value based method had been applied to all outstanding
awards for the years ended December 31:
 
 2004
    
    2003Net
      loss, as reported
    
    $
    (5,847,017
    )
    $
    (4,690,188
    )Add:
      stock-based employee compensation expense included in reported net loss
      net of related tax effects
    
    
    -
    
    
    -Deduct:
      total stock-based employee compensation expense determined under the fair
      value method for all awards, net of related tax effects
    
    $
    (360,150
    )
    $
    (1,642,276
    )Pro
      forma net loss
    
    $
    (6,207,167
    )
    $
    (6,332,464
    )Basic
      and diluted loss per common share, as reported
    
    $
    (.13
    )
    $
    (.12
    )Basic
      and diluted loss per common share, pro forma
    
    $
    (.13
    )
    $
    (.17
    )
 
 **Income
Taxes**
 
 Income
taxes are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes resulting from
temporary differences. Such temporary differences result from differences in the
carrying value of assets and liabilities for tax and financial reporting
purposes. The deferred tax assets and liabilities represent the future tax
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized.
 
 **Net
Loss Per Common Share**
 
 Basic
income (loss) per common share is computed by dividing net income (loss)
available to common shareholders by the weighted average common shares
outstanding for the period. Diluted income (loss) per common share is computed
giving effect to all potentially dilutive common shares. Potentially dilutive
common shares may consist of incremental shares issuable upon the exercise of
stock options, adjusted for the assumed repurchase of the Company’s common
stock, at the average market price, from the exercise proceeds and also may
include incremental shares issuable in connection with convertible securities.
In periods in which a net loss has been incurred, all potentially dilutive
common shares are considered anti-dilutive and thus are excluded from the
calculation. As of December 31, 2004 and 2003, the Company had respectively,
30,338,867 and 20,334,701 potentially dilutive common shares as a result of
warrants and options granted.
 
 **Fair
Value of Financial Instruments**
 
 Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management as of December 31, 2004 and 2003.
The respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash,
receivables, accounts payable, accrued expenses and loans from shareholders. The
fair value of our long-term debt is estimated based on the current rates offered
to us for debt of similar terms and maturities. Under this method the fair value
of long-term debt was not significantly different from the stated value at
December 31, 2004 and 2003.
  F-11
 *Table of Contents*
  **Use
of Estimates**
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of 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.
 
 **Management’s
Plans**
 
 As of
December 31, 2004, the Company has a working capital deficit and has incurred
significant losses from operations since its inception. Senior management of the
Company, owning approximately 64% of the outstanding shares of common stock of
the Company as of December 31, 2004, has represented its positive intent and
ability to fund the operations, including debt service payments, of Sequiam
Corporation and Subsidiaries on an as needed basis through January 1, 2006.
 
 **Reclassification**
 
 Certain
reclassifications have been made to the 2003 financial statements to conform to
the 2004 presentation.
 
 **Recent
Accounting Pronouncements**
 
 In
December 2004, the Financial Accounting Standards Board (FASB) revised Statement
of Financial Accounting Standard No. 123 "Share-Based Payment" (SFAS 123R). SFAS
123R requires Companies to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value
of the award. The cost will be recognized over the period during which an
employee is required to provide service in exchange for the award (usually the
vesting period). Changes in fair value during the requisite service period will
be recognized as compensation cost over that period. The grant date fair value
of employee share options and similar instruments will be estimated using
option-pricing models adjusted for the unique characteristics of those
instruments (unless observable market prices for the same or similar instruments
are available). If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the
fair value of the modified award over the fair value of the original award
immediately before the modification This statement is effective for the first
reporting period beginning after June 15, 2005. In the opinion of management,
the adoption of this statement will not have a significant impact on the
Company's consolidated financial statements.
 
 **2.
Property and Equipment**
 
 Property
and equipment consist of the following at December 31:
 
 2004
    
    2003Leasehold
      improvements
    
    $
    1,465,270
    
    $
    1,126,769Office
      furniture and fixtures
    
    
    451,984
    
    
    450,398Computer
      equipment
    
    
    150,749
    
    
    127,293Purchased
      software
    
    
    192,212
    
    
    192,2122,260,215
    
    
    1,896,672Less
      accumulated depreciation
    
    
    956,458
    
    
    721,806$
    1,303,757
    
    $
    1,174,866
 
 Depreciation
expense totaled $234,798 and $256,034 during 2004 and 2003, respectively.
Included in current assets are $-0- and $40,706 of equipment held for resale,
net of a $40,706 impairment loss recognized in 2004 on that equipment. The
equipment was written down to its estimated liquidation value based upon
information obtained from dealers. This equipment remains from operations
discontinued by Brekel prior to its acquisition by Sequiam.
  F-12
 *Table of Contents*
  **3.
Intangible Assets**
 
 Intangible
assets consist of the following as of December 31, 2003:
 
 Amortized
      Intangible Assets
    
    Weighted-
      average
      Amortization
      period
    
    Gross
      Carrying
      Amount
    
    Accumulated
      Amortization
    
    Net
      Carrying
      AmountSoftware
      Development costs
    
    
    5
    
    $
    136,145
    
    $
    27,229
    
    $
    108,916Acquired
      software
    
    
    5
    
    
    288,000
    
    
    57,600
    
    
    230,400Intellectual
      properties
    
    
    5
    
    
    1,097,650
    
    
    112,005
    
    
    985,645$
    1,521,795
    
    $
    196,834
    
    $
    1,324,961
 
 
 Intangible
assets consist of the following as of December 31, 2004
 Amortized
      Intangible Assets
    
    Weighted-
      average
      Amortization
      period
    
    Gross
      Carrying
      Amount
    
    Accumulated
      Amortization
      &
      Impairment
      Allowance
    
    Net
      Carrying
      AmountAcquired
      software
    
    
    5
    
    
    288,000
    
    
    124,800
    
    
    163,200Intellectual
      properties
    
    
    5
    
    
    1,112,718
    
    
    467,822
    
    
    644,896$
    1,536,863
    
    $
    728,767
    
    $
    808,096
 
 Amortization
expense totaled $325,851 and $196,834 during 2004 and 2003,
respectively.
 
 The
estimated future amortization expense for each of the five succeeding years is
as follows:
 
 Year
      ending
      December
      31,2005
    
    
    245,1302006
    
    
    245,1302007
    
    
    235,5302008
    
    
    82,306
 
 **4.
Notes and Debentures Payable**
 
 On March
5, 2003 Sequiam issued to La Jolla Cove Investors, Inc. ("LJCI"), an 8%
Convertible Debenture in the principal amount of $300,000 and a warrant to
purchase 2,000,000 shares of our common stock at $1.50 per share (the "Initial
Financing"). Sequiam received a total of $150,000 of the principal amount of the
debenture, representing the balance due at December 31, 2003.
 
 In
connection with the debenture and the warrant, Sequiam was required to register
the resale of common stock to be issued to LJCI upon conversion of the debenture
and exercise of the warrant. To meet this obligation, Sequiam filed a
registration statement on April 27, 2003, an amended registration statement on
May 7, 2003, and a second amended registration statement on June 23, 2003, all
of which were withdrawn on September 5, 2003, prior to being declared effective.
 
 Effective
as of January 29, 2004, the Company entered into an Agreement of Accord and
Satisfaction with LJCI pursuant to which LJCI agreed to accept $200,000 plus
100,000 shares of restricted common stock in accord and satisfaction of the
debenture and warrant and other documents related to the Initial Financing. As a
result, all of our obligations under the Initial Financing, including the
obligation to file a new registration statement, have been
terminated.
  F-13
 *Table of Contents*
  Pursuant
to the accord and satisfaction, Sequiam issued 100,000 shares of restricted
common stock to LJCI, which, had a fair market value of $51,000, based on a
closing trading price of $0.51 per share on January 29, 2004. In addition, the
Company delivered to LJCI a promissory note in the principal amount of $200,000
with interest in the amount of 8% per year, plus principal, due in six
installments of $34,017 per month beginning February 1, 2004. The Company has
paid the note in full.
 
 Under the
new agreement, LJCI has "piggy-back" registration rights, meaning Sequiam is
obligated to include the resale of the 100,000 shares of restricted common stock
by LJCI in any registered offering of securities the Company may make during any
time that LJCI still holds such 100,000 shares. Unless the Company makes a
registered offering, it has no obligation to register the resale of the 100,000
shares of restricted common stock.
 
 On May
13, 2003, Sequiam entered into a loan agreement with Lee Harrison Corbin,
Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a
principal loan amount of $400,000 under a promissory note bearing interest at
five percent (5%). In connection with this loan, Sequiam Corporation issued two
warrants to the holder to purchase 625,000 shares of its common stock at an
exercise price of $0.01 per share and 350,000 shares of its common stock at
$1.00 per share. The Warrants for 625,000 shares were exercised on June 25, 2003
and the warrants for 350,000 remain outstanding and expire in May 2008. The fair
value of the attached warrants exceeded the value of the proceeds received from
the Note and has been recorded as a debt discount of $400,000. The payment
schedule was originally tied to that of the LJCI Convertible Debenture described
above. However, on January 30, 2004 the Company amended the loan agreement such
that all principal and interest become due on January 30, 2005. The debt
discount was originally amortized over the original estimated life of the
Note of 36 months. Beginning in January 2004, the remaining unamortized debt
discount will be amortized over twelve months. As of December 31, 2003, the
balance of the Note, net of the unamortized debt discount of $133,928 was
$266,072 and is included in Notes Payable.
 
 On
December 18, 2003, Sequiam entered into a loan agreement with Lee Harrison
Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a
principal loan amount of $100,000 under a promissory note bearing interest at
five percent (5%). In connection with this loan, Sequiam Corporation issued one
warrant to the holder to purchase 200,000 shares of its common stock at an
exercise price of $0.25 per share. The principal and accrued interest were paid
in full during 2004.
 
 On
December 18, 2003, Sequiam entered into a loan agreement with Lee Harrison
Corbin, for a principal loan amount of $50,000 under a promissory note bearing
interest at five percent (5%). In connection with this loan, Sequiam Corporation
issued one warrant to the holder to purchase 100,000 shares of its common stock
at an exercise price of $0.25 per share. The principal and accrued interest were
paid in full during 2004.
 
 On
December 26, 2003, Sequiam entered into a debenture agreement (“Debenture”) with
Eagle Financial, LLC, for a principal loan amount of $150,000 under a debenture
bearing interest at ten percent (10%). The principal and accrued interest were
paid in full during 2004. The Debenture also provided for an unconditional
equity provision whereby the Corporation issued seventy five thousand (75,000)
restricted shares to the Holder as an incentive to lend. The fair value of the
shares was recorded as a debt discount of $30,000.
 
