<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, 2001

                                       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:

<TABLE>
<CAPTION>
                                             Name of each exchange on which
Title of each class                                   Registered
<S>                                      <C>

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

----------------------------------       --------------------------------------
</TABLE>

         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. ( )

State issuer's revenues for its most recent fiscal year. $804,058.

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 25, 2002 of
$0.025, the aggregate market value of voting stock held by non-affiliates is
$3,474,326.


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<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                                              PAGE
<S>                                                                                                <C>
Item 1.      Description of Business                                                                  3

Item 2.      Description of Property                                                                 11

Item 3.      Legal Proceedings                                                                       12

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


PART II

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

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 Accounting
             Financial Disclosure                                                                    41

PART III

Item 9.      Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act                                       42

Item 10.     Executive Compensation                                                                  45

Item 11.     Security Ownership of Certain Beneficial Owners and Management                          47

Item 12.     Certain Relationships and Related Transactions                                          48

Item 13.     Exhibits and Reports on Form 8-K                                                        50
</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 substantial
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


                                       3
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the medical and dental industries. A plan, structured by Management, was
implemented for 2001. Under the plan, the Company's business was divided into
three. The three divisions were:

         1.       Disinfectant Division
         2.       Healthy Lifestyles Division
         3.       Norpak US Division

The first division, 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 division, 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, pre-tanning and after-tanning; all in a towelette product
delivery configuration), 2. BugSwipe(TM) (an insect repellant in the towelette
product delivery configuration), 3. a vegetable wash ("Nature Clean(R)") which
helps remove grime, wax, pesticides and inorganic pollutants, and 4. a cleaner
("CRA-Z Soap(TM)") which cleans all types of surfaces, including human skin,
rugs, upholstery, etc.

The third division, the Norpak US Division, had obtained distribution rights in
the United States for products including wipe commodity products, alcohol swabs
or prep pads, an iodine prep pad, a spot remover, and nail polish remover, all
offered in single use towelettes or sachets.

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 two new divisions 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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<PAGE>

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 any program will 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 EPA
approvals:

         1.       For the towelettes:
                      Tuberculocidal:
                         Mycobacterium bovis (BCG)
                      Bactericidal:
                          Streptococcus pyogenes, ATCC #19615


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                          Escherichia coli, ATCC #11229
                          Vancomycin-resistant Enterococcus faecium (VRE),
                             ATCC #51559
                          Staphylococcus aureus (MRSA), ATCC #33591
                      Fungicidal:
                          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
approvals.

For 2002 we have made the following adjustments to our focus:

         1.       We continue to focus our sales efforts on our Disinfectant and
                  Healthy Lifestyle products.

         2.       We are aggressively continuing to pursue possible strategic
                  alliances with a number of major corporations to further
                  strengthen our company. Our goal for these alliances with
                  entities having existing distribution networks is to create
                  immediate distribution and fulfillment avenues for our
                  products while focusing our capital resources.

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

<TABLE>
<CAPTION>
                   Department                                            Number of Employees
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                   <S>                                                   <C>
                   Management & Finance                                           2
                   Sales                                                          3
                   Administration                                                 2
                   Shipping/Receiving                                             2
</TABLE>

In addition to our employees, certain Board members, while not employees,
provide assistance to us. We also use consultants to assist with administration,
sales, operations, and marketing.

THE DISINFECTANT DIVISION

As noted, this division is the historical business of the Company, i.e. the
disinfectant products based upon VIRAHOL(R) formulation. During the past year we
have worked diligently on obtaining additional approvals for revised/expanded
claims from the EPA. We have also worked aggressively to pursue possible
strategic alliances with entities having existing distribution networks. These
alliances should allow us to present our innovative products to the market on a
larger, global basis through existing distribution channels. The


                                       6
<PAGE>

combination of these distribution opportunities, along with our new label
claims, should provide us with the basis for firm growth and expansion.

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 to take advantage of various size
containers which are in demand. We still believe that our current pricing
structure allows us margins which can support the 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 - During 2000 we discontinued our relationship with Horizon, a
contract fill company which was located in our building as a sub-tenant. Now 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


                                       7
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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 US and Foreign, and amount to be
produced/repackaged/ relabeled for the current year.

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)) 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


                                       8
<PAGE>

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 fall into two categories:
(1) product concepts which belong to us and production is arranged by us
(SunSwipe(TM) and BugSwipe(TM), and (2) products owned and manufactured by
third parties for which we are distributors (CRA-Z Soap(TM) and Nature
Clean(R)). Focus in this division is on penetrating the retail arena.

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).

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
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


                                       9
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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.

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.


                                       10
<PAGE>

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

We lease 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 includes 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 pay 20% of the utilities and the real estate taxes,
allocated to the percentage of the total building occupied by us. Our telephone
number is (727) 576-1600 and our facsimile number is (727) 576-1611.

We have a lease-to-buy on our phone voicemail system for $113.64 per month and
currently lease a postage meter and copier. We have lease-to-buy agreements for
our computer network system for $532.55 per month and individual personal
computers for $219.41 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
         Utility Patent Pending, Application No. 09/296915, Instrument
           Sterilizer

In addition, the Company has various foreign patents and a patent application,
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
         Australia Patent No. 667930, STERIHOL(R)(CCSII), issued July 30, 1996


                                       11
<PAGE>

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
         BIO-GERM DEFENSE, filed January 23, 2002, Application No. 76/361,699

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

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. Veridien
claims that neither it nor its subsidiaries named as Defendants had a
contractual relationship with the Plaintiff as broadly alleged in the Complaint
and that neither Veridien Corporation nor its subsidiaries having such debt
obligation to the Plaintiff as claimed. Management and its attorney believe the
Company has adequate legal defenses that can be asserted and the action will be
vigorously defended.

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 has requested that the Company provide them with certain documents.
The Company is responding to the SEC's inquiry, the outcome of which presently
cannot be determined.

