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The highs and lows of IQ.

Founder Unloads Interest for $1,000 as Company Shuts Down; Will He Look Internationally?

PEERING OVER THE TOP of his glasses, W.A. Robinson cuts a curious figure.

He's not wearing the bifocals expected of a 57-year-old man, but sleek goggles flickering in the ruby glow of light-emitting diodes.

Robinson, a hypnotherapist, former stockbroker and ex-con, is demonstrating the new-age invention that launched his Little Rock-based IQ International Inc. into the rarified air of the world export market and the exotic pages of The Sharper Image catalog.

In four years, he says, more than 50,000 of his InnerQuest glasses had been sold, bringing annual sales of $3.2 million.

The "brain wave synchronization" glasses, used primarily for relaxation and learning enhancement, seemed destined to propel the company into unimaginable riches.

It was a mirage.

Under the surface, the company was torn asunder by a battle with the Food and Drug Administration, a rash of epileptic seizures and the loss of its Sharper Image contract.

A planned stock offering was cancelled in the fall amid accusations that Robinson had deceived potential investors. In November, the company filed for Chapter 11 bankruptcy protection.

IQ's product liability insurance expired on Feb. 1, and it's unlikely that any company will pick it up.

A few weeks back, Robinson finally sold his 62 percent interest in the company to Worldwide Capital Corp. for a measly $1,000. He claims to have invested about $230,000 in the company by the time it failed.

Last week, the company temporarily closed down while a court-appointed trustee assessed the quagmire.

"The company shutting down has left me virtually broke," he says.

Wilbur A. Robinson made his first splash in 1976 when he was convicted of a felony for possessing a stolen car.

A stockbroker at the time, he says the car was given to him by a wealthy investor who was repaying a debt, but had no title to the car.

Robinson was sentenced to three years and actually served 30 days in the county jail with the remainder served on probation.

Hypnotic Discoveries

Having surrendered his securities license, Robinson became engrossed with the hypnotherapy trade, where he dealt with high-strung, aggravated people desperate to relax and change their lifestyles.

In the spirit of discovery he purchased a cheap strobe light from Radio Shack in the early 1980s and began experimenting with patients, bouncing the strobe off the ceiling and into their eyes.

Robinson determined that certain strobe rates relaxed his clients and made them more receptive to hypnotic instructions.

Having a fundamental knowledge of electronics, he wired up a pair of sunglasses with LED's to enhance his experiments, and a new sensation was born.

Robinson had a few InnerQuest clinical devices built in 1983, incorporating white noise along with the visual stimuli. The device was well-received by clients, and in 1986 he decided to create a consumer version.

The first sale was made in the fall of 1987. By early 1988, the product was being assembled in Taiwan and distributed in Germany. The trouble began when Robinson advertised his product in meditation and new-age publications.

The early ads claimed InnerQuest could enhance athletic performance, reduce stress, control pain and "improve conditions of illness."

That got the attention of the FDA, which said the medical claims would require the product to undergo extensive testing for certification.

In September 1989 U.S. government agents seized a shipment of 400 InnerQuest glasses imported from Taiwan. Robinson changed the ads, but the FDA was not satisfied.

There was one loophole left. If Robinson could prove that a similar product was sold in interstate commerce prior to May 1976, InnerQuest would not have to undergo the lengthy FDA testing.

Robinson claims a crude but basically similar version of his product had been sold across state lines by a small company in Oregon. He submitted evidence, but the FDA found it unacceptable.

A Useful Product

On the battle raged. In the meantime, InnerQuest was compiling some respectable results.

At Arizona State University in Tempe, many disabled students have used the glasses to decrease tension and improve their learning retention.

"We never used it as a medical instrument," says Richard Jones, coordinator of the university's access learning lab. Jones was unaware of any problems with the FDA.

He says the 30 or so students per year who use the system have been carefully screened for epilepsy and the use of certain drugs.

With few exceptions, the results have been positive.

"There was one student who had a visual impairment--rapid movement of her eyes," Jones says. "This machine actually allowed her to relax. She's now in law school."

Rave reviews also are heard from Delta Health Care in Dallas, which has used InnerQuest to help break chemical dependence, and the Chileda Habilitation Institute in Wisconsin, where the product has been successful in calming autistic children.

Until recently, the FDA controversy had not affected business. Robinson says sales grew exponentially from $45,000 in 1988 to $1.6 million in 1990 and $3.2 million in 1992.

He believes sales could have reached $50 million in a matter of years were it not for the FDA's antagonism.

