##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2006
 OR
 o
    
    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
  Delaware
    
    59-3020382(State or other jurisdiction
    
    (I.R.S. Employerof incorporation)
    
    Identification No.)7600 Bryan Dairy Rd, Suite F, Largo, Florida
    
    33777-1433(Address of principal executive offices)
    
    (Zip code)
 (727) 576-1600
  Name of each exchange on whichTitle of each class
    
    Registered
   
  
  þ
 þ o
 þ
 o þ




---



##### 



PAGEPART IItem 1.
    
    Description of Business
    
    
    3Item 2.
    
    Description of Property
    
    
    14Item 3.
    
    Legal Proceedings
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17PART IIItem 5.
    
    Market for Common Equity and Related Stockholder Matters
    
    
    18Item 6.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    22Item 7.
    
    Financial Statements
    
    
    30Item 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    53Item 8A.
    
    Controls and Procedures
    
    
    53Item 8B.
    
    Other Information
    
    
    53PART IIIItem 9.
    
    Directors and Executive Officers of the Registrant; Compliance with Section 16(a) of the Exchange Act
    
    
    54Item 10.
    
    Executive Compensation
    
    
    56Item 11.
    
    Security Ownership of Certain Beneficial Owners and  Management
    
    
    58Item 12.
    
    Certain Relationships and Related Transactions
    
    
    59Item 13.
    
    Exhibits and Reports on Form 8-K
    
    
    61Item 14.
    
    Principal Accountant Fees and Services
    
    
    64EX-3.10 CERTIFICATE FOR 2006A REDEEMABLE STOCKEX-3.11 CERTIFICATE FOR 2006B REDEEMABLE STOCKEX-3.12 CERTIFICATE FOR 2006C REDEEMABLE STOCKEX-3.13 CERTIFICATE OF AMENDMENT OF INCORPORATIONEX-21.8  SUBSIDIARIES OF VERIDIEN CORPORATIONEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX- 31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO
  2




---



##### Table of Contents



,
  
       3




---



##### Table of Contents



1.
    
    contact an approved testing laboratory and determine that an EPA
approved protocol 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 protocol;3.
    
    the protocol is customized by the laboratory to assure its
appropriateness for testing 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 more weeks;
 4




---



##### Table of Contents



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 now takes 120 days (for most antimicrobial
efficacy claims requiring the review of data); butii)
    
    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, the applicant is notified and given an opportunity to
correct the deficiency. The timeline for review can then be adjusted
to allow for submission of new information or re-submission of data.
There is no limit to how long the process can be extended, at that
point, as long as the agency believes that the applicant is
cooperating. At the end of the original 120 days, or any extended
period, the agency may approve or reject the application in whole or
in part.7.
    
    if, at the end of the review cycle the EPA approves the kill claim,
the EPA gives recommendations regarding label wording; and8.
    
    the Company then amends its label to comply with EPA requirements.
   
 5




---



##### Table of Contents



6




---



##### Table of Contents




    
    Viraguard® Heavy Duty Textured Wipes  rugged, roughened wipes
designed for use in very rigorous and bloody environments such as
ambulances and emergency rooms.
    
    Viraguard® Medical Instrument Wipes  pocket size handy wipes for
cleaning Stethoscopes, scissors, otoscopes, etc.
    
    Viraguard® Telephone & Keyboard Wipes- for disinfecting office
equipment, cellular phones and computers.
    
    Water Cooler Cleaning Kits  special unscented formula for removal of
bacteria, fungus and mold that can accumulate in water cooler
equipment.
    
    Viraguard® Toilet Seat Wipes 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.
  
    
    20 count Antiseptic Hand Wipes
    
    40 count Hospital Disinfectant Wipes
    
    250 ml Antiseptic Hand Spray
    
    250 ml Hospital Disinfectant Spray
    
    Family Health Kits containing disinfectant spray, hand spray and hand wipes to help
prevent the spread of influenza in the home.
    7




---



##### Table of Contents



8




---



##### Table of Contents



Employees
      9




---



##### Table of Contents



Competitive Advantage
  10




---



##### Table of Contents



Research & Development
 Pricing Strategy
 Expanded Marketing
  Manufacturing
  Availability of Raw Materials
 Governmental Regulation
 11




---



##### Table of Contents



A.
    
    VIRAHOL® 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® 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.
      12




---



##### Table of Contents



13




---



##### Table of Contents



14




---



##### Table of Contents



www.veridien.com
     
  
  
  
   pending
  pending
  15




---



##### Table of Contents



1.
    
    U.S. Patent Application Serial No. 10/792,339
U.S. Patent Application Publication No. US2004/0235898
Entitled: Methods for Controlling Fungi and Bacteria
Filing date: March 3, 20042.
    
    PCT Application No. PCT/US2004/006437
PCT Application Publication No. WO 2004/078136
Entitled: Pyridinium Salts, Compounds and Methods of Use
Filing date: March 3, 2004
Published: September 16, 20043.
    
    U.S. Patent Application Serial No. 10/792,465
U.S. Patent Application Publication No. US2004/0224984
Entitled: Methods of Treating Inflammations and Infections with Pyridinium Salts
Filing date: March 3, 2004
Published: November 11, 20044.
    
    U.S. Patent Application Serial No. 10/792,496
U.S. Patent Application Publication No. US2004/0235898
Entitled: Compounds and Methods for Controlling Fungi, Bacteria and Insects
Filing date: March 3, 2004
Published: November 25, 20045.
    
    PCT Application No. PCT/US2005/045325
PCT Application Publication No. WO 2006/065942
Entitled: Thiazolium Compounds and Uses Thereof
Filing date: December 15, 2005
Published: June 22, 20066.
    
    U.S. Provisional Patent Application
Entitled: Methods Of Using Pyridinium And Thiazolium Compounds As Reagents, Diagnostic
Compounds, And Therapeutic Agents
Filing date: January 19, 20077.
    
    PCT Application
Entitled: Stilbazium Research Assays
Filing date: April 7, 20068.
    
    PCT Application
Entitled: Pyridinium And Thiazolium Conjugates Including Polyethylene Glycols And Methods Of
Using The Same
Filing Date: November 8, 20069.
    
    PCT Application
Entitled: Disinfectant And Antiseptic Pyridinium And Thiazolium Compounds And Methods Of
Using The Same
Filing Date: November 8, 2006
 16




---



##### Table of Contents



pending
  
   
  FINANCIAL REORGANIZATION AND RECAPITALIZATION PLAN
   (A)
    
    The Board adopted a proposal to amend the Certificate of Incorporation of the
Company to increase the authorized shares of Common Stock of the Company to 800,000,000 and
referred the amendment to shareholders with its recommendation of the approval of such
amendment. On November 13, 2006, via a Consent to Action by Majority in Voting Interest in
Lieu of Special Meeting of the Shareholders, shareholders holding a majority in interest of
the voting power of the Company (59.39%) approved the amendment. On November 17, 2006 a
Preliminary Information Statement was filed with the SEC and on November 29, 2006 a
Definitive Information Statement was filed with the SEC. Both of these filings are
available for electronic viewing at www.sec.gov. Shareholders of record as of
November 13, 2006 were mailed a copy of the Definitive Information Statement. The
Certificate was so Amended December 21, 2006.(B)
    
    The Board of Directors exercised its authority under Delaware Law and the Companys
Articles of Incorporation and created 3 new series of Preferred Stock: (i) 2006-A Series of
Convertible Redeemable Preferred Stock; (ii) 2006-B Series of Convertible Redeemable
Preferred Stock; and (iii) 2006-C Series of Convertible Redeemable Preferred Stock. These
series were designated from the Companys existing 25,000,000 Shares of Authorized Preferred
Stock.
  17




