-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TTavkQ2bfyycLv29l2+uE13QiE+jAKPWD4X3PwoIlK0P20eOeIyeozI8wcY05FP3 6An8owELW9MO8Ho0nI5D3Q== 0001015402-03-001954.txt : 20030515 0001015402-03-001954.hdr.sgml : 20030515 20030515140404 ACCESSION NUMBER: 0001015402-03-001954 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEQUIAM CORP CENTRAL INDEX KEY: 0001123606 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330875030 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 333-45678 FILM NUMBER: 03703423 BUSINESS ADDRESS: STREET 1: 300 SUNPORT LANE CITY: ORLANDO STATE: FL ZIP: 32809 BUSINESS PHONE: 4075410774 MAIL ADDRESS: STREET 1: 300 SUNPORT LANE CITY: ORLANDO STATE: FL ZIP: 32809 FORMER COMPANY: FORMER CONFORMED NAME: WEDGE NET EXPERTS INC DATE OF NAME CHANGE: 20000912 10QSB 1 doc1.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to _______________. Commission File Number 333-45678 SEQUIAM CORPORATION (Exact name of registrant as specified in its charter) CALIFORNIA 33-0875030 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 300 SUNPORT LANE, ORLANDO, FLORIDA 32809 (Address, including zip code, of principal executive offices) 407-541-0773 (Registrant's telephone number, including area code) (Former name, former address) 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 the 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. Yes [X] No [ ] The number of shares of the Registrant's Common Stock outstanding as of April 23, 2003 was 36,267,747. DOCUMENTS INCORPORATED BY REFERENCE Transitional Small Business Disclosure Format (Check one): Yes [_] No [X] ================================================================================
FORM 10-QSB INDEX Page PART I: FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . 3 ITEM 1. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 4 Sequiam Corporation and Subsidiaries . . . . . . . . . . . . . . . . 4 Condensed Consolidated Balance Sheets. . . . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Operations. . . . . . . . . . . 5 Condensed Consolidated Statements of Stockholders' Deficit . . . . . 6 Condensed Consolidated Statements of Cash Flows. . . . . . . . . . . 7 Condensed Consolidated Statements of Cash Flows. . . . . . . . . . . 8 Notes to Condensed Consolidated Financial Statements . . . . . . . . 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . 16 ITEM 3. CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . . . 19 PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . 20 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) . . . . . . . . . . . . 22 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2 PART I: FINANCIAL INFORMATION ------------------------------ This Quarterly Report on Form 10-QSB includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These include, among others, the statements about our plans and strategies. When used in this document and the documents incorporated herein by reference, the words "believes," "expects," "anticipates," "intends," "plans," "estimates," or similar expressions are intended to identify, in certain circumstances, forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed in forward-looking statements. Although it is not possible to itemize all of the factors and specific events that could affect the outlook of a technology company like ours operating in a competitive environment, factors that could significantly impact expected results include: the acceptance of our technology; the effect of national and local economic conditions; our outstanding indebtedness; the loss of key employees; competition from technologies developed by other companies; the ability to attract and retain employees; delays in completing the development of our new products caused by a lack of capital or external causes beyond our reasonable control; and the ability to identify and consummate relationships with strategic partners. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure that such plans, intentions or expectations will be achieved. Actual results may differ materially from the forward-looking statements made in this Quarterly Report on Form 10-QSB. We do not intend to update any forward-looking statements, and we hereby disclaim any obligation to update such forward-looking statements. 3 ITEM 1. FINANCIAL STATEMENTS - -----------------------------
SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2003 (Unaudited) December 31, 2002 ---------------- ------------------- ASSETS Current assets: Cash $ - $ 85,922 Accounts receivable, net 32,068 41,141 Prepaid expenses 110,000 - Equipment held for sale 40,706 177,080 ---------------- ------------------- Total current assets 182,774 304,143 ---------------- ------------------- Property and equipment, net 1,307,461 1,375,398 Software development costs, net 136,145 131,939 Acquired software 273,600 288,000 Deposits and other assets 7,800 7,800 ---------------- ------------------- Total assets $ 1,907,780 $ 2,107,280 ================ =================== LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Bank overdraft $ 22,770 $ - Amount due for acquisition 92,866 288,457 Accounts payable 541,129 646,331 Accrued expenses 118,447 64,783 Loan from shareholders 795,450 795,450 Accrued shareholder salaries 944,792 854,792 ---------------- ------------------- Total current liabilities 2,515,454 2,649,813 ---------------- ------------------- Long-term debt 824,447 680,540 ---------------- ------------------- Total liabilities 3,339,901 3,330,353 ---------------- ------------------- Shareholders' deficit: Common shares 36,267 35,463 Additional Paid-in capital 1,595,875 935,677 Accumulated deficit (3,064,263) (2,194,213) ---------------- ------------------- Total shareholders' deficit (1,432,121) (1,223,073) ---------------- ------------------- Total liabilities and shareholders' deficit $ 1,907,780 $ 2,107,280 ================ =================== See accompanying notes to condensed consolidated financial statements.
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SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, -------------------------- 2003 2002 ------------ ------------ Net sales $ 123,194 $ - Costs and expenses: Software and web development costs 141,863 - Selling, general and administrative 631,685 80,926 Depreciation and amortization 82,840 4,851 ------------ ------------ 856,388 85,777 ------------ ------------ Loss from operations (733,194) (85,777) Loss on impairment of equipment held for sale (75,000) - Loss on sale of equipment (43,870) - Interest expense (17,986) (837) ------------ ------------ Net loss $ (870,050) $ (86,614) ============ ============ Net loss per common share: Basic and diluted $ (0.02) $ (0.00) ============ ============ Weighted average common shares outstanding: Basic and diluted 35,640,120 20,000,000 ============ ============ See accompanying notes to condensed consolidated financial statements.
