ITEM 1. DESCRIPTION OF BUSINESS
Intelliquis International, Inc. ("the Company" or "Intelliquis") has
become a republisher, marketer and supporter of Internet Year 2000
utility, reference and communication software products for the computer
software retail market. The Company was incorporated as Leesburg Land
and Mining Inc., June 21, 1983 in Colorado for the purpose of seeking
out and developing a business opportunity. Effective December 31, 1998,
the Company acquired all of the equity of Intelliquis LLC, a Utah
Limited Liability Company, which then became a wholly owned subsidiary
("the Subsidiary") of the Company. During this same period the Company
changed its corporate domicile to Nevada and changed its name to
Intelliquis International, Inc. The Subsidiary was founded in August
1997 and organized in Utah in December 1997, as a Limited Liability
Company. As a result of the acquisition of the Subsidiary, the
controlling shareholders of the Subsidiary became controlling
shareholders of the Company.
The Company built a position in the software market by first
licensing fully tested software applications from independent software
developers and then developing or acquiring a family of software
applications. During the year 2000 The Company's changed its emphasis
to Internet Utilities titles, but will offer software titles in
reference, and communication programs both in the North American and
International market. The software products are being marketed through
traditional software distribution channels to retail outlets and the
Internet's World Wide Web. Since the release of the Company's first
software title in November 1997, the Company has grossed approximately
$11 million in sales to date.
The Company has licensed and as current products, a total of seven
software titles through the end of 2000 namely: Web Site Medic,
TotalFax, Web Site Traffic Builder, Traffic Analyzer, Credit Builder,
Mass-E-Mailer, and Cyber Surveillance. In the last quarter of 1997, the
Company republished and released its first three titles (NetFax, Speed98
and Credit Builder). During 1998, Intelliquis released another three
titles (TotalFax, Fix2000, and Web Site Traffic Builder).
In 1999, the Company purchased and redesigned Credit Builder and
launched it as Credit Builder Deluxe. Intelliquis also released Cyber
Surveillance during fourth quarter 1999.
Intelliquis announced the launch of two new titles at the beginning
of 2000, Mass-E- Mailer and Web Site Traffic Analyzer (Traffic Meter).
Mass-E-Mailer is a bulk e-mail message program that allows users to
broadcast e-mails to multiple contact lists. Web Site Traffic Analyzer
allows Webmasters and web site owners to track and monitor traffic
patterns to and within their Internet sites. The Company offers Web Site
Traffic Analyzer as a stand-alone product and has included the product
with Web Site Traffic Builder in a suite of Internet products.
The Company developed and released it's own version of Web Site
Traffic Builder in July of 2000. Traffic Builder is a program that
submits web site information to the major search engines. With the
availability of new and quality titles to license, the Company intends
to release new titles on a regular basis in 2001 and beyond.
The Company has licensed and released a total of five software titles
namely, IntelliFix2000 (formerly Fix2000), TotalFax, Website Traffic
Builder, Credit Builder, and Speed98. In the last quarter of 1997, the
Company republished and released the first three titles (NetFax, Speed98
and Credit Builder). In the first quarter of 1998, Intelliquis released
another two titles (TotalFax and Fix2000). Intelliquis' most recent title
(Website Traffic Builder) was released in August 1998. With the
availability of new and quality titles to license, the Company intends to
release new titles on a regular basis in 1999 and beyond.
ITEM 3. LEGAL PROCEEDINGS
1. On The Planet, Inc. v. Intelliquis International, Inc., et al. On May
6, 1999, On The Planet, Inc.("OTP"), filed an action against the Company in
the United States District Court for the District of Utah, entitled On The
Planet v. Intelliquis International, Inc., Civil No. 2:99CV324K. The
claims purportedly arise out of a Software Rights Agreement under which the
Company granted OTP "an exclusive license for direct sales along with a
nonexclusive license for all other sales including but not limited to
retail sales" for certain Y2K fix software identified therein. OTP asserts
that the Company violated that Agreement by engaging in direct sales or
giving third parties a license to engage in direct sales of the Y2K fix
software and other related products. OTP asserts claims of copyright
infringement, breach of contract and fraud. In addition to injunctive
relief, OTP is seeking unspecified damages including profits lost through
the direct sales of the Y2K fix software, as well as attorneys' fees and
punitive damages. In response to the lawsuit filed by OTP, the Company
denied the claims filed against it and has filed counterclaims seeking
rescission of the Software Rights Agreement and asserting breach of
contract of that Agreement. The Company has also filed additional claims
against OTP and its principal, Ernest Hemple, arising from conduct that the
Company believes to constitute defamation and interference with contract.