---



##### Table of Contents



Outstanding
    
    OutstandingPre-Plan
    
    Post-Plan *Common Shares
    
    
    247,859,113
    
    
    
    249,359,113Class A Pref. Shares
    
    
    6,000
    
    
    
    0Series B Pref. Shares
    
    
    201,670
    
    
    
    02006-A Pref. Shares     (new)
    
    
    0
    
    
    
    200,6072006-B Pref. Shares     (new)
    
    
    0
    
    
    
    959,5552006-C Pref. Shares     (new)
    
    
    0
    
    
    
    0Class A Pref. Shares Accrued & Unpaid
Dividends
    
    $
    66,000
    
    
    $
    0Series B Pref. Shares Accrued & Unpaid
Dividends
    
    $
    2,042,624
    
    
    $
    0Convertible Debentures Principal & Accrued
Interest
    
    $
    8,023,877
    
    
    $
    799,665
 
 *
    
    note Outstanding Post-Plan numbers are not necessarily December 31, 2006 balances as other
securities issuance activity occurred between the implementation of the Plan and Veridiens
year-end. 
 PART II
 
  Market Information
  Quarter Ended
    
    High Bid
    
    Low BidDecember 31, 2006
    
    $
    .049
    
    
    
    .032September 30, 2006
    
    
    .043
    
    
    
    .025June 30, 2006
    
    
    .05
    
    
    
    .03March 31, 2006
    
    
    .084
    
    
    
    .018December 31, 2005
    
    $
    .054
    
    
    
    .025September 30, 2005
    
    
    .05
    
    
    
    .038June 30, 2005
    
    
    .056
    
    
    
    .04March 31, 2005
    
    
    .056
    
    
    
    .043
  18




---



##### Table of Contents



Holders
  Dividends
   1.
    
    At present there is a series of 300,000 shares of Preferred Stock, created on November
7, 2006, titled 2006-A Series of Convertible Redeemable Preferred Stock, of which 200,607
are issued and outstanding at December 31, 2006. These shares are entitled to receive an
annual dividend of 8% of their stated value per share before any dividend is paid to
holders of the Common Stock. Any dividend not declared and paid is accumulated on a
quarterly basis and must be paid before any dividend or distribution is made on our Common
Stock. At December 31, 2006 there were $22,518 in accrued and unpaid dividends on this
series of stock.2.
    
    At present there is a series of 1,200,000 shares of Preferred Stock, created on
November 7, 2006, titled 2006-B Series of Convertible Redeemable Preferred Stock, of
which 943,746 are issued and outstanding at December 31, 2006. These shares are entitled to
receive an annual dividend of 8% of their stated value per share before any dividend is
paid to holders of the Common Stock. Any dividend not declared and paid is accumulated on
a quarterly basis and must be paid before any dividend or distribution is made on our
Common Stock. At December 31, 2006 there were $103,065 in accrued and unpaid dividends on
this series of stock.3.
    
    At present there is a series of 300,000 shares of Preferred Stock, created on November
7, 2006, titled 2006-C Series of Convertible Redeemable Preferred Stock, of which zero
(0) are issued and outstanding at December 31, 2006. These shares are entitled to receive
an annual dividend of 8% of their stated value per share before any dividend is paid to
holders of the Common Stock. Any dividend not declared and paid is accumulated on a
quarterly basis and must be paid before any dividend or distribution is made on our Common
Stock. At December 31, 2006 there were no accrued and unpaid dividends on this series of
stock.
   19




---



##### Table of Contents



Number of
    
    Weightedsecurities to be
    
    average
    
    Number of securitiesissued upon
    
    exercise price
    
    remaining available forexercise of
    
    of outstanding
    
    future issuance underoutstanding
    
    options,
    
    equity compensation plansoptions, warrants
    
    warrants &
    
    (excluding securities& rights
    
    rights
    
    reflected in column(a))(a)
    
    (b)
    
    (c)Equity compensation
plans approved by
security holders
    
    
    0
    
    
    
    0
    
    
    
    0Equity compensation
plans not approved
by security holders
    
    
    2,000,000
    
    
    $
    0.0635
    
    
    
    1,918,410Total
    
    
    2,000,000
    
    
    
    
    
    
    
    1,918,410
  Sales of Unregistered Securities During Fiscal Year 2006
  Common Stock
  $1,100.
 20




---



##### Table of Contents



Preferred Stock
  Convertible Debenture Conversions
  Loan and Security Agreement Conversion
 
 Common Stock Warrants
    21




---



##### Table of Contents



Overview
   Ò
 Ò Ò
    22




---



##### Table of Contents



Results of Operations
 Fiscal 2006 Compared With Fiscal 2005
 Year Ended December 31, 2006 vs. Year Ended December 31, 2005
 Year Ended
    
    Percentage ofDecember 31
    
    net revenue2006
    
    2005
    
    2006
    
    2005Revenues
    
    $
    1,850,066
    
    
    $
    1,063,745
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    1,238,935
    
    
    
    773,604
    
    
    
    67
    %
    
    
    73
    %Gross Profit
    
    
    611,131
    
    
    
    290,141
    
    
    
    33
    %
    
    
    27
    %Operating ExpensesGeneral & Administrative
    
    
    1,185,586
    
    
    
    1,066,105
    
    
    
    64
    %
    
    
    100
    %Research & Development
    
    
    138,771
    
    
    
    110,849
    
    
    
    8
    %
    
    
    10
    %Research
& Development  Mycosol
    
    
    349,620
    
    
    
    852,192
    
    
    
    19
    %
    
    
    80
    %(Loss) from Operations
    
    
    (1,062,846
    )
    
    
    (1,739,005
    )
    
    
    (57
    )%
    
    
    (163
    )%Other Income (expense) Net
    
    
    (1,933,123
    )
    
    
    (780,467
    )
    
    
    (104
    )%
    
    
    (73
    )%Net income (loss) before minority
interest
    
    
    (2,995,969
    )
    
    
    (2,519,472
    )
    
    
    (162
    )%
    
    
    (237
    )%Minority interest in Mycosol loss
    
    
    181,323
    
    
    
    543,604
    
    
    
    10
    %
    
    
    51
    %Net loss
    
    
    (2,814,646
    )
    
    
    (1,975,868
    )
    
    
    (152
    )%
    
    
    (186
    )%Deemed dividend on preferred
stock
    
    
    (1,159,378
    )
    
    
    -0-
    
    
    
    (63
    )%
    
    
    0
    %Net loss attributable to common
shareholders
    
    
    (3,974,024
    )
    
    
    (1,975,868
    )
    
    
    (215
    )%
    
    
    (186
    )%
  
    
    Gross revenue from product sales increased in 2006 by $786,321, or 74%, to $1,850,066
compared with $1,063,745 in 2005. The increase in sales revenue was due primarily to the
Canadian launch in the retail market of the Viraguard product line and an increase in U.S.
sales from a major customer. We continue active promotion of our product line through
trade-show presentations, contracts, 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.
    
    Interest income for 2006 increased by $4,201, or 155%, to $6,910 compared to $2,709 in
2005. The increase in interest income is due primarily to an increase in cash on hand from
increased sales.
 23




---



##### Table of Contents




    
    Dividend income for 2006 increased by $113,324, or 685%, to $129,871 compared to $16,547
in 2005. The dividend income recorded in 2006 is for 359,753 Standard Global Holding Group
Ltd. (SNDH) common shares which were distributed in February 2006 valued at $125,914 and
359,754 Healthnostics, Inc. (HNST) common shares which were distributed in November 2006
valued at $3,957. At December 31, 2006 the Company owned 719,507 Health Quotient, HQNT
common shares, 370,495 HNST common shares, and 431,404 SNDH common shares and recorded them
at their fair market value of $37,476. At December 31, 2005 the Company owned 719,507 HQNT
common shares, 10,741 HNST common shares and 71,651 SNDH common shares and recorded them at
their fair market value of $137,795.
  