 The
      preceding information is summarized as follows at December 31,
      2003:**Face**
    
    **Debt**
    
    **Carrying****Amount**
    
    **Discount**
    
    **Amount**Promissory
      note - Lee Harrison Corbin
    
    
    50,000
    
    
    -
    
    
    50,000Promissory
      note - Lee Harrison Corbin-Trustee for John Svenningsen
    
    
    100,000
    
    
    -
    
    
    100,00010%
      Convertible Debenture-Eagle Funding, LLC, 10%
    
    
    150,000
    
    
    (30,000
    )
    
    120,000Promissory
      note - Lee Harrison Corbin-Trustee for John Svenningsen
    
    
    400,000
    
    
    (133,928
    )
    
    266,0728%
      Convertible Debenture-La Jolla Cove Investors
    
    
    150,000
    
    
    (93,750
    )
    
    56,250850,000
    
    
    (257,678
    )
    
    592,322
  F-14
 *Table of Contents*
  On or
about October 3, 2002, General Electric Capital Corporation (“GE”) filed a
lawsuit against Brekel Group, Inc. (“Brekel”), in the Circuit Court of the
9 th Judicial
Circuit in and for Orange County, located in Orlando, Florida. GE claims that
Brekel owes a deficiency balance in the amount of $93,833 for three digital
copiers rented under a lease agreement. Brekel has returned possession of the
copiers to GE, but Brekel disputes the claim for damages. On January 30, 2004
Brekel entered into a settlement agreement with GE by agreeing to pay $70,000 in
36 monthly installments of $1,945 without interest.
 
 On
February 1, 2004 Brekel entered into a settlement agreement with Precision
Partners, LTD for disputed rents on a facility formerly occupied by Brekel by
agreeing to pay $80,000 in 24 monthly installments of $3,510 including interest
at 5%.
 
 On
January 30, 2004, the Company entered into a loan agreement with Lee Harrison
Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a
principal loan amount of $400,000 under a promissory note bearing interest at
five percent (5%). In connection with this loan, the Company issued one warrant
to the holder to purchase 800,000 shares of its common stock at an exercise
price of $0.225 per share. The Warrant was exercised on January 30, 2004. The
principal and interest become due on January 30, 2005.
 
 On
September 7, 2004, the Company entered into an unsecured loan agreement with
Eagle Funding, LLC, for a principal loan amount of $200,000 under a promissory
note bearing interest at eight percent (8%). The principal becomes due on March
7, 2005 and the interest is due monthly. In connection with this loan, the
Company issued one warrant to the holder to purchase 400,000 shares of its
common stock at an exercise price of $0.66 per share.
 
 On
September 30, 2004, the Company entered into an unsecured loan agreement with
Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John
Svenningsen, for a principal loan amount of $500,000 under a promissory note
bearing interest at five percent (5%). In connection with this loan, the Company
issued one warrant to the holder to purchase 1,300,000 shares of its common
stock at an exercise price of $0.66 per share. The principal and interest become
due on March 30, 2005.
 
 On
September 30, 2004, the Company entered into an unsecured loan agreement with
Lee Harrison Corbin for a principal loan amount of $75,000 under a promissory
note bearing interest at five percent (5%). In connection with this loan, the
Company issued one warrant to the holder to purchase 195,000 shares of its
common stock at an exercise price of $0.66 per share. The principal and interest
become due on March 30, 2005.
 
 On
November 19, 2004, the Company entered into an unsecured loan agreement with
Walter H. Sullivan III, for a principal loan amount of $100,000 under a
promissory note bearing interest at five percent (5%). In connection with this
loan, the Company issued one warrant to the holder to purchase 260,000 shares of
its common stock at an exercise price of $0.66 per share. The principal and
interest become due on February 19, 2005.
 
 On
December 16, 2004, the Company entered into an unsecured loan agreement with Lee
Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John
Svenningsen, for a principal loan amount of $50,000 under a promissory note
bearing interest at five percent (5%). In connection with this loan, the Company
issued one warrant to the holder to purchase 150,000 shares of its common stock
at an exercise price of $0.33 per share. The principal and interest become due
on January 31, 2005.
  F-15
 *Table of Contents*
  The
      preceding information is summarized as follows at December 31,
      2004:**Face**
    
    **Debt**
    
    **Carrying****Amount**
    
    **Discount**
    
    **Amount**Notes
      payable - Precision
    
    $
    47,634
    
    
    
    
    $
    47,634Notes
      payable - GE
    
    
    50,556
    
    
    
    
    
    50,556Promissory
      note - Lee Harrison Corbin-Trustee for John Svenningsen
    
    
    400,000
    
    
    -
    
    
    400,000Promissory
      note - Lee Harrison Corbin-Trustee for John Svenningsen
    
    
    400,000
    
    
    -
    
    
    400,000Promissory
      note - Eagle Funding, LLC
    
    
    200,000
    
    
    (24,018
    )
    
    175,982Promissory
      note - Lee Harrison Corbin-Trustee for John Svenningsen
    
    
    500,000
    
    
    (71,342
    )
    
    428,658Promissory
      note - Lee Harrison Corbin
    
    
    75,000
    
    
    (10,701
    )
    
    64,299Promissory
      note - Walter Sullivan
    
    
    100,000
    
    
    (15,272
    )
    
    84,728Promissory
      note - Lee Harrison Corbin-Trustee for John Svenningsen
    
    
    50,000
    
    
    (9,780
    )
    
    40,220$
    1,823,190
    
    $
    (131,113
    )
    $
    1,692,077
 
 **5.
Loans From Shareholders**
 
 On
February 1, 2002, Mark Mroczkowski, the Chief Financial Officer and a
shareholder of the Company, loaned Sequiam Communications, Inc. (formerly Brekel
Group, Inc.) $50,000.  Interest is payable at 6%.  As of December 31,
2004 and 2003, the balance due under this loan was $50,000 payable on demand
together with accrued interest of $2,750 and $5,250, respectively.
 
 Nicholas
VandenBrekel, the President and Chief Executive Officer and majority shareholder
of the Company, has advanced money to Sequiam Corporation and Sequiam Software,
Inc. under demand notes.  At December 31, 2004 and 2003, Sequiam owed
$271,650 and $570,450 on these notes, including accrued interest of $24,106 and
$15,316, respectively.  The notes bear interest at 2% per annum and are due
on demand.
 
 Alan
McGinn, the Chief Technology Officer and a shareholder of the Company, has
advanced money to Sequiam Corporation.  At December 31, 2004 and 2003,
Sequiam owed approximately $12,000 without interest or specific repayment
terms.
 
 A
shareholder not employed by the Company advanced $75,000 to the Brekel Group,
Inc. on March 1, 2002. The terms of the demand note include interest payable at
6% and a right to convert the note to common stock at $1.00 per share. At
December 31, 2004 and 2003 the remaining principal balance was $15,301 and
$62,850 and accrued interest was $-0- and $735, respectively.
 
 Included
in accounts payable and accrued expenses at December 31, 2004 and 2003 are
un-reimbursed business expenses of $2,324 and $2,244 owed to Nicholas
VandenBrekel and $1,000 and $10,000 owed to Mark Mroczkowski,
respectively.
 
 **6.
Income Taxes**
 
 The
Company has estimated net operating loss carryforwards (“NOLs”) for federal
income tax purposes of approximately $16,464,000 and $12,785,000 at December 31,
2004 and 2003, respectively. These net operating losses can be carried forward
and applied against future taxable income, if any, and expire in the years 2020
through 2024. However, as a result of certain acquisitions, the use of these
NOLs may be limited under the provisions of section 382 of the Internal Revenue
Code. Treasury Regulation 1.1502-21 regarding separate return limitation years
may further limit these NOLs.
 
 The
following is a reconciliation of income taxes at the federal statutory rate of
34% to the provision for income taxes as reported in the accompanying
consolidated statements of operations. The temporary differences between net
income and taxable income result from the accrual of officers’ salaries of
$1,349,792 that are expensed in the financial statements, but are not deductible
for tax purposes until paid:
  F-16
 *Table of Contents*
  
 Years
      ended December 31,2004
    
    2003Income
      tax benefit computed at the federal statutory rate
    
    $
    (2,015,700
    )
    $
    (1,594,800
    )Deferred
      tax asset acquired
    
    
    630,800
    
    
    204,700State
      income tax benefit, net of federal benefit
    
    
    (147,800
    )
    
    (148,300
    )Increase
      in valuation allowance
    
    
    1,532,700
    
    
    1,538,400Income
      tax expense (benefit)
    
    $
    -
    
    $
    -
 
 The
components of the deferred income tax asset are as follows at December 31,
 
 Deferred
      tax assets:
    
    2004
    
    2003Accrued
      shareholder salaries
    
    $
    603,100
    
    $
    457,100Deferred
      lease obligation
    
    
    -
    
    
    336,100Net
      operating loss carryforward
    
    
    6,427,700
    
    
    4,704,800Valuation
      allowance
    
    
    (7,030,800
    )
    
    (5,498,000
    )Net
      deferred tax assets
    
    $
    -
    
    $
    -
 
 Valuation
allowances are provided against deferred tax assets if, based on the weight of
available evidence, if it is more likely than not that some or all of the
deferred tax assets will not be realized. The Company has evaluated the
realizability of the deferred tax assets on its balance sheets and has
established a valuation allowance in the amount of $7,030,800 and $5,498,000
against its net deferred tax assets at December 31, 2004 and 2003, respectively.
The valuation allowance increased $1,532,800 and $1,538,400 during the years
ended December 31, 2004 and 2003, respectively.
 
 **7.
Forbearance Agreement**
 
 Prior to
our acquisition of the Brekel Group, Inc., effective July 1, 2001, the Brekel
Group, Inc. entered into an operating lease agreement to rent approximately
60,000 square feet of combined office and manufacturing space through June 30,
2011.  Because we determined to cease Brekel’s print and publishing
operations before we acquired it, effective July 1, 2002, Brekel entered into a
lease forbearance agreement for 10,000 square feet of the same space for the
remaining term of the lease. In April 2004, we entered into a new lease
agreement and note payable with the landlord that supercedes and replaces the
lease forbearance agreement entered into by the Brekel Group, Inc. effective
July 1, 2002 prior to its acquisition by us.
 
