Sequiam Corp 10QSB 3-31-2005

10QSB 1 body.htm SEQUIAM CORP 10QSB 3-31-2005 Sequiam Corp 10QSB 3-31-2005

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, 2005

o 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

(State or other jurisdiction of incorporation or organization)

33-0875030

(I.R.S. Employer 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 o

The number of shares of the Registrant’s Common Stock outstanding as of May 3, 2005 was 52,457,306.

DOCUMENTS INCORPORATED BY REFERENCE

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

FORM 10-QSB

INDEX


	Page

PART I: FINANCIAL INFORMATION	3

ITEM 1. FINANCIAL STATEMENTS	3

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)	3

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)	4

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)	5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)	6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS	19

ITEM 3. CONTROLS AND PROCEDURES	26

PART II. OTHER INFORMATION	27

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	27

ITEM 6. EXHIBITS	27

SIGNATURES	28

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Sequiam Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31, 2005 (Unaudited)			December 31, 2004
Assets
Current assets:
Cash	$	21,341		$	-
Accounts receivable, net		40,017			39,111
Prepaid expenses		-			97,125
Total current assets		61,358			136,236
Property and equipment, net		1,248,300			1,303,757
Acquired software, net		148,801			163,200
Intellectual properties, net		598,011			644,896
Product development costs		102,221			34,509
Loan costs, net		184,641			224,252
Deposits and other assets		8,805			8,805
Total assets	$	2,352,137		$	2,515,655

Liabilities and shareholders’ deficit
Current liabilities:
Overdraft		-		$	24,165
Notes payable		1,807,381			1,692,077
Accounts payable		752,185			706,966
Accrued expenses		155,798			96,299
Current portion of long-term debt		1,071,049			840,245
Deferred revenue		-			6,000
Deferred rents		31,525			26,141
Loans from shareholders		644,450			348,951
Accrued shaeholder salaries		1,439,792			1,349,792
Total current liabilities		5,902,180			5,090,636
Long-term debt		2,088,982			2,301,793
Total liabilities		7,991,162			7,392,429
Shareholders’ deficit:
Common shares		51,086			47,966
Additional paid-in capital		8,019,524			7,524,118
Accumulated deficit		(13,709,635	)		(12,448,858	)
Total shareholders’ deficit		(5,639,025	)		(4,876,774	)
Total liabilities and shareholders’ deficit	$	2,352,137		$	2,515,655

See accompanying notes to condensed consolidated financial statements.

Sequiam Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three months ended March 31,
	2005			2004

Revenues
Services	$	123,843		$	70,183
Product sales		5,012			4,881

Total Revenues		128,855			75,064

Costs and expenses:
Cost of services		225,718			277,276
Cost of product sales		6,304			3,571
Selling, general and administrative		926,448			599,420
Gain on sale of equipment		(370	)		-
Gain on debt settlement		-			(5,492	)
Total costs and expenses		1,158,100			885,759

Loss from operations		(1,029,244	)		(810,695	)

Interest expense, net		(231,533	)		(288,040	)

Net loss	$	(1,260,777	)	$	(1,098,735	)

Net loss per common share:
Basic and diluted	$	(0.03	)	$	(0.02	)

Shares used in computation of net loss per common share - Basic and diluted weighted average shares outstanding		49,116,164			44,917,334

See accompanying notes to condensed consolidated financial statements

Sequiam Corporation and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

Three months ended March 31, 2005

(Unaudited)

	Common Shares
	Shares Outstanding		Par Value		Additional Paid-in Capital		Accumulated Deficit			Total

Balance at December 31, 2004		47,965,604	$	47,966	$	7,524,118	$	(12,448,858	)	$	(4,876,774	)
Common shares issued for services		2,387,500		2,388		349,275		-			351,663
Common shares issued for salaries		732,670		733		146,131		-			146,864
Net loss		-		-		-		(1,260,777	)		(1,260,777	)
Balance at March 31, 2005		51,085,774	$	51,086	$	8,019,524	$	(13,709,635	)	$	(5,639,025	)

See accompanying notes to condensed consolidated financial statements.

Sequiam Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three months ended March 31,
	2005			2004
Cash flows from operating activities:
Net loss	$	(1,260,777	)	$	(1,098,735	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization		116,741			152,912
Accretion of debt discount		149,105			146,128
Amortization of loan costs		39,611			-
Issuance of common stock in exchange for services		351,663			238,450
Issuance of common stock in exchange for salaries		146,864			-
Loss on debt settlement		-			5,492
Increase in accounts receivable		(906	)		(8,333	)
Decrease in prepaid expenses and other assets		97,125			16,280
Decrease in bank overdraft		(24,165	)		-
(Decrease) increase in accounts payable		45,219			(94,600	)
Increase in accrued shareholders salaries		90,000			90,000
Increase in other accrued expenses		59,499			3,924
Decrease in deferred revenue		(6,000	)		-
Increase in deferred rents		(617	)		-
Net cash used for operating activities		(190,637	)		(548,482	)

Cash flows from investing activities:
Equipment purchases		-			(1,954	)
Cash paid for WMW Communications		-			(30,580	)
Product development costs capitalized		(67,712	)		-
Net cash used for investing activities		(67,712	)		(32,534	)

Cash flows from financing activities:
Proceeds from sale of common stock		-			761,092
Repayment of long-term debt		-			(4,710	)
Proceeds from note payable		-			400,000
Payment of notes payable		(15,809	)		(171,346	)
Proceeds from shareholder loans		310,000			-
Repayments of shareholder loans		(14,501	)		-
Net cash provided by financing activities		279,690			985,036
Net change in cash		21,341			404,020
Cash, beginning of period		-			151,450
Cash, end of period	$	21,341		$	555,470

See accompanying notes to condensed consolidated financial statements.

Sequiam Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

Non-cash activities:	2005		2004
Common Stock issued to correct error		-	$	19
Liabilities assumed with acquisition of Telepartners, Inc.		-	$	15,068
Warrants issued in connection with loan agreement		-	$	119,880

See accompanying notes to condensed consolidated financial statements.