On November 8, 2000. On The Planet filed in Federal Court and release of
lawsuit. In March 2001 OTP and the Company reached a settlement agreement
relating to the remaining cash liability owed OTP. OTP agreed to forgive
any remaining debt in exchange for 1,500,000 of the Company's restricted
common shares.
2. Rosenthal Engineering v. Intelliquis. This case was brought by Doren
Rosenthal d/b/a Rosenthal Engineering ("Rosenthal") against the Company,
based on claims made by Rosenthal that stem from an alleged breach of a
licensing agreement. The case includes claims for breach of contract,
misappropriation of trade secrets, and others.
Rosenthal is a software programmer that developed computer programs
designed to fix Year 2000 bugs in software programs. Rosenthal alleges
that he entered into a licensing agreement with Intelliquis, whereby
Intelliquis licensed Rosenthal's software program and included it in the
Company's own Year 2000 fix, and whereby Intelliquis did not pay certain
royalties owed to Rosenthal, and also that Intelliquis made unauthorized
use of Rosenthal's program. Rosenthal has filed a lawsuit in the
Superior Court for the State of California based on the contract and
related claims, and is seeking damages in an unspecified amount.
Rosenthal has also threatened to file a lawsuit in Federal Court based
on claims related to intellectual property. Outside of the litigation,
Rosenthal has stated that he is seeking in excess of $1,000,000.
Intelliquis denies all of the allegations made by Rosenthal
in the case, and has filed a Demurrer (the state court equivalent of a
motion to dismiss) to the complaint. Intelliquis has taken the position
that any royalties owed, if any, are of a nominal amount, and were
properly withheld as a reserve due to potential returns of the Rosenthal
product as a result of product defects. Intelliquis also denies that it
engaged in any misappropriation of trade secrets, or any of the other
acts alleged. Intelliquis intends to defend the present and threatened
actions of Rosenthal.
This matter is in its early stages, and the outcome is uncertain.
There can be no assurance that Intelliquis will be successful in its
defense of the case, and in the event that Intelliquis is unsuccessful,
the amount of potential damages that may be awarded is also uncertain.
3. United Television, Inc. d.b.a. KTVX 4 Utah vs. Intelliquis, LLC,
Third District Court, Salt Lake County, State of Utah Civil No.
000909917; In its Complaint, United Television, Inc. asserts a claim for
payment in the amount of $5,848.67 purportedly owed for the broadcasting
of advertising for Intelliquis International, Inc. (the "Company"). On
February 7, 2001, United Television and the Company entered into a
Stipulation through which the Company agreed to pay to United
Television, Inc. the sum of $2,500.00 payable in three installments, the
final installment in the amount of $250.00 being due on April 16, 2001.
Upon payment in full, this matter will be dismissed, with prejudice.
4. Onesource.com, Inc. vs. Intelliquis, LLC, Third District Court, Salt
Lake County, State of Utah Civil No. 000411165: Onesource seeks to
recover the sum of $44,943.11, allegedly owed for the packaging,
shipping and distribution of software products produced by the Company.
The Company has filed an Answer and Counterclaim through which it seeks
to recover the sum of approximately $50,000.00.
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The claim of the Company arises from the shipment of packaged product by
Onesource in an amount substantially in excess of the amount ordered by
distributors and the consequent return of those products resulting in a cash
reimbursement paid by Onesource and debited to the Company. Discovery
is proceeding in this matter.
This matter is in its early stages, and the outcome is uncertain.
There can be no assurance that Intelliquis will be successful in its
defense of the case, and in the event that Intelliquis is unsuccessful,
the amount of potential damages that may be awarded is also uncertain.
5. Elite Marketing, LC vs. Intelliquis, LLC, Fourth District
Court, Utah County, State of Utah Civil No. 00403243: Elite Marketing
has asserted claims against the Company through which it seeks to recover
$19,180.32, allegedly due as payment for the production of compact discs.