 The new
lease for 24,085 square feet is effective July 1, 2004 for a period of
seventy-two months beginning July 1, 2004 and ending on June 30, 2010. The note
payable was fixed at $1,600,000 together with interest thereon at a simple
interest rate equal to six percent per annum. Commencing on August 1, 2004 and
continuing on the first day of each month thereafter through and including June
1, 2010, we are scheduled to pay to Lender payments consisting of principal and
interest in the amount of $26,517 per month.
 
 Rental
expense for the years ended December 31, 2004 and 2003 was $137,903 and
$125,508, respectively. The original amount of the note of $1,600,000 represents
$893,112 of deferred rent and $706,888 of tenant improvements. The December 3,
2004 balance of $ 1,525,376 included $234,181 in current portion of long-term
debt and $1,290,558 in long-term debt. The new minimum future rentals required
under the operating lease and the maturities of the long-term note payable are
as follows:
 
 Year
    
    Rentals
    
    Maturities2005
    
    $
    193,564
    
    $
    234,1812006
    
    
    206,773
    
    
    248,6242007
    
    
    210,993
    
    
    263,9592008
    
    
    215,319
    
    
    280,2392009
    
    
    219,753
    
    
    297,524Thereafter
    
    
    110,999
    
    
    200,849$
    1,157,401
    
    $
    1,525,376
  F-17
 *Table of Contents*
  **8.
Convertible Debt**
 
 On April
27, 2004, the Company closed a convertible debt transaction with Laurus Master
Fund, Ltd. (“Laurus”) providing up to $3.0 million in financing. Under the
arrangement, the Company delivered to Laurus a secured convertible term note,
bearing interest at the Wall Street Journal Prime rate plus 2% (7.25% at
December 31, 2004), in the initial amount of $2.0 million, convertible into the
Company’s common stock (the “Note”), and a warrant to purchase up to 666,666
shares of the Company’s common stock.
 
 The Note
has a term of three years. Interest shall be payable monthly in arrears
commencing on June 1, 2004, and on the first day of each consecutive calendar
month thereafter. Monthly amortization payments shall commence on August 2,
2004, at the rate of $60,606. The balance of the Note at December 31, 2004 is
$1,818,182 less debt discount recognized of $201,521 or a net of $1,616,561 and
is included $1,010,597 in long-term debt and $606,604 in current portion of
long-term debt. The maturities of the Note as of December 31, 2004 are as
follows:
 
 Year
    
    Maturities2005
    
    $
    606,0642006
    
    
    909,0962007
    
    
    303,022$
    1,818,182
  The
interest rate under the Note is subject to adjustment on a month by month basis
if specified conditions are met (including that the common stock underlying the
conversion of the Note and the warrant issued to Laurus are registered with the
U.S. Securities and Exchange Commission and whether and to what extent the
market price of the Company’s common stock for the five (5) trading days
preceding a particular determination date exceeds (or is less than) the fixed
conversion price applicable to the Note).
 
 Laurus
also has the option to convert all or a portion of the Note into shares of the
Company’s common stock at any time, subject to specified limitations, at a fixed
conversion price of $0.66 per share. The Note is secured by a first lien on all
the Company’s and its subsidiaries’ assets. In connection with the Note, Laurus
was paid a fee of $105,000, which is included in other assets as deferred loan
costs and is being amortized over the life of the loan. Laurus received a
six-year warrant to purchase up to 666,666 shares of the Company’s common stock
at prices ranging from $0.83 per share to $1.16 per share. A discount of
$215,915 was recognized on the value of the warrants and is being amortized as
interest expense over the life of the loan. A discount of $458,339 was allocated
to the beneficial conversion feature. All stock conversion prices and exercise
prices are subject to adjustment for stock splits, stock dividends or similar
events. The Company also agreed to file a registration statement with the U.S.
Securities and Exchange Commission covering the shares issuable upon conversion
of the Note and the exercise of the warrant issued to Laurus.
 
 Laurus
has committed to fund to the Company an additional $1.0 million under the
financing arrangement on substantially similar terms as the initial $2.0 million
funding, which additional $1.0 million will become available to the Company
following its completion and/or achievement of certain conditions to funding,
including, without limitation, certain performance benchmarks.
 
 On
October 27, 2004, the “Company amended the terms of its agreements with Laurus
by reducing the fixed conversion price of $0.66 per share to $0.33 per share;
amending the principal amortization from $60,606 per month beginning August 2,
2004 to $75,758 beginning May 2, 2005; amending the six-year warrant to purchase
up to 666,666 shares of the Company’s common stock at prices ranging from $0.41
per share to $0.58 per share; and granting a new six-year warrant to purchase up
to 470,000 shares of the Company’s common stock at a price of $0.33 per
share  in
satisfaction of due and unpaid fees in the aggregate amount of $49,333. In
addition Laurus agreed to release the Company from a technical default of the
Securities Purchase Agreement with respect to the creation of the certain debt
obligations.
  F-18
 *Table of Contents*
  **9.
Capital Stock**
 
 During
the year ended December 31, 2004, the Company issued 1,752,082 common shares for
business advisory services valued at $570,450 based on the Company’s quoted
market price on the date of the related agreements.
 
 During
the year ended December 31, 2004, the Company sold an aggregate of 1,993,757
shares of its common stock to six accredited investors at an average price of
$0.38 per share for net proceeds of $761,092. In connection with such sales, the
Company relied on the exemption from registration provided by Section 4(2) of
the Securities Act of 1933.  These investors represented in writing that
the shares were being acquired for investment and, in addition, the certificates
representing the shares bear a restrictive securities legend.
  Shares
    
    Fair
      Value
    
    Average
      priceStock
      for services
    
    
    1,972,082
    
    $
    570,450
    
    $
    0.3Stock
      sales
    
    
    2,131,257
    
    $
    801,467
    
    $
    0.36
  **10.
Employee Stock Incentive Plan**
 
 On
September 23, 2003 Sequiam executed the Sequiam Corporation 2003 Employee Stock
Incentive Plan and the Sequiam Corporation 2003 Non-Employee Directors And
Consultants Stock Plan. This Stock Incentive Plan is intended to allow
designated officers, directors (including non-employee directors), employees and
certain non-employees, including any independent contractor or consultant
providing services to the Company and its Subsidiaries to receive certain
options (the "Stock Options") to purchase Sequiam common stock, par value $0.001
per share, and to receive grants of the Common Stock subject to certain
restrictions (the "Awards"). **** The
maximum number of shares of the Common Stock that may be issued pursuant to
these plans shall be 14,000,000 and 1,000,000, respectively at December 31,
2004, amended from 10,000,000 and 5,000,000 at December 31, 2003.
 
 The
Company may grant Stock Options in such amounts, at such times, and to the
Employees nominated by the management of the Company in its discretion. Stock
Options granted under this Plan shall constitute "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986 as
amended.
 
 The
purchase price (the "Exercise Price") of shares of the Common Stock subject to
each Stock Option shall be the Fair Market Value of the Common Stock on the date
the Stock Option is granted; provided, however, for designated non-statutory
stock options, the Board of Directors may determine an Exercise Price at, above
or below Fair Market Value. For an Employee holding greater than 10 percent of
the total voting power of all stock of the Company, either common or preferred,
the Exercise Price of an incentive stock option shall be at least 110 percent of
the Fair Market Value of the Common Stock on the date of the grant of the
option.
 
 The Stock
Option term will begin on the date of grant of the Stock Option and shall be 10
years or such shorter period as is determined by the Company.
 
 On
November 28, 2003 the Company granted options for 9,660,500 shares to its
employees at an exercise price of $0.17 the fair market value of the stock on
that date. Officers and Employee Directors were granted options for nine million
of the total granted. On April 1, 2004 and July 26, 2004 the Company granted
options for 2,000,000 and 300,000 shares to two employees at exercise prices of
$0.70 and $0.33, the fair market value of the stock on those dates,
respectively.
  F-19
 *Table of Contents*
  2004
    
    2003Number
      of
      Shares
    
    Weighted
      Average
      Exercise
      Price
    
    Number
      of
      Shares
    
    Weighted
      Average
      Exercise
      PriceOutstanding
      beginning of year
    
    
    9,660,500
    
    $
    0.186
    
    
    -0-
    
    $
    0.186Granted
    
    
    2,300,000
    
    $
    0.652
    
    
    9,660,500
    
    $
    0.186Exercised
    
    
    (237,500
    )
    $
    0.170
    
    
    -0-
    
    
    -0-Canceled
    
    
    -0-
    
    
    -0-
    
    
    -0-
    
    
    -0-Outstanding
      end of year
    
    
    11,723,000
    
    $
    0.278
    
    
    9,660,500
    
    $
    0.186Exercisable
      at December 31
    
    
    9,423,000
    
    $
    0.186
    
    
    9,660,500
    
    $
    0.186Available
      for grant at December 31
    
    
    3,277,000
    
    
    
    
    
    339,500
  The
following table summarizes the stock options outstanding and exercisable at
December 31, 2004:
 
 Outstanding
    
    ExercisableExercise
      Price
    
    Number
      of
      Options
    
    Weighted-
      Average
      Remaining
      Contractual
      Life
    
    Weighted-
      Average
      Exercise
      Price
    
    Number
      of
      Options
    
    Weighted-
      Average
      Exercise
      Price$
    0.186
    
    
    9,423,000
    
    
    9
      Years
    
    $
    0.186
    
    
    9,423,000
    
    $
    0.186$
    0.70
    
    
    2,000,000
    
    
    10
      Years
    
    $
    0.70
    
    
    -0-
    
    $
    0.70$
    0.33
    
    
    300,000
    
    
    10
      Years
    
    $
    0.33
    
    
    -0-
    
    $
    0.33
 
 
 Had
compensation costs for the stock option plans been determined based on the fair
value at the date of grant for awards, the Company's net loss and earnings per
share would approximate the following pro forma amounts:
 
 
 2004
    
    2003Net
      loss - as reported
    
    $
    (5,928,302
    )
    $
    (4,690,188
    )Net
      loss - pro forma
    
    $
    (7,427,637
    )
    $
    (6,332,464
    )Basic
      and Diluted EPS - as reported
    
    $
    (0.13
    )
    $
    (0.12
    )Basic
      and Diluted EPS - pro forma
    
    $
    (0.16
    )
    $
    (0.17
    )
 
 The fair
value of each option is estimated on the date of grant using the Black-Scholes
option-pricing model. The fair
value of options granted during 2004 and 2003 were calculated utilizing the
following weighted-average assumptions: no dividend yield; expected volatility
of 284.89%; risk free interest rate of 4.32%; and expected lives of 10
years. As of
December 31, 2004 and 2003, no stock options had been granted under the Sequiam
Corporation 2003 Non-Employee Directors and Consultants Stock Plan.
 