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SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT Three months Ended March 31, 2003 (Unaudited) Common Shares -------------------- Additional Shares Par Paid-in Accumulated Outstanding Value Capital Deficit Total -------------------------------------------------------------- Balance at December 31, 2002 35,462,609 $35,463 $ 935,677 $ (2,194,213) $(1,223,073) Sale of common shares 276,667 276 189,726 190,002 Beneficial conversion feature on convertible debenture 150,000 150,000 Common shares issued for services 210,000 210 170,790 171,000 Common shares issued for acquisition of WMW Communications 318,471 318 149,682 150,000 Net Loss (870,050) (870,050) -------------------------------------------------------------- Balance at December 31, 2002 36,267,747 $36,267 $ 1,595,875 $ (3,064,263) $(1,432,121) ============================================================== See accompanying notes to condensed consolidated financial statements.
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SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months Ended March 31, 2003 2002 ----------- ----------- Cash flows from operating activities: Net loss $ (870,050) $ (86,614) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 82,840 4,851 Accretion of debt discount 6,250 - Increase in accrued expenses in exchange for services 90,000 - Issuance of common stock in exchange for services 171,000 - Increase in note payable for deferred rent 141,943 - Loss on sale of equipment 43,871 - Loss on impairment of equipment held for sale 75,000 - Decrease in accounts receivable 9,074 2,000 Increase in prepaid expenses and other assets (110,000) - Increase in bank overdraft 22,770 - Decrease in accounts payable (105,202) - Increase in accrued shareholders salaries 90,000 69,000 Decrease in other accrued expenses (36,336) - ----------- ----------- Net cash used for operating activities (388,840) $ (10,763) ----------- ----------- Cash flows from investing activities: Proceeds from sales of equipment 17,000 - Cash paid for WMW Communications (45,591) - Software development costs capitalized (4,206) (4,097) ----------- ----------- Net cash used for investing activities (32,797) (4,097) ----------- ----------- Cash flows from financing activities: Proceeds from Debenture 150,000 - Sale of common stock 190,002 - Repayment of note payable (4,287) (2,205) Proceeds from loan from related party - 17,065 ----------- ----------- Net cash provided by financing activities 335,715 14,860 ----------- ----------- Net change in cash (85,922) - Cash, beginning of period 85,922 - ----------- ----------- Cash, end of period $ - $ - =========== =========== See accompanying notes to condensed consolidated financial statements.
7
SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Non-cash activities: - ------------------- Common Stock issued for acquisition of WMW Communications $150,000 - Beneficial conversion feature on convertible debenture $150,000 - See accompanying notes to condensed consolidated financial statements.
8 SEQUIAM CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Description of Business Sequiam Corporation ("Sequiam" or the "Company") through its wholly owned subsidiaries, Sequiam Software, Inc. and Sequiam Communications, Inc., develops, markets, and supports a portfolio of Internet and print enterprise-wide software products that enable users to acquire, manage, personalize, and present information. In addition, the Company provides application service provider ("ASP") hosting of Internet-enabled solutions, Internet service provider ("ISP") including Internet access and hosting, consulting, application integration, and custom web development and software development services. ASP and ISP hosting is performed using the Company's software and facilities to provide processing, print, mail, archival, and Internet delivery of documents for customers who outsource this activity. On May 9, 2003, the Company acquired substantially all of the assets of Smart Biometrics, Inc. (see Note 9). Effective April 1, 2002, Sequiam Corporation (f/k/a Wedge Net Experts, Inc.), through its wholly owned subsidiary, Sequiam Acquisitions, Inc., merged with Sequiam, Inc. and Sequiam Acquisitions, Inc. survived the merger. Sequiam Acquisitions, Inc. changed its name to Sequiam Software, Inc. on May 1, 2002. Pursuant to the merger agreement, Sequiam Corporation issued 20,000,000 shares of common stock in exchange for all of the outstanding shares of common stock of the Company, consisting of 20,000,000 shares. Additionally, pursuant to the merger agreement, 500,000 shares of Sequiam Corporation's common stock were returned to treasury and cancelled. As a result, the former shareholders of the Company obtained 82.53% of the voting rights of Sequiam Corporation. The transaction was accounted for as a recapitalization of Sequiam Corporation and the results of operations and cash flows presented herein prior to the merger are those of Sequiam, Inc. Sequiam, Inc. was incorporated in Delaware on January 23, 2001 (date of inception) to research, develop, produce and market a document management software product. Since inception, the Company's primary activities have consisted of research and development, and software development activities. Accordingly, the Company had not generated any significant revenues. During 2002, the Company acquired the Brekel Group, Inc. and WMW Communications, Inc. doing business as Access Orlando, and began offering web development, Internet and web hosting and custom software development, while continuing its software development activities. During the three months ended March 31, 2003, the Company paid $45,591 in cash and $150,000 in common shares related to the acquisition of Access Orlando and the remaining amount due for this acquisition was $92,866 as of March 31,2003. Note 2 - Summary of Significant Accounting Policies Basis of Presentation ----------------------- The Company, under the rules and regulations of the Securities and Exchange Commission, has prepared the unaudited condensed consolidated financial 9 statements. The accompanying condensed consolidated financial statements contain all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of such financial statements. Certain information and disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted under such rules and regulations although the Company believes that the disclosures are adequate to make the information presented not misleading. The year-end balance sheet data was derived from the audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes for Sequiam Corporation included in Form 10-KSB filed for the year ended December 31, 2002. Interim results of operations for the periods presented may not necessarily be indicative of the results to be expected for the full year. Net