**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**Form
      10-KSB**





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


For
      the
      fiscal year ended December 31, 2006





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





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 is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act o





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 o No





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B 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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


o Yes x No





Issuer's
      revenues for its most recent fiscal year:  $1,688,118





The
      aggregate market value of the Common Stock held by nonaffiliates of the
      Registrant as of April 12, 2007, was approximately $15,858,500 based upon the
      closing price of the Registrant’s Common Stock on such date.





There
      were 83,465,793 shares of Common Stock outstanding as of April 12,
      2007.





Documents
      incorporated by reference.  None.


Transitional
      Small Business Disclosure Format (Check one):  Yes o ;
      No x





TABLEOF
      CONTENTS


PART
                IITEM
                1.
            DESCRIPTION
                OF BUSINESS
            3ITEM
                2.
            DESCRIPTION
                OF PROPERTY
            13ITEM
                3.
            LEGAL
                PROCEEDINGS
            13ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS
            13PART
                IIITEM
                5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER
                MATTERS
            14ITEM
                6.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION
            15ITEM
                7.
            FINANCIAL
                STATEMENTS
            35ITEM
                8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                AND FINANCIAL DISCLOSURE
            61ITEM
                8A
            CONTROLS
                AND PROCEDURES
            61ITEM
                8B
            OTHER
                INFORMATION
            61PART
                IIIITEM
                9
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
                AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
                ACT
            61ITEM
                10.
            EXECUTIVE
                COMPENSATION
            63ITEM
                11
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT AND RELATED STOCKHOLDER MATTERS
            67ITEM
                12
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND
                DIRECTOR INDEPENDENCE
            68ITEM
                13.
            EXHIBITS
            71ITEM
                14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            73


2





**INTRODUCTORY
      NOTE**





This
      Report and other Company communications and statements may contain
“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. For
      information concerning these factors and related matters, see Item 6,
“Management's Discussion and Analysis.”





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.





**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 on the OTC Bulletin Board from “WNXP” to “SQUM.OB”. On May 19,
      2004, our common stock was formally listed on the Frankfurt Stock Exchange
      under
      the symbol RSQ.





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 to include 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: Safety and
      Security and Information Management. 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 is and will be a key feature in our
      current and future product offerings; and (b) a fingerprint detection system
      which we believe represents a new advancement in that science. Since the
      implementation of our Safety and Security segment, our focus has been on
      developing a portfolio of biometric products. Our Information Management segment
      utilizes our interactive web-based technologies.


3
 *Table
          of Contents*


Our
      Safety and Security segment consists of the following subsidiaries: (a) Sequiam
      Biometrics, Inc.; (b) Constellation Biometrics Corporation: and (c) Fingerprint
      Detection Technologies, Inc. Constellation is the parent company of a wholly
      owned subsidiary, Biometric Security (PTY) LTD. (a/k/a Secure Biometrics or
      Biometrics.co.za), a South African company, engaged in the development,
      marketing and sale of biometric technology products. We also own 30% of Shanghai
      Changjiang Intelligence Information Technology, Ltd. (also known as New Era
      Biometrics, Ltd.), a joint venture with Magstone Innovation, Inc. and Changjiang
      Computer Group Corporation. Our Information Management segment consists of
      the
      following subsidiaries: (a) Sequiam Software, Inc.; (b) Sequiam Sports, Inc.;
      and (c) Sequiam Education, Inc.





**Development
      of the Business**





**Safety
      and Security Segment**







**Acquisition
      of Constellation Biometrics Corporation.** On
      June
      7, 2005, we acquired 100% of Constellation Biometrics Corporation, a Florida
      corporation, effective May 31, 2005, pursuant to a stock purchase agreement
      dated May 31, 2005 by and among us, Constellation and the shareholders of
      Constellation. We accounted for this transaction as a purchase. Constellation
      is
      the parent company of a wholly owned subsidiary Biometric Security (PTY) LTD.
      (a/k/a Secure Biometrics or Biometrics.co.za), a South African company, engaged
      in the development, marketing and sale of biometric technology
      products.





**Joint
      Venture Agreement.** On April
      27, 2006 one of our wholly owned subsidiaries, Sequiam Biometrics, Inc., entered
      into a Joint Venture Agreement with Changjiang Computer Group Corporation and
      Magstone Innovation, Inc. The Chinese and English names of the joint venture
      are
      Shanghai Changjiang Intelligence Information Technology, LTD. and New Era
      Biometrics, LTD., respectively. The joint venture is headquartered in Shanghai.
      The purpose of the joint venture agreement is to develop and market biometric
      and other information technology products and applications in China and other
      regions and to support Sequiam Biometrics by providing research and development
      for new products. The joint venture agreement grants Sequiam Biometrics
      exclusive rights to distribute those products in North America, Europe and
      Africa.





Since
      2003, our main focus has been on the development of our biometric technology
      products, primarily the BioVaultTM and BioLock. Initial deliveries of both of
      these products occurred during the last six months of 2006.








**Information
      Management Segment**





Three
      principal shareholders, Nicholas 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. Through the acquisition of different businesses during 2002 and 2003,
      we acquired an internet remote print software product and an internet service
      provider.





Currently,
      our only ongoing operations included in the Information Management Segment
      are
      internet hosting and collocation services and the licensing of our internet
      remote print software. Through our internet hosting and collocation services,
      we
      host third-party web content on either our server or on the third party’s
      server, both of which are located at our remote network operations center.
      All
      of these services and licensing are provided by our subsidiary, Sequiam
      Software, Inc.











4
 *Table
          of Contents*








The
      following chart reflects an overview of our corporate organization (including
      jurisdictions of incorporation and percentages owned by the parent corporation)
      as of December 31, 2006.














**Description
      of the Biometrics Industry**





The
      use
      of unique physical traits to verify a person's identity is known as biometric
      identification. Biometric identification includes fingerprinting, hand geometry,
      iris scanning, retinal scanning, voice recognition, face recognition and
      signature analysis. Biometric technology has been used for decades in government
      and law enforcement applications. Until recently, these systems were too
      expensive to manufacture to make retail marketing realistic. However, due to
      the
      development of more advanced technology, we believe that biometric
      identification techniques can be adapted for commercial purposes on an
      economically feasible basis. In addition, we believe that, as biometric
      technology becomes more familiar, that its presence in safety and security
      applications will grow.





There
      are
      many alternatives in the biometrics industry that include, but are not limited
      to, fingerprint recognition, facial recognition, voice recognition, palm
      recognition, iris scanning and retinal scanning. Many providers have used these
      different methods in different applications. We believe that, although the
      biometric industry is in its infancy, biometric technology is a rapidly maturing
      science. Presently, although many companies have entered the biometric detection
      and application industry, many companies have failed to create a marketable
      product.





We
      believe that fingerprint identification is more effective at authenticating
      a
      person's identity than current processes. We also believe that fingerprint
      verification is less intrusive, more widely accepted and more cost effective
      than other available forms of biometric identification, and as a result, we
      believe that the use of biometrics for access control is becoming more widely
      accepted in the marketplace.





**Products**





**Safety
      and Security Segment**





**A.**
            **Sequiam
                Biometrics, Inc.**





**BioVault** **TM**





We
      market
      a personal access denial device called BioVault TM that
      uses patent-pending fingerprint recognition technology as the sole means to
      control access, and requires no key, card or combination. The
      BioVault TM is
      constructed of heavy-duty 12-gauge steel. The BioVault TM 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 TM 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 TM
      ࿠ signals
      the user like a smoke detector.





5
 *Table
          of Contents*


The
      BioVault TM 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 TM is
      easy
      to program and stores up to 15 authorized fingerprints. We believe that handgun
      owners are the largest market for this product and have developed a relationship
      with the National Rifle Association for the sale of the BioVault TM.





We
      have
      re-designed, re-engineered and re-tooled the BioVault TM and
      have
      introduced it as the BioVault TM 2.0. The
      re-designed BioVault TM 2.0
      includes features requested by partners who required improvements to be
      incorporated in order to commit to the product to a high degree. Some of these
      features include doors that open shallow enough to be in small spaces, a
      polished fit and finish, ability to wire mount in hotel rooms, ability to mount
      in police and other vehicles, an LCD screen to display helpful information
      for
      end users and most importantly a much lower price point. All the requested
      features have been successfully integrated into the new BioVault TM 2.0’s
      design. In addition to our partnership with the National Rifle Association,
      over
      130 distributors and retail outlets have agreed to sell the BioVault TM 2.0.
      Sequiam Biometrics manufactures, assembles, tests and packages the
      BioVault TM 2.0 via
      Magstone Innovation, Inc. in Guangzhou, China. We acquired 80% of the
      outstanding shares of Magstone on January 8, 2007, pursuant to an amended and
      restated stock purchase agreement. Initial deliveries were made of the product
      in August 2006 and through streamlining of the manufacturing process larger
      quantities of the BioVault TM 2.0
      became available in December 2006. For the year ended December 31, 2006, we
      had
      $183,822 in revenues from sales of the BioVault TM and
      BioVault TM 2.0.





**BioLock**





On
      September 13, 2005, we entered into a five-year, Exclusive Co-Operative
      Development and Supply Agreement with Black & Decker’s subsidiary, Kwikset
      Corporation. The purpose of this relationship is to develop, market and sell
      biometric enabled security door hardware and systems.





We,
      together with Kwikset Corporation, have developed the BioLock: a biometrically
      accessible door lock system to be applied to external and internal doors.
      Kwikset has since branded the BioLock the ‘Smart Scan’ for its introduction to
      the Home Depot chain of stores and other retail stores. The Smart Scan was
      introduced into Home Depot in a limited pilot program in November 2006 and
      is
      slated for nationwide release through Black and Decker partners in May-June
      2007.





The
      system uses a Kwikset deadbolt and a biometric sensor with matcher developed
      at
      our laboratories in Orlando, Florida. When a valid finger is detected on the
      biometric sensor, it activates the remote control accessory module to open
      the
      lock.





The
      BioLock biometric module is a completely self-encapsulated device that
      incorporates advanced AC Capacitive biometric sensing technology. The technology
      can read through dirt and oil and overcomes many of the common ‘real world’
failings of previous biometric devices. The BioLock features a simple 3-step
      enrollment of fingerprints on the sensor and no computers or servers are
      required. The BioLock can hold up to 50 fingerprints and operates using either
      battery power or house low voltage power for at least 12 months average
      operation without the need to replace batteries. The BioLock features automatic
      detection of the bolt position and avoids the common issue of the consumer
      having to worry about the position of the bolt when they leave their home.
      The
      BioLock also features a user-friendly interface via an integrated LCD screen
      that allows users to be named and features such as automatic timing out of
      fingerprint records. The BioLock also comes with 2 keys for backup in case
      of
      battery failure, a low battery warning indicator and a lifetime finish warranty.





During
      2006, we provided Kwikset with the biometric and electronic components of the
      BioLock and Kwikset performed the remaining manufacturing of the BioLock.
      Limited deliveries of the BioLock commenced during the fourth quarter of 2006.
      For the year ended December 31, 2006, revenues earned from the sale of the
      BioLock were $51,024. For the year ended December 31, 2006, revenues earned
      from
      the sale of the biometric and electronic components of the BioLock were
      $952,162.





In
      future
      years, we expect to earn revenues from the BioLock by selling the product,
      providing non-recurring engineering services and earning a royalty on
      non-Sequiam BioLock sales.





6
 *Table
          of Contents*


**OEM
      Kits 1 and 2**





OEM
      1 is
      intended for customers who want to quickly develop products that incorporate
      biometric lock actuation for a very low cost, including opening safes, garage
      doors, cabinets, or anything that would normally require a key. The OEM 1 was
      rebranded the UBI ‘Universal Biometric Interface’ in late 2006. Even a
      television remote control could be biometrically enabled with UBI technology.
      The UBI also provides support for a variety of fingerprint sensors. Different
      environments require fingerprint sensors that are designed for effective use
      within that environment. This applies to customers who plan to create products
      that operate in hot or cold temperatures and/or moist areas. Manufacturing
      of
      the UBI began in December 2006 and the product is available through channels
      such as Arrow through their product testing program.





OEM
      2 is
      a biometric board assembly that can be used in a wide variety of biometric
      devices. Unlike OEM 1, OEM 2 provides a feature set that allows OEMs to develop
      products such as time and attendance boxes, biometric medical devices, access
      control devices, governmental related access projects and biometric video
      time-stamping products. OEM 2 is designed for any product that needs memory
      and
      processing power on a biometric OEM device.





Both
      products will have full support from our easy to use suite of developers’ kits
      allowing any home computer to manage or develop new applications using these
      products. For the year ended December 31, 2006, we had no revenues from the
      development of either OEM Kits 1 or 2. Production of OEM 1 began in December
      2006 production of OEM 2 is anticipated to begin in 2007.





**BioCareTrack
      (HCB)**





BioCareTrack
      was specifically developed for the home healthcare market and allows providers
      to verify health care visits, track treatments and eliminate fraud. The system
      functions as described below, however, it can easily be modified to accommodate
      specific procedures and work flows. The system is entirely automatic and only
      requires the caregiver to enter a code and touch the sensor, once the patient
      touches the sensor confirming that care was given, the transaction is
      completed.





According
      to the National Association of Home Health Care, there were over 7.6 million
      Americans requiring home healthcare in 2005. This is a large market and growing
      larger each day as the baby boomer generation grows older. On September 13,
      2005, we signed an exclusive distribution agreement with Kelimo Incorporated
      for
      BioCareTrack. For the fiscal year ended December 31, 2006, we had no revenues
      from the sale of the BioCareTrack. Production of the BioCareTrack began in
      December 2006 with first deliveries expected during the second quarter of 2007.





**USB
      Fingerprint Sensor (CMOS II)**





This
      sensor is designed for integration into products such as notebook computers,
      stand-alone USB fingerprint pods and other products that require an added degree
      of security. The CMOS II is designed to be a low cost consumer oriented solution
      for mass market products. The CMOS II was acquired in an exclusive technology
      licensing agreement with Tacoma Technology, Inc. of Taipei, Taiwan in which
      our
      resources would be utilized to complete the product offering.





The
      devices will be offered with two fingerprint sensors, one from Tacoma and a
      version from Fujitsu Microelectronics America (FMA). These devices will be
      fully
      supported by our (and third party) SDK development kits allowing the ability
      for
      software developers to develop robust applications using these fingerprint
      devices. We experienced various engineering and pre-production delays with
      the
      CMOS II project. For the fiscal year ended December 31, 2006, we had no revenues
      from the sale of the USB Fingerprint Sensor. Small scale production of the
      sensor is expected in April 2007. Sample production began in December 2006.





**Windows
      CE Biometric/RFID PDA (HDT)**





This
      biometric PDA is under development in conjunction with CJCC (Chang Jiang
      Computer Group) and New Era Biometrics Joint Venture of Shanghai China. We
      have
      a 30% ownership interest in this joint venture. The product is a Windows CE
      based handheld PDA that includes features such as a high resolution color LCD,
      a
      proximity RFID reader, a biometric sensor, voice recognition and six
      programmable function keys. The product is designed for applications such as
      use
      in the Chinese Social Security System, Patient Tracking and Venue Security. For
      the
      fiscal year ended December 31, 2006, we had no revenues from the sale of
      the Windows
      CE Biometric/RFID PDA. The product is currently in the prototype phase and
      is
      expected to begin limited production in June 2007.





7
 *Table
          of Contents*


**OEM/ODM
      USB Fingerprint Scanners**





We
      are
      currently working with Fujitsu Microelectronics, Inc. to develop OEM/ODM USB
      fingerprint scanning devices. These devices are designed to secure computer
      equipment that range from home and small office PC’s to enterprise level
      servers. Full production is expected to begin in July 2007. Sampling production
      began in March 2007. For the fiscal year ended December 31, 2006, we had no
      revenues from the sale of the OEM/ODM USB Fingerprint Scanners.





**B.**
            **Constellation
                Biometrics Corporation**





**High
      Speed Biometric Algorithm**





The
      Biometric Algorithm is our biometric matching intellectual property acquired
      with Biometric Security (Pty) Ltd. The matcher works in three phases. First,
      the
      system extracts fingerprint minutiae from a fingerprint graphic provided by
      any
      standard 500Dpi fingerprint sensor. Each print from the same finger entered
      into
      the enroll process is then averaged in to an amalgam via our advanced
      fingerprint averaging algorithm. Once the averaging is completed the fingerprint
      is stored in the fingerprint database. This allows a highly robust matching
      process since much more data is stored per fingerprint in the
      database.





Our
      Biometric Algorithm identifies people by comparing their fingerprints to ones
      in
      the database at a high rate of speed using common computer equipment. We have
      been able to utilize the Biometric Algorithm in our own products avoiding the
      costly licensing of matching systems from our competitors.





The
      Biometric Algorithm is available for licensing to customers in embedded, Linux
      and Windows versions. For the fiscal year ended December 31, 2006, we had no
      revenues from the licensing of the High Speed Biometric Algorithm.





**BioTime**





BioTime
      is our fraud-free, easy-to-use computerized access control, attendance and
      recording tool. All staff activity is recorded automatically at the points
      of
      entry and exit. Upon arrival at work, employees login quickly and easily. Upon
      exiting the premises at the end of the working day, this process is repeated.
      Because the system accurately and instantly identifies each employee, no
      unauthorized people can enter the facility, and all staff movement is fully
      recorded. BioTime is a software program that can work with a variety of
      biometric and other devices.





BioTime
      automatically eradicates time disputes, or “buddy clocking” by other staff
      members. These records can then be saved or printed, and analyzed at any time.
      Also, the figures can be integrated with the most popular payroll packages,
      allowing for the complete automation of the entire payroll calculation process.





BioTime
      is a complete ready-to-use system that includes software, a clocking-in
      terminal, communications cables, a “Getting Started” guide, and a full
      installation manual. Since the software is completely menu-driven and
      exceptionally easy to use, it can be quickly installed and operated by a person
      with little computer experience. A typical installation takes less than one
      hour
      and individuals can be added to the system in a matter of minutes. For the
      fiscal year ended December 31, 2006, we had approximately $37,000 in revenues
      from sales of BioTime.





**BioTools**





BioTools
      is a biometric development kit (SDK) that consists of an ActiveX controls
      toolkit that can be used by developers, OEM's and system integrators as a
      biometric “front-end” to any commercial or custom-written software package. The
      toolkit considerably decreases (from weeks to minutes) the process of adding
      biometric security, and it comes complete with sample code to facilitate quick,
      smooth, trouble-free integration. The toolkit supports Windows 95, 98, NT,
      2000,
      XP, IIS 4 & 5 and the Microsoft Access and SQL Server databases. It is also
      ODBC-compliant, enabling it to integrate with most database
      systems.





8
 *Table
          of Contents*


Biometric
      devices supported include: Authentec, BioLink, Digent, Digital Persona, Kingston
      Technology, Lifeview, Nitgen, Precise Biometrics, Sagem, Secugen, Sony, Suprema,
      Tacoma, Tai-Hao and Targus.





The
      toolkit is available in two versions - Standard and Professional. The BioTools
      Professional Toolkit extends the Standard Toolkit by adding web server samples
      and support tools, web-cam support, and Smart Card (chip card) support. For
      the
      fiscal year ended December 31, 2006, we had approximately $9,000 in revenues
      from sales of the BioTools.





**BioMail**





BioMail’s
      combination of fingerprint biometric security and encryption brings you secure
      email management. With BioMail, no one gets to see your private communication.
      BioMail works by sending your fingerprint template to your intended confidential
      correspondent as a standard email attachment in Outlook. This template is stored
      in his/her address book under your contact details. Whenever he/she wants to
      send you a confidential email, the contents are encrypted automatically when
      she
      adds your name to the “To” field at the top of the email and by clicking on the
      encrypt icon.





In
      transit and on arrival, the documents remain encrypted until your fingerprint
      is
      read on a biometric fingerprint scanner. This means that no one other than
      the
      intended recipient can open, view, or copy the document. For the fiscal year
      ended December 31, 2006, we had no revenues from sales of BioMail.





**Information
      Management Segment**





**A.**
            **Sequiam
                Software, Inc.**





Sequiam
      Software, Inc’s ongoing operations currently consist only of internet hosting
      and collocation services and the licensing of our internet remote print
      software. Through our internet hosting and collocation services, we host
      third-party web content on either our server or on the third party’s server,
      both of which are located at our remote network operations center. Revenue
      earned during the year ended December 31, 2006 from providing internet hosting
      and collocation services and from the licensing of our internet remote print
      software were $60,237 and $33,400, respectively.





**Market
      for our Products and Services**





The
      year
      ended December 31, 2006 was the first year we had significant sales from our
      primary biometric products, the BioVault TM 2.0 and
      BioLock. During 2005 and much of 2006 our time was spent acquiring, developing
      and preparing these products for sale. Our revenues for the year ended December
      31, 2005 were primarily derived from secondary products and services such as
      web
      hosting and collocation services, internet remote print software and web and
      custom software development. The National Rifle Association has agreed to
      actively market the BioVault TM 2.0 and
      Black & Decker’s subsidiary, Kwikset Corporation has agreed to actively
      market the BioLock, both at no cost to us. Market estimates for the sale of
      the
      BioVault TM 2.0 and
      BioLock were provided to us by the National Rifle Association and Kwikset
      Corporation, respectively. In addition Analog Devices, Authentec, Fujitsu
      Microelectronics, Inc., Arrow Electroincs, Inc. and others are actively
      marketing our technology using Universal Biometric Interface demonstration
      kits
      provided by us at minimal cost.





We
      are
      targeting sales of our biometric products primarily to leading suppliers in
      manufacturing and distribution of safety and security products.





**Distribution
      of our Products and Services**





Two
      of
      our biometric products came to market during the last six months of 2006 after
      a
      lengthy development period. We intend to sell our biometric products through
      “Value Added Resellers,” distributors and marketing alliances and through our
      own direct sales efforts. We will also license our technology to manufacturers
      who wish to incorporate biometric technologies into the products they make
      as we
      did with Black and Decker’s subsidiary: Kwikset Corporation. On September 13,
      2005, we entered into a five-year, Exclusive Co-operative Development and Supply
      Agreement with Kwikset Corporation. The purpose of this agreement is to
      establish the business relationship between Kwikset and us in respect to the
      development, marketing and sales of biometric enabled security door hardware
      and
      systems, including our BioLock product.





9
 *Table
          of Contents*


**Value
      Added Resellers** .
      We plan
      to continue to form additional relationships with Value Added Resellers. Under
      a
      typical agreement, the Value Added Reseller will sell our products in
      conjunction with their own products.  In some instances, a Value Added
      Reseller might convert our products to their own private-label.





**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 a rapidly growing distribution network for our biometric products
      that includes over 100 retail stores and a number of distributors. Some of
      the
      resellers include Sportsmans Market, Inc, Earthtec, Pacific Supply Group, Zurich
      Products, Keylock LLC, RDG Barcode America, SmartHome, Inc. and Lowry Security
      Group. The distributors include Davenport Sales, Fulcrum Biometrics, Arrow
      Electroincs, Inc., Sporty’s, The Artemis Group and RSR Group.





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 original BioVaultTM price points
      were too high for the National Rifle Association to commit to selling the
      BioVaultTM to the desired degree. BioVaultTM 2.0 includes a 52% reduction in the
      cost to manufacture the product. This allows us to set the MSRP of the BioVaultTM
2.0 to the level desired by the National Rifle Association. Shipments of the
      BioVaultTM 2.0 commenced during the last six months of 2006. The National Rifle
      Association will offer our BioVaultTM 2.0 in its online store and catalog and
      will market the product through its instructors. For the fiscal year ended
      December 31, 2006, we had 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
      sometime in 2007.





**Alliance
      Partners** .
      Our
“Alliance Partners” will be companies that partner with us on our products. 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. Analog Devices, an
      Alliance Partner, has included us in its press and marketing endeavors that
      include articles in EE Times and other publications. Another Alliance Partner
      is
      Authentec, Inc. who provided millions of fingerprint sensor devices in 2006.
      Authentec, Inc. is recommending us as a premier provider of biometric hardware
      and technology to facilitate their customers’ needs for advanced biometric
      hardware designs that include the Authentec, Inc. biometric sensor. We are
      actively pursuing other Fortune 500 alliance partners. For the fiscal year
      ended
      December 31, 2006, we had not received significant revenue from our Alliance
      Partners.





**Competition**





We
      compete in a highly competitive marketplace that is characterized by rapid
      technological change, declining average selling price and continuously evolving
      customer requirements. We believe that the principal competitive factors in
      our
      markets include:




•
            the
                ability to consistently deliver biometric performance across the
                widest
                user demographics;•
            the
                ability to provide solutions that meet evolving security requirements;•
            cost;•
            size,
                convenience and ease of use;•
            the
                breadth and diversity of product offerings;•
            the
                ability to provide a reliable supply of products in sufficient quantities
                and in a timely manner;•
            the
                quality of customer service and technical support;•
            the
                ability to operate in harsh physical environments; and•
            financial
                and operational stability and reputation.







10
 *Table
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We
      believe we currently compete favorably with respect to these factors in the
      aggregate. However, we cannot assure that our products will continue to compete
      favorably or that we will be successful in the face of increasing competition
      from new products and enhancements introduced by existing competitors or new
      companies entering the fingerprint biometrics market. Increased competition
      could harm our business, by, for example, increasing pressure on our profit
      margins or causing us to lose customers. In addition, delivery of products
      with
      defects or reliability, quality or compatibility problems may damage our
      reputation and competitive position.





**Biometric** **Industry**





Each
      of
      the following biometric companies generally has a biometric product or service
      that they market into a specific field or to a specific customer. Our market
      method is to sell or license our technology to other biometric companies. We
      believe that our major competitors for our biometrics products include, but
      are
      not limited to, the following companies:





*Sagem
      Morpho* - Sagem
      Morpho is the largest competitor in the biometric field. Currently Sagem has
      over 38,000 employees and market a diverse range of biometric products directly
      to the government security market and to integrators and developers that serve
      that market. One of their primary products is called the MorphoTouch - a
      hand-held device that can read fingerprints, smart cards, bar codes and more.





Our
      hardware products are expected to have a vastly superior price/performance
      ratio
      over Sagem Morpho. The current product is called the OEM 2 that competes with
      the MorphoTouch. OEM 2 has generally all the capabilities of the MorphoTouch
      and
      unlike the MorphoTouch can be integrated in a wide variety of biometric
      products.