 **11.
Commitments and Contingencies**
 
 On
October 1, 2002, the Company’s Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”) entered into amended and restated employment
agreements with Sequiam Corporation and its Subsidiaries. The amended agreements
replace separate agreements with Sequiam, Inc. and Brekel Group, Inc. The
agreements have an initial term of two years with automatic one-year renewals.
The agreements provide for compensation in the form of minimum annual salary of
$185,000 and $175,000 respectively, and allow for bonuses in cash, stock or
stock options and participation in Company benefit plans. Full-time employment
is a requirement of the contract. In the event that a change in control of the
Company occurs without the prior approval of the then existing Board of
Directors, these contracts will be deemed terminated and compensation of $5
million each is payable at termination, and $1 million annually for five years
subsequent to termination will be due and payable to the CEO and CFO. For the
years ended December 31, 2004 and 2003, Sequiam accrued and did not pay the
minimum annual salaries payable to the CEO and CFO.
  F-20
 *Table of Contents*
  On
November 1, 2002, the Company’s Chief Technology Officer (“CTO”) entered into an
employment agreement with Sequiam Software. The agreement has an initial term of
two years with automatic one-year renewals. The agreements provide for
compensation in the form of minimum annual salary of $75,000 and allows for
bonuses in cash, stock or stock options and participation in Company benefit
plans. Full-time employment is a requirement of the contract.
 
 Brekel
entered into a note payable with Xerox Corporation in November 2000 to finance
equipment. Brekel also entered into a Document Services Agreement (“Agreement”)
with Xerox Corporation (“Xerox”) on November 1, 1999 commencing April 1, 2000.
During the 63-month term of the Agreement ending June 30, 2005, Xerox agreed to
provide equipment and services in accordance with specified performance
standards. Those standards include, among other things, a performance
satisfaction guaranty by Xerox. Under the terms of that guaranty, Brekel may
terminate the agreement without incurring any early termination charges. Brekel
gave proper notice of such termination in March 2001. On September 3, 2002 Xerox
did, contrary to the contract, assert its claim for early termination charges
and for monthly minimum service charges on billings made after the termination
date. Xerox had taken no action since its September 3, 2002 demand letter until
June 29, 2004, when Xerox Corporation filed a lawsuit in the Circuit Court in
and for Pinellas County State of Florida. The claim amount in controversy is
approximately $1,574,000. The Company disputes these claims and believes them to
be without merit. Because this matter is in very preliminary stages, management
is unable to determine the likelihood of an unfavorable outcome and,
accordingly, has not accrued any amount for potential losses in connection with
this lawsuit.
 
 The
Company currently operates without directors’ and officers’ insurance and
property, casualty and general liability insurance and is at risk for those
types of losses.
 
 **12.
Supplemental Cash Flow Information**
 
 Year
      ended December 31,2004
    
    2003Supplemental
      cash flow information:Cash
      paid for interest
    
    $
    124,358
    
    $
    33,446Non-cash
      investing and financing activities:Correct
      stock price error
    
    
    19
    
    
    -Accounts
      payable converted to notes payable
    
    $
    150,000
    
    
    -Leasehold
      improvements financed
    
    $
    338,501
    
    
    -Original
      issue discount on debt
    
    $
    1,216,868
    
    $
    580,000Loan
      costs paid with warrants
    
    $
    49,333Common
      shares issued for acquisition of WMW Communications, Inc.
      assets
    
    
    -
    
    $
    150,000Common
      shares issued for acquisition of Smart Biometrics, Inc.
    assets
    
    
    -
    
    $
    750,000Common
      shares issued for acquisition of Telepartners, Inc. assets andliabilities
      assumed
    
    $
    15,068
    
    $
    149,933Common
      shares issued for acquisition of Fingerprint Detection Technologies,
      Inc.
    
    
    -
    
    $
    237,650
 
 **14.
Operating Segments**
 
 Pursuant
to FAS 131, the Company defines an operating segment as:
 
 ·
    A
      business activity from which the Company may earn revenue and incur
      expenses;
 
 ·
    Whose
      operating results are regularly reviewed by the chief operating decision
      maker to make decisions about resources to be allocated to the segment and
      assess its performance; and
 
 ·
    For
      which discrete financial information is available.
  F-21
 *Table of Contents*
  Sequiam
has two operating segments, which are defined as each business line that it
operates. This however, excludes corporate headquarters, which does not generate
revenue.
 
 Our
operating segments are defined as follows:
 
 The
Information Management segment provides interactive web-based technologies, as
well as ASP, ISP and other customer web development and software development
services.
 
 The
Safety and Security segment provides fingerprint biometric access control
systems technology and fingerprint identification technology.
 
 The table
below presents certain financial information by business segment for the year
ended December 31, 2003.
 
  Information
      Management
    
    Safety
      and
      Security
    
    Segments
      Total
    
    Corporate
    
    Consolidated
      TotalRevenue
      from external customers
    
    $
    338,549
    
    $
    47,620
    
    $
    386,170
    
    $
    -
    
    $
    386,170Interest
      expense
    
    
    (31,426
    )
    
    -
    
    
    (31,426
    )
    
    (337,237
    )
    
    (368,663
    )Depreciation
      and amortization
    
    
    354,772
    
    
    98,096
    
    
    452,868
    
    
    -
    
    
    452,868Segment
      loss
    
    
    (1,531,676
    )
    
    (158,202
    )
    
    (1,689,878
    )
    
    (3,000,310
    )
    
    (4,690,188
    )Segmentassets
      (1)
    
    
    1,594,176
    
    
    876,427
    
    
    2,470,603
    
    
    272,282
    
    
    2,742,885
 
 The table
below presents certain financial information by business segment for the year
ended December 31, 2004.
 
 Information
      Management
    
    Safety
      and Security
    
    Segments
      Total
    
    Corporate
    
    Consolidated
      TotalRevenue
      from external customers
    
    $
    165,729
    
    $
    99,765
    
    
    265,494
    
    $
    -
    
    
    265,494Interest
      expense
    
    
    (61,154
    )
    
    -
    
    
    (61,154
    )
    
    (1,288,683
    )
    
    (1,349,836
    )Depreciation
      and amortization
    
    
    353,241
    
    
    207,407
    
    
    560,649
    
    
    71,331
    
    
    631,980Segment
      loss
    
    
    (2,486,939
    )
    
    (409,682
    )
    
    (2,896,621
    )
    
    643,021
    
    
    (5,847,017
    )Segment
      assets
      (1)
    
    
    1,403164
    
    
    469,470
    
    
    1,872,634
    
    
    (2,950,396
    )
    
    2,515,655
 
 Segment
assets have been adjusted for intercompany accounts to reflect actual assets for
each segment.
  F-22
 *Table of Contents*
   **ITEM 8.**
    **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**
 
 On
January 19, 2004, we terminated Gallogly, Fernandez & Riley, LLP as our
independent auditor. Our Board of Directors approved the termination of
Gallogly, Fernandez & Riley, LLP. Gallogly, Fernandez & Riley, LLP
audited our financial statements for the fiscal years ended December 31, 2002
and 2001.
 
 Gallogly,
Fernandez & Riley, LLP ‘s report on our financial statements for the fiscal
years ended December 31, 2002 and 2001 did not contain any adverse opinion or
disclaimer of opinion and were not qualified as to uncertainty, audit scope or
accounting principles. During the recent fiscal year ended December 31, 2003,
(i) there were no disagreements between us and Gallogly, Fernandez & Riley,
LLP on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved to the
satisfaction of Gallogly, Fernandez & Riley, LLP, would have caused
Gallogly, Fernandez & Riley, LLP to make reference to the subject matter of
the disagreement in connection with its reports and (ii) there were no
“reportable events,” as defined in Item 304(a)(1)(v) of Regulation S-K of the
SEC. The decision to replace Gallogly, Fernandez & Riley, LLP was not the
result of any disagreement between Gallogly, Fernandez & Riley, LLP and us
on any matter of accounting principle or practice, financial statement
disclosure or audit procedure.
 
 Concurrently,
on January 19, 2004, our Board of Directors approved the appointment of Tedder,
James, Worden & Associates, P.A. as our new independent accountant and
auditor. We did not consult with Tedder, James, Worden & Associates, P.A. on
any matters related to accounting principles or practice, financial statement
disclosures or audit procedures prior to selecting and appointing Tedder, James,
Worden & Associates, P.A. as our auditor.
 
  **ITEM 8A**
    **CONTROLS
      AND PROCEDURES**
 
 **Evaluation
of Disclosure Controls and Procedures**
 
 The
Company maintains disclosure controls and procedures (as defined by Rule
15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) that are designed to ensure that information required to be disclosed in
the periodic reports filed by the Company with the Securities and Exchange
Commission (the “SEC”) is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC and that such
information is accumulated and communicated to the Company's management. Based
on their most recent evaluation, which was completed during the period covered
by this report, the Company's Chief Executive Officer and Chief Financial
Officer believe that the Company's disclosure controls and procedures provide
reasonable assurance that the disclosure controls and procedures are effective
to accomplish their objectives.
 
 **Changes
in Internal Control Over Financial Reporting**
 
 In
addition, management, including the Company's Chief Executive Officer and Chief
Financial Officer, reviewed the Company's internal control over financial
reporting (as defined by Rule 15(d)-15(f) of the Exchange Act), and there have
been no significant changes in the Company's internal control or in other
factors that could significantly affect the Company's internal control over
financial reporting during the period covered by this report.
 
 **ITEM 8B**
    **OTHER
      INFORMATION**
 
 Not
applicable.
 
 **PART
III**
  F-23
 *Table of Contents*
  **ITEM 9**
    **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(A) OF THE EXCHANGE ACT.**
 
 The
following table sets forth the name, age and position of each person who
currently serves as a director and/or officer of our Company as of December 31,
2004. Our directors serve for a three-year term that expires at every third
regular annual meeting of our shareholders, and until such directors’ successors
are elected and qualified.
 
 Name
    Age
    PositionNicholas
      H. VandenBrekel
    40
    Chairman,
      President and CEO; DirectorMark
      L. Mroczkowski
    51
    Senior
      Vice President and CFO; DirectorDavid
      Dobkin
    52
    President
      of Sequiam Software, Inc.James
      C. Stanley
    66
    President
      of Sequiam Biometrics, Inc.; DirectorAlan
      McGinn
    44
    Vice
      President and CTOMarianne
      Morrison
    45
    Vice
      President of Sales of Sequiam Software, Inc.John
      P. Bevilaqua
    59
    President
      and COO of Sequiam Sports, Inc.
 