                                       12
<PAGE>

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

There were no matters submitted to a vote of shareholders in 2001. 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 2000 and 2001, the
high and low bid and asked prices were as follows:

<TABLE>
<CAPTION>
         Quarter Ended                                                    High Bid                    Low Bid
         -------------                                                    --------                   --------
         <S>                                                              <C>                        <C>
         December 31, 2001                                                $   .13                    $   .02
         September 30, 2001                                                   .07                        .015
         June 30, 2001                                                        .07                        .025
         March 31, 2001                                                       .08                        .031

         December 31, 2000                                                    .095                       .04
         September 30, 2000                                                   .1725                      .07
         June 30, 2000                                                        .20                        .10
         March 31, 2000                                                       .43                        .055
</TABLE>

On March 25, 2002 the closing prices of the Company's Common Stock were $0.022
bid and $0.027 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 5,472 (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:

         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


                                       14
<PAGE>

                  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:

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

                  -        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.

SALES OF UNREGISTERED SECURITIES DURING FISCAL YEAR 2001

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 2001:

Debentures

Issuance of Convertible Debentures

On January 26, 2001 the Company issued a Convertible Debenture in the principal
amount of $50,000 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 matures on January 25, 2004. Both the principal and all accrued
interest are immediately convertible into Common Stock at any time and from time
to time at a price calculated as two-thirds of the average of the mid-point
between the closing bid and asked prices for the ten business days prior to the
conversion date provided, however, that during the first year the conversion
price shall not be less than $0.05 per share nor more than $0.10 per share;
during the second year shall not be less than $0.10 per share; and during the
third year shall not be less than $0.15 per share.

On May 8, 2001 the Company issued a Convertible Debenture in the principal
amount of $35,000 to an accredited investor. The principal sum bears interest at
the rate of 10% per annum and matures on May 7, 2004. Both the principal and all
accrued interest are immediately convertible into Common Stock at any time and
from time to time at a price of $0.035 per share during the first twelve months,
and thereafter at a price calculated as two-thirds of the closing price on the
date of conversion, but not less than $0.05 per share.

On November 8, 2001 the Company converted 22 prior short-term loans from Milfen
Limited, totaling $640,500, to Convertible Debentures, each of which was dated
as of the date of the original loan. In addition, further advances between
November 9, 2001 and December 31, 2001, totaling $145,000, were similarly
treated. Each Debenture bears interest at the rate of 10% per annum, is
convertible after fifteen months to the Company's Common Stock at the closing
bid price on the date of the original loan (deemed issuance date), and matures
on December 31, 2003.

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


                                       15
<PAGE>

1999-A Convertible Debenture Conversions On the following dates the indicated
dollar amounts of both principal and accrued interest of outstanding 1999-A
Convertible Debentures were converted to the indicated number of shares of
Common Stock:

<TABLE>
<CAPTION>
         Date of Conversion                                          Amount Converted                Shares of Common Stock
         ------------------                                          ----------------                ----------------------
         <S>                                                         <C>                             <C>
         January 16, 2001                                               $  11,380                            175,076
</TABLE>

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

1999-D Convertible Debenture Conversions
On the following dates the indicated dollar amounts of both principal and
accrued interest of outstanding 1999-D Convertible Debentures were converted to
the indicated number of shares of Common Stock:

<TABLE>
<CAPTION>
         Date of Conversion                                             Amount Converted                   Shares of Common Stock
         ------------------                                             ----------------                   ----------------------
         <S>                                                            <C>                                <C>
         November 5, 2001                                                   $ 60,649                               854,205
         November 5, 2001                                                   $156,637                             2,206,154
         December 28, 2001                                                  $105,339                             1,483,650
</TABLE>

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

2000 Convertible Debenture Conversions

During March 2001, $561,527.00 of both principal and accrued interest of
outstanding 2000 Convertible Debentures were converted to 8,638,870 shares of
Common Stock.

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>
         June 20, 2001                              $89,776                     3,000,000                         8,678
         October 24, 2001                           $62,886                     6,000,000                         5,689
         November 16, 2001                          $62,886                     6,000,000                         5,689
</TABLE>

As at December 31, 2001, the lenders have converted $2,196,208 of debt into
Common Shares and Series B Pref Shares at a combined average cost of the
equivalent of $0.034 per Common Share.

                                       16
<PAGE>

Common Stock

On May 8, 2001 we issued 100,000 shares of Common Stock valued at $35,000 to an
individual involved in the hospitality industry for his marketing services
consisting of introductions of the Company's products within the hospitality
industry. This issuance was considered exempt from registration by reason of
Section 4(2) of the Securities Act.

On May 30, 2001 we issued 900,000 shares of Common Stock valued at $45,000 to an
investor public relations firm as compensation for services to be rendered. The
contract was not fully completed and 306,000 shares were returned in December
2001. This issuance (net 594,000 shares) was considered exempt from registration
by reason of Section 4(2) of the Securities Act.

On June 30, 2001 we issued 1,000,000 shares of Common Stock valued at $15,000 to
an employee for acquisition of the SunSwipes concept as a result of continuing
negotiations since January 2000. This issuance was considered exempt from
registration by reason of Section 4(2) of the Securities Act.

On July 1, 2001 we issued 340,000 shares of Common Stock valued at $18,700 to an
employee for reimbursement of expenses incurred in the establishment of sales
offices. This issuance was considered exempt from registration by reason of
Section 4(2) of the Securities Act.

Also on July 1, 2001 we issued 300,000 shares of Common Stock valued at $10,955
to the Company's landlord for reimbursement of property taxes for the term of
the lease relating to the 20% of the building occupied by the Company (see
"Property of the Company"). This issuance was considered exempt from
registration by reason of Section 4(2) of the Securities Act.

On December 12, 2001 we issued 257,500 shares of Common Stock valued at $10,300
to the Chairman of the Company's Scientific Advisory Board for unrelated EPA
advisory services. This issuance was considered exempt from registration by
reason of Section 4(2) of the Securities Act.

Also on December 12, 2001 we issued 500,000 shares of Common Stock valued at
$17,500 to an investor public relations firm for services to be rendered. This
issuance was considered exempt from registration by reason of Section 4(2) of
the Securities Act.

Also on December 12, 2001 we issued 172,738 shares of Common Stock valued at
$6,000 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 December 13, 2001 we issued 250,000 shares of Common Stock valued at $8,750
to an investor public relations firm for services to be rendered. This issuance
was considered exempt from registration by reason of Section 4(2) of the
Securities Act.