Loss per Common Share ------------------------- Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Common stock warrants are included in the calculation of diluted earnings per common share using the treasury stock method, when the result is dilutive. Common shares underlying the convertible debenture are included in the calculation of diluted earnings per common share using the if-converted method when the result is dilutive. Potential common shares underlying outstanding warrants were 2,400,000 as of March 31, 2003. Potential common shares underlying the convertible debenture are contingent upon certain factors as described in Note 7. Principles of Consolidation ----------------------------- The consolidated financial statements include the accounts of Sequiam Corporation and its subsidiaries Sequiam Software, Inc. and Sequiam Communications, Inc (the "Company"). All intercompany transactions and accounts have been eliminated. Note 3 - Going Concern and Managements' Plan The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Sequiam has accumulated significant operating losses, a working capital deficit and produced minimal revenues since inception. During the first quarter of 2003 and April 2003, the Company obtained financing from La Jolla Cove Investors, Inc. (the "Investor") as well as additional financing from the sale of its common stock and a loan agreement (see Notes 7,8 and 9). In addition, the Company has begun to generate revenues on a consistent basis. With the proceeds expected to be received from the Investor, the Company will fund continuing product development and the marketing of the products developed by the Company. The company will also actively seek new acquisitions of proven products and technologies. Management plans to continue to seek additional 10 financing in the form of a private placement of common and preferred stock, debt or some combination thereof to supplement its financing arrangement with the Investor. With the proceeds from the financings described above along with the expected increase in revenues from the sale of the Company's existing products and services, the Company believes there will be sufficient working capital during the next 12 months to support operations during that period. The Company's ability to continue as a going concern remains dependent upon its ability to meet the requirements of its financing agreement with the Investor and execute its business plan. Note 4 - Commitments and Contingencies On October 1, 2002, the Companies Chief Executive Officer and Chief Financial Officer entered into amended and restated employment agreements with Sequiam Corporations 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, then these contracts will be deemed terminated and compensation of $5 million is payable at termination and $1 million annually for five years subsequent to termination will be due and payable to each employee. Included in accounts payable and accrued expenses at March 31, 2003 are un-reimbursed business expenses of $21,054 and $8,185 owed to Nicholas VandenBrekel and Mark Mroczkowski, respectively. The Company is involved in various claims and legal actions incidental to the normal conduct of its business. On or about October 3, 2002, General Electric Capital Corporation ("GE") filed a lawsuit against Brekel Group, Inc. ("Brekel"), in the Circuit Court of the 9th Judicial Circuit in and for Orange County, located in Orlando, Florida. GE claims that Brekel owes a deficiency balance in the amount of $93,833 for three digital copiers rented under a lease agreement. Brekel has returned possession of the copiers to GE, but Brekel disputes the claim for damages. The court has entered no decisions to date. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company based upon the value of the equipment returned to GE. Brekel entered into a note payable with Xerox Corporation in November 2000 to finance equipment. Brekel also entered into a Document Services Agreement ("Agreement") with Xerox Corporation on November 1, 1999 commencing April 1, 2000. During the 63-month term of the Agreement ending June 30, 2005, Xerox agreed to provide equipment and services in accordance with specified performance standards. Those standards include, among other things, a performance satisfaction guaranty by Xerox. Under the terms of that guaranty, Brekel may terminate the agreement without incurring any early termination charges. Brekel did in March 2001 give proper notice of such termination. On 11 September 3, 2002 Xerox did, contrary to the contract, assert its claim for early termination charges and for monthly minimum service charges on billings made after the termination date. The Company disputes these claims and believes them to be without merit. A competing web-development company has posted an alternative web site for the World Olympian Association ("WOA"), claiming such right was granted to it by the WOA. We are seeking to resolve this conflict with the WOA without resort to litigation. This dispute will not affect our publication of the print magazine "World Olympian," but it has the potential to result in the loss of revenue from the WOA web site. We do not believe the loss of such revenue will have a material, adverse effect on our overall business. Note 5 - Income taxes The Company records income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." The Company has incurred net operating losses since inception resulting in a deferred tax asset, for which a valuation allowance was provided since it is more likely than not that the deferred tax asset will not be realized. Note 6 - Long-lived Assets Held for Disposal The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an investment may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. In connection with the acquisition of Brekel in July 2002, the Company reclassified production equipment acquired from Brekel that is no longer being used for operations to equipment held for disposal. During the three months ended March 31, 2003, the Company recorded an impairment loss of $75,000 to reduce the equipment to fair market value. The Company believes that $40,706 as of March 31, 2003 is a reasonable estimate of the current fair market value for the remaining equipment to be disposed. The Company expects to sell this remaining equipment by June 30, 2003. Note 7 - Convertible Debenture Sequiam entered into a Securities Purchase Agreement with La Jolla Cove Investors, Inc. (the "Investor"), dated March 5, 2003, pursuant to which it delivered to Investor an 8% Convertible Debenture in the amount of $300,000, convertible into our common stock, and a Warrant to Purchase Common Stock. Upon closing on March 7, 2003, Sequiam received $150,000 less attorneys fees of $2,500, of the total $300,000 principal amount of the 8% Convertible Debenture. 