    
    The cost of goods sold from product sales for 2006 increased by $465,331, or 60%, to
$1,238,935 compared with $773,604 in 2006. The cost of goods ratio as a percentage of
product sales decreased to 67% in 2005 compared to 73% in 2005. The increase in cost of
goods sold is primarily due to the increased sales by 74% for 2006 versus 2005. The
overall decrease in the percentage for cost of goods ratio for product sales improved by 6%
due to sales with a product mix with higher margins. Although the costs of Isopropyl
Alcohol and freight surcharges being levied due to the increasing costs of oil has
decreased margins, the Company continues to work toward decreasing the cost of goods ratio
as a percentage by improving the product mix with higher margins by sourcing new
manufacturers and adding new higher margin products.
    
    General, selling, and administrative expenses for 2006 increased overall by $119,481, or
11%, to $1,185,586 compared with $1,066,105 in 2005. The increase in general, selling and
administrative costs was mostly attributable to an increase in professional  legal,
consulting, and accounting  service expenses for 2006 which increased by 6% to $278,260
compared with $261,326 in 2005. Legal and consulting fees increased by 1% while accounting
fees increased by 19%. Additionally, there was an increase in sales expenses for 2006 by
14% to $426,905 compared with $374,676 in 2005. Increases in general, selling and
administrative costs were also attributable to an increase in administrative wages for 2006
by 17% to $152,211 compared with $129,716 in 2005.
    
    Research and development expenses for 2006 increased by $27,922, or 25%, to $138,771
compared with $110,849 in 2005. The increase was due primarily to increased cost on
research focusing on broadening the range of claims we can assert on our existing products
and on testing new products for commercialization in the U.S. and globally.
    
    Expenses related to Mycosol Research and Development for 2006 decreased by $502,572, or
59%, to $349,620 compared with $852,192 in 2005. On June 7, 2004, Veridien reached an
understanding to create an alliance with Mycosol, Inc., a drug and chemical development
company. Mycosols business purpose is to bring to market mutually beneficial products
that utilize existing technologies of Veridien and new technologies being developed by
Mycosol. During the third quarter of 2006, Veridien acquired additional ownership interest
in Mycosol resulting in Veridien owning an interest of over 50% of Mycosol. Prior to the
third quarter, Veridien consolidated the operations of Mycosol in accordance with FASB
Interpretation 46 (Revised), Consolidation of Variable Interest Entities, which requires
a company to consolidate their interest in a variable interest entity (VIE) if the company
stands to absorb a majority of the VIEs expected losses and/or receive a majority of the
VIEs expected residual returns.During 2006 Veridien invested $362,000 in Mycosol through subscription to Mycosols
Preference Share Offering; receiving 362,000 Preferred A Shares and 135,750 Common Share
 24




---



##### Table of Contents



Warrants. During the third quarter 2006, under the terms of an Investment Agreement (as
amended), Veridien issued 9,803,992 Veridien common shares to Mineola Holding Corporation, a
third party, in exchange for 458,333 shares of the common stock of Mycosol. The 458,333
Mycosol common shares were originally sold to the unrelated third party (by Veridien) for
$500,000 cash in March 2005. The 9,803,992 Veridien shares have been valued at $392,160
which was Veridiens share price on the date the agreement was executed (ie. $0.04 per
share). These step-acquisitions during 2006 have resulted in additional goodwill being
recorded during 2006 in the amount of $495,516.At December 31, 2006 Veridien holdings in Mycosol include (i) 1,852,000 Preferred A Shares
(convertible into Mycosol common shares); (ii) 687,500 Common Shares; and (iii) 443,625
Common Share Warrants to purchase Mycosol common stock at an exercise price of $ 0.001.The accounts of Mycosol, Inc. that have consolidated with Veridien and subsidiaries at
December 31, 2006 and 2005 are as follows:
 2006
    
    
    2005Cash
    
    $
    880
    
    
    $
    134Inventory  raw materials
    
    
    54,131
    
    
    
    50,641Property and equipment
    
    
    13,311
    
    
    
    18,119Deposits and other
    
    
    4,883
    
    
    
    8,000Patents  pending
    
    
    362,051
    
    
    
    233,086Accounts payable
    
    
    (176,278
    )
    
    
    (63,383
    )Notes payable
    
    
    (34,102
    )
    
    
    (34,102
    )Minority Interest
    
    
    (100,790
    )
    
    
    (178,756
    )Accured Expenses
    
    
    
    
    
    
    Accumulated deficit
    
    
    
    
    
    
    124,086
    
    
    
    33,739Research and development expenses
    
    
    349,620
    
    
    
    852,192Minority interest Mycosol loss
    
    
    (181,323
    )
    
    
    (543,604
    )$
    292,383
    
    
    $
    342,327
  Units Held by
    
    VRDE % ofMycosol Equity Unit
    
    Units Issued
    
    Veridien
    
    categoryPreferred stock
    
    
    1,977,000
    
    
    
    1,852,000
    
    
    
    93.7
    %Common Stock
    
    
    2,625,000
    
    
    
    687,500
    
    
    
    26.2
    %Total
    
    
    4,602,000
    
    
    
    2,539,500
    
    
    
    55.18
    %
  
    
    Interest expense for 2006 increased by $81,757, or 16%, to $605,717 compared with
$523,960 in 2005. The increase in interest expense was due primarily to Convertible
Debenture holders in 2006 and other various debts.
    
    On November 7, 2006 the Board of Directors approved a Plan of Financial Reorganization
and Recapitalization. The plan was designed to reduce the debt and accrued liabilities of
Veridien by seeking the exchange of (i) Convertible Debenture debt (principal and accrued
interest); (ii) unpaid dividends accrued on Class A Preferred Stock; and (iii) unpaid
dividends accrued on Series B Preferred Stock, into equity. Veridiens liability for $7.2
Million of convertible debt (including accrued interest thereon) and $2.1 Million of
Preferred Stock accrued and unpaid dividends were satisfied and converted to equity with
the implementation of this plan.
 25




---



##### Table of Contents



The reorganization and recapitalization plan incurred $1,233,998 in debt conversion expenses for
2006. This is a one-time, non-cash non-recurring expense.
 
    
    During 2006 the Company did not sell any of its marketable securities. During 2005 the
Company sold 300 Standard Global Holding Group Ltd. (SNDH) shares for a realized loss of
$3. This represents a net realized loss of $3 for the twelve months of 2005.
    