Also on December 13, 2001 we issued 1,000,000 shares of Common Stock valued at
$140,000 to Paul L. Simmons, one of the Company's directors, and International
Center for Technology Transfer, Inc., Mr. Simmons' corporation, in satisfaction
of a previously agreed settlement of indebtedness. This issuance was considered
exempt from registration by reason of Section 4(2) of the Securities Act.

On December 20, 2001 we issued 870,000 shares of Common Stock valued at $30,450
to Kenneth J. Chester, our then COO, in satisfaction of the requirement of his
Employment Agreement as of April 1, 2001. 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, 2001 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,
FRUIT & VEGETABLE WASH 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, 2001,
the Company had an accumulated deficit of $33,416,017. The Company has financed
its ongoing business activities through a combination of sales, equity
financing, and debt.


                                       18
<PAGE>

RESULTS OF OPERATIONS

FISCAL 2001 COMPARED WITH FISCAL 2000

YEAR ENDED DECEMBER 31, 2001 VS. YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                   Year Ended                          Percentage of
                                                                  December 31                           net revenue
                                                            2001                2000               2001             2000
                                                          --------           ---------            -----            -----
                                                                            (In thousands)
<S>                                                      <C>                 <C>                  <C>              <C>
Net Sales                                                $     804           $   1,757             100%             100%
Cost of Goods Sold                                             534               1,629              66%              93%
Gross Profit                                                   270                 128              34%               7%

Operating Expenses
General & Administrative                                     1,466               1,774             182%             101%
Research & Development                                          63                 180               8%              10%
(Loss) from Operations                                      (1,259)             (1,826)           (157)%           (104)%
Other Income (Expense) Net                                    (814)                170            (101)%             10%
Net (Loss) Before Taxes                                     (2,073)             (1,656)           (258)%            (94)%
Income Taxes                                                     0                   0               0%               0%
Net (Loss)                                                  (2,073)             (1,656)           (258)%            (94)%
</TABLE>

Consolidated gross revenues for 2001 decreased by $1,278,804, or 57%, to
$954,075 compared with $2,232,879 in 2000.

-        Gross revenue from product sales decreased in 2001 by $952,933, or 54%,
         to $804,058 compared with $1,756,991 in 2000. The decrease in sales
         revenue was due primarily to a decrease in the sales of low margin raw
         material canisters; however, our SunSwipe(TM) sales increased by 493%
         compared to 2000, resulting in increased margins in 2001 of 34% versus
         7% for 2000. During 2001, we devoted a substantial amount of effort
         toward implementing our marketing strategy and adding new products for
         distribution.

-        Gross rental income for 2001 decreased by $76,169, or 93%, to $5,350
         compared with $81,519 in 2000. 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 our new facility is for a 19-month period ending December
         31, 2002, and the reduction in rent as compared to our old facility
         will result in net savings in excess of $180,000 annually. The new
         facility has sufficient office and warehouse space to satisfy our
         current needs and allow for future expansion.

-        Gross revenue from licensing fees for 2001 increased by $1,196, or 33%,
         to $4,780 compared with $3,584 in 2000. During 2000, the exclusivity of
         the agreement expired due to the minimum licensing fee not being met by
         the licensee, so only the 10% of sales licensing fee of $4,780 and
         $3,584, respectively, was recognized during 2001 and 2000.


                                       19
<PAGE>

-        Interest income for 2001 decreased by $13,139, or 93%, to $960 compared
         to $14,099 in 2000. The decrease in interest income is due primarily to
         a decreased daily cash balance earning interest.

-        The Company recognized a net gain on sale of property and equipment of
         $74,427 under other income for 2001. 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. On
         May 1, 2001 our company entered into an agreement with Vin-Dotco, Inc.
         to lease 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 the second and third weeks of May 2001. The new
         facility has sufficient office and warehouse space both to satisfy our
         current needs and allow for future expansion.

-        The Company recognized a sale of cash credits of $64,500 under other
         income for 2001. The Company exchanged cash credits with a stated value
         of $129,000 for 430,000 restricted common shares of H-Quotient, Inc on
         May 4, 2001. The investment in common shares was recorded at cost less
         a 50% estimated marketability discount due to sale restrictions. The
         investment is not classified as a marketable security due to the
         existence of restrictions and, therefore, no unrealized gain or loss
         will be recognized until the restrictions have expired or the shares
         are sold.

Consolidated gross expenses for 2001 decreased by $861,078, or 22%, to
$3,027,499 compared with $3,888,577 in 2000.

-        The cost of goods sold for 2001 decreased by $1,095,618, or 67%, to
         $533,482 compared with $1,629,100 in 2000. There was a decrease in the
         cost of goods ratio as a percentage of sales to 66% in 2001 compared to
         93% in 2000. The decrease in the cost of sales resulted primarily from
         decreased sales in 2001 at 54% compared to 2000, with an offsetting
         increase in profit margins on specific new products. The cost of goods
         ratio as a percentage of sales decreased by 29%, to 66% for 2001
         compared to 93% in 2000. The Company is continuing to work toward
         decreasing the cost of goods ratio as a percentage by improving the
         product mix with higher margins.

-        General, selling, and administrative expenses for 2001 decreased
         overall by $307,457, or 17%, to $1,466,414 compared with $1,773,871 in
         2000. The decreases that affected this category include professional
         service expenses for 2001 which decreased by 39% to $281,098 compared
         with $460,289 in 2000. Other decreases that affected general and
         administrative expenses included rent, state product registration fees,
         outside services, and licensing fees for 2001 decreased by 51% to
         $136,276 compared with $276,531 in 2000. Additionally, increases that
         affected general and administrative costs were associated with
         increased wage expenses of general operations and administrative
         personnel for 2001 that increased by 47% to $562,020 compared with
         $382,190 in 2000. Additionally, during 2001, sales expenses increased
         by 28% to $202,597 compared with $157,682 in 2000.

-        Research and development expenses for 2001 decreased by $116,750, or
         65%, to $63,205 compared with $179,955 in 2000. The decrease can be
         attributed primarily to the closure and sale of the chemistry and
         microbiology labs in May 2001. The labs and other equipment were sold
         to a foreign manufacturing company for $85,000. The Company has testing
         and research processed off-site on an as needed basis. In 2001 the
         Company formed the Scientific Advisory Board to assist with research
         and development. The Company intends to continue with product testing
         of our existing products in an effort to be able to continue to expand
         our label claims as to product efficacy.