 Nicholas
VandenBrekel is the founder of Sequiam Corporation and serves as its President,
CEO and Chairman. Mr. VandenBrekel has an extensive background in both military
service as well as entrepreneurial venues. He is a native of the Netherlands and
a permanent resident of the United States. During the last five years Mr.
VandenBrekel has been the President and CEO of Brekel Group, Inc. for the last
two years and was the President of Sequiam, Inc. In the course of his
assignments, he has been responsible for all aspects of, business development,
teaching and operations, including strategic planning, product and service
development, marketing, and sales and staff development. He speaks several
languages and has been a public speaker for many years. Mr. VandenBrekel
continuously displays a strong ability to merge both North American business
culture with that of Europe and the Far East. Mr. VandenBrekel has a degree in
communications from the OPS Academy Royal Netherlands Navy and is a licensed
Helicopter Aviator. He also holds degrees and diplomas in electronics and the
martial arts. Nick received the 2001 businessman of the year award from the
National Republican Congressional Committee’s Business Advisory
Council.
 
 Mark
Mroczkowski has served as Senior Vice President and CFO for Sequiam Corporation
since its inception in 2001 and as CFO for Brekel Group, Inc. since June 2000.
He brings to the company an extensive background as CFO and senior manager of
other organizations. Prior to Sequiam and Brekel, Mr. Mroczkowski was the Chief
Financial Officer of GeoStar Corporation from 1994 until 2000. From 1975 until
1994, Mr. Mroczkowski practiced public accounting with several large accounting
firms and ultimately formed his own successful firm. During those years he also
founded or co-founded and managed several other profitable ventures both
domestically and internationally. Mr. Mroczkowski holds a B.S. degree in
Accounting from Florida State University, he is a Certified Public Accountant
licensed in Florida and a licensed commercial pilot. He has a strong background
in finance and financial management from his twenty-five years of practice. He
managed private placements, debt financing and IPO preparations for a number of
firms. He has also managed audit, tax and consulting engagements for a variety
of organizations.
 
 If the
Company maintained an Audit Committee, Mr. Mroczkowski would qualify as is our
audit committee financial expert. Mr. Mroczkowski is not an independent
director.
 
 Mr. David
Dobkin is President of Sequiam Software Inc., Mr. Dobkin, in his role as
President of Sequiam Software Inc, is responsible for the development of
business and strategic direction for the software company. Prior to his position
with Sequiam he had been Vice President of e Business at AlphaGraphics Inc. He
was previously a Senior Vice President for Caliber Learning a NASDAQ traded
technology services company providing on-line learning services to corporations.
As well he was Principal with Ernst and Young LLP Management Consulting,
focusing on Internet business consulting and he served as a Vice President and
in other various management capacities for R.R. Donnelley and Sons. He holds
both and MBA from the University of Chicago and MSc in Engineering from
University of Illinois.
  F-24
 *Table of Contents*
  Mr. James
C. Stanley, in addition to his role as President of Sequiam Biometrics, Inc.
also sits on the Board of Directors. Mr. Stanley has held many important
management positions as well as owned and operated his own businesses. Among his
accomplishments is the formation of an investment advisory firm that was sold to
Bache & Company. He also owned an advertising agency in New York, whose
clients included Citicorp, Penske Racing, Hilton International, Holland American
Lines and Banco Popular. Mr. Stanley built, owned and operated Hilton Ski Resort
in Breckenridge, Colorado. Currently, Mr. Stanley is the founder of Concord
Communications, Inc. that is a joint venture with AT & T. Mr. Stanley serves
on numerous boards, including Vice Chairman of the International Center for
Religion and Diplomacy, Washington, DC. Mr. Stanley is a well-versed and sought
after consultant on business development, mergers and acquisitions. During the
last five years, Mr. Stanley has served as a Director and a principal in the
Quasar Group, Inc., and concurrently during the last two years as Chairman if
Smart Biometrics, Inc., prior to its acquisition by Sequiam. Mr.
Stanley has a BA and an MBA from the University of Virginia.
 
 Alan
McGinn accepted the position of Chief Technology Officer for Sequiam Corporation
in March 1, 2003. He had been President of W.M.W. Communications, Inc., d/b/a
Access Orlando since 1995. During that time, he also served as a consultant to
SMART Biometrics prior to its acquisition by Sequiam. From 1984 to 1995, Mr.
McGinn was a Senior Design Engineer at Lockheed Martin. While he was at Lockheed
Martin, Mr. McGinn designed the night vision system for the Apache Helicopter.
His other significant designs included: Microcontroller-based servo control
system; Laser tracker controller with a 1553 bus interface; Microcontroller
based control panel for helicopter navigation; CCD camera with real time image
processing; and Fiber Optic communications link and tracker interface. Mr.
McGinn has a B.S. Degree in Electrical Engineering from the University of
Tennessee and an M.S. Degree in Electrical Engineering from the University of
Central Florida.
 
 Marianne
Morrison has served as the Vice President of Sales for Sequiam Software, Inc
since July 26, 2004. For the past four years, Ms. Morrison served as Vice
President of Sales, Production Printing Group, of Atlanta, GA-based IKON Office
Solutions, a leading document management and services firm. From 1990-2000, Ms.
Morrison was with Xerox Corporation, an international copy and equipment
manufacturer and held various titles, including Sales Operation Manager,
Marketing Operations Manager, Integrated Sales Manager, and Product Marketing
Manager. Ms. Morrison has a Master's Degree in Education from Bridgewater State
College in 1983 and a Bachelor's Degree in Human Services from Fitchburg State
College in 1981.
 
 John P.
Bevilaqua has served as the President and Chief Operating Officer of Sequiam
Sports, Inc. since June of 2004. Mr. Bevilaqua served as the President and Chief
Executive Officer of Creative Marketing Strategies, Inc. from 1994 to 2004. Mr.
Bevilaqua served as the Chief Marketing Officer for Jacoby Development, Inc.
from 1997 to 2001 and served as a partner of Unique Signature Applications, Inc.
Mr. Bevilaqua also served as the National Sports Manager and Olympic Project
Manager for The Coca-Cola Company from 1978 to 1983. Mr. Bevilaqua received a
B.S. Degree in Business Administration from the University of
Chattanooga.
 
 We
currently have no independent directors because all directors beneficially own
stock in our company. As a result, our board of directors is unable to rely upon
an independent director to resolve any conflicts of interests between the
interest a director may have personally as a stockholder and the fiduciary
obligations the director may have to our company. For example, when taking
actions that may directly affect our stockholders, such as decisions to make
distributions, to approve mergers or to approve other reorganizations, our
directors will not have the benefit of input form an independent director.
Furthermore, our directors must comply with Section 310(a) of the California
Corporation Code when authorizing any such action. Because we do not have an
independent director, any such action must meet the requirements of Section
310(a)(1) or Section 310(a)(3) of the California Corporation Code, because
Section 310(a)(2) of the California Corporation Code is not available. Section
310 provides as follows:
  F-25
 *Table of Contents*
  (a) No
contract or other transaction between a corporation and one or more of its
directors, or between a corporation and any corporation, firm or association in
which one or more of its directors has a material financial interest, is either
void or voidable because such director or directors or such other corporation,
firm or association are parties or because such director or directors are
present at the meeting of the board or a committee thereof which authorizes,
approves or ratifies the contract or transaction, if (1) The material facts as
to the transaction and as to such director's interest are fully disclosed or
known to the shareholders and such contract or transaction is approved by the
shareholders (Section 153) in good faith, with the shares owned by the
interested director or directors not being entitled to vote thereon, or (2) The
material facts as to the transaction and as to such director's interest are
fully disclosed or known to the board or committee, and the board or committee
authorizes, approves or ratifies the contract or transaction in good faith by a
vote sufficient without counting the vote of the interested director or
directors and the contract or transaction is just and reasonable as to the
corporation at the time it is authorized, approved or ratified, or (3) As to
contracts or transactions not approved as provided in paragraph (1) or (2) of
this subdivision, the person asserting the validity of the contract or
transaction sustains the burden of proving that the contract or transaction was
just and reasonable as to the corporation at the time it was authorized,
approved or ratified. A mere common directorship does not constitute a material
financial interest within the meaning of this subdivision. A director is not
interested within the meaning of this subdivision in a resolution fixing the
compensation of another director as a director, officer or employee of the
corporation, notwithstanding the fact that the first director is also receiving
compensation from the corporation.
 
 We are
currently seeking to elect or appoint an independent director, but we cannot
guaranty that we will be able to do so. We believe it is unlikely we will find a
willing person to serve as an independent director until we obtain liability
insurance for our officers and directors.
 
 Mr. David
Dobkin was hired as the President of Sequiam Software, Inc. pursuant to an
employment agreement dated as of April 1, 2004 and extends for a term of two
years. Mr. Dobkin earns annual compensation of $150,000 until we acquire at
least $3 million in new equity capital. Once we acquire $3 million in new equity
capital, Mr. Dobkin’s annual compensation will increase to $175,000. Upon the
commencement of employment, Mr. Dobkin earned 50,000 shares of restricted common
stock which we have not issued as of the date of this prospectus. In addition,
we will pay Mr. Dobkin a sign-on bonus of $50,000, net of taxes, once we acquire
$3 million in new equity capital. We granted Mr. Dobkin stock options
exercisable into two million shares of common stock at an exercise price equal
to the market price as of the date of employment.
 
 Ms.
Marianne Morrison was hired as the Vice President of Sales of Sequiam Software,
Inc. pursuant to a letter agreement dated July 26, 2004 and extends for a term
of two years, and may be extended for successive one-year periods. Ms. Morrison
earns annual compensation of $140,000 until December 31, 2004. Beginning on
January 1, 2005, Ms. Morrison’s annual compensation will increase to $152,000.
Ms. Morrison will also earn a $1,000 bonus for each new account closed and a
commission equal to 1% of team gross sales/override on direct and indirect
sales, paid monthly. In the event that a change in control of Sequiam Software,
Inc. occurs, then Ms. Morrison will receive a lump sum payment equal to two
years salary if occurring during the first two years of her employment or will
receive a lump sum payment equal to one years salary for each year thereafter.
We granted Ms. Morrison stock options exercisable into five hundred thousand
shares of common stock at an exercise price equal to the market price as of the
date of employment.
 