    During 2006 the Company recorded an unrealized loss on investments in the amount of
$230,189 due to the decline in the fair market value of H-Quotient, Inc (HQNT) shares to
$.00 at December 31, 2006 from $.17 at December 31, 2005; Healthnostics, Inc. (HNST) shares
to $.008 at December 31, 2006 from $.125 at December 31, 2005 and Standard Global Holding
Group Ltd. (SNDH) shares to $.08 at December 31, 2006 from $.24 at December 31, 2005. At
December 31, 2006 the Company held 719,507 shares H-Quotient, Inc. (HQNT), 370,495 shares
of Healthnostics, Inc. (HNST) and 431,404 shares of Standard Global Holding Group Ltd.
(SNDH) for a total net fair market value of $37,476. At December 31, 2005 the Company held
719,507 shares HQNT, 10,741 shares of HNST and 71,651 shares of SNDH for a total net fair
market value of $137,795.
      26




---



##### Table of Contents




    
    During the twelve months ended December 31, 2006 we issued 9
convertible debentures (i) 6 for cash proceeds totaling $780,000;
(ii) 1 for extinguishment of notes payable (cash proceeds already
received by the company) of $360,000; (iii) 1 for extinguishment
of notes payable-related party (cash proceeds already received by
the company) of $501,000; and (iv) 1 for extinguishment of
accounts payable  related party (fees and expenses due from the
company) of $266,032. These debentures all carried an interest
rate of 8%, had 3-year terms and had conversion rates of between
$0.033 and $0.04 per share.
    
    During the twelve months ended December 31, 2006, 409,373 common shares were issued under the Companys S-8 Registration Statement
to employees under the terms of their employment contracts and as
recognition of performance. The average effective price per share
was $0.04 per share.
    
    During the twelve months ended December 31, 2006, 400,000 common shares were earned by the Chairman of the Board under the terms of
his consulting agreement with the Company. The effective price
per share was $0.042 per share.
    
    During the second quarter a convertible debenture with a principal
balance of $50,000 and accrued interest of $14,582 was converted
into 1,291,638 common shares at the conversion rate of $0.05 per
share.
    
    During the third quarter, under the terms of an Investment
Agreement (as amended) [see Exhibit 10.37 as filed with our Form
10QSB for the period ended March 31, 2005 and see Form 8K filed
May 23, 2006], we issued 9,803,992 common shares to a third party
in exchange for 458,333 shares of the common stock of Mycosol,
Inc. The 458,333 Mycosol common shares were originally sold to
the unrelated third party (by Veridien) for $500,000 cash in March
2005. The effective price of the 9,803,992 shares of the
Companys common stock as issued in July was $0.04 per share.
    
    During the fourth quarter of 2006, a convertible debenture with a
principal balance of $100,000 and accrued interest of $90,996 was
converted into 4,184,550 common shares at the conversion rate of
$0.046 per share.
    
    During the fourth quarter of 2006, $129,583 of the Loan and
Security Agreement principal was converted by the holders to
27,451 shares of Series B Preferred Stock and 7,858,150 shares of
Common Stock
    
    During the fourth quarter of 2006, we issued 16,000 Series 2006-B
Preferred Shares for cash proceeds of $160,000.
    
    During the fourth quarter of 2006, the Company implemented a
Financial Reorganization and Recapitalization Plan. See Item 4
above for full details.
   27




---



##### Table of Contents



Critical Accounting Estimates
    28




---



##### Table of Contents



29




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     /s/ Malone & Bailey, PCMalone & Bailey, PCwww.malone-bailey.comHouston, Texas
  30




---



##### Table of Contents



Financial Statements
Veridien Corporation
and Subsidiaries
   2006
    
    
    2005AssetsCurrent assets:Cash
    
    $
    185,656
    
    
    $
    115,493Marketable securities
    
    
    37,476
    
    
    
    137,795Accounts receivable, net of allowance of $86,077 and $27,494
    
    
    620,145
    
    
    
    324,952Inventory
    
    
    499,700
    
    
    
    376,624Prepaid expenses and other current assets
    
    
    77,420
    
    
    
    82,399Total current assets:
    
    
    1,420,397
    
    
    
    1,037,263Property and equipment, net of accumulated
depreciation of $425,286 and $417,365
    
    
    35,970
    
    
    
    29,762Other assets:Patents, net of accumulated amortization of
of $516,298 and $511,188
    
    
    410,136
    
    
    
    286,280Goodwill
    
    
    905,516
    
    
    
    410,000Security deposits
    
    
    8,283
    
    
    
    9,965Total Assets:
    
    $
    2,780,302
    
    
    $
    1,773,270
  31




---



##### Table of Contents



Veridien Corporation
And Subsidiaries
   2006
    
    
    2005Liabilities and Deficit in Stockholders Equity (Deficit)Current liabilities:Note payable
    
    $
    92,325
    
    
    $
    571,522Note payable  related party
    
    
    145,000
    
    
    
    260,000Current portion of convertible debentures, net of debt
discount of $7,071and $0 at December 31, 2006, and 2005
    
    
    201,929
    
    
    
    671,066Current portion of convertible debentures  related party
    
    
    150,000
    
    
    
    824,096Accounts payable
    
    
    632,161
    
    
    
    452,904Accounts payable  related party
    
    
    93,406
    
    
    
    232,049Accrued liabilities
    
    
    195,975
    
    
    
    534,686Accrued liabilities  related party
    
    
    125,183
    
    
    
    769,192Customer deposit
    
    
    -0-
    
    
    
    16,977Total current liabilities
    
    
    1,635,979
    
    
    
    4,332,492Long-term liabilities:Convertible debentures
    
    
    50,000
    
    
    
    2,910,811Total liabilities:
    
    
    1,685,979
    
    
    
    7,243,303Minority interest
    
    
    100,790
    
    
    
    178,756Shareholders equity:Undesignated preferred stock, $.001 par
value, 25,000,000 shares authorizedConvertible redeemable preferred stock,
$10 par value, 100,000 authorized and 0 issued and
outstanding at December 31, 2006 and 100,000
authorized and 6,000 issued and outstanding at
December 31, 2005
    
    
    -0-
    
    
    
    60,000Series B Preferred Stock, $.001 par value, 245,344
authorized, and 0 issued and outstanding at December
31, 2006 and 174,219 issued and
outstanding at December 31, 2005
    
    
    -0-
    
    
    
    175Series 2006-A Preferred Stock, $.001 par value, 300,000
authorized, and 200,607 issued and outstanding at December
31, 2006 and 0 issued and outstanding at December 31, 2005
    
    
    201
    
    
    
    -0-Series 2006-B Preferred Stock, $.001 par value, 1,200,000
authorized, and 943,746 issued and outstanding at December
31, 2006 and 0 issued and outstanding at December 31, 2005
    
    
    944
    
    
    
    -0-Series 2006-C Preferred Stock, $.001 par value, 0 authorized,
and 0 issued and outstanding at December 31, 2006 and 0
issued and outstanding at December 31, 2005
    
    
    -0-
    
    
    
    -0-
 32




---



##### Table of Contents



2006
    
    
    2005Common Stock  $.001 par value; 800,000,000 shares at December
31, 2006 and 300,000,000 shares at December 31, 2005
authorized; 253,840,560 and 228,282,857 shares issued and
outstanding at December 31, 2006 and December 31, 2005
    
    
    253,841
    
    
    
    228,283Additional paid-in capital
    
    
    41,335,741
    
    
    
    31,819,544Cumulative foreign exchange adjustment
    
    
    (25,757
    )
    
    
    -0-Accumulated deficit
    
    
    (37,756,791
    )
    
    
    (35,780,923
    )Current period profit (loss)
    
    
    (2,814,646
    )
    
    
    (1,975,868
    )Total shareholders equity (deficit):
    
    
    993,533
    
    
    
    (5,648,789
    )Total Liabilities and Shareholders Equity (Deficit):
    
    $
    2,780,302
    
    
    $
    1,773,270
  33




---



##### Table of Contents



Veridien Corporation
and Subsidiaries
 
 2006
    
    
    2005Revenue
    
    $
    1,850,066
    
    
    $
    1,063,745Operating costs and expenses:Cost of revenue
    
    
    1,238,935
    
    
    
    773,604General, selling, and
administrative
    
    
    1,185,586
    
    
    