12 When the Securities and Exchange Commission declares this registration statement filed on April 25, 2003 effective, the Company will receive the balance of $150,000. On April 16, 2003, the terms of the debenture and warrant agreement were amended, as set forth in a letter agreement with the Investor. Under the terms of the amended debenture, provided the "Market Rate" (as defined and determined in accordance with the debenture) is greater than $0.625, the number of common shares into which the debenture may be converted is equal to the dollar amount of the debenture being converted multiplied by eleven, minus the product of the "Conversion Price" multiplied by six and two-thirds times the dollar amount of the debenture being converted, and the entire foregoing result shall be divided by the Conversion Price. The "Conversion Price" is defined as the lesser of $1.50 per share or 80% of "Market Value" (as defined and determined in accordance with the debenture)(the "Discount Multiplier"), but if the Market Rate is equal to or below $0.625 on the day La Jolla Cove Investors, Inc. elects to convert a portion of the 8% Convertible Debenture, then the Company will have the right to prepay that portion of the Debenture in which La Jolla Cove Investors had elected to convert, at a rate of 150% of such amount, provided La Jolla Cove Investors, Inc. may, in lieu of accepting such prepayment, elect to withdraw its notice of conversion. If the Market Rate is less than $0.625 and the Company does not prepay the debenture, then the debenture may only be converted into the number of shares equal to the dollar amount of the debenture being converted divided by the Conversion Price. The Investor may convert a maximum of 10% of the principal into our common stock during any month. Under the terms of the amended warrant, the Investor received a warrant to purchase 2,000,000 shares of our common stock, at an exercise price of $1.50 per share. The warrant will expire in March 2006. As of the date of filing this report, the Investor had not exercised any portion of the warrant or converted any portion of the debenture, and no shares of common stock have been issued relative to these agreements. Sequiam is obligated to register the sale of the underlying common stock to be issued upon conversion of the debenture and the exercise of the warrant. Upon the effective date of the registration statement, we will receive the balance of the principal amount of the debenture. Beginning the first full month following the effectiveness of such registration statement, we have the right to cause the Investor to convert at least 5% of the debenture each month and provided that the market price of the Company's common shares is above $0.625, to exercise a portion of the warrant equal to the product of the dollar amount of the debenture being converted multiplied by ten, divided by 1.5 (which will result in the exercise of at least 5% of the related warrant, per month). In the event the Investor breaches the provision to convert at least 5% of the original principal amount of the debenture and exercise the related warrant, the Investor shall not be entitled to collect interest on the debenture for that month. At the time the debenture has been fully converted and the warrant has been fully exercised, the Company will issue additional warrants to the Investor in an amount equal to 6,600,000 minus the number of shares issued to the Investor pursuant to the conversion of the debenture and exercise of the warrants. The additional warrants will have an exercise price of $1.50 per share and will expire three years from the date of issuance. 13 The 8% Convertible Debenture contains a beneficial conversion feature since the calculated conversion amount is lower than the Company's stock price at the date of the agreement. In accordance with EITF 00-27, since the fair value of the beneficial conversion feature exceeded the amount of the proceeds received from the debenture, the Company recorded the beneficial conversion feature as a debt discount of $150,000, which is equal to the proceeds received. The debt discount is being amortized over the life of the debenture of 24 months. As of March 31, 2003, the balance of the debenture, net of the unamortized debt discount of $143,750 was $6,250 and is included in long-term debt. The number of shares to be issued to the selling security holder upon conversion of the 8% Convertible Debenture depends upon the trading price of our common stock, but cannot, exceed 4,600,000 shares of common stock. Upon conversion of all of the 8% Convertible Debenture and exercise of all of the related Warrant to Purchase Common Stock, we will have issued a maximum of 6,600,000 shares of common stock to the selling security holder. If the selling security holder receives less than 6,600,000 shares of common stock after conversion of the entire amount of the 8% Convertible Debenture and exercise of the entire amount of the Warrant to Purchase Common Stock, then we have agreed, pursuant to the letter agreement dated April 16, 2003, to issue to the selling security holder the difference between 6,600,000 shares and the number of shares received upon conversion of the debenture and exercise of the warrant, at a purchase price of $1.50 per share (regardless of market rate). This right will expire three years after the conversion of the 8% Convertible Debenture. In some circumstances, we may repay some or all the 8% Convertible Debenture, in which event less than 6,600,000 shares will be issued to the selling security holder. Beginning thirty (30) days after this registration statement is declared effective by the Securities and Exchange Commission, the selling security holder has agreed to convert at least 5% but no more than 10% of the 8% Convertible Debenture and exercise at least 5% but no more than 10% of the related Warrant to Purchase Common Stock, per month. However, the selling stockholder has contractually agreed to restrict its ability to convert or exercise its warrants and receive shares of our common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. Sequiam has agreed not to pay any accrued salaries or shareholder loans that are presently outstanding until after the 8% Convertible Debenture is paid in full or converted, except to the extent that any such accrued salaries or shareholder loans are used to perform obligations under a Put and Call Agreement between Nick VandenBrekel, Mark Mroczkowski and the Investor, or unless the Company can pay the accrued salaries out of the proceeds of any additional financing we might obtain. Note 8 - Capital Stock During the three months ended March 31, 2003, the Company issued 210,000 common shares for business advisory services and technology transfer services valued at $171,000 based on the Company's quoted market price on the date of the related 14 agreements. In addition, the