<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 2002
                                       OR
              | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934
                 for the transaction period _____ from to _____

                         Commission File Number 0-02555

                              Veridien Corporation
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                 (Name of Small Business Issuer in its charter)

         Delaware                                                59-3020382
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(State or other jurisdiction                                  (I.R.S. Employer
     of incorporation)                                       Identification No.)

2875 MCI Drive, Suite B, Pinellas Park, Florida                  33782-6105
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   (Address of principal executive offices)                      (Zip code)

Issuer's telephone number (727) 576-1600
                          --------------

Securities registered under Section 12(b) of the Exchange Act:

Title of each class                               Name of each exchange on which
                                                            Registered

-----------------------------                     ------------------------------

-----------------------------                     ------------------------------

-----------------------------                     ------------------------------

         Securities registered under Section 12(g) of the Exchange Act:

                                  Common Stock
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                                (Title of class)


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                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No | |

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|

State issuer's revenues for its most recent fiscal year. $834,647.

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. At the average bid and asked prices of stock as of March 18, 2003 of
$0.035, the aggregate market value of voting stock held by non-affiliates is
$5,164,752.
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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                       PAGE

<S>         <C>                                                               <C>
Item 1      Description of Business                                            3

Item 2      Description of Property                                           11

Item 3      Legal Proceedings                                                 13

Item 4      Submission of Matters to a Vote of Security Holders               13

PART II

Item 5      Market for Registrant's Common Equity and Related                 14
            Stockholder Matters

Item 6      Management's Discussion and Analysis or Plan of Operation         18

Item 7      Financial Statements                                              24

Item 8      Changes in and Disagreements with Accountants on                  40
            Accounting Financial Disclosure

PART III

Item 9      Directors, Executive Officers, Promoters and Control Persons;     41
            Compliance with Section 16(a) of the Exchange Act

Item 10     Executive Compensation                                            44

Item 11     Security Ownership of Certain Beneficial Owners and Management    46

Item 12     Certain Relationships and Related Transactions                    47

Item 13     Exhibits and Reports on Form 8-K                                  49
</TABLE>


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ITEM 1. DESCRIPTION OF BUSINESS

ORGANIZATION/HISTORICAL BACKGROUND

Following our incorporation in Delaware on June 4, 1991 as "VCT Acquisitions II,
Inc.", we acquired all of the assets of another Delaware corporation called
"Viral Control Technology, Inc." On November 8, 1991, we changed our name to
Veridien Corporation.

We were founded primarily to develop, manufacture, distribute and sell
disinfectants, antiseptics, and sterilants which are inherently non-toxic, and
which are environmentally friendly, decomposing into harmless naturally
occurring organic molecules. To this end, we developed and patented a hard
surface disinfectant, VIRAHOL(R), which has been registered with the
Environmental Protection Agency (EPA), and an antiseptic hand gel sanitizer
which is drug listed with the Food and Drug Administration (FDA), containing the
patented VIRAHOL(R) composition. Prior to the year 2000, our primary emphasis
was on the development, marketing and sale of such products, primarily to the
medical and dental markets, which included:

            VIRAHOL(R) (now marketed under the brand name of VIRAGUARD(R)) - A
      ready-to-use, hard surface disinfectant/cleaner that is a tuberculocide,
      bactericide, virucide, and fungicide.

            VIRAGEL(R) (now marketed under the brand name of VIRAGUARD(R)) - A
      waterless, antiseptic hand sanitizer to supplement routine hand washing
      for the family or for the person on the job when no water is available, to
      sanitize hands or for antiseptic cleansing of hands

ORIGINAL BUSINESS PLAN

Our original business plan was focused on the sale and distribution of the
VIRAHOL(R)/VIRAGUARD(R) formulation to the medical and dental markets. Initially
the claims which had been approved by the EPA (1990) related to two viruses:
HIV-1 (AIDS virus) and Herpes simplex type 2, and three bacteria: Staphylococcus
aureus, Salmonella choleraesuis, and Pseudomonus aeruginosa.

The three bacteria listed were those the Company believed were required to
secure hospital sales. However, the hospitals also wanted a tuberculocidal
claim. Accordingly, we performed the necessary research and testing and secured
approval for claims related to Mycobacterium tuberculosis and Trichophyton
mentagrophytes (fungus) in 1993.

REVISED BUSINESS PLAN -- 1999-2001

In 1999 we began the development of an evolving, three-pronged expansion of our
business plan. The essence of the plan was to expand our product base and our
marketing approach beyond our historical focus on the medical and dental
markets.

The change in our business plan was based upon our Management's analysis of our
position after several years of pursuing the original business plan. Although
the VIRAHOL(R)/VIRAGUARD(R) formulation is believed to offer advantages over
competitive products, it was noted that (a) there were a number of competitors
in the disinfectant market and establishment of a meaningful market share would
require a continuing expenditure of time, effort and expense and (b) many of the
competitors with better name recognition were financially stronger, so that the
Company would have many barriers to overcome in building a market. Based upon
this evaluation, Management decided that the Company needed to expand both its
product focus and its market focus beyond the disinfectant products and beyond
the medical and


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dental industries. A plan, structured by Management, was implemented for 2001.
Under the plan, the Company's business was divided into two areas of focus.

The first area, the Disinfectant Division, was essentially the Company's line of
infection control products with the liquid and gel product lines enhanced with
the addition of new product delivery configurations such as canisters,
towelettes and private labeling.

The second area, the Healthy Lifestyles Division, was focused on new products
for which we had obtained distribution/sales rights, including: 1. the
SunSwipe(TM) product line (sunscreen impregnated towelettes in SPF 15, SPF 30,
SPF 45, Baby 45 and after-tanning; all in a towelette product delivery
configuration) and 2. BugSwipe(TM) (an insect repellant in the towelette product
delivery configuration).

This Revised Business Plan was not intended to de-emphasize or abandon
VIRAHOL(R)/VIRAGUARD(R) or the disinfectant market. Rather, the Disinfectant
Division was to actively enhance the marketing of those historic products plus
add new product introductions and expand beyond the medical and dental markets.

During 2001, the Company applied to the EPA to expand its label claims. In
addition, the product delivery configurations were strengthened by being
broadened to include canisters and towelettes in two sizes each. The Company
expanded marketing to the janitorial and sanitation industries and to the
restaurant industry, rather than only the medical and dental market. At the same
time, the other new division gave the Company many new and profitable products
which could be offered to a wide variety of larger markets, including especially
the retail and specialty markets.


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FURTHER REVISIONS -- 2002

As the Company's Business Plan has evolved, the Company has experienced delays
due to the requirements of the regulatory process. For example, in order to make
a "kill" claim with respect to any specific pathogens for products under the
jurisdiction of the EPA, the Company must:

      1.    contact an approved testing laboratory and determine than an EPA
            guideline exists for testing of a product against that pathogen;

      2.    if no protocol exists (e.g., with respect to Hepatitis B and
            Hepatitis C for the towelettes), the laboratory must work with the
            EPA to secure a guideline;

      3.    the guideline is customized by the laboratory as a "protocol" for
            testing of the specific product;

      4.    direct the laboratory to perform the necessary testing, which
            normally takes several weeks, and to prepare the written report in
            accordance with EPA guidelines, which typically takes several weeks
            more;

      5.    the report, with required documentation, is sent to the EPA, where
            it undergoes preliminary review:

            i)    if the submission is deemed to be in compliance, it is sent
                  for scientific review, which takes 180 days; but

            ii)   if the submission is not deemed to be in compliance it is
                  returned to the Company for amendment;

      6.    if, during the scientific review, errors and/or omissions are found
            in the submission, it is returned at the end of the 180-day period,
            and upon refiling, the 180-day period begins again;

      7.    if, at the end of the 180-day period the EPA approves the "kill"
            claim, the EPA gives recommendations regarding label wording; and

      8.    the Company then amends its label to comply with EPA requirements.

As noted above with respect to hospital requirements, sales of our products are
directly affected by the "kill" claims. Thus, regardless of the specifics of our
Business Plan at any given time, implementation of certain programs may be
dependent upon timing of EPA approvals. Furthermore, securing EPA approvals may
have larger or smaller sales impact than anticipated, requiring reevaluation.

Since implementing the revised plan in 2001 we have received a number of
additional EPA approvals:

      1.  For the towelettes:
              Tuberculocidal:
                 Mycobacterium bovis (BCG)
              Bactericidal:
                 Streptococcus pyogenes, ATCC #19615
                 Escherichia coli, ATCC #11229
                 Vancomycin-resistant Enterococcus faecium (VRE), ATCC #51559
                 Staphylococcus aureus (MRSA), ATCC #33591

              Fungicidal:

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                 Trichophyton mentagrophytes, ATCC #9533
              Virucidal:
                 Herpes simplex type 1, ATCC #VR260
                 HIV-1 (AIDS Virus)

      2.  For the liquid:
              Bactericidal:
                 Streptococcus pyogenes, ATCC #49399, #19615
                 Escherichia coli, Strain 0157, ATCC #43895
                 Vancomycin-resistant Enterococcus faecalis (VRE), ATCC #51299
                 Methicillin-resistant Staphylococcus aureus (MRSA), ATCC #33593
              Virucidal:
                 Cytomegalovirus (CMV), ATCC #VR538
                 Respiratory syncytial virus (RSV), ATCC #VR26
                 Rotavirus (SA-11; Group A)
                 Influenza type A-2 (Hong Kong), ATCC #VR544
                 Adenovirus type 2, ATCC #VR846

Our potential market for these products has increased as a result of the
additional approvals.

For 2003 we have made the following adjustments to our focus:

CURRENT FOCUS

During 2002 and early 2003, we have continued to focus our sales efforts on our
Disinfectant products. We have expanded our product line to include Viraguard(R)
Toilet Seat Wipes, which are available for use in restrooms in hotels,
restaurants, airports and other public places as well as in hospitals and
physicians' offices, and other places where disinfection is critical to
controlling the spread of disease carrying organisms.

To spearhead expansion of our Dental Markets, beginning December 1, 2002,
Veridien launched a national sales force of specialized dental representatives
to target dental supply and distribution companies. The sales force is managed
by MKS Associates, a specialty health products marketing company. Mark Siegler,
the Principal of MKS Associates, has extensive experience in the dental supply
industry.

During 2002, we signed a contract with Dunnigan Developments Ltd. to coordinate
sales and marketing activities with our large multi-national and other major
corporate customers. Paul Dunnigan, the principal of Dunnigan Developments Ltd.,
has 22 years experience in marketing and merchandising consumer products, as
well as in supply-chain management for large retailing operations, including
many years with a multi-national corporation.

We are aggressively continuing to pursue possible strategic alliances with a
number of major corporations to further strengthen our Company.

During 2002, we entered into a global distribution agreement with E.I. DuPont de
Nemours and Company to market Veridien's line of sunscreen towelettes. DuPont
has commenced marketing Veridien's towelettes and sales of these products in the
Emergency Services and Industrial markets are expected to commence in the second
quarter of 2003.


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In addition, we entered into a five (5) year Distribution Agreement with DuPont
for all Viraguard(R) products in the United States of America for specific
market segments. The Agreement includes certain exclusivity rights for the
Emergency Services and Industrial markets. The products concerned are
Viraguard(R) Hard Surface Disinfectant Towelettes, Viraguard(R) Antiseptic Hand
Wipes, Viraguard(R) Disinfectant solution in one gallon, 16 ounce and 2 ounce
formats all of which are being produced for DuPont under their brand
label. Deliveries commenced in February 2003.

Employees - We employ four persons, all of whom are full-time employees.

           Department                            Number of Employees
           ----------                            -------------------
           Management & Finance                           2
           Sales                                          1
           Administration/Regulatory                      1

We also use consultants to assist with administration, sales, operations, and
marketing. In addition to our employees, certain Board members, while not
employees, provide assistance to us.  Our core team including employees, active
Board members, and primary consultants encompasses eleven people.

THE DISINFECTANT DIVISION

Competitive Advantage - In the field, there are many competitors in our major
product categories: (i) hard surface disinfectants and (ii) instant hand
sanitizers. Our competitors include companies currently marketing disinfecting
and sanitizing products for use in the home, hospital, private medical and
dental offices, restaurants, and other institutions. Many of the competitor's
products contain one or more of the following four ingredients: quaternary
ammonium, phenol, chlorine, or glutaraldehyde. One of the common characteristics
of these types of active ingredients is that they are harmful to the skin and
usually require gloves when being used. Our Virahol(R)/Viraguard(R) product
line, based on our patented formulation, has the basic underlying characteristic
of being recognized by the FDA as being safe and effective for use on human
skin. The active ingredient in each of our products is Isopropyl
alcohol/Isopropanol. The other ingredients in our patented composition are
propylene glycol, water and fragrance. Propylene glycol is a wetting agent that
retards evaporation and aids in the penetration of cell walls, as well as lowers
flammability. Isopropyl alcohol/Isopropanol and propylene glycol combine to
create a synergistic action that makes the formulation more effective than
alcohol alone.

Many of our competitors, recognizing an untapped market potential in changing
consumer awareness about disease transmission, are expanding the market through
various marketing campaigns. This market expansion is deemed to be of great
importance to us as increased market growth of the market base (due to increased
awareness) will allow for an easier penetration by our products.

Research & Development - Research and Development may be carried out from time
to time in order to assist the company in moving forward with its existing
and/or additional products. Product research and/or product testing may form
part of the costs to be incurred.

Pricing Strategy - The division's pricing strategy remains unchanged from last
year. Although the VIRAHOL(R) composition is inherently more expensive than the
raw materials of the competitive products, our new pricing strategy is to remain
as close as possible to competitors' pricing to emphasize the clear price/value
comparison. We revised our prices during 1999 and again in 2002 to take
advantage of various size containers which are in demand and to adjust to new
market conditions for raw materials and finished products. We still believe that
our current pricing structure allows us margins which can support the


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Company at the anticipated volume of sales during the next year and yet provide
our customers with competitive pricing.

Expanded Marketing - While we continue with our sales representatives to sell to
the medical and dental market, we are positioning to move into the janitorial
and sanitation market and the restaurant market, for both our surface
disinfectant, which has EPA approval, and the hand sanitizer, which is FDA drug
listed. While there is substantial competition in the retail market for
towelettes, the competition within niche markets we seek is not so intensive and
the addition of the towelettes in the product line expands our configurations
for delivery of our patented formulation.

Manufacturing -Our products are manufactured in various locations primarily by
contract fillers and contract packagers.