    1,066,105Research and development
    
    
    488,391
    
    
    
    963,0412,912,912
    
    
    
    2,802,750Income (loss) from operations
    
    
    (1,062,846
    )
    
    
    (1,739,005
    )Other income (expense):Interest expense
    
    
    (605,717
    )
    
    
    (523,960
    )Debt conversion expense
    
    
    (1,233,998
    )
    
    
    -0-Realized gain (loss)
on marketable investments
    
    
    -0-
    
    
    
    (3
    )Unrealized gain (loss)
on investments
    
    
    (230,189
    )
    
    
    (275,760
    )Interest and dividend income
    
    
    136,781
    
    
    
    19,256(1,933,123
    )
    
    
    (780,467
    )Net loss before minority
interest
    
    
    (2,995,969
    )
    
    
    (2,519,472
    )Minority interest in Mycosol loss
    
    
    181,323
    
    
    
    543,604Net loss
    
    $
    (2,814,646
    )
    
    $
    (1,975,868
    )Deemed dividend on preferred
stock
    
    $
    (1,159,378
    )
    
    
    -0-Net loss attributable to common
shareholders
    
    $
    (3,974,024
    )
    
    $
    (1,975,868
    )Net loss per common share
 basic and diluted
    
    $
    (.01
    )
    
    $
    (.01
    )Net loss attributable to common
shareholders per common
share  basic and diluted
    
    $
    (.02
    )
    
    $
    (.01
    )Weight average share outstanding
    
    
    235,738,481
    
    
    
    227,474,605
  34




---



##### Table of Contents



Veridien Corporation
and Subsidiaries
   Number of SharesConvertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    ShareholdersRedeemable
    
    
    Series B
    
    
    Series 2006-A
    
    
    Series 2006-B
    
    
    Common
    
    
    Capital
    
    
    Accumulated
    
    
    Comprehensive
    
    
    EquityPreferred
    
    
    Preferred
    
    
    Preferred
    
    
    Preferred
    
    
    Shares
    
    
    Stock
    
    
    Deficit
    
    
    Income/(loss)
    
    
    (Deficit)Balances at January 1, 2005
    
    
    6,000
    
    
    
    174,219
    
    
    
    
    
    
    
    
    
    
    
    214,369,622
    
    
    
    31,668,988
    
    
    
    (35,780,923
    )
    
    
    
    
    
    
    (4,111,935
    )Common stock issued for- payment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,321,857
    
    
    
    113,489
    
    
    
    
    
    
    
    
    
    
    
    113,489- services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    591,378
    
    
    
    25,525
    
    
    
    
    
    
    
    
    
    
    
    25,525- investment in Mycosol
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000,000
    
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    300,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,975,868
    )
    
    
    
    
    
    
    (1,975,868
    )Balances at December 31, 2005
    
    
    6,000
    
    
    
    174,219
    
    
    
    
    
    
    
    
    
    
    
    228,282,857
    
    
    $
    32,108,002
    
    
    $
    (37,756,791
    )
    
    
    
    
    
    $
    (5,648,789
    )Common stock issued for- cash received for exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,000
    
    
    
    1,100
    
    
    
    
    
    
    
    
    
    
    
    1,100- services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    809,373
    
    
    
    32,970
    
    
    
    
    
    
    
    
    
    
    
    32,970- payment of debt
    
    
    
    
    
    
    27,451
    
    
    
    
    
    
    
    
    
    
    
    13,334,338
    
    
    
    476,415
    
    
    
    
    
    
    
    
    
    
    
    476,415- investment in Mycosol
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,803,992
    
    
    
    392,160
    
    
    
    
    
    
    
    
    
    
    
    392,160- pref share
conversion to common stock
    
    
    (6,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,500,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred Share sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,000
    
    
    
    
    
    
    
    160,000
    
    
    
    
    
    
    
    
    
    
    
    160,000Plan of Reorganization and Recapitalization
    
    
    
    
    
    
    (201,670
    )
    
    
    200,607
    
    
    
    927,746
    
    
    
    
    
    
    
    8,367,226
    
    
    
    
    
    
    
    
    
    
    
    8,367,226Fair value of warrants issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,248
    
    
    
    
    
    
    
    
    
    
    
    32,248BCF for Convertible debt issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,606
    
    
    
    
    
    
    
    
    
    
    
    20,606Beneficial conversion feature embedded in common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,159,378Deemed dividend on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,159,378
    )Cumulative foreign exchange adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,757
    )
    
    
    (25,757
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,814,646
    )
    
    
    
    
    
    
    (2,814,646
    )Balances at December 31, 2006
    
    
    
    
    
    
    
    
    
    
    200,607
    
    
    
    943,746
    
    
    
    253,840,560
    
    
    $
    41,590,727
    
    
    $
    (40,571,437
    )
    
    $
    (25,757
    )
    
    $
    993,533
 Less par values:Convertible
redeemable preferred
    
    
    Series B preferred
    
    
    Series 2006-A
preferred
    
    
    (201
    )Series 2006-B
preferred
    
    
    (944
    )Common
    
    
    (253,841
    )Paid in Capital
    
    $
    41,335,741
  35




---



##### Table of Contents



Veridien Corporation
and Subsidiaries
 2006
    
    
    2005Cash flows from operating activitiesNet (loss)
    
    $
    (2,814,646
    )
    
    $
    (1,975,868
    )Adjustments to reconcile net (loss) to net cash
used by operating activities:Depreciation and amortization
    
    
    13,032
    
    
    
    25,226Amortization of debt discount associated with BCF
    
    
    13,535
    
    
    
    -0-Non cash dividends
    
    
    (129,871
    )
    
    
    (16,547
    )Unrealized (gain) losses on marketable securities
    
    
    230,189
    
    
    
    275,760Realized (gain) loss on marketable securities
    
    
    -0-
    
    
    
    3Issuances of common stock for services
    
    
    32,970
    
    
    
    25,526Minority interest
    
    
    (181,323
    )
    
    
    (543,604
    )Debt conversion expense
    
    
    1,233,998
    
    
    
    -0-Changes in:Accounts receivable
    
    
    (295,193
    )
    
    
    (144,274
    )Inventory
    
    
    (123,076
    )
    
    
    (44,922
    )Prepaid expenses and other current assets
    
    
    4,979
    
    
    
    (6,312
    )Deposits
    
    
    1,682
    
    
    
    1,035Customer deposits
    
    
    (16,977
    )
    
    
    16,977Accounts payable  third party
    
    
    179,257
    
    
    
    208,973Accounts payable  related party
    
    
    127,389
    
    
    
    200,476Accrued expenses  third party
    
    
    320,547
    
    
    
    184,868Accrued expenses  related party
    
    
    282,262
    
    
    
    313,728Net cash provided (used) by operating activities
    
    
    (1,121,246
    )
    
    
    (1,478,955
    )Cash flow from investing activities:Proceeds from sale of marketable securities
    
    
    -0-
    
    
    
    66Purchase of property and equipment
    
    
    (17,382
    )
    
    
    (22,229
    )Increase in patents
    
    
    (128,966
    )
    
    
    (115,086
    )Net cash (used) by investing activities
    
    
    (146,348
    )
    
    
    (137,249
    )Cash flow from financing activities:Proceeds from Mineola for Mycosol interest
    
    
    -0-
    
    
    
    500,000Proceeds from convertible debentures
    
    
    780,000
    
    
    
    450,000Proceeds on notes payable  third party
    
    
    81,248
    
    
    
    395,670Proceeds on notes payable  related party
    
    
    458,000
    
    
    
    260,000Proceeds on
preferred stock  series 2006-B
    
    
    160,000
    
    
    