  **ITEM 10.**
    **EXECUTIVE
      COMPENSATION**
 
 The
following table sets forth all compensation paid or accrued by Sequiam, as well
as certain other compensation, paid or accrued, during each of Sequiam’s last
two fiscal years to the Chief Executive Officer and to the other executive
officers whose total annual salary and bonus paid or accrued exceeded $100,000.
Directors who are also employees receive no compensation for serving on the
Board of Directors.
  F-26
 *Table of Contents*
  Footnotes:
 **SUMMARY
      COMPENSATION TABLE****ANNUAL
      COMPENSATION**
    
    **LONG-TERM
      COMPENSATION****AWARDS****Name
      &**
      **Principal**
      **Position**
    
    **Year**
    
    **Salary**
    
    **Bonus**
    
    **Other**
      **Annual**
      **Compensation******
      **(2)**
    
    **Restricted**
      **Stock**
      **Awards**
    
    **Securities**
      **Underlying**
      **Options/SARs**
      **(3)**
    
    **LTIP**
      **Payouts**
    
    **All**
      **Other**
      **Compensation**Nicholas
      VandenBrekel,President,
      CEO,
    
    
    2004
    
    $
    194,375
    
    
    
    
    $
    14,400Chairman
      (1)
    
    
    2002
    
    $
    185,000
    
    
    
    
    $
    14,400
    
    
    
    
    
    5,000,0002002
    
    $
    158,750
    
    
    
    
    $
    14,400Mark
      Mroczkowski,Corporate
      Secretary,
    
    
    2004
    
    $
    184,375
    
    
    
    
    $
    12,000Senior
      Vice President,
    
    
    2003
    
    $
    175,000
    
    
    
    
    $
    12,000
    
    
    
    
    
    4,000,000Treasurer
      and CFO (1)
    
    
    2002
    
    $
    156,250
    
    
    
    
    $
    8,000
   (1) None
of the annual salary amounts shown were paid in 2001, 2002 or 2003 and remain
accrued at December 31, 2003. In 2004 $125,000 was paid and $69,375 was accrued
to Nicholas VandenBrekel and $118,750 was paid and $65,625 was accrued to Mark
Mroczkowski.
 
 (2)
Compensation shown in this column was earned by accruing the automobile
allowances provided in the employment agreements.
 
 (3)
Shares shown in this column represent options granted under the Sequiam
Corporation 2003 Employee Stock Incentive Plan.
 
 **Director
and Officer Stock Option/Stock Appreciation Rights (“SARs”)
Grants**
 
 On
September 23, 2003, we adopted the Sequiam Corporation 2003 Employee Stock
Incentive Plan and the Sequiam Corporation 2003 Non-Employee Directors and
Consultants Stock Plan, subject to stockholder approval.
 
 The
following table sets forth the stock options granted to our named executive
officers and directors during the year ended December 31, 2004. No stock
appreciation rights were awarded.
  Name
    
    Number
      of securities
      underlying
      options/SARs
      granted
      (#)
    
    Percent
      of total
      options/SARs
      granted to
      employees
      in
      fiscal year
    
    Exercise
      or
      base
      price ($/Sh)
    
    Expiration
      dateDavid
      Dobkin
    
    
    2,000,000
    
    
    86.96
    %
    $
    0.70
    
    
    April
      1, 2014Marianne
      Morrison
    
    
    300,000
    
    
    13.04
    %
    $
    0.33
    
    
    July
      26, 2014
 **Long
Term Incentive Plan Awards**
 
 No
long-term incentive plan awards have been made by the Company to
date.
 
 **Defined
Benefit or Actuarial Plan Disclosure**
 
 We do not
provide retirement benefits for the directors or officers.
 
 **Compensation
of Directors**
  F-27
 *Table of Contents*
  None of
our directors received compensation for their service as directors during the
fiscal year ended December 31, 2004.
 
 **Employment
Contracts and Change-In-Control Arrangements**
 
 On
October 1, 2002, Mr. VandenBrekel and Mr. Mroczkowski entered into amended and
restated employment agreements with Sequiam Corporation and its subsidiaries.
The amended agreements replace separate agreements with Sequiam, Inc. and Brekel
Group, Inc. The agreements have an initial term of two years with automatic
one-year renewals. The agreements provide for compensation in the form of
minimum annual salary of $185,000 and $175,000, respectively, and allow for
bonuses in cash, stock or stock options and participation in our benefit plans.
No bonuses have been paid and no criteria for determining bonuses has been
established by our directors. We do not intend to pay bonuses for the calendar
year 2004. Full time employment is a requirement of the contract. In the event
that a change in control of any related company occurs without the prior
approval of our then existing Board of Directors, then these contracts will be
deemed terminated and we will owe termination compensation to each employee
consisting of a $5 million lump sum cash payment plus five annual payments of $1
million, each. Each of Mr. VandenBrekel and Mr. Mroczkowski may terminate their
respective employment agreement without cause upon 30-day advance written
notice.
 
 Mr. Alan
McGinn was hired as the CTO of Sequiam Software, Inc., pursuant to an employment
agreement dated as of December 1, 2002. Mr. McGinn did not begin to earn
compensation until March 1, 2003. Pursuant to our agreement with Mr. McGinn, he
will earn a base salary of $75,000, and we are obligated to adopt a qualified
stock option plan for our senior executive officers that will include the
following stock options to Mr. McGinn: 500,000 shares of our common stock, to be
vested one-third (1/3) at the end of twelve (12) months, and one-third (1/3) at
the end of each subsequent twelve-month period. Each option will expire five (5)
years after we adopt the plan. The option price per share will equal the average
closing trading price per share for the ten (10) day trading period immediately
preceding the granting of the options. If we do not adopt a qualified stock
option plan by June 30, 2003, the employee may elect to participate in a plan
adopted after June 30, 2003, or, receive a cash compensation payment intended to
similarly compensate Mr. McGinn as if the stock option plan had been adopted.
Mr. McGinn may terminate his employment agreement without cause upon 30-day
advance written notice.
 
 Mr. James
Stanley was hired as the President of Sequiam Biometrics, Inc., pursuant to an
employment agreement dated as of April 21, 2003 and extends for a term of two
years. Mr. Stanley does not begin to earn or accrues compensation until a future
date to be determined by the Board of Directors at which time he will earn a
base salary of $150,000. In February 2005, Mr. Stanley was informed in writing
that his contract will not be renewed after April 21, 2005.
 
 **Section
16(A) Beneficial Ownership Reporting Compliance**
 
 Not
applicable.
 
 **C** **OMMITTEES
OF THE BOARD**
 
 We do not
currently have any formal board committees.
 
 **Family
Relationships**
 
 There are
no family relationships among our executive officers and directors.
 
 **Legal
Proceedings**
 
 During
the past five years, none of our executive officers, directors, promoters or
control persons have been involved in a legal proceeding material to an
evaluation of the ability or integrity of such person.
  F-28
 *Table of Contents*
  **Code
of Ethics**
 
 The
Company has not adopted a code of ethics for its CEO and Senior Financial
Officers as defined by the Securities and Exchange Commission. The Company
intends to adopt a code of ethics for its CEO and Senior Financial Officers
shortly.
 
 **Compensation
Committee**
 
 We
currently do not have a compensation committee of the Board of Directors. The
Board of Directors as a whole determines executive compensation. Currently, we
do not have any independent directors who can evaluate the reasonableness of
executive compensation without regard to his or her own compensation paid by our
company.
 
 **ITEM 11**
    **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**
 
 The table
below sets forth, as of January 7, 2005, certain information with respect to the
beneficial ownership of our common stock by each person who we know to be
beneficial owner of more than 5% of any class or series of our capital stock,
each of the directors and executive officers individually, and all directors and
executive officers as a group. Except as otherwise set forth below, the address
of each of the persons listed below is 300 Sunport Lane, Orlando, Florida
32809.
 
 Name
    
    Shares
      Beneficially
      Owned
    
    Percentage
      of Shares
      Beneficially
      OwedNicholas
      VandenBrekel (1)
    
    
    23,325,000
    
    
    39.16
    %Mark
      Mroczkowski (2)
    
    
    9,251,118
    
    
    15.53
    %L.
      Alan McGinn (3)
    
    
    225,000
    
    
    0.38
    %Officers
      and Directors as a group
    
    
    36,197,784
    
    
    60.77
    %Optimix
      Technology Fund, N.V.
      Johannes
      Vermeer Straat
      14224
      Box 15543
      Amsterdam,
      NA
      Netherlands
      1001
    
    
    2,666,666
    
    
    5.55
    %Laurus
      Master Fund, Ltd. (3)
      c/o
      M&C Corporate Services Limited
      P.O.
      Box 309 G.T.
      Ugland
      House, South Church Street
      George
      Town
      Grand
      Cayman, Cayman Islands
    
    
    2,363,889
    
    
    4.99
    %Walter
      H. Sullivan, III (4)
      4
      Embarcabero Center Suite 1570
      San
      Francisco, California 94111
    
    
    11,064,214
    
    
    19.70
    %
  (1)
    Includes
      5,000,000 shares that may be acquired upon exercise of stock
      options.
 (2)
    Includes:
      (a) 4,000,000 shares that may be acquired upon exercise of stock options;
      and (b) 294,118 shares owned by Mr. Mroczkowski’s wife, of which he
      disclaims beneficial ownership.
 (3)
    Although
      6,060,606 shares may be acquired immediately upon conversion of an
      outstanding secured convertible term note at a conversion price of $0.33
      per share and 1,136,666 shares which may be purchased immediately upon
      exercise of outstanding common stock purchase warrants as further
      discussed below, the convertible note and warrant contain provisions which
      restrict Laurus from beneficially owning in excess of 4.99% of our
      outstanding shares of common stock provided that Laurus can waive this
      restriction on 75 days notice to the Company or upon an event of default
      under the outstanding secured convertible term note. Does not include an
      additional 1,772,728 shares which may be issuable on account of interest
      and any possible penalties or anti-dilution adjustments.
 (4)
    Includes
      8,784,201 shares of common stock which may be issued upon exercise of
      outstanding warrants and 2,280,013 that are held of record. This does not
      include any stock that may be beneficially owned by Mr. Sullivan and held
      by brokers in “street name.”
  F-29
 *Table of Contents*
  The
following table provides information regarding the status of our existing equity
compensation plans at December 31, 2004.
 