The snazzy Sharper Image stores and catalogs accounted for 25 percent of IQ's business. Ten percent of the volume came from other U.S. dealers and 65 percent of sales came from the export market -- most notably Germany and Japan.

In the heady month of May 1992, Little Rock native James Lilly was named chief executive officer and president of the company, leaving a posh position as vice president of logistics for Unisys Corp.

Lilly seemed confident, investing $90,000 of his own money in the company for 10 percent of its stock. As soon as he arrived, IQ announced plans to hold a limited stock offering to raise $875,000 for working capital.

"This market, this product will mushroom," Lilly told a group of distributors after he arrived.

Pattern of Deceit Emerges

In applying for the stock offering, the company filed false information about Robinson's background to the Arkansas Securities Department.

The application claimed Robinson held a bachelor's degree from the University of Chicago and two master's degrees from the University of Arizona in Tucson.

It's not true.

Robinson says his subordinates at IQ submitted the false information, and he did not bother to read over it.

He now claims a bachelor's degree in business administration from Arizona State, but the university says it hasn't granted a degree to anyone with Robinson's name or social security number. Robinson says he has lost his copy of the degree.

Also excluded from the securities application was his felony conviction and his personal bankruptcy in the early '80s. The conviction, however, was already on file with the Securities Department due to Robinson's experience as a broker.

In July 1992, the FDA showed up to audit the company and informed Lilly that the product must be approved as a medical device before it could be sold. The FDA also visited The Sharper Image that month.

Lilly, who maintains he never knew of any troubles with the FDA or with Robinson's background, abruptly left IQ after three months at the helm. He estimated that his investment losses, moving expenses and salary cut cost him almost $250,000.

Then there was the lawsuit.

Carilyn Sue Hipp of Texas sued IQ for $43 million after a pair of demonstration glasses in a Sharper Image store caused her to have an epileptic seizure, fall to the ground and strike her head.

Robinson says the suit was frivolous, but notes that IQ's product liability insurance carrier settled with Hipp recently for $1 million.

He acknowledges five reports of seizures by Sharper Image customers who tried out InnerQuest, and another three cases worldwide. The product, however, has always carried a warning for epileptics.

"It's a pre-existing condition," Robinson says. "No one is given epilepsy."

Robinson says the seizures could have been avoided if Sharper Image would have displayed the product properly and not allowed customers to use a model with brighter lights that was only intended for display purposes.

Motivated by the reports of epileptic seizures, the state Health Department got into the act in September 1992. The department threw a quarantine on InnerQuest glasses stored at The Sharper Image warehouse in Little Rock until the FDA could straighten out the paper work to seize the glasses.

With the company coming apart at the seams, Robinson filed for bankruptcy in early November.

The petition revealed total IQ assets of $1.03 million and liabilities of $837,000.

The largest unsecured claim in the bankruptcy case is a $44,415 debt to Air Traffic Service Corp. of Little Rock, owner of the building where IQ is headquartered on Rodney Parham Road. Two claims by Little Rock tax lawyers total $58,581, and IQ owes another $28,250 to the accounting firm of KPMG Peat Marwick.

Robinson himself says the company owes him $300,000. The day after the bankruptcy filing, the FDA moved to seize the quarantined glasses. Since then, Robinson says, The Sharper Image has withheld $85,000 in accounts payable.

On Dec. 2, with IQ International being cut back to a skeleton staff, and everything going wrong, Robinson called off the stock offering.

Unless the bankruptcy court will allow the company to make products strictly for export, IQ International appears doomed.

Robinson himself has bailed out, although his wife retains 28 percent of the company's worthless stock.

"It's going to be very difficult," says James Dowden, the court-appointed trustee. The fate of the company will be known within two weeks, he says.

But Robinson still has one trick up his sleeve. He might start from scratch in another country, where the government isn't so picky.

Lately, Robinson's face has been popping up in newspaper advertisements as he attempts to regenerate the hypnoptherapy business he says once earned him $200,000 a year. But his Markham Street office is very quiet these days, leaving plenty of time for reflection.

Michael Strange, his former hypnotherapy colleague, went elsewhere last year when Robinson became notorious.

The old telephone number for their office forwards the caller to Strange, not Robinson. Outside the building, the vanity plate on his car says "TRANCE," conjuring images of Robinson in his leather armchair, goggles donned.

If he truly believes in his invention, he may use it often in the tense months to follow.
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Title Annotation:bogus therapeutic powers of IQ International Inc.'s InnerQuest glasses
Author:Haman, John
Publication:Arkansas Business
Date:Feb 8, 1993
Previous Article:Let the battle begin.
Next Article:Small business update: Arkansas entrepreneurs at work.

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