Sequiam Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 -Description of Business and Acquisitions

General

We were incorporated in California on September 21, 1999 as Wedge Net Experts, Inc. On or about May 1, 2002, we changed our name to Sequiam Corporation and changed our stock symbol from “WNXP” to “SQUM.OB”. On May 19, 2004, our common stock was formally listed on the Frankfurt Stock Exchange under the symbol RSQ. We believe that listing our shares of common stock on the Frankfurt Stock Exchange will increase our profile with investors, both institutional and retail, in Germany and across Europe.

Until the acquisition of Smart Biometrics, Inc. in 2003, we were primarily focused on developing a portfolio of Internet and print enterprise-wide software products and developing custom software, databases and websites for businesses. We also operated as an Internet Service Provider and provided Internet access and web site hosting for our customers who required those services. During this period, our business was operated under one operating segment through our subsidiaries: Sequiam Software, Inc. and Sequiam Communications, Inc.

In 2003, we decided to expand our portfolio of product offerings 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 BioVaultTM while associated with Smart Biometrics, Inc.

Today, our operations are divided into two distinct operating segments: Information Management and Safety and Security. Our Information Management segment utilizes our custom software skills, our contacts with the world sports communities and interactive web-based technologies. We formed our Safety and Security segment after our acquisition of Smart Biometrics, Inc. and Fingerprint Detection Technologies, Inc. Through these acquisitions, we acquired: (a) a fingerprint biometric access control system, which will be a key feature in our future product offerings; and (b) a fingerprint detection system which we believe represents a new advancement in that science.

Our Information Management segment consists of the following subsidiaries: (a) Sequiam Software, Inc.; (b) Sequiam Sports, Inc.; and (c) Sequiam Education, Inc. Our Safety and Security segment consists of the following subsidiaries: (a) Sequiam Biometrics, Inc.; and (b) Fingerprint Detection Technologies, Inc.

Development of the Business

Information Management Segment

Three principal shareholders, 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. From its inception until April 1, 2002, Sequiam Software, Inc.’s sole business activity was the development of its software product, Sequiam Document Management System, also referred to as Sequiam DMS.

Acquisition of Brekel Group, Inc. In 2002, we acquired 99.38% of the issued and outstanding common stock of Brekel Group, Inc. We acquired Brekel Group, Inc. for its expertise in digital on-demand publishing and printing and the innovations that it brings to our document management, Internet remote print and print on-demand software applications. We also acquired Brekel Group, Inc. for its contract with the World Olympians Association and its Internet and ExtraNet expertise and product development gained from that project. Today, the business of Brekel Group, Inc. is conducted by our subsidiary Sequiam Sports, Inc., which is part of our Information Management segment.

Acquisition of the Assets of W.M.W. Communications, Inc. Effective November 1, 2002, we acquired all of the assets of W.M.W. Communication, Inc., doing business as Access Orlando. We accounted for this transaction as an acquisition of the business of W.M.W. Communications, Inc. We acquired W.M.W. Communications, Inc. for its Internet Remote Print, commonly referred to as “IRP” and Internet Remote Print Duplicator, commonly referred to as “IRPlicator,” software products. IRP is a software product that allows computer users to print remotely to any printer via the Internet. Because IRP is highly complementary to the Sequiam DMS product, we have integrated the two products. W.M.W. Communications, Inc. also acted as an Internet Service Provider, which we incorporated into our business. Through our Internet hosting and collocation services, we host third-party web content on either our server located at our remote network operations center, or on the third party’s server that is located at our remote network operations center. Today, our subsidiary Sequiam Software, Inc. conducts the business of W.M.W. Communication, Inc. which is part of our Information Management segment.

Acquisition of the Assets of Telepartners, Inc. On June 1, 2003, we acquired substantially all of the assets of Telepartners, Inc. located in West Palm Beach, Florida. We accounted for this transaction as an acquisition of the business of Telepartners, Inc. Telepartners, Inc. developed supplemental educational products for schoolchildren in grades 1 through 12. The major asset acquired from Telepartners, Inc. was the Extended Classroom™ software, which is a supplemental educational program consisting of a video lesson library containing the same lesson concepts that are taught in our public school classrooms in the United States. Each lesson summary has been produced in high quality and digitally mastered, allowing for Internet and television broadcast distribution as well as being offered in CD and video formats. Today, our subsidiary Sequiam Education, Inc. conducts the business of Telepartners, Inc. which is part of our Information Management segment.

Safety and Security Segment

Acquisition of the Assets of Smart Biometrics, Inc. On May 9, 2003, we acquired substantially all of the assets of Smart Biometrics, Inc. located in Sanford, Florida. We accounted for this transaction as an acquisition of the business of Smart Biometrics, Inc. Smart Biometrics, Inc. is engaged in the development of biometric technologies. The BioVault™ technology, which is a secure access denial device that utilizes biometric technology and protocols to recognize a person’s fingerprint to unlock, was the major asset of Smart Biometrics, Inc. Today, our subsidiary Sequiam Biometrics, Inc., conducts the business of Smart Biometrics, Inc. which is a part of our Safety and Security segment.

Acquisition of Fingerprint Detection Technologies, Inc. On September 11, 2003, we acquired 100% of the issued and outstanding shares of common stock of Fingerprint Detection Technologies, Inc., a Florida corporation. Fingerprint Detection Technologies, Inc. has the rights to develop and market a patented and proprietary technology for fingerprint analysis using a light-emitting diode, or LED, intense headband light source. Because Fingerprint Detection Technologies, Inc. had no operating history and had not generated any revenues, we accounted for the acquisition as a purchase of its assets. Today, Fingerprint Detection Technologies, Inc. is one of our subsidiaries and is part of our Safety and Security segment.