Company agreed to issue 90,000 shares for investor and public relations services valued at $90,000 which was included in accrued expenses. The 90,000 shares were issued in April 2003. On January 2, 2003, Sequiam Corporation sold an aggregate of 10,000 shares of its common stock to two accredited investors at a price of $1.00 per share for proceeds of $10,000. On February 6, 2003, Sequiam Corporation sold an aggregate of 266,667 shares of its common stock to one accredited investor at a price of $0.75 per share for proceeds of $200,002, less a commission of $20,000 for net proceeds of $180,002. Sequiam Corporation also granted warrants to this accredited investor to purchase 400,000 shares of its common stock at $1.50 exercisable through February 6, 2007. Note 9 - Subsequent Events On April 22, 2003 Sequiam Corporation sold an aggregate of 200,000 shares of its common stock to one accredited investor at a price of $0.50 per share for proceeds of $100,000 less a commission of $10,000 for net proceeds of $90,000. Sequiam Corporation also granted warrants to this accredited investor to purchase 500,000 shares of its common stock at $1.00 per share, exercisable through April 22, 2007. In connection with such sales, Sequiam Corporation relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. This investor represented in writing that the shares were being acquired for investment and, in addition, the certificates representing the shares bear a restrictive securities legend. On May 9, 2003, Sequiam Biometrics, Inc., a wholly owned subsidiary of Sequiam Corporation formed on April 21, 2003, acquired substantially all of the assets of Smart Biometrics, Inc. of Sanford, Florida. In consideration for the assets, Sequiam Corporation issued a total of 1,500,000 shares of its common stock to Smart Biometrics, Inc. Smart Biometrics, Inc. is engaged in the development of biometric technologies. The assets acquired by Sequiam Biometrics, Inc. include the BioVault(TM), which is a secure safe that utilizes patent pending technology and protocols to recognize a person's fingerprint to unlock. On May 13, 2003, Sequiam Corporation entered into a loan agreement ("Note") with Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a principal loan amount of $400,000 under a promissory note bearing interest at five percent (5%) interest. On April 22, 2003, Sequiam Corporation received $75,000, and on May 13, 2003, Sequiam Corporation received another $75,000 as advances under the Note. The remaining loan proceeds will be disbursed $100,000 on June 12, 2003 and $50,000 on July 12, 2003. In connection with this note, Sequiam Corporation issued two warrants to the holder to purchase 625,000 shares of its common stock at an exercise price of $0.01 per share and 350,000 shares of its common stock at $1.00 per share. These warrants expire in May 2008. The outstanding principal balance, together with any and all accrued unpaid interest and any other amounts due and owing under this Note, shall be due and payable on the date that is the earlier of (a) the date that the exercise price is paid to Sequiam Corporation for any portion of the warrants by La Jolla Cove Investors, Inc. (see Note 7), or (b) the date the La Jolla Warrant 15 expires in March 2006. The principal payments to the holder will be made in a percentage of the obligation that is equal to the percentage of the total warrants exercised by La Jolla, such that the Note is fully repaid as the Warrants are exercised by La Jolla. Unless otherwise specifically provided for in the Note, all Note payments shall be applied first to interest and then to principal. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS - -------------- Recent Developments - -------------------- On May 12, 2003, Sequiam Biometrics, Inc., a wholly owned subsidiary of Sequiam Corporation formed on April 21, 2003, acquired substantially all of the assets of Smart Biometrics, Inc. of Sanford, Florida. In consideration for the assets, Sequiam Corporation issued a total of 1,500,000 shares of its common stock to Smart Biometrics, Inc. Smart Biometrics, Inc. is engaged in the development of biometric technologies. The assets acquired by Sequiam Biometrics, Inc. include the BioVault(TM), which is a secure safe that utilizes patent pending technology and protocols to recognize a person's fingerprint to unlock. In addition, we closed several private equity transactions that are more fully described below in Part II, Item 2. Quarter Ended March 31, 2003 compared to Quarter Ended March 31, 2002. - -------------------------------------------------------------------------------- REVENUES We derived our revenues from four sources: (i) the sale and licensing of our software products; (ii) consulting, custom software services and web development services; (iii) maintenance agreements in connection with the sale and licensing of software products; and (iv) Internet access and web hosting services. During 2003, we intend to also derive revenue from our print publication. Software license revenue will be recognized when all of the following criteria have been met: (a) there is an executed license agreement, and software has been delivered to the customer, (b) the license fee is fixed and payable within twelve months, (c) collection is deemed probable, and (d) product returns are deemed reasonably estimable. Revenues related to multiple element arrangements will be allocated to each element of the arrangement based on the fair values of elements such as license fees, maintenance and professional services. Fair value will be determined based on vendor specific objective evidence. Maintenance revenues are recognized ratably over the term of the maintenance contract, typically 12 to 36 months. Consulting, custom software and web development and other service revenues are recognized when services are performed. Internet access and web-hosting services are recognized over the period the services are provided, typically month-to-month. Total revenue increased to $123,194 for the quarter ended March 31, 2003 from $-0- for the quarter ended March 31, 2001. Software and license fee revenues were unchanged at $-0- for both 2002 and 2003. During first quarter 2002 and 2003, Sequiam Document Management System was still 16 under development, and we did not acquire Access Orlando and its IRP and IRPlicator software products until November 2002. We expect to begin generating revenues from the sale of our DMS and IRP software products in the second quarter of 2003. Other sales for 2003 included consulting, custom software services and web development services totaling $71,158; and Internet access and web-hosting services totaling $52,036. All of the foregoing were 100% increases over 2002 first quarter revenues of $-0-. OPERATING EXPENSES Operating expenses increased by $770,611, from $85,777 for the quarter