Availability of Raw Materials - The largest ingredients by weight for the
VIRAHOL(R) composition are isopropanol and propylene glycol. Both of these
chemicals are readily available from a wide variety of sources nationally and
internationally, at competitive prices. Although we prefer to use isopropanol as
the monohydric alcohol and propylene glycol as the polyhydric alcohol, our
patent covers the full range of both of these alcohols so that a wide variety of
choices are available should a shortage in one or more chemicals occur, subject
to EPA approval. Substantial numbers of companies produce both the plastic and
corrugated packaging used by the Company. Trade secret ingredients are employed
for fragrances used in the Company's products but are available from several
sources.

Governmental Regulation - Those who develop products to control pests are
subject to regulation under several Federal Laws. However, only certain pest
control products are subject to registration. The Federal Insecticide, Fungicide
and Rodenticide Act (FIFRA) and Federal Food, Drug, and Cosmetic Act (FFDCA) As
Amended by the Food Quality Protection Act (FQPA) of August 3, 1996, requires
that before any person in any state or foreign country can sell or distribute
any pesticide in the United States, they must obtain a registration from the U.
S. Environmental Protection Agency (EPA). The term "pesticide," as defined in
FIFRA section 2 (u), means any substance or mixture of substances intended for
preventing, destroying, repelling, or mitigating any pest, virus, bacteria, or
other micro-organism (except viruses, bacteria, or other micro-organism on or in
living man or other living animals). Pesticides include fungicides,
disinfectants, sanitizers, and germicides. After the registration process and
submission of required data, an accepted label is stamped accepted and returned
to the registrant for the registered product. Annual Pesticide Maintenance Fees
are required for registered products. Anyone who sells/distributes a pesticide
(including antimicrobial products such as disinfectants, sanitizers, and
germicides) must register that product in every state that they intend to
sell/distribute and pay a registration fee. As of this date, Alaska does not
require a registration fee but does require registration.

In order to "produce," defined to mean "to manufacture, prepare, propagate,
compound, or process any pesticide . . . or to repackage or otherwise change the
container of any pesticide . . ." the plant(s) and/or facility must be
registered. Upon registration an establishment number is assigned. The label
and/or container must bear the registration number as well as the establishment
number. Annual reports are required to be submitted to the U.S. EPA indicating
the amount produced, repackaged/relabeled for the past year, amount
sold/distributed for the past year U.S. and Foreign, and amount to be
produced/repackaged/ relabeled for the current year.


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The Company currently has two products registered with the United States
Environmental Protection Agency. They are as follows:

A.    VIRAHOL(R) Hospital Disinfectant/Cleaner & Instrument Presoak, assigned
      EPA Registration No. 60142-1, and has an EPA accepted label, is designed
      for effective disinfecting, cleaning and deodorizing of hard inanimate
      surfaces such as walls, sink tops, tables, chairs, telephones, toilet
      seats and bed frames.

B.    VIRAHOL(R) Hospital Surface Disinfectant Towelette, assigned EPA
      Registration No. 60142-3, and has an EPA accepted label, is designed for
      effective cleaning, disinfecting and deodorizing of hard non-porous,
      inanimate surfaces such as walls, sink tops, tables, chairs, telephones,
      toilet seats and bed frames.

Additional brand names for these two products (e.g. VIRAGUARD(R), Viraguard(R)
Toilet Seat Wipes, etc.) are also registered.

The Company is registered and has been assigned EPA Establishment No.
60142-FL-1. Also our contract manufacturers are registered EPA establishments.

In addition, the Company contract manufactures and distributes Antiseptic Drug
Products per 21 CFR Parts 333 and 369 and respective monographs, Topical
Antimicrobial Drug Products for Over-the-Counter Human Use. Veridien
Corporation's establishment is registered and a Labeler Code Number was
assigned. Per Title 21, Part 207 of the Code of Federal Regulations (CFR), the
products are drug listed with the Food and Drug Administration (FDA).

All regulated products, EPA and FDA, are manufactured in compliance with Good
Manufacturing Practices (GMPs).

THE HEALTHY LIFESTYLES DIVISION

This division is focused on new products for which we have obtained
distribution/sales rights. Products in this division include our SunSwipe(TM)
line and BugSwipe(TM) product.

We have adopted a new approach to marketing SunSwipe(TM) and BugSwipe(TM)
products for 2003 and onward. We are developing Master Distributor Agreements
with companies who have strong market penetration in specific areas. These
include Emergency Services, Healthcare, Retail Mass Merchandise, Sporting Goods,
Supermarkets, Convenience Stores, Industrial and Institutional sales channels.
Master Distribution agreements allow us to take advantage of the Distributors'
extensive abilities to place products in these markets.

There are many sources of raw materials for all of the products in this division
and many manufacturing alternatives available to us. We will be competing with
numerous other companies when introducing these products; however, we believe
that our innovative delivery systems for these conventional products will give
us a competitive edge.

The Company manufactures and distributes sunscreen towelette products per 21 CFR
Part 352 and respective tentative monographs, Sunscreen Drug Products for
Over-the-Counter Human Use. A Labeler Code Number has been assigned to
Veridien's subsidiary, The SunSwipe Corporation L.L.C. The Company's contract
manufacturers are registered FDA establishments. Per Title 21, Part 207 of the
Code of Federal Regulations (CFR), the products are drug listed with the Food
and Drug Administration (FDA).


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CANADIAN LICENSING

We have entered into an agreement with a Canadian company to produce and market
the VIRAHOL(R) line in Canada on a non-exclusive basis. The products have been
approved with Health Canada and are marketed under the VIRAGUARD(R) trade name.

COMPLIANCE WITH ENVIRONMENTAL LAWS

We have had no need to spend monies on compliance with local, state and federal
environmental laws. We are current for our annual filing of the Pesticide
Registration Maintenance Fee Filing Form for 2002, and our annual filing of the
Pesticide Report for Pesticide-Producing Establishments. The Company is in
receipt of the certificates of approval from all states that the registered
product is currently sold and/or distributed.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

This report contains some forward-looking statements. "Forward-looking
statements" describe our current expectations or forecasts of future events.
These statements do not relate strictly to historical or current facts. In
particular, these include statements relating to future actions, prospective
products, future performance or results of current and anticipated products,
sales, efforts, the outcome of contingencies and financial results. Any or all
of the forward-looking statements we make may turn out to be wrong. They can be
affected by inaccurate assumptions we might make or by known or unknown risks
and uncertainties. Many factors, such as product acceptance, competition and
marketing capabilities, will be important in determining future results.
Consequently, no forward-looking statements can be guaranteed. Actual future
results may vary materially.

We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any future disclosures we make on related subjects
in our 10-QSB, 8-KSB, and 10-KSB reports to the SEC.

We provide the following cautionary discussion of risks, uncertainties and
possible inaccurate assumptions relevant to our business and our products. These
are factors that we think could cause our actual results to differ materially
from expected results. Other factors besides those listed here could adversely
affect us.

RISKS OF OUR BUSINESS

We are a small and relatively new company. To date, we have expended much of our
efforts and funds on development of products. We are initiating sales and
marketing efforts. We are uncertain about the market acceptance of our products.

As a small company, we are highly dependent upon the efforts and abilities of
our management. The loss of the services of any of them could have a substantial
adverse effect on us. We have not purchased "key man" insurance policies on any
of them.

To date the Company has not had significant sales. We expect the growth in our
sales to come primarily from others, such as independent manufacturer's
representatives and accessing existing distribution and fulfillment systems. We
cannot be certain about our ability to attract and retain representatives until
we have had greater experience with these groups and organizations. We are also
uncertain about their sales effectiveness for our products.


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We have expended substantial capital on developing our products and beginning
sales and marketing. Until we are cash flow-positive from sales, we will need
additional financing to fund our growth. We are uncertain about our ability to
secure the financing. We are also uncertain about the costs of any financing
which we may obtain.

We have many competitors in our major product categories. We are uncertain about
our ability to compete effectively.

We must be able to manage our expected growth. This means we must increase our
manufacturing capacity, expand and improve our timely management of orders, and
secure sufficient, reliable shipping. We must also have the systems to handle
ordering of raw materials and packaging supplies, as well as managing our
inventories.

Although we are diversifying our product line to lessen our dependence on
VIRAHOL(R), which is patented, that change will take time. Therefore, under
present circumstances, if VIRAHOL(R) were to become subject to a problem such as
loss of patent protection, regulatory proceedings, or pressure from a directly
competitive product, the impact on our revenues could be significant.

RISKS OF OUR PRODUCTS

Our products, disinfectants and antiseptics, are subject to regulation by
various governmental agencies. Typically, they must be tested before they can be
introduced into the market. Our VIRAHOL(R) product is EPA registered. We are
uncertain about approvals of future products.

Any failure of our products to fulfill their stated purpose could result in
lawsuits for product liability or breech of contract. We currently maintain
product liability insurance. A successful claim against us in excess of our
insurance coverage could have a material adverse effect on our results of
operations, financial condition or business. Even unsuccessful claims would
result in expenditure of funds in litigation, as well as diversion of management
time and resources.

ITEM 2. DESCRIPTION OF PROPERTY

During 2002 we leased approximately 15,000 square feet of an
office/manufacturing/warehouse building located at 2875 MCI Drive, Suite B,
Pinellas Park, Florida 33782-6105. Our area included office space and warehouse
space. The lease commenced on May 1, 2001 and rent, at the rate of $5,900 per
month, commenced on May 16, 2001. In addition to the rent, we paid 20% of the
utilities and the real estate taxes, allocated to the percentage of the total
building occupied by us. When our lease came due on December 31, 2002 we
negotiated a renewal for the office portion only of our space, being
approximately 2,600 square feet. Our current lease commenced on January 1, 2003,
is at the rate of $ 1,625.00 per month and is for a period of 2 years. In
addition to the rent, we pay 3.5% of the utilities and the real estate taxes,
allocated to the percentage of the total building occupied by us. We were no
longer in need of the warehouse space we had previously utilized as we have now
contracted with North American Warehousing Company in Bedford Park, Illinois to
provide us with fulfillment services for our products, i.e. warehousing and
distribution. Our telephone number is (727) 576-1600, our facsimile number is
(727) 576-1611 and our website address is www.veridien.com.


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We currently lease a postage meter and copier. We have lease-to-buy agreements
for our computer network system for $532.55 per month. We own all other
equipment and furniture currently at the premises, which consists of certain
computers, computer accessories, office furniture, file cabinets, and
miscellaneous equipment.

PATENTS AND TRADEMARKS

The Company has various United States patents and a United States utility patent
pending, as follows:
     Patent No. 5,145,663, VIRAHOL(R)(Disinfectant - DSI), issued September 8,
     1992
     Patent No. 5,441,723, VIRAHOL(R)(Disinfectant - DSII), issued August 15,
     1995
     Patent No. 5,405,602, STERIHOL(R)(Cold Sterilant - CCSII), issued April 11,
     1995
     Patent No. 5,637,307, Method (Sterilant - CCSS/AOCC III), issued June 10,
     1997
     Patent No. 5,985,929, Cold Chemical Sterilant - UREA (STERIHOL(R)PLUS),
     issued November 16, 1999
     Patent No. 5,925,052, Umbilical Surgical Scissors, issued July 20, 1999
     Patent No. 5,891,052, Diagnostic Syringe Actuator Device, issued April 6,
     1999
     Patent No. 5,895,354, Integrated Medical Diagnostic Center, issued
     April 20, 1999

In addition, the Company has various foreign patents as follows:
     Australia Patent No. 628932, VIRAHOL(R)(DSI), issued January 22, 1993
     United Kingdom Patent No. 2,245,171, VIRAHOL(R)(DSI), issued April 14, 1993
     New Zealand Patent No. 269419, VIRAHOL(R)(DSII), issued July 15, 1994
     Canadian Patent No. 1,337,329, VIRAHOL(R)(DSI), issued October 17, 1995
     Mexican Patent No. 185,884, VIRAHOL(R)(DSII), issued September 9, 1997
     Great Britain Patent No. 2,294,639, VIRAHOL(R)(DSII), issued January 14,
     1998
     Australia Patent No. 695346, VIRAHOL(R)(DSII), issued November 26, 1998
     Japanese Patent No. 2,904,917, VIRAHOL(R)(DSI), issued June 14, 1999
     Canadian Patent No. 2,166,810, VIRAHOL(R)(DSII), issued March 14, 2000

The Company also has numerous trade names registered in the U.S.  The Company
has trademarks for the following brands:
     VIRAHOL(R)registered September 24, 1991, Trademark No. 1,657,969
     VIRAGEL(R)registered July 20, 1993, Trademark No. 1,783,204
     VERIDIEN(R)registered September 5, 1995, Trademark No. 1,917,134
     STERIHOL(R)registered June 16, 1998, Trademark No. 2,166,502
     VIRASCRUB(R)registered June 16, 1998, Trademark No. 2,166,503
     VIRASONIC(R)registered June 16, 1998, Trademark No. 2,166,504
     VIRA-CD7(R)registered January 6, 1998, Trademark No. 2,127,866
     VIRA-RD12(R)registered March 24, 1998, Trademark No. 2,146,770
     VIRA-GC18(R)registered May 12, 1998, Trademark No. 2,157,635
     VIRALUBE(R)registered July 7, 1998, Trademark No. 2,171,823
     VIRAGUARD(R)registered September 1, 1998, Trademark No. 2,186,559
     VIRAGUARD(R)design registered February 20, 2001, Registration No. 2429809

The Company also has trademark applications pending in the U.S.:
     BUGSWIPE, filed December 18, 2000, Application No. 76/182,457
     SUNSWIPE, filed January 24, 2003, Application No.76/484748

The Company also has a trademark application pending in Canada:
     BUGSWIPE, filed November 30, 2000, Application No. 1,084,705


                                       12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

Except for the proceedings discussed below, we are not a party to any legal
actions nor are we aware of any legal proceedings pending, threatened or
contemplated against any of our officers or directors, respectively, in their
capacities as such.

      On June 7, 2001 Veridien Corporation was served with a Complaint that was
      filed with the Circuit Court of the 15th Judicial Circuit in and for Palm
      Beach, Florida docketed to CA 01-05916[AB]. The Plaintiff is Unico
      International Trading Corp., a Florida corporation. The originally named
      Defendants were Veridien Corporation, Sheldon C. Fenton and Kenneth J.
      Chester. The Plaintiff's action claims and seeks relief for (i)
      $110,734.80 it states is owed for goods sold and delivered, (ii) an
      additional $789,091.00 it states is owed for goods sold pursuant to
      certain agreements, for which the goods were never produced or delivered,
      and (iii) $22,500.00 it states is owed for the production of molds for
      which it alleges there was a verbal agreement between the parties. The
      Plaintiff filed an Amended Complaint dropping the individuals as
      Defendants while adding the Company's subsidiaries, Norpak (US), Inc. and
      The SunSwipe Corporation, L.L.C. and two unrelated corporations as
      Defendants. This suit was settled during the third quarter of 2002 for a
      cash payment of $58,000 with no liability acknowledged by either party.
      Mutual releases have been exchanged by the parties.

