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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
 for
the transaction period
from  to
 Commission File Number 0-02555
 Veridien Corporation
  Delaware
    
    59-3020382(State or other jurisdiction
of incorporation)
    
    (I.R.S. Employer
Identification No.)2875 MCI Drive, Suite B, Pinellas Park, Florida
    
    33782-6105(Address of principal executive offices)
    
    (Zip code)
   Title of each class
    
    Name of each exchange on which
Registered
  Common Stock  (Title of class)
 
 (Title of class)
 þ
 þ o
 þ
 o þ




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##### 



PAGEPART IItem 1. Description of Business
    
    
    3Item 2. Description of Property
    
    
    14Item 3. Legal Proceedings
    
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    
    16PART IIItem 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
    
    
    16Item 6. Managements Discussion and Analysis or Plan of Operation
    
    
    21Item 7. Financial Statements
    
    
    28Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    47Item 8A. Controls and Procedures
    
    
    47Item 8B. Other Information
    
    
    49PART IIIItem 9. Directors and Executive Officers of the Registrant
    
    
    50Item 10. Executive Compensation
    
    
    52Item 11. Security Ownership of Certain Beneficial Owners and Management
    
    
    54Item 12. Certain Relationships and Related Transactions
    
    
    55Item 13. Exhibits and Reports on Form 8-K
    
    
    57Item 14. Principal Accountant Fees and Services
    
    
    60EX-21.7: Subsidiaries (as of December 31, 2005)EX-31.1: Section 302 Certification of CEOEX-31.2: Section 302 Certification of CFOEX-32.1: Section 906 Certification of CEOEX-32.2: Section 906 Certification of CFO
  2




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,
  
    ® ®
 ® ®
 ® ®
  ® ®
 3




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®
 ® ®
 ®
  1.
    
    contact an approved testing laboratory and determine that an EPA
approved protocol exists for testing of a product against that
pathogen;2.
    
    if no protocol exists (e.g., with respect to Hepatitis B and Hepatitis
C for the towelettes), the laboratory must work with the EPA to secure
a protocol;3.
    
    the protocol is customized by the laboratory to assure its
appropriateness for testing the specific product;4.
    
    direct the laboratory to perform the necessary testing, which normally
takes several weeks, and to prepare the written report in accordance
with EPA guidelines, which typically takes several 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 now takes 120 days; but
 4




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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, the applicant is notified and given an opportunity to
correct the deficiency. The timeline for review can then be adjusted
to allow for submission of new information or re-submission of data.
There is no limit to how long the process can be extended, at that
point, as long as the agency believes that the applicant is
cooperating. At the end of the original 120 days, or any extended
period, the agency may approve or reject the application in whole or
in part.7.
    
    if, at the end of the review cycle the EPA approves the kill claim,
the EPA gives recommendations regarding label wording; and8.
    
    the Company then amends its label to comply with EPA requirements.
   1. For the towelettes:Tuberculocidal:Mycobacterium bovis (BCG)Bactericidal:Streptococcus pyogenes, ATCC #19615Escherichia coli, ATCC #11229Vancomycin-resistant Enterococcus faecium (VRE), ATCC #51559Staphylococcus aureus (MRSA), ATCC #33591Fungicidal:Trichophyton mentagrophytes, ATCC #9533Virucidal:Herpes simplex type 1, ATCC #VR260HIV-1 (AIDS Virus)2. For the liquid:Bactericidal:Streptococcus pyogenes, ATCC #49399, #19615Escherichia coli, Strain 0157, ATCC #43895Vancomycin-resistant Enterococcus faecalis (VRE), ATCC #51299Methicillin-resistant Staphylococcus aureus (MRSA), ATCC #33593Virucidal:Cytomegalovirus (CMV), ATCC #VR538Respiratory syncytial virus (RSV), ATCC #VR26Rotavirus (SA-11; Group A)Influenza type A-2 (Hong Kong), ATCC #VR544Adenovirus type 2, ATCC #VR846Hepatitis A, B and C
  5