*Digital
      Persona, Authentec, Secugen* - These
      companies are all fingerprint sensor manufacturers who market integration of
      their biometric technologies to electronics groups. They actively foster
      development of products that contain their sensor hardware. Their competitive
      products include their software development kits and reference designs. For
      example, Authentec markets both software development kits and embedded software
      development kits.





*Neurotechnologija* - this
      company develops matching systems for numerous sensor manufacturers. Their
      products allow customers to add biometric capability to any software
      application. The application they most commonly sell is called VeriFinger.
      They
      also sell an embedded development kit called FingerCell that gives embedded
      devices fingerprint stand-alone matching capability.





Our
      development kits are very similar to VeriFinger and FingerCell but have a price
      point about 40% lower, support twice as many devices and are judged by many
      easier to use and implement.





**BioVault** **TM** **.** The
      single competitor for the BioVaultTM is 9g Products’ flagship product, the
      INPRINT TM .
      Using
      fingerprint technology, the INPRINT TM securely
      stores jewelry, handguns, valuables, important documents, medications, and
      personal information and is similar in purpose and operation to the BioVaultTM.
      INPRINT TM is less
      expensive than the BioVault TM and, in
      our opinion is also less well constructed and a less substantial product in
      general. The INPRINT TM is
      constructed of aluminum, while the BioVaultTM uses all steel construction. 9g
      Products Inc. was founded in 2002 and its only product is the
      INPRINT TM .





11
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          of Contents*


**Our
      Customers**





**Safety
      and Security**





Sales
      to
      Black & Decker during 2006 represented 56% of our total revenues. During
      2006, our sales to Black & Decker were comprised of the sale of biometric
      and electronic components for the BioLock. We do not expect these type sales
      to
      be a significant part of our revenues in future years as we expect to earn
      revenues from the BioLock by selling the product, providing non-recurring
      engineering revenue services and earning a royalty on non-Sequiam BioLock sales.
      Many of the customers for our biometric products are in South Africa and are
      customers of our wholly owned subsidiary Biometric Security (PTY) Ltd. The
      customers in South Africa include Ford Motor Company, South Africa; Wimpy,
      South
      Africa; Pick 'n Pay, South Africa; Receiver of Revenue, Cape Town, South Africa;
      Provincial Administration, Western Cape, South Africa; Santam; Royal Dutch
      Shell; South African Police; Free State; South Africa Hewlett Packard and
      others. In the United States, during the last six months of 2006 we started
      to
      market our BioVaultTM and BioLock products via the distribution channels
      discussed in the “Distribution of our Products and Services” section
      above.





On
      September 13, 2005, we entered into a five-year, Exclusive Co-Operative
      Development and Supply Agreement with Kwikset Corporation, a subsidiary of
      Black
& Decker. The purpose of this agreement is to establish the business
      relationship between Kwikset and us in respect to the development, marketing
      and
      sales of biometric enabled security door hardware and systems.





**Information
      Management**





This
      segment provides web-hosting and collocation services and also licenses our
      internet remote print software. The segment’s customers are generally
      individuals and small businesses that require web-hosting and collocation
      services and businesses and schools that require the printing of documents
      at
      several different locations.





**Intellectual
      Property**





Our
      patent pending for “BioVault TM ”
was
      denied. We have resubmitted our patent application with the United States Patent
      Office. We do not anticipate that we will file any additional patents on our
      existing biometric products at this time. We have registered “Sequiam”, “Smart
      Biometrics” and “BioVault” (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
      Biometrics, Inc. and Constellation Biometrics
      Corporation** *.* **** We
      acquired the “BioVaultTM” technology. Accordingly, we had no significant research
      and development costs associated with this product other than normal adaptations
      for alternate uses of the biometrics. Research and development costs for this
      product were not significant during 2006 and we do not expect research and
      development costs for this product to be significant during the foreseeable
      future. We have discontinued the BioVaultTM in favor of the BioVaultTM 2.0.





As
      of
      December 31, 2006, we capitalized $364,117 in product development costs related
      to the redesign of the BioVaultTM 2.0, development of the BioLock and OEM Kits 1
      and 2 and other biometric products.





**Our
      Employees**





As
      of
      December 31, 2006, we employed 13 full-time employees in the United States
      and 6
      in South Africa for a total of 19. Three of these employees worked in sales
      and
      marketing; 13 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.





12
 *Table
          of Contents*


**Dependence
      on Key Management Personnel**





We
      believe that our continued success depends to a significant extent upon the
      efforts and abilities of our senior management. In particular, the loss of
      Nicholas H. VandenBrekel, our President and Chief Executive Officer, Mark L.
      Mroczkowski, our Executive Vice President and Chief Financial Officer, Alan
      McGinn, our Chief Technology Officer, or Kevin Henderson, President of Sequiam
      Biometrics, 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**





Ourcorporate
      headquarters is 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.
      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.





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
      commenced July 1, 2004 and continue through June 1, 2010.





On
      May
      17, 2005, EastGroup Properties, LP agreed to an additional six (6) month
      deferment of the Company’s Promissory Note payments until December 1, 2005,
      contingent upon the payment of April and May 2005, and that all rental payments
      between now and December 2005 are kept current. EastGroup Properties, LP also
      agreed to extend the Note by twelve (12) months to represent the twelve (12)
      total deferred payments from December 2004 to November 2005. We are currently
      in
      the process of renegotiating the repayment terms of the note
      payable.





We
      also
      lease approximately 2,100 square feet of office space in Bellville, South
      Africa. This space is used as an office for our South African operations. The
      lease expires October 31, 2008.





**ITEM
                3.**
            **LEGA****L
                PROCEEDINGS**





No
      material legal proceedings are currently pending or threatened
      against us.





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





Not
      applicable.


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 *Table
          of Contents*


**PART
      II**





**ITEM
                5.**
            **MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER
                MATTERS**





Asof
      March 28, 2007, there were approximately 1,006 holders of
      record of our common stock and 83,287,793 shares outstanding. We have not
      previously declared or paid any dividends on our common stock and do not
      anticipate declaring any dividends on our common stock in the foreseeable
      future. The following table shows the high and low bid prices of our common
      stock as quoted on the OTC Bulletin Board, by quarter, during each of our last
      two fiscal years ended December 31, 2006 and 2005. These quotes reflect
      inter-dealer prices, without retail markup, markdown or commissions and may
      not
      represent actual transactions. The information below was obtained from the
      OTC
      Bulletin Board, for the respective periods.





Market
                PricesQuarter
            2005
            2006High
            Low
            High
            LowFirst
                quarter
            $0.30
            $0.12
            $0.41
            $0.25Second
                quarter
            0.29
            0.06
            0.32
            0.20Third
                quarter
            0.77
            0.06
            0.32
            0.17Fourth
                quarter
            0.53
            0.23
            0.33
            0.18





The
      high
      and low bid prices for shares of our common stock on March 28, 2007, were $0.17
      and
      $0.16 ,
      respectively, based upon bids that represent prices quoted by broker-dealers
      on
      the OTC Bulletin Board. These quotations reflect inter-dealer prices, without
      retail mark-up, mark-down or commissions, and may not represent actual
      transactions. For information concerning principal shareholders, see “Security
      Ownership of Certain Beneficial Owners and Management.”





On
      May
      24, 2004, we were formally listed on the Frankfurt Stock Exchange under the
      symbol RSQ. The high and low bid prices for shares of our common stock on March
      28, 2007, were €0.13 and €0.12, respectively, based upon bids that represent
      prices quoted on the Frankfurt Stock Exchange. These quotations reflect
      inter-dealer prices, without retail mark-up, mark-down or commissions, and
      may
      not represent actual transactions.





**Dividend
      Policy**





We
      have
      not declared or paid any cash or other dividends on shares of our common stock
      in the last two years, and we presently have no intention of paying any cash
      dividends on shares of our common stock in the foreseeable future. Our
      current policy is to retain earnings, if any, to finance the expansion of our
      business. The future payment of dividends on shares of our common stock will
      depend on the results of operations, financial condition, capital expenditure
      plans and other factors that we deem relevant and will be at the sole discretion
      of our board of directors.





**Recent
      Sales of Unregistered Securities**





Unregistered
      sales of our equity securities during fiscal 2006 not previously reported in
      our
      prior quarterly and current reports filed with the SEC were as
      follows:





The
      Company received a total of $289,412 and in exchange issued a total of 1,378,151
      of its common shares as a result of the exercise of warrants to purchase common
      shares at $0.21 per share.





The
      company issued 476,191 of its common shares as a result of an election made
      by a
      holder of the Company’s Series B preferred stock to convert shares of the
      Company’s Series B preferred stock to shares of the company’s common stock, at a
      fixed conversion rate of $0.21 per share. Also, the Company issued 24,479 of
      its
      common shares to this holder of the Company’s Series B preferred stock as
      payment of the 10% cumulative dividend payable to Series B preferred
      stockholders. Because no commission or other remuneration was paid or given
      directly or indirectly for soliciting the aforementioned exchange, the
      conversion described above was exempt from registration pursuant to Section
      3(a)(9) of the Securities Act.




14
 *Table
          of Contents*


**ITEM
                6.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION**





Management's
      discussion and analysis provides supplemental
      information, which sets forth the major factors that have affected our financial
      condition and results of operations and should be read in conjunction with
      the
      Consolidated Financial Statements and related notes. Management's discussion
      and
      analysis is divided into subsections entitled “Forward Looking Statements,”
“Introduction,” “Results of Operations,” “Liquidity and Capital Resources,”
“Critical Accounting Policies,” “Off-Balance Sheet Arrangements” and “Risk
      Factors.” Information therein should facilitate a better understanding of the
      major factors and trends that affect our earnings performance and financial
      condition, and how our performance during 2006 **** 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 2006 compared to Fiscal
      2005; and (ii) financial liquidity and capital resources.  This discussion
      and analysis should be read in conjunction with our consolidated financial
      statements and notes included in this 10-KSB.





We
      are a
      biometric technology company specializing in biological identification security
      systems. Our business is divided into two operating segments: (a) Safety and
      Security; and (b) Information Management.





The
      use
      of unique physical traits to verify a person's identity is known as biometric
      identification. Biometric identification includes fingerprinting, hand geometry,
      iris scanning, retinal scanning, voice recognition, face recognition and
      signature analysis. Biometric technology has been used for decades in government
      and law enforcement applications. Until recently, these systems were too
      expensive to manufacture to make retail marketing realistic. However, due to
      the
      development of more advanced technology, we believe that biometric
      identification techniques can be adapted for commercial purposes on an
      economically feasible basis. In addition, we believe that, as biometric
      technology becomes more familiar, that its use in safety and security
      applications will grow.





There
      are
      many alternatives in the biometrics industry that include, but are not limited
      to, fingerprint recognition, facial recognition, voice recognition, palm
      recognition, iris scanning and retinal scanning. Many providers have used these
      different methods in different applications. We believe that, although the
      biometric industry is in its infancy, biometric technology is a rapidly maturing
      science. Presently, although many companies have entered the biometric detection
      and application industry, many companies have failed to create a marketable
      product.





We
      believe that fingerprint identification is more effective at authenticating
      a
      person's identity than current processes. We also believe that fingerprint
      verification is less intrusive, more widely accepted and more cost effective
      than other available forms of biometric identification, and as a result, we
      believe that the use of biometrics for access control is becoming widely
      accepted in the marketplace.





15
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          of Contents*


Since
      inception, we have invested heavily in research and development and have not
      yet
      achieved profitability. Our revenue has grown from $0.3 million in 2004 to
      $1.7 million in 2006, driven primarily by demand in the biometrics product
      market. We expect sales of our products for use in the biometrics product market
      to continue to represent a substantial portion of our revenue in the foreseeable
      future.




We
      primarily sell our products to OEMs, original design manufacturers, or ODMs,
      or
      contract manufacturers. Our customers’ products are complex and require
      significant time to define, design and ramp to volume production. Our sales
      cycle begins with our marketing and sales staff and application engineers
      engaging with our customers’ system designers and management, which is typically
      a multi-month, or even multi-year, process. If we are successful, a customer
      will decide to incorporate our solution in its product. Because the sales cycles
      for our products are long, we incur expenses to develop and sell our products
      well in advance of generating revenue, if any, from those expenditures. We
      do
      not have long-term purchase commitments from any of our customers, as sales
      of
      our products are generally made under individual purchase orders. We have
      experienced revenue growth due to an increase in the number of our products
      offered and an expansion of our customer base.





For
      the
      years ended December 31, 2006 and 2005, the Company’s revenues were derived 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 product
      and
      licensing revenue are recognized when all of the following criteria have been
      met: (a) there is an executed license agreement, for licensing revenue, and
      the
      technology, software or product has been delivered to the customer, (b) the
      sale
      amount is fixed and payable within twelve months, (c) collection is deemed
      probable, and (d) product returns are deemed reasonably estimable. Revenues
      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 customers in advance of amounts
      earned is deferred and recorded as a liability.





The
      following table shows the proportion of total revenues by segment in each of
      the
      last two fiscal years ended December 31, 2006.





**Period**
            **Safety
                and Security**
            **Information
                Management**Fiscal
                year ended December 31, 2005
            $239,779
            $386,141Fiscal
                year ended December 31, 2006
            $1,582,647
            $105,471





**Results
      of Operations**





**Fiscal
      2006 compared to Fiscal 2005.** Unless
      otherwise noted, references to 2006 represent the year ended December 31,
      2006 and references to 2005 represent the year ended December 31,
      2005.





The
      following table sets forth information regarding our financial results for
      2006
      and 2005.





2006
              Amount
            2005
              AmountRevenue
            $1,688,118
            $625,920Costs
                of services and product sales
            $1,789,743
            $904,655Selling,
                general and administrative
            $3,599,125
            $3,119,022Interest
                expense
            $1,317,923
            $1,732,444Net
                loss
            $(5,200,617)
            $(5,430,660)





16
 *Table
          of Contents*


**Revenues**





Total
      revenue increased by $1,062,198 or 170% to $1,688,118 for the year ended
      December 31, 2006, from $625,920 for the year ended December 31, 2005.





This
      increase was due to our BioVaultTM and BioLock products coming to market during
      the last six months of 2006. Sales of the BioVaultTM, BioLock, and related
      components and accessories during 2006 were $1,197,359 compared to 2005 sales
      of
      the prior version of the BioVaultTM of $19,854. The increase in revenues during
      2006 was also a result of an increase in sales from Constellation Biometrics
      Corporation, which we acquired May 31, 2005, from $154,661 in 2005 to $345,337
      in 2006. The increase in revenues during 2006 was partially offset by a decrease
      in revenues from our Information Management segment. Revenues earned from this
      segment decreased to $105,471 in 2006 from $386,141 in 2005. The decrease was
      a
      result of our continued focus on developing our Safety and Security segment
      and
      our portfolio of biometric products.





During
      the last several years we spent significant time acquiring and redeveloping
      our
      biometric technology products. As a result, we expect more significant sales
      of
      our biometric technology products during 2007 and thereafter. In addition to
      our
      own sales efforts we are looking for other companies in the industry to whom
      we
      can license our biometric technology products. We believe that this will result
      in an increase in the number of outlets in which these products are made
      available.




We
      believe that the following developments will have a positive impact on our
      future revenues:





·
            On
                September 13, 2005, Sequiam Corporation entered into a five-year,
                Exclusive Co-Operative Development and Supply Agreement with Black
&
                Decker’s subsidiary Kwikset Corporation. The purpose of this agreement is
                to establish the business relationship between Kwikset and Sequiam
                in
                respect to the development, marketing and sales of biometric enabled
                security door hardware and systems. Our BioLock product, which came
                to
                market during the last quarter of 2006, was developed under this
                agreement.





·
            Effective
                April 10, 2006, Sequiam Biometrics, Inc., a wholly-owned subsidiary
                of
                Sequiam Corporation, entered into an Exclusive License Agreement
                with
                Tacoma Technology, Inc. The purpose of this agreement is to provide
                the
                conditions and terms for the manufacturing and distribution of certain
                biometric products of Tacoma, including all of Tacoma’s biometric sensor
                modules. The term of this agreement is six years and may be automatically
                renewed for additional 24-month terms unless either party provides
                the
                other with 30-days prior notice of its desire not to
                renew.





·
            Effective
                April 15, 2006, Sequiam Biometrics, Inc. entered into an Exclusive
                Distribution and Manufacturing Agreement with CJCC (China Jiangsu
                Construction Corporation). The purpose of this agreement is to provide
                the
                conditions and terms for the distribution of certain biometric products
                and services of Sequiam Biometrics, Inc., including a biometric personal
                digital assistant. The term of this agreement is five years and may
                be
                renewed for additional 24-month terms unless either party provides
                the
                other with written notice of termination at least 90 days prior to
                the
                expiration of the then current term.·
            On
                April 27, 2006, Sequiam Biometrics, Inc. , a wholly owned subsidiary
                of
                Sequiam Corporation, entered into a Joint Venture Agreement with
                Changjiang Computer Group Corporation and Magstone Innovation, Inc.
                . The
                Chinese and English names of the joint venture are Shanghai Changjiang
                Intelligence Information Technology, LTD, and New Era Biometrics,
                Ltd.,
                respectively. The joint venture is headquartered in Shanghai. The
                purpose
                of the joint venture agreement is to develop and market biometric
                and
                other information technology products and applications in China and
                other
                regions and to support Sequiam Biometrics, Inc. by providing research
                and
                development for new products. The joint venture agreement grants
                Sequiam
                Biometrics, Inc. exclusive rights to distribute those products in
                North
                America, Europe and Africa.





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As
      a
      result of these developments, we expect that revenues from our Safety and
      Security segment will continue to increase during 2007 and thereafter as we
      continue to focus our efforts on our biometric products.





**Operating
      Expenses**





Cost
      of
      services decreased by $467,966 or 82%, from $571,684 for the year ended December
      31, 2005 to $103,718 for the year ended December 31, 2006. Depreciation and
      amortization included in cost of services decreased $230,132 or 78% from
      $294,638 in 2005 to $64,506 in 2006 due primarily to intangible assets becoming
      fully amortized during 2005 and an increase in the allocation of depreciation
      and amortization to Corporate. All other expenses incurred to deliver the cost
      of services decreased $237,834 or 86% from $277,046 in 2005 to $39,212 in 2006,
      largely due to staff reduction and related personnel costs.





Cost
      of
      product sales increased $1,353,054 or 406% from $332,971 in 2005 to $1,686,025
      in 2006 due primarily to the increase in sales of the BioVaultTM, BioLock, and
      related components and accessories during 2006. The increase was also caused
      by
      an increase in sales of product as a result of the acquisition of Constellation
      Biometrics Corporation during 2005 and an increase in depreciation and
      amortization allocated to Cost of product sales.





Selling,
      general and administrative expenses increased $480,103 or 15% from $3,119,022
      in
      2005 to $3,599,125 in 2006. The increase was primarily due to an increase in
      payroll from $1,187,855 in 2005 to $1,586,965 in 2006, which was an increase
      of
      $399,110, an increase in non-payroll related expenses incurred by Constellation
      Biometrics Corporation, who we acquired during the second quarter of 2005,
      from
      $62,316 in 2005 to $146,168 in 2006 and an increase in the amount of
      amortization and depreciation expense allocated to selling, general and
      administrative expenses of $169,946. The increase was partially offset by an
      overall decrease in selling, general and administrative expenses not related
      to
      payroll, Constellation or amortization and depreciation. This decrease was
      attributed to non-cash and non-recurring 2005 expenses for investment banking,
      consulting and other non-payroll expenses incurred in exchange for
      stock.




As
      discussed above, our total payroll included in selling, general and
      administrative expenses was $1,586,965 for 2006 and $1,187,855 for 2005, an
      increase of $399,110 or 34%. This increase was due to: (a) $282,269 of payroll
      expense recognized during 2006 as a result of issuing shares of our common
      stock
      to our CEO and CFO in order to pay salaries due to them; (b) the hiring of
      additional employees in our Safety and Security segment beginning during the
      latter part of 2005 and during 2006; (c) the addition during the second quarter
      of 2005 of employees resulting from the acquisition of Constellation Biometrics
      Corporation; and (d) the hiring of an employee during the first quarter of
      2006
      to assist with corporate accounting and financial reporting responsibilities.
      The increase was partially offset by a decrease in payroll related to our
      Information Management segment that resulted from the change in our primary
      focus from the Information Management segment to the Safety and Security
      segment.





We
      currently operate without directors’ and officers’ insurance and is at risk for
      those types of losses.





**Other
      Gains and Losses**





During
      2006 and 2005 we recognized gains on sale of equipment of $5,000 and $370,
      respectively.





We
      recognized a loss on impairment of intangible assets of $260,069 in 2005.This
      impairment resulted from the write-off of $154,469 which represented the
      remaining net book value of the intellectual property recorded as a result
      of
      the 2003 acquisition of Fingerprint Detection Technologies, Inc. and the
      write-off of $105,600 which represented the remaining net book value of the
      capitalized software development costs for our internet remote print product.





We
      recognized a loss on impairment of goodwill of $79,188 during 2005. This loss
      represented the goodwill recorded as a result of the 2005 acquisition of
      Constellation Biometrics Corporation.





We
      recognized a gain on restructuring of debt of $13,056 during 2006. This gain
      resulted from a write-down of a note payable to the amount that was repaid
      to
      the lender, which was agreed to by the lender.





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During
      2005, we recognized a net gain on extinguishment of debt of $38,428. One
      component of the net gain was the write-off of accounts payable of $315,428
      that
      consisted primarily of liabilities assumed as a result of the 2002 acquisition
      of BrekelGroup, Inc. This gain was partially offset by the fair value of a
      warrant issued during 2005, in connection with the repayment of long-term debt,
      that is exercisable into 1,500,000 shares of our common stock. The fair value
      of
      the warrant was determined to be $277,000.





During
      2006, we recognized a loss on settlement of a lawsuit of $200,000. On July
      13,
      2006, we reached an agreement with Chapman Spira & Carson, LLC to settle the
      complaint filed by Chapman on or about September 28, 2005 in United States
      District Court for the Southern District of New York in which Chapman asserted
      claims for breach of contract and unjust enrichment. The agreement to settle
      the
      dispute required us to deliver a cash payment to Chapman of $200,000. This
      cash
      payment was made in July 2006.





**Interest
      Expense**





Interest
      expense was $1,317,923 in 2006 and $1,732,444 in 2005, a decrease of $414,521
      or
      24%. This decrease was due to the write-off of loan costs of $184,641 during
      2005 and an increase in the non-cash charge which resulted from the accretion
      of
      the debt discount related to the fair value of warrants for common stock issued
      in connection with the various loan agreements. The total accretion of debt
      discounts during 2005 was $625,970 compared to $454,507 during 2006, a decrease
      of $171,463.





**Net
      Losses**





We
      incurred net losses of $5,200,617 and $5,430,660 for the years ended December
      31, 2006 and 2005, respectively, a decrease of $230,043 or 4%. The decrease
      was
      due to an improvement in revenues less cost of revenues of $177,110, a decrease
      in other net losses of $118,515 and a decrease in interest expense of $414,521.
      The decrease was partially offset by an increase in selling, general and
      administrative expenses of $480,103.





We
      expect
      to incur additional net losses through the first two quarters of 2007 as our
      biometric products continue to be developed and marketed. We expect our overall
      cash flow to improve beginning in the second quarter of 2007 primarily as a
      result of a new financing.





**Liquidity
      and Capital Resources**





**General**





Our
      principal use of cash in our operating activities for 2006 was for inventory
      and
      selling, general and administrative expenses.  Our principal source of
      liquidity has historically been from financing activities.  We expect our
      cash flow to improve during 2007 as a result of new financing and the sales
      and
      licensing of our biometric products. We need to obtain additional financing
      to
      continue our operations and we expect to secure such additional capital in
      a
      timely manner.





**Operating
      Activities**





Net
      cash
      used for operating activities was $2,904,737 for the year ended December 31,
      2006, as a result of the: (a) net loss during the period of $5,200,617, (b)
      non-cash expenses and net gains and losses of $1,735,545 and (c) increases
      in
      receivables of $591,677 and inventory of $688,438, which were partially offset
      by increases in accounts payable of $894,391, accrued expenses of $757,641
      and
      deposits of $112,500.





We
      continue to incur net losses as our biometric products just came to market
      for
      the first time during the last six months of 2006. Non-cash expenses and net
      gains and losses consist primarily of: (a) depreciation of property and
      equipment and amortization of intellectual properties; (b) the accretion of
      debt
      discounts related to long-term debt; (c) the amortization of loan costs; and
      (d)
      the issuance of common stock in exchange for services, interest and salaries.
      The increases in receivables, inventory, accounts payable, accrued expenses
      and
      deposits are a result of our biometric products coming to market for the first
      time during the last six months of 2006. The increase in accrued expenses was
      also caused by an increase in accrued interest on the loan payable to the Trust
      Under the Will of John Svenningsen that resulted from us not making the
      scheduled payments the last three months of 2006 due to poor cash
      flow.





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**Investing
      and Financing Activities**





Net
      cash
      used for investing activities was $528,180 for the year ended December 31,
      2006,
      consisting primarily of purchases of equipment of $88,847, product development
      costs of $244,333, an increase in advance receivable of $140,000 and cash
      invested in our joint venture (described more fully below) with Changjiang
      Computer Group Corporation and Magstone Innovation, Inc. of $60,000. Cash was
      used for these investing activities in order to help grow our core business:
      the
      sale and licensing of biometric products.





On
      April
      27, 2006, Sequiam Biometrics, Inc., our wholly owned subsidiary, entered into
      a
      Joint Venture Agreement with Changjiang Computer Group Corporation and Magstone
      Innovation, Inc.. The Chinese and English names of the Joint Venture are
      Shanghai Changjiang Intelligence Information Technology, LTD and New Era
      Biometrics, Inc., respectively. The JV is headquartered in Shanghai, China.
      The
      purpose of the JV Agreement is to develop and market biometric and other IT
      products and applications in China and other regions and to support us by
      providing research and development for new products. The JV Agreement grants
      us
      exclusive rights to distribute those products in North America, Europe and
      Africa.





The
      JV is
      owned 30% each by us and Magstone and 40% by CJCGC. The JV Agreement was
      approved by the Chinese government during 2006.