      On December 28, 2001, the Securities and Exchange Commission issued a
      formal order of private investigation with respect to Press Releases and
      other communications issued by the Company concerning Anthrax related
      products. The SEC requested that the Company provide them with certain
      documents and the Company complied. Post production of documents, there
      has been no further communication between the Company and the SEC. The
      outcome of this inquiry cannot presently be determined.

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

The Annual Meeting of Shareholders for November 2001 was postponed to March 6,
2002. At that meeting, in addition to the reelection of Messrs. Van Zandt,
Gareau, Fenton, Ritter and Simmons as directors, the following matters were
approved:

1.    Approval of Amendment of Section 1 of Article Fourth of the Certificate of
      Incorporation to increase the authorized number of shares of Common Stock
      to 300,000,000.

<TABLE>
<S>                                <C>
                  For:             138,410,574
                  Against:           2,887,631
                  Abstain:           2,876,178
</TABLE>

2.    Ratification of Appointment of Carter, Cartier, Melby & Guarino, CPA's as
      the Company's auditors.

<TABLE>
<S>                                <C>
                  For:             139,735,212
                  Against:           1,781,023
                  Abstain:           2,658,148
</TABLE>


                                       13
<PAGE>
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our Common Stock is traded on the NASDAQ Bulletin Board under the stock symbol
"VRDE." The chart below breaks down the high bid and the low bid prices for each
of the last 8 quarters (as reported by NASDAQ Trading & Market Services) which
quotations reflect inter-dealer price, without retail mark-up, mark-down or
commission, and may not reflect actual transactions. During 2001 and 2002, the
high and low bid and asked prices were as follows:

<TABLE>
<CAPTION>
      Quarter Ended                 High Bid               Low Bid
      -------------                 --------               -------

<S>                                 <C>                    <C>
      December 31, 2002              $ .04                 $ .02
      September 30, 2002               .042                  .018
      June 30, 2002                    .052                  .018
      March 31, 2002                   .051                  .019

      December 31, 2001              $ .13                 $ .02
      September 30, 2001               .07                   .015
      June 30, 2001                    .07                   .025
      March 31, 2001                   .08                   .031
</TABLE>

On March 18, 2003 the closing prices of the Company's Common Stock were $0.03
bid and $0.04 asked, as quoted on the NASDAQ Bulletin Board.

HOLDERS

The approximate number of holders of record of our Common Stock, which is our
only class of common equity, is 5,522 (which includes an estimated 5,000
shareholders whose holdings are in street name).

DIVIDENDS

We have never had net profits on operations and therefore are currently
proscribed under the Delaware General Corporation Law from declaring dividends.
We have not paid any cash dividends on our Common Stock or our Preferred Stock.
Our Board of Directors has no present intention of declaring any cash dividends,
as we expect to re-invest all profits in the business for additional working
capital for continuity and growth. The declaration and payment of dividends in
the future will be determined by our Board of Directors considering the
conditions then existing, including the Company's earnings, financial condition,
capital requirements, and other factors.

In addition, there are two series of Preferred Stock which affect the payment of
dividends on the Common Stock:


                                       14
<PAGE>
      1.    At present there is a series of 100,000 shares of Preferred Stock,
            created on April 3, 1995, titled "10% Cumulative Convertible
            Redeemable Preferred Stock," of which 6,000 shares are issued and
            outstanding. These shares are entitled to receive an annual dividend
            of $1.00 per share before any dividend is paid to holders of the
            Common Stock. Any dividend not declared and paid is accumulated and
            must be paid before any dividend or distribution is made on our
            Common Stock.

      2.    Also, at present there is a series of 244,678 shares of Preferred
            Stock created on December 15, 1997, titled "Series B Convertible
            Preferred Stock," of which 174,219 shares are issued and
            outstanding. These shares are entitled to receive an annual dividend
            equal to the greater of:

            o     10% of the stated value, as adjusted from time to time; and

            o     the actual dividend per share of Common Stock as declared by
                  the Company's Board of Directors times the number of shares of
                  Common Stock into which each share of Series B Convertible
                  Preferred Stock is convertible on the dividend record date.

            The dividend is cumulative, whether or not earned and, to the extent
            not paid on a quarterly dividend payment date (commencing January 1,
            1999), is added to the stated value.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

On June 11, 2002 the Company filed a Form S-8 Registration Statement with the
Securities and Exchange Commission. The Form S-8 proposed the issuance of up to
10,000,000 shares of the Company's common stock pursuant to the then recently
adopted Employees & Consultants Compensation and Stock option Plan (see Exhibit
10.34). These share have not all be allocated. This compensation plan was
approved by the Board of Directors but has not been put forth to the security
holder for their approval.

At December 31, 2002 a total of 1,550,255 common shares had been issued to
employees and consultants under this plan. In addition 1,000,000 stock options
have been issued under this plan as follows:

<TABLE>
<CAPTION>
                                                         Weighted         Number of securities
                                                         average        remaining available for
                              Number of securities    exercise price     future issuance under
                               to be issued upon      of outstanding      equity compensation
                                  exercise of            options,           plans (excluding
                              outstanding options,      warrants &        securities reflected
                               warrants & rights          rights              in column(a))
                                      (a)                  (b)                     (c)

<S>                           <C>                     <C>               <C>
Equity compensation plans                  0                   0                        0
approved by security
holders

Equity compensation plans          1,000,000               $0.03                7,449,745
not approved by security
holders

Total                              1,000,000                                    7,449,745
</TABLE>

The plan was designed to (i) compensate employees and consultants in lieu of
cash and (ii) incentivize and compensate employees and consultants with stock
options. The material features of the plan include the


                                       15
<PAGE>
ability of the company, for a five year period commencing March 26, 2002, to
issue shares and/or stock options in any combination thereof to a combined
maximum of 10,000,000 common shares. No person or entity shall be issued more
than $ 100,000 worth of stock and no more than $ 100,000 worth of options per
year. Any options granted will have a 5 year expiration from their date of
issuance and will have an exercise price of not less than 100% of the fair
market value of the Company's stock at the time the options are granted.

SALES OF UNREGISTERED SECURITIES DURING FISCAL YEAR 2002

The following issuances of equity securities (including debt securities
immediately convertible into equity securities) without registration under the
Securities Act of 1933 occurred during fiscal year 2002:

Debentures

Issuance of Convertible Debentures

During the first quarter of 2002 the Company issued (seven) 7 Convertible
Debentures in the aggregate principal amount of $204,000 to Milfen Limited, a
Canadian corporation controlled by Mr. Shelley Fenton's mother. The principal
sum bears interest at the rate of 10% per annum and the debentures each mature
3 years from the date of their respective advances. Both the principal and all
accrued interest are immediately convertible into Common Stock at any time and
from time to time at a price equal to the closing bid price on the date of the
original advance (ranging from $0.02 to $0.04).

These issuances were considered exempt from registration by reason of Section
4(2) of the Securities Act.

2001-A,B&C Series Convertible Debenture Conversions

On the following dates the indicated dollar amounts of both principal and
accrued interest of outstanding 2001-A,B&C series Convertible Debentures were
converted to the indicated number of shares of Common Stock:

<TABLE>
<CAPTION>
                                                        Shares of Common
Series     Date of Conversion     Amount Converted           Stock
------     ------------------     ----------------      ----------------
<S>        <C>                    <C>                   <C>
  A        April 18, 2002              $56,208             1,124,167
  B        June 13, 2002               $38,539             1,101,111
  C        January 21, 2002            $55,166             1,100,000
</TABLE>

These issuances were considered exempt from registration by reason of Section
3(a)(9) of the Securities Act.

Loan and Security Agreement Conversions

On the following dates the indicated dollar amounts of both principal and
accrued interest of the Loan and Security Agreement were converted to the
indicated number of shares of Common Stock and Series B Preferred Stock:

<TABLE>
<CAPTION>
Date of Conversion      Amount Converted    Shares of Common Stock   Shares of Preferred Stock
------------------      ----------------    ----------------------   -------------------------
<S>                     <C>                 <C>                      <C>
October 7, 2002             $54,250                3,500,000                     0
</TABLE>

This issuance was considered exempt from registration by reason of Section
3(a)(9) of the Securities Act.

                                       16
<PAGE>
As at December 31, 2002, the lenders have converted $2,250,458 of debt into
Common Shares and Series B Preferred Shares at a combined average cost of the
equivalent of $0.033 per Common Share.

Common Stock

On March 31, 2002 we issued 90,170 shares of Common Stock valued at $3,000 to an
employee to fulfill the Common Stock compensation portion of his employment
contract. This issuance was considered exempt from registration by reason of
Section 4(2) of the Securities Act.

On April 2, 2002 we issued 19,697 shares of Common Stock valued at $650 to an
individual for consulting services in investor public relations. This issuance
was considered exempt from registration by reason of Section 4(2) of the
Securities Act.

On April 2, 2002 we issued 200,000 shares of Common Stock valued at $6,400 to an
individual involved in a specific retail market industry for his services
consisting of introductions and implementations to a specific retail market.
This issuance was considered exempt from registration by reason of Section 4(2)
of the Securities Act.

On April 2, 2002 we issued 50,000 shares of Common Stock valued at $2,000 to an
individual as compensation of services in investor public relations. This
issuance was considered exempt from registration by reason of Section 4(2) of
the Securities Act.

On April 2, 2002 we issued 150,000 shares of Common Stock valued at $6,000 to an
individual as compensation of services in investor public relations. This
issuance was considered exempt from registration by reason of Section 4(2) of
the Securities Act.

On April 2, 2002 we issued 210,000 shares of Common Stock valued at $10,500 to
the Chairman of the Board for related consulting services. This issuance was
considered exempt from registration by reason of Section 4(2) of the Securities
Act.

Common Stock Warrants

On March 27, 2002 we issued 500,000 warrants for the purchase of Common Stock
with an exercise price of $ 0.08 and an expiry 12 months, to an employee to
fulfill the compensation portion of his employment contract. This issuance was
considered exempt from registration by reason of Section 4(2) of the Securities
Act.

On December 31, 2002 we issued 1,000,000 warrants for the purchase of Common
Stock with an exercise price of $ 0.03 and an expiry of 24 months, to a
consultant providing marketing and management services to the Company. These
warrants were issued in fulfillment of part of the compensation portion of our
consulting agreement with this party. This issuance was considered exempt from
registration by reason of Section 4(2) of the Securities Act.


                                       17
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis provide information that we believe is
relevant to an assessment and understanding of the results of operations and
financial condition for the two years ended December 31, 2002 compared to the
same periods of the prior year. This discussion should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto included
elsewhere in this Report. The discussion contained herein relates to the
financial statements, which have been prepared in accordance with GAAP. This
Report also contains certain forward-looking statements and information. The
cautionary statements should be read as being applicable to all related
forward-looking statements wherever they may appear. Our actual future results
could differ materially from those discussed herein.

OVERVIEW

We are a Health Care company incorporated in Delaware focusing on infection
control and other Healthy Lifestyle products. The Company has developed PATENTED
and UNIQUE PRODUCTS including SURFACE DISINFECTANTS, ANTISEPTIC HAND CLEANSERS,
and SUN PROTECTION PRODUCTS.

The flagship product, VIRAHOL(R) Hospital Disinfectant/Cleaner & Instrument
Presoak, is now being marketed as VIRAGUARD(R) Hospital Disinfectant/Cleaner &
Instrument Presoak. VIRAGUARD(R) Hospital Disinfectant/Cleaner & Instrument
Presoak and VIRAGUARD(R) Hospital Surface Disinfectant Towelette are EPA
registered disinfectants designed for effective disinfecting, cleaning and
deodorizing of hard, inanimate nonporous surfaces. VIRAGUARD(R) Antiseptic Hand
Gel and VIRAGUARD(R) Antimicrobial Hand Wipes, which are regulated by the FDA
and utilize Veridien's patented formulation, are effective against germs when
soap and water hand washing is not possible.

Recent product line extensions have included sales of sunscreen impregnated
towelettes being marketed under the SunSwipe(TM) label.

The Company has incurred losses since its incorporation. At December 31, 2002,
the Company had an accumulated deficit of $34,229,321. The Company has financed
its ongoing business activities through a combination of sales, equity
financing, sale of marketable securities and debt.


                                       18
<PAGE>
RESULTS OF OPERATIONS

FISCAL 2002 COMPARED WITH FISCAL 2001

YEAR ENDED DECEMBER 31, 2002 VS. YEAR ENDED DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                         Year Ended                   Percentage of
                                         December 31                   net revenue
                                     2002            2001           2002         2001
                                     ----            ----           ----         ----

<S>                             <C>             <C>                <C>          <C>
Net Sales                       $   834,647     $   804,058         100%         100%
Cost of Goods Sold                  489,840         533,482          59%          66%
Gross Profit                        344,807         270,576          41%          34%

Operating Expenses
General & Administrative          1,218,456       1,466,414         146%         182%
Research & Development              144,420          63,205          17%           8%
(Loss) from Operations           (1,018,069)     (1,259,043)       (122)%       (157)%
Other Income (Expense) Net          204,765        (814,381)         25%        (101)%
Net (Loss) Before Taxes            (813,304)     (2,073,424)        (97)%       (258)%
Income Taxes                              0               0           0%           0%
Net (Loss)                         (813,304)     (2,073,424)        (97)%       (258)%
</TABLE>

Consolidated gross revenues for 2002 increased by $473,324, or 50%, to
$1,427,399 compared with $954,075 in 2001.

      -     Gross revenue from product sales increased in 2002 by $30,589, or
            4%, to $834,647 compared with $804,058 in 2001. The increase in
            sales revenue was due primarily to an increase in sales in the
            Viraguard(R) line. We continue active promotion of our product line
            through trade-show presentations and direct calls on both existing
            and potential customers. Our goal is to continue to expand our
            product lines and we anticipate new products, which are scheduled
            with various releases this year, will generate new revenue in this
            and future years. In addition, we continue to pursue strategic
            alliances with other corporations that have existing distribution
            networks. Our goal for these alliances is to create immediate
            distribution and fulfillment avenues for our products, while
            focusing on our capital resources.