                                       20
<PAGE>

-        Interest expense for 2001 increased by $6,561, or 2%, to $312,212
         compared with $305,651 in 2000. The increase in interest expense was
         due primarily to accrued interest on convertible debentures.

-        The Company recognized a change in market value of a marketable
         security of $252,186 for 2001. 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 securities and is carrying the investment at an estimated
         fair market value of $124,500 at December 31, 2001.

-        The Company realized a permanent loss on a write down of a marketable
         security of $400,000 for 2001. On December 22, 2000, the Company
         exchanged 8,000,000 restricted common shares for 61,500 common shares
         of Internet Guide, Inc., 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 in Internet Guide since the Company has been unable to
         obtain appropriate information from which to value this investment.

-        Loss from Operations for 2001 decreased by $566,892, or 31%, to
         $1,259,043 compared to $1,825,935 in 2000. The decrease in loss from
         operations is primarily due to an overall decrease in general and
         administrative expenses, and research and development expenses.

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, 2001 and December 31, 2000 we had working capital deficits of
approximately $1,560,876 and $1,975,312, respectively. Our independent certified
public accountants stated in their report on the 2001 and 2000 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 have cut operating expenses and changed our product
mix such that the Company has achieved improved profit margins throughout the
fiscal year 2001 to date. Because of our significant losses incurred since
inception, we have become substantially dependent on loans from officers,
directors, and third parties, and from private placements of our securities to
fund operations. These financings and equity placements are included in the
following descriptions:

During the twelve months ended December 31, 2001 we borrowed $688,000 in short
term loans. During the fourth quarter this $688,000 as well as the $97,500 in
short term loans from 2000 were converted into Convertible Debentures, each of
which were dated as of the date of the original loan. Each debenture bears
interest at the rate of 10% per annum, matures on December 31, 2003 and is
convertible at any time to the Company's Common Stock at the closing bid price
on the date of the original loan date (deemed issuance date).

During the fourth quarter 2001 we negotiated a one-year renewal of the Loan and
Security Agreement. Previous to the renewal, 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, 2001
the principal balance outstanding was $303,792, along with $182,662 in accrued
interest.

During the twelve months ended December 31, 2001, $215,548 of the Loan and
Security Agreement principal was converted by the holders to 20,057 shares of
Series B Preferred Stock and 15,000,000 shares of Common Stock.


                                       21
<PAGE>

During the twelve months ended December 31, 2001, Convertible Debentures with
principal balances of $784,892 and accrued interest of $110,638 were converted
into 13,357,955 shares of common stock at conversion rates between $0.065 and
$0.071 per share.

During the twelve months ended December 31, 2001 we utilized public relations
services for which we issued Common Stock valued at $65,450.

During the fourth quarter 2001 we settled $10,300 of payables for services
provided to the Company for the issuance of 257,500 Common shares.

During the fourth quarter 2001 we settled $141,000 of payables due to a Director
for the issuance of 1,000,000 Common shares.

During the fourth quarter 2001 we issued 870,000 Common shares valued at $30,450
to K. Chester, our then COO, in satisfaction of the requirement of his
Employment Agreement as of April 1, 2001.

During the third quarter 2001 we negotiated the reimbursement of certain
expenses incurred by an employee to be repaid by way of the issuance of 340,000
Common shares.

During the third quarter 2001 we arranged to issue 300,000 Common shares to our
landlord as compensation for our share of the property taxes for the property
for the term of our lease.

During the third quarter 2001, 56,945 Common shares previously allocated to
staff in recognition of performance during 2000, vested.

During the second quarter 2001 we issued a three year Convertible Debenture in
the amount of $35,000. The Convertible Debenture carries an interest rate of 10%
and the principal and interest amounts are convertible into Common shares of
Veridien at two-thirds of the average of the mid-point between the closing bid
and ask prices for the 10 business days prior to the election date, however,
conversion price shall not be less than $0.05. In addition, conversion can be
accomplished during the first twelve months at a conversion price of $0.035. As
of August 2001 we are continuing to generate funding through the continuation of
private placement efforts.

During the second quarter 2001 the owner of Sunswipe Inc., with whom Veridien
had previously contracted to purchase a 50% interest in the SunSwipe(TM) product
line, agreed to relinquish all right, title and interest in the SunSwipe(TM)
product line to Veridien in exchange for a 2 year employment contract which in
addition to a salary and commissions entitles him to 1,000,000 common shares of
Veridien and to warrants (vesting over the term of the contract) to purchase a
further 1,000,000 shares at $0.08. As a result, The SunSwipe Corporation L.L.C.
is now a 100% wholly owned subsidiary of Veridien Corporation. Veridien has no
responsibility under the previous agreement with Sunswipe Inc.

During the first quarter 2001 we issued a three year Convertible Debenture in
the amount of $50,000. The Convertible Debenture carries an interest rate of 10%
and the principal and interest amounts are convertible into common shares of
Veridien at two-thirds of the average of the mid-point between the closing bid
and ask prices for the 10 business days prior to the election date, however,
conversion price shall not be less than $0.05 during the first year, $0.10
during the second year and $0.15 during the third year. In addition, conversion
can be accomplished during the first twelve months at a conversion price of
$0.10.


                                       22
<PAGE>

During 2001, accounts receivable increased by $46,448 to $158,127 from $111,679
at December 31, 2000. This increase can be attributed to increasing sales of
SunSwipe(TM) product.

During 2001 accounts payable and accrued expenses increased by $766,758,
primarily due to increases in payables relating to inventory purchases of
$465,306, as well as an increase in accrued interest expenses on debt
obligations of $194,127 and an increase in expenses to a management services
company in the amount of $90,000.

During 2001, inventory increased by 206% to $586,313 compared with $191,353 at
December 31, 2000. The increase is due to the purchase of inventory to fulfill
orders at our increasing sales levels. SunSwipe(TM) inventory currently accounts
for 72% of our total inventory.

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 15, 2002, we have cash of approximately $20,447 and during April and
May 2002, 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 acquire a larger volume of
product inventory to support an anticipated increase in orders.