    -0-Proceeds on exercised warrants
    
    
    1,100
    
    
    
    -0-Payments on notes payable  third party
    
    
    (70,591
    )
    
    
    -0-Payments on notes payable  related party
    
    
    (72,000
    )
    
    
    -0-Net cash provided by financing activities
    
    
    1,337,757
    
    
    
    1,605,670Net increase/(decrease) in cash and equivalents
    
    
    70,163
    
    
    
    (10,534
    )Cash at beginning of year
    
    
    115,493
    
    
    
    126,027Cash at end of year
    
    $
    185,656
    
    
    $
    115,493Non-cash investing and financing activities:Conversion of convertible debentures, old preferred A & B stock
to common stock and new preferred A & B stock
    
    
    10,182,501
    
    
    
    113,489Payment of debt to convertible debentures
    
    
    1,127,032
    
    
    
    -0-Payment of accrued interest with Mycosol warrants
    
    
    -0-
    
    
    
    222,360Purchase of Mycosol interest with 9,803,992 in 2006 and
6,000,000 shares in 2005 of Veridien common stock
    
    
    392,160
    
    
    
    300,000
  36




---



##### Table of Contents



NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  1.
    
    Organization, Business and Control
   2.
    
    Principles of Consolidation
  3.
    
    Accounting Estimates
  4.
    
    Cash Equivalents
  5.
    
    Revenue Recognition
  37




---



##### Table of Contents



NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED
 6.
    
    Accounts Receivable
  7.
    
    Inventories
  8.
    
    Marketable Securities
  9.
    
    Property and Equipment
  10.
    
    Patents
  11.
    
    Fair Value of Financial Instruments
  Recent Accounting Pronouncements
  38




---



##### Table of Contents



NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED
 13.
    
    Stock-Based Compensation
 Share-Based Payment Accounting for Stock Issued to Employees
    39




---



##### Table of Contents



NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED
 2005Net Income (Loss)
    
    As reported
    
    $
    (1,975,868
    )Stock based compensation included in Net Loss
    
    
    Fair Value of stock based compensation
    
    
    13,198Pro forma
    
    $
    (1,989,066
    )Net (Loss) per share
    
    As reported
    
    $
    (0.01
    )Stock based compensation included in Net Loss
    
    
    Fair Value of stock based compensation
    
    
    (0.00
    )Pro forma
    
    $
    (0.01
    )
 14.
    
    Asset Impairment
  15.
    
    Income Taxes
  16.
    
    Reclassification
  40




---



##### Table of Contents



NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED
 17.
    
    Net Loss per Share
  NOTE B  GOING CONCERN
     NOTE C  CONSOLIDATION OF MYCOSOL
  Consolidation of Variable Interest Entities
  41




---



##### Table of Contents



NOTE C  CONSOLIDATION OF MYCOSOL  CONTINUED
    2006
    
    
    2005Cash
    
    $
    880
    
    
    $
    134Inventory  raw materials
    
    
    54,131
    
    
    
    50,641Property and equipment
    
    
    13,311
    
    
    
    18,119Deposits and other
    
    
    4,883
    
    
    
    8,000Patents  pending
    
    
    362,051
    
    
    
    233,086Accounts payable
    
    
    (176,278
    )
    
    
    (63,383
    )Notes payable
    
    
    (34,102
    )
    
    
    (34,102
    )Minority Interest
    
    
    (100,790
    )
    
    
    (178,756
    )Accrued Expenses
    
    
    
    
    
    
    Accumulated deficit
    
    
    
    
    
    
    124,086
    
    
    
    33,739Research and development expenses
    
    
    349,620
    
    
    
    852,192Minority interest Mycosol loss
    
    
    (181,323
    )
    
    
    (543,604
    )292,383
    
    
    $
    342,327Veridiens ownership interest in Mycosol at
December 31, 2006 is 55.18%:Preferred stock
    
    
    1,852,000Common shares
    
    
    687,500Common share warrants
    
    
    443,625
 NOTE D  MARKETABLE SECURITIES
  42




---



##### Table of Contents



NOTE D  MARKETABLE SECURITIES  CONTINUED
  NOTE E  NOTES PAYABLE
    NOTE F  FINANCIAL REORGANIZATION AND RECAPITALIZATION PLAN
    43




---



##### Table of Contents



NOTE F  FINANCIAL REORGANIZATION AND RECAPITALIZATION PLAN  CONTINUED
  Outstanding
    
    
    OutstandingPre-Plan
    
    
    Post-Plan *Common Shares
    
    
    247,859,113
    
    
    
    249,359,113Class A Pref. Shares
    
    
    6,000
    
    
    
    0Series B Pref. Shares
    
    
    201,670
    
    
    
    02006-A Pref. Shares (new)
    
    
    0
    
    
    
    200,6072006-B Pref. Shares (new)
    
    
    0
    
    
    
    959,5552006-C Pref. Shares (new)
    
    
    0
    
    
    
    0Class A Pref. Shares Accrued & Unpaid
Dividends
    
    $
    66,000
    
    
    $
    0Series B Pref. Shares Accrued & Unpaid
Dividends
    
    $
    2,042,624
    
    
    $
    0Convertible Debentures Principal & Accrued
Interest
    
    $
    8,023,877
    
    
    $
    799,665
 
 *
    
    note Outstanding Post-Plan numbers are not necessarily December 31, 2006 balances
as other securities issuance activity occurred between the implementation of the Plan
and Veridiens year-end. NOTE G  CONVERTIBLE DEBENTURES
    Year
    
    3rd Parties
    
    
    Related Parties
    
    
    Total2007
    
    $
    209,000
    
    
    $
    150,000
    
    
    $
    359,0002008
    
    
    0
    
    
    
    0
    
    
    
    02009
    
    
    50,000
    
    
    
    0
    
    
    
    50,000Total
    
    $
    259,000
    
    
    $
    150,000
    
    
    $
    409,000
  44




---



##### Table of Contents



NOTE H  COMMITMENTS AND CONTINGENCIES
    Year
    
    Amount2007
    
    $
    48,0002008
    
    $
    24,000
 NOTE I  PREFERRED STOCK
 (a) CONVERTIBLE REDEEMABLE PREFERRED STOCK (Class A Preferred Stock)
  December 31, 2006
    
    December 31, 2005Class A Pref Shares outstanding
    
    
    0
    
    
    
    6,000Accrued and Unpaid Dividends
    
    $
    0
    
    
    $
    66,000
 Accounting for Derivative Instruments and Hedging
Activities Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock.
 45




---



##### Table of Contents



(b)  SERIES B CUMULATIVE PREFERRED STOCK
   December 31, 2006
    
    December 31, 2005Series B Pref Shares outstanding
    
    
    0
    
    
    
    174,219Accrued and Unpaid Dividends
    
    $
    0
    
    
    $
    1,770,031
 98-5 Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios
 Accounting for Derivative Instruments and Hedging
Activities Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock.
 46




---



##### Table of Contents



(c) 2006-A SERIES OF CONVERTIBLE REDEEMABLE PREFERRED STOCK
   December 31, 2006
    
    December 31, 20052006-A Series Pref Shares
outstanding
    
    
    200,607
    
    
    
    n/aAccrued and Unpaid Dividends
    
    $
    22,518
    
    
    
    n/a
 98-5 Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios
 Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity.
 Accounting for Derivative Instruments and Hedging
Activities Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock.
 47