      -     Gross rental income for 2002 decreased by $5,350, or 100%, to $0
            compared with $5,350 in 2001. The Company will no longer be
            subletting space and earning rental income. The Company previously
            subleased a portion of the 38,000 square foot manufacturing facility
            to a medical manufacturer. On May 1, 2001 our company entered into
            an agreement with Vin-Dotco, Inc. to lease approximately 15,000
            square feet of their building located at 2875 MCI Drive, Suite B,
            Pinellas Park, Florida 33782. Our lease with our previous landlord
            expired on May 18, 2001, and the Company moved into our new facility
            during May 2001. The rental agreement for the new facility was for a
            19-month period ending December 31, 2002. On January 1, 2003 the
            Company signed a new rental agreement for a 24-month period ending
            December 31, 2004 with the Vin-Dotco, Inc at the same location. The
            new agreement includes office space of 2,600 square feet. The
            Company will recognize a net savings of $51,300 annually.
            Fulfillment has been moved to various locations closer to our
            manufacturers. We have sufficient office space to satisfy our
            current needs and allow for future expansion.


                                       19
<PAGE>
      -     Gross revenue from licensing fees for 2002 decreased by $4,780, or
            100%, to $0 compared with $4,780 in 2001.

      -     Interest income for 2002 decreased by $587, or 61%, to $373 compared
            to $960 in 2001. The decrease in interest income is due primarily to
            a decreased daily cash balance earning interest.

      -     During 2002, the Company recognized a net gain on sale of property
            and equipment of $36,193 under other income. The Company received
            6,000 common shares of Nutraceutical Clinical Laboratories
            International, Inc. (NCCL) for payment on an aged accounts
            receivable. A net gain of $3,630 was realized for the difference of
            the debt paid and the fair market value of the common shares. Also
            during 2002, the Company realized a gain on the sale of obsolete
            inventory by receipt of 18,000 common shares of Nutraceutical
            Clinical Laboratories International, Inc. (NCCL). The investment in
            common shares was recorded at $31,500 which represents fair market
            value of the security. A realized gain on sale of property and
            equipment during 2002 resulted in a realized gain of $1,063. During
            2001, the company recognized a net gain on sale of property and
            equipment of $74,427 under other income. An amount of $85,000 was
            recognized for sale of the chemistry and microbiology labs and
            additional manufacturing equipment that was located at the old
            location and was no longer needed at the new location. A loss on the
            sale of assets during the relocation from the 38,000 square foot
            manufacturing facility to our current location resulted in the
            amount of $10,573.

      -     During 2002, the Company recognized a net gain on the realized sale
            of cash credits in the amount of $64,500 as a result of a
            reclassification on June 30, 2002 of the exchanged asset to
            marketable equity securities at fair market value. During 2001, the
            investment in common shares were recorded at cost less a 50%
            estimated marketability discount due to sale restrictions. The cash
            credits were originally received when the Company sold inventory in
            May 2001 to SGD International Corporation. These credits were
            originally recorded in May 2001 in the amount of $129,000 with a
            stated value of $150,500. These credits were exchanged for 430,000
            shares of restricted common shares of H-Quotient, Inc. (HQNT). At
            December 31, 2001, the $129,000 was written down to $64,500 due to
            their restrictions. Currently, a remainder of $23,000 cash credits
            still remains with SGD International.

      -     During 2002, the company recognized a change in market value of the
            marketable equity securities of $415,450. At December 31, 2002, the
            Company owned 203,733 shares of H- Quotient, Inc. (HQNT) with a fair
            market value of $273,002. During 2002, the Company sold 641,267
            shares and realized a net gain of $89,381. During 2001, the Company
            recognized a change in market value of the marketable equity
            securities of $252,186. Effective September 29, 2001, the
            restriction expired on certain shares of the Company's investment in
            H-Quotient, Inc. The Company reclassified these 415,000 shares to
            marketable equity securities and carried the investment at an
            estimated fair market value of $124,500 at December 31, 2001. The
            430,000 H-Quotient, Inc. (HQNT) common shares acquired May 2001 were
            carried as investments in common stock, restricted, at cost less a
            50% estimated marketability discount due to sale restrictions at
            December 31, 2001.

      -     During 2002, The Company realized a net gain on investments of
            $76,236. During 2002, the Company sold 641,267 H-Quotient, Inc.
            (HQNT) common shares and realized a net gain of $89,381. During
            2002, the Company also sold 24,000 Nutraceutical Clinical
            Laboratories, Inc. (NCCL) common shares at a net loss of $13,145.
            During 2001, the Company realized a permanent loss on a write down
            of a marketable security of $400,000. On December 22, 2000, the


                                       20
<PAGE>
            Company exchanged 8,000,000 restricted common shares for 61,500
            common shares of a privately owned company. The investment was
            valued at a cost of $400,000 using the estimated market value of the
            shares exchanged discounted for marketability due to the restriction
            on re-sale. On December 31, 2001, the Company recorded a permanent
            write down of $400,000 on this investment. The Company has been
            unable to obtain appropriate information from which to value this
            investment in 2002 and 2001.

Consolidated gross expenses for 2002 decreased by $786,796, or 26%, to
$2,240,703 compared with $3,027,499 in 2001.

      -     The cost of goods sold for 2002 decreased by $43,642, or 8%, to
            $489,840 compared with $533,482 in 2001. There was a decrease of 7%
            in the cost of goods ratio as a percentage of sales to 59% in 2002
            compared to 66% in 2001. The decrease in the cost of sales resulted
            primarily from an increase in profit margins from the change in
            product mix. The Company is continuing to work toward decreasing the
            cost of goods ratio as a percentage by improving the product mix
            with higher margins and new products.

      -     General, selling, and administrative expenses for 2002 decreased
            overall by $247,958, or 17%, to $1,218,456 compared with $1,466,414
            in 2001. The decrease in general and administrative costs were
            attributable to the re-allocation of senior management expenses from
            administrative wages to consulting for 2002 that decreased by 10% to
            $104,268 compared with $116,270 in 2001. Additional decreases that
            affected general and administrative costs were associated with
            professional service expenses for 2002 that decreased by 4% to
            $247,719 compared with $258,621 in 2001. Increases for 2002 include
            sales expenses by 14% to $387,031 compared with $338,733 in 2001.

      -     Research and development expenses for 2002 increased by $81,215, or
            128%, to $144,420 compared with $63,205 in 2001. The increase was
            due primarily to additional research on the focus of broadening the
            range of claims we can assert on our existing products and on
            testing new products for commercialization.

      -     Interest expense for 2002 increased by $75,775, or 24%, to $387,987
            compared with $312,212 in 2001. The increase in interest expense was
            due primarily to accrued interest on convertible debentures and note
            payables.

      -     Loss from Operations for 2002 decreased by $240,974, or 19%, to
            $1,018,069 compared to $1,259,043 in 2001. The decrease in loss from
            operations is primarily due to an overall decrease in general and
            administrative expenses, and the cost of sales.

LIQUIDITY AND WORKING CAPITAL

Historically, our principal source of financing for our research and development
and business activities has been through sales, equity offerings, and debt. As
of December 31, 2002 and December 31, 2001 we had working capital deficits of
approximately $3,818,329 and $1,560,876 respectively. Our independent certified
public accountants stated in their report on the 2002 and 2001 consolidated
financial statements that due to losses from operations and a working capital
deficit, there is substantial doubt about the Company's ability to continue as a
going concern. We are addressing the going concern issue in virtually every
aspect of our operation. We continue to cut operating expenses and are
successfully changing our product mix such that the company is achieving
improved margins. Because of our significant losses


                                       21
<PAGE>
incurred since inception, we have become dependent on (1) loans from
officers, directors, and third parties, (2) private placements of our
securities (3) revenue from sales, and (4) liquidation of our marketable
securities to fund operations. These financings and equity placements are
included in the following descriptions.

During the first quarter of 2002, the Company issued $204,000 in Convertible
Debentures. Each debenture bears interest at the rate of 10% per annum, matures
3 years from the date of its advance and is convertible at any time to the
Company's Common Stock at the closing bid price on the date of funding.

During the fourth quarter 2002 we negotiated an 18 month renewal of the Loan and
Security Agreement. During 2001, we had also negotiated a waiver with the
lenders. The original agreement required the Company to issue to the lenders
warrants, in sufficient quantity, that at all times the loan agreement was in
force the lenders could obtain 51% of all classes of outstanding stock for a
$2,500,000 exercise price. The lenders agreed to waive this provision and the
number of warrants was fixed effective January 1, 2001. At December 31, 2002 the
principal balance outstanding was $249,542, along with $212,182 in accrued
interest.

During the twelve months ended December 31, 2002, $54,250 of the Loan and
Security Agreement principal was converted by the holders to -0- shares of
Series B Preferred Stock and 3,500,000 shares of Common Stock.

During the twelve months ended December 31, 2002, Convertible Debentures with
principal balances of $135,404 and accrued interest of $14,510 were converted
into 3,325,278 shares of common stock at conversion rates between $0.035 and
$0.08 per share.

During the twelve months ended December 31, 2002 a total of 518,874 common
shares were issued to an employee under the terms of their employment contract.
The average effective price per share was $0.03. The second, third and forth
quarter components were issued under the company's S8 Registration Statement.

During the twelve months ended December 31, 2002 the Company liquidated a
portion of its marketable securities for a net cashflow of $503,230.

During the fourth quarter 2002 80,000 common shares were issued to various staff
in recognition of performance during 2002. These shares were issued under the
Company's S8 Registration Statement.

During the third quarter 2002 51,545 common shares, previously allocated to
various staff in recognition of performance during 2001, vested and were issued
under the Company's S8 Registration Statement.

During the second quarter 1,619,703 common shares were issued to providers of
various services to the company. Said services amounted to the cash equivalent
of $55,150 and included general consulting services, R&D consulting services and
shareholder relations services. The effective price per share was $0.034.

During 2002, accounts receivable decreased by $59,922 to $98,205 from $158,127
at December 31, 2001. This decrease can be attributed to shorter collection
periods for our receivables.

During 2002 accounts payable and accrued expenses increased by $242,364,
primarily due to an increase in accrued interest expenses on debt obligations of
$368,259.


                                       22
<PAGE>
During 2002, inventory decreased by 61% to $226,688 compared with $586,313 at
December 31, 2001. The decrease is due to (i) minimization of inventories on
hand as we increasingly move towards fulfillment of our customer orders via
drop-shipping from our contract manufacturers and (ii) lower SunSwipe(TM)
inventory carry forward from the 2002 season to 2003 versus what we carried
forward from 2001 to 2002.

We plan to utilize our current debt financing arrangements and pursue additional
equity and debt financing while managing cash flow in an effort to provide funds
to increase revenues to support operation, research and development activities.
We believe that our long-term success depends on revenues from operations from
product sales and ongoing royalties from technologies. If such sources of funds
are not adequate, we may seek to obtain financing to meet operating and research
expenses from other sources including, but not limited to, future equity or debt
financings.

As of March 11, 2003, we have cash of approximately $30,000 and during April and
May 2003, we expect cash flow of $300,000 from operating activities, private
placements and possible sale of marketable securities. This level of liquidity
should be sufficient to operate the Company for 180 days. The Company
anticipates increasing sales, reduced operating expenses, and additional private
placement funding will contribute to continuous operations of the Company.

We anticipate utilizing a portion of our funds to support the working capital
requirements of our anticipated increase in sales.

If disruptions occur in third party vendors that supply raw materials to our
contract fill manufacturers, we may experience the inability to have product
inventory for sale to our customers. Such events could have material adverse
effect on Veridien to compete effectively in the marketplace. Since the second
quarter 2000 Veridien has been utilizing the services of four new contract fill
manufacturers. One manufacturer handles Veridien's liquid products, another the
canister products and the third and fourth the SunSwipe(TM) product line. We
have also been able to identify alternative manufacturers for all of these
products. Our contract fill manufacturers have been successful in locating
sources of our commonly available raw materials and converting these into
finished products and we believe that use of these contract fill manufacturers
will assure us of the timely production of products.


                                       23
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

              CARTER, CARTIER, MELBY & GUARINO, C.P.A.S, P.A. LOGO

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Veridien Corporation

We have audited the accompanying consolidated balance sheets of Veridien
Corporation (a Delaware corporation) and subsidiaries as of December 31, 2002
and 2001, and the related statements of operations, changes in deficit in
stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Veridien
Corporation and subsidiaries as of December 31, 2002 and 2001, and the results
of their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note B to the
consolidated financial statements, the Company, since its inception, has
sustained substantial losses, has a deficit in stockholders' equity, a deficit
in working capital, and is experiencing a continued cash flow deficiency. Those
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding these matters are described in Note
B. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.


Carter, Cartier, Melby & Guarino, C.P.A.s, P.A.
St. Petersburg, Florida

March 8, 2003


                                       24
<PAGE>
                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                              2002          2001
                                                           ----------    ----------
<S>                                                        <C>           <C>
                                     Assets
Current Assets:
   Cash                                                    $   89,048    $    7,219
   Accounts receivable - trade
      less allowance for doubtful accounts of
        $20,584 and $46,900, respectively                      98,205       158,127
   Inventory                                                  226,688       586,313
   Marketable equity securities, trading, at fair value       273,002       124,500
         (cost: 2002, $109,738 - 2001, $376,686)
   Prepaid expenses and other current assets                   62,553        54,728
                                                           ----------    ----------
      Total current assets                                    749,496       930,887

Property and equipment:
   Furniture and fixtures                                     409,211       390,211
                                                           ----------    ----------
                                                              409,211       390,211
   Less accumulated depreciation                              377,197       364,560
                                                           ----------    ----------
                                                               32,014        25,651

Other Assets:
   Investments in common stock restricted, cost basis              --        64,500
   Patents, less accumulated amortization of
      $496,811 and $493,202, respectively                      17,571        21,179
   Security deposits and other assets                           1,625        37,022
                                                           ----------    ----------
                                                               19,196       122,701
                                                           ----------    ----------
                                                           $  800,706    $1,079,239
                                                           ==========    ==========
</TABLE>

See accompanying notes to the consolidated financial statements.