As
      part
      of the JV Agreement, we along with Magstone were required to invest $60,000
      each
      and CJCGC $80,000. We made this investment during the fourth quarter of 2006.
      The term of the JV Agreement is twenty years, expiring on May 31, 2026, and
      will
      be automatically renewed for additional ten-year terms unless all parties agree
      in writing to cease operations prior to the expiration of the then current
      term.





We
      account for our investment in the JV under the equity-method of
      accounting.





Net
      cash
      provided by financing activities was $2,708,683 for the year ended December
      31,
      2006 representing proceeds from the sale of common stock and exercise of
      warrants of $539,413, proceeds form the sale of preferred stock of $2,962,500
      and proceeds from shareholder loans of $209,997, offset primarily by the payment
      of stock issuance costs of $347,181, and the repayment of long-term debt of
      $635,398. Cash provided through long-term debt, the sale of preferred and common
      stock and the exercise of warrants are our primary methods of obtaining cash
      until the sale and licensing of our biometric products are sufficient enough
      to
      support our operations. This is expected to occur during the last six months
      of
      2007.





Effective
      April 15, 2006, Sequiam Biometrics, Inc., our wholly-owned subsidiary, entered
      into an Exclusive Distribution and Manufacturing Agreement with CJCC (China
      Jiangsu Construction Corporation). The purpose of this agreement is to provide
      the conditions and terms for the distribution of certain biometric products
      and
      services of the Company, including a biometric personal digital assistant.
      As
      part of the Agreement, during 2006, CJCC purchased 483,871 restricted common
      shares of Sequiam Corporation common stock for $150,000.





During
      April 2006, we entered into an Amendment to a Promissory Note. This Promissory
      Note was classified as a loan from shareholder prior to it being repaid during
      2005. As part of this amendment, it was agreed that for certain consideration
      provided by the Promissory Note holder, the warrant to purchase 7,500 of the
      Company’s common shares at $1.00 per share granted under the original Promissory
      Note was amended to 476,191 of the Company’s common shares at $0.21 per share.
      During April 2006, this warrant was exercised and we received $100,000 and
      in
      exchange issued 476,191 of our common shares.





During
      2006, warrants issued during 2005 in connection with our Series A preferred
      stock offering were exercised to purchase 1,378,151 shares of our common stock
      at $0.21 per share. We received $289,412 from the exercise of the warrants.
      In
      our opinion the issuance and sale of the shares upon exercise of these warrants
      were exempt from the registration under the Securities Act of 1933, as amended,
      in reliance upon Section 4(2) of the Securities Act of 1933, as
      amended.





On
      May 17
      and June 21, 2006, we closed preferred stock transactions with a total of
      nineteen institutional and accredited investors, pursuant to which we issued
      a
      total of 2,962.5 shares of our Series B preferred stock, par value $0.001 per
      share with a stated per share value of $1,000 for total proceeds of $2,962,500.
      The Series B preferred stock is non-voting and entitles the Series B Purchasers
      to receive a 10% cumulative dividend payable semiannually. The Series B
      Preferred Stock is convertible into 14,107,142 of our common shares at a fixed
      price of $0.21 per share.





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On
      May
      18, 2005, we closed a debt transaction with Lee Harrison Corbin,
      Attorney-in-Fact for the Trust Under the Will of John Svenningsen, now known
      as
      Stephen A. Ross, Attorney-in-Fact for the Trust Under the Will of John
      Svenningsen, pursuant to which the Trust consolidated $1.55 million in existing
      unsecured debt owed by us to the Trust and provided $2.1 million in additional
      financing for a total of $3,650,000.





The
      $3,650,000 promissory note issued to the Trust has a term of two years. Eight
      percent (8%) interest is payable monthly in arrears commencing on November
      10,
      2005, and on the first day of each consecutive calendar month thereafter.
      Monthly principal payments commencd on May 10, 2006, at the rate of $75,000.
      The
      Trust’s promissory note is secured by all of our assets. We did not make any
      principal or interest payment from October 2006 to December 2006 and,
      accordingly, a penalty of $196,500 has been recorded.





We
      currently lease approximately 24,000 square feet of office space from EastGroup
      Properties, LP that is used for our corporate headquarters. The lease is for
      a
      period of seventy-two months beginning July 1, 2004 and ending June 30, 2010.
      In
      April 2004, we entered into a $1.6 million note payable agreement with
      EastGroup. The $1.6 million represented $893,112 of deferred rent expense and
      $706,888 of tenant improvements. Beginning August 1, 2004 and continuing on
      the
      first day of each month thereafter through and including June 1, 2010, we were
      scheduled to make payments consisting of principal and interest of $26,517.
      The
      note payable bears interest at six percent per annum. On May 17, 2005, EastGroup
      agreed to an additional six month deferment of our payments until December
      1,
      2005, contingent upon the payment of April and May 2005 prior to May 31, 2005,
      and that all rental payments through December 2005 were kept current. EastGroup
      also agreed to extend the note payable by twelve months to represent the twelve
      total deferred payments from December 2004 to November 2005. We are currently
      in
      the process of renegotiating the repayment terms of the note payable.





On
      February 28, 2005 as part of the acquisition of Biometric Security (PTY) LTD,
      Constellation Biometrics Corporation, our wholly-owned subsidiary, entered
      into
      a note payable with Aregee Investments No. 105 for $440,000 payable in quarterly
      payments of $55,000 without interest. The note matures on April 1, 2007 and
      is
      secured by all the assets of Biometric Security (PTY) LTD. This note payable
      was
      amended effective December 1, 2006. As a result of the amendment, repayment
      terms changed to quarterly payments of $55,000 for the period starting July
      1,
      2005 through July 1, 2006 and then quarterly payments of $12,500 for the period
      starting September 1, 2006 through April 1, 2007 and a final payment consisting
      of 178,000 restricted common shares of the Company delivered on or before April
      1, 2007. The note payable was repaid in full during April 2007.





Rental
      expense related to the EastGroup operating lease for the years ended December
      31, 2006 and 2005 was $228,445 and $210,161, respectively. At December 31,
      2006,
      minimum future rentals required under the EastGroup operating lease and the
      maturities of all long-term debt are as follows:





Year
            Rentals
            Long-term
                Debt Maturities2007
            $
                220,034
            $
                3,678,8992008
            224,360
            253,6342009
            228,794
            269,2782010
            115,519
            285,8862011
            -
            303,519Thereafter
            -
            78,762$788,707
            $
                4,869,978





Current
      liabilities of $7,019,614 exceed current assets of $1,657,845 by $5,361,769.
      Of
      that amount, $3,768,619 was due by May 2007 as repayment of outstanding
      principal and interest under the loan agreement with the Trust Under the Will
      of
      John Svenningsen. See the Subsequent Events section for a discussion of the
      refinancing of this loan.





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During
      the year ended December 31, 2006, we incurred a net loss of $5,200,617 and
      used
      $2,904,737 of cash in operating activities. As of December 31, 2006, we had
      an
      accumulated deficit of $23,080,135, total shareholders' deficit of $4,492,631,
      and negative working capital of $5,361,769.





We
      anticipate sales from our products increasing to a level during 2007 where
      they
      are sufficient enough to sustain our operations. Until that time, we need to
      secure additional financing.





**Subsequent
      Events**





A.  Refinancing





On
      March
      30, 2007, we closed a debt transaction with Biometrics Investors, LLC
      (“ Biometrics ”).
      Pursuant to the Financing, we amended and restated that Second Amended, Restated
      and Consolidated Senior Secured Term Note, dated November 1, 2005, made to
      Lee
      Harrison Corbin, Attorney In Fact for the Trust under the Will of John
      Svenningsen, in the original principal amount plus interest of $3,965,119 (the
      “ Original
      Note ”),
      which
      was recently transferred to Biometrics, to provide for $2,500,000 of
      additional funding subject to the satisfaction of certain conditions
      (“ Term
      Loan A ”).
      The
      aggregate principal amount of Term Loan A (which
      includes $3,965,119 from the Original Note”) is $6,500,000. In
      connection with this financing, Biometrics provided us with written notice
      that
      we were no longer in default of the Original Note as previously reported on
      the
      current report on Form 8-K filed with the U.S. Securities and Exchange
      Commission on March 14, 2007.





Term
      Loan A





Term
      Loan
      A shall be disbursed by Biometrics to us in a series of ten disbursements,
      each
      in the amount of $250,000, payable every other week, which shall be
      disbursed based on the our satisfaction of the conditions stated in Paragraphs
      4(a) and (b) of that certain Agreement by and between us and Biometrics, dated
      March 30, 2007 (the “ Loan
      Agreement ”),
      including our issuance to Biometrics of a warrant exercisable for
      65,719,041 shares of our common stock at an exercise price of $.01 per share
      (the “ Initial
      Warrant ”).
      Biometrics, in its sole discretion, may elect to advance Term Loan A in greater
      amounts or on an accelerated funding schedule. On March 30, 2007, we issued
      the
      Initial Warrant to Biometrics in accordance with the Loan
      Agreement.





The
      $6,500,000 promissory note issued to Biometrics has a term of two years.
      Interest shall be payable monthly in arrears commencing on May 1, 2007, and
      on
      the first day of each consecutive calendar month thereafter at a rate of 12%
      per
      annum. The outstanding principal balance under this note is payable on April
      15,
      2009 and it is secured by all of our assets.





The
      Initial Warrant is subject to adjustment for stock splits, stock dividends
      or
      similar events. Biometrics may request and, if requested, we have agreed to
      file one or more registration statements with the U.S. Securities and
      Exchange Commission covering the all or part of the shares issuable upon the
      exercise of the Initial Warrant.





Term
      Loan B





Subject
      to the terms and conditions of the Loan Agreement, Biometrics agreed to make
      a
      second term loan to us in the principal amount of $5,000,000 (“ Term
      Loan B ”).
      Term
      Loan B shall consist of a series of advances not to exceed, in the aggregate,
      $5,000,000, which shall be disbursed to us based on our satisfaction of the
      conditions stated in Paragraphs 4(a) and (c) of the Loan Agreement, including
      the issuance to Biometrics of a warrant exercisable for 39,431,424 shares
      of our common stock at an exercise price of $.01 per share (the “ Additional
      Warrant ”).
      The
      Additional Warrant will not be issued to Biometrics until such time as we
      determine that it is in our best interest to borrow additional funds from
      Biometrics pursuant to Term Loan B. If any amounts are funded pursuant to Term
      Loan B, the outstanding principal balance under Term Loan B will
      be payable on April 15, 2009 and will be secured by all of our
      assets.





The
      Additional Warrant is subject to adjustment for stock splits, stock dividends
      or
      similar events. Biometrics may request and, if requested, we have agreed to
      file one or more registration statements with the U.S. Securities and
      Exchange Commission covering the all or part of the shares issuable upon the
      exercise of the Additional Warrant.




22
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In
      our
      opinion, the issuance and sale of the Initial Warrant, described above, was
      exempt from registration under the Securities Act in reliance upon Section
      4(2)
      of the Securities Act of 1933, as amended. Biometrics is an accredited investor.
      Biometrics had an opportunity to ask management questions about us and had
      adequate access to information about us. No sales of securities involved the
      use
      of an underwriter and no commissions were paid in connection with the issuance
      or sale of any securities.





The
      principal documents involved in the transaction are the Loan Agreement, a
      Master Security Agreement, Term Notes A and B, an Initial and Additional Common
      Stock Purchase Warrant, a Registration Rights Agreement, a Second Amended and
      Restated Stock Pledge Agreement, a Shareholders Agreement, a Grant of Security
      Interest in Patents and Trademarks for us and certain of our subsidiaries,
      a
      Subsidiary Guaranty from each of our Subsidiaries, and a Subordination Agreement
      from Mark Mroczkowski and Nick VandenBrekel to Biometrics, each of which is
      dated as of March 30, 2007 and a copy of which is attached as an exhibit to this
      report to the current report on Form 8-K filed with the U.S. Securities and
      Exchange Commission on April 5, 2007.





B.  Series
      B Waiver and Consent .





In
      connection with the Biometrics financing, our Series B preferred shareholders
      and warrant holders consented to the financing and acknowledged that the
      consummation of the financing did not give rise to a termination or default
      under the Series B Preferred Stock Purchase Agreement, the Certificate of
      Determination for the Series B preferred stock, the warrants held by the Series
      B preferred shareholders or the Registration Rights Agreement for the Series
      B
      preferred stock and the warrants held by the Series B preferred shareholders,
      each of which is dated as of May 17, 2006. The Series B preferred shareholders
      and warrant holders further waived their: (a) rights to participate in the
      financing; (b) anti-dilution rights, and (c) registration rights. The Series
      B
      preferred shareholders and warrant holders also consented to an increase in
      our
      authorized common shares and to the termination of the Registration Rights
      Agreement.





C.  Series
      A Waiver and Consent .





In
      connection with the Biometrics financing, our Series A preferred shareholders
      and warrant holders consented to the Biometrics financing and acknowledged
      that
      the consummation of the Biometrics financing did not give rise to a termination
      or default under the Series A Preferred Stock Purchase Agreement or the warrants
      held by the Series A preferred shareholders, each of which is dated as of
      November 30, 2005. The Series A preferred shareholders and warrant holders
      further agreed to waive their rights of participation in the Biometrics
      financing and to any anti-dilution rights. The Series A preferred shareholders
      and warrant holders also consented to an increase in our authorized common
      shares.





D.  Shareholder
      Actions .





In
      connection with the Biometric financing described above, 51.54% of the common
      shareholders voted and agreed to increase the number of directors on our Board
      of Directors and each of our subsidiaries from three to five members and further
      agreed to vote that the two additional directors will be representatives
      designated by Biometrics for so long as Biometrics remains a shareholder.




In
      connection with the Biometric financing described above, 51.54% of the common
      shareholders voted and agreed in an Action by Written Consent of Shareholders
      to
      Amend the our articles of incorporation to increase the authorized common shares
      from 200 million shares to 400 million shares.





**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 31, 2006.





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**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.





**Risk
      Factors**





*You
      should consider carefully the following risk factors before deciding whether
      to
      invest in our common stock. Our business, including our operating results and
      financial condition, could be harmed by any of these risks. Additional risks
      and
      uncertainties not currently known to us or that we currently deem to be
      immaterial also may materially and adversely affect our business. The trading
      price of our common stock could decline due to any of these risks, and you
      may
      lose all or part of your investment. In assessing these risks you should also
      refer to the other information contained in our filings with the SEC, including
      our financial statements and related notes.*





**RISKS
      RELATED TO OUR BUSINESS AND INDUSTRY**





***WE
      HAVE LIMITED OPERATING FUNDS, AND OUR ABILITY TO CONTINUE AS A GOING CONCERN
      IS
      DEPENDENT UPON OUR ABILITY TO OBTAIN ADDITIONAL CAPITAL TO OPERATE THE
      BUSINESS.*** **





We
      have
      incurred net losses and negative cash flows from operations since our inception.
      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.





***WE
      HAVE INCURRED OPERATING LOSSES IN THE PAST AND MAY INCUR SIGNIFICANT OPERATING
      LOSSES IN THE FUTURE.***





We
      have
      incurred net losses each year since our inception. Our business has no record
      of
      profitability and it may never become profitable. As of December 31, 2006,
      we
      had an accumulated deficit of $23,080,135 and total stockholders’ deficit of
      $4,492,631. Our ability to obtain profitability on a quarterly or annual basis
      in the future depends in part on the rate of growth of our target markets,
      the
      acceptance of our products and services, the competitive position of our
      products and services, our ability to develop new products and our ability
      to
      manage expenses.





***SINCE
      WE HAVE A LIMITED OPERATING HISTORY, IT MAY BE DIFFICULT FOR YOU TO ASSESS
      OUR
      BUSINESS AND FUTURE PROSPECTS.***





We
      did
      not launch our Information Management segment until 2002 or our Safety and
      Security segment until 2003, and most of our operating subsidiaries were formed
      as a result of various acquisitions with development stage companies. As a
      consequence, we have a limited operating history available to evaluate our
      business and prospects. You should consider our prospects in light of the
      following risks, expenses and uncertainties, particularly those that rely,
      in
      part, on the technology market:





·
            management
                of an expanding business in a rapidly changing
                market;





·
            attracting
                new customers and maintaining customer satisfaction;





·
            introducing
                new and enhanced services, products and alliances;
                and





·
            maintaining
                profit margins, notwithstanding price competition or rising wholesale
                prices.





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To
      address these risks we must successfully:





·
            develop
                and extend relationships with manufacturers, distributors, alliance
                partners and value added resellers;





·
            implement
                an evolving and unproven business model;
                and





·
            manage
                growth, if any.





We
      have
      incurred net losses and negative cash flows from operations since our inception.
      We do not have sufficient funds to follow through on these initiatives and
      may
      find that these initiatives are more expensive than anticipated. As of December
      31, 2006, we had an accumulated deficit of $23,080,135 and for the fiscal year
      ended December 31, 2006 we incurred a net loss of $5,200,617. Increases in
      expenses would further increase our operating losses. Moreover, the timing
      of
      such expenses can contribute to fluctuations in our quarterly operating results.
      If we cannot generate sufficient funds to successfully manage these risks,
      our
      business will suffer. We cannot assure you that we will successfully address
      these risks or that our business strategy will be successful.





***OUR
      BRAND MAY NOT ATTAIN SUFFICIENT RECOGNITION.***





We
      believe that establishing, maintaining and enhancing our brand is a critical
      aspect of our efforts to develop and expand our operations. The number of
      biometric security product providers that offer competing products increases
      the
      importance of establishing and maintaining brand name recognition. To attract
      and retain customers, and to promote and maintain our operations in response
      to
      competitive pressures, we may find it necessary to increase substantially our
      financial commitment to creating and maintaining a strong brand loyalty among
      customers. This will require significant expenditures on advertising and
      marketing. If we incur excessive expenses in an attempt to promote and maintain
      our products and services, our business prospects, operating results and
      financial condition would be materially and adversely affected to such an extent
      that we are forced to restructure, sell some of our assets or curtail our
      operations, any of which would have a detrimental effect on the value of our
      common stock. For example, although we have expended considerable time and
      energy in developing a relationship with the National Rifle Association to
      market and advertise the BioVault TM ,
      to
      date, we have not derived significant revenue from this relationship nor can
      we
      assure that we ever will.





***WE
      ARE DEPENDENT UPON A RELATIVELY SMALL NUMBER OF SIGNIFICANT END CUSTOMERS FOR
      MORE THAN 50% OF OUR 2006 REVENUE. THE LOSS OF ANY ONE OR MORE OF THESE
      CUSTOMERS COULD REDUCE OUR REVENUE.***





A
      relatively small number of end customers account for a significant portion
      of
      our revenue in any particular period. In fiscal 2006, sales to Black &
Decker or Kwikset accounted for 56% of our revenue. We expect that our history
      of high end customer concentration will continue in future periods. The loss
      of
      any significant end customer will limit our ability to sustain and grow our
      revenue.




***OUR
      FUTURE FINANCIAL PERFORMANCE WILL DEPEND ON THE WIDESPREAD ACCEPTANCE OF
      BIOMETRIC SOLUTIONS.***





In
      its
      short history, the biometrics market has been characterized by the frequent
      introduction of new technologies and products. The application of biometric
      technologies in non-governmental applications, including fingerprint, is
      relatively new. Although the market has been growing rapidly, there is no
      assurance that this growth will continue. Consumers and corporations may not
      find value in having biometric technologies integrated in the products they
      use
      such as PCs, wireless devices and access control systems. If end users do not
      value the product, then our customers may decide not to use our products. In
      addition, there are multiple variants of biometric technologies beyond
      fingerprint including face, hand, vein, voice, iris and others. Our customers,
      and their end users, may find these technologies of greater value and choose
      these technologies over our own.





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The
      expansion of the biometric market also depends on the following factors:


•
            public
                perception regarding the intrusiveness of our biometrics and the
                manner in
                which organizations use the biometric information collected;•
            legislation
                related to biometric information;•
            publicity
                regarding biometric solutions; and•
            security
                or use issues associated with our or competitive products that may
                reflect
                poorly on the biometrics market in general.




Even
      if
      biometric solutions gain wide market acceptance, our solutions may not
      adequately address market requirements and may not continue to gain market
      acceptance.





***OUR
      PRODUCTS MUST MEET EXACTING SPECIFICATIONS, AND DEFECTS AND FAILURES MAY OCCUR,
      WHICH MAY CAUSE CUSTOMERS TO RETURN OR STOP BUYING OUR
      PRODUCTS.***





Our
      customers generally establish demanding specifications for quality, performance
      and reliability that our products must meet. However, our products are highly
      complex and may contain defects and failures when they are first introduced
      or
      as new versions are released. Our products are also subject to rough
      environments as they are integrated into our customer products for use by the
      end customers. If defects and failures occur in our products, we could
      experience lost revenue, increased costs, including warranty expense and costs
      associated with customer support, delays in or cancellations or rescheduling
      of
      orders or shipments, product returns or discounts, diversion of management
      resources or damage to our reputation and brand equity, and in some cases
      consequential damages, any of which would harm our operating results. In
      addition, delays in our ability to fill product orders as a result of quality
      control issues may negatively impact our relationship with our customers. We
      cannot assure you that we will have sufficient resources, including any
      available insurance, to satisfy any asserted claims.





***OUR
      SALES CYCLE IS LENGTHY AND EXPENSIVE AND COULD ADVERSELY AFFECT THE AMOUNT,
      TIMING AND PREDICTABILITY OF FUTURE REVENUE.***




Our
      customers generally need a few months to a few years, if not longer, after
      initial contact to make a final purchase decision with respect to our products.
      Our typical sales cycle often includes a prototype phase as a method to show
      proof of concept and manufacturability. As customers weigh their purchase
      options, we may expend significant resources in pursuit of a sale that may
      ultimately fail to close. We have little control over our customers’ budget
      cycles and approval processes, or the strength of competitors’ relationships
      with our potential customers, all of which could adversely affect our sales
      efforts. The introduction of new products and product enhancements may lengthen
      our sales cycle as customers defer a decision on purchasing existing products
      and evaluate our new products. If we are unsuccessful in closing sales after
      expending significant resources, our revenue and operating expenses will be
      adversely affected.





***IF
      WE FAIL TO MAINTAIN PROPER AND EFFECTIVE INTERNAL CONTROLS, OUR ABILITY TO
      PRODUCE ACCURATE FINANCIAL STATEMENTS COULD BE IMPAIRED, WHICH COULD ADVERSELY
      AFFECT OUR OPERATING RESULTS, OUR ABILITY TO OPERATE OUR BUSINESS AND OUR STOCK
      PRICE.***





Commencing
      in fiscal 2008, we must perform system and process evaluation and testing of
      our
      internal controls over financial reporting to allow management and our
      independent registered certified public accounting firm to report on the
      effectiveness of our internal controls over financial reporting, as required
      by
      Section 404 of the Sarbanes-Oxley Act. We currently do not have an internal
      audit group, and we will need to hire additional accounting and financial staff
      with appropriate public company experience and technical accounting knowledge.
      As of the date of this prospectus, we have not undertaken any formal assessment
      of our internal controls over financial reporting. Our testing, or the
      subsequent testing by our independent registered certified public accounting
      firm, may reveal deficiencies in our internal controls over financial reporting
      that are deemed to be material weaknesses. Moreover, if we are not able to
      comply with the requirements of Section 404 in a timely manner, or if we or
      our independent registered certified public accounting firm identifies
      deficiencies in our internal controls over financial reporting that are deemed
      to be material weaknesses, the market price of our stock could decline and
      we
      could be subject to sanctions or investigations by Nasdaq, the SEC or other
      regulatory authorities, which would require additional financial and management
      resources.





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***OUR
      HEADQUARTERS ARE LOCATED IN FLORIDA, AND OUR THIRD-PARTY MANUFACTURING
      SUBCONTRACTORS ARE CONCENTRATED IN ASIA, AREAS SUBJECT TO SIGNIFICANT NATURAL
      DISASTER RISKS.***





Sequiam
      East, Inc., which fabricates our BioVaultTM, is
      located in Guangzhou, China. There is a level of political unrest or uncertainty
      in this area. We may not be able to obtain alternate capacity on favorable
      terms, if at all, which could harm our operating results.





In
      addition, our headquarters are located in Florida. The risk of a hurricane
      in
      Florida is significant. In 2004, the three hurricanes affected the area in
      which
      we operate, and we suffered power outages and disrupted business operations.





***OUR
      SUCCESS WILL DEPEND ON THE TIMELY INTRODUCTION OF NEW PRODUCTS WITH INCREASED
      FUNCTIONALITY.***





Our
      future financial performance will depend on our ability to meet customer
      specifications and requirements by enhancing our current fingerprint
      authentication solutions and developing products with new and better
      functionality. We expect to devote significant resources to identifying new
      market trends and developing products to meet anticipated customer demand for
      fingerprint biometric solutions. Ultimately, however, customers may not purchase
      our biometric solutions. Accordingly, we can not assure you that demand for
      the
      type of solutions we offer and plan to offer will continue to develop as we
      anticipate, or at all.





We
      must
      develop new products and enhance our existing products with improved
      technologies to meet rapidly evolving customer requirements. The success of
      new
      features depends on several factors, including their timely introduction and
      market acceptance. We may not be successful in developing enhancements or new
      solutions or bringing them to market in a timely manner. We could experience
      delays in completing the development and introduction of new products and
      product enhancements that may render our products, when introduced, obsolete
      and
      unmarketable. Customers may also defer purchases of our existing products
      pending the introduction of anticipated new products. If our new solutions
      are
      not competitive with solutions offered by other vendors, we may not be perceived
      as a technology leader and could miss market opportunities. If we are unable
      to
      enhance the functionality of our solutions or introduce new solutions which
      achieve widespread market acceptance, our reputation will be damaged, the value
      of our brand will diminish, and our business will suffer. In addition,
      uncertainties about the timing and nature of new features and products could
      result in increases in our research and development expenses with no assurance
      of future sales.





***FLUCTUATIONS
      IN FOREIGN CURRENCY EXCHANGE RATES COULD AFFECT OUR FINANCIAL RESULTS.***





We
      earn
      revenues, pay expenses, own assets and incur liabilities in South Africa, which
      uses the South African Rand. In 2006, we derived approximately 20% of our net
      operating revenues from operations in South Africa. Because our consolidated
      financial statements are presented in U.S. dollars, we must translate revenues,
      income and expenses as well as assets and liabilities into U.S. dollars at
      exchange rates in effect during or at the end of each reporting period.
      Therefore, increases or decreases in the value of the U.S. dollar against the
      South African Rand will affect our net revenues, operating income and the value
      of balance sheet items denominated in the South African Rand. Significant
      fluctuations in exchange rates between the U.S. dollar and foreign currencies,
      especially the South African Rand, may adversely affect our future net
      revenues.