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 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 the Company included in Form 10-KSB filed for the year ended December 31, 2004. 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 loss per common share is computed by dividing net loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted 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 March 31, 2005, the Company had 30,038,867 potentially dilutive common shares as a result of warrants and options granted and convertible debt outstanding.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries Sequiam Software, Inc., Sequiam Biometrics, Inc., Sequiam Education, Inc., Fingerprint Detection Technologies, Inc., and Sequiam Sports, Inc (the “Company”). All intercompany transactions and accounts have been eliminated.

Accounting for Stock-Based Compensation

SFAS No. 123, Accounting for Stock-Based Compensation (“FAS 123”), encourages the use of a fair-value method of accounting for stock-based awards under which the fair value of stock options is determined on the date of grant and expensed over the vesting. As allowed by FAS 123, the Company has elected to account for stock-based compensation plans under an intrinsic value method that requires compensation expense to be recorded only if, on the grant date, the current market price of the Company's common stock exceeds the exercise price the employee must pay for the stock. The Company's policy is to grant stock options at the fair market value of the underlying stock at the date of grant.

The Company has adopted the disclosure-only provisions of FAS 123. Accordingly, no compensation cost has been recognized for the stock option plans. There were no stock options granted during the three months ended March 31, 2005 and 2004. All stock options issued prior to this year have been fully vested. As such, pro forma net loss is equal to reported net loss.

Note 3 - 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 replaced separate agreements with Sequiam, Inc. and Brekel Group, Inc. The agreements have an initial term of two years with automatic one-year renewals. The agreements provide for compensation in the form of minimum annual salary of $185,000 and $175,000 respectively, and allow for bonuses in cash, stock or stock options and participation in Company benefit plans. Full-time employment is a requirement of the contract. In the event that a change in control of the Company occurs without the prior approval of the then existing Board of Directors, these contracts will be deemed terminated and compensation of $5 million each is payable at termination, and $1 million annually for five years subsequent to termination will be due and payable to the CEO and CFO. For the quarters ended March 31, 2005 and 2004, 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 agreements provide for compensation in the form of minimum annual salary of $75,000 and allows for bonuses in cash, stock or stock options and participation in Company benefit plans. Full-time employment is a requirement of the contract.

Mr. David Dobkin was hired as the President of Sequiam Software, Inc. pursuant to an employment agreement dated as of April 1, 2004 and extends for a term of two years. Mr. Dobkin earns annual compensation of $150,000 until the Company acquires at least $3 million in new equity capital. After the Company acquires $3 million in new equity capital, Mr. Dobkin’s annual compensation will increase to $175,000. Upon the commencement of employment, Mr. Dobkin earned and was issued 50,000 shares of common stock. In addition, we paid Mr. Dobkin a sign-on bonus of $50,000, net of taxes that was also paid in common shares. We granted Mr. Dobkin stock options exercisable into two million shares of common stock at an exercise price equal to the market price as of the date of employment.

Brekel entered into a note payable with Xerox Corporation in November 2000 to finance equipment. Brekel also entered into a Document Services Agreement (“Agreement”) with Xerox Corporation (“Xerox”) on November 1, 1999 commencing April 1, 2000. During the 63-month term of the Agreement ending June 30, 2005, Xerox agreed to provide equipment and services in accordance with specified performance standards. Those standards include, among other things, a performance satisfaction guaranty by Xerox. Under the terms of that guaranty, Brekel may terminate the agreement without incurring any early termination charges. Brekel gave proper notice of such termination in March 2001. On September 3, 2002 Xerox did, contrary to the contract, assert its claim for early termination charges and for monthly minimum service charges on billings made after the termination date. Xerox had taken no action since its September 3, 2002 demand letter until June 29, 2004, when Xerox Corporation filed a lawsuit in the Circuit Court in Pinellas County State of Florida. The claim amount in controversy is approximately $1,574,000. The Company disputes these claims and believes them to be without merit. Because this matter is in very preliminary stages, management is unable to determine the likelihood of an unfavorable outcome and, accordingly, has not accrued any amount for potential losses in connection with this lawsuit.

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

Note 4 - 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 5 - Intangible Assets

As of March 31, 2005, intangible assets consist of the following:

	Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Acquired Software		5		288,000		139,199		148,801
Intellectual Properties		5		937,650		339,639		598,011
Product Development Costs		5	$	102,221	$	-0-	$	102,221
			$	1,327,871	$	478,838	$	849,033

Amortization expense amounted to $61,238 and $97,575 for the three months ended March 31, 2005 and 2004.

The estimated future amortization expense for each of the five succeeding years is as follows:

September 30:
2005	$	245,130
2006		245,130
2007		245,130
2008		113,643
	$	849,033

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 amounts 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. No such impairment losses occurred during the three months ended March 31, 2005 and 2004.

Note 7- Notes and Debentures Payable

On March 5, 2003 Sequiam issued to La Jolla Cove Investors, Inc. ("LJCI"), an 8% Convertible Debenture in the principal amount of $300,000 and a warrant to purchase 2,000,000 shares of our common stock at $1.50 per share (the "Initial Financing"). Sequiam received a total of $150,000 of the principal amount of the debenture, representing the balance due at December 31, 2003.

In connection with the debenture and the warrant, Sequiam was required to register the resale of common stock to be issued to LJCI upon conversion of the debenture and exercise of the warrant. To meet this obligation, Sequiam filed a registration statement on April 27, 2003, an amended registration statement on May 7, 2003, and a second amended registration statement on June 23, 2003, all of which were withdrawn on September 5, 2003, prior to being declared effective.

Effective as of January 29, 2004, the Company entered into an Agreement of Accord and Satisfaction with LJCI pursuant to which LJCI agreed to accept $200,000 plus 100,000 shares of restricted common stock in accord and satisfaction of the debenture and warrant and other documents related to the Initial Financing. As a result, all of our obligations under the Initial Financing, including the obligation to file a new registration statement, have been terminated.