                                       25
<PAGE>
                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

                     Consolidated Balance Sheets - Continued
                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                      2002             2001
                                                                  ------------     ------------
<S>                                                               <C>              <C>
                Liabilities and Deficit in Stockholders' Equity
Current Liabilities:
   Current capital lease obligations                              $      5,150     $      5,886
   Notes payable                                                       293,323          343,792
   Convertible debentures due                                        1,981,311          100,000
   Accounts payable                                                  1,113,791        1,257,102
   Accrued compensation                                                  7,412            6,506
   Accrued interest                                                  1,053,227          684,968
   Other accrued liabilities                                            40,229           23,719
   Customer deposits                                                    41,406           20,327
   Due to stockholders                                                  31,976           49,463
                                                                  ------------     ------------
      Total current liabilities                                      4,567,825        2,491,763

Long term liabilities:
   Capital lease obligations less current                                6,022           11,173
   Convertible debentures                                              349,000        2,162,500
                                                                  ------------     ------------

      Total liabilities                                              4,922,847        4,665,436

Deficit in stockholders' equity:
   Undesignated Preferred Stock $.001 par value,
      25,000,000 shares authorized
   Convertible Redeemable Preferred Stock,
      $10 par value; 100,000 authorized, 6,000 issued and
      outstanding at December 31, 2002 and 2001                         60,000           60,000
   Series B Preferred Stock, $.001 par value,
      245,344 authorized, 174,219 issued
      and outstanding at December 31, 2002 and 2001                        175              175
   Common Stock, $.001 par value; 300,000,000 shares
      authorized, 183,274,887 and 174,179,487 shares issued
      and outstanding at December 31, 2002 and 2001                    183,275          174,181
   Additional paid-in capital                                       29,842,331       29,574,065
   Common Stock warrants                                                26,399           26,399
   Accumulated deficit                                             (34,229,321)     (33,416,017)
                                                                  ------------     ------------
                                                                    (4,117,141)      (3,581,197)
   Stock subscriptions receivable                                       (5,000)          (5,000)
                                                                  ------------     ------------
      Total stockholders' deficit                                   (4,122,141)      (3,586,197)
                                                                  ------------     ------------

                                                                  $    800,706     $  1,079,239
                                                                  ============     ============
</TABLE>

See accompanying notes to the consolidated financial statements.


                                       26
<PAGE>
                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

                      Consolidated Statements of Operations

                     Years ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                           2002              2001
                                                      -------------     -------------
<S>                                                   <C>               <C>
Sales                                                 $     834,647     $     804,058

Operating costs and expenses:
   Cost of sales                                            489,840           533,482
   General and administrative                             1,218,456         1,466,414
   Research and development                                 144,420            63,205
                                                      -------------     -------------
                                                          1,852,716         2,063,101
                                                      -------------     -------------

      Loss from operations                               (1,018,069)       (1,259,043)

Other income (expense):
   Interest expense                                        (387,987)         (312,212)
   Change in market value of marketable securities          415,450          (252,186)
   Realized gain (loss) on investments                       76,236          (400,000)
   Rental income                                                 --             5,350
   Licensing fees                                                --             4,780
   Sale of cash credits                                      64,500            64,500
   Gain on sale of property and equipment                    36,193            74,427
   Interest income                                              373               960
                                                      -------------     -------------
                                                            204,765          (814,381)
                                                      -------------     -------------

Net loss before income tax                                 (813,304)       (2,073,424)

      Net loss                                        $    (813,304)    $  (2,073,424)
                                                      =============     =============


Net loss per common share                             $      (.0046)    $      (.0136)
                                                      =============     =============

Weighted average shares outstanding                     178,849,107       152,717,290
                                                      =============     =============
</TABLE>

See accompanying notes to the consolidated financial statements.


                                       27
<PAGE>
                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

      CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT IN STOCKHOLDERS' EQUITY

                     Years ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                       Convertible
                                        Redeemable    Series B     Number                     Additional
                                        Preferred    Preferred     Common         Common       Paid-in
                                          Stock        Stock       Shares         Stock        Capital
                                       -----------   ---------     ------         ------      ----------

<S>                                    <C>           <C>         <C>             <C>          <C>
Balances at January 1, 2001               60,000        154      140,410,349     $140,411     $28,205,587

Conversion of convertible debentures                              13,357,955       13,358         882,174
Conversion of debt                                       21       16,000,000       16,000         340,536
Issuance of stock for services                                     4,411,183        4,412         145,768
Net (loss)
                                          ------        ---      -----------     --------     -----------
Balances at December 31, 2001             60,000        175      174,179,487     $174,181     $29,574,065


Conversion of convertible debentures                               3,325,278        3,324         146,589
Conversion of debt                                                 3,500,000        3,500          50,751
Issuance of stock for services                                     2,170,122        2,270          70,926
Net (loss)
                                          ------        ---      -----------     --------     -----------
Balances at December 31, 2002             60,000        175      183,174,887     $183,275     $29,842,331
                                          ======        ===      ===========     ========     ===========
</TABLE>

<TABLE>
<CAPTION>

                                                                            Stock       Stockholders'
                                           Stock        Accumulated     Subscriptions      Equity
                                          Warrants        Deficit         receivable      (Deficit)
                                          --------      -----------     -------------   -------------

<S>                                       <C>          <C>              <C>             <C>
Balances at January 1, 2001               $ 26,399     $ (31,342,593)      $ (5,000)     $(2,915,042)

Conversion of convertible debentures                                                         895,532
Conversion of debt                                                                           356,557
Issuance of stock for services                                                               150,180
Net (loss)                                                (2,073,424)                     (2,073,424)
                                          --------     -------------       --------      -----------
Balances at December 31, 2001             $ 26,399     $ (33,416,017)      $ (5,000)     $(3,586,197)


Conversion of convertible debentures                                                         149,913
Conversion of debt                                                                            54,251
Issuance of stock for services                                                                73,196
Net (loss)                                                  (813,304)                       (813,304)
                                          --------     -------------       --------      -----------
Balances at December 31, 2002             $ 26,399     $ (34,229,321)      $ (5,000)     $(4,122,141)
                                          ========     =============       ========      ===========
</TABLE>


         See accompanying notes to the consolidated financial statements


                                       28
<PAGE>
                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                     Years ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                2002           2001
                                                            -----------    -----------
<S>                                                         <C>            <C>
Cash flows from operating activities
  Net (loss)                                                 $(813,304)    $(2,073,424)
  Adjustments to reconcile net (loss) to net cash
  used by operating activities:
     Depreciation and amortization                              16,246          16,735
     (Gain) loss on disposal of property                       (36,193)        (74,427)
     Stock issuances, warrants and options for services         73,196         150,180
     Stock issuances for interest expense, non-cash             14,510         112,845
     Other, not affecting cash                                 (58,592)        (18,911)
     Realized (gains) losses on investments                    (76,236)        400,000
     Unrealized (gains) losses on marketable securities       (415,450)        252,186
     Proceeds from sale of marketable securities               498,339              --
     Exchange of barter credits                                (64,500)        (64,500)
     Change in:
         Accounts receivable                                    59,922         (46,448)
         Inventories                                           359,625        (394,960)
         Licensing fees receivable                                  --          49,997
         Note receivable                                            --          15,000
         Prepaid and other current assets                       (7,825)        (17,532)
         Other assets                                           99,897          (3,518)
         Current capital lease obligations                        (716)         (1,352)
         Accounts payable and accrued expenses                 242,364         766,756
         Customer deposits                                      21,079          (4,812)
         Due to stockholders                                   (17,487)         21,613
                                                             ---------     -----------
             Total adjustments                                 708,179       1,158,852
                                                             ---------     -----------
  Net cash (used) by operating activities                     (105,125)       (914,572)
                                                             ---------     -----------

Cash flow from investing activities:
     Purchases of property and equipment                       (19,000)         (3,581)
                                                             ---------     -----------
  Net cash (used) by operating activities                      (19,000)         (3,581)

Cash flow from financing activities:
     Proceeds from convertible debentures                      204,000         870,500
     Net payment on capital leases                              (5,151)         (6,088)
     Net proceeds from borrowings                                7,105          40,000
                                                             ---------     -----------
  Net cash provided (used) by financing activities             205,954         904,412
                                                             ---------     -----------

Net increase (decrease) in cash and equivalents                 81,829         (13,741)
Cash and equivalents, beginning of year                          7,219          20,960
                                                             ---------     -----------
Cash and equivalents, end of year                            $  89,048     $     7,219
                                                             =========     ===========
</TABLE>

        See accompanying notes to the consolidated financial statements.


                                       29
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows.

1. Organization, Business and Control

On June 4, 1991, the Company was incorporated in Delaware as "VCT Acquisitions
II, Inc.". The Company then acquired all of the assets of another Delaware
corporation called Viral Control Technology, Inc. On September 13, 1991, the
Company changed its name to Viral Control Technology, Inc. Subsequently, on
November 8, 1991, the Company again changed its name and became Veridien
Corporation (the Company).

The "Viral Control Technology, Inc." from which the Company acquired its assets
was created on August 3, 1989, by a reverse acquisition of a public shell called
Valencia Enterprises, Inc., by a private company named Viral Control Technology,
Inc. The original Viral Control Technology, Inc., was organized in Delaware on
August 10, 1988, while Valencia Enterprises was organized in Utah on February
10, 1984. Valencia, which had changed its name to Viral Control Technology,
Inc., after the reorganization, was redomesticated in Delaware on December 14,
1990. The original private company called Viral Control Technology, Inc., was
organized by Paul L. Simmons and his wife.

The Company was founded to develop disinfectants and sterilants which will pose
no hazard to people who use them and will not harm the environment. To this end,
the Company has developed a hard surface disinfectant (VIRAHOL(R)/VIRAGUARD(R)),
which has been registered with the Environmental Protection Agency (EPA). The
Company's research and development efforts are currently focused on further
development of infection control chemicals and on devices, both medical and
commercial, which utilize the Company's liquid products and are in keeping with
the corporate philosophy of environmentally friendly products. To this end the
patented VIRAHOL(R)/VIRAGUARD(R) formula is now marketed in liquid form, in an
antiseptic hand gel, in single use towelettes and in 60-160 count towelette
canisters for both hand and hard surface applications. The Company has recently
expanded its product offerings to include unique "Healthy Lifestyle" products
including sun protection products.

In October 1995, the Company entered into a 10% Convertible Senior Secured Term
Loan agreement to finance marketing efforts for its line of products, to fund
operating cash flow deficiencies, and to continue its research and development
activities.

The original agreement required the Company to issue to the lender warrants, in
sufficient quantity, that at all times the loan agreement is in force the lender
could obtain 51% of all classes of outstanding stock for a $2,500,000 exercise
price. This provision was waived and the number of warrants fixed effective
January 1, 2001. During 2002 and 2001, $ 54,250 and $215,548 of the lender's
debt were converted into 3,500,000 and 15,000,000 common shares respectively,
and -0- and 20,056 Series B preferred shares respectively.

2. Principles of Consolidation

The accompanying financial statements include the accounts of the company and
its subsidiaries, each of which is wholly owned. All intercompany balances and
transactions have been eliminated in consolidation.


                                       30
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

3. Accounting Estimates

The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

4. Accounts Receivable

The Company uses the allowance method of accounting for doubtful accounts. The
year-end balance is based on historical collections and management's review of
the current status of existing receivables and estimate as to their
collectibility.

5. Inventories

Inventories, consisting primarily of raw materials and finished goods, are
stated at the lower of cost or market. Cost is determined by the first-in,
first-out method. At December 31, 2002, raw materials and finished goods
amounted to approximately $112,320 and $114,368, respectively. At December 31,
2001, raw materials and finished goods amounted to approximately $49,600 and
$536,700, respectively.

6. Marketable Equity - Securities, Trading

Marketable Equity - Securities, Trading are comprised of common stock and are
carried at estimated fair value. The associated unrealized gains and losses, net
of income tax are included in the statement of operations.

7. Property and Equipment

Property and equipment are stated at cost. Depreciation on property and
equipment is calculated on the straight-line method over their estimated useful
lives ranging from three to seven years. Leasehold improvements are amortized on
the straight-line method over the shorter of the lease term or estimated useful
life. Major renewals, betterments and replacements are capitalized. Maintenance
and repairs are charged to expense as incurred.

8. Patents

The Company capitalizes certain costs, primarily legal and other fees, related
to patents. Accumulated costs are amortized over the estimated lives of the
patents using the straight-line method, commencing at the time the patents are
issued.

9. Loan Costs

Loan costs are amortized by the straight-line method over the term of the
respective loans.


                                       31
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

10. Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.

11. Reclassification

Certain reclassifications have been made to the 2001 financial statements to be
in conformity with the 2002 presentation.

12. Net Loss per Share

Net loss per share is calculated by dividing the net loss by the weighted
average number of common shares outstanding during the period. Weighted average
number of common shares outstanding is calculated as the sum of the month-end
balances of shares outstanding, divided by the number of months. The weighted
average shares outstanding were 178,849,107 and 152,717,290 for the years ended
December 31, 2002 and 2001, respectively. Common stock equivalents (stock
options, warrants, convertible debentures and convertible redeemable preferred
stock) are not included in the weighted average number of common shares because
the effects would be anti-dilutive.

NOTE B - REALIZATION OF ASSETS

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. Since inception, the Company has
incurred losses of approximately $34 million, resulting primarily from research
and development, sales and marketing, and administrative expenses being
substantially in excess of sales revenue. The Company has a deficit in
stockholders' equity of $4.1 million, a deficit in working capital of $3.8
million and is experiencing a continuing cash flow deficiency.

For the year ended December 31, 2002, the Company's operating activities
resulted in cash outflows of $105,125. In addition, the Company used $19,000 for
patent development and equipment purchases. In order to fund these cash
outflows, the Company borrowed $7,105, received net proceeds of $204,000 from
the sale of convertible debentures and received proceeds of $498,339 from the
sale of some of the Company's equity investments.

These proceeds, together with the cash balance at the beginning of the year,
provided the Company's cash needs, resulting in a net cash increase of $81,829
for the year ended December 31, 2002.

The Company plans to continue to liquidate its marketable securities and pursue
additional equity and debt financing while managing cash flow in an effort to
provide funds to increase revenues to support operations, research and
development activities. Management anticipates cash flow from product sales
and/or strategic equity financing will meet and exceed cash requirements in the
Fall of 2003. In addition, the Company plans to pursue additional cash through
sales of convertible debentures.


                                       32
<PAGE>
NOTE B - REALIZATION OF ASSETS - CONTINUED

In view of the matters described in the preceding paragraphs, recoverability of
a major portion of the recorded asset amounts shown in the accompanying
consolidated balance sheet is dependent upon the continued operations of the
Company and that such operations will be profitable and provide adequate cash
flows. Further, the ability of the Company to continue its operations and
successfully defend itself against potential claims or assessments is dependent
on the ability to obtain additional debt and equity financing, employ cash
management techniques and aggressively market its products.

The consolidated financial statements do not contain any adjustments relating to
the recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.

NOTE C - RELATED PARTY TRANSACTIONS

At December 31, 2002 and 2001, the Company owed $31,976 and $49,463,
respectively to stockholders who have made advances of material or provided
services to the Company.