***WE
      OPERATE A GLOBAL BUSINESS THAT EXPOSES US TO ADDITIONAL
      RISKS.*** **





We
      operate in South Africa and a part of our revenue comes from international
      sales. Operations outside of the United States may be affected by changes in
      trade protection laws, policies and measures, and other regulatory requirements
      affecting trade and investment; unexpected changes in regulatory requirements
      for biometric products; social, political, labor, or economic conditions in
      a
      specific country or region; and difficulties in staffing and managing foreign
      operations.





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***OUR
      MANAGEMENT MAY BE UNABLE TO EFFECTIVELY INTEGRATE OUR ACQUISITIONS AND TO MANAGE
      OUR GROWTH AND WE MAY BE UNABLE TO FULLY REALIZE ANY ANTICIPATED BENEFITS OF
      THESE ACQUISITIONS.***





Our
      future results will depend in part on our success in implementing our
      acquisition strategy. This strategy is limited to effecting acquisitions of
      companies with complementary technology and supplier relationships. Our ability
      to implement this strategy will be dependent on our ability to identify,
      consummate and successfully assimilate acquisitions on economically favorable
      terms. In addition, acquisitions involve a number of special risks that could
      adversely effect our operating results, including the diversion of management’s
      attention, failure to retain key acquired personnel, risks associated with
      unanticipated events or liabilities, legal, accounting and other expenses
      associated with any acquisition, some or all of which could increase our
      operating costs, reduce our revenues and cause a material adverse effect on
      our
      business, financial condition and results of operations to such an extent that
      we are forced to restructure, sell some of our assets or curtail our operations,
      any of which would have a detrimental effect on the value of our common
      stock.





***WE
      OPERATE IN A HIGHLY COMPETITIVE MARKET AND COMPETE WITH COMPANIES THAT HAVE
      SIGNIFICANTLY LARGER OPERATIONS AND GREATER FINANCIAL RESOURCES; WE MAY NOT
      BE
      ABLE TO COMPETE EFFECTIVELY AGAINST SUCH COMPANIES, WHICH COULD RESULT IN
      ADDITIONAL LOSSES.***





We
      are
      subject to extensive competition from numerous competitors. We cannot assure
      you
      that we will be able to compete successfully or that competitive pressures
      will
      not damage our business.





Our
      competition includes biometric companies such as 9g Products.





Many
      of
      our competitors are larger and have substantially greater financial,
      distribution and marketing resources. If we cannot compete successfully against
      such competitors, it will impair our ability to maintain our market position.





For
      example, the biometric technology industry is highly competitive and rapidly
      changing. Many companies are currently exploiting the benefits of fingerprint
      recognition technologies. As a result, competing biometric technology companies
      could develop products substantially similar or superior to the
      BioVault TM or
      the
      BioLock. In addition, our Safety and Security segment could be adversely
      affected if other forms of biometric identification technologies (such as
      retinal, iris or face recognition) are utilized to develop superior
      products.





***WE
      RELY ON THE SERVICES OF OUR KEY PERSONNEL, AND IF WE ARE UNABLE TO RETAIN OUR
      CURRENT PERSONNEL AND HIRE ADDITIONAL PERSONNEL, OUR ABILITY TO DEVELOP AND
      SUCCESSFULLY MARKET OUR PRODUCTS AND SERVICES COULD BE HARMED.***





We
      rely
      upon the continued service and performance of a relatively small number of
      key
      technical and senior management personnel. If we lose any of our key technical
      or senior management personnel, or are unable to fill key positions, our
      business could be harmed. As a result, our future success depends on our
      retention of key employees, such as Nicholas H. VandenBrekel, our Chief
      Executive Officer, Mark L. Mroczkowski, our Chief Financial Officer, and Alan
      McGinn, our Chief Technology Officer. We rely on these individuals for the
      management of our company, development of our business strategy and management
      of our strategic relationships. Any of these employees could leave our company
      with little or no prior notice. We do not have “key person” life insurance
      policies covering any of our employees. Additionally, there is a limited number
      of qualified technical personnel with significant experience in the design,
      development, manufacture, and sale of biometric devices using fingerprint
      recognition technology, and we may face challenges hiring and retaining these
      types of employees.





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          of Contents*


***OUR
      ABILITY TO COMPETE WILL BE HARMED IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR
      INTELLECTUAL PROPERTY.***





We
      rely
      primarily on a combination of trademark, trade secret and copyright law and
      contractual restrictions to protect our intellectual property. These afford
      only
      limited protection. Despite our efforts to protect our proprietary rights,
      unauthorized parties may attempt to obtain, copy or use information that we
      regard as proprietary, such as product design and manufacturing process
      expertise. As of December 31, 2006, we had two U.S. patent applications pending.
      Our pending patent applications and any future applications may not result
      in
      issued patents or may not be sufficiently broad to protect our proprietary
      technologies. Moreover, policing any unauthorized use of our products is
      difficult and costly, and we cannot be certain that the measures we have
      implemented will prevent misappropriation or unauthorized use of our
      technologies, particularly in foreign jurisdictions where the laws may not
      protect our proprietary rights as fully as the laws of the United States. The
      enforcement of patents by others may harm our ability to conduct our business.
      Others may independently develop substantially equivalent intellectual property
      or otherwise gain access to our trade secrets or intellectual property. Our
      failure to effectively protect our intellectual property could harm our
      business.





***ASSERTIONS
      BY THIRD PARTIES OF INFRINGEMENT BY US OF THEIR INTELLECTUAL PROPERTY RIGHTS
      COULD RESULT IN SIGNIFICANT COSTS AND CAUSE OUR OPERATING RESULTS TO SUFFER.***





The
      biometric technology industry is characterized by vigorous protection and
      pursuit of intellectual property rights and positions, which has resulted in
      protracted and expensive litigation for many companies. Although we are not
      currently a party to legal action alleging our infringement of third-party
      intellectual property rights, in the future we may receive letters from various
      industry participants alleging infringement of patents, trade secrets or other
      intellectual property rights. Any lawsuits resulting from such allegations
      could
      subject us to significant liability for damages and invalidate our proprietary
      rights. These lawsuits, regardless of their success, would likely be
      time-consuming and expensive to resolve and would divert management time and
      attention. Any potential intellectual property litigation also could force
      us to
      do one or more of the following:





·
            stop
                selling products or using technology that contain the allegedly infringing
                intellectual property;





·
            pay
                damages to the party claiming infringement;





·
            attempt
                to obtain a license to the relevant intellectual property, which
                may not
                be available on reasonable terms or at all; and





·
            attempt
                to redesign those products that contain the allegedly infringing
                intellectual property.





In
      the
      future, the outcome of a dispute may be that we would need to develop
      non-infringing technology or enter into royalty or licensing agreements. We
      may
      also initiate claims or litigation against third parties for infringement of
      our
      proprietary rights or to establish the validity of our proprietary rights.





***WE
      MAY UNDERTAKE ACQUISITIONS TO EXPAND OUR BUSINESS THAT MAY POSE RISKS TO OUR
      BUSINESS AND DILUTE THE OWNERSHIP OF OUR EXISTING STOCKHOLDERS.***





As
      part
      of our growth and product diversification strategy, we will continue to evaluate
      opportunities to acquire other businesses, intellectual property or technologies
      that would complement our current offerings, expand the breadth of markets
      we
      can address or enhance our technical capabilities. Acquisitions that we may
      potentially make in the future entail a number of risks that could materially
      and adversely affect our business, operating and financial results, including:





·
            problems
                integrating the acquired operations, technologies or products with
                our
                existing business and products;





·
            diversion
                of management’s time and attention from our core business;





·
            need
                for financial resources above our planned investment levels;





·
            difficulties
                in retaining business relationships with suppliers and customers
                of the
                acquired company;





·
            risks
                associated with entering markets in which we lack prior experience;





·
            potential
                loss of key employees of the acquired company; and





·
            potential
                requirement to amortize intangible assets.





Future
      acquisitions also could cause us to incur debt or contingent liabilities or
      cause us to issue equity securities that would reduce the ownership percentages
      of existing stockholders.





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***WE
      RELY ON THIRD PARTIES TO MAKE OUR PRODUCTS, LEAVING US POTENTIALLY VULNERABLE
      TO
      SUBSTANTIAL COST INCREASES AND DELAYS.***





We
      do not
      manufacture BioVault TM 2.0 or
      our BioLock products. If one or more of our current manufacturers were no longer
      able to manufacture our products, we would be required to negotiate arrangements
      with alternate manufacturers, which would likely include some cost or delay,
      which could be substantial. In addition, no assurance can be given that any
      alternative arrangements would be on terms as favorable as our current
      arrangements.





We
      currently do not have long-term supply contracts with any of our subcontractors.
      Therefore, they are not obligated to perform services or supply products to
      us
      for any specific period, in any specific quantities or at any specific price,
      except as may be provided in a particular purchase order. Our subcontractors
      have not provided contractual assurances to us that adequate capacity will
      be
      available for us to meet future demand for our products. These third-party
      vendors may allocate capacity to the production of other companies’ products
      while reducing deliveries to us on short notice. In particular, other customers
      that are larger and better financed than we are or that have long-term
      agreements with our subcontractors may cause them to reallocate capacity to
      those customers, decreasing the capacity available to us.




***IF
      OUR STRATEGIC PARTNERS DO NOT EFFECTIVELY MARKET OUR PRODUCTS, WE MAY NOT
      GENERATE SIGNIFICANT SALES OR PROFITS.***





We
      utilize third parties to assist in marketing, selling and distributing our
      products. We believe that the establishment of a network of third-party
      strategic partners, particularly abroad, with extensive and specific knowledge
      of the biometric industry is important for us to succeed. We cannot assure
      you
      that our current or future strategic partners, such as the National Rifle
      Association, will market our products and services at sufficient levels or
      provide us with adequate support. If one or more of our partners under-performs
      or if any of our strategic relationships are terminated or otherwise disrupted,
      our operating performance, results of operations and financial condition will
      be
      adversely affected to such an extent that we are forced to restructure, sell
      some of our assets or curtail our operations, any of which would have a
      detrimental effect on the value of our common stock.





***BIOMETRICS
      INVESTORS, LLC MAY NOT ADVANCE US FUNDS PURSUANT TO OUR RECENT FINANCING IF
      WE
      FAIL TO SATISFY CONDITIONS FOUND IN THE APPLICABLE LOAN
      DOCUMENTS.***





On
      March
      30, 2007, we closed a debt transaction with Biometrics Investors, LLC. Pursuant
      to the Financing, we amended and restated that Second Amended, Restated and
      Consolidated Senior Secured Term Note, dated November 1, 2005, made to Lee
      Harrison Corbin, Attorney In Fact for the Trust under the Will of John
      Svenningsen, in the original principal amount plus interest of $3,965,119,
      which
      was recently transferred to Biometrics, to provide for $2,500,000 of
      additional funding subject to the satisfaction of certain conditions. The
      aggregate principal amount of the restated loan (which
      includes $3,965,119 from the Svenningsen note)
      is $6,500,000.





Biometrics
      is not obligated to advance any funds to us unless we satisfy all of the
      applicable conditions contained in the loan documents. Although we intend to
      satisfy all of these conditions to funding, we cannot guarantee if and when
      these conditions will ever be satisfied. If we do not satisfy these conditions
      and do not receive all of the funds available to us pursuant to the Biometrics
      financing, then our business prospects, operating results and financial
      condition may be materially and adversely affected to such an extent that we
      are
      forced to restructure, sell some of our assets or curtail our operations, any
      of
      which would have a detrimental effect on the value of our common stock.





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Additionally,
      Biometrics has offered to loan us an additional $5,000,000 on substantially
      the
      same terms as the initial $2,500,000 of additional funding described above.
      If
      we elect to obtain this loan, Biometrics will not be obligated to advance any
      funds to us unless we satisfy all of the applicable conditions contained in
      the
      loan documents, which include certain quantitative performance criteria that
      we
      may not be able to achieve. If we are in need of this additional financing
      to
      operate our business and we do not satisfy these conditions and do not receive
      all of the funds available to us pursuant to this second Biometrics financing,
      then our business prospects, operating results and financial condition may
      be
      materially and adversely affected to such an extent that we are forced to
      restructure, sell some of our assets or curtail our operations, any of which
      would have a detrimental effect on the value of our common stock.




***IF
      AN EVENT OF DEFAULT OCCURS UNDER THE BIOMETRICS LOAN, IT COULD RESULT IN A
      SERIOUS PROBLEM FOR US AND CAUSE US TO CURTAIL OUR OPERATIONS OR SELL SOME
      OF
      OUR ASSETS TO REPAY THE LOAN.***





If
      we
      default on the loan made by Biometrics Investors, LLC, then Biometrics may
      declare the outstanding principal amount of the loan and any accrued interest
      immediately due and payable and may foreclose on all of our assets. The cash
      required to pay those amounts will most likely come out of our working capital.
      Since we rely on our working capital and our assets for our day-to-day
      operations, a default on the loan could have a serious and adverse effect on
      our
      business, operating results and financial condition to such an extent that
      we
      are forced to restructure, sell some of our assets or curtail our operations,
      any of which would have a detrimental effect on the value of our common stock.





**RISKS
      RELATED TO OUR COMMON STOCK**





***IF
      AN EVENT OF DEFAULT OCCURS UNDER THE TERMS OF THE SERIES B PREFERRED STOCK,
      IT
      COULD RESULT IN A SERIOUS PROBLEM FOR US AND CAUSE US TO CURTAIL OUR OPERATIONS
      OR SELL SOME OF OUR ASSETS TO FINANCE THE REDEMPTION OF THE SERIES B PREFERRED
      STOCK.***





On
      May 17
      and June 21, 2006, we issued 2962.5 shares (2,862.5 shares of which were
      outstanding at December 31, 2006) of Series B preferred stock to certain of
      the
      selling shareholders. The Certificate of Determination of Preferences, Rights
      and Limitations of Series B 10% Convertible Preferred Stock provides for the
      following events of default.





·
            we
                provide notice of our inability to comply with a conversion
                request;





·
            we
                fail for any reason to pay in full any amounts due to the holder
                of the
                Series B preferred stock within five days of the date
                due;





·
            we
                fail to have available a sufficient number of authorized and unreserved
                shares of common stock to issue to the holders of the Series B preferred
                stock upon a conversion hereunder;





·
            we
                breach any covenant, agreement or warranty and such failure or breach
                shall not, and such breach has not been cured within 30 calendar
                days
                after the date on which written notice of such breach shall have
                been
                given;





·
            we
                redeem more than a de minimis number of securities junior to the
                Series B
                preferred stock;





·
            any
                change in our controlling ownership;





·
            any
                form of bankruptcy or insolvency proceeding is instituted by or against
                us, which is not vacated within 60 days;





·
            our
                common stock fails to be listed or quoted for trading on the OTCBB
                for
                more than five trading days;





·
            any
                monetary judgment, writ or similar final process shall be entered
                or filed
                against us, any of out subsidiaries or any of their respective property
                or
                other assets for more than $50,000, and shall remain unvacated, unbonded
                or unstayed for a period of 45 calendar
                days.





31
 *Table
          of Contents*


If
      we
      default on the Series B preferred stock, we may be required to redeem all of
      the
      Series B preferred stock for a total amount equal to the sum of (i) the greater
      of (A) $3,721,250 and (B) the product of (a) the VWAP (with “VWAP” defined as
      the price determined by the OTCBB) on the trading day immediately preceding
      the
      date of default and (b) $2,862,500 divided by the then conversion price (which
      is $0.21 per share as of the date of this Report), (ii) accrued but unpaid
      dividends and (iii) all liquidated damages and other amounts due in respect
      of
      the Series B preferred stock.





The
      cash
      required to pay those amounts will most likely come out of our working capital.
      Since we rely on our working capital for our day-to-day operations, a default
      could have a serious and adverse effect on our business, operating results
      and
      financial condition to such an extent that we are forced to restructure, sell
      some of our assets or curtail our operations, any of which would have a
      detrimental effect on the value of our common stock.





***THE
      LARGE NUMBER OF SHARES ELIGIBLE FOR IMMEDIATE AND FUTURE SALES MAY DEPRESS
      THE
      PRICE OF OUR STOCK.***





Our
      Articles of Incorporation authorize the issuance of 400,000,000 shares of common
      stock, $.001 par value per share, and 50,000,000 shares of preferred stock,
      $.001 par value per share. As of April 12, 2007, we had outstanding
      83,465,793 shares of common stock. Also as of April 12, 2007, we had
      outstanding a total of 2,862.5 shares of Series B preferred stock which are
      convertible into a total of 13,630,952 shares of common stock. We have reserved
      15,000,000 shares of common stock for issuance in respect of option grants
      under
      our stock option plan. From those available shares, options have been granted
      for 10,357,500 shares of common stock, and there remain available for options
      under the plan 4,642,500 shares of common stock. There are 116,335,160 shares
      that are issuable upon exercise of outstanding warrants.





Our
      board
      of directors has the authority to issue additional shares of common stock and
      preferred stock up to the authorized amount stated in our Articles of
      Incorporation. Our board of directors may choose to issue some or all of such
      shares to acquire one or more businesses or other types of property, or to
      provide additional financing in the future. The issuance of any such shares
      may
      result in a reduction of the book value or market price of the outstanding
      shares of our common stock. If we do issue any such additional shares, such
      issuance also will cause a reduction in the proportionate ownership and voting
      power of all other shareholders. Further, any such issuance may result in a
      change of control of the company.





Holders
      of our securities have registration rights for 65,719,041 shares of common
      stock
      that may be issued upon exercise of outstanding Common Stock Purchase Warrants.
      Sales of substantial amounts of our common stock in the open market could
      adversely affect the market price of our common stock.





***ADDITIONAL
      FINANCINGS MAY DILUTE THE HOLDINGS OF CURRENT STOCKHOLDERS.***





In
      order
      to provide capital for the operation of the business, we may enter into
      additional financing arrangements. These arrangements may involve the issuance
      of new shares of common stock, preferred stock that is convertible into common
      stock, debt securities that are convertible into common stock or warrants for
      the purchase of common stock. Any of these items could result in a material
      increase in the number of shares of common stock outstanding, which would in
      turn result in a dilution of the ownership interests of existing common
      stockholders. In addition, these new securities could contain provisions, such
      as priorities on distributions and voting rights, which could affect the value
      of our existing common stock.





***THERE
      ARE CURRENTLY OPTIONS AND WARRANTS OUTSTANDING TO PURCHASE UP TO 126,525,994
      SHARES OF OUR COMMON STOCK, WHICH IF EXERCISED, WOULD CAUSE A SIGNIFICANT
      DILUTION TO EXISTING STOCKHOLDERS***





We
      have
      issued options, warrants or similar rights to purchase up to 126,525,994 shares
      of our common stock. Of that amount, Biometrics Investors, LLC is the beneficial
      owner of warrants to purchase up to 74,319,041 shares of our common stock.
      If
      all the foregoing warrants and options were exercised as of April 12, 2007,
      our
      issued and outstanding shares of common stock would have increased from
      83,465,793 to 209,991,787, an increase of approximately 152%. Such exercise
      would cause a stockholder holding 1,000,000 shares of our common stock prior
      to
      such exercise to immediately drop from holding approximately 1.20% of our common
      stock to holding approximately 0.48% of our common stock. In addition, the
      value
      of our common stock as traded on the OTC Bulletin Board may experience a
      significant drop as a result of the exercise of all or a portion of the
      outstanding options and warrants.





32
 *Table
          of Contents*


***OUR
      COMMON STOCK IS CONSIDERED A “PENNY STOCK” AND MAY BE DIFFICULT TO SELL WHEN
      DESIRED.***





The
      SEC
      has adopted regulations which generally define “penny stock” to be an equity
      security that has a market price of less than $5.00 per share or an exercise
      price of less than $5.00 per share, subject to specific exemptions. The market
      price of our common stock has been less than $5.00 per share. This designation
      requires any broker or dealer selling these securities to disclose specified
      information concerning the transaction, obtain a written agreement from the
      purchaser and determine that the purchaser is reasonably suitable to purchase
      the securities. These rules may restrict the ability of brokers or dealers
      to
      sell our common stock and may affect the ability of stockholders to sell their
      shares. In addition, since our common stock is currently quoted on the OTC
      Bulletin Board, stockholders may find it difficult to obtain accurate quotations
      of our common stock and may experience a lack of buyers to purchase our shares
      or a lack of market makers to support the stock price.





***OUR
      PREFERRED STOCK MAY CAUSE DILUTION.***





Our
      Articles of Incorporation authorize the issuance of up to 50,000,000 shares
      of
“blank check” preferred stock with such rights and preferences as our board of
      directors, without further shareholder approval, may determine from time to
      time. Of these preferred shares, 1,575 shares were designated as Series A
      preferred stock and 2,962.5 shares were designated as Series B preferred stock.
      On April 12, 2007, we had 2,862.5 shares of outstanding Series B preferred
      stock. All Series B preferred stock ranks senior to common stock as to payment
      of dividends and distribution of assets. The Series B preferred stock is
      non-voting and entitles the Series B purchasers to receive a 10% cumulative
      dividend payable semiannually. The Series B preferred stock is convertible
      into
      13,630,952 of our common shares at a fixed price of $0.21 per share. As
      of April 12, 2007, there remained 49,995,462.5 shares of authorized but
      undesignated and unissued shares of preferred stock that may be sold in the
      future and that can, at the discretion of our board of directors, be designated
      as another series of preferred stock with dividend, liquidation, conversion,
      voting or other rights and preferences that are senior, and not available,
      to
      the holders of our common stock. Thus, issuances of new series of preferred
      stock could adversely affect the relative voting power, distributions and other
      rights of the common stock. Holders of our common stock could realize less
      than
      the amount of dividends and/or distributions to which they would otherwise
      be
      entitled.





Further,
      preferred stock could be used as a method of discouraging, delaying, or
      preventing a take-over of our company. If we issue “blank check” preferred
      stock, it could have a dilutive effect upon our common stock. This would
      decrease the chance that our shareholders would realize a premium over market
      price for their shares of common stock as a result of a takeover
      bid.





***WE
      DO NOT ANTICIPATE PAYING DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE
      AND THEREFORE YOU SHOULD NOT BUY THIS STOCK IF YOU WISH TO RECEIVE CASH
      DIVIDENDS.***





We
      currently intend to retain our future earnings, if any, to support operations
      and to finance expansion and therefore do not anticipate paying any cash
      dividends on our common stock in the foreseeable future.





***THE
      PUBLIC MARKET FOR OUR COMMON STOCK HAS BEEN CHARACTERIZED BY A LOW VOLUME OF
      TRADING AND OUR STOCKHOLDERS MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE
      THE PRICE AT WHICH THEY PURCHASED THEIR SHARES, IF AT
      ALL.***




Historically,
      the volume of trading in our common stock has been low. A more active public
      market for our common stock may not develop or be sustained. The market price
      of
      our common stock may fluctuate significantly in response to factors, some of
      which are beyond our control. These factors include:





·
            product
                liability claims or other
                litigation;





·
            the
                announcement of new products or product enhancements by us or our
                competitors;





·
            developments
                concerning intellectual property rights and regulatory
                approvals;





·
            quarterly
                variations in our or our competitors’ results of
                operations;





·
            developments
                in our industry; and





·
            general
                market conditions and other factors, including factors unrelated
                to our
                own operating performance.





33
 *Table
          of Contents*


The
      stock
      market in general has recently experienced extreme price and volume
      fluctuations. In particular, market prices of securities of technology companies
      have experienced fluctuations that often have been unrelated or disproportionate
      to the operating results of these companies. Continued market fluctuations
      could
      result in extreme volatility in the price of shares of our common stock, which
      could cause a decline in the value of our shares. Price volatility may be worse
      if the trading volume of our common stock is low.





***THE
      EMPLOYMENT AGREEMENTS OF NICHOLAS H. VANDENBREKEL AND MARK L. MROCZKOWSKI
      CONTAIN SEVERANCE AGREEMENTS PROVIDING FOR UP TO $10,000,000 IN TERMINATION
      PAYMENTS TO EACH OF THEM, AND SUCH TERMINATION PAYMENTS COULD DETER ANY
      POTENTIAL ACQUISITION OR CHANGE IN CONTROL OF OUR
      COMPANY.***





Each
      of
      our employment agreements with Nicholas H. VandenBrekel and Mark L. Mroczkowski
      contains provisions for severance payments in the event a change of control
      occurs without the prior approval of the then existing Board of Directors,
      whether by proxy contest, or as the result of a tender offer made without the
      approval of the then existing Board of Directors, or by any other means. In
      the
      event of such a change in control, each officer would receive a lump sum payment
      of $5,000,000, plus $1,000,000 each year thereafter for five years, for a total
      of $10,000,000 per person. This has the effect of deterring any potential
      acquisition or change in control of our company without the prior consent of
      our
      Board of Directors.





34
 *Table
          of Contents*


**ITEM
                7.**
            **FINANCIAL
                STATEMENTS**





SequiamCorporation
      and subsidiaries





Consolidated
      Financial Statements





*For
      the years ended December 31, 2006 and 2005*


35
 *Table
          of Contents*


Sequiam
      Corporation and Subsidiaries





Consolidated
      Financial Statements





For
      the
      years ended December 31, 2006 and 2005











**Contents**





Report
                of Independent Registered Certified Public
                Accounting Firm
            37Consolidated
                Financial Statements:Consolidated
                Balance Sheet
            38Consolidated
                Statements of Operations
            39Consolidated
                Statements of Shareholders’
                Deficit
            40Consolidated
                Statements of Cash Flows
            41Notes
                to Consolidated Financial
                Statements
            42


36
 *Table
          of Contents*


REPORT
      OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING
      FIRM





The
      Board
      of Directors and Shareholders


Sequiam
      Corporation





We
      have
      audited the accompanying consolidated balance sheet of Sequiam Corporation
      and
      subsidiaries as of December 31, 2006, and the related consolidated statements
      of
      operations, shareholders’ deficit, and cash flows for each of the two years in
      the period ended December 31, 2006. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





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





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Sequiam Corporation and
      subsidiaries as of December 31, 2006 , and the results of their operations
      and
      their cash flows for the two years in the period ended December 31, 2006. in
      conformity with U.S. generally accepted accounting principles.