 **Equity
      Compensation Plan Information**Plan
      category
    Number
      of securities
      to
      be issued upon
      exercise
      of
      outstanding
      options,
      warrants
      and rights
      (a)
    Weighted-average
      exercise
      price of
      outstanding
      options,
      warrants
      and rights
      (b)
    Number
      of securities
      remaining
      available for
      future
      issuance under equity
      compensation
      plans
      (excluding
      securities
      reflected
      in column (a))
      (c)Equity
      compensation plans approved by security holders
    0
    0
    0Equity
      compensation plans not approved by security holders
    11,723,000
    $0.278
    3,277,000Total
    11,723,000
    $0.278
    3,277,000
 
 Footnotes
to Table :
 
 (1)
Options for 300,000 of the 11,723,000 shares to be issued have an exercise price
of market value. The weighted-average exercise price is based upon the closing
trading price of $0.40 on December 31, 2003.
 
 On
September 23, 2003, we adopted the Sequiam Corporation 2003 Employee Stock
Incentive Plan and the Sequiam Corporation 2003 Non-Employee Directors and
Consultants Stock Plan, both subject to stockholder approval at our next annual
meeting. The Stock Incentive Plan is intended to allow designated officers,
directors (including non-employee directors), employees and certain
non-employees, including any independent contractor or consultant providing
services to our companies to receive certain options to purchase our common
stock and to receive grants of our common stock, subject to certain
restrictions. **** The
maximum number of shares of our common stock that may be issued pursuant to
these plans shall be 14,000,000 and 1,000,000, respectively.
 
 We may
grant stock options in such amounts, at such times, and to the employees
nominated by our management in as they may determine in their discretion. Stock
options granted under this plan shall constitute "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986 as
amended.
 
 The
purchase price of shares of our common stock subject to each stock option shall
be the fair market value of the common stock on the date the stock option is
granted; provided, however, for designated non-statutory stock options, we may
determine an exercise price at, above or below fair market value. For an
employee holding greater than 10 percent of the total voting power of all stock
of our company, either common or preferred, the exercise price of an incentive
stock option shall be at least 110 percent of the fair market value of the
common stock on the date of the grant of the option.
 
 Stock
options have a term of 10 years or such shorter period as is determined by the
Company.
 
 **ITEM 12**
    **CERTAIN
      RELATIONSHIPS AND RELATED
TRANSACTIONS**
  F-30
 *Table of Contents*
  On April
1, 2002, we acquired Sequiam Software, Inc. (formerly known as Sequiam, Inc.). This
transaction was accounted for as a recapitalization of Sequiam Corporation and
the results of operations and cash flows presented in our financial statements
prior to the acquisition are those of Sequiam, Inc. The
following table shows the number of shares received by our directors and
executive officers as a result of this transaction.
  **Name**
    
    **Common
      Stock**
      **Before
      Closing**
    
    **Percent
      of**
      **Class**
    
    **Common
      Stock**
      **After
      Closing**
    
    **Percent
      of**
      **Class**Nicholas
      H. VandenBrekel
    
    
    0
    
    
    0
    %
    
    15,000,000(1
    )
    
    61.90
    %Mark
      Mroczkowski
    
    
    0
    
    
    0
    %
    
    5,500,000(2
    )
    
    22.70
    %James
      Rooney
    
    
    0
    
    
    0
    %
    
    500,000
    
    
    2.06
    %Brekel
      Group, Inc.
    
    
    0
    
    
    0
    %
    
    1,000,000
    
    
    4.13
    %
 Footnotes :
 
 (1) At
the time of the transaction, Nicholas H. VandenBrekel served as an officer and
director of Brekel Group, Inc., and therefore 15,000,000 shares includes
1,000,000 shares issued to Brekel Group, Inc. The 1,000,000 shares held by
Brekel Group, Inc. were returned to treasury and cancelled upon Sequiam
Corporations acquisition of Brekel Group, Inc. in July 2002.
 
 (2) At
the time of the transaction, Mark Mroczkowski served as an officer and director
of Brekel Group, Inc., and therefore 5,5000,000 shares includes 1,000,000 shares
issued to Brekel Group, Inc. The 1,000,000 shares held by Brekel Group, Inc.
were returned to treasury and cancelled upon Sequiam Corporations acquisition of
Brekel Group, Inc. in July 2002.
 
 In July
2002, we acquired Sequiam Communications, Inc. (formerly known as Brekel Group,
Inc.) in a tax-free exchange of stock. The following table shows the number of
shares received by our directors and executive officers as a result of this
transaction.
 
 **Name**
    
    **Common
      Stock**
      **Before
      Closing**
    
    **Percent
      of**
      **Class(1)**
    
    **Common
      Stock**
      **After
      Closing**
    
    **Percent
      of**
      **Class(2)**Nicholas
      H. VandenBrekel
    
    
    15,000,000(3
    )
    
    61.90
    %
    
    18,500,000
    
    
    76.37
    %Mark
      Mroczkowski
    
    
    5,500,000(4
    )
    
    22.70
    %
    
    4,957,000
    
    
    20.46
    %James
      W. Rooney
    
    
    500,000
    
    
    2.06
    %
    
    526,666
    
    
    2.17
    %Brekel
      Group, Inc.
    
    
    1,000,000
    
    
    4.13
    %
    
    0
    
    
    0
    %
 
 Footnotes :
 
 (1) Based
upon 20,000,000 shares issued and outstanding prior to closing.
 
 (2) Based
upon 24,223,000 shares issued and outstanding after closing.
 
 (3) At
the time of the transaction, Nicholas H. VandenBrekel served as an officer and
director of Brekel Group, Inc., and therefore 15,000,000 shares includes
1,000,000 shares issued to Brekel Group, Inc. The 1,000,000 shares held by
Brekel Group, Inc. were returned to treasury and cancelled upon Sequiam
Corporations acquisition of Brekel Group, Inc. in July 2002.
 
 (4) At
the time of the transaction, Mark Mroczkowski served as an officer and director
of Brekel Group, Inc., and therefore 5,500,000 shares includes 1,000,000 shares
issued to Brekel Group, Inc. The 1,000,000 shares held by Brekel Group, Inc.
were returned to treasury and cancelled upon Sequiam Corporations acquisition of
Brekel Group, Inc. in July 2002.
 