During 2001, the Company converted $141,000 of funds due to shareholders into
1,000,000 shares of common stock at a conversion price of $.14 per share.

The Company has entered into numerous financing transactions with Dunvegan
Mortgage Corporation, a corporation of which the Company's President and CEO is
an officer and a director. These transactions are detailed elsewhere in these
footnotes.

During 2002 and 2001, the Company utilized the services of a management company
which has as its senior officer and director, the individual who serves as the
Company's President/CEO and a director, to assist with administrative and
organizational function of the Company. The Company incurred expenses of
$124,954 and $92,884 in 2002 and 2001 respectively for professional services and
related costs. At December 31, 2002, these fees remain unpaid in the amount of
$388,148 and are included in accounts payable. During 2001, the licensing fee
receivable of $49,997 was realized by offset against management fees owed by the
Company.

During 2002 and 2001 the Company's President/CEO personally incurred expenses on
behalf of the Company for travel etc. The amounts accrued by the Company and not
yet reimbursed to this individual are $6,025 and $10,939 for 2002 and 2001
respectively. In addition, this individual has previous years' unreimbursed
expenses which when added to these numbers total $112,395 and are included in
accounts payable at December 31, 2002.

The Company owns an investment in marketable securities of an entity that owns
more than 5% of the Company's common stock. See Note E.

During 2001 a company which has as its senior officer and director the
individual who serves as the Company's President/CEO and a director, purchased
$480,000 (plus accrued interest) of an accounts receivable owed for inventory by
the Company to one of its vendors. $472,386 of these monies, plus interest
accruing at 10% per annum are included in accounts payable and accrued interest.

NOTE D - NOTES RECEIVABLE

During March 2001, the Company realized the remaining balance due on the note
receivable. The note had been non-interest bearing.


                                       33
<PAGE>
NOTE E - MARKETABLE EQUITY SECURITIES, TRADING

The Company owned 203,733 and 415,000 shares of H-Quotient, Inc., with a fair
value of $273,002 and $124,500 at December 31, 2002 and 2001, respectively.
During 2002 (i) 430,000 shares of H-Quotient, Inc. were reclassified from
Investments in Common Stock Restricted to Marketable Equity Securities and (ii)
the Company sold 641,267 shares and realized a net gain of $89,381.

In February 2002 the Company realized a gain on the sale of obsolete inventory
by receipt of 18,000 common shares of Nutraceutical Clinical Laboratories
International, Inc. (NCCL). The investment in common shares was recorded at
$31,500 which represents fair market value of the security received. During the
quarter ending June 30, 2002 these shares were sold and a loss in the amount of
$10,720 was recognized.

The Company received 6,000 common shares of Nutraceutical Clinical Laboratories
International, Inc. (NCCL) for payment on an aged accounts receivable. During
the quarter ending June 30, 2002 these shares were sold and a loss in the amount
of $2,425 was recognized.

On December 22, 2000, the Company exchanged 8,000,000 restricted common shares
for 61,500 common shares of a privately owned company. The investment was valued
at cost of $400,000 using the estimated market value of the shares exchanged
discounted for marketability, due to the existence of restriction on re-sale. On
December 31, 2001, the Company recorded a permanent write down of $400,000 in
this investment. The Company has been unable to obtain appropriate information
from which to value this investment.

NOTE F - NOTES PAYABLE

In October 1995, the Company secured a 10% Convertible Senior Secured Term Loan
of up to $2,500,000 with a mortgage company. During 2002 and 2001, the holder
converted $54,250 and $215,548 of debt into 3,500,000 and 15,000,000 common
shares and -0- and 20,056 Series B preferred shares, respectively. Originally
the loan agreement granted the lender warrants to purchase 51% of the Company's
outstanding common and preferred stock. This provision was waived and the number
of warrants fixed effective January 1, 2001. The note is collateralized by the
assets and intellectual properties of the Company and its subsidiaries and
requires semi-annual payments of interest only with the entire principal balance
due in May 2004. As of December 31, 2002, the remaining principal balance
outstanding was $249,542, and $212,182 of interest has accrued under the
agreement.

During 2001, the Company issued 1,000,000 common shares in satisfaction of
$141,000 of promissory notes with a director of the Company.

During 2002, the Company received a $7,105 short-term loans due on demand with a
stated interest rate of 10% per annum of which $7,105 is outstanding at December
31, 2002.

NOTE G - DEFERRED REVENUE/LICENSING FEES

For sales in Canada, the Company is entitled to license fees equal to 10% of
sales. The Company recognized as licensing fees $0 and $4,780 for 2002 and 2001,
respectively.


                                       34
<PAGE>
NOTE H - CONVERTIBLE DEBENTURES

During 2002 and 2001, the Company received $204,000 and $870,500, respectively
of proceeds from the sale of convertible debentures. Interest is accrued at
various rates from 10% - 11% per annum, compounded in full at various maturities
from February 2003 to March 2005. Prior to the retirement of the debentures, the
debenture holders may convert any or all amounts owed into common stock. The
conversion price for each debenture ranges from $.02 to $.15 per share. The
conversion privilege terminates when all principal plus interest due has been
paid in full. In addition, the debenture holders were issued 4,029,540 warrants
which are outstanding at December 31, 2002 for additional common shares for 100
- 105% of the convertible debentures per share conversion price. The additional
warrants expire five years from the original date of the debentures.

Certain of the convertible debentures in the amount of $820,000 matured during
February and March 2003. The Company intends to negotiate renewal of these
instruments.

NOTE I - COMMITMENTS AND CONTINGENCIES

The Company from time to time is involved in lawsuits and actions by third
parties arising in the ordinary course of business. With respect to these
matters, management believes that it has adequate legal defenses that can be
asserted. The Company is not aware of any additional litigation, claims or
assessments that were pending that could have a material adverse effect on the
Company's business, financial condition and results of operations.

During 2002 the Company leased manufacturing and office facilities for $5,900
per month under a lease that expired December 31, 2002. Beginning January 1,
2003 the Company entered into a new lease with the existing landlord for office
facilities only. The new lease is for $1,625 per month and the lease expires
December 31, 2004. Rent expense was approximately $67,850 and $104,837 for 2002
and 2001, respectively.

The following table reflects approximate future minimum annual rental expense
amounts:

                            Year           Amount
                          --------        --------

                            2003          $ 19,500

                            2004          $ 19,500

NOTE J - CONVERTIBLE REDEEMABLE PREFERRED STOCK

In 1994, the Company prepared an Offering Circular to raise approximately
$1,000,000 of 10% Cumulative Convertible Redeemable Preferred Stock with a $10
par value. At the option of the Company, the shares can be redeemed after two
years at $10 per share plus accrued and unpaid dividends in aggregate amounts
not to exceed $250,000 annually. Each preferred share is convertible into twenty
common shares. Additionally, the Offering Circular provides for common stock
purchase warrants with an exercise price of $.01 per share. The number of
warrants issued, when exercised in combination with conversion of the preferred
stock into common stock, will result in an effective cost for each share of the
common stock equal to the closing bid price of the common stock, in the
over-the-counter market, on the day of the subscription to the Offering
Circular. The warrants may be redeemed for $.001, at the election of the
Company, upon thirty days' written notice after the bid price of the common
stock in the then existing public market has been $1.00 or more for thirty
continuous days in which the market is open for business. From inception through
December 31, 2002, $622,000 of preferred stock was issued


                                       35
<PAGE>
NOTE J - CONVERTIBLE REDEEMABLE PREFERRED STOCK - CONTINUED

for cash and $318,150 was issued in satisfaction of debt and services at $10 per
share. Preferred shareholders have converted 88,015 shares of preferred stock
into 1,760,300 shares of common stock. No conversion of preferred stock into
common stock occurred during 2002 or 2001. At December 31, 2002, preferred stock
dividends in arrears totaled approximately $48,000.

NOTE K - SERIES B CUMULATIVE PREFERRED STOCK

The Series B Cumulative Preferred Stock was created on December 31, 1997, as a
mechanism of permitting the conversion of part of the indebtedness under the
Loan and Security Agreement, without sacrificing the intent of the original Loan
and Security Agreement warrants. The Series B Cumulative Preferred Stock has a
par value of $.001 per share and an initial stated capital of $10 per share,
which is subject to adjustment. This Series is senior to the Common Stock and is
senior to all other classes and series except that it is junior to the
Convertible Redeemable Preferred Stock (Note I) with respect to the payment of
dividends. Each share has that number of votes equal to the number of share of
Common Stock into which it is convertible on the record date. Subject to
adjustment in the event of certain future Common Stock or convertible security
issuances, each share is convertible into 20.04010695 shares of Common Stock.
These shares are entitled to receive an annual dividend equal to the greater of
10% of the stated value and the actual dividend per share of common stock
declared by the Company's Board of Directors times the number shares of Common
stock into which each share of Series B is convertible on the dividend record
date. The dividend is cumulative, whether or not earned and, to the extent not
paid on a quarterly dividend payment date is added to the stated value.

NOTE L - STOCK WARRANTS

During 2002, 500,000 warrants were issued under the terms of an employment
contract at exercise prices of $0.08 and 1,000,000 warrants were issued under
the terms of a consulting contract at exercise prices of $0.03. In addition,
during 2002 100,000 warrants expired.

During 2001, 100,000 warrants were cancelled and under the terms of the Loan and
Security Agreement, 15,000,000 warrants were exercised.

As described in Note J, the Company offered $1,000,000 of 10% Cumulative
Convertible Redeemable Preferred Stock along with common stock purchase warrants
at $.01 per share. The number of warrants issued, when exercised in combination
with conversion of the preferred stock into common stock results in an effective
cost for each share of the common stock equal to the closing bid price of the
common stock, in the over-the-counter market, on the day of the subscription to
the Offering Circular. The warrants are recorded at their fair market value at
the time of issuance less the exercise price of $.01 and reported as a reduction
to preferred stock. The value assigned to the warrants is amortized over the
shorter of the life or the exercise of the warrant.

As described in Note A, in October 1995, the Company entered into a 10%
Convertible Senior Secured Term Loan agreement. The original agreement required
the Company to issue to the lender warrants, in sufficient quantity, that at all
times the loan agreement was in force the lender could obtain 51% of all classes
of outstanding stock for a $2,500,000 exercise price. This provision was waived
and the number of warrants fixed effective January 1, 2001.


                                       36
<PAGE>
NOTE L - STOCK WARRANTS - CONTINUED

At December 31, 2001, in aggregate the lender was entitled to 84,524,866
warrants at a cumulative exercise price of $2,500,000 under the terms of the
agreement. This equated to an effective cost of $0.0296 per share. As of
December 31, 2002, the lender(s) had converted $2,250,458 of the debt and the
lender's warrants were exercised into 64,114,388 common shares and 213,590
Series B preferred shares (convertible into 4,280,350 common shares) at a
combined cost of equivalent to $0.033 per common share.

Warrants issued and exercised are summarized as follows:

<TABLE>
<CAPTION>
                                                             Exercise
          Common Stock                       Warrants       Price Range
-----------------------------------         -----------     ------------
<S>                                         <C>             <C>
Outstanding at January 1, 2001
2001:                                        39,244,546        .01 - .20
          Cancelled                            (100,000)             .10
          Loan & Security
          Agreement Conversion              (15,000,000)            .014
                                            -----------     ------------

Outstanding at December 31, 2001             24,144,546     $ .001 - .20
2002:                                       -----------     ------------

          Granted                             1,500,000        .03 - .08
          Expired                              (100,000)             .20
          Loan & Security Agreement
          Conversion                         (3,500,000)            .016
                                            -----------     ------------

Outstanding at December 31, 2002             22,044,546     $ .001 - .20
                                            ===========     ============
</TABLE>

Effective December 31, 1997, the Board of Directors created the Series B
Cumulative Preferred Stock (as discussed in Note K) and issued 245,344 warrants
for this Preferred Stock to the lender under the Loan and Security Agreement to
replace 4,916,720 common stock warrants already issued to them. The warrants
expired on November 18, 2000, and have been extended through May 18, 2004 and
have a $10 exercise price. During 2002 and 2001, -0- and 20,056 of these
warrants were exercised by the holder. At December 31, 2002, 27,451 of these
warrants are still outstanding.

Effective December 31, 1997, the Board of Directors created the Series CI
Preferred Stock and issued 115,184 warrants for this Preferred Stock to a
Convertible Debenture holder to replace 3,430,555 common stock warrants already
issued to them. The warrants expired on December 31, 2001.

Effective December 31, 1997, the Board of Directors created the Series CII
Preferred Stock and issued 41,893 warrants for this Preferred Stock to a
Convertible Debenture holder to replace 1,680,647 common stock warrants already
issued to them. The warrants expired on December 31, 2001.


                                       37
<PAGE>
Preferred warrants issued and exercised are summarized as follows:

<TABLE>
<CAPTION>
                                                                     Equivalent #
                                       Preferred      Preferred    Common Shares on
                                         Share        Exercise     Preferred Share
                                        Warrants        Price         Conversion
--------------------------------       ----------     ---------    ----------------

<S>                                    <C>            <C>          <C>
Outstanding at January 1, 2001            206,120                      6,094,029
2001:
             Cancelled Series B            (1,536)                       (30,782)
             Exercised Series B           (20,056)     $ 10.00          (401,924)
             Expired Series CI           (115,184)                    (3,430,555)
             Expired Series CII           (41,893)                    (1,680,647)
                                       ----------                     ----------

Outstanding at December 31, 2001           27,451                        550,121
                                       ==========                     ==========

Outstanding at December 31, 2002           27,451                        550,121
                                       ==========                     ==========
             Series B                      27,451                        550,121
                                       ==========                     ==========
</TABLE>

NOTE M - INCOME TAXES

There is no income tax provision for the years ended December 31, 2002 and 2001
due to net operating losses for which no benefit is currently available. The
Company has net operating loss carryforwards of approximately $21,506,000 at
December 31, 2002, available to offset future taxable income from 2003 through
2023.

The Company has determined that in 1995 a change of ownership occurred as
defined in the Internal Revenue Code 382 and related Treasury Regulations. After
elimination of net operating loss carry forwards of approximately $10,920,000,
the Company has approximately $21,506,000 remaining net operating loss carry
forwards.

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets are presented below:

<TABLE>
<CAPTION>
                     December 31,
                                               2002              2001
                                           -----------       -----------
<S>                                        <C>               <C>
Deferred Tax Assets:

Net Operating loss carry forwards          $ 7,312,000       $ 6,895,000

Less valuation allowance                    (7,312,000)       (6,895,000)
                                           -----------       -----------
            Net deferred tax assets        $        --       $        --
                                           ===========       ===========
</TABLE>

NOTE N - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest amounted to $-0- and $5,240 for 2002 and 2001,
respectively.