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 gel products, another the
liquid products, the third the canister products and the 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, 2001
and 2000, 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, 2001 and 2000, 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, 2002


                                       24
<PAGE>

                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                           2001                  2000
                                                                                       ------------          ------------
<S>                                                                                    <C>                   <C>
                                                              Assets
Current Assets:
  Cash                                                                                 $      7,219          $     20,960
  Accounts receivable - trade
    less allowance for doubtful accounts of
      $46,900 and $48,000, respectively                                                     158,127               111,679
  Licensing fees receivable                                                                      --                49,997
  Inventory                                                                                 586,313               191,353
  Note receivable                                                                                --                15,000
  Marketable securities                                                                     124,500                    --
  Prepaid expenses and other current assets                                                  54,728                37,196
                                                                                       ------------          ------------

     Total current assets                                                                   930,887               426,185

Property and equipment:
  Furniture and fixtures                                                                    390,211               416,655
  Leasehold improvements                                                                         --                85,303
                                                                                       ------------          ------------
                                                                                            390,211               501,958
  Less accumulated depreciation                                                             364,560               456,189
                                                                                       ------------          ------------
                                                                                             25,651                45,769

Other Assets:
  Investments in common stock, cost basis                                                        --               400,000
  Investments in common stock restricted, cost basis                                         64,500               376,686
  Patents, less accumulated amortization of
    $493,202 and $489,594, respectively                                                      21,179                24,788
  Security deposits and other assets                                                         37,022                33,503
                                                                                       ------------          ------------
                                                                                            122,701               834,977
                                                                                       ------------          ------------

                                                                                       $  1,079,239          $  1,306,931
                                                                                       ============          ============
</TABLE>

See accompanying notes to the consolidated financial statements.


                                       25
<PAGE>

                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

                     Consolidated Balance Sheets - Continued
                           December 31, 2001 and 2000

<TABLE>
<CAPTION>

                                                                                             2001                  2000
                                                                                        --------------         --------------
<S>                                                                                     <C>                    <C>

                                 Liabilities and Deficit in Stockholders' Equity
Current Liabilities:
   Current capital lease obligations                                                    $        5,886         $        7,238
   Notes payable                                                                               343,792                621,840
   Convertible debentures due                                                                  100,000                372,893
   Accounts payable                                                                          1,257,102                701,796
   Accrued compensation                                                                          6,506                  3,080
   Accrued interest                                                                            684,968                490,841
   Other accrued liabilities                                                                    23,719                  9,820
   Customer deposits                                                                            20,327                 25,139
   Due to stockholders                                                                          49,463                168,850
                                                                                        --------------         --------------
      Total current liabilities                                                              2,491,763              2,401,497

Long term liabilities:
   Capital lease obligations less current                                                       11,173                 17,261
   Convertible debentures                                                                    2,162,500              1,803,215
                                                                                        --------------         --------------

      Total liabilities                                                                      4,665,436              4,221,973

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, 2001 and 2000                                                 60,000                 60,000
   Series B Preferred Stock, $.001 par value,
      245,344 authorized, 174,219 and 154,163 issued
      and outstanding at December 31, 2001 and 2000                                                175                    154
   Common Stock, $.001 par value; 200,000,000 shares
      authorized, 174,179,487 and 140,410,349 shares issued
      and outstanding at December 31, 2001 and 2000                                            174,181                140,411
   Additional paid-in capital                                                               29,574,065             28,205,587
   Common Stock warrants                                                                        26,399                 26,399
   Accumulated deficit                                                                     (33,416,017)           (31,342,593)
                                                                                        --------------         --------------
                                                                                            (3,581,197)            (2,910,042)
   Stock subscriptions receivable                                                               (5,000)                (5,000)
                                                                                        --------------         --------------
      Total stockholders' deficit                                                           (3,586,197)            (2,915,042)
                                                                                        --------------         --------------

                                                                                        $    1,079,239         $    1,306,931
                                                                                        ==============         ==============

</TABLE>


See accompanying notes to the consolidated financial statements.


                                       26
<PAGE>


                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

                      Consolidated Statements of Operations

                     Years ended December 31, 2001 and 2000

<TABLE>
<CAPTION>

                                                                                             2001                     2000
                                                                                        ---------------         ---------------
<S>                                                                                     <C>                     <C>
Sales                                                                                   $       804,058         $     1,756,991

Operating costs and expenses:
   Cost of sales                                                                                533,482               1,629,100
   General and administrative                                                                 1,466,414               1,773,871
   Research and development                                                                      63,205                 179,955
                                                                                        ---------------         ---------------
                                                                                              2,063,101               3,582,926
                                                                                        ---------------         ---------------


      Loss from operations                                                                   (1,259,043)             (1,825,935)


Other income (expense):
   Interest expense                                                                            (312,212)               (305,651)
   Change in market value of marketable securities                                             (252,186)                     --
   Realized loss on write down of marketable securities                                        (400,000)                     --
   Rental income                                                                                  5,350                  81,519
   Licensing fees                                                                                 4,780                   3,584
   Sale of cash credits                                                                          64,500                 376,686
   Gain on sale of property and equipment                                                        74,427                      --
   Interest income                                                                                  960                  14,099
                                                                                        ---------------         ---------------
                                                                                               (814,381)                170,237
                                                                                        ---------------         ---------------

Net loss before income tax                                                                   (2,073,424)             (1,655,698)

      Net loss                                                                          $    (2,073,424)        $    (1,655,698)
                                                                                        ===============         ===============

Net loss per common share                                                               $          (.01)        $          (.01)
                                                                                        ===============         ===============

Weighted average shares outstanding                                                         152,717,290             127,578,907
                                                                                        ===============         ===============

</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, 2001 and 2000

<TABLE>
<CAPTION>

                                                Convertible
                                                Redeemable    Series B      Number                    Additional
                                                Preferred    Preferred      Common         Common      Paid-in       Stock
                                                  Stock        Stock        Shares         Stock       Capital      Warrants
                                                -----------  ---------   ------------    ---------    -----------   --------
<S>                                             <C>          <C>         <C>             <C>          <C>           <C>
Balances at January 1, 2000                     $  60,000    $  194       119,958,735    $ 119,960    $26,789,390    $26,399