As
      discussed in Note 1 to the consolidated financial statements, the Company
      adopted the provisions of Statement of Financial Accounting Standards No.
      123(R), Share-Based Payment, using the modified prospective approach, effective
      January 1, 2006.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company has suffered recurring losses from operations, has
      a
      working capital deficit and its total liabilities exceed its total assets.
      This
      raises substantial doubt about the Company's ability to continue as a going
      concern. Management's plans in regard to these matters are also described in
      Note 1. The financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.





/s/
      Tedder, James, Worden & Associates, P.A.





Orlando,
      Florida


April
      13,
      2007


37
 *Table
          of Contents*


Sequiam
      Corporation and Subsidiaries


Consolidated
      Balance Sheet


December
      31, 2006





ASSETSCurrent
                assets:Cash
            $
                54,161Receivables,
                net of allowance for bad debts of $15,541
            836,715Inventory
            766,969Total
                current assets
            1,657,845Property
                and equipment, net
            919,909Intellectual
                properties, net
            559,927Product
                development costs
            364,117Advance
                receivable
            140,000Investment
                in joint venture
            60,000Deposits
                and other assets
            16,264Total
                assets
            $
                3,718,062LIABILITIES
                AND SHAREHOLDERS’ DEFICITCurrent
                liabilities:Accounts
                payable
            $
                1,190,380Accrued
                expenses
            1,274,324Dividends
                payable
            179,808Customer
                deposits
            112,500Deferred
                revenue
            31,500Deferred
                rents
            35,917Current
                portion of long-term debt
            3,512,188Loans
                from shareholders
            682,997Total
                current liabilities
            7,019,614Long-term
                debt, net of current portion
            1,191,079Total
                liabilities
            8,210,693Commitments
                and contingenciesShareholders’
                deficit:Preferred
                shares, Series B convertible, par value $0.001; 50,000,000 preferred
                shares authorized; 2,862.5 shares issued and outstanding
            3Common
                shares, par value $.001; 200,000,000 shares authorized; 82,281,212
                shares
                issued and outstanding
            82,281Additional
                paid-in capital
            18,493,022Accumulated
                deficit
            (23,080,135)Accumulated
                other comprehensive income
            12,198Total
                shareholders’ deficit
            (4,492,631)Total
                liabilities and shareholders’ deficit
            $
                3,718,062





*See
      accompanying notes to consolidated financial statements*


38
 *Table
          of Contents*


SequiamCorporation
      and Subsidiaries


Consolidated
      Statements of Operations





Years
                ended December 31,2006
            2005Revenues:Services
            $
                105,471
            $
                443,641Product
                sales
            1,582,647
            182,279Total
                revenues
            1,688,118
            625,920Costs
                and expenses:Cost
                of services
            103,718
            571,684Cost
                of product sales
            1,686,025
            332,971Selling,
                general and administrative
            3,599,125
            3,119,022Gain
                on sale of equipment
            (5,000)
            (370)Loss
                on impairment of intangible assets
            -
            260,069Loss
                on impairment of goodwill
            -
            79,188Gain
                on restructuring of debt
            (13,056)
            -Gain
                on extinguishment of debt
            -
            (38,428)Loss
                on settlement of lawsuit
            200,000
            -5,570,812
            4,324,136Loss
                from operations
            (3,882,694)
            (3,698,216)Interest
                expense
            (1,317,923)
            (1,732,444)Net
                loss
            (5,200,617)
            (5,430,660)Preferred
                stock dividends
            (184,836)
            -Net
                loss applicable to common shareholders
            $(5,385,453)
            $(5,430,660)Net
                loss per common share:Basic
                and diluted
            $
                (0.07)
            $
                (0.09)Shares
                used in computation of net loss per common share -Basic
                and diluted weighted average shares outstanding
            73,458,573
            57,848,617





*See
      accompanying notes to consolidated financial statements*


39
 *Table
          of Contents*


SequiamCorporation
      and Subsidiaries


Consolidated
      Statements of Shareholders' Deficit


Years
      Ended December 31, 2006 and 2005


Preferred
                Shares
            Common
                SharesAccumulatedAdditional
            OtherShares
            Par
            Shares
            Par
            Paid-in
            Comprehensive
            Accumulated
            
            
            ComprehensiveOutstanding
            Value
            Outstanding
            Value
            Capital
            Income
                (Loss)
            Deficit
            Total
            
            LossBalance
                at December 31, 2004
            -
            $
                -
            47,965,604
            $
                47,966
            $
                7,524,118
            $
                -
            $
                (12,448,858)
            $(4,876,774)Sale
                of common shares
            -
            -
            537,358
            537
            108,760
            -
            -
            109,297Common
                shares issued for services
            -
            -
            4,293,238
            4,293
            686,329
            -
            -
            690,622Common
                shares issued for salaries
            -
            -
            2,373,772
            2,374
            342,162
            -
            -
            344,536Common
                share warrants exercised
            -
            -
            914,444
            914
            356,408
            -
            -
            357,322Acquisition
                of Constellation Biometrics Corporation
            -
            -
            1,635,513
            1,636
            173,364
            -
            -
            175,000Common
                shares issued for debt conversions
            -
            -
            6,738,392
            6,738
            991,042
            -
            -
            997,780Warrants
                issued in connection with long-term debt
            -
            -
            -
            -
            1,126,380
            -
            -
            1,126,380Warrants
                issued in connection with mandatorily redeemable preferred
                stock
            -
            -
            -
            -
            1,004,625
            -
            -
            1,004,625Mandatorily
                redeemable preferred stock conversion feature
            -
            -
            -
            -
            570,375
            -
            -
            570,375Foreign
                currency translation adjustment
            -
            -
            -
            -
            -
            (3,000)
            -
            (3,000)
            
            $
                (3,000)Net
                loss
            -
            -
            -
            -
            -
            -
            (5,430,660)
            (5,430,660)
            
            (5,430,660)Comprehensive
                loss
            
            
            
            
            
            
            
            
            
            $
                (5,433,660)Balance
                at December 31, 2005
            -
            -
            64,458,321
            64,458
            12,883,563
            (3,000)
            (17,879,518)
            $(4,934,497)Sale
                of common shares
            -
            -
            483,871
            484
            149,516
            -
            -
            150,000Common
                shares issued for accrued salaries, interest and services
            -
            -
            7,056,712
            7,057
            2,039,390
            -
            -
            2,046,447Common
                share warrants exercised
            -
            -
            1,854,342
            1,854
            387,558
            -
            -
            389,412Conversion
                of mandatorily redeemable preferred stock
            -
            -
            7,500,000
            7,500
            1,567,500
            -
            -
            1,575,000Common
                shares issued for payment of mandatorily redeemable preferred stock
                dividend
            -
            -
            427,297
            428
            89,897
            -
            -
            90,325Common
                shares issued for payment of Series B preferred stock
                dividend
            -
            -
            24,479
            24
            5,004
            -
            -
            5,028Warrants
                issued in connection with long-term debt
            -
            -
            -
            -
            37,269
            -
            -
            37,269Warrants
                issued for services
            -
            -
            -
            -
            75,434
            -
            -
            75,434Stock-based
                compensation
            -
            -
            -
            -
            34,246
            -
            -
            34,246Change
                in fair value of outstanding common share warrants
            -
            -
            -
            -
            101,970
            -
            -
            101,970Accretion
                of mandatorily redeemable preferred stock discount
            -
            -
            -
            -
            (976,719)
            -
            -
            (976,719)Mandatorily
                redeemable preferred stock issuance costs
            -
            -
            -
            -
            (253,098)
            -
            -
            (253,098)Declaration
                of mandatorily redeemable preferred stock dividend
            -
            -
            -
            -
            (78,512)
            -
            -
            (78,512)Conversion
                of Series B preferred stock
            (100)
            -
            476,190
            476
            (476)
            -
            -
            -Issuance
                of Series B preferred shares
            2,962.5
            3
            -
            -
            2,962,497
            -
            -
            2,962,500Series
                B preferred stock issuance costs
            -
            -
            -
            -
            (347,181)
            -
            -
            (347,181)Series
                B preferred stock beneficial conversion feature
            -
            -
            -
            -
            758,084
            -
            -
            758,084Accretion
                of Series B preferred stock beneficial conversion feature
            -
            -
            -
            -
            (758,084)
            -
            -
            (758,084)Declaration
                of Series B preferred stock dividend
            -
            -
            -
            -
            (184,836)
            -
            -
            (184,836)Foreign
                currency translation adjustment
            -
            -
            -
            -
            -
            15,198
            -
            15,198
            
            $
                15,198Net
                loss
            -
            -
            -
            -
            -
            -
            (5,200,617)
            (5,200,617)
            
            (5,200,617)Total
                comprehensive loss
            
            
            
            
            
            
            
            
            
            $
                (5,185,419)Balance
                at December 31, 2006
            2,862.5
            $
                3
            82,281,212
            $
                82,281
            $
                18,493,022
            $
                12,198
            $
                (23,080,135)
            $(4,492,631)*See
                accompanying notes to consolidated financial
                statements*




40
 *Table
          of Contents*


Sequiam
      Corporation and Subsidiaries


Consolidated
      Statements of Cash Flows





Years
                ended December 31,Cash
                flows from operating activities:
            2006
            2005Net
                loss
            $(5,200,617)
            $
                (5,430,660)Adjustments
                to reconcile net loss to net cash used for operating
                activities:Depreciation
                and amortization
            526,443
            541,269Accretion
                of debt discount
            454,507
            625,970Change
                in fair value of outstanding common share warrants
            101,970
            -Accretion
                of beneficial conversion feature
            -
            570,375Amortization
                of loan costs
            -
            231,483Amortization
                of product development costs
            54,346
            -Issuance
                of common stock and warrants in exchange for services and
                interest
            299,820
            690,622Issuance
                of common stock in exchange for salaries
            282,269
            344,536Issuance
                of stock options to employees
            34,246
            -Gain
                on sale of equipment
            (5,000)
            (370)Loss
                on impairment of intangible assets
            -
            260,069Loss
                on impairment of goodwill
            -
            79,188Gain
                on restructuring of debt
            (13,056)
            -Gain
                on extinguishment of debt
            -
            (38,428)Increase
                in receivables
            (591,677)
            (124,913)Increase
                in allowance for bad debts
            10,854
            1,297Decrease
                in prepaid expenses, deposits and other assets
            34,878
            81,041Increase
                in inventory
            (688,438)
            (78,531)Decrease
                in bank overdraft
            -
            (24,165)Increase
                (decrease) in accounts payable
            894,391
            (173,196)Increase
                in accrued expenses
            757,641
            344,783Increase
                in customer deposits
            112,500
            -Increase
                (decrease) in deferred revenue
            31,500
            (6,000)Increase
                (decrease) in deferred rents
            (1,314)
            11,090Increase
                in accrued shareholders’ salaries
            -
            190,000Net
                cash used for operating activities
            (2,904,737)
            (1,904,540)Cash
                flows from investing activities:Equipment
                purchases
            (88,847)
            (50,129)Proceeds
                from sale of equipment
            5,000
            1,295Cash
                acquired through acquisition of Constellation Biometrics
            -
            29,142Product
                development costs capitalized
            (244,333)
            (132,127)Increase
                in advance receivable
            (140,000)
            -Investment
                in joint venture
            (60,000)
            -Net
                cash used for investing activities
            (528,180)
            (151,819)Cash
                flows from financing activities:Proceeds
                from sales of common stock and exercise of warrants
            539,413
            466,619Proceeds
                from sales of preferred stock
            2,962,500
            -Proceeds
                from sales of mandatorily redeemable preferred stock
            -
            1,575,000Payment
                of preferred stock issuance costs
            (347,181)
            -Principle
                payments on notes payable
            (20,000)
            (265,135)Proceeds
                from long-term debt
            -
            2,100,000Principle
                payments on long-term debt
            (635,398)
            (1,110,000)Payment
                of loan costs
            -
            (208,625)Proceeds
                from shareholder loans
            209,997
            290,800Principle
                payments on shareholder loans
            (648)
            (26,103)Net
                cash provided by financing activities
            2,708,683
            2,822,556Effect
                of exchange rate changes on cash
            15,198
            (3,000)Net
                increase (decrease) in cash
            (709,036)
            763,197Cash,
                beginning of period
            763,197
            -Cash,
                end of period
            $54,161
            $
                763,197


*See
      accompanying notes to consolidated financial statements*


41
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          of Contents*


Sequiam
      Corporation and Subsidiaries


Notes
      to
      Consolidated Financial Statements


For
      the
      years ended December 31, 2006 and 2005





**1.**
            **Summary
                of Business and Significant Accounting
                Policies**





Description
      of Business and Acquisition





Sequiam
      Corporation (“Sequiam” or the “Company”) through its wholly owned subsidiaries,
      primarily develops, markets, and supports a portfolio of biometric fingerprint
      unlocking devices that enable users to gain access using their personal
      identity. The Company also provides internet access and hosting services and
      custom software development services.





The
      Company's operations are divided into two distinct operating segments: Safety
      and Security and Information Management. The Safety and Security segment
      includes the Company’s biometric technology products. The Information Management
      segment includes all non-biometric technology products, which are discussed
      above.





**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 an additional allowance based on certain percentages of aged
      receivables, which are determined based on historical experience and an
      assessment of the general financial conditions affecting the customer base.
      If
      the Company’s actual collections experience changes, revisions to the 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.





**Inventory**





Inventory
      consists of raw materials, work in process and finished goods and is stated
      at
      the lower of cost or market. The Company uses the first-in, first-out cost
      method of determining cost for its inventory. The Company evaluates its
      inventory balances at the end of each quarter to ensure that they are carried
      at
      the lower of cost or market.





**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.





**Intellectual
      Properties**





Intangible
      assets determined to have a finite useful life are amortized over their
      respectful estimated useful lives and reviewed for impairment annually. Any
      recognized intangible asset determined to have an indefinite useful life will
      not be amortized, but instead will be tested for impairment annually. Intangible
      assets, which are stated at cost and consist of intellectual properties, are
      being amortized over their estimated useful lives of five
      years.


42
 *Table
          of Contents*





In
      connection with the acquisitions of other companies, including the acquisition
      during 2005 of Constellation Biometrics Corporation, the Company acquired
      intellectual properties including patents, trademarks, technical drawings,
      proprietary software and other knowledge based assets that were assigned values
      representing the excess of the purchase price over the fair value of the
      tangible assets acquired. Amortization expense was $249,250 and $227,499 for
      the
      years ended December 31, 2006 and 2005, respectively. The unamortized balance
      of
      $154,469 related to a 2003 acquisition was written off as an impairment loss
      during 2005.





**Product
      Development Costs**





The
      Company capitalizes research and development costs when the product under
      development reaches technological feasibility. Capitalization ends when the
      product is available for general release to 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. Product development costs included in selling, general and
      administrative expenses for the year ended December 31, 2006 were $83,763.
      There
      were no product development costs included in expenses for the year ended
      December 31, 2005.





During
      2005, the Company elected to cease all development efforts related to two of
      its
      Information Management segment products. All costs related to the development
      of
      these products have been expensed.





**Revenue
      Recognition**





For
      the
      years ended December 31, 2006 and 2005, the Company’s revenues were derived 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 product
      and
      licensing revenue are recognized when all of the following criteria have been
      met: (a) there is an executed license agreement, for licensing revenue, and
      the
      technology, software or product has been delivered to the customer, (b) the
      sale
      amount is fixed and payable within twelve months, (c) collection is deemed
      probable, and (d) product returns are deemed reasonably estimable. Revenues
      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 customers in advance of amounts
      earned is deferred and recorded as a liability.




**Shipping
      and Handling Costs**





Shipping
      and handling costs are included in cost of product sales in the accompanying
      statements of operations.




**Accounting
      for Stock-Based Compensation**





At
      December 31, 2006, the Company has two stock-based compensation plans (the
      “Plans”) which are described more fully in Note 15. Prior to January 1, 2006,
      the Company accounted for the Plans under the recognition and measurement
      provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
      Issued to Employees” (“APB 25”), and related Interpretations, as permitted by
      Financial Accounting Standards Board (“FASB”) Statement No. 123, “Accounting for
      Stock-Based Compensation”. No stock-based compensation cost related to the Plans
      was recognized in the Statement of Operations for the year ended December 31,
      2005, as all options granted under the Plans had an exercise price at least
      equal to the market value of the underlying common stock on the date of
      grant.





Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      FASB Statement No. 123(R) “Share-Based Payment”, using the modified-prospective
      transition method. Under that transition method, compensation cost recognized
      includes (a) compensation cost for all share-based payments granted prior to,
      but not yet vested as of January 1, 2006, based on the grant date fair value
      estimated in accordance with the original provisions of Statement 123, and
      (b)
      compensation cost for all share-based payments granted subsequent to January
      1,
      2006, based on the grant-date fair value estimated in accordance with the
      provisions of Statement 123(R). Accordingly, results for prior periods have
      not
      been restated.





43
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          of Contents*


As
      a
      result of adopting Statement 123(R) on January 1, 2006, the Company’s net loss
      for the year ended December 31, 2006 was $34,246 higher than if it had continued
      to account for share-based compensation under APB 25. Basic and diluted net
      loss
      per common share for the year ended December 31, 2006 would have remained $0.07
      if the Company had not adopted Statement 123(R). Also, there was no change
      in
      cash used in operating activities and cash provided by financing activities
      as a
      result of adopting Statement 123(R).





The
      Company’s net loss would have been approximately $165,000 higher and basic and
      diluted net loss per common share would have increased to $0.10 for the year
      ended December 31, 2005 if the Company had applied the fair value recognition
      provisions of Statement 123 to options vested under the Plans for this period.
      There was no share-based employee compensation cost included in net loss as
      reported for this period.





**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
      more
      likely than not 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, 2006 and 2005, the Company had respectively,
      75,103,380 and 47,074,423 potentially dilutive common shares as a result of
      warrants and options granted and convertible preferred stock
      issued.





**Comprehensive
      Loss**





Comprehensive
      loss includes net loss adjusted for gains and losses from foreign currency
      translation adjustments.





**Foreign
      Currency Translation**





Assets
      and liabilities of the Company’s foreign subsidiary are translated into U.S.
      dollars at the applicable rate of exchange in effect at the end of the fiscal
      year. Revenue and expense accounts are translated at the average rate of
      exchange during the period and equity accounts are translated at the rate in
      effect when the transactions giving rise to the balances took place. Gains
      and
      losses resulting from translation are included in “Accumulated Other
      Comprehensive Loss.” Gains and losses resulting from foreign currency
      transactions are included in income.





**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, 2006. The
      respective carrying value of certain on-balance-sheet financial instruments
      approximated their fair values. These financial instruments include receivables,
      accounts payable, accrued expenses and loans from shareholders. The fair value
      of our long-term debt and notes payable is estimated based on the current rates
      offered to us for debt of similar terms, credit risk and maturities. Under
      this
      method the fair value of long-term debt was not significantly different from
      the
      stated value at December 31, 2006.





44
 *Table
          of Contents*


**Concentration
      of Credit Risk**





Sales
      to
      Black & Decker, one of the Company’s Safety and Security segment customers,
      during the year ended December 31, 2006 comprised 56% of total revenues for
      2006
      and 78% of receivables at December 31, 2006. Any unanticipated change in Black
      & Decker’s credit worthiness or other matters affecting the collectibility
      of amounts due the Company, could have a material affect on the Company’s
      results of operations in the period in which such changes or events
      occur.





**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, 2006, the Company has a working capital deficit and has incurred
      significant losses from operations since its inception. Management expects
      revenues earned from its biometric products and the proceeds to be received
      from
      a new financing agreement, expected to be entered into during April 2007, will
      allow the Company to sustain its operations during 2007 and beyond.





The
      Company’s ability to continue as a going concern is heavily dependant upon the
      Company’s ability to obtain additional capital to sustain operations. Although
      the Company is presently attempting to secure additional financing to continue
      the Company’s operations, there is no assurance additional capital will be
      available on acceptable terms, if at all.





**2.**
            **Inventory**





Inventory
      consists of the following at December 31, 2006:





Raw
                materials
            $
                370,219Work
                in process
            127,512Finished
                goods
            269,238$
                766,969





**3.**
            **Property
                and Equipment**





Property
      and equipment consist of the following at December 31, 2006:





Leasehold
                improvements
            $1,465,270Office
                furniture and fixtures
            567,220Computer
                equipment
            226,526Purchased
                software
            151,7012,410,717Less
                accumulated depreciation
            1,490,808$919,909





Depreciation
      expense totaled $277,193 and $256,170 during 2006 and 2005, respectively.








45
 *Table
          of Contents*


**4.**
            **Intangible
                Assets**





Intangible
      assets consist of the following as of December 31, 2006:





Amortized
                Intangible Assets
            Weighted-average
                Amortization period
            Gross
                Carrying Amount
            Accumulated
                Amortization & Impairment Allowance
            Net
                Carrying AmountIntellectual
                properties
            5
            $1,246,250
            $686,323
            $559,927








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 was being amortized over its estimated useful
      life of five years. Amortization expense was $57,600 for the year ended December
      31, 2005. The unamortized balance of $105,600 was written off as an impairment
      loss during 2005.





In
      connection with the 2003 acquisition of Fingerprint Detection Technologies,
      Inc., the Company recorded intellectual property that was assigned a value
      of
      $237,650. This intellectual property was being amortized over its estimated
      useful life of five years. Amortization expense was $23,766 for the year ended
      December 31, 2005. The unamortized balance of $154,469 was written off as an
      impairment loss during 2005.





Amortization
      expense totaled $249,250 and $285,099 during 2006 and 2005,
      respectively.





The
      estimated future amortization expense is as follows:





Year
                ending December 31,2007
            $249,2502008
            155,9062009
            109,2502010
            45,521$559,927





**5.**
            **Advance
                Receivable**





As
      discussed in Note 16, effective April 10, 2006, Sequiam Biometrics, Inc., a
      wholly-owned subsidiary of the Company, entered into an Exclusive License
      Agreement (the “Tacoma Agreement”) with Tacoma Technology, Inc. (“Tacoma”). In
      exchange for considerations within this agreement Sequiam shall lend to Tacoma
      $20,000 per month for the first 24 months of this agreement. Terms of the loan
      will be covered in a separate agreement. This separate agreement has not yet
      been executed. The outstanding balance of the advance receivable at December
      31,
      2006 is $140,000.





**6.**  **Investment
      in Joint Venture**





On
      April
      27, 2006, Sequiam Biometrics, Inc., a wholly owned subsidiary of the Company,
      entered into a Joint Venture Agreement (the “JV Agreement”) with Changjiang
      Computer Group Corporation (“CJCGC”) and Magstone Innovation, Inc. (“Magstone”).
      The Chinese and English names of the Joint Venture are Shanghai Changjiang
      Intelligence Information Technology, LTD and New Era Biometrics, LTD,
      respectively (the “JV”). The JV is headquartered in Shanghai, China. The purpose
      of the JV Agreement is to develop and market biometric and other IT products
      and
      applications in China and other regions and to support Biometrics by providing
      research and development for new products. The JV Agreement grants Biometrics
      exclusive rights to distribute those products in North America, Europe and
      Africa.





The
      JV is
      owned 30% each by Biometrics and Magstone and 40% by CJCGC. The JV Agreement
      was
      approved by the Chinese government during 2006.





46
 *Table
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As
      part
      of the JV Agreement, Biometrics and Magstone were required to invest $60,000
      each and CJCGC $80,000. The Company made this investment during the fourth
      quarter of 2006. The term of the JV Agreement is twenty years, expiring on
      May
      31, 2026, and will be automatically renewed for additional ten-year terms unless
      all parties agree in writing to cease operations prior to the expiration of
      the
      then current term.





The
      Company accounts for its investment in the JV under the equity-method of
      accounting.




**7.**
            **Notes
                Payable and Long-Term Debt**




On
      or
      about October 3, 2002, General Electric Capital Corporation (“GE”) filed a
      lawsuit against Brekel Group, Inc. (“Brekel”), who the Company acquired during
      2002, in the Circuit Court of the 9 th Judicial
      Circuit in and for Orange County, located in Orlando, Florida. GE claimed that
      Brekel owed a deficiency balance in the amount of $93,833 for three digital
      copiers rented under a lease agreement. Brekel had returned possession of the
      copiers to GE, but Brekel disputed 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 April 27, 2006, GE’s
      successor in interest TBF Financial, LLC agreed to settle the remaining
      outstanding balance for $20,000, which was paid during May 2006. As a result,
      a
      gain on restructuring of debt of $13,056 was recorded in 2006.





On
      May
      18, 2005, the Company closed a debt transaction with Lee Harrison Corbin,
      Attorney in-Fact for the Trust Under the Will of John Svenningsen, now known
      as
      Stephen A. Ross, Attorney-in-fact for the Trust Under the Will of John
      Svenningsen, (the “Trust”) pursuant to which the Trust consolidated $1.35
      million in existing unsecured debt owed by the Company to the Trust and provided
      $2.1 million in additional financing (the “Additional Financing”) for a total of
      $3,450,000 (the “Loan”). The Company also issued to the Trust a warrant
      exercisable into 6,000,000 shares of the Company’s common stock (the
“Trust  Warrant”).
      Subsequently, after the Company’s acquisition of Constellation, it consolidated
      into this loan a $200,000 loan from the Trust to Constellation, bringing the
      total Loan to $3,650,000. In connection with this $200,000 loan, the Trust
      received a common stock purchase warrant for 600,000 shares of the Company’s
      common stock at an exercise price of $0.33, with a term from March 24, 2005
      to
      March 24, 2010.