                                       38
<PAGE>
NOTE N - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CONTINUED

During 2002, the Company issued 3,500,000 common shares in exchange for debt
conversion in the amount of $54,251. In 2002, the Company issued 3,004,987
common shares in conversion of convertible securities in the amount of $135,404.
In 2002, the Company issued 320,291 common shares in exchange for interest of
$14,509 and 2,270,131 common shares in exchange for services of $73,196.

During 2001, the Company issued 16,000,000 common and 20,056 preferred shares in
exchange for debt conversion in the amount of $356,557. In 2001, the Company
issued 11,673,702 common shares in conversion of convertible securities in the
amount of $782,687. In 2001, the Company issued 1,684,253 and 4,411,183 common
shares in exchange for interest expense and services of $112,845 and $150,180,
respectively.

NOTE O - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

      Cash and Short Term Investments. For those short term instruments, the
      carrying amount is a reasonable estimate of fair value.

      Investment in Securities. For investments in securities, fair values are
      based on quoted market prices or dealer quotes, if available. If a quoted
      market price is not available, fair value is estimated using quoted market
      prices for similar securities.

NOTE P - CONCENTRATION OF RISK

Financial instruments that subject the Company to concentrations of credit risk
consist principally of trade receivables. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses.

Sales of the Company's products are concentrated among specific customers.

During 2002 the Company recorded sales from six customers which comprise 49% of
total sales and range from 2.5 - 13.4% each.

During 2001 the Company recorded sales from six customers which comprise 50% of
total sales and range from 7 - 10% each.


                                       39
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Carter & Cartier P.A., CPA's, now named Carter, Cartier, Melby & Guarino,
C.P.A.s, P.A., who audited our financial statements for the fiscal years ended
December 31, 1997, December 31, 1998, December 31, 1999, December 31, 2000 and
December 31, 2001 have audited our financial statements for the fiscal year
ended December 31, 2002. There has been no change in our accountants and there
have been no disagreements with respect to any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure.


                                       40
<PAGE>
PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS. The position(s) held by each of our executive
officers and Directors as of March 25, 2003 are shown in the following table.
Biographical information for each is set forth following the table. Our current
Directors were elected at the 2001 Annual Meeting held on March 6, 2002. Each
Director serves for a one-year term and until a successor is elected and has
qualified. Currently, our Directors are not compensated for their services,
although their expenses in attending meetings are reimbursed.

<TABLE>
<CAPTION>
    Name                     Age       Position
    ----                     ---       --------

<S>                          <C>       <C>
    Russell D. Van Zandt      62       Chairman of the Board of Directors

    Rene A. Gareau            61       Vice Chairman of the Board of Directors/
                                       Corporate Secretary

    Sheldon C. Fenton         51       President and CEO/Director

    Alfred A. Ritter          59       Director

    Paul L. Simmons           74       Director
</TABLE>

RUSSELL D. VAN ZANDT was first named to the Board of Directors on October 28,
1997. Mr. Van Zandt was graduated in 1962 with a BA in Mathematics from St.
Michael's College in Vermont, and was graduated in 1973 with an MBA from Florida
Atlantic University in Florida. He also completed course work in 1975 for a
doctorate in Business Administration from George Washington University in
Washington, DC.

Mr. Van Zandt is currently President and CEO of Ela Medical in Plymouth, MN. Ela
Medical is a manufacturer and marketer of pacemakers and implantable
defibrillators. Previously Mr. Van Zandt had been a corporate Vice President at
Datascope Corp., a NASDAQ listed company engaged in the health care and medical
device products industry. On behalf of Datascope Corp., he had alternately
headed two divisions as President. From 1996 to 1998, he was President of the
Intervascular, Inc. Division, which manufactures and markets vascular grafts and
patches on a worldwide basis. From July 1992 through September 1996 he was
President of the Cardiac Assist Division which manufactures and markets
intra-aortic balloon pumps and catheters. From November 1969 until August 1992,
Mr. Van Zandt worked with C.R. Bard, Inc., a health care and medical device
company listed on the New York Stock Exchange. He started as personnel director
at a division level and rose through the company's ranks to reach, in 1992, the
position of President of Bard Vascular Systems Division.

RENE A. GAREAU was first named to the Board of Directors on March 13, 1996.
Since 1989, Mr. Gareau has been Chairman of the Board of Sarasota Quay, a real
estate management company located in Sarasota, Florida, specializing in property
and asset management for commercial properties. From 1982 to 1989, Mr. Gareau
was the Chairman of a private Canadian real estate development company involved
in the development and syndication of residential condominium and commercial
projects in a number of Canadian provinces. From 1981 to 1982 he was President
of Bank of America (Canada) with


                                       41
<PAGE>
responsibilities for overseeing all retail and mortgage banking operations in
Canada. From 1974 to 1981 he was Senior Vice President of Citicorp-Citibank in
their International Division. He had responsibilities in corporate and consumer
banking with assignments in Asia, Europe, South America, and the U.S.A.

SHELDON C. FENTON is President and CEO. Mr. Fenton was first named to the Board
of Directors on June 3, 1998. Since 1981 Mr. Fenton has been President and CEO
of Tanlon Corporate Holdings Ltd. (and predecessor corporations), located in
Toronto, Canada. Tanlon is a fully integrated management services company. The
group also has knowledge and experience in the areas of strategic acquisitions,
real estate development and syndication, financing for private and public
ventures, as well as asset and property management. They are regarded as
specialists in the areas of structuring and restructuring of investments and
negotiation with lenders and other corporate stakeholders.

Mr. Fenton is also an officer and director of Dunvegan Mortgage Corporation, a
company which has been a lender to the Company, as described under "Principal
Shareholders."

From 1979-1981 Mr. Fenton was employed by the Canadian Imperial Bank of Commerce
alternately as Solicitor and Manager. In 1977-1978 he worked for the firm of Day
Wilson & Campbell in Toronto, Canada focusing on corporate and real estate law,
and in 1976-1979 he worked as a financial consultant for FF. Management in
Toronto, Canada.

Mr. Fenton was graduated with honors with a Bachelor of Science degree from the
University of Toronto in 1974 and was graduated from the Faculty of Law with an
L.L.B. degree from the University of Western Ontario, Canada.

ALFRED A. RITTER was first named to the Board of Directors on March 26, 1993.
Mr. Ritter has been the co-owner and director of EXPORATLAS, Lisbon, Portugal
since 1981. The company is an import/export firm involved in the paper and pulp
industry. Since 1996, Mr. Ritter has been the owner and director of TEOTONIO
INVESTMENTS, a commercial real estate and project development company based in
Vaduz, Liechtenstein. Additionally, since 1996, Mr. Ritter has been co-owner and
director of EUROVENTOS, which is developing alternative energy sources in
Portugal. Mr. Ritter has held positions with Credit Suisse in Zurich,
Switzerland, the Bank of London and South America, in London, England, and
Lloyd's Bank Ltd. in New York City.

PAUL L. SIMMONS has been a member of the Board of Directors since our
incorporation in 1991. He is a recognized authority by both the industry and the
FDA in plant manufacturing validation and certification, as well as
manufacturing plant and process design for the genetic, pharmaceutical, bulk
pharmaceutical chemical, device and diagnostic industries. Mr. Simmons (with his
wife, Diane) is the founder of our Company, commencing with one of our
predecessors, ROST, Inc. founded in 1980. Mr. Simmons served in a consulting
capacity for manufacturing plant and process design and regulatory compliance to
more than 45 major biotech, pharmaceutical and device firms, in 72 plant
locations in the U.S., U.K., Europe and the Far East. Mr. Simmons has formulated
and designed many of the qualification/ validation programs and testing methods
now in use in the industry. He is a noted author, having written many technical
papers for national trade journals, as well as the writing and publication of a
long list of technical and procedural manuals. As a lecturer, Mr. Simmons has
addressed more than 55 trade and professional associations in 26 states and
several foreign countries, including the Parenteral Drug Association,
Pharmaceutical Manufacturer's Association, Association for Professionals In
Infection Control, Quality Control Managers Association, Philadelphia Academy of
Pharmaceutical Sciences, Biotech 84, Scale-up 84, Interphex and FDA Small
Business Seminars.


                                       42
<PAGE>
On October 6, 1998, Mr. Simmons filed a Petition for Reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Middle District of Florida, docketed to Number 98-17181-8P1. Mr.
Simmons' Plan of Reorganization was confirmed (approved) by the Court on
December 27, 1999, which order operated as a discharge of all debts except as
covered by the Plan.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

All of our officers, directors and beneficial owners were in compliance with
Section 16(A) during fiscal year 2002.

SCIENTIFIC ADVISORY BOARD

Prior to October 2001 we relied upon informal contacts and relationships for
general scientific advice in connection with our research and development. In
October 2001, in order to have a more structured arrangement, we formed a
Scientific Advisory Board consisting of:

JERRY A. MOORE, Ph.D., served for more than 25 years with the EPA, with 17 years
in the Pesticide Programs Office in Washington, DC. Dr. Moore served in the
Office of Research and Development in the EPA where he acted as liaison with
other federal agencies. Dr. Moore has broad expertise in the field of pesticide
science and governmental regulation of products used for environmental
disinfection.

BRIAN CHADROFF, D.D.S., is a Diplomat of the American Board of Periodontology
and Clinical Associate Professor of Post Graduate Periodontology in the
Department of Post Graduate Periodontology and Implant Dentistry at the New York
University College of Dentistry. Dr. Chadroff has conducted research, published,
and lectured nationally and internationally in the field of Bone Grafting and
Implant Dentistry and maintains a practice specializing in Periodontics in New
York City.

JEROME KERN, Ph.D., is a Microbiologist and Virologist with 40 years of
experience in Bacteriology, Microbiology and Virology, serving in government,
industry and academia. Dr. Kern has served with the National Institutes of
Health, National Institute of Allergy and Infectious Diseases, and the National
Cancer Institute; Queens Hospital and the University of Hawaii; the Medical
University of South Carolina; Litton Bionetics, Inc.; Microbiological
Associates, Inc.; Bionetics Research, Inc.; and Veridien Corporation as
Laboratory Director from 1996 until his retirement in 2001.

SAM GARBAWAY, Ph.D., is a Pharmacist currently operating a pharmaceutical
manufacturing company in Toronto, Canada. Dr. Garbaway served with
Boehringer-Mannheim in Germany, where he specialized in the sales and
development of clinical chemistry machinery and reagents, with special focus on
human biochemistry test screens. Dr. Garbaway has been heavily involved in the
design and production of operating-theater protective clothing. He was an early
pioneer in the introduction of a protective shield for use by surgeons during
the performance of procedures.


                                       43
<PAGE>
THOMAS C. LAIPPLY, M.D., FCAP, FIAP, is a Pathologist and Director of Molecular
Tissue Pathology with Nichols Institute-Quest Diagnostics, In San Juan
Capistrano, California. Dr. Laipply previously served as Assistant Professor of
Pathology at Case Western Reserve University Medical School in Cleveland, Ohio.
Dr. Laipply has devoted 20 years to the practice of Pathology and lecturing in
aspects of Blood Banking, Clinical Cytometry and Cytology, Morphologic
Hematology, Immunology and Immunochemistry. For the past decade Dr. Laipply has
concentrated his practice in the field of Surgical Pathology. Dr. Laipply has
been issued more than 10 U.S. and international patents for anti-infective and
invisid fluid applicators.

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

Currently, our directors are not compensated for their services as directors,
although their expenses in attending meetings are reimbursed. During 2002 there
were five meetings of the Board of Directors. All current directors attended all
meetings, except for Mr. Simmons, who attended three of the meetings, and Mr.
Ritter, who attended two of the meetings.

COMPENSATION OF MANAGEMENT

The following table sets forth the compensation paid to our Chief Executive
Officer or such other officer who fulfilled the duties of the Chief Executive
Officer for the periods indicated. Except for the individuals named, no
executive officers had a total annual salary and bonus of $100,000 or more.

<TABLE>
<CAPTION>
Name & Principal                                                            Other
Position                             Year          Salary       Bonus    Compensation
----------------------------     ------------    -----------    -----    ------------
<S>                              <C>             <C>            <C>      <C>
Sheldon C. Fenton, President
  & CEO                          7/98-Present         -0-(1)     -0-          -0-
Andrew T. Libby, Jr., COO         8/98-5/2000    $130,000(2)     -0-          -0-(3)
Kenneth J. Chester, COO            1/01-12/01    $150,000        -0-      $30,450(4)
</TABLE>

Except for Mr. Libby's stock options (see below) and Mr. Chester's 870,000
shares of Common Stock, none of the named persons has received stock options or
other such non-cash compensation.

----------
(1)   Tanlon Management Services Inc. (of which Mr. Fenton is an officer and a
      director) charges the Company an annual management fee of $120,000 at the
      rate of $30,000 per quarter; however, such fee covers the services of
      Tanlon employees and is not intended as compensation for Mr. Fenton. At
      December 31, 2002 these fees remain unpaid in the amount of $388,148 and
      are included in accounts payable.

(2)   Andrew T. Libby, Jr. had an annual salary of $130,000; however, he was
      paid at the rate of $90,000 per year with $40,000 accrued to be paid when
      we had sufficient cash flow or significant funding was received. The
      accrued balance of $45,000 was paid in connection with his resignation.

(3)   See "Option Grants" below.

(4)   Mr. Chester received 870,000 shares of Common Stock, having an assigned
      value of $30,450, on April 1, 2001.


                                       44
<PAGE>
OPTION GRANTS

The following table sets forth information with respect to grants of stock
options to the named officers during 1999. No stock options were issued to any
of the named officers during 2000 or 2001. None of these options were exercised
during the fiscal year ended December 31, 2002. None of these options have been
repriced.

<TABLE>
<CAPTION>
                        Number of Securities
                        Underlying Options/     Exercise Price
       Name               SARs Granted (#)         ($/Share)       Expiration Date
--------------------    --------------------    --------------     ---------------
<S>                     <C>                     <C>                <C>
Andrew T. Libby, Jr.          100,000                $0.20         December 31, 2003
Andrew T. Libby, Jr.          250,000                $0.10         August 10, 2003
Andrew T. Libby, Jr.          250,000                $0.20         December 31, 2004
</TABLE>


                                       45
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 18, 2003, information regarding the
beneficial ownership of shares of Common Stock by each person known by the
Company to own five percent or more of the outstanding shares of Common Stock,
by each of the Officers, by each of the Directors, and by the Officers and
Directors as a group. At the close of business on March 18, 2003, there were
183,519,887 shares issued and outstanding of record, as well as 48,092,252
shares issuable in the event of the conversion of the $2,330,311 of Convertible
Debentures outstanding and the $754,632 of interest thereon as of December 31,
2002.