---



##### Table of Contents



(d) 2006-B SERIES OF CONVERTIBLE REDEEMABLE PREFERRED STOCK
   December 31, 2006
    
    December 31, 20052006-B Series Pref Shares
outstanding
    
    
    943,746
    
    
    
    n/aAccrued and Unpaid Dividends
    
    $
    103,065
    
    
    
    n/a
 98-5 Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios
 Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity.
 Accounting for Derivative Instruments and Hedging
Activities Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock.
 48




---



##### Table of Contents



(e) 2006-C SERIES OF CONVERTIBLE REDEEMABLE PREFERRED STOCK
   NOTE J  STOCK WARRANTS
     49




---



##### Table of Contents



NOTE J  STOCK WARRANTS  CONTINUED
    ExercisePriceCommon Stock
    
    Warrants
    
    
    RangeOutstanding at January 1, 2005
    
    
    17,290,007
    
    
    
    .001 - .07Granted
    
    
    1,000,000
    
    
    
    .057Expired
    
    
    (1,000,000
    )
    
    
    .05Loan & Security
Agreement Conversion
    
    
    (7,321,857
    )
    
    
    .016Outstanding at December 31, 2005
    
    
    9,968,150
    
    
    $
    .001 - .07Granted
    
    
    2,333,333
    
    
    
    .06-.07Exercised
    
    
    (110,000
    )
    
    
    .01Expired
    
    
    (1,000,000
    )
    
    
    .07Loan & Security
Agreement Conversion
    
    
    (7,858,150
    )
    
    
    .016Outstanding at December 31, 2006
    
    
    3,333,333
    
    
    $
    .057 -.07
  Equivalent #Common SharesPreferred
    
    
    Preferred
    
    
    on PreferredShare
    
    
    Exercise
    
    
    ShareWarrants
    
    
    Price
    
    
    ConversionOutstanding at December 31, 2005
    
    
    27,451
    
    
    $
    10.00
    
    
    
    550,121Exercised
    
    
    (27,451
    )Outstanding at December 31, 2006
    
    
    0
 50




---



##### Table of Contents



NOTE J  STOCK WARRANTS  CONTINUED
  NOTE K  INCOME TAXES
  Deferred tax assets  NOLs
    
    $
    8,790,100Valuation allowance
    
    
    (8,790,100
    )Net deferred taxes
    
    $
    
 NOTE L  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    NOTE M  RELATED PARTY TRANSACTIONS
  51




---



##### Table of Contents



NOTE M  RELATED PARTY TRANSACTIONS  CONTINUED
    NOTE N  PATENTS AND GOODWILL
  Gross Carrying
    
    
    AccumulatedPATENTS
    
    Amount
    
    
    AmortizationBalance at December 31, 2004
    
    $
    682,382
    
    
    $
    (506,077
    )Activity during 2005
    
    
    115,086
    
    
    
    (5,111
    )Balance at December 31, 2005
    
    
    797,468
    
    
    
    (511,188
    )Activity during 2006
    
    
    128,966
    
    
    
    (5,110
    )Balance at December 31, 2006
    
    $
    926,434
    
    
    $
    (516,298
    )
 GOODWILL
    
    Carrying AmountBalance at December 31, 2004
    
    $
    Goodwill as result of consolidation
Resulting from FIN 46R.
    
    
    410,000Balance at December 31, 2005
    
    
    410,000Goodwill acquired through Step Acquisitions
    
    
    495,516Balance at December 31, 2006
    
    $
    905,516
  Goodwill and
Other Intangible Assets.
 NOTE O  MAJOR CUSTOMERS
   NOTE P  SEGMENT REPORTING
  Revenue (1)
 2006
    
    
    2005United States
    
    $
    1,264,450
    
    
    $
    1,063,745Canada
    
    
    485,349
    
    
    
    0Other
    
    
    100,267
    
    
    
    0Total
    
    $
    1,850,066
    
    
    $
    1,063,745
 Long-lived Assets
 2006
    
    
    2005United States
    
    $
    1,359,905
    
    
    $
    736,007Canada
    
    
    0
    
    
    
    0Other
    
    
    0
    
    
    
    0Total
    
    $
    1,359,905
    
    
    $
    736,007
 
 (1)
 NOTE Q  SUBSEQUENT EVENTS
  52




---



##### Table of Contents



ITEM 8B OTHER INFORMATION
 
 53




---



##### Table of Contents



PART III
 
  Directors and Executive Officers
 Name
    
    Age
    
    PositionRussell D. Van Zandt
    
    
    65
    
    
    Chairman of the Board of Directors/Chief
Financial OfficerRene A. Gareau
    
    
    64
    
    
    Vice Chairman of the Board of Directors/Corporate
SecretarySheldon C. Fenton
    
    
    55
    
    
    President and CEO/ DirectorAlfred A. Ritter
    
    
    63
    
    
    DirectorRichard Klein
    
    
    62
    
    
    Director
    54




---



##### Table of Contents



55




---



##### Table of Contents



Compliance with Section 16(A) of The Exchange Act
  
  Compensation of Directors
  Compensation of Management
  Other AnnualName & Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    CompensationSheldon Fenton, CEO(1)
    
    
    2004
    
    
    
    0
    
    
    
    0
    
    
    
    02005
    
    
    
    0
    
    
    
    0
    
    
    
    02006
    
    
    
    0
    
    
    
    0
    
    
    
    0Russell Van Zandt, CFO(2)
    
    
    2004
    
    
    $
    30,000
    
    
    
    0
    
    
    $
    17,0532005
    
    
    $
    30,000
    
    
    
    0
    
    
    $
    17,1502006
    
    
    $
    30,000
    
    
    
    0
    
    
    $
    16,700
 
 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, 2006 these fees remain unpaid in the amount of $90,000 and
are included in accounts payable  related party.2
    
    During the fourth quarter 2003 the Company entered into a Consulting Agreement with
Russell Van Zandt, who is the Chairman of the Board of Directors. This Agreement has been
renewed annually. The Agreement calls for $30,000 annually in cash payment for services and
100,000 common shares per quarter. Other Compensation in the above table represents the fair
market value of the quarterly 56




---



##### Table of Contents



awarded common shares, at the time earned. In June 2005 Mr. Van Zandt took on the added
responsibilities as Chief Financial Officer of the Company.   1.
    
    The management of the Company is limited to four (4) persons;2.
    
    All of the management team have now been associated with the Company for
several years and have become familiar with the requirements applicable to them;3.
    
    The management of the Company is so small and in such regular
communication that the conduct of any one member of management is apparent to all;
and4.
    
    The Company has centralized the collection and disclosure of material
information and the control of public communications to persons familiar with the
applicable requirements and having direct professional access in the event of
perceived problems.
 