Pursuant to the accord and satisfaction, Sequiam issued 100,000 shares of restricted common stock to LJCI, which, had a fair market value of $51,000, based on a closing trading price of $0.51 per share on January 29, 2004. In addition, the Company delivered to LJCI a promissory note in the principal amount of $200,000 with interest in the amount of 8% per year, plus principal, due in six installments of $34,017 per month beginning February 1, 2004. The Company has paid the note in full.

Under the new agreement, LJCI has "piggy-back" registration rights, meaning Sequiam is obligated to include the resale of the 100,000 shares of restricted common stock by LJCI in any registered offering of securities the Company may make during any time that LJCI still holds such 100,000 shares. Unless the Company makes a registered offering, it has no obligation to register the resale of the 100,000 shares of restricted common stock.

On May 13, 2003, Sequiam entered into a loan agreement with Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a principal loan amount of $400,000 under a promissory note bearing interest at five percent (5%). In connection with this loan, Sequiam Corporation issued two warrants to the holder to purchase 625,000 shares of its common stock at an exercise price of $0.01 per share and 350,000 shares of its common stock at $1.00 per share. The Warrants for 625,000 shares were exercised on June 25, 2003 and the warrants for 350,000 remain outstanding and expire in May 2008. The fair value of the attached warrants exceeded the value of the proceeds received from the Note and has been recorded as a debt discount of $400,000. The payment schedule was originally tied to that of the LJCI Convertible Debenture described above. However, on January 30, 2004 the Company amended the loan agreement such that all principal and interest became due on January 30, 2005. The debt discount was originally amortized over the original estimated life of the Note of 36 months. Beginning in January 2004, the remaining unamortized debt discount will be amortized over twelve months. As of March 31, 2005, the balance of the Note, net of the unamortized debt discount of $-0- was $400,000 and is included in Notes Payable.

On December 18, 2003, Sequiam entered into a loan agreement with Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a principal loan amount of $100,000 under a promissory note bearing interest at five percent (5%). In connection with this loan, Sequiam Corporation issued one warrant to the holder to purchase 200,000 shares of its common stock at an exercise price of $0.25 per share. The principal and accrued interest were paid in full during 2004.

On December 18, 2003, Sequiam entered into a loan agreement with Lee Harrison Corbin, for a principal loan amount of $50,000 under a promissory note bearing interest at five percent (5%). In connection with this loan, Sequiam Corporation issued one warrant to the holder to purchase 100,000 shares of its common stock at an exercise price of $0.25 per share. The principal and accrued interest were paid in full during 2004.

On December 26, 2003, Sequiam entered into a debenture agreement (“Debenture”) with Eagle Financial, LLC, for a principal loan amount of $150,000 under a debenture bearing interest at ten percent (10%). The principal and accrued interest were paid in full during 2004. The Debenture also provided for an unconditional equity provision whereby the Corporation issued seventy five thousand (75,000) restricted shares to the Holder as an incentive to lend. The fair value of the shares was recorded as a debt discount of $30,000.

On or about October 3, 2002, General Electric Capital Corporation (“GE”) filed a lawsuit against Brekel Group, Inc. (“Brekel”), in the Circuit Court of the 9^th Judicial Circuit in and for Orange County, located in Orlando, Florida. GE claims that Brekel owes a deficiency balance in the amount of $93,833 for three digital copiers rented under a lease agreement. Brekel has returned possession of the copiers to GE, but Brekel disputes the claim for damages. On January 30, 2004 Brekel entered into a settlement agreement with GE by agreeing to pay $70,000 in 36 monthly installments of $1,945 without interest.

On February 1, 2004 Brekel entered into a settlement agreement with Precision Partners, LTD for disputed rents on a facility formerly occupied by Brekel by agreeing to pay $80,000 in 24 monthly installments of $3,510 including interest at 5%.

On January 30, 2004, the Company entered into a loan agreement with Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a principal loan amount of $400,000 under a promissory note bearing interest at five percent (5%). In connection with this loan, the Company issued one warrant to the holder to purchase 800,000 shares of its common stock at an exercise price of $0.225 per share. The Warrant was exercised on January 30, 2004. The principal and interest became due on January 30, 2005.

On September 7, 2004, the Company entered into an unsecured loan agreement with Eagle Funding, LLC, for a principal loan amount of $200,000 under a promissory note bearing interest at eight percent (8%). The principal became due on March 7, 2005 and the interest is due monthly. In connection with this loan, the Company issued one warrant to the holder to purchase 400,000 shares of its common stock at an exercise price of $0.66 per share.

On September 30, 2004, the Company entered into an unsecured loan agreement with Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a principal loan amount of $500,000 under a promissory note bearing interest at five percent (5%). In connection with this loan, the Company issued one warrant to the holder to purchase 1,300,000 shares of its common stock at an exercise price of $0.66 per share. The principal and interest became due on March 30, 2005.

On September 30, 2004, the Company entered into an unsecured loan agreement with Lee Harrison Corbin for a principal loan amount of $75,000 under a promissory note bearing interest at five percent (5%). In connection with this loan, the Company issued one warrant to the holder to purchase 195,000 shares of its common stock at an exercise price of $0.66 per share. The principal and interest became due on March 30, 2005.

On November 19, 2004, the Company entered into an unsecured loan agreement with Walter H. Sullivan III, for a principal loan amount of $100,000 under a promissory note bearing interest at five percent (5%). In connection with this loan, the Company issued one warrant to the holder to purchase 260,000 shares of its common stock at an exercise price of $0.66 per share. The principal and interest became due on February 19, 2005.

On December 16, 2004, the Company entered into an unsecured loan agreement with Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a principal loan amount of $50,000 under a promissory note bearing interest at five percent (5%). In connection with this loan, the Company issued one warrant to the holder to purchase 150,000 shares of its common stock at an exercise price of $0.33 per share. The principal and interest became due on January 31, 2005.