Conversion of debt to equity                                                1,393,660        1,393         68,289
Conversion of convertible debentures                                        9,187,930        9,188        828,349
Issuance of stock for equity investment                                     8,000,000        8,000        392,000
Issuance of stock for services                                              1,006,026        1,006        117,133
Conversion of preferred stock to common stock                   (40)          788,998          789           (749)
Issuance of stock for license rights                                           75,000           75         11,175
Net (loss)
                                                ---------    ------      ------------    ---------    -----------    -------

Balances at December 31, 2000                   $  60,000    $  154      $140,410,349    $ 140,411    $28,205,587    $26,399

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    $26,399
                                                =========    ======      ============    =========    ===========    =======


<CAPTION>

                                                                      Stock         Stockholders'
                                                  Accumulated       Subscriptions      Equity
                                                   Deficit           receivable       (Deficit)
                                                 ------------        ------------   -------------
<S>                                              <C>                <C>              <C>
Balances at January 1, 2000                      $(29,686,895)       $(5,000)        $(2,695,952)


Conversion of debt to equity                                                              69,682
Conversion of convertible debentures                                                     837,537
Issuance of stock for equity investment                                                  400,000
Issuance of stock for services                                                           118,139
Conversion of preferred stock to common stock
Issuance of stock for license rights                                                      11,250
Net (loss)                                         (1,655,698)                        (1,655,698)
                                                 ------------        -------         -----------

Balances at December 31, 2000                    $(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                    $(33,416,017)       $(5,000)        $(3,586,197)
                                                 ============        =======         ===========

</TABLE>


        See accompanying notes to the consolidated financial statements.


                                       28
<PAGE>


                              VERIDIEN CORPORATION
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                     Years ended December 31, 2001 and 2000

<TABLE>
<CAPTION>

                                                                     2001                    2000
                                                                 -------------           -------------
<S>                                                              <C>                     <C>
Cash flows from operating activities
  Net (loss)                                                     $  (2,073,424)          $  (1,655,698)
  Adjustments to reconcile net (loss) to net cash
  (used) by operating activities:
     Depreciation and amortization                                      16,735                  43,233
     (Gain) loss on disposal of property                               (74,427)                     --
     Stock issuances, warrants and options for services                150,180                 129,389
     Stock issuances for interest expense, non-cash                    112,845                  99,927
     Other, not affecting cash                                         (18,911)                     --
     Realized loss on write down of investment                         400,000                      --
     Unrealized loss on marketable securities                          252,186                      --
     Exchange of barter credits                                        (64,500)               (376,686)
     Accounts receivable                                               (46,448)                142,345
     Licensing fees receivable                                          49,997                  (3,584)
     Note receivable                                                    15,000                   7,500
     Prepaid and other current assets                                  (17,532)                (23,257)
     Inventories                                                      (394,960)                (34,421)
     Other assets                                                       (3,518)                  6,444
     Current capital lease obligations                                  (1,352)                    858
     Accounts payable and accrued expenses                             766,756                 256,179
     Customer deposits                                                  (4,812)                (21,377)
     Due to stockholders                                                21,613                   2,063
                                                                 -------------           -------------
  Net cash (used) by operating activities                             (914,572)             (1,427,085)

Cash flow from investing activities:
     Purchases of property and equipment                                (3,581)                 (1,497)
                                                                 -------------           -------------
  Net cash (used) by operating activities                               (3,581)                 (1,497)

Cash flow from financing activities:
     Proceeds from convertible debentures                              870,500               1,347,546
     Net payment on capital leases                                      (6,088)                 (7,238)
     Net proceeds from borrowings                                       40,000                 102,500
                                                                 -------------           -------------
  Net cash provided by financing activities                            904,412               1,442,808
                                                                 -------------           -------------

Net increase (decrease) in cash and equivalents                        (13,741)                 14,226
Cash and equivalents, beginning of year                                 20,960                   6,734
                                                                 -------------           -------------
Cash and equivalents, end of year                                $       7,219           $      20,960
                                                                 =============           =============

</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 multi-use soap, lens care, fruit and vegetable wash and 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 2001 and 2000, $215,548 and $-0- of the lender's debt
were converted into 15,000,000 and -0- common shares respectively, and 20,056
and -0- Series B preferred shares respectively.


                                       30
<PAGE>


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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.

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, 2001, raw materials and finished goods
amounted to approximately $49,600 and $536,700, respectively. At December 31,
2000, raw materials and finished goods amounted to approximately $42,900 and
$148,500, respectively.

6.       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.

7.       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.


                                       31
<PAGE>


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

8.       Loan Costs

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

9.       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.

10.      Reclassification

Certain reclassifications have been made to the 2000 financial statements to be
in conformity with the 2001 presentation.

11.      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 152,717,290 and 127,578,907 for the years ended
December 31, 2001 and 2000, 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 $33.0 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 $3.6 million, a deficit in working capital of $1.6
million and is experiencing a continuing cash flow deficiency.

For the year ended December 31, 2001, the Company's operating activities
resulted in cash outflows of $914,572. In addition, the Company used $12,704 for
patent development and equipment purchases. In order to fund these cash
outflows, the Company borrowed


                                       32
<PAGE>




NOTE B - REALIZATION OF ASSETS - CONTINUED

$40,000 and received net proceeds of $870,500 from the sale of convertible
debentures. These proceeds, together with the cash balance at the beginning of
the year, provided the Company's cash needs, resulting in a net cash decrease of
$13,741 for the year ended December 31, 2001.

The Company plans to utilize its 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 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 2002. In addition, the Company plans to pursue additional cash through
sales of convertible debentures.

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, 2001 and 2000, the Company owed $49,463 and $168,850,
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 2001 and 2000, 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 $92,884
and $123,968 in 2001 and 2000 respectively for professional services and related
costs. At December 31, 2001, these fees remain unpaid in the amount of $303,195
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.


                                       33
<PAGE>


NOTE C - RELATED PARTY TRANSACTIONS - CONTINUED

During 2001 and 2000 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 $10,939 and $14,871 for 2001 and 2000
respectively. In addition, this individual has previous years' unreimbursed
expenses which when added to these numbers total $106,370 and are included in
accounts payable at December 31, 2001.

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.

NOTE E - MARKETABLE SECURITIES AND INVESTMENTS

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 securities and is carrying the investment at an estimated
fair market value of $124,500 at December 31, 2001. At December 31, 2001, the
Company has recorded an unrealized loss of $252,186.