In
      connection with the Loan: (a) the Trust delivered $1,000,000 of the Additional
      Financing to Laurus Master Fund, Ltd., a Cayman Islands company (“ Laurus ”);
      and
      (b) the Company (i) reduced the conversion price of that certain secured
      convertible term note, dated as of April 27, 2004, made by the Company in favor
      of Laurus to $0.15 per share pursuant to Rule 3(a)(9) of the Securities Act
      of
      1933, as amended (the “Securities Act”) (the “Laurus Note”), and (ii) issued a
      warrant to Laurus exercisable into 1,500,000 shares of the Company’s common
      stock at an exercise price of $0.23 per share (the “Laurus Warrant”) (the
“Payoff Consideration”). In return for receiving the Payoff Consideration,
      Laurus, the Trust and the Borrower entered into that certain Assignment,
      Assumption and Release, dated as of May 18, 2005, pursuant to which, Laurus
      assigned (the “Assignment”) all of its rights, liabilities and obligations under
      the Laurus Note, and all documents related thereto (collectively with the Laurus
      Note, the “Laurus Loan Documents”), to the Trust. In addition, Laurus released
      the Company from all liability whatsoever under the Laurus Loan Documents,
      except for any terms therein which may survive the assignment.





In
      the
      2005 consolidated statement of operations, the fair value of the Laurus Warrant
      of $277,000 has been netted against the write-off of accounts payable of
      $315,428 to arrive at a net gain on extinguishment of debt of
      $38,428.





The
      $3,650,000 promissory note issued to the Trust (the “Trust Note”) has a term of
      two years. Eight percent (8%) interest is payable monthly in arrears commencing
      on November 10, 2005, and on the first day of each consecutive calendar month
      thereafter. Monthly principal payments commenced on May 10, 2006, at the rate
      of
      $75,000. The Trust Note is secured by all of the Company’s assets. The Company
      did not make any principal or interest payment from October 2006 to December
      2006 and, accordingly, a penalty of $196,500 has been recorded as interest
      expense.





In
      connection with the Loan, the Trust received the Trust Warrant to purchase
      up to
      6,000,000 shares of the Company’s common stock at prices ranging from $0.20 per
      share to $0.30 per share. 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 the exercise of the
      Trust Warrant and the Laurus Warrant.





47
 *Table
          of Contents*


As
      of
      December 31, 2006, the Trust holds 2,028,388 common shares of the Company,
      or
      2.5% of the total outstanding common shares. As of December 31, 2006, on a
      fully
      diluted basis, the Trust holds 10,028,388 common shares of the Company, or
      6.4%
      of the fully diluted common shares.





Of
      the
      Loan amount, the Company received approximately $1.1 million in cash after
      payment to Laurus of $1,000,000 toward reduction of the Laurus Note (described
      above). The remaining principal balance of the Laurus Note after such payment
      was $818,182, which balance was converted into 5,454,547 shares of common stock
      by Laurus at the reduced conversion rate of $0.15 per share.





In
      the
      Company’s opinion, the issuance and sale of the Trust Warrant and the Laurus
      Warrant described above was exempt from registration under the Securities Act
      in
      reliance upon Section 4(2) of the Securities Act. The Trust and Laurus are
      accredited investors. The securities are not subject to resale except pursuant
      to registration under the Securities Act or pursuant to an available exemption
      from registration under the Securities Act. The Trust and Laurus had an
      opportunity to ask management questions about the Company and had adequate
      access to information about the Company. No sales of securities involved the
      use
      of an underwriter and no commissions were paid in connection with the issuance
      or sale of any securities.





The
      principal documents involved in the transaction are a Securities Purchase
      Agreement, an Amended and Restated Master Security Agreement, an Amended,
      Restated and Consolidated Senior Secured Term Note, a Common Stock Purchase
      Warrant issued to the Trust, a Common Stock Purchase Warrant issued to Laurus,
      a
      Registration Rights Agreement, an Amended and Restated Stock Pledge Agreement,
      an Amended and Restated Grant of Security Interest in Patents and Trademarks
      for
      the Company and certain of its subsidiaries, a Subsidiary Guaranty, a
      Subordination Agreement from Mark Mroczkowski and Nick VandenBrekel to the
      Trust, a Subordination Agreement from Eagle Funding, LLC to the Trust, and
      an
      Assignment, Assumption and Release, each of which is dated as of May 18,
      2005.





In
      April
      2004, the Company entered into a $1.6 million note payable agreement with
      EastGroup Properties, LP (‘EastGroup”). The $1.6 million represented $893,112 of
      deferred rent expense and $706,888 of tenant improvements. Beginning August
      1,
      2004 and continuing on the first day of each month thereafter through and
      including June 1, 2010, the Company was scheduled to make payments consisting
      of
      principal and interest of $26,517. The note payable bears interest at six
      percent per annum. On May 17, 2005, EastGroup agreed to an additional six month
      deferment of the Company’s payments until December 1, 2005, contingent upon the
      payment of April and May 2005 prior to May 31, 2005, and that all rental
      payments through December 2005 were kept current. EastGroup also agreed to
      extend the note payable by twelve months to represent the twelve total deferred
      payments from December 2004 to November 2005. The Company is currently in the
      process of renegotiating the repayment terms of the note payable.





On
      February 28, 2005 as part of the acquisition of Biometric Security (PTY) LTD,
      Constellation Biometrics Corporation entered into a note payable with Aregee
      Investments No. 105 for $440,000 payable in quarterly payments of $55,000
      without interest. The note matures on April 1, 2007 and is secured by all the
      assets of Biometric Security (PTY) LTD. This note payable was amended effective
      December 1, 2006. As a result of the amendment, repayment terms changed to
      quarterly payments of $55,000 for the period starting July 1, 2005 through
      July
      1, 2006 and then quarterly payments of $12,500 for the period starting September
      1, 2006 through April 1, 2007 and a final payment consisting of 178,000
      restricted common shares of the Company delivered on or before April 1, 2007.








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The
      preceding information is summarized as follows at December 31,
      2006:





**Face**
              **Amount**
            **Debt**
              **Discount**
            **Carrying**
              **Amount****Included
                in Long-term debt:**EastGroup
                Properties, LP
            $
                1,429,978
            $
                -
            $
                1,429,978Svenningsen
                Trust
            3,275,000
            (166,711)
            3,108,289Aregee
                Investments No. 105
            165,000
            -
            165,000Total
            4,869,978
            (166,711)
            4,703,267Less
                Current Portion
            (3,678,899)
            166,711
            (3,512,188)$
                1,191,079
            $
                -
            $
                1,191,079





The
      future maturities of long-term debt as of December 31, 2006 are as
      follows:





2007
            $
                3,678,8992008
            253,6342009
            269,2782010
            285,8862011
            303,519Thereafter
            78,762$
                4,869,978





**8.**
            **Accrued
                Expenses**





Accrued
      expenses consist of the following at December 31, 2006





Interest
            $551,510Payroll
                and payroll taxes
            216,771Inventory
                purchases
            278,159Other
            227,884$1,274,324





**9.**
            **Loans
                from Shareholders**





On
      February 1, 2002, Mark Mroczkowski, the Chief Financial Officer and a
      shareholder of the Company, loaned the Company $50,000. The loan did bear
      interest at 6% and was payable on demand. On May 17, 2006, an Amended and
      Restated Promissory Note was entered into for $50,000. The note is for a term
      of
      eighteen months, bears interest at 6%, is unsecured and replaces the original
      loan agreement. At December 31, 2006 , the balance due under the loan was
      $50,000 plus accrued interest of $8,750.




On
      February 15, 2005 Cynthia Mroczkowski, the former wife of Mark Mroczkowski,
      loaned the Company $50,000. The loan bears interest at 6% and was due on January
      31, 2006. At December 31, 2006, the balance due under the loan was $50,000
      plus
      accrued interest of $1,500.





Prior
      to
      2006, Nicholas VandenBrekel, the President and Chief Executive Officer and
      shareholder of the Company, advanced money to the Company under demand
      notes.  The notes did bear interest at 2% per annum and were due on demand.
      On May 17, 2006, an Amended and Restated Promissory Note was entered into for
      $361,000, the outstanding balance under the demand notes as of that date. The
      note is for a term of eighteen months, bears interest at 6%, is unsecured and
      replaces the demand notes previously issued. At December 31, 2006, the Company
      owed $361,000 on the note, plus accrued interest of $47,641.





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During
      2006, Nicholas VandenBrekel, advanced amounts to the Company which were
      outstanding at December 31, 2006. The amounts advanced were $61,220, which
      does
      not bear interest, and $148,777, which bears interest at 12%.





Alan
      McGinn, the Chief Technology Officer and a shareholder of the Company, has
      advanced money to the Company. At December 31, 2006 and 2005, the Company owed
      $12,000 without interest or specific repayment terms.





**10****.**
            **Mandatorily
                Redeemable Cumulative Convertible Preferred
                Stock**





On
      November 30, 2005, the Company closed a preferred stock transaction with seven
      institutional investors, collectively the purchasers (“Purchasers”) pursuant to
      which the Company issued 1,575 shares of its Series A preferred stock, par
      value
      $0.001 per share (the “Preferred Stock”) with a stated per share value of $1,000
      for total proceeds of $1,575,000 (the “Offering”). The Company also issued to
      the Purchasers a warrant exercisable into 7,500,000 shares of the Company’s
      common stock (the “Warrants”).





The
      Preferred Stock was non-voting and entitled the Purchasers to receive a 9%
      cumulative dividend payable semiannually. The Preferred Stock was convertible
      into 7,500,000 shares of the Company’s common stock at a fixed price of $0.21
      per share. During 2006, all Preferred Stock was converted into the Company’s
      common stock.





In
      connection with the Offering, the Purchasers received Warrants to purchase
      up to
      an aggregate of 7,500,000 shares of the Company’s common stock at $0.33 per
      share. All stock conversion prices and exercise prices are subject to adjustment
      for stock splits, stock dividends or similar events. During 2006, the exercise
      price of the Warrants was lowered from $0.33 per share to $0.21 per share as
      a
      result of the Series B preferred stock offering discussed in Note 13. The
      Company also agreed to file a registration statement with the U.S. Securities
      and Exchange Commission covering the shares issuable upon the conversion of
      the
      Preferred Stock and exercise of the Warrant.





In
      the
      Company’s opinion, the issuance and sale of the Preferred Stock and the Warrants
      were exempt from registration under the Securities Act in reliance upon Section
      4(2) of the Securities Act. The Purchasers are accredited investors. The
      securities are not subject to resale except pursuant to registration under
      the
      Securities Act or pursuant to an available exemption from registration under
      the
      Securities Act. The Purchasers had an opportunity to ask management questions
      about the Company and had adequate access to information about the Company.
      No
      sales of securities involved the use of an underwriter and no commissions were
      paid in connection with the issuance or sale of any securities.





The
      principal documents involved in the transaction were a Securities Purchase
      Agreement, a certificate of Determination of Preferences, Rights and Limitations
      of Series A Convertible Preferred Stock, a Registration Rights Agreement, a
      Common Stock Purchase Warrant, and an Escrow Deposit Agreement, each of which
      is
      dated as of November 30, 2005.





As
      a
      result of the issuance of the Warrants, a preferred stock discount of $1,004,625
      was recorded and was being amortized over the life of the preferred stock,
      which
      was three years. During 2006, the remaining unamortized preferred stock discount
      was amortized as a result of the conversion of all of the Preferred Stock into
      the Company’s common stock. Also, as a result of the Preferred Stock
      transaction, a preferred stock conversion feature of $570,375 and loan costs
      of
      $260,326 were recorded.





**11.**
            **Income
                Taxes**





The
      Company has estimated net operating loss carryforwards (“NOLs”) for federal
      income tax purposes of approximately $28,726,000 at December 31, 2006. These
      net
      operating losses can be carried forward and applied against future taxable
      income, if any, and expire in the years 2020 through 2026. 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.





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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 primarily from the accrual of officers’
salaries and related interest of $2,046,447 and $1,539,792 as of December 31,
      2006 and 2005, respectively, that have been expensed for financial statement
      reporting purposes, but are not deductible for tax purposes until recognized
      as
      income by the officers:





Years
                ended December 31,2006
            2005Income
                tax benefit computed at the federal statutory rate
            $
                (1,768,200)
            $
                (1,846,500)Adjustment
                of NOLs
            77,300
            (696,800)State
                income tax benefit, net of federal benefit
            (188,800)
            (196,800)Other
            9,400
            3,200Increase
                in valuation allowance
            1,870,300
            2,736,900Income
                tax expense (benefit)
            $
                -
            $
                -





The
      components of the deferred income tax asset are as follows at December 31,
      2006:





Deferred
                tax assets:Accrued
                salaries
            $
                819,700Other
            8,800Net
                operating loss carryforward
            10,809,600Valuation
                allowance
            (11,638,100)Net
                deferred tax assets
            $
                -





A
      valuation allowance is provided against deferred tax assets if, based on the
      weight of available evidence, 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 sheet and has
      established a valuation allowance in the amount of $11,638,100 against its
      net
      deferred tax asset at December 31, 2006. The valuation allowance increased
      $1,870,300 during the year ended December 31, 2006.





**12.**
            **Lease
                Agreements**





The
      Company leases 24,085 square feet of office space that is used for its corporate
      headquarters. The lease is for a period of seventy-two months beginning July
      1,
      2004 and ending June 30, 2010.





During
      the year ended December 31, 2005, the Company entered into an operating lease
      agreement to rent approximately 2,100 square feet of office space through
      October 31, 2008. This space is used by the Company’s office located in South
      Africa.





Rental
      expense for the years ended December 31, 2006 and 2005 was $243,033 and
      $213,147, respectively. The new minimum future rentals required under the
      operating lease are as follows:





Year
            Rentals2007
            $
                234,6462008
            237,5352009
            228,7942010
            115,519$816,494





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**13.**
            **Preferred
                Stock**





On
      May 17
      and June 21, 2006, the Company closed preferred stock transactions with a total
      of nineteen institutional and accredited investors, (collectively the “Series B
      Purchasers”) pursuant to which the Company issued a total of 2,962.5 shares of
      its Series B preferred stock, par value $0.001 per share (the “Series B
      Preferred Stock”) with a stated per share value of $1,000 for total proceeds of
      $2,962,500 (the “Series B Offering”).





The
      Series B Preferred Stock is non-voting and entitles the Series B Purchasers
      to
      receive a 10% cumulative dividend payable semiannually. The Series B Preferred
      Stock is convertible into 14,107,142 common shares of the Company at a fixed
      price of $0.21 per share. During 2006, the Company issued 476,190 of its common
      shares as a result of an election made by a Series B Purchaser to convert shares
      of Series B Preferred Stock to shares of the Company’s common stock. Also, the
      Company issued 24,479 of its common shares to this Series B Purchaser as payment
      of the 10% cumulative dividend related to the Series B preferred shares that
      were converted.





In
      connection with the Series B Offering, the Series B Purchasers received warrants
      to purchase up to an aggregate 14,107,142 shares of the Company’s common stock
      at $0.30 per share (the “Series B Warrants”).





All
      stock
      conversion prices and exercise prices are subject to adjustment for stock
      splits, stock dividends or similar events.





A
      fair
      value of $1,857,235 has been assigned to the Series B Warrants. This fair value
      is being amortized using the straight-line method over the life of the warrants,
      which is 60 months. The amount amortized during 2006 was $245,155. Also, as
      a
      result of the Series B Preferred Stock transaction, a beneficial conversion
      feature of $758,084 and stock issuance costs of $347,181 were recorded.





**14.**
            **Common
                Stock**





During
      2006, the Company received $150,000 and in exchange issued 483,871 of its common
      shares pursuant to Regulation S of the Securities Act of 1933, as amended.




During
      April 2006, the Company entered into an Amendment to a Promissory Note (the
      “Amendment”). This Promissory Note was classified as a loan from shareholder
      prior to it being repaid during 2005. As part of the Amendment, it was agreed
      that for certain consideration provided by the Promissory Note holder, the
      warrant to purchase 7,500 of the Company’s common shares at $1.00 per share
      granted under the original Promissory Note was amended to 476,191 of the
      Company’s common shares at $0.21 per share. As a result of the Amendment, the
      Company recognized $101,970 of interest expense, representing the difference
      between the fair values of the amended and original warrants. During April
      2006,
      this warrant was exercised and the Company received $100,000 and in exchange
      issued 476,191 of its common shares.





Effective
      May 17, 2006, the Company, entered into two Restricted Stock Agreements (the
      “Agreements”) with Nicholas VandenBrekel and Mark Mroczkowski, the Company’s CEO
      and CFO, respectively. The purpose of the Agreements was to convert accrued
      salaries and interest owed to the officers into restricted common shares. In
      consideration of accrued and unpaid salary of $799,690 owed to Nicholas
      VandenBrekel and $740,102 owed to Mark Mroczkowski under the terms of their
      Amended and Restated Employment Agreements, together with interest thereon
      in
      the amount of $116,384 and $108,002, respectively, the Company issued 3,664,296
      shares and 3,392,416 shares to them, based on the conversion price of $0.25
      per
      share of the Company's common stock, subject to certain restrictions thereon
      (collectively, the “Restricted Shares”). In the Company’s opinion, the issuance
      and sale of the Restricted Shares were exempt from registration under the
      Securities Act of 1933, as amended (the “Securities Act”) in reliance upon
      Section 4(2) of the Securities Act.





The
      Company issued 7,500,000 of its common shares pursuant to Section 3(a)(9) of
      the
      Securities Act of 1933, as amended, as a result of elections made by holders
      of
      the Company’s mandatorily redeemable cumulative convertible preferred stock to
      convert shares of the Company’s Series A preferred stock to shares of the
      Company’s common stock, at a fixed conversion rate of $0.21 per share. Also, the
      Company issued 427,297 of its common shares pursuant to Section 3(a)(9) of
      the
      Securities Act of 1933, as amended, to the holders of the Company’s mandatorily
      redeemable cumulative convertible preferred stock as payment of the 9%
      cumulative dividend payable to Series A preferred stockholders.





In
      connection with the Company’s mandatorily redeemable cumulative convertible
      preferred stock transaction with seven institutional investors (collectively
      the
“Purchasers”) that closed on November 30, 2005, the Purchasers received warrants
      (the “Warrants”) to purchase up to an aggregate of 7,500,000 shares of the
      Company’s common stock at $0.33 per share. The re-set provision of the Warrants
      was affected by the Series B preferred stock transaction described above. As
      a
      result, the exercise price of the Warrants has decreased from $0.33 to $0.21
      and
      the number of warrants held by the Purchasers has been increased in accordance
      with the anti-dilution provisions of the Warrants.





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During
      2006, Purchasers exercised Warrants to purchase 1,378,151 shares of the
      Company’s common stock at $0.21 per share. The Company received $289,412 from
      the exercise of the Warrants. In the Company’s opinion the issuance and sale of
      the shares upon exercise of the Warrants were exempt from the registration
      under
      the Securities Act of 1933, as amended, in reliance upon Section 4(2) of the
      Securities Act of 1933, as amended.





**15.**
            **Stock
                Incentive Plans**





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 (the “Plans”). These Plans are 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
      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,
      2006.





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 the Plans 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.





As
      of
      December 31, 2006, no Stock Options and 250,000 shares of common stock had
      been
      granted under the Sequiam Corporation 2003 Non-Employee Directors and
      Consultants Plan.


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A
      summary
      of Stock Option activity under the 2003 Employee Stock Incentive Plan as of
      December 31, 2006, and changes during the years ended December 31, 2005 and
      2006
      is presented below:





Options
            Number
              of
                Shares
            
            Weighted-
              Average
              Exercise
                Price
            Weighted-
              Average
              Remaining
              Contractual
              Term
            Aggregate
                Intrinsic
              ValueOutstanding
                at December 31, 2004
            
            12,223,000
            
            $
            0.302Granted
            
            550,000
            
            $
            0.180Canceled
            
            (2,300,000)
            
            $
            0.652Outstanding
                at December 31, 2005
            
            10,473,000
            
            $
            0.220Canceled
            
            (115,500
            )
            $
            0.170Outstanding
                at December 31, 2006
            
            10,357,500
            
            $
            0.234
            
            6.7
            
            -0-Vested
                or expected to vest at December 31, 2006
            
            10,357,500
            
            $
            0.234
            
            6.7
            
            -0-Exercisable
                at December 31, 2006
            
            9,999,167
            
            $
            0.235
            
            6.7
            
            -0-








The
      fair
      value of Stock Options granted during 2005 was calculated utilizing the
      following weighted-average assumptions: no dividend yield; expected volatility
      of 165.17% (calculated using historical volatility); risk-free interest rate
      of
      4.02%; and expected term of 10 years. The fair value of each Stock Option is
      estimated on the date of grant using the Black-Scholes option-pricing
      model.





The
      weighted-average grant-date fair value of Stock Options granted during 2005
      was
      $0.179.





A
      summary
      of the status of the Company’s nonvested Stock Options granted under the 2003
      Employee Stock Incentive Plan as of December 31, 2006, and changes during the
      years ended December 31, 2005 and 2006 is presented below:





Nonvested
                options
            Number
              of
                Shares
            
            Weighted-
              Average
              Grant-Date
                Fair ValueNonvested
                at December 31, 2005
            
            550,000
            
            $
            0.179Vested
            
            (191,667)
            
            $
            0.179Nonvested
                at December 31, 2006
            
            358,333
            
            $
            0.179








As
      of
      December 31, 2006, there was $64,025 of total unrecognized compensation cost
      related to nonvested share-based compensation arrangements granted under the
      Plans. That cost is expected to be recognized over a weighted-average period
      of
      1.1 years.





As
      of
      December 31, 2006, no common stock had been granted under the Sequiam
      Corporation 2003 Employee Stock Incentive Plan.








54
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**16.**
            **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. In the
      event of termination of employment other than in a change in control event,
      the
      Company shall pay to the CEO and CFO the total amount of salary payable to
      them
      from the date of such termination until the end of the term of their employment
      agreement, but in no event less than one year’s salary (The CEO’s and CFO’s
      salaries for 2006 were $200,000 and $190,000, respectively). For the year ended
      December 31, 2005, Sequiam accrued and did not pay the minimum annual salaries
      payable to the CEO and CFO.





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 agreement provides 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.





On
      March
      1, 2005, Sequiam Biometrics, Inc. and Constellation Biometrics Corp. both
      wholly-owned subsidiaries of the Company, entered into employment agreements
      with its Vice-President of Product Development and its President, respectively.
      The agreements have a term of two years. The agreements provide for compensation
      in the form of minimum total annual salary of $96,000 and allow for bonuses
      in
      cash, or other property and services and allow for participation in Company
      benefit plans. As of December 31, 2006, compensation of $131,849 is owed and
      has
      been recorded as a liability.





Effective
      April 10, 2006, Sequiam Biometrics, Inc., a wholly-owned subsidiary of the
      Company, entered into an Exclusive License Agreement (the “Tacoma Agreement”)
      with Tacoma Technology, Inc. (“Tacoma”). The purpose of the Tacoma Agreement is
      to provide the conditions and terms for the manufacturing and distribution
      of certain biometric products of Tacoma, including all of Tacoma’s biometric
      sensor modules. The term of the Tacoma Agreement is six years and may be
      automatically renewed for additional 24-month terms unless either party provides
      the other with 30-days prior notice of its desire not to renew.





Effective
      April 15, 2006, Sequiam Biometrics, Inc. (“Biometrics”), a wholly-owned
      subsidiary of the Company, entered into an Exclusive Distribution and
      Manufacturing Agreement (the “Agreement”) with CJCC (China Jiangsu Construction
      Corporation). The purpose of the Agreement is to provide the conditions and
      terms for the distribution of certain biometric products and services of
      Biometrics (the “Products”), including a biometric personal digital
      assistant.





In
      connection with the Agreement, CJCC will act, during the term of the Agreement,
      as the exclusive distributor of Products in Asia for Biometrics. In addition,
      Biometrics will act, during the term of the Agreement, as the exclusive
      biometric designer and manufacturer of the Products for CJCC.





As
      part
      of the Agreement, CJCC purchased 483,871 restricted common shares of Sequiam
      Corporation common stock at full market value during the year ended December
      31,
      2006.





The
      term
      of the Agreement is five years, expiring on April 15, 2011, and may be renewed
      for additional 24-month terms unless either party provides the other with
      written notice of termination at least 90-days prior to the expiration of the
      then current term.





On
      April
      24, 2006, in the case of Xerox Corporation vs. Brekel Group, Inc. in the Circuit
      Court in and for Pinellas County, State of Florida, Xerox Corporation and
      Sequiam Sports, Inc. (formerly known as Brekel Group, Inc.), a wholly-owned
      subsidiary of Sequiam Corporation, gave joint notice of voluntary dismissal
      with
      prejudice of this matter with each party bearing its own costs and attorney
      fees.





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On
      or
      about October 3, 2002, General Electric Capital Corporation (“GE”) filed a
      lawsuit against Brekel Group, Inc. (“Brekel”), who the Company acquired during
      2002, in the Circuit Court of the 9th Judicial Circuit in and for Orange County,
      located in Orlando, Florida. GE claimed that Brekel owed a deficiency balance
      in
      the amount of $93,833 for three digital copiers rented under a lease agreement.
      Brekel had returned possession of the copiers to GE, but Brekel disputed 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 April 27, 2006, GE’s successor in interest TBF
      Financial, LLC agreed to settle the remaining outstanding balance for $20,000,
      which was paid during May 2006. As a result, a gain on restructuring of debt
      of
      $13,056 was recorded for the year ended December 31, 2006.





On
      July
      13, 2006, the Company reached an agreement with Chapman Spira & Carson, LLC
      (“Chapman”) to settle the complaint filed by Chapman on or about September 28,
      2005 in United States District Court for the Southern District of New York
      in
      which Chapman asserted claims for breach of contract and unjust enrichment
      (the
“Dispute”). The agreement to settle the Dispute required the Company to deliver
      a cash payment to Chapman of $200,000, which was made in July 2006. As a result,
      the Company recorded a loss on settlement of lawsuit of $200,000 during the
      year
      ended December 31, 2006. In exchange for the settlement payment, both parties
      stipulated and agreed that all claims and counterclaims in the Dispute are
      discontinued as to all parties with prejudice. Neither party admitted any
      liability or wrongdoing and the settlement did not construe any admission of
      liability or wrongdoing.





The
      Company currently operates without directors’ and officers’ insurance and is at
      risk for those types of losses.