The preceding information is summarized as follows at March 31, 2005:
	Face Amount		Debt Discount		Carrying Amount
Notes payable - Precision	$	37,659	$	-	$	37,659
Notes payable - GE		44,722		-		44,722
Promissory note - Lee Harrison Corbin-Trustee for John Svenningsen		400,000		-		400,000
Promissory note - Lee Harrison Corbin-Trustee for John Svenningsen		400,000		-		400,000
Promissory note - Eagle Funding, LLC		200,000		-		200,000
Promissory note - Lee Harrison Corbin-Trustee for John Svenningsen		500,000		-		500,000
Promissory note - Lee Harrison Corbin		75,000		-		75,000
Promissory note - Walter Sullivan		100,000		-		100,000
Promissory note - Lee Harrison Corbin-Trustee for John Svenningsen		50,000		-		50,000
	$	1,807,381	$	-	$	1,807,381

Each of the Notes payable to the Svenningsen Trust, Walter Sullivan, Lee Corbin and Eagle Funding are delinquent as to their due dates. On May 18, 2005 the Company entered into a new loan agreement with the Svenningsen Trust for $3.65 million that includes a roll-up of each of the existing Notes Payable for $1.55 million and $2.1 million of new money. On May 11, 2005 Walter Sullivan converted his $100,000 loan and $2,375 of accrued interest into 731,252 common shares of Sequiam Corporation at $0.14 per share. On May 18, 2005 Lee Corbin converted his $75,000 loan and $2,363 of accrued interest into 535,714 common shares of Sequiam Corporation at $0.14 per share. On May 17, 2005, effective April 7, 2005, Eagle Funding LLC extended the term of their loan to November 7, 2005. Each of these transactions is further described in Note 13 Subsequent Events.

Note 8 - Loans From Shareholders

On February 1, 2002, Mark Mroczkowski, the Chief Financial Officer and a shareholder of the Company, loaned Sequiam Software, Inc. $50,000. On February 15, 2005 he loaned Sequiam Corporation $50,000. Interest is payable at 6%. As of March 31, 2005, the balance due under these loans was $100,000 payable on demand together with accrued interest of $4,000.

Nicholas VandenBrekel, the President and Chief Executive Officer and majority shareholder of the Company, has advanced money to the Company and Sequiam Software, Inc. under demand notes. At March 31, 2005, the Company owed $532,450 on these notes, including accrued interest of $25,793. The notes bear interest at 2% per annum and are due on demand.

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

Note 9 - Lease Agreement and Note Payable

Prior to our acquisition of the Brekel Group, Inc., effective July 1, 2001, the Brekel Group, Inc. entered into an operating lease agreement to rent approximately 60,000 square feet of combined office and manufacturing space through June 30, 2011. Because we determined to cease Brekel’s print and publishing operations before we acquired it, effective July 1, 2002, Brekel entered into a lease forbearance agreement for 10,000 square feet of the same space for the remaining term of the lease. In April 2004, we entered into a new lease agreement and note payable with the landlord that supercedes and replaces the lease forbearance agreement entered into by the Brekel Group, Inc. effective July 1, 2002 prior to its acquisition by us.

The new lease for 24,085 square feet is effective July 1, 2004 for a period of seventy-two months beginning July 1, 2004 and ending on June 30, 2010. The note payable was fixed at $1,600,000 together with interest thereon at a simple interest rate equal to six percent per annum. Commencing on August 1, 2004 and continuing on the first day of each month thereafter through and including June 1, 2010, we are scheduled to pay to Lender payments consisting of principal and interest in the amount of $26,517 per month.

Rental expense for the quarter ended March 31, 2005 and 2004 was $59,201and $33,134, respectively. The original amount of the note of $1,600,000 represents $893,112 of deferred rent and $706,888 of tenant improvements. The March 31, 2005 balance of $ 1,525,376 included $234,181 in current portion of long-term debt and $1,291,195 in long-term debt. The new minimum future rentals required under the operating lease and the maturities of the long-term note payable are as follows:

Year	Rentals		Maturities
2005	$	193,564	$	234,181
2006		206,773		248,624
2007		210,993		263,959
2008		215,319		280,239
2009		219,753		297,524
Thereafter		110,999		200,849
	$	1,157,401	$	1,525,376

Note 10 - Convertible Debt

On April 27, 2004, the Company closed a convertible debt transaction with Laurus Master Fund, Ltd. (“Laurus”) providing up to $3.0 million in financing. Under the arrangement, the Company delivered to Laurus a secured convertible term note, bearing interest at the Wall Street Journal Prime rate plus 2% (7.75% at March 31, 2005), in the initial amount of $2.0 million, convertible into the Company’s common stock (the “Note”), and a warrant to purchase up to 666,666 shares of the Company’s common stock.

The Note has a term of three years. Interest shall be payable monthly in arrears commencing on June 1, 2004, and on the first day of each consecutive calendar month thereafter. Monthly principal payments commenced on August 2, 2004, at the rate of $60,606. The balance of the Note at March 31, 2005 is $1,818,182 less debt discount recognized of $183,527 or a net of $1,634,655 and is included $984,844 in long-term debt and $833,338 in current portion of long-term debt. The maturities of the Note as of December 31, 2004 are as follows:

Year	Maturities
2005	$	833,338
2006		909,096
2007		75,758
	$	1,818,182

The interest rate under the Note is subject to adjustment on a month by month basis if specified conditions are met (including that the common stock underlying the conversion of the Note and the warrant issued to Laurus are registered with the U.S. Securities and Exchange Commission and whether and to what extent the market price of the Company’s common stock for the five (5) trading days preceding a particular determination date exceeds (or is less than) the fixed conversion price applicable to the Note).

Laurus also has the option to convert all or a portion of the Note into shares of the Company’s common stock at any time, subject to specified limitations, at a fixed conversion price of $0.66 per share. The Note is secured by a first lien on all the Company’s and its subsidiaries’ assets. In connection with the Note, Laurus was paid a fee of $105,000, which is included in other assets as deferred loan costs and is being amortized over the life of the loan. Laurus received a six-year warrant to purchase up to 666,666 shares of the Company’s common stock at prices ranging from $0.83 per share to $1.16 per share. A discount of $215,915 was recognized on the value of the warrants and is being amortized as interest expense over the life of the loan. A discount of $458,339 was allocated to the beneficial conversion feature. All stock conversion prices and exercise prices are subject to adjustment for stock splits, stock dividends or similar events. The Company also agreed to file a registration statement with the U.S. Securities and Exchange Commission covering the shares issuable upon conversion of the Note and the exercise of the warrant issued to Laurus.