Elite Marketing and the Company entered into a Stipulation and Settlement
Agreement on March 14, 2001. That Agreement requires that the Company make
payments to Elite Marketing in the total amount of $4,000.00, of that
amount a final payment in the amount of $2,000.00 is due and payable on
April 15, 2001. Upon receipt of payment in full by Elite Marketing, the
Complaint in this matter will dismissed, with prejudice.
6. All West Communications vs. Intelliquis, LLC, Third District Court,
Salt Lake County, State of Utah Civil No. 000410898: All West
Communications has filed a Complaint seeking the recovery of $12,677.21
allegedly owed for telecommunication services. Intelliquis has agreed
to make monthly payment of $1,000 per month till satisfied.
7. MCB Printing, Inc. d.b.a. Excell Graphics, Inc. vs. Intelliquis,
et al., Fourth District Court, Utah County, State of Utah Civil No.
000403250: In its Complaint, MCB Printing, Inc. seeks to recover
$16,350.50 allegedly owed for printing services provided to the Company.
The Company has filed an Answer through which it denies that any amounts
are owing to plaintiff. Discovery is now under way in this matter. This
matter is in its early stages, and the outcome is uncertain. There can be
no assurance that Intelliquis will be successful in its defense of the
case, and in the event that Intelliquis is unsuccessful, the amount of
potential damages that may be awarded is also uncertain.
8. Cyberspace Headquarters, LLC vs. Intelliquis International,
Inc.,United States District Court, Central District of California, State
of California Civil No. 00-12834 AHM: In this action Cyberspace
Headquarters claims that the Company breached a License Agreement which
licensed certain software to the Company for inclusion in its products.
Cyberspace Headquarters argues that because the License Agreement was
breached, the Company's license to make use of that software was
terminated and thus, through continued sales, the Company infringed on
the Cyberspace Headquarters copyright to that software. The Company has
filed an Answer in which it denies those allegations and will file a
Counterclaim through which it will seek to recover damages arising from
certain defects in the software licensed from Cyberspace Headquarters.
In a Rule 26(f) Report, Cyberspace Headquarters states that it will seek
to recover damages in an amount between $50,000.00 and $200,000.00. The
Company has submitted a Notice of Claim to its insurer, Evanston
Insurance Company. The insurer, at this time, has neither admitted nor
denied coverage.
This matter is in its early stages, and the outcome is uncertain. There
can be no assurance that Intelliquis will be successful in its defense
of the case, and in the event that Intelliquis is unsuccessful, the
amount of potential damages that may be awarded is also uncertain.
9. Cyberspace Headquarters, LLC vs. Intelliquis In
ternational, Inc., Superior Court, State of California, County of Los
Angeles Civil No. BC241520; In this state court companion case,
Cyberspace Headquarters seeks to recover damages allegedly arising from
the breach of the License Agreement, as discussed immediately above,
and, in addition, has asserted claims purportedly arising under the
California Business Practices Act for an interference with prospective
economic advantage. Cyberspace Headquarters alleges that it is entitled
to recover "not less than $45,000.00" on its breach of contract claim.
The Company has filed an Answer denying the material allegations of the
Complaint and will file a Counterclaim based on the defective software.
Cyberspace Headquarters has not specified the damages, which it seeks to
recover on the remaining claims. This matter is in its early stages, and
the outcome is uncertain. There can be no assurance that Intelliquis
[4]
will be successful in its defense of the case, and in the event that
Intelliquis is unsuccessful, the amount of potential damages that may be
awarded is also uncertain.
10. MSAS Global Logistics, Inc. vs. Intelliquis, LLC d.b.a. Intelliquis
International, Inc. Third District Court, Salt Lake County, State of
Utah Civil No. 00411518: In its Complaint, MSAS Global Logistics asserts
claims based on an open account for the shipment of the Company's
products through which it seeks to recover $91,004.21. The Company has
filed an Answer, denying the material allegations of the Complaint and
has asserted a Counterclaim through which it seeks to recover
$300,000.00 as damages for the negligent destruction of certain products
by agents of MSAS Global Logistics. This proceeding remains in the
discovery stage of litigation.This matter is in its early stages, and
the outcome is uncertain. There can be no assurance that Intelliquis
will be successful in its defense of the case, and in the event that
Intelliquis is unsuccessful, the amount of potential damages that may be
awarded is also uncertain.
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