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**17.**
            **Supplemental
                Cash Flow Information**





Year
                ended December 31,2006
            2005Supplemental
                cash flow information:Cash
                paid for interest
            $266,112
            $107,159Non-cash
                investing and financing activities:Refinance
                notes payable
            -
            $1,350,000Notes
                payable and long-term debt converted to common stock
            -
            $997,780Warrants
                issued in connection with long-term debt
            $37,269
            $849,380Original
                issue discount on mandatorily redeemable preferred stock
            -
            $1,004,625Loan
                costs unpaid at end of year
            -
            $51,704Common
                shares issued for acquisition of Constellation Biometrics
                Corporation
            -
            $175,000Common
                shares issued upon conversion of mandatorily redeemable preferred
                stock
            $1,575,000
            -Common
                shares issued for payment of accrued shareholders’
salaries
            $1,539,792
            -Mandatorily
                redeemable preferred stock issuance costs
            $253,098
            -Amortization
                of original issue discount on mandatorily redeemable preferred
                stock
            $976,719
            -Beneficial
                conversion feature of Series B preferred stock
            $758,084
            -Series
                B preferred stock dividend declared and unpaid at end of
                year
            $179,808
            -Common
                shares issued for payment of mandatorily redeemable preferred stock
                dividend
            $90,325
            -Common
                shares issued for payment of Series B preferred stock
                dividend
            $5,028
            -Common
                shares issued upon conversion of Series B preferred stock
            $476
            -




**18.**
            **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.





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
      Safety and Security segment provides fingerprint biometric access control
      systems technology and fingerprint identification technology.





The
      Information Management segment provides all non-biometric technology services
      including internet access and hosting services and custom software development
      services.





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The
      table
      below presents certain financial information by business segment for the year
      ended December 31, 2006.





Safety
                and Security
            Information
                Management
            Segments
                Total
            Corporate
            Consolidated
                TotalRevenue
                from external customers (2)
            $
                1,582,647
            $
                105,471
            $
                1,688,118
            $
                -
            $
                1,688,118Interest
                expense
            (6,050)
            (2,256)
            (8,306)
            (1,309,617)
            (1,317,923)Depreciation
                and amortization
            291,991
            64,506
            356,497
            169,946
            526,443Segment
                loss
            (1,419,099)
            (178,916)
            (1,598,015)
            (3,602,602)
            (5,200,617)Segment
                assets (1) (2)
            2,823,854
            180,380
            3,004,234
            713,828
            3,718,062





The
      table
      below presents certain financial information by business segment for the year
      ended December 31, 2005.




Safety
                and Security
            Information
                Management
            Segments
                Total
            Corporate
            Consolidated
                TotalRevenue
                from external customers
            $
                239,779
            $
                386,141
            $
                625,920
            $
                -
            $
                625,920Interest
                expense
            -
            114
            114
            (1,732,558)
            (1,732,444)Depreciation
                and amortization
            246,631
            294,638
            541,269
            -
            541,269Segment
                loss
            (1,344,164)
            (678,561)
            (2,022,725)
            (3,407,935)
            (5,430,660)Segment
                assets (1)
            1,340,394
            421,072
            1,761,466
            1,731,956
            3,493,422





(1)  Segment
      assets have been adjusted for intercompany accounts to reflect actual assets
      for
      each segment.





(2)
            Revenue
                of $345,337 and assets of $64,612 were attributable to Biometric
                Security
                (Pty) Ltd., a subsidiary of Constellation Biometrics Corporation,
                whose
                operations are located in South Africa. Constellation Biometrics
                Corporation is a subsidiary of the
                Company.





**19.**  **Subsequent
      Events**





On
      January 8, 2007, the Company acquired 80% of the outstanding shares (“the
      Purchase Shares”) of Magstone Innovation, Inc., a foreign owned Chinese
      corporation (“Magstone”), pursuant to an amended and restated stock purchase
      agreement dated January 8, 2007 by and among Sequiam, Magstone and Shixiong
      Chen
      (“the Sole Shareholder”) of Magstone (the “Magstone Acquisition”).





In
      exchange for the Purchase Shares owned by the Sole Shareholder, Sequiam will
      issue and deliver to the Sole Shareholder an Installment Note Payable in the
      amount of $150,000 bearing interest at eight percent per annum, payable in
      three
      quarterly installments of $50,000 beginning April 1, 2007. The note is secured
      by


the
      Purchase Shares. Sequiam also agreed to repay Magstone’s debt to ETI Hong Kong
      for HKD 1,400,000 (approximately $180,000 USD). As additional consideration,
      Magstone distributed to the Sole Shareholder the following: all trademarks
      owned
      by Magstone and Magstone’s 30% ownership in the Chinese Joint Venture known as
      New Era Biometrics. The Sole Shareholder shall pay to Magstone 9% of any
      distributions paid to the Sole Shareholder by the Joint Venture until such
      time
      as the Sole Shareholder no longer serves as President of Magstone.





Immediately
      following the closing, Magstone will change its name to Sequiam East, Inc.
      (“SEI”).


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In
      conjunction with the foregoing, SEI entered into an employment agreement with
      the Sole Shareholder to serve as its President and CEO. The term of the
      agreement is for eight years at a minimum annual salary of $120,000 plus an
      annual bonus equal to 1.25 percent of SEI’s gross sales. In addition the Company
      will grant Mr. Chen options to purchase one million five hundred thousand shares
      of Sequiam Corporation common stock at $0.20 per share in accordance with its
      2003 Employee Stock Incentive Plan. The options will fully vest one year from
      the date of the agreement, or immediately in the event of any earlier
      termination of employment by SEI. If on December 31, 2008 the net value of
      the
      options after exercise is less than one million dollars, then the Company shall
      grant additional options as necessary to maintain such value.





Refinancing





On
      March
      30, 2007, we closed a debt transaction with Biometrics Investors, LLC. Pursuant
      to the Financing, we amended and restated that Second Amended, Restated and
      Consolidated Senior Secured Term Note, dated November 1, 2005, made to Lee
      Harrison Corbin, Attorney In Fact for the Trust under the Will of John
      Svenningsen, in the original principal amount plus interest of $3,965,119 (the
      “ Original
      Note ”),
      which
      was recently transferred to Biometrics, to provide for $2,500,000 of
      additional funding subject to the satisfaction of certain conditions
      (“ Term
      Loan A ”).
      The
      aggregate principal amount of Term Loan A (which
      includes $3,965,119 from the Original Note”) is $6,500,000. In
      connection with this financing, Biometrics provided us with written notice
      that
      we were no longer in default of the Original Note as previously reported on
      the
      current report on Form 8-K filed with the U.S. Securities and Exchange
      Commission on March 14, 2007.





Term
      Loan A





Term
      Loan
      A shall be disbursed by Biometrics to us in a series of ten disbursements,
      each
      in the amount of $250,000, payable every other week, which shall be
      disbursed based on the our satisfaction of the conditions stated in Paragraphs
      4(a) and (b) of that certain Agreement by and between us and Biometrics, dated
      March 30, 2007 (the “ Loan
      Agreement ”),
      including our issuance to Biometrics of a warrant exercisable for
      65,719,041 shares of our common stock at an exercise price of $.01 per share
      (the “ Initial
      Warrant ”).
      Biometrics, in its sole discretion, may elect to advance Term Loan A in greater
      amounts or on an accelerated funding schedule. On March 30, 2007, we issued
      the
      Initial Warrant to Biometrics in accordance with the Loan
      Agreement.





The
      $6,500,000 promissory note issued to Biometrics has a term of two years.
      Interest shall be payable monthly in arrears commencing on May 1, 2007, and
      on
      the first day of each consecutive calendar month thereafter at a rate of 12%
      per
      annum. The outstanding principal balance under this note is payable on April
      15,
      2009 and it is secured by all of our assets.





The
      Initial Warrant is subject to adjustment for stock splits, stock dividends
      or
      similar events. Biometrics may request and, if requested, we have agreed to
      file one or more registration statements with the U.S. Securities and
      Exchange Commission covering the all or part of the shares issuable upon the
      exercise of the Initial Warrant.





Term
      Loan B





Subject
      to the terms and conditions of the Loan Agreement, Biometrics agreed to make
      a
      second term loan to us in the principal amount of $5,000,000 (“ Term
      Loan B ”).
      Term
      Loan B shall consist of a series of advances not to exceed, in the aggregate,
      $5,000,000, which shall be disbursed to us based on our satisfaction of the
      conditions stated in Paragraphs 4(a) and (c) of the Loan Agreement, including
      the issuance to Biometrics of a warrant exercisable for 39,431,424 shares
      of our common stock at an exercise price of $.01 per share (the “ Additional
      Warrant ”).
      The
      Additional Warrant will not be issued to Biometrics until such time as we
      determine that it is in our best interest to borrow additional funds from
      Biometrics pursuant to Term Loan B. If any amounts are funded pursuant to Term
      Loan B, the outstanding principal balance under Term Loan B will
      be payable on April 15, 2009 and will be secured by all of our
      assets.





The
      Additional Warrant is subject to adjustment for stock splits, stock dividends
      or
      similar events. Biometrics may request and, if requested, we have agreed to
      file one or more registration statements with the U.S. Securities and
      Exchange Commission covering the all or part of the shares issuable upon the
      exercise of the Additional Warrant.




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In
      our
      opinion, the issuance and sale of the Initial Warrant, described above, was
      exempt from registration under the Securities Act in reliance upon Section
      4(2)
      of the Securities Act of 1933, as amended. Biometrics is an accredited investor.
      Biometrics had an opportunity to ask management questions about us and had
      adequate access to information about us. No sales of securities involved the
      use
      of an underwriter and no commissions were paid in connection with the issuance
      or sale of any securities.





The
      principal documents involved in the transaction are the Loan Agreement, a
      Master Security Agreement, Term Notes A and B, an Initial and Additional Common
      Stock Purchase Warrant, a Registration Rights Agreement, a Second Amended and
      Restated Stock Pledge Agreement, a Shareholders Agreement, a Grant of Security
      Interest in Patents and Trademarks for us and certain of our subsidiaries,
      a
      Subsidiary Guaranty from each of our Subsidiaries, and a Subordination Agreement
      from Mark Mroczkowski and Nick VandenBrekel to Biometrics, each of which is
      dated as of March 30, 2007 and a copy of which is attached as an exhibit to
      this
      report to the current report on Form 8-K filed with the U.S. Securities and
      Exchange Commission on April 5, 2007.





Series
      B Waiver and Consent .





In
      connection with the Biometrics financing, our Series B preferred shareholders
      and warrant holders consented to the financing and acknowledged that the
      consummation of the financing did not give rise to a termination or default
      under the Series B Preferred Stock Purchase Agreement, the Certificate of
      Determination for the Series B preferred stock, the warrants held by the Series
      B preferred shareholders or the Registration Rights Agreement for the Series
      B
      preferred stock and the warrants held by the Series B preferred shareholders,
      each of which is dated as of May 17, 2006. The Series B preferred shareholders
      and warrant holders further waived their: (a) rights to participate in the
      financing; (b) anti-dilution rights, and (c) registration rights. The Series
      B
      preferred shareholders and warrant holders also consented to an increase in
      our
      authorized common shares and to the termination of the Registration Rights
      Agreement.





Series
      A Waiver and Consent .





In
      connection with the Biometrics financing, our Series A preferred shareholders
      and warrant holders consented to the Biometrics financing and acknowledged
      that
      the consummation of the Biometrics financing did not give rise to a termination
      or default under the Series A Preferred Stock Purchase Agreement or the warrants
      held by the Series A preferred shareholders, each of which is dated as of
      November 30, 2005. The Series A preferred shareholders and warrant holders
      further agreed to waive their rights of participation in the Biometrics
      financing and to any anti-dilution rights. The Series A preferred shareholders
      and warrant holders also consented to an increase in our authorized common
      shares.





Shareholder
      Actions .





In
      connection with the Biometric financing described above, 51.54% of the common
      shareholders voted and agreed to increase the number of directors on our Board
      of Directors and each of our subsidiaries from three to five members and further
      agreed to vote that the two additional directors will be representatives
      designated by Biometrics for so long as Biometrics remains a shareholder.




In
      connection with the Biometric financing described above, 51.54% of the common
      shareholders voted and agreed in an Action by Written Consent of Shareholders
      to
      Amend the our articles of incorporation to increase the authorized common shares
      from 200 million shares to 400 million shares.





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





None.





**ITEM
                8A**
            **CONTROLS
                AND PROCEDURES**





**Evaluationof
      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 concluded that the Company’s disclosure controls and procedures were not
      effective.





**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 changes in the Company's internal control or in other factors that
      have
      materially affected, or are reasonably likely to materially affect, the
      Company's internal control over financial reporting during the period covered
      by
      this report.





**ITEM
                8B**
            **OTHER
                INFORMATION**





None.





**PART
      III**





**ITEM
                9**
            **D****IRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
                COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
                ACT.**





Thefollowing
      table shows the positions held by our current board
      of directors and executive officers. 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**
            **Position**Nicholas
                H. VandenBrekel
            42
            Chairman,
                President and CEO; DirectorMark
                L. Mroczkowski
            53
            Executive
                Vice President and CFO; DirectorJames
                C. Stanley
            68
            DirectorAlan
                McGinn
            46
            Vice
                President and CTOKevin
                Henderson
            37
            President
                of Sequiam Biometrics, Inc. and Constellation Biometrics
                Corporation





**Nicholas
      H. VandenBrekel.** Mr.
      VandenBrekel is our founder and has served as our President, Chief Executive
      Officer and Chairman of the Board since our inception in 1999. Mr. VandenBrekel
      served as a consultant from 1997 to 1999. 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. Mr.
      VandenBrekel has been the President and Chief Executive Officer of Brekel Group,
      Inc. for the last two years and was the President of Sequiam, Inc. In the course
      of his assignments, Mr. VandenBrekel 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.
      Mr.
      VandenBrekel **** 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. Mr. VandenBrekel also holds degrees and diplomas in
      electronics and the martial arts. Mr. VandenBrekel received the 2001 businessman
      of the year award from the National Republican Congressional Committee’s
      Business Advisory Council.





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**Mark
      L. Mroczkowski.** Mr.
      Mroczkowski **** has
      served as our Executive Vice President, Chief Financial Officer and as one
      of
      our directors since our inception in 2001 and as Chief Financial Officer for
      Brekel Group, Inc. since June 2000. Mr. Mroczkowski **** has an
      extensive business background. 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. 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. Mr. Mroczkowski **** has
      a
      strong background in finance and financial management. Mr.
      Mroczkowski **** managed
      private placements, debt financing and Initial Public Offering preparations
      for
      a number of firms. Mr. Mroczkowski has also managed audit, tax and consulting
      engagements for a variety of organizations.





**James
      C. Stanley.** Mr.
      Stanley served as President of Sequiam Biometrics, Inc. from April 21, 2003
      until April 21, 2005 and has served as a one of our directors since May 21,
      2003. Since 2001, Mr. Stanley has also served as the Vice President of Finance
      for Quasar Group, Inc. Prior to joining the Quasar Group, Inc., Mr. Stanley
      worked with J.C. Stanley and Associates from 1997 to 2001. 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. which 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 six years, Mr. Stanley has served
      as a
      Director and a principal in the Quasar Group, Inc., and prior to our acquisition
      of Smart Biometrics, Inc, Mr. Stanley served as Chairman of that company. Mr.
      Stanley has a BA and an MBA from the University of Virginia.





**Alan
      McGinn.** Mr.
      McGinn has served as our Chief Technology Officer since March 1, 2003.
      Previously, Mr. McGinn 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. From 1984 to 1995, Mr. McGinn was a Senior Design Engineer
      at
      Lockheed Martin. While at Lockheed Martin, Mr. McGinn designed the night vision
      system for the Apache Helicopter. Mr. McGinn’s 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.





**Kevin
      Henderson** .
      Mr.
      Henderson has served as Vice President of Sequiam Biometrics, Inc. and President
      of Constellation Biometrics, Inc. since March 1, 2005. Mr. Henderson is
      responsible for business development and product development. Prior to joining
      Sequiam, Mr. Henderson developed numerous biometric, smart card and software
      products and operated a large IT firm in Houston, Texas. Kevin has also held
      positions as US territorial representative for Inmos Semiconductor, CTO of
      the
      PAR Worldwide Group and appeared as guest host on the syndicated radio show
      'CPU' for NBC radio.





**Committees
      of the Board**





We
      do not
      currently have any formal board committees. We do not maintain an Audit
      Committee. If we maintained an Audit Committee, Mr. Mroczkowski would qualify
      as
      our audit committee financial expert. Mr. Mroczkowski is not an independent
      director.





**Family
      Relationships**





There
      are
      no family relationships among our executive officers and directors.





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**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.





**Section
      16(A) Beneficial Ownership Reporting Compliance**




Not
      applicable.





**Code
      of Ethics for Chief Executive Officer and Senior Financial
      Officers**





We
      have
      adopted a Code of Ethics applicable to our Chief Executive Officer, Chief
      Financial Officer, Controller and other finance organization employees. A copy
      of the Code of Ethics will be provided to you, free of charge, upon your written
      request to the Company sent to the attention of Mark L. Mroczkowski, Sequiam
      Corporation, 300 Sunport Lane, Orlando, Florida 32809.  If we make any
      substantive amendments to the Code of Ethics, or grant any waiver, including
      any
      implicit waiver, from a provision of the Code of Ethics, we will disclose the
      nature of such amendment or wavier in a report on Form 8-K.





**ITEM
                10.**
            **EXECUTIVE
                COMPENSATION**





Thefollowing
      Summary Compensation Table includes information
      concerning compensation for the Company’s named executive officers, including
      the required information regarding the Company’s CEO and the Company’s two most
      highly compensated executive officers, for the last completed fiscal year ending
      December 31, 2006.





**SUMMARY
                COMPENSATION TABLE****Name
                &**
              **Principal**
              **Position**
            **Year**
            **Salary**
            
            **Stock
                Awards (1)**
            
            **All
                Other Compensation (2)**
            
            **Total**Nicholas
                VandenBrekel,
            2006
            $200,000
            
            $262,956
            
            $14,400
            
            $477,356President,
                CEO,ChairmanMark
                Mroczkowski, Corporate Secretary, Executive Vice
            2006
            $190,000
            
            $243,699
            
            $12,000
            
            $445,699President,
                TreasurerAnd
                CFO





The
      individuals listed in the table above did not receive any Bonus, Option Awards,
      Non-Equity Inventive Plan Compensation or Change in Pension Value and
      Nonqualified Deferred Compensation Earnings during 2006.





Footnotes:





(1)
      Effective May 17, 2006, we entered into two Restricted Stock Agreements with
      Nicholas VandenBrekel and Mark Mroczkowski. The purpose of these agreements
      was
      to convert accrued salaries and interest owed to the officers into restricted
      common shares. In consideration of accrued and unpaid salary of $799,690 owed
      to
      Nicholas VandenBrekel and $740,102 owed to Mark Mroczkowski under the terms
      of
      their Amended and Restated Employment Agreements, together with interest thereon
      in the amount of $116,384 and $108,002, respectively, the Company issued
      3,664,296 shares and 3,392,416 shares to them, based on the conversion price
      of
      $0.25 per share of our common stock, subject to certain restrictions thereon.
      As
      a result of this transaction, 2006 salary expense of $146,572 and $135,697
      was
      recognized for Nicholas VandenBrekel and Mark Mroczkowski, respectively. This
      2006 salary expense resulted from the difference between the closing price
      of
      our common stock on the date of the agreements of $0.29 and the conversion
      price
      included in the agreements of $0.25. The amounts included in the Stock Awards
      column in the above table include interest and 2006 salary expense that resulted
      form this transaction. In our opinion, the issuance and sale of these restricted
      shares were exempt from registration under the Securities Act of 1933, as
      amended in reliance upon Section 4(2) of the Securities Act.





(2)  Compensation
      shown in this column was earned by accruing the automobile allowances provided
      in the employment agreements.





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**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.





**Employment
      Agreements**





On
      October 1, 2002, Mr. VandenBrekel and Mr. Mroczkowski entered into amended
      and
      restated employment agreements with us and our 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. Full-time employment is a requirement of the contracts. Each of
      Mr.
      VandenBrekel and Mr. Mroczkowski may terminate their respective employment
      agreement without cause upon 30-day advance written notice.





**Change
      of Control Arrangements**





Each
      of
      the employment agreements for Mr. VandenBrekel and Mr. Mroczkowski provide
      for
      payments in the event that
      we
      experience a change of control without the prior approval of the then existing
      Board of Directors, whether by proxy contest, or as the result of a tender
      offer
      made without the approval of the then existing Board of Directors, or by any
      other means, then the employment agreement of each of Mr. VandenBrekel and
      Mr. Mroczkowski shall be
      deemed terminated and the following termination compensation will be immediately
      due and payable to each of Mr. VandenBrekel and Mr. Mroczkowski :




(a)
      a lump
      sum payment of $5,000,000 due and payable thirty days following the termination
      of the employment agreement; and





(b)
      five
      annual payments of $1,000,000 due and payable on the anniversary of the
      termination date of the employment agreement.





**Payments
      on Termination (other than upon Change of Control)**




Each
      of
      the named executive officers has an employment agreement providing for severance
      payments in the event of termination of employment other than in a change in
      control event.





Mr.
      VandenBrekel





Upon
      a
      termination of his employment agreement without cause by Mr. VandenBrekel or
      with cause by us, we shall immediately pay to Mr. VandenBrekel all accrued
      and
      unpaid compensation as of the date of such termination. Upon a termination
      of
      his employment agreement with cause by Mr. VandenBrekel or without cause by
      us,
      we shall immediately pay to Mr. VandenBrekel all accrued and unpaid compensation
      as of the date of such termination and a severance payment equal the total
      amount of salary payable to Mr. VandenBrekel from the date of such termination
      until the end of the term of his employment agreement (prorated for any partial
      month), but in no event less than one year's salary (Mr. VandenBrekel’s salary
      for 2006 was $200,000). The accrued compensation due and payable at termination
      together with any severance payment due under his employment agreement shall
      bear interest at the lesser of eight percent (8%) per annum or the maximum
      rate
      permitted by law until such amounts are paid in full. Pursuant to Mr.
      VandenBrekel’s stock option agreement, if he is terminated, Mr. VandenBrekel has
      30 days to exercise any options that are exercisable. All other options are
      forfeited.





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If
      Mr.
      VandenBrekel dies during the term of his employment agreement, his employment
      agreement shall terminate, except that Mr. VandenBrekel's legal representatives
      shall be entitled to receive any earned but unpaid compensation due under his
      employment agreement. If, during the term of his employment agreement, Mr.
      VandenBrekel suffers and continues to suffer from a disability, then we may
      terminate Mr. VandenBrekel’s employment agreement by delivering to him 60
      calendar days prior written notice of termination based on such disability.
      If
      Mr. VandenBrekel dies or is otherwise declared to be disabled, then he or his
      estate, has 180 days to exercise any options that are exercisable. All other
      options are forfeited.





Mr.
      Mroczkowski





Upon
      a
      termination of his employment agreement without cause by Mr. Mroczkowski or
      with
      cause by us, we shall immediately pay to Mr. Mroczkowski all accrued and unpaid
      compensation as of the date of such termination. Upon a termination of his
      employment agreement with cause by Mr. Mroczkowski or without cause by us,
      we
      shall immediately pay to Mr. Mroczkowski all accrued and unpaid compensation
      as
      of the date of such termination and a severance payment equal the total amount
      of salary payable to Mr. Mroczkowski from the date of such termination until
      the
      end of the term of his employment agreement (prorated for any partial month),
      but in no event less than one year's salary (Mr. Mroczkowski’s salary for 2006
      was $190,000). The accrued compensation due and payable at termination together
      with any severance payment due under his employment agreement shall bear
      interest at the lesser of eight percent (8%) per annum or the maximum rate
      permitted by law until such amounts are paid in full. Pursuant to Mr.
      Mroczkowski’s stock option agreement, if he is terminated, Mr. Mroczkowski has
      30 days to exercise any options that are exercisable. All other options are
      forfeited.





If
      Mr.
      Mroczkowski dies during the term of his employment agreement, his employment
      agreement shall terminate, except that Mr. Mroczkowski’s legal representatives
      shall be entitled to receive any earned but unpaid compensation due under his
      employment agreement. If, during the term of his employment agreement, Mr.
      Mroczkowski suffers and continues to suffer from a disability, then we may
      terminate Mr. Mroczkowski’s employment agreement by delivering to him 60
      calendar days prior written notice of termination based on such
      disability. If Mr.
      Mroczkowski dies or is otherwise declared to be disabled, then he or his estate,
      has 180 days to exercise any options that are exercisable. All other options
      are
      forfeited.





**Restricted
      Shares**





Effective
      May 17, 2006, we entered into two Restricted Stock Agreements with Nicholas
      VandenBrekel and Mark Mroczkowski. The purpose of these agreements was to
      convert accrued salaries and interest owed to the officers into restricted
      common shares. In consideration of accrued and unpaid salary of $799,690 owed
      to
      Nicholas VandenBrekel and $740,102 owed to Mark Mroczkowski under the terms
      of
      their Amended and Restated Employment Agreements, together with interest thereon
      in the amount of $116,384 and $108,002, respectively, the Company issued
      3,664,296 shares and 3,392,416 shares to them, based on the conversion price
      of
      $0.25 per share of our common stock, subject to certain restrictions thereon.
      As
      a result of this transaction, 2006 salary expense of $146,572 and $135,697
      was
      recognized for Nicholas VandenBrekel and Mark Mroczkowski, respectively. This
      2006 salary expense resulted from the difference between the closing price
      of
      our common stock on the date of the agreements of $0.29 and the conversion
      price
      included in the agreements of $0.25. The amounts included in the Stock Awards
      column in the above table include interest and 2006 salary expense that resulted
      form this transaction. In our opinion, the issuance and sale of these restricted
      shares were exempt from registration under the Securities Act of 1933, as
      amended in reliance upon Section 4(2) of the Securities Act.







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**Outstanding
      Equity Awards Value at Fiscal Year-End Table**






The
      following table includes certain information with respect to the value of all
      unexercised options previously awarded to the executive officers named above
      at
      the fiscal year end, December 31, 2006. The number of options held at December
      31, 2006 includes options granted under the Sequiam Corporation 2003 Employee
      Stock Incentive Plan.




**Name
                and Principal Position**
            
            **Number
                of Securities Underlying Unexercised Options
                Exercisable**
            
            **Number
                of Securities Underlying Unexercised Options
                Unexercisable**
            
            **Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options**
            
            **Option
                ExercisePrice**
            
            **Option
                ExpirationDate**Nicholas
                VandenBrekel
            
            5,000,000
            
            —
            
            —
            
            $0.187
            
            11/28/13President,
                CEO, ChairmanMark
                Mroczkowski
            
            4,000,000
            
            —
            
            —
            
            $0.187
            
            11/28/13Corporate
                Secretary,Executive
                VicePresident,
                Treasurerand
                Chief FinancialOfficer








**Compensation
      of Directors**





None
      of
      our directors received compensation for their service as directors during the
      fiscal year ended December 31, 2006, other than the payment of James C.
      Stanley’s health insurance premiums during 2006 which totaled
      $5,500.