Laurus has committed to fund to the Company an additional $1.0 million under the financing arrangement on substantially similar terms as the initial $2.0 million funding, which additional $1.0 million will become available to the Company following its completion and/or achievement of certain conditions to funding, including, without limitation, certain performance benchmarks.

On October 27, 2004, the Company amended the terms of its agreements with Laurus by reducing the fixed conversion price of $0.66 per share to $0.33 per share; amending the principal amortization from $60,606 per month beginning August 2, 2004 to $75,758 beginning May 2, 2005; amending the six-year warrant to purchase up to 666,666 shares of the Company’s common stock at prices ranging from $0.41 per share to $0.58 per share; and granting a new six-year warrant to purchase up to 470,000 shares of the Company’s common stock at a price of $0.33 per share in satisfaction of due and unpaid fees in the aggregate amount of $49,333. In addition Laurus agreed to release the Company from a technical default of the Securities Purchase Agreement with respect to the creation of the certain debt obligations.

Note 11 - Capital Stock

During the three months ended March 31, 2005, the Company issued 2,387,500 and 732,670 common shares for business advisory, marketing services and payroll valued at $351,663 and $146,864, respectively based on the Company’s quoted market price on the date of the related agreements.

Note 12 - 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.

The Company has two operating segments, which are defined as each business line that it operates. This however, excludes corporate headquarters, which does not generate revenue.

The Company’s operating segments are defined as follows:

The Information Management segment provides interactive web-based technologies, as well as ASP, ISP and other customer web development and software development services.

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

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

	Information Management			Safety and Security			Segments Total			Corporate			Consolidated Total
Revenue from external customers		66,343			62,512			128,855						128,855
Interest expense, net		(23,864	)					(23,864	)		(207,669	)		(231,533	)
Depreciation and amortization		67,523			49,219			116,741			39,611			156,352
Segment loss		(333,913	)		(349,439	)		(683,352	)		(577,425	)		(1,260,777	)
Segment assets (1)		1,329,647			154,099			1,483,747			868,390			2,352,137

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

The table below presents certain financial information by business segment for the three months ended March 31, 2004.

	Information Management			Safety and Security			Segments Total			Corporate			Consolidated Total
Revenue from external customers	$	45,184		$	29,880		$	75,064		$	-		$	75,064
Interest expense, net		10,184			-			10,184			277,856			288,040
Depreciation and amortization		92,360			60,552			152,912			-			152,912
Segment loss		(352,083	)		(50,535	)		(402,618	)		(696,117	)		(1,098,735	)

Note 13 - Subsequent Events

On May 18, 2005, Sequiam Corporation (the “Company”) closed a debt transaction with Lee Harrison Corbin, 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”).

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.

The $3,450,000 promissory note issued to the Trust (the “Trust Note”) has a term of two years. Interest shall be payable monthly in arrears commencing on November 10, 2005, and on the first day of each consecutive calendar month thereafter. Monthly amortization payments shall commence on May 10, 2006, at the rate of $75,000. The trust Note is secured by all of the Company’s assets.

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.

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.

On May 11, 2005 Walter Sullivan converted his $100,000 loan and $2,375 of accrued interest into 731,252 common shares of Sequiam Corporation at $0.14 per share.

On May 17, 2005, effective April 7, 2005, Eagle Funding LLC extended the term of their loan to November 7, 2005.

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 prior to May 31, 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.

On May 18, 2005 Lee Corbin converted his $75,000 loan and $2,363 of accrued interest into 552,593 common shares of Sequiam Corporation at $0.14 per share. The agreement included piggyback registration rights for all shares and warrants owned by Mr. Corbin.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS

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. 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. Current shareholders and prospective investors are cautioned that any forward-looking statements are not guarantees of future performance. Such forward-looking statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results for future periods could differ materially from those discussed in this report, depending on a variety of important factors, among which are our ability to implement our business strategy, our ability to compete with major established companies, the acceptance of our products in our target markets, the outcome of litigation, our ability to attract and retain qualified personnel, our ability to obtain financing, our ability to continue as a going concern, and other risks described from time to time in our filings with the Securities and Exchange Commission. Forward-looking statements contained in this report speak only as of the date of this report. Future events and actual results could differ materially from the forward-looking statements. You should read this report completely and with the understanding that actual future results may be materially different from what management expects. We will not update forward-looking statements even though its situation may change in the future.

INTRODUCTION

The following discussion and analysis summarizes the significant factors affecting: (i) our consolidated results of operations for the three months ended March 31, 2005 compared to the three months ended March 31, 2004; 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 prospectus.

We are an information management and software and security technology company specializing in biological identification security systems and web-based application services for the business, education and travel industries. Our business is divided into two operating segments: (a) Safety and Security; and (b) Information Management.

We derive or plan to derive our revenues from five sources: (i) the sale and licensing of our software products; (ii) consulting, custom software services and web development services; (iii) maintenance agreements in connection with the sale and licensing of software products; (iv) Internet access and web hosting services; and (v) the sale and licensing of our biometric products. We have not yet generated revenue from the sale and licensing of our software products. Software license revenue will be recognized when all of the following criteria have been met: (a) there is an executed license agreement and software has been delivered to the customer, (b) the license fee is fixed and payable within twelve months, (c) collection is deemed probable, and (d) product returns are deemed reasonably estimable. Maintenance revenues are recognized ratably over the term of the maintenance contract, typically 12 to 36 months. Internet access and web-hosting services are recognized over the period the services are provided, typically month-to-month.

The following table shows the proportion of total revenues by segment in the three period ended March 31, 2005.