 57




---



##### Table of Contents



Percentage as ofShares of Common Stock
    

3/05/07 1Sheldon C. Fenton
160 Eglinton Ave E, #500
Toronto, Ontario
Canada M4P 3B5
    
    174,297,4022
    
    
    42.6
    %Dunvegan Mortgage Corporation
222 Delaware Ave, PO Box 2306
Wilmington, DE 19899
    
    173,914,4022,3
    
    
    42.5
    %Rene A. Gareau
602 Sarasota Quay
Sarasota, FL 34236
    
    
    125,000
    
    
    
    0.05
    %Russell D. Van Zandt
100 Beach Dr. NE, #1002
St. Petersburg, FL 33701
    
    
    1,991,560
    
    
    
    0.77
    %Alfred A. Ritter
Rua Baronessa DeBeck 130
Malveira Da Serra
2755-153 Alcabideche, Portugal
    
    
    0
    
    
    
    0Richard Klein
107 Marseille Place
Cary, NC 27511
    
    
    2,700,000
    
    
    
    1.05
    %Margreat, Inc.
149 Dunvegan Rd.
Toronto, Ontario Canada M5P 1M5
    
    14,869,9984
    
    
    5.5
    %Lexxec Corporation
145 Dunvegan Rd.
Toronto, Ontario Canada M5P 2N8
    
    16,802,9845
    
    
    6.2
    %Allen Greenspoon
60 High Park Drive
Dundas, Ontario Canada L9H 6G7
    
    17,232,8426
    
    
    6.4
    %Sarasota Retail Investments, Inc.
138 East Central Avenue
Howey-In-The-Hills, FL 34737
    
    18,515,4607
    
    
    6.7
    %Mineola Holdings Corporation
c/o Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801-1120
    
    13,112,6428
    
    
    5.0
    %All Directors and Officers as a
Group (5 persons)
    
    
    179,113,962
    
    
    
    43.8
    %
 
 1
    
    Based on 257,650,248 common shares (shares) issued and outstanding as of March
5, 2007 and assuming conversion of all of the Debentures and Preferred Shares, held by the
specified Investor, into common shares 58




---



##### Table of Contents



(which number is added to the denominator for the purposes of calculating that Investors
percentage ownership).2
    
    Includes Mr. Fentons direct ownership of 383,000 shares and indirect ownership of
22,333,014 shares owned by Dunvegan Mortgage Corporation, of which Mr. Fenton is an officer
and director. Also includes (i) 7,895,888 shares obtainable on the conversion of 27,608
Series 2006-A Preferred Shares owned by Dunvegan Mortgage Corporation; and (ii) 143,685,500
shares obtainable on the conversion of 574,742 Series 2006-B Preferred Shares owned by
Dunvegan Mortgage Corporation. For information purposes only, does not include holdings of
his adult son including (i) 6,882,634 shares; (ii) 1,676,532 shares obtainable on the
conversion of 5,862 Series 2006-A Preferred Shares; or (iii) 3,992,755 shares issuable in the
event of conversion of the $60,000 of Convertible Debentures (principal) and $39,779 of
interest thereon as of December 31, 2006; in which Mr. Fenton disclaims any beneficial
ownership. For information purposes only, does not include holdings of his adult daughter
including (i) 7,441,704 shares; (ii) 1,713,500 shares obtainable on the conversion of 6,854
Series 2006-B Preferred Shares; or (iii) 2,812,244 shares issuable in the event of conversion
of the $50,000 of Convertible Debentures (principal) and $34,367 of interest thereon as of
December 31, 2006; in which Mr. Fenton disclaims any beneficial ownership.3
    
    Includes (i) 7,895,888 shares obtainable on the conversion of 27,608 Series 2006-A
Preferred Shares owned by Dunvegan Mortgage Corporation; and (ii) 143,685,500 shares
obtainable on the conversion of 574,742 Series 2006-B Preferred Shares owned by Dunvegan
Mortgage Corporation4
    
    Includes 14,869,998 shares obtainable on the conversion of 51,993 Series 2006-A
Preferred Shares owned by Margreat, Inc. Marilyn Fenton, wife of Sheldon Fenton, owns
Margreat, Inc.. Mr. Fenton disclaims any beneficial ownership of Margreat, Inc.s holdings.5
    
    Includes 14,569,984 shares obtainable on the conversion of 50,944 Series 2006-A
Preferred Shares owned by Lexxec Corporation.6
    
    Includes (i) 2,075,502 shares obtainable on the conversion of 7,257 Series 2006-A
Preferred Shares; (ii) 5,523,000 shares obtainable on the conversion of 22,092 Series 2006-B
Preferred Shares; and (iii) 3,056,656 shares issuable in the event of conversion of the
$80,000 of Convertible Debentures (principal) and $16,591 of interest thereon as of December
31, 2006.7
    
    Includes: (i) 10,684,960 shares obtainable on the conversion of 37,360 Series 2006-A
Preferred Shares; and (ii) 7,830,500 shares obtainable on the conversion of 31,322 Series
2006-B Preferred Shares.8
    
    Includes 2,854,000 shares obtainable on the conversion of 11,416 Series 2006-B
Preferred Shares owned by Mineola Holdings Corporation. 
     59




---



##### Table of Contents



th
    RUSSELL VAN ZANDT
  60




---



##### Table of Contents



Exhibit IndexNo.
    
    Description of Exhibit* 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, 20023.10
    
    Certificate of Designation for 2006-A Series of Convertible Redeemable Preferred Stock  dated November 7, 20063.11
    
    Certificate of Designation for 2006-B Series of Convertible Redeemable Preferred Stock  dated November 7, 20063.12
    
    Certificate of Designation for 2006-C Series of Convertible Redeemable Preferred Stock  dated November 7, 20063.13
    
    Certificate of Amendment of Certificate of Incorporation  dated December 22, 2006* 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
 61




---



##### Table of Contents



Exhibit IndexNo.
    
    Description of Exhibit* 10.3
    
    Contract Fill and Sub-lease 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* 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* 10.35
    
    Consulting Agreement with Russell Van Zandt
 62




---



##### Table of Contents



Exhibit IndexNo.
    
    Description of Exhibit* 10.36
    
    Agreement with Mycosol, Inc.* 10.37
    
    Investment Agreement  Mineola Holdings Corporation, Veridien Corporation & Mycosol, Inc* 16.1
    
    Carter, Cartier, Melby and Guarino Letter (re: 8K filed at time of Change in Auditors)* 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)* 21.5
    
    Subsidiaries (as of December 31, 2003)* 21.6
    
    Subsidiaries (as of December 31, 2004)* 21.7
    
    Subsidiaries (as of December 31, 2005)21.8
    
    Subsidiaries (as of December 31, 2006)31.1
    
    RULE 13a-14(a)/15d-14(a) CERTIFICATION, ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 200231.2
    
    RULE 13a-14(a)/15d-14(a) CERTIFICATION, ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Exhibit previously filed. Reports on Form 8-K
  Date
    
    Items
    
    DescriptionMay 30, 2006
    
    
    2.03 & 3.02
    
    
    Off Balance Sheet Obligation & Unregistered Sale of Equity SecuritiesJuly 24, 2006
    
    
    2.03 & 3.02
    
    
    Acquisition of Assets & Unregistered Sale of Equity SecuritiesAugust 15, 2006
    
    
    7.01 & 9.01
    
    
    Press ReleaseAugust 17, 2006
    
    
    3.02
    
    
    Unregistered Sale of Equity SecuritiesNovember 13, 2006
    
    
    3.03, 5.03, 8.01 & 9.01
    
    
    Plan of Financial Reorganization and Recapitalization, Amendment to
Articles of Incorporation & Material modification to Rights of
Security HoldersNovember 15, 2006
    
    
    7.01 & 9.01
    
    
    Press Release
  63




---



##### Table of Contents



64




---



##### Table of Contents



SIGNATURES
   By
    
    /s/ Sheldon C. Fenton,
    
    , President & CEOSheldon C. Fenton, President & C.E.O.Date
    
    March 30, 2007By
    
    /s/ Russell D. VanZandt
    
    , CFORussell D. VanZandt, C.F.O.Date
    
    March 30, 2007
  By
    
    /s/ Sheldon C. FentonSheldon C. Fenton, President & C.E.O.Date
    
    March 30, 2007By
    
    /s/ Russell D. Van ZandtRussell D. Van Zandt, C.F.O. and Chairman of the Board of DirectorsDate
    
    March 30, 2007By
    
    /s/ Rene A. GareauRene A. Gareau, Vice Chairman of the Board of DirectorsDate
    
    March 30, 2007
 65