ended March 31, 2002 to $856,388 for the quarter ended March 31, 2003. This increase is explained below. Selling, general and administrative expenses increased $550,759 (681%) from $80,926 in first quarter 2002 to $631,685 in first quarter 2003. We increased our selling and overhead expenditures such as salaries, wages and benefits for administrative and marketing personnel, office rent, computer maintenance and supplies, professional services such as investor relations, legal and accounting fees, and corporate travel expenses as a result of expanding our operations, our merger with Sequiam Corporation and our acquisitions of Brekel Group and Access Orlando. We also increased expenditures for marketing including advertising, production of marketing materials, and participation in trade show activities as we completed the development of our software products and introduced web development, web hosting and Internet access services. Software and web development costs increased from $-0- in first quarter 2002 to $141,863 in first quarter 2003, due to the establishment and expansion of the development staff beginning in the second quarter 2002. This expansion of staff was needed to expand our products and services and to keep pace with new industry developments and the continued need to improve features and functionality of the Sequiam software products. Depreciation expense increased by $77,989, from $4,851 in first quarter 2002 to $82,840 in first quarter 2003, as a result of depreciation on assets acquired from Brekel in July 2002. LOSS ON IMPAIRMENT OF EQUIPMENT HELD FOR SALE AND SALES OF EQUIPMENT A loss on impairment of equipment held for sale of $75,000 was recognized in the first quarter of 2003 based upon the estimated net realizable value of the equipment acquired from Brekel. A loss of $43,870 was recognized in the first quarter of 2003 on the actual sale of certain equipment acquired from Brekel. INTEREST EXPENSE Interest expense increased by $17,148, from $837 in first quarter 2002 to $17,986 in first quarter 2003, as a result of an increase in loans from shareholders and a note payable related to leasehold improvements acquired from Brekel Group in July 2002 and accretion of the discount on the convertible debenture of $6,250. 17 NET LOSSES Sequiam Corporation incurred net losses of $870,050 and $86,614 for the quarters ended March 31, 2003 and 2002, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents decreased to $-0- as of March 31, 2003 from $85,922 as of March 31, 2002. Net cash used in operating activities was $388,840 for the quarter ended March 31, 2003, as a result of the net loss during the period of $870,050 and decreases in accounts payable and accrued expenses totaling $141,538, which was partially offset by increases in accrued shareholder salaries of $90,000 and non-cash expenses and losses totaling $610,904. Net cash used for investing activities was $32,797 for the quarter ended March 31, 2003, primarily due to proceeds from the sale of equipment of $17,000 offset by cash paid for the acquisition of Access Orlando of $45,591 and software development costs of $4,206 for the Sequiam DMS product. Net cash provided by financing activities was $335,715 for the quarter ended March 31, 2003. Proceeds from the La Jolla Cove Debenture accounted for $150,000 and sales of common stock accounted for $210,002 and was offset by commissions of $20,000. During the quarter ended March 31, 2003, we repaid $4,287 of an existing note payable for tenant improvements described below. On July 1, 2001, the Brekel Group, Inc., prior to its acquisition by Sequiam, entered into a lease agreement to rent approximately 60,000 square feet of combined office and manufacturing space through June 30, 2011. Effective July 1, 2002, Sequiam entered into a lease forbearance agreement for 10,000 square feet of the same space for the remaining term of the lease. Pursuant to the lease agreement, we make monthly base rent payments including common area maintenance charges of $9,633, with annual increases of approximately 3% per year beginning in July 2004. As part of the lease forbearance agreement, we executed a note payable to the landlord to reimburse them for lost rents on the 50,000 square feet relinquished to them through June 30, 2004; less rents and principal payments received from us; less 75% of any rents received from replacement tenants; plus any leasing commissions or tenant build out costs required for replacement tenants. The note also includes amounts previously owed by Brekel to the landlord for tenant improvements. The outstanding balance on the note of $818,197 as of March 31, 2003 represents $424,504 of deferred rent and $393,693 of tenant improvements. Payments on the note commence July 1, 2004 through June 1, 2010 with interest at 6%. Rental expense for the quarter ended March 31, 2003 was $172,577(of which $141,943 was deferred rent) and $11,927 for the three months ended March 31, 2002. The minimum future rentals required under the lease and the maturities of the long-term note payable are as follows: 18 Debt Year Rentals Maturities - ---------- -------- ----------- 2003 $ 86,700 $ 0 2004 117,334 61,313 2005 120,854 119,754 2006 124,480 127,140 2007 128,214 134,982 Thereafter 339,169 375,008 -------- ----------- $916,751 $ 818,197 ======== =========== Since the end of our last fiscal year ending December 31, 2002, we sold securities in four separate private placements, as more fully described in Part II, Item 2, below. As a result, we have received to date total net proceeds of $600,002. We received $190,002 (approximately one-third) of these proceeds during the quarter ending March 31, 2003, and most of this amount is reflected as additional paid-in capital in our financial statements for the period ending March 31, 2003. We will need additional capital to continue operations during the next twelve months. Our management is undertaking several initiatives to address our liquidity, including the following: (1) continued efforts to increase our revenues from software licenses and other revenue sources; (2) proceeds expected to be received from the convertible debentures and exercise of warrants as described above; (3) proceeds expected to be received from the promissory note and exercise of warrants as described above; (4) continued efforts to obtain additional debt and/or equity financing. Our management believes that these activities will generate sufficient cash flows to sustain our operations during the next twelve months. 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. 