On May 4, 2001, the Company exchanged cash credits with a stated value of
$129,000 for 430,000 restricted common shares of H-Quotient, Inc. The investment
in common shares was recorded at cost less a 50% estimated marketability
discount due to sale restrictions. The investment is not classified as a
marketable security due to the existence of restrictions and, therefore, no
unrealized gain or loss will be recognized until the restrictions have expired
or the shares are sold.

On December 22, 2000, the Company exchanged 8,000,000 restricted common shares
for 61,500 common shares of Internet Guide, Inc., 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 restriction on
re-sale.

On December 31, 2001, the Company recorded a permanent write down of $400,000 in
Internet Guide, its 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 2001 and 2000, the holder
converted $215,548 and $-0- of debt into 15,000,000 and -0- common shares and
20,056 and -0- 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


                                       34
<PAGE>


NOTE F - NOTES PAYABLE - CONTINUED

with the entire principal balance due in November 2002. As of December 31, 2001,
the remaining principal balance outstanding was $303,792, and $182,662 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 2001, the Company received $50,000 of short-term loans due on demand with
stated interest rates of 0% to 10% per annum of which $40,000 is outstanding at
December 31, 2001.

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 $4,780 and $3,584 for 2001 and
2000, respectively.

NOTE H - CONVERTIBLE DEBENTURES

During 2001 and 2000, the Company received $870,500 and $1,347,546, 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 May 2004. 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 $.10 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, 2001 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.

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.

The Company leases manufacturing and office facilities for $5,900 per month
under a lease that expires December 31, 2002. Rent expense was approximately
$104,837 and $219,000 for 2001 and 2000, respectively.


                                       35
<PAGE>


NOTE I - COMMITMENTS AND CONTINGENCIES - CONTINUED

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

<TABLE>
<CAPTION>
                       Year                Amount
                    -----------        -------------
                    <S>                <C>
                      2002               $  70,800

</TABLE>

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, 2001, $622,000 of preferred stock was issued 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 2001 or 2000. At December 31, 2001, preferred stock dividends in
arrears totaled approximately $42,000.

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.


                                       36
<PAGE>

NOTE L - STOCK WARRANTS

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

During 2000, the Company issued 100,000 and 25,000 warrants at exercise prices
of $.20 and $.10, respectively as additional compensation for payroll and
consulting services, respectively. The Company issued an additional 3,827,991
warrants under the terms of the loan and security agreement.

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.

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, 2001, the lender(s) had converted $2,196,208 of the debt and the
lender's warrants were exercised into 60,614,383 common shares and 213,590
Series B preferred shares (convertible into 4,280,355 common shares) at a
combined cost of equivalent to $0.034 per common share.


                                       37
<PAGE>


NOTE L - STOCK WARRANTS - CONTINUED

Warrants issued and exercised are summarized as follows:

<TABLE>
<CAPTION>

                                                                           Exercise
                                                                            Price
                 Common Stock                          Warrants             Range
-----------------------------------------------     ---------------     --------------
<S>                                                 <C>                 <C>
Outstanding at January 1, 2000                          36,669,101      $ .01 - 1.00
2000:
               Granted                                   4,052,991       .030 - .100
               Expired                                  (1,477,546)      .268 - 1.00
                                                     -------------      -------------

Outstanding at December 31, 2000                        39,244,546        .01 - .20
2001:
               Cancelled                                  (100,000)          10
               Loan & Security
               Agreement Conversion                    (15,000,000)        .014
                                                     -------------      -------------

Outstanding at December 31, 2001                        24,144,546      $ .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 November 18, 2002
and have a $10 exercise price. During 2001 and 2000, 20,056 and -0- of these
warrants were exercised by the holder. At December 31, 2001, 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.


                                       38
<PAGE>


NOTE L - STOCK WARRANTS - CONTINUED

Preferred warrants issued and exercised are summarized as follows:

<TABLE>
<CAPTION>

                                                                                     Equivalent #
                                                                                       Common
                                                 Preferred           Preferred        Shares on
                                                  Share              Exercise       Preferred Share
                                                 Warrants             Price           Conversion
                                                 --------          -----------      ---------------
<S>                                              <C>               <C>              <C>
Outstanding at January 1, 2000                    206,120                              6,094,029
2000:
                    Exercised Series B                (--)            $10.00                 (--)
                                                 --------                           ------------

Outstanding at December 31, 2000                  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
                                                 --------                           ------------
                    Series B                       27,451                                550,121
                                                 --------                           ------------

</TABLE>

NOTE M - INCOME TAXES

There is no income tax provision for the years ended December 31, 2001 and 2000
due to net operating losses for which no benefit is currently available. The
Company has net operating loss carryforwards of approximately $20,278,000 at
December 31, 2001, available to offset future taxable income from 2002 through
2022.

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 $20,278,000 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,
                                                          2001                   2000
                                                     -------------           -------------
<S>                                                  <C>                     <C>
Deferred Tax Assets:

Net Operating loss carry forwards                    $   6,895,000           $   6,272,000

                  Less valuation allowance              (6,895,000)             (6,272,000)
                  --------------------------         -------------           -------------
                   Net deferred tax assets           $          --           $          --
                                                     =============           =============

</TABLE>


                                       39
<PAGE>




NOTE N - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest amounted to $5,240 and $11,533 for 2001 and 2000,
respectively.

During 2001, the Company issued 16,000,000 common and 20,056 preferred shares in
exchange for debt conversion in the amount of $356,548. 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 $150,179,
respectively.

During 2000, the Company issued 1,393,660 common shares in exchange for debt
conversions in the amount of $69,683. In 2000, the Company issued 9,187,930
common shares in conversion of convertible securities in the amount of $740,653.
In 2000, the Company issued 8,000,000 common shares in exchange for an equity
investment recorded at a value of $400,000 in an unrelated company. In 2000, the
Company issued 1,006,026 and 75,000 common shares in exchange for interest
expense, services and licensing rights of $99,927, $118,189 and $11,250,
respectively.

NOTE O - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has financial instruments, none of which are held for trading
purposes. The Company estimates that the fair value of all financial instruments
at December 31, 2001 and 2000, do not differ materially from the aggregate
carrying value of its financial instruments recorded in the accompanying
consolidated balance sheet. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is required in interpreting
market data to develop the estimates of fair value, and, accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.