**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 other than James C. Stanley who can
      evaluate the reasonableness of executive compensation without regard to his
      or
      her own compensation paid by us.














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





The
      table below sets forth, as of April 1, 2007, certain
      information with respect to the beneficial ownership of our common stock by
      each
      person whom 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**
            **Number
                of Shares of Common Stock (1)**
            **Percentage
                of Class Beneficially Owned**Nicholas
                H. VandenBrekel
            27,136,819(2)
            30.74%Mark
                L. Mroczkowski
            12,500,000(3)
            14.32%Officers
                and Directors as a group (three persons)
            40,474,408
            43.86%Walter
                H. Sullivan, III4
                Embarcabero Center Suite 1570San
                Francisco, California 94111
            11,574,060(4)
            12.20%Biometrics
                Investors, LLC5111
                Maryland Way, Suit 201Brentwood,
                TN 37027
            76,347,429(5)
            48.44%




(1)
            For
                purposes of calculating the percentage beneficially owned, the number
                of
                shares of Common Stock deemed outstanding includes (i) 83,287,793
                shares
                outstanding at April 1, 2007, and (ii) shares issuable by the Company
                pursuant to options and warrants held by the respective persons which
                may
                be exercised within 60 days following April 1, 2007. The shares issuable
                pursuant to options and warrants are considered to be outstanding
                and
                beneficially owned by the person holding such options or warrants
                for the
                purpose of computing the percentage ownership of such person but
                are not
                treated as outstanding for the purpose of computing the percentage
                ownership of any other person.





(2)
            Includes
                5,000,000 shares that may be acquired upon exercise of stock
                options.





(3)
            Includes
                4,000,000 shares that may be acquired upon exercise of stock
                options.





(4)
            Includes
                7,927,059 shares of common stock which may be issued upon exercise
                of
                outstanding warrants and 3,647,001 that are held of record.





(5)
            Includes:
                (a) 2,028,388 shares of common stock that are held of record and
                (b)
                74,319,041 shares that may be acquired upon the exercise of outstanding
                common stock purchase warrants.








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**Equity
      Compensation Plan Information**





The
      following table provides information regarding the status of our existing equity
      compensation plans at December 31, 2006.





Plan
                category
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            Weighted-average
                exercise price of outstanding options, warrants and rights
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in the second
                column)Equity
                compensation plans approved by security holders (1)
            10,357,500
            $0.234
            4,642,500Equity
                compensation plans not approved by security holders
            0
            0
            0Total
            10,357,500
            $0.234
            4,642,500





Footnotes :





(1)  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 of which have been approved by the stockholders.
      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 and as they may determine in their discretion.
      Stock
      options granted under this plan may qualify as “incentive stock options” within
      the meaning of Section 422 of the Internal Revenue Code of 1986.





The
      exercise prices of the stock options are 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. If an employee holds greater than ten percent
      of the total voting power of either our common stock or preferred stock, then
      we
      may set the exercise price for any incentive stock options granted to such
      person to 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 we may determine.





**ITEM
                12**
            **CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE**





**Indebtedness**





During
      2006, Nicholas VandenBrekel, our President and Chief Executive Officer, advanced
      amounts to us which were outstanding at December 31, 2006. The amounts advanced
      were $61,220, which does not bear interest, and $148,777, which bears interest
      at 12%.





**Restricted
      Shares**





Effective
      May 17, 2006, we entered into two Restricted Stock Agreements with Nicholas
      VandenBrekel and Mark Mroczkowski, our CEO and CFO, respectively. The purpose
      of
      the agreements is to convert accrued salaries and interest owed to the officers
      into restricted common shares.





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In
      consideration of accrued and unpaid salary of $799,690 owed to Mr. VandenBrekel
      and $740,102 owed to Mr. Mroczkowski under the terms of their Amended and
      Restated Employment Agreements, together with interest thereon in the amount
      of
      $116,384 and $108,002, respectively we shall issue 3,664,296 shares and
      3,392,416 shares to them, based on the conversion price of $0.25 per share
      of
      the our common stock, par value $0.001 per share, in their names subject to
      certain restrictions.





Both
      Mr.
      VandenBrekel and Mr. Mroczkowski accepted the restricted shares subject to
      the
      following restrictions:





(a) Forfeiture
      Restrictions .
      The
      restricted shares may not be sold, assigned, pledged, exchanged, hypothecated
      or
      otherwise transferred, encumbered or disposed of to the extent then subject
      to
      the forfeiture restrictions, and in the event of termination of such employee's
      employment with us, such employee shall, for no consideration, forfeit to us
      all
      restricted shares to the extent then subject to the forfeiture restrictions.
      The
      forfeiture restrictions shall be binding upon and enforceable against any
      transferee of restricted shares.





(b) Lapse
      of Forfeiture Restrictions .
      The
      forfeiture restrictions shall lapse as to the restricted shares on November
      17,
      2007 provided that such Employee has been continuously employed by us until
      November 17, 2007.





**Restated
      Promissory Notes**





On
      May
      17, 2006, we entered into Amended and Restated Promissory Notes with Nicholas
      VandenBrekel and Mark Mroczkowski for $361,000 and $50,000, respectively. Each
      note is for a term of eighteen months, bears interest at 6% and replaces demand
      notes previously issued in 2002 for the same amounts.





**Certain
      Equity Holdings**





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 our 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 5,500,000 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 our acquisition of Brekel Group,
      Inc. in July 2002.











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In
      July
      2002, we acquired Sequiam Sports, 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 24,223,000 shares issued and outstanding prior to closing.





(2)  Based
      upon 24,224,172 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 our 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 our acquisition of Brekel Group,
      Inc. in July 2002.





**Director
      Independence**




The
      Board
      of Directors has determined that James C. Stanley is
      considered an independent director. In concluding that James C. Stanley is
      an
      independent director, we considered the fact that we paid for Mr. Stanley’s
      health insurance during 2006, which totaled $5,500. We don’t believe this
      affects his independence. M r. VandenBrekel,
      our Chairman, does not meet the independence standards because he is an employee
      and our President and Chief Executive Officer. Mr. Mroczkowski, a director,
      does
      not meet the independence standards because he is an employee and our Executive
      Vice President and Chief Financial Officer. The Board defines independence
      as
      meeting the requirements to be considered independent directors as defined
      under
      the current NASDAQ
      rules .




There
      were no transactions or relationships between us and any of our directors during
      2006 other than as described in this report. There is no family relationship
      between any of our directors and executive officers.


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**ITEM
                13.**
            **EXHIBITS**





Exhibit
              No.
            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 17,200272.8
            Asset
                Purchase Agreement by and between Constellation Biometrics Corporation
                and
                Biometric Security (PTY), LTD, dated effective as of February 28,
                2005.192.9
            Stock
                Purchase Agreement, dated as of and effective May 31, 2005, by and
                among
                Sequiam Corporation, Constellation Biometrics, Inc., and the shareholders
                of Constellation Biometrics, Inc.193.1
            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
            Certificate
                of Amendment to Articles of Incorporation of Sequiam Corporation,
                dated
                January 6, 2003.233.4
            Certificate
                of Amendment to Articles of Incorporation of Sequiam Corporation,
                dated
                December 8, 2005.233.5
            Bylaws.83.6
            Amendment
                to our Bylaws, dated July 18, 2002.104.1
            Securities
                Purchase Agreement, dated May 18, 2005, between Sequiam Corporation
                and
                Lee Harrison Corbin, Attorney in-Fact for the Trust Under the Will
                of John
                Svenningsen.184.2
            Registration
                Rights Agreement, dated May 18, 2005, by and between Sequiam Corporation
                and Lee Harrison Corbin, Attorney in-Fact for the Trust Under the
                Will of
                John Svenningsen.184.3
            Common
                Stock Purchase Warrant, dated May 18, 2005, issued by Sequiam Corporation,
                in favor of Laurus Master Fund, Ltd.184.4
            Common
                Stock Purchase Warrant, dated May 18, 2005, issued by Sequiam Corporation,
                in favor of Lee Harrison Corbin, Attorney in-Fact for the Trust Under
                the
                Will of John Svenningsen.184.5
            Amended
                and Restated Common Stock Purchase Warrant dated May 20, 2005, issued
                by
                Sequiam Corporation, in favor of Lee Harrison Corbin, Attorney in-Fact
                for
                the Trust Under the Will of John Svenningsen.184.6
            Amended
                and Restated Common Stock Purchase Warrant dated May 20, 2005, issued
                by
                Sequiam Corporation, in favor of Lee Harrison Corbin.184.7
            Stock
                Purchase Agreement, dated as of and effective May 31, 2005, by and
                among
                Sequiam Corporation, Constellation Biometrics, Inc., and the shareholders
                of Constellation Biometrics, Inc.194.8
            Common
                Stock Purchase Warrant, issued by Sequiam Corporation, in favor of
                Lee
                Harrison Corbin, Attorney-in-Fact for the Trust under the Will of
                John
                Svenningsen194.9
            Securities
                Purchase Agreement dated November 30, 2005, between Sequiam Corporation
                and the Purchasers.204.10
            Certificate
                of Determination of Preferences Rights and Limitations of Series
                A 9%
                Convertible Preferred Stock, dated November 30, 2005.204.11
            Registration
                Rights Agreement, dated November 30, 2005, by and between Sequiam
                Corporation and the Purchasers.204.12
            Common
                Stock Purchase Warrant dated November 30, 2005.204.13
            Certificate
                of Determination of Preferences Rights and Limitations of Series
                A 9%
                Convertible Preferred Stock, dated December 9, 2005.214.14
            Securities
                Purchase Agreement dated May 17, 2006, between Sequiam Corporation
                and the
                Purchasers.274.15
            Certificate
                of Determination of Preferences Rights and Limitations of Series
                B 10%
                Convertible Preferred Stock, filed as of April 26, 2006.274.16
            Amended
                and Restated Certificate of Determination of Preferences Rights and
                Limitations of Series B 10% Convertible Preferred Stock, filed as
                of May
                9, 2006.274.17
            Registration
                Rights Agreement, dated May 17, 2006, by and between Sequiam Corporation
                and the Purchasers.274.18
            Form
                of Common Stock Purchase Warrant.274.19
            Amendment
                and Additional Issuance Agreement, dated June 21, 2006, between Sequiam
                Corporation and the Purchasers.284.20
            Form
                of Common Stock Purchase Warrant.284.21
            Stock
                Purchase Agreement, dated as of and effective January 8, 2007, by
                and
                among Sequiam Corporation, Magstone Innovation, Inc., and Shixiong
                Chen.314.22
            Registration
                Rights Agreement, dated March 30, 2007, by and between Sequiam Corporation
                and Biometrics Investors, LLC.324.23
            Initial
                Common Stock Purchase Warrant, dated March 30, 2007, and issued by
                Sequiam
                Corporation, in favor of Biometrics Investors, LLC.324.24
            Additional
                Common Stock Purchase Warrant, undated and un-issued by Sequiam
                Corporation, in favor of Biometrics Investors, LLC.3210.1
            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 $301,000.1210.2
            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 $396,158.1210.3
            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.1110.6
            Amended
                and Restated Employment Agreement with Mark Mroczkowski.1110.7
            Employment
                Agreement with Alan McGinn.1110.8
            Put
                and Call Agreement dated April 16, 2003.1310.9
            Continuing
                Personal Guaranty, dated January 29, 20041410.10
            Exclusive
                Patent License Agreement, between Fingerprint Detection Technologies,
                Inc.
                and Westinghouse Savannah River Company LLC.1510.11
            2003
                Employee Stock Incentive Plan1610.12
            2003
                Non-Employee Directors and Consultants Stock Plan1610.13
            Lease
                Agreement by and between Sequiam Sports, Inc. and EastGroup Properties,
                L.P.1710.14
            Promissory
                Note, dated as of July 1, 2004, made by Sequiam Corporation in favor
                of
                EastGroup Properties, L.P.1710.15
            Agreement,
                dated as of August 19, 2004, by and between Sequiam Corporation and
                the
                National Rifle Association of America.1710.16
            Promissory
                Note, dated as of September 7, 2004, made by Sequiam Corporation
                in favor
                of Eagle Funding, LLC1710.17
            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 Svenningsen1710.18
            Amended,
                Restated and Consolidated Senior Secured Term Note, dated May 18,
                2005,
                made by Sequiam Corporation in favor of Lee Harrison Corbin, Attorney
                in-Fact for the Trust Under the Will of John Svenningsen.1810.19
            Amended
                and Restated Master Security Agreement, dated May 18, 2005, 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.1810.20
            Amended
                and Restated Subsidiary Guaranty, dated May 18, 2005, by and among
                Sequiam
                Software, Inc., Sequiam Biometrics, Inc., Sequiam Education, Inc.,
                Sequiam
                Sports, Inc., and Fingerprint Detection Technologies, Inc.1810.21
            Amended
                and Restated Grant of Security Interest in Patents and Trademarks,
                dated
                May 18, 2005, by and between Sequiam Corporation and Lee Harrison
                Corbin,
                Attorney in-Fact for the Trust Under the Will of John Svenningsen.1810.22
            Amended
                and Restated Grant of Security Interest in Patents and Trademarks,
                dated
                May 18, 2005, by and between Sequiam Software, Inc. and Lee Harrison
                Corbin, Attorney in-Fact for the Trust Under the Will of John
                Svenningsen.1810.23
            Amended
                and Restated Grant of Security Interest in Patents and Trademarks,
                dated
                May 18, 2005, by and between Sequiam Sports, Inc. and Lee Harrison
                Corbin,
                Attorney in-Fact for the Trust Under the Will of John
                Svenningsen1810.24
            Amended
                and Restated Grant of Security Interest in Patents and Trademarks,
                dated
                May 18, 2005, by and between Sequiam Biometrics, Inc and Lee Harrison
                Corbin, Attorney in-Fact for the Trust Under the Will of John
                Svenningsen.1810.25
            Amended
                and Restated Stock Pledge Agreement, dated May 18, 2005 by and among
                Sequiam Corporation, Sequiam Software, Inc., Sequiam Biometrics,
                Inc.,
                Sequiam Education, Inc., Sequiam Sports, Inc, Fingerprint Detection
                Technologies, Inc., and Lee Harrison Corbin, Attorney in-Fact for
                the
                Trust Under the Will of John Svenningsen.1810.26
            Subordination
                Agreement, dated May 18, 2005, by and among Mark Mroczkowski, Nick
                VandenBrekel and Lee Harrison Corbin, Attorney in-Fact for the Trust
                Under
                the Will of John Svenningsen.1810.27
            Subordination
                Agreement, dated May 18, 2005, by and between Eagle Funding, LLC
                and Lee
                Harrison Corbin, Attorney in-Fact for the Trust Under the Will of
                John
                Svenningsen.1810.28
            Assignment,
                Assumption and Release, dated as of May 18, 2005, by and among Assignment,
                Assumption and Release, Sequiam Corporation and Laurus Master Fund,
                Ltd.1810.29
            Debt
                Conversion Agreement, dated May 20, 2005, by and between Sequiam
                Corporation and Lee Harrison Corbin.1810.30
            Debt
                Conversion Agreement, dated May 20, 2005, by and between Sequiam
                Corporation and Walter H. Sullivan.1810.31
            Promissory
                Note dated March 7, 2005 from Sequiam Corporation in favor of Eagle
                Funding, LLC (renewal note).1810.32
            Letter
                agreement dated May 17, 2005 from EastGroup Properties.1810.33
            Promissory
                Note in the principal amount of $200,000, made on March 23, 2005
                by
                Constellation Biometrics Corporation in favor of Lee Harrison Corbin,
                Attorney-in-Fact for the Trust under the Will of John Svenningsen
                (and
                assumed by Sequiam Corporation under that certain Stock Purchase
                Agreement
                dated as of and effective May 31, 2005 and referenced above).1910.34
            Asset
                Purchase Agreement by and between Constellation Biometrics Corporation
                and
                Biometric Security (PTY), LTD, dated effective as of February 28,
                2005.1910.35
            Promissory
                Note dated February 28, 2005, in the principal amount of $440,000,
                made by
                Constellation Biometrics Corporation in favor of Biometric Security
                (PTY)
                LTD.1910.36
            Escrow
                Deposit Agreement, dated November 30, 2005, by and between Sequiam
                Corporation and vFinance Investments, Inc.2010.37
            Exclusive
                Co-Operative Development and Supply Agreement between Sequiam Biometrics,
                Inc., a wholly owned subsidiary of Sequiam Corporation, and Kwikset
                Corporation effective September 13, 2005 (Portions of this Agreement
                have
                been omitted pursuant to a request for confidential treatment)2210.38
            Exclusive
                License Agreement, effective April 10, 2006, by and between Sequiam
                Biometrics, Inc. and Tacoma Technology, Inc.2410.39
            Exclusive
                Distribution and Manufacturing Agreement, effective April 15, 2006,
                by and
                between Sequiam Biometrics, Inc. and CJCC.2510.40
            Joint
                Venture Agreement2610.41
            Bylaws
                of Shanghai Changjiang Intelligence Information Technology,
                LTD.2610.42
            Restricted
                Stock Agreement with Nicholas H. VandenBrekel.2710.43
            Restricted
                Stock Agreement with Mark L. Mroczkowski27.10.44
            Amended
                and Restated Promissory Note to Nicholas H. VandenBrekel.2710.45
            Amended
                and Restated Promissory Note to Mark L. Mroczkowski2710.46
            Escrow
                Deposit Agreement, dated April 27, 2006,by and between Sequiam Corporation
                and vFinance Investments, Inc. as amended by that certain side letter,
                dated as of May 12, 2006.2710.47
            Amendment
                No. 1 to Consent and Waiver, dated June 20, 2006, between Sequiam
                Corporation and DKR SoundShore Oasis Holding Fund Ltd.2810.48
            Distribution
                and Manufacturing Agreement, effective July 6, 2006, by and between
                Sequiam Biometrics, Inc. and Quasar Group, Inc.2910.49
            Forbearance
                Agreement between Sequiam Corporation and Stephen A. Ross, as duly
                authorized agent for the Trust Under the Will of John
                Svenningsen.3010.50
            Promissory
                Note in the principal amount of $150,000, made on January 8, 2007
                by
                Sequiam Corporation in favor of Shixiong Chen.3110.51
            Employment
                Agreement by and between Sequiam East, Inc. and Shixiong Chen, dated
                January 8, 2007.3110.52
            Loan
                Agreement, dated March 30, 2007, between Sequiam Corporation and
                Biometrics Investors, LLC.3210.53
            Term
                Note A, dated March 30, 2007, made by Sequiam Corporation in favor
                of
                Biometrics Investors, LLC.3210.54
            Term
                Note B, undated, and unexecuted by Sequiam Corporation in favor of
                Biometrics Investors, LLC.3210.55
            Master
                Security Agreement, dated March 30, 2007, by and among, Constellation
                Biometrics Corporation, Biometric Security (PTY) Ltd., Sequiam East,
                Inc.
                in favor of Biometrics Investors, LLC.3210.56
            Subsidiary
                Guaranty, dated March 30, 2007, by and among Sequiam Software, Inc.,
                Sequiam Biometrics, Inc., Sequiam Education, Inc., Sequiam Sports,
                Inc.,
                and Fingerprint Detection Technologies, Inc. Constellation Biometrics
                Corporation, Biometric Security (PTY) Ltd., Sequiam East, Inc. in
                favor of
                Biometrics Investors, LLC.3210.57
            Grant
                of Security Interest in Patents and Trademarks, dated March 30, 2007,
                by
                and between Sequiam Corporation and Biometrics Investors, LLC.3210.58
            Grant
                of Security Interest in Patents and Trademarks, dated March 30, 2007,
                by
                and between Sequiam Biometrics, Inc. and Biometrics Investors,
                LLC.3210.59
            Grant
                of Security Interest in Patents and Trademarks, dated March 30, 2007,
                by
                and between Sequiam Software, Inc. and Biometrics Investors,
                LLC.3210.60
            Grant
                of Security Interest in Patents and Trademarks, dated March 30, 2007,
                by
                and between Sequiam Sports, Inc. Biometrics Investors, LLC.3210.61
            Grant
                of Security Interest in Patents and Trademarks, dated March 30, 2007,
                by
                and between Fingerprint Detection Technologies, Inc. and Biometrics
                Investors, LLC.3210.62
            Second
                Amended and Restated Stock Pledge Agreement, dated March 30, 2007
                by and
                among Sequiam Corporation, Sequiam Software, Inc., Sequiam Biometrics,
                Inc., Sequiam Education, Inc., Sequiam Sports, Inc, Fingerprint Detection
                Technologies, Inc. Constellation Biometrics Corporation, Biometric
                Security (PTY) Ltd., Sequiam East, Inc., and Biometrics Investors,
                LLC.3210.63
            Subordination
                Agreement, dated March 30, 2007, by and among Mark Mroczkowski, Nick
                VandenBrekel and Biometrics Investors, LLC.3210.64
            Shareholders
                Agreement by and among Sequiam Corporation, Biometrics Investors,
                L.L.C.,
                and such other shareholders of the Company that become a party
                hereto.3210.65
            Waiver
                and Consent by Series B Preferred Shareholders and Warrant
                Holders.3210.66
            Waiver
                and Consent by Series A Preferred Warrant Holders.3221.1
            Subsidiaries.*31.1
            Certification
                Of Chief Executive Officer Pursuant To 15d-14.*31.2
            Certification
                Of Chief Financial Officer Pursuant To 15d-14.*32.1
            Certification
                Of Chief Executive Officer Pursuant To 18 U.S.C. §1350, As Adopted
                Pursuant To Section 906 Of The Sarbanes-Oxley Act Of
                2002.*32.2
            Certification
                Of Chief Financial Officer Pursuant To 18 U.S.C. §1350, As Adopted
                Pursuant To Section 906 Of The Sarbanes-Oxley Act Of
                2002.*


71





*  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 Annual Report on Form 10-KSB, filed with the
                Securities and Exchange Commission on March 28,
                2003.





12
            Incorporated
                by reference from our Quarterly Report on Form 10-QSB/A filed with
                the
                Securities and Exchange Commission on February 20,
                2003.





13
            Incorporated
                by reference from our Amended Annual Report on Form 10-KSB/A, filed
                with
                the Securities and Exchange Commission on April 18,
                2003.





14
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on February 6,
                2004.





15
            Incorporated
                by reference from our Annual Report on Form 10-KSB, filed with the
                Securities and Exchange Commission on April 14,
                2004.





16
            Incorporated
                by reference from our Form S-8 filed with the SEC on September 30,
                2003.





17
            Incorporated
                by reference from our Form SB-2/A filed with the SEC on November
                5,
                2004.





18
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on May 24,
                2005.





19
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on June 10,
                2005.





20
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on December 2,
                2005.





72
 *Table
          of Contents*


21
            Incorporated
                by reference from our Current Report on Form 8-K/A, filed with the
                Securities and Exchange Commission on December 19,
                2005.





22
            Incorporated
                by reference from our Quarterly Report on 10-QSB/A, filed with the
                Securities and Exchange Commission on January 20,
                2006.





23
            Incorporated
                by reference from our Registration Statement on Form SB-2, filed
                with the
                Securities and Exchange Commission on December 30,
                2005.





24
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on April 14,
                2006.





25
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on April 20,
                2006.





26
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on May 3,
                2006.





27
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on May 18,
                2006.





28
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on June 22,
                2006.





29
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on July 11,
                2006.





30
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on November 30,
                2006.





31
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on January 11,
                2007.





32
            Incorporated
                by reference from our Current Report on Form 8-K, filed with the
                Securities and Exchange Commission on April 5,
                2007.





**ITEM
                14.**
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**





Thefollowing
      list details billed professional services by the
      Company’s Independent Registered Certified Public Accounting firm during 2006
      and 2005





2006
            2005Audit
                Fees (1)
            $
                82,162
            $
                64,963Audit
                Related Fees
            -
            -Tax
                Fees
            -
            -All
                other fees
            -
            -$
                82,162
            $
                64,963





(1)
            Audit
                fees consist of fees for the audit of the Company’s financial statements
                and review of the financial statements included in the Company’s quarterly
                reports.





The
      appointment of Tedder, James, Worden & Associates, P.A. was approved by the
      Board of Directors as the principal auditors for the Company. The members of
      the
      Company’s Board of Directors, currently serve as the audit committee until the
      Company is able to recruit independent directors with the appropriate financial
      experience and/or background to serve on such committee and who are truly
      independent from internal and external influences, as well as independent under
      NASDAQ or AMEX rules. When independent directors with the appropriate financial
      background join the Board of Directors, the Board of Directors plans to
      establish a formal audit committee, which will then adopt an appropriate charter
      and pre-approval policies and procedures in connection with services to be
      rendered by the independent auditors.


73
 *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
                CORPORATIONDate:  April
                16, 2007By:
                /s/ Nicholas H. VandenBrekel__________________________________Nicholas
                H. VandenBrekel, Chairman, President andChief
                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
                16, 2007By:
                /s/ Nicholas H. VandenBrekel____________________________________Nicholas
                H. VandenBrekel, Chairman, President,Chief
                Executive Officer and DirectorBy:
                /s/ Mark L. Mroczkowski_____________________________________Mark
                L. Mroczkowski, Chief Financial Officer(Principal
                Financial Officer), Corporate Secretary,Executive
                Vice President, Treasurer and Director
              
              By:
                /s/ Douglas R. Dillman
              ______________________________________
              Douglas
                R. Dillman, Controller
              
              SUPPLEMENTAL
                INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
                15(d)
                OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS.
              
              No
                annual report to security holders covering the registrant's last
                fiscal
                year has been delivered to security holders.
              
              No
                proxy statement, form of proxy or other proxy soliciting material
                has been
                delivered to more than ten of the registrant's security holders with
                respect to any annual or other meeting of security holders during
                the
                registrant's last fiscal year.
              
              Proxy
                soliciting material will be furnished to security holders subsequent
                to
                the filing of this report and such materials shall be furnished to
                the
                Commission when they are sent to security
                holders.


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          of Contents*