Period		Information Management		Safety and Security		Total
Three Months ended March 31, 2005		$66,343		$62,512		$128,555

Results of Operations

The following table sets forth information regarding our financial results for 2005 and 2004.

	Three Months Ended March 31,
	2005			2004			% Change

Revenue		128,855			75,064			-72	%
Costs of services and product sales		232,022			280,847			17	%
Selling, general and administrative		926,448			599,420			-55	%
Gains on sale of equipment, impairment of equipment held for sale and debt settlement		(370	)		(5,492	)		107	%
Interest expense, net		(231,954	)		(288,040	)		19	%
Net Losses		(1,260,777	)		(1,098,735	)		-15	%

Quarter Ended March 31, 2005 compared to Quarter Ended March 31, 2004. Unless otherwise noted, references to 2005 represent the three-month period ended March 31, 2005 and references to 2004 represent the three-month period ended March 31, 2004.

Revenues. Total revenue increased by $53,791 or 72% to $128,855 in 2005, from $75,064 in 2004. This occurred because we completed certain web development, custom software development and engineering services engagements. Software and license fee revenues were unchanged at $-0- for both 2005 and 2004. Revenues from consulting, custom software services, web development services and Internet access and web-hosting services totaled $23,043 in 2005 and $45,184 in 2004, a decrease of $22,141 or 49%. Revenues from sales of the BioVault^TMwere $5,061 in 2005 compared to $29,880 in 2004 a decrease of $24,819 or 83%. Revenues from the maintenance of our existing IRP customers were $-0- in 2005 compared to $-0- in 2004. During 2004 and 2003 we re-developed IRP and IRPlicator from server based products into an ASP model for use over the Internet and for marketing purposes we renamed the products PrintIt 123! and ScanIt 123!, respectively. We began generating revenues from the sale of our IRP suite of software products in the second quarter of 2004 and recorded $43,300 in ASP service fees in 2005 compared to none in 2004. We also earned $57,500 in biometric consulting fees in 2005.

During 2003 and 2004, we spent most of our time acquiring and redeveloping our products. Sales and marketing efforts did not commence until the third quarter of 2004. We believe that the high cost of the BioVaultÔ was an impediment to its sales. As a result, we developed a less expensive version 2.0 of the BioVault. The BioVault 2.0 is out of design and in the molding and casting process. We expect production to begin in the third quarter 2005. Additionally we now have several resellers for our PrintIt123 product line (formerly IRP), ScanIt123 (formerly IRPlicator) as a result of that and the BioVault 2.0 coming to market, we expect to generate increased revenues from these products during the third quarter of 2005.

During 2004, we entered into a pilot program for our PrintIt123 products with AlphaGraphics, Inc., and Sir Speedy/PIP both of whom are internationally franchised chains of print shops. In the fourth quarter 2005, we entered into sales agreements with several state college and university systems for our PrintIT123 product. Georgia Tech and the University of Mississippi each purchased for cash a prepackaged bundle of remote print transactions using our ASP service, which is to say that they are entitled to use our software, which is provided solely through hosting services run on our servers. Additionally, we are currently in discussions with other companies for the license of our other biometric technology products.

As a result of these recent developments, we expect: (a) that consulting, custom software services, web development and web-hosting activities will make up a smaller portion of our overall revenues; and (b) that revenues from our Safety and Security segment will begin to increase in mid and late 2005.

Cost of Services and Product Sales. Cost of services and product sales were $232,022 in 2005 and $280,847 in 2004, a decrease of $48,825 or 17 %. This increase was primarily attributable to decreased production costs associated with decreased sales as a result of redesigning our products. We also increased depreciation and amortization expense that was $156,352 in 2005 and $152,912 in 2004, an increase of $3,440 or 2 %. This increase is attributable to the amortization of intellectual properties from W.M.W. Communications, Inc., Smart Biometrics, Inc., Telepartners, Inc. and Fingerprint Detection Technologies, Inc.

Selling, General and Administrative. Selling, general and administrative expenses were $926,448 in 2005 and $599,420 in 2004, a increase of $327,028 or 55 %. The significant increase was attributed to non-cash and non-recurring expenses for investment banking, consulting and other services acquired in exchange for stock totaling $498,527. The overall increase was offset in part by decreases in selling costs and costs associated with being a public company. We decreased our recurring selling and overhead expenditures such as salaries, wages and benefits for administrative and marketing personnel, computer maintenance and supplies, professional services (such as legal and accounting fees), and corporate travel expenses.

Our total payroll was $84,564 for 2005 and $208,944 for 2004. This decrease in payroll is attributable to our reduction from 24 employees in 2004, to 8 employees in 2005. The decrease in payroll has increased our liquidity and increased our cash flow for 2005. We can expect that payroll will remain constant for the next six months untill we bring our products to market. Once we establish continued sales for our software and biometric products, we expect that the payroll burden will be reduced as a percentage of total revenue.

Losses on Sale of Equipment, Impairment of Equipment Held for Sale and Debt Settlement. A loss of $370 was recognized on the sale of equipment.

Interest Expense. Interest expense was $231,533 in 2005 and $288,040 in 2004, a decrease of $56,507 or 19%. This decrease is because no new debt discounts were recorded during the quarter.

Net Losses. We incurred net losses of $1,260,777 in 2005 and $1,098,735 in 2004, a increase of $162,042 or 14%. The increase was attributed to non-cash and non-recurring expenses for investment banking, consulting and other services acquired in exchange for stock totaling $498,527. We expect to incur additional net losses through the second quarter of 2005 as we continue to introduce our products to the marketplace. We expect cash flow to increase beginning in the third quarter of 2005 using proceeds from sales of our products. The Company presently requires sales of approximately $125,000 per month to provide a positive cash flow.

Liquidity and Capital Resources

General

Our principal use of cash in our operating activities is for selling general and administrative expenses. Our principal source of liquidity has historically been from financing activities. We believe that cash provided by our operating and financing activities will provide adequate resources to satisfy our working capital, liquidity and anticipated capital expenditure requirements for approximately six months. Before such time, we expect to have sufficient cash flow to continue our operations.