<TABLE>
<CAPTION>
                                                Shares of           Percentage
                                                 Common                as of
Name and Address of Beneficial Owners             Stock            03/18/2003(1)
-------------------------------------           ---------          -------------

<S>                                            <C>                 <C>
Sheldon C. Fenton                              30,661,390(2)           16.7%
160 Eglinton Avenue East, Suite 500
Toronto, Ontario M4P 3B5

Rene A. Gareau                                    125,000              0.07%
603 Sarasota Quay
Sarasota, Florida 34236

Dunvegan Mortgage Corporation                  30,278,390(3)           16.5%
222 Delaware Ave., PO Box 2306
Wilmington, Delaware 19899

Paul L. Simmons                                 4,427,600(4)           2.41%
8825 Laurel Drive
Pinellas Park, Florida 33782

Russell D. Van Zandt                              741,560               0.4%
100 Beach Drive NE, Suite 1002
St. Petersburg, Florida 33701

Alfred A. Ritter                                        0                --
Rua Baronesa DeBeck 130
Malveira Da Serra
2750 Cascais Portugal

H. Quotient Inc.                               17,101,542               9.3%
(& subsidiary Quotient Capital Corp.)
8150 Leesburg Pike, Suite 503
Vienna, VA 22182

Milfen Limited                                  2,438,023(5)           1.33%
33 Jackes Avenue, #303
Toronto, Ontario
M4T 1E2
</TABLE>


                                       46
<PAGE>
<TABLE>
<S>                                            <C>                     <C>
All Directors and Officers                     35,955,550              19.6%
  as a Group (5 persons)
</TABLE>

----------

(1)   Based on 183,519,887 shares issued and outstanding as of March 18, 2003.

(2)   Includes Mr. Fenton's direct ownership of 383,000 shares, indirect
      ownership of 22,333,014 shares owned by Dunvegan Mortgage Corporation, of
      which Mr. Fenton is an officer and director, as well as 7,945,376 shares
      issuable in the event of conversion of the $471,215 of Convertible
      Debentures [principal] owned by Dunvegan Mortgage Corporation and the
      $323,322 of interest thereon as of December 31, 2002. Does not include
      1,324,075 Convertible Debenture Warrants owned by Dunvegan Mortgage
      Corporation. For informational purposes, also does not include 16,130,128
      Series I ($.499) and Series II ($.001) Warrants previously owned by
      Dunvegan Mortgage Corporation but assigned (in 1998) to 1192615 Ontario
      Limited et al and in which he disclaims any beneficial interest. For
      informational purposes, does not include holdings of his adult daughter
      including (i) 839,500 shares and (ii) the 3,474,722 shares issuable in the
      event of conversion of the $90,000 Convertible Debenture (principal) and
      $14,241 of interest thereon as of December 31, 2002; in which he disclaims
      any beneficial interest. For informational purposes does not include
      holdings of his adult son, including (i) 250,000 shares and (ii) the
      3,856,025 shares issuable in the event of conversion of the $90,000 of
      Convertible Debentures (principal) and $12,090.28 of interest thereon as
      of December 31, 2002; in which he disclaims any beneficial interest. For
      informational purposes does not include holdings of Milfen Limited, a
      Corporation owned by Mr. Fenton's mother, in which he disclaims any
      beneficial interest.

(3)   Includes 7,945,376 shares issuable in the event of conversion of the
      $471,215 of Convertible Debentures [principal] owned by Dunvegan Mortgage
      Corporation and the $323,322 of interest thereon as of December 31, 2002.
      Does not include 1,324,075 Convertible Debenture Warrants or 154,163
      shares of Series B Preferred Stock.

(4)   Includes Mr. Simmons' direct ownership of 2,753,000 shares and indirect
      ownership of 674,600 shares owned by International Center for Technology
      Transfer, Inc., of which Mr. Simmons is an Officer and Director and
      1,000,000 shares owned jointly by Simmons and ICTT.

(5)   Does not include 17,207,973 shares issuable in the event of conversion of
      the $674,096 of Convertible Debentures [principal] owned by Milfen Limited
      and the $95,793 of interest thereon as of December 31, 2002.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Dunvegan Mortgage Corporation, a corporation of which Sheldon C. Fenton, the
Company's President/CEO and a director, is an officer and a director, entered
into various financing transactions with the Company prior to January 1, 1999.
As a result of those transactions, as of December 31, 2002, Dunvegan Mortgage
Corporation continued to hold 154,163 shares of Series B Preferred Stock
(88.5%), 22,333,014 shares of our Common Stock (12.1%), Convertible Debentures
(1996-1998) in the principal amount of $471,215 (100%), 1,324,075 Convertible
Debenture Warrants (33%) and 890 Series D Dunvegan Warrants exercisable to
purchase 890 shares of an as-yet-undesignated series of Preferred Stock having
25,000 votes per share, at a price of $1.00 per share.

During fiscal year 2002, Milfen Limited (i) purchased seven additional
debentures for principal sums totaling $204,000; (ii) converted $36,383 of
debenture principal (& interest accrued thereon) into common stock at the price
of $0.05; and (iii) otherwise divested of $329,021 of debenture principal (and
interest accrued thereon) to other parties. During fiscal year 2001, Milfen
Limited purchased a $50,000 debenture, made 22 short-term advances totaling
$640,500 which were converted to debentures, and purchased five additional
debentures for principal sums totaling $145,000. Milfen Limited is a Canadian
corporation


                                       47
<PAGE>
controlled by the mother of Mr. Shelley Fenton, our President and CEO (see Item
5, "Sales of Unregistered Securities During Fiscal Year 2002").

On June 20, 2001, we sold $150,000 of SGD International, Inc. trade credits to
H. Quotient, Inc. for 430,000 shares of the Common Stock of H. Quotient, Inc.,
which shares were unregistered (restricted as to further transfer). The shares
were valued at $.30 each, or a total of $129,000 but were recorded at cost less
a 50% estimated marketability discount due to sale restrictions.

In 1995 the Company entered into a Loan and Security Agreement with Dunvegan
Mortgage Corporation, a company of which Sheldon Fenton is an officer and
director. On October 5, 1998 Dunvegan Mortgage Corporation assigned their
interest in the balance of the Loan and Security Agreement (and conversion
entitlements thereunder) to a group of companies, some of which have as their
officers or directors siblings of Mr. Fenton. Neither Mr. Fenton nor Dunvegan
Mortgage Corporation have any further interest in the Loan and Security
Agreement and disclaim any beneficial interest therein.

NORPAK MANUFACTURING, INC.

During 1999 we entered into a strategic alliance agreement with a Canadian
medical products manufacturer/distribution company in which a family members of
Sheldon C. Fenton, the Company's President/CEO and a director, then owned
directly or indirectly approximately 48% of the corporation. During January
2000, members of Sheldon C. Fenton's family and/or entities of which they are
officers or directors increased their ownership to a majority of the
corporation. During 2000 and 2001 Norpak Manufacturing was one of two
manufacturers contracted to produce the SunSwipe(TM) product line for the
Company. We no longer utilize their services as we have sourced other production
partners for this product line in the United States.

935934 ONTARIO LTD.

During late 2001, 935934 Ontario Ltd., a company of which Sheldon C. Fenton is
an officer and director, purchased $ 480,000US (plus accrued interest) of the
accounts receivable owed for inventory by The SunSwipe Corporation L.L.C. (a
wholly owned subsidiary of Veridien) to Norpak Manufacturing Inc. Of these
monies, $472,386 plus interest accruing at 10% per annum are still due and owing
by Veridien to 935934 Ontario Ltd. and are included in accounts payable and
accrued interest respectively.

TANLON MANAGEMENT SERVICES, INC.

During fiscal years 1999, 2000, 2001 and 2002 we utilized the services of Tanlon
Management Services, Inc., a management company which Sheldon C. Fenton [the
Company's President/CEO] is an officer and a director. We expensed $120,000 for
these professional services for each of 1999, 2000 and 2002 and $90,000 for 2001
(for which the $30,000 due for the 4th quarter was waived). These fees are
intended to cover the salaries of relevant Tanlon employees who provide various
support services; none of the fees are intended to compensate Mr. Fenton. At
December 31, 2002 these fees remain unpaid in the amount of $388,148 and are
included in accounts payable.

In addition to the accrued indebtedness for services, the Company owes Tanlon an
additional $112,395 for advanced expenses for related travel, courier/express
deliveries, and telephone costs.


                                       48
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
EXHIBIT INDEX
      No.         Description of Exhibit
-------------     ----------------------
<S>               <C>
    * 3.1         Certificate of Incorporation of VCT Acquisitions II, Inc. -
                  Dated June 4, 1991

    * 3.2         Restated Certificate of Incorporation of VCT Acquisitions II,
                  Inc. - Dated September 13, 1991

    * 3.3         Certificate of Amendment of Restated Certificate of
                  Incorporation - November 6, 1991

    * 3.4         Bylaws of Veridien Corporation - 1998 as amended to date

    * 3.5         Certificate of the Powers, Preferences, Rights,
                  Qualifications, Limitations and Restrictions of Series B
                  Convertible Preferred Stock - Dated September 11, 1998

    * 3.6         Certificate of Designation - Dated April 3, 1995

    * 3.7         Certificate of Amendment to the Certificate of Incorporation -
                  Dated February 16, 1996

    * 3.8         Certificate of Amendment of Restated Certificate of
                  Incorporation

    * 3.9         Certificate of Amendment of Certificate of Incorporation -
                  Dated May 27, 2002

    * 4.1         Debenture Sample

    * 4.2         General Security Agreement between Veridien Corp. and Dunvegan
                  Mortgage Corp. - Dated October 19, 1995

    * 4.3         Loan and Security Agreement between Veridien Corp. and
                  Dunvegan Mortgage Corp. - Dated October 19, 1995

    * 4.4         General Security Pledge between Veridien Corp. and Dunvegan
                  Mortgage Corp. - Dated October 19, 1995

    * 4.5         Warrant Agreement regarding Warrants to purchase Common Stock
                  of Veridien Corporation - Series I - Dated October 19, 1995

    * 4.6         Warrant Agreement regarding Warrants to purchase Common Stock
                  of Veridien Corporation - Series II - Dated October 19, 1995

    * 4.7         Warrant to purchase Common Stock Series I and Series II -
                  Dated December 12, 1995

    * 4.8         Common Stock Purchase Warrant: $0.135 per share - Dated June
                  10, 1998

    * 10.1        Building Lease

    * 10.2        Canadian Licensing Agreement - Dated February 28, 1998

    * 10.3        Contract Fill and Sub-lease Agreement with Horizon
                  Pharmaceuticals, Inc. - Dated August 1, 1998

    * 10.4        Trademark - Virahol

    * 10.5        Trademark - Viraguard

    * 10.6        Trademark - Viragel

    * 10.7        Trademark - Vira- CD7

    * 10.8        Australian Patent No. 667,930/Sterihol
</TABLE>


                                       49
<PAGE>
<TABLE>
<S>               <C>
    * 10.9        Australian Patent No. 628,932/Virahol

    * 10.10       Canadian Patent No. 1,337,329/Virahol

    * 10.11       Mexican Patent No. 185,884/Virahol

    * 10.12       U.K. Patent No. 2,294,639/Virahol

    * 10.13       U.K. Patent No. 2,245,171/Virahol

    * 10.14       U.S. Patent No. 5,405,602/Sterihol

    * 10.15       U.S. Patent No. 5,145,663/Virahol

    * 10.16       U.S. Patent No. 5,441,723/Virahol

    * 10.17       U.S. Patent No. 5,637,307/Method of Immersion Sterilization &
                  Organic Cold Chemical Sterilant

    * 10.18       New Zealand Patent No. 269,419/Virahol

    * 10.19       Employment Agreement with Paul Simmons

    * 10.20       Employment Agreement with Andrew T. Libby, Jr.

    * 10.21       Norpak Manufacturing Inc. Agreement

    * 10.22       Consulting Agreement with Kenneth J. Chester

    * 10.23       Option Agreement re: Purchase of SunSwipe, Inc.

    * 10.24       Consulting Agreement with Robert P. Belling

    * 10.25       Scott R. Dotson Agreement

    * 10.26       Trademark - Veridien

    * 10.27       Australian Patent No. 695,346/Virahol (DSII)

    * 10.28       U.S. Patent No. 5,891,052/Diagnostic Syringe Actuator

    * 10.29       U.S. Patent No. 5,895,354/Integrated Medical Diagnostic Center

    * 10.30       U.S. Patent No. 5,925,052/Umbilical Surgical Scissors

    * 10.31       U.S. Patent No. 5,985,929/Cold Chemical Sterilant

    * 10.32       Canadian Patent No. 2,166,810/Virahol (DSII)

    * 10.33       Trademark and Design - Viraguard

    * 10.34       Employees & Consultants Compensation and Stock Option Plan

    * 21.1        Subsidiaries

    * 21.2        Subsidiaries (as of December 31, 2000)

    * 21.3        Subsidiaries (as of December 31, 2001)

      21.4        Subsidiaries (as of December 31, 2002)

      99.1        Certification pursuant to 18 U.S.C. Section 1350, as Adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>


                                       50
<PAGE>
<TABLE>
<S>               <C>
      99.2        Certification pursuant to 18 U.S.C. Section 1350, as Adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

*     Exhibit previously filed.

REPORTS ON FORM 8-K
No Forms 8-K were filed.


                                       51
<PAGE>
SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

VERIDIEN CORPORATION


By      /s/ Sheldon C. Fenton, C.E.O., President
   ----------------------------------
            Sheldon C. Fenton, C.E.O.

Date    March 28, 2003
     ---------------------------------


      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.


By      /s/ Sheldon C. Fenton, C.E.O.
   ----------------------------------
            Sheldon C. Fenton, C.E.O.


Date        March 28, 2003
     ---------------------------------


By      /s/ Russell D. Van Zandt, Chairman of the Board of Directors
   -----------------------------------------------------------------
            Russell D. Van Zandt, Chairman of the Board of Directors


Date      March 28, 2003
     ---------------------------------


By      /s/ Rene A. Gareau, Vice Chairman of the Board of Directors
   ----------------------------------------------------------------
            Rene A. Gareau, Vice Chairman of the Board of Directors


Date    March 28, 2003
     ---------------------------------


                                       52