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

During 2000, the Company had one customer that accounted for 69% of total sales.


                                       40
<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 and December 31, 2000,
have audited our financial statements for the fiscal year ended December 31,
2001. 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.


                                       41
<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, 2002 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>
         Russell D. Van Zandt                61               Chairman of the Board of Directors

         Rene A. Gareau                      60               Vice Chairman of the Board of Directors/
                                                              Corporate Secretary

         Sheldon C. Fenton                   50               President and CEO/Director

         Alfred A. Ritter                    58               Director

         Paul L. Simmons                     73               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


                                       42
<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 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. He currently operates a securities private
placement and investment management company in Lisbon, Portugal, and Vaduz,
Liechtenstein.

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.


                                       43
<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, except for Mr. Simmons,
were in compliance with Section 16(A) during fiscal year 2001.

Mr. Simmons filed a Form 5 on March 11, 2002 in lieu of not having filed a Form
4 with respect to the following transactions:

         a.       the conversion, on December 13, 2001, of a receivable from
                  Veridien in the amount of $140,000.00 to 1,000,000 shares of
                  Common Stock ($.14 per share); and
         b.       the sale, on December 19, 2001 of 200,000 shares of our Common
                  Stock.

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.


                                       44
<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 2001 there
were two meetings of the Board of Directors. All directors attended both
meetings, except for Mr. Simmons, who attended one of the meetings, and Mr.
Schlussel, who did not attend either meeting.

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.
         For the 4th quarter of 2001, the fee was waived. At December 31, 2001
         these fees remain unpaid in the amount of $303,195 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.


                                       45
<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 was exercised
during the fiscal year ended December 31, 2001. None of these options has 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>


                                       46
<PAGE>


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 25, 2002, 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 25, 2002, there were
174,179,487 shares issued and outstanding of record, as well as 40,875,507
shares issuable in the event of the conversion of the $2,261,715 of Convertible
Debentures outstanding and the $486,962 of interest thereon as of December 31,
2001.

<TABLE>
<CAPTION>

                                                                Shares of               Percentage
                                                                 Common                    as of
Name and Address of Beneficial Owners                             Stock                03/25/2002(1)
-------------------------------------                        ----------------          --------------
<S>                                                          <C>                       <C>
Sheldon C. Fenton                                               30,116,281(2)               17.29%
160 Eglinton Avenue East, Suite 500
Toronto, Ontario  M4P 3B5

Rene A. Gareau                                                     125,000                   0.07%
4273 Boca Point Drive
Sarasota, Florida 34238

Dunvegan Mortgage Corporation                                   29,529,281(3)               16.95%
222 Delaware Ave., PO Box 2306
Wilmington, Delaware 19899

Paul L. Simmons                                                  4,427,600(4)                2.54%
8825 Laurel Drive
Pinellas Park, Florida 33782

Russell D. Van Zandt                                               741,560                   0.43%
17543 Bearpath Trail
Eden Prairie, Minnesota 55347

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

H. Quotient Inc.                                                10,900,000(5)                6.26%
(& subsidiary Quotient Capital Corp.)
8150 Leesburg Pike, Suite 503
Vienna, VA 22182

All Directors and Officers                                      35,410,441                  20.33%
    as a Group (5 persons)

</TABLE>

----------
(1)      Based on 174,179,487 shares issued and outstanding as of March 25,
         2002.


                                       47
<PAGE>
(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 7,196,267
         shares issuable in the event of conversion of the $471,215 of
         Convertible Debentures [principal] owned by Dunvegan Mortgage
         Corporation and the $248,411 of interest thereon as of December 31,
         2001. Also includes 204,000 Shares held in the name of Mr. Fenton's
         wife for the benefit of Mr. Fenton's adult daughter and in which he
         disclaims any beneficial interest. Does not include 1,324,075
         Convertible Debenture Warrants owned by Dunvegan Mortgage Corporation.
         For informational purposes, also does not include 19,630,128 Series I
         ($.499) and Series II ($.001) Warrants previously owned by Dunvegan
         Mortgage Corporation but assigned to 1192615 Ontario Limited et al and
         in which he disclaims any beneficial interest. For informational
         purposes does not include 585,500 Shares owned by his daughter in which
         he disclaims any beneficial interest.
(3)      Includes 7,196,267 shares issuable in the event of conversion of the
         $471,215 of Convertible Debentures [principal] owned by Dunvegan
         Mortgage Corporation and the $248,411 of interest thereon as of
         December 31, 2001. 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 500,000 shares common shares held personally by D.
         Cohn, President & CEO of H. Quotient Inc.



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, 2001, Dunvegan Mortgage
Corporation continued to hold 154,163 shares of Series B Preferred Stock
(88.5%), 22,333,014 shares of our Common Stock (12.8%), 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 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 controlled by the mother of Mr. Shelley
Fenton, our President and CEO (see Item 5, "Sales of Unregistered Securities
During Fiscal Year 2001").

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.

                                       48
<PAGE>

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. Under the strategic alliance agreement we have agreed to market,
sell and distribute the Canadian company's products to customers in the U.S.
Norpak Manufacturing is also one of two manufacturers contracted to produce the
SunSwipe(TM) product line for the Company.

TANLON MANAGEMENT SERVICES, INC.

During fiscal years 1999, 2000 and 2001 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 owe $120,000 for these
professional services for each of 1999 and 2000, 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, 2001
these fees remain unpaid in the amount of $303,195 and are included in accounts
payable.

In addition to the accrued indebtedness for services, the Company owes Tanlon an
additional $79,564.88 for advanced expenses for related travel, courier/express
deliveries, and telephone costs.


                                       49
<PAGE>


ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT INDEX

<TABLE>
<CAPTION>

  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

 *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

*10.9     Australian Patent No. 628,932/Virahol
</TABLE>


                                       50
<PAGE>

<TABLE>
<S>       <C>
*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

*21.1     Subsidiaries

*21.2     Subsidiaries (as of December 31, 2000)

 21.3     Subsidiaries (as of December 31, 2001)
</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, 2002
     --------------------------------------------------------------

      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, 2002
     --------------------------------------------------------------


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, 2002
    ---------------------------------------------------------------


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, 2002
    ---------------------------------------------------------------


                                       52