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 has determined that the allowance for doubtful accounts is adequate at March 31, 2003. ITEM 3. CONTROLS AND PROCEDURES - ----------------------------------- The Company maintains disclosure controls and procedures 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 within 90 days of the filing of this Quarterly Report on Form 10-QSB, the Company's Chief Executive Officer and Chief Financial Officer 19 believe that the Company's disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these internal controls subsequent to the date of the most recent evaluation. PART II. OTHER INFORMATION - ----------------------------- ITEM 2. CHANGES IN SECURITIES (c) Recent Sales of Unregistered Securities Common Stock. On January 2, 2003, we sold an aggregate of 10,000 shares of our - ------------- common stock to two accredited investors at a price of $1.00 per share for proceeds of $10,000. In connection with such sales, we relied upon an exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 504. On February 6, 2003, we sold an aggregate of 266,667 shares of our common stock to one accredited investor at a price of $0.75 per share for proceeds of $200,002. We also granted warrants to this accredited investor to acquire 400,000 shares of our common stock at $1.50 per share, exercisable through February 6, 2007. In connection with such sales, we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This accredited investor represented in writing that the shares were being acquired for investment and, in addition, the certificates representing the shares bear a restrictive securities legend. Common Stock and Warrants. On April 22, 2003, we sold an aggregate of 200,000 - --------------------------- shares of our common stock to one accredited investor at a price of $0.50 per share for proceeds of $100,000, less a commission of $10,000, for net proceeds of $90,000. We also granted warrants to this accredited investor to purchase 500,000 shares of our common stock at $1.00 per share, exercisable through April 22, 2007. In connection with such sales, we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This investor represented in writing that the shares were being acquired for investment and, in addition, the certificates representing the shares bear a restrictive securities legend. Convertible Debenture and Warrants. We entered into a Securities Purchase - ------------------------------------- Agreement with La Jolla Cove Investors, Inc. (the "Investor"), dated March 5, 2003, pursuant to which we delivered to the Investor an 8% Convertible Debenture in the amount of $300,000, convertible into our common stock, and a Warrant to Purchase Common Stock that permits the Investor to purchase up to 2,000,000 shares of common stock at a purchase price of $1.50 per share. In connection with such sales, we relied upon an exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. 20 We are obligated to register the Investor's sale of the underlying common stock to be issued upon conversion of the 8% Convertible Debenture and the exercise of the Warrant to Purchase Common Stock. Upon closing on March 5, 2003, we received $150,000 of the total $300,000 principal amount of the 8% Convertible Debenture. When the Securities and Exchange Commission declares our amended registration statement filed on May 7, 2003 effective, we will receive the balance of $150,000. The number of shares to be issued to the selling Investor upon conversion of the 8% Convertible Debenture depends upon the trading price of our common stock, but cannot exceed 4,600,000 shares of our common stock. Upon conversion of all of the 8% Convertible Debenture and exercise of all of the related Warrant to Purchase Common Stock, we will have issued a maximum of 6,600,000 shares of our common stock to the Investor. If the Investor receives less than 6,600,000 shares of our common stock after conversion of the entire amount of the 8% Convertible Debenture and exercise of the entire amount of the Warrant to Purchase Common Stock, then we have agreed, pursuant to the letter agreement dated April 16, 2003, to issue to the Investor the difference between 6,600,000 shares and the number of shares received upon conversion of the debenture and exercise of the warrant, at a purchase price of $1.50 per share (regardless of market rate). This right will expire three years after the conversion of the 8% Convertible Debenture. In some circumstances, we may repay some or all the 8% Convertible Debenture, in which event less than 6,600,000 shares will be issued to the Investor. Beginning thirty (30) days after our amended registration statement filed on May 7, 2003 is declared effective by the Securities and Exchange Commission, the Investor has agreed to convert at least 5% but no more than 10% of the 8% Convertible Debenture and exercise at least 5% but no more than 10% of the related Warrant to Purchase Common Stock, per month. However, the Investor has contractually agreed to restrict its ability to convert or exercise its warrants and receive shares of our common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The conversion price of the 8% Convertible Debenture and the exercise price of the Warrant to Purchase Common Stock may be adjusted in certain circumstances, such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution of the selling security holder's position prior to conversion. As of the date of filing this report, the Investor had not converted any portion of the 8% Convertible Debenture or exercised any portion of the Warrant to Purchase Common Stock, and no shares of our common stock have been issued to the Investor. We have agreed not to pay any accrued salaries or shareholder loans that are presently outstanding until after the 8% Convertible Debenture is paid in full or converted, except to the extent that any such accrued salaries or shareholder loans are used to perform obligations under a Put and Call Agreement between Nick VandenBrekel, Mark Mroczkowski and the Investor, or unless we can pay the accrued salaries out of the proceeds of any additional financing we might obtain. 21 Debenture and Warrants. On May 13, 2003, we entered into a loan agreement with - ----------------------- Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen for $400,000, pursuant to the terms of a certain Promissory Note bearing interest at five percent (5%) interest. On April 22, 2003 we received $75,000 and on May 13, 2003 we received another $75,000 as advances under the Note. The remaining loan proceeds will be disbursed $100,000 on June 12, 2003 and $50,000 on July 12, 2003. In connection with this note, we issued two warrants to the holder to purchase 625,000 shares of our common stock at an exercise price of $0.01 per share and 350,000 shares of our common stock at $1.00 per share. These warrants expire in May 2008. In connection with such sales, we relied upon an exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. The outstanding principal balance, together with any and all accrued unpaid interest and any other amounts due and owing under this loan agreement, shall be due and payable on the date that is the earlier of (a) the date that the exercise price is paid to us for any portion of the warrants issued to La Jolla Cove Investors, Inc. (see "Convertible Debenture and Warrants" above), or (b) the date such warrant expires in March 2006. The principal payments to the holder will be made in a percentage of the obligation that is equal to the percentage of the total warrants exercised by La Jolla, such that the loan agreement is fully repaid as such warrants are exercised by La Jolla. Unless otherwise specifically provided for in the loan agreement, all payments shall be applied first to interest and then to principal. We may at any time prepay principal and interest to the holder without penalty. We may not use the loan proceeds to pay accrued officers' salaries or shareholder loans. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Effective as of January 8, 2003, our stockholders approved an amendment to our Articles of Incorporation to increase the authorized number of common shares from 50 million to 100 million and the authorized number of preferred shares from 10 million to 50 million. Action was taken by written consent of the stockholders without a meeting in accordance with our Bylaws. Stockholders holding collectively 23,282,000 shares of common stock took such action by written consent without a meeting, which represented more than 50% of the total number of possible votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) - --------------------------------------------- (a) Exhibits: 4.1 Securities Purchase Agreement dated March 5, 2003, between Sequiam Corporation and La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit 4.1 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 4.2 8% Convertible Debenture, dated March 5, 2003, issued to La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit 4.2 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 22 4.3 Warrant to Purchase Common Stock, dated March 5, 2003, issued to La Jolla Cove is hereby incorporated by this reference to Exhibit 4.3 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003.Investors, Inc. 4.4 Side Letter Agreement, dated March 5, 2003, between Sequiam Corporation and La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit 4.4 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 4.5 Registration Rights Agreement dated March 5, 2003, between Sequiam Corporation and La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit 4.5 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 4.6 Letter Agreement, dated April 16, 2003, by and between La Jolla Cove Investors, Inc. and Sequiam Corporation is hereby incorporated by this reference to Exhibit 4.1 to our Form 8-K filed with the Securities and Exchange Commission on April 17, 2003. 21.1 Subsidiaries 99.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. 99.2 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 15d-14. (b) Reports on Form 8-K: The following reports on Form 8-K were filed during the quarter ending March 31,2003: Form 8-K filed on January 8, 2003, regarding increase in authorized common and preferred shares. Form 8-K/A filed on February 20, 2003, regarding amended financial statements for the acquisition of the Brekel Group, Inc. Form 8-K/A filed on February 20, 2003, regarding amended financial statements for the acquisition of the Brekel Group, Inc. Form 8-K filed on March 13, 2003, regarding a private equity financing with La Jolla Cove Investors, Inc. 10.1 Put and Call Agreement by and between La Jolla Cove Investors, Inc., Nicholas VandenBrekel and Mark Mroczkowski, dated April 16, 2003, is hereby incorporated by reference to Exhibit 10.1 our Form 10-KSB/A, Amendment No. 1, filed with the Securities and Exchange Commission on April 21, 2003. (b) Reports on Form 8-K 23 - Form 8-K filed with the Securities and Exchange Commission on February 10, 2003, to report an increase in the number of authorized shares of common and preferred stock. - Form 8-K/A, Amendment No. 2, filed with the Securities and Exchange Commission on February 20, 2003, including amended Financial Statements of Sequiam Software, Inc. - Form 8-K filed with the Securities and Exchange Commission on March 13, 2003, to report under Item 5 the equity transaction with La Jolla Cove Investors, Inc. - Form 8-K filed with the Securities and Exchange Commission on April 17, 2003, to report under Item 5 an amendment to the equity transaction with La Jolla Cove Investors, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SEQUIAM CORPORATION Date: May 15, 2003 By: /s/ Nicholas H. VandenBrekel - -------------------------------------------------- Nicholas H. VandenBrekel, Chief Executive Officer By: /s/ Mark Mroczkowski - -------------------------------------------- Mark L. Mroczkowski, Chief Financial Officer 24 EX-21.1 3 doc2.txt Exhibit 21.1 Subsidiaries ------------ Sequiam Software, Inc., a California corporation, doing business as Sequiam and Sequiam, Inc. Sequiam Communications, Inc. (formerly Brekel Group, Inc.), a Delaware corporation, doing business as Sequiam Sports and Olympic Publications. Sequiam Biometrics, Inc., a Florida corporation. 25 EX-99.1 4 doc3.txt Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. Sec.1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Sequiam Corporation (the "Company") on Form 10-QSB for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Nicolaas H. Van den Brekel, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Nicholas H. VandenBrekel ----------------------------------- Nicholas H. Van den Brekel Chairman, President and Chief Executive Officer May 15, 2003 In connection with the Quarterly Report of Sequiam Corporation (the "Company") on Form 10-QSB for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark L. Mroczkowski, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Mark L. Mroczkowski -------------------------- Mark L. Mroczkowski Senior Vice President and Chief Financial Officer May 15, 2003 26 EX-99.2 5 doc4.txt Exhibit 99.2 Certifications Pursuant to 15D-14 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 15D-14 ------------------------ I, Nicolaas H. Van den Brekel, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Sequiam Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 27 b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ Nicholas H. VandenBrekel - ----------------------------- Nicholas H. VandenBrekel Chief Executive Officer 28 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 15D-14 ------------------------ I, Mark L. Mroczkowski, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Sequiam Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 29 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ Mark L. Mroczkowski - -------------------------- Mark L. Mroczkowski Chief Financial Officer 30 -----END PRIVACY-ENHANCED MESSAGE-----