Operating Activities

Net cash used in operating activities was $190,637 for 2005, as a result of the net loss during the period of $1,260,777, offset by non-cash expenses of $803,985, increases in accrued shareholder salaries of $90,000 and net decrease in other working capital items totaling $176,155.

Investing and Financing Activities

Net cash used for investing activities for 2005 was $67,712, product development costs for the BioVault 2.0 that we capitalized.

Net cash provided by financing activities was $279,690 for 2005. Proceeds from the shareholder loans accounted for $295,499. Payments of long-term debt used cash of $15,809.

Current liabilities of $5,902,180 exceed current assets of $61,358 by $5,840,822. Of that amount, $2,084,242 or 35.7% is owed to shareholders as loans and accrued but unpaid salaries under employment agreements. The officers of the Company are dedicated to its business plan and will place no undue demands on its working capital. They expect payment from future cash flows and equity capital infusions. Also included in current liabilities is $358,541 of accounts payable owed by the former Brekel Group, Inc. We are negotiating to settle these liabilities related to the former Brekel Group, Inc. at amounts less than the amounts recorded in the balance sheet. We are unable to estimate an expected settlement below the carrying amount at this time. We expect that these liabilities will be settled for cash.

Year	Rentals		Maturities
2005	$	193,564	$	234,181
2006		206,773		248,624
2007		210,993		263,959
2008		215,319		280,239
2009		219,753		297,524
Thereafter		110,999		200,849
	$	1,157,401	$	1,525,376

Since December 31, 2004, shareholders of the Company have lent $295,500 to the company in support of its operations.

We have recently acquired new financing as described below. We believe that, to the extent obtained and cleared by the SEC, such financing will be adequate to support our operations until fully supported by revenues.

Recent Events

The $3,450,000 promissory note issued to the Trust (the “Trust Note”) has a term of two years. Interest shall be payable monthly in arrears commencing on November 10, 2005, and on the first day of each consecutive calendar month thereafter. Monthly amortization payments shall commence on May 10, 2006, at the rate of $75,000. The Trust Note is secured by all of the Company’s assets.

On May 11, 2005 Walter Sullivan converted his $100,000 loan and $2,375 of accrued interest into 731,252 common shares of Sequiam Corporation at $0.14 per share.

On May 17, 2005, effective April 7, 2005, Eagle Funding LLC extended the term of their loan to November 7, 2005.

Application of Critical Accounting Policies

Software Development Costs

Costs incurred to establish technological feasibility of computer software products are research and development costs and are charged to expense as incurred. Costs of producing product masters subsequent to technological feasibility are capitalized. Capitalization of computer software costs ceases when the product is available for general release to the customers. Capitalized software costs are amortized using the straight-line method over the estimated useful life of the products or the gross revenue ratio method, whichever results in the greater amount of amortization.

Acquired Software

In connection with the acquisition of Access Orlando, the Company acquired Internet Remote Print software that was assigned a value of $288,000, representing the excess of the purchase price over the fair value of the tangible assets acquired. The acquired software is being amortized over its expected useful life of five years.

Intellectual Properties

In connection with the acquisitions of Smart Biometrics, Inc, Telepartners, Inc. and Fingerprint Detection Technologies, Inc., the Company acquired intellectual properties including patents, trademarks, technical drawings, proprietary software and other knowledge based assets that were assigned values of $700,000, $160,000 and $237,650, respectively, for a total of $1,097,650 representing the excess of the purchase price over the fair value of the tangible assets acquired. The acquired intellectual properties are being amortized over their expected useful life of five years.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) revised Statement of Financial Accounting Standard No. 123 "Share-Based Payment" (SFAS 123R). SFAS 123R requires Companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). Changes in fair value during the requisite service period will be recognized as compensation cost over that period. The grant date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification This statement is effective for the first reporting period beginning after June 15, 2005. In the opinion of management, the adoption of this statement will not have a significant impact on the Company's consolidated financial statements.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined by Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the periodic reports filed by the Company with the Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Company's management. Based on their most recent evaluation, which was completed during the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer believe that the Company's disclosure controls and procedures provide reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

Changes in Internal Control Over Financial Reporting

In addition, management, including the Company's Chief Executive Officer and Chief Financial Officer, reviewed the Company's internal control over financial reporting (as defined by Rule 15(d)-15(f) of the Exchange Act), and there have been no significant changes in the Company's internal control or in other factors that could significantly affect the Company's internal control over financial reporting during the period covered by this report.

PART II: OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The information provided in Part I, Item 2 of this Quarterly Report on Form 10-QSB under the caption “Recent Events” is incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

10.1	Non-Exclusive Reseller Agreement with IKON Office Solutions, Inc.

31.1	Certification of Nicholas VandenBrekel, Chief Executive Officer and President of Sequiam Corporation, pursuant to Rule 15d-14(a) of the Securities and Exchange Act of 1934.*

31.2	Certification of Mark L. Mroczkowski, Senior Vice President and Chief Financial Officer of Sequiam Corporation, pursuant to Rule 15d-14(a) of the Securities and Exchange Act of 1934.*

32.1	Certification of Nicholas VandenBrekel, Chief Executive Officer and President of Sequiam Corporation, pursuant to 18 U.S.C. Section 1350.*

32.2	Certification of Mark L. Mroczkowski, Senior Vice President and Chief Financial Officer of Sequiam Corporation, pursuant to 18 U.S.C. Section 1350.*

_______________________________

* Filed herewith

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SEQUIAM CORPORATION

Date: May 23, 2005

By: /s/ Nicholas H. VandenBrekel
Nicholas H. VandenBrekel, Chief Executive Officer and President

Date: May 23, 2005

By: /s/ Mark L. Mroczkowski
Mark L. Mroczkowski, Senior Vice President and Chief Financial Officer