 ****Item 13.**
    **Exhibits
      and Reports on Form 8-K****
 F-31
 *Table of Contents*
  ExhibitNo.
    Description
      of Exhibit2.1
    Agreement
      and Plan of Merger.12.2
    Stock
      Exchange Agreement and Plan of Reorganization.22.3
    Asset
      Purchase Agreement.32.4
    Agreement
      and plan of acquisition between Fingerprint Detection Technologies, Inc.,
      a Florida corporation, UTEK Corporation, a Delaware corporation, and
      Sequiam Corporation, Inc., a California corporation.42.5
    Asset
      Purchase Agreement with Smart Biometrics, Inc.52.6
    Asset
      Purchase Agreement with Telepartners, Inc.62.7
    Stock
      Exchange Agreement and Plan of Reorganization among Sequiam Corporation
      and the Shareholders of Brekel Group, Inc., dated June 17,200273.1
    Articles
      of Incorporation (Charter Document).83.2
    Certificate
      of Amendment to Articles of Incorporation of Wedge Net Experts, Inc.,
      dated April 29, 2002.93.3
    Bylaws.83.4
    Amendment
      to our Bylaws, dated July 18, 2002.104.1
    8%
      Convertible Debenture.114.2
    Warrant
      to Purchase Common Stock.114.3
    Side
      Letter Agreement between Sequiam Corporation and La Jolla Cove Investors,
      Inc. regarding Warrant to Purchase Common Stock, dated March 5,
      2003.114.4
    Registration
      Rights Agreement114.5
    Letter
      Agreement between Sequiam Corporation and La Jolla Cove Investors, Inc.,
      dated April 16, 2003.124.6
    Secured
      Convertible Term Note, dated April 27, 2004, made by Sequiam Corporation
      in favor of Laurus Master Fund, Ltd.134.7
    Registration
      Rights Agreement, dated April 27, 2004, by and between Sequiam Corporation
      and Laurus Master Fund, Ltd.134.8
    Common
      Stock Purchase Warrant, dated April 27, 2004, issued by Sequiam
      Corporation, in favor of Laurus Master Fund, Ltd.134.9
    Common
      Stock Purchase Warrant, dated October 27, 2004, issued by Sequiam
      Corporation, in favor of Laurus Master Fund, Ltd.2210.1
    Demand
      Promissory Note made by Sequiam, Inc. (a/k/a Sequiam Software, Inc.)
      payable to Nicholas H. VandenBrekel, dated June 30, 2002, in the principal
      amount of $301,000.1510.2
    Demand
      Promissory Note made by Sequiam Software, Inc. payable to Brekel Group,
      Inc. (a/k/a Sequiam Communications, Inc.), dated June 30, 2002, in the
      principal amount of $396,158.1510.3
    Employment
      Agreement with Nicholas Van den Brekel.910.4
    Employment
      Agreement with Mark Mroczkowski.910.5
    Amended
      and Restated Employment Agreement with Nicolas Van den Brekel.1410.6
    Amended
      and Restated Employment Agreement with Mark Mroczkowski.1410.7
    Employment
      Agreement with Alan McGinn.1410.8
    Put
      and Call Agreement, dated April 16, 2003.1610.9
    Agreement
      with World Olympians Association1710.10
    Agreement
      of Accord and Satisfaction, dated January 29, 20041810.11
    Promissory
      Note, dated January 29, 2004, made by Sequiam Corporation in favor of La
      Jolla Cove Investors, Inc.1810.12
    Continuing
      Personal Guaranty, dated January 29, 20041810.13
    Asset
      Purchase Agreement dated June 1, 2003, between Sequiam Software, Inc. and
      Great Barrier Reef, Inc.1910.14
    Subscriber
      Acquisition Agreement dated December 11, 2003, between Sequiam Software,
      Inc. and Internet Junction Corporation.1910.15
    Letter
      Agreement dated December 5, 2003, between Sequiam Corporation and The
      Eversull Group, Inc.1910.16
    Letter
      Agreement dated December 3, 2003, between Sequiam Corporation and The
      Research Works, Inc.19
  F-32
 *Table of Contents*
  10.17
    License
      Agreement for Use of Co-location Space, dated November 2003, between
      Sequiam Software, Inc. and FDS Telecommunications, L.P.1910.18
    Exclusive
      Patent License Agreement, between Fingerprint Detection Technologies, Inc.
      and Westinghouse Savannah River Company LLC.1910.19
    Memorandum
      of Agreement, dated August 27, 2003, between Sequiam Biometrics, Inc. and
      T&N Enterprises2310.20
    2003
      Employee Stock Incentive Plan2010.21
    2003
      Non-Employee Directors and Consultants Stock Plan2010.22
    Securities
      Purchase Agreement, dated April 27, 2004, between Sequiam Corporation and
      Laurus Master Fund, Ltd.1810.23
    Secured
      Convertible Term Note, dated April 27, 2004, made by Sequiam Corporation
      in favor of Laurus Master Fund, Ltd.1310.24
    Master
      Security Agreement, dated April 27, 2004, by and among Sequiam
      Corporation, Sequiam Software, Inc., Sequiam Biometrics, Inc., Sequiam
      Education, Inc., Sequiam Sports, Inc, Fingerprint Detection Technologies,
      Inc., and Laurus Master Fund, Ltd.1310.25
    Registration
      Rights Agreement, dated April 27, 2004, by and between Sequiam Corporation
      and Laurus Master Fund, Ltd.1310.26
    Common
      Stock Purchase Warrant, dated April 27, 2004, issued by Sequiam
      Corporation, in favor of Laurus Master Fund, Ltd.1310.27
    Subsidiary
      Guaranty, dated April 27, 2004, by and among Sequiam Software, Inc.,
      Sequiam Biometrics, Inc., Sequiam Education, Inc., Sequiam Sports, Inc.,
      and Fingerprint Detection Technologies, Inc.1310.28
    Grant
      of Security Interest in Patents and Trademarks, dated April 27, 2004, by
      and between Sequiam Corporation and the Purchaser1310.39
    Grant
      of Security Interest in Patents and Trademarks, dated April 27, 2004, by
      and between Sequiam Software, Inc. and Laurus Master Fund,
      Ltd.1310.30
    Grant
      of Security Interest in Patents and Trademarks, dated April 27, 2004, by
      and between Sequiam Sports, Inc. and Laurus Master Fund, Ltd.1310.31
    Grant
      of Security Interest in Patents and Trademarks, dated April 27, 2004, by
      and between Sequiam Biometrics, Inc. and Laurus Master Fund,
      Ltd.1310.32
    Stock
      Pledge Agreement, dated April 27, 2004 by and among Sequiam Corporation,
      Sequiam Software, Inc., Sequiam Biometrics, Inc., Sequiam Education, Inc.,
      Sequiam Sports, Inc, Fingerprint Detection Technologies, Inc., and Laurus
      Master Fund, Ltd.1310.33
    Incremental
      Funding Side Letter, dated April 27, 2004, by and between Sequiam
      Corporation and Laurus Master Fund, Ltd.1310.34
    Subordination
      Agreement, dated April 27, 2004, by and among Mark Mroczkowsi, Nick
      VandenBrekel and Laurus Master Fund, Ltd.1310.35
    Funds
      Escrow Agreement, dated April 27, 2004, by and by and among Sequiam
      Corporation, Laurus Master Fund, Ltd. and Dechert LLP.1310.36
    License
      Agreement between Sequiam Biometrics, Inc. and Security Marketing Group,
      LLC2110.37
    Lease
      Agreement by and between Sequiam Sports, Inc. and EastGroup Properties,
      L.P.2310.38
    Promissory
      Note, dated as of July 1, 2004, made by Sequiam Corporation in favor of
      EastGroup Properties, L.P.2310.39
    Developer’s
      License Agreement, dated as of July 15, 2004, by and between Sequiam
      Corporation and Blackboard, Inc.2310.40
    Agreement,
      dated as of August 19, 2004, by and between Sequiam Corporation and the
      National Rifle Association of America.2310.41
    Promissory
      Note, dated as of September 7, 2004, made by Sequiam Corporation in favor
      of Eagle Funding, LLC2310.42
    Promissory
      Note, dated as of September 30, 2004, made by Sequiam Corporation in favor
      of Lee Harrison Corbin2310.43
    Promissory
      Note, dated as of September 30, 2004, made by Sequiam Corporation in favor
      of Lee Harrison Corbin,Attorney-in-Fact
      For the Trust Under the Will of John Svenningsen2310.44
    Employment
      Agreement with David Dobkin2310.45
    Employment
      Agreement with Marianne Morrison23
  F-33
 *Table of Contents*
  10.46
    Amendment
      and Waiver to Securities Purchase Agreement, dated as of October 27, 2004,
      by and between Sequiam Corporation and Laurus Master Fund,
      Ltd.2210.47
    Promissory
      Note, dated as of November 19, 2004, made by Sequiam Corporation in favor
      of Walter H. Sullivan, III2314.1
    Code
      of Ethics16.1
    Letter
      regarding change in certifying accountant.1421.1
    Subsidiaries*23.1
    Consent
      of Tedder, James, Worden & Associates, P.A.*31.1
    Certification
      Of Chief Executive Officer Pursuant To 15d-14.31.2
    Certification
      Of Chief Financial Officer Pursuant To 15d-14.32.1
    CertificationOf
      Chief Executive OfficerPursuant To 18 U.S.C. §1350, As Adopted Pursuant To Section 906 Of The
      Sarbanes-Oxley Act Of 2002.32.2
    CertificationOf
      Chief Financial OfficerPursuant To 18 U.S.C. §1350, As Adopted Pursuant To Section 906 Of The
      Sarbanes-Oxley Act Of 2002.
 ___________________________________
 
 * Filed
herewith
  1
    Incorporated
      by reference from our Current Report on Form 8-K, filed with the
      Securities and Exchange Commission on April 16,
2002.
 2
    Incorporated
      by reference from our Current Report on Form 8-K, filed with the
      Securities and Exchange Commission on August 6,
2002.
 3
    Incorporated
      by reference from our Current Report on Form 8-K, filed with the
      Securities and Exchange Commission on May 23,
2003.
 4
    Incorporated
      by reference from our Quarterly Report on Form 10-QSB, filed with the
      Securities and Exchange Commission on November 19,
2003.
 5
    Incorporated
      by reference to our Form 8-K filed with the Securities and Exchange
      Commission on May 23, 2003.
 6
    Incorporated
      by reference from our Quarterly Report on Form 10-QSB/A, filed with the
      Securities and Exchange Commission on October 3,
2003.
 7
    Incorporated
      by reference from our Form 8-K filed with the Securities and Exchange
      Commission on August 6, 2002.
 8
    Incorporated
      by reference from our Registration Statement on Form SB-2, filed with the
      Securities and Exchange Commission on September 13,
  2000.
 9
    Incorporated
      by reference from our Quarterly Report on Form 10-QSB, filed with the
      Securities and Exchange Commission on May 20,
2002.
 10
    Incorporated
      by reference from our Quarterly Report on Form 10-QSB, filed with the
      Securities and Exchange Commission on August 14,
2002.
 11
    Incorporated
      by reference from our Current Report on Form 8-K, filed with the
      Securities and Exchange Commission on March 13,
2003.
 12
    Incorporated
      by reference from our Current Report on Form 8-K, filed with the
      Securities and Exchange Commission on April 17,
2003.
 13
    Incorporated
      by reference from our Current Report on Form 8-K, filed with the
      Securities and Exchange Commission on May 6,
2004.
 14
    Incorporated
      by reference from our Annual Report on Form 10-KSB, filed with the
      Securities and Exchange Commission on March 28,
2003.
 15
    Incorporated
      by reference from our Quarterly Report on Form 10-QSB/A filed with the
      Securities and Exchange Commission on February 20,
2003.
  F-34
 *Table of Contents*
  16
    Incorporated
      by reference from our Amended Annual Report on Form 10-KSB/A, filed with
      the Securities and Exchange Commission on April 18,
  2003.
 17
    Incorporated
      by reference from our Amended Annual Report on Form 10-KSB/A, filed with
      the Securities and Exchange Commission on June 13,
2003.
 18
    Incorporated
      by reference from our Current Report on Form 8-K, filed with the
      Securities and Exchange Commission on February 6,
2004.
 19
    Incorporated
      by reference from our Annual Report on Form 10-KSB, filed with the
      Securities and Exchange Commission on April 14,
2004.
 20
    Incorporated
      by reference from our Form S-8 filed with the SEC on September 30,
      2003.
 21
    Incorporated
      by reference from our Quarterly Report on Form 10-QSB filed with the
      Securities and Exchange Commission on May 17,
2004.
 22
    Incorporated
      by reference from our Current Report on Form 8-K, filed with the
      Securities and Exchange Commission on November 3,
2004.
 23
    Incorporated
      by reference from our Registration Statement on Form SB-2/A, filed with
      the Securities and Exchange Commission on December 17,
    2004.
  **Item 14.**
    **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**
 
 **Audit
Fees**
  We were
billed $96,665 for the fiscal year ended December 31, 2004, and $93,101 for the
fiscal year ended December 31, 2003, for professional services rendered by the
principal accountant for the audit of the our annual financial statements, the
review of our quarterly financial statements, and other services performed in
connection with our statutory and regulatory filings. These services also
included updating the audits for our registration statements.
 
 **Audit
Related Fees**
 
 We were
billed $-0- for the fiscal year ended December 31, 2004, and $-0- for the fiscal
year ended December 31, 2003, for assurance and related services rendered by the
principal accountant related to the audit or review of our financial statements,
not included in the foregoing paragraph.
 
 **Tax
Fees**
 
 We were
billed $-0- for the fiscal year ended December 31, 2004, and $-0- for the fiscal
year ended December 31, 2003, for professional services rendered by the
principal accountant for tax compliance, tax advice and tax
planning.
 
 **All
Other Fees**
 
 There
were no other professional services rendered by our principal accountant during
the last two fiscal years that were not included in paragraphs (a), (b) or (c)
above.
 
 We have
no audit committee pre-approval policies and procedures related to the
engagement of our independent auditor. Our board of directors approved all of
the services provided by our principal accountant. No more than 50% of the hours
expended on our audit for the last fiscal year were attributed to work performed
by persons other than full-time employees of our principal
accountant.
  
 F-35
 *Table of Contents*
 
 SIGNATURES
 In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 SEQUIAM
CORPORATION
 
 
 Date:
April 15, 2005
 
 By:
/s/ Nicholas H. VandenBrekel
 Nicholas
H. VandenBrekel, Chairman, President and
 Chief
Executive Officer
 
 
 In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
 
 Date:
April 15, 2005
 
 By:
/s/ Nicholas H. VandenBrekel
 
 Nicholas
H. VandenBrekel, Chairman, President and
 Chief
Executive Officer
 
 
 By:
/s/ Mark Mroczkowski
 Mark L.
Mroczkowski, Chief Financial Officer
 (Principal
Financial Officer), Corporate Secretary,
 Senior
Vice President and Treasurer
 
 F-36