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For the liquid:Bactericidal:Salmonella choleraesuis, ATCC #10708Staphylococcus aureus, ATCC #6538Pseudomonus aeruginosa, ATCC #15442Streptococcus pyogenes, ATCC #49399, #19615Escherichia coli, Strain 0157, ATCC #43895Vancomycin-resistant Enterococcus faecalis (VRE), ATCC #51299Methicillin-resistant Staphylococcus aureus (MRSA), ATCC #33593Virucidal:Hepatitis A, B and CHIV-1 (AIDS virus)Herpes simplex type 2, ATCC# VR539Cytomegalovirus (CMV), ATCC #VR538Respiratory syncytial virus (RSV), ATCC #VR26Rotavirus (SA-11; Group A)Influenza type A-2 (Hong Kong), ATCC #VR544Adenovirus type 2, ATCC #VR846Tuberculocidal:Mycobacterium tuberculosisFungicidal:Trichophyton mentagrophytes, ATCC #9533For the towelettes:Bactericidal:Salmonella choleraesuis, ATCC #10708Pseudomonus aeruginosa, ATCC #15442Streptococcus pyogenes, ATCC #19615Escherichia coli, ATCC #11229Vancomycin-resistant Enterococcus faecium (VRE), ATCC #51559Staphylococcus aureus, ATCC #6538Staphylococcus aureus (MRSA), ATCC #33591Virucidal:Herpes simplex type 1, ATCC #VR260HIV-1 (AIDS Virus)Tuberculocidal:Mycobacterium bovis (BCG)Fungicidal:Trichophyton mentagrophytes, ATCC #9533
   
    
    Viraguard® Heavy Duty Textured Wipes  rugged, roughened wipes
designed for use in very rigorous
 6




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and bloody environments such as
ambulances and emergency rooms.
    
    Viraguard® Medical Instrument Wipes  pocket size handy wipes for
cleaning Stethoscopes, scissors, otoscopes, etc.
    
    Viraguard® Telephone & Keyboard Wipes- for disinfecting office
equipment, cellular phones and computers.
    
    Water Cooler Cleaning Kits  special unscented formula for removal of
bacteria, fungus and mold that can accumulate in water cooler
equipment.
    
    Viraguard® Toilet Seat Wipes wipes which are available for use in
restrooms in hotels, restaurants, airports and other public places as
well as in hospitals and physicians offices, and other places where
disinfection is critical to controlling the spread of disease carrying
organisms.
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®
 ® ® ®
  Employees
    8




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â
    and and
 9




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Competitive Advantage  ® ® ® ® ® ®
  10




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




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A.
    
    VIRAHOL® Hospital Disinfectant/Cleaner & Instrument Presoak, assigned
EPA Registration No. 60142-1, and has an EPA accepted label, is
designed for effective disinfecting, cleaning and deodorizing of hard
inanimate surfaces such as walls, sink tops, tables, chairs,
telephones, toilet seats and bed frames.B.
    
    VIRAHOL® Hospital Surface Disinfectant Towelette, assigned EPA
Registration No. 60142-3, and has an EPA accepted label, is designed
for effective cleaning, disinfecting and deodorizing of hard
non-porous, inanimate surfaces such as walls, sink tops, tables,
chairs, telephones, toilet seats and bed frames.
 ® ®
  
  ®
 ®
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13




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www.veridien.com
  14




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Patents, Trademarks and copyright material
 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® (Disinfectant  DSI), issued September 8, 1992Patent No. 5,441,723, VIRAHOL® (Disinfectant  DSII), issued August 15, 1995Patent No. 5,637,307, Method (Sterilant  CCSS/AOCC III), issued June 10, 1997Patent No. 5,985,929, Cold Chemical Sterilant  UREA (STERIHOL® PLUS), issued November 16, 1999Patent No. 5,925,052, Umbilical Surgical Scissors, issued July 20, 1999Patent No. 5,891,052, Diagnostic Syringe Actuator Device, issued April 6, 1999In addition, the Company has various foreign patents and a patent application, as follows:Australia Patent No. 628932, VIRAHOL® (DSI), issued January 22, 1993United Kingdom Patent No. 2,245,171, VIRAHOL® (DSI), issued April 14, 1993New Zealand Patent No. 269419, VIRAHOL® (DSII), issued July 15, 1994Canadian Patent No. 1,337,329, VIRAHOL® (DSI), issued October 17, 1995Mexican Patent No. 185,884, VIRAHOL® (DSII), issued September 9, 1997Great Britain Patent No. 2,294,639, VIRAHOL® (DSII), issued January 14, 1998Australia Patent No. 695346, VIRAHOL® (DSII), issued November 26, 1998Japanese Patent No. 2,904,917, VIRAHOL® (DSI), issued June 14, 1999Canadian Patent No. 2,166,810, VIRAHOL® (DSII), issued March 14, 2000The Company also has numerous trade names registered in the U.S. The Company has trademarks for
the following brands:VIRAHOL® registered September 24, 1991, Trademark No. 1,657,969VIRAGEL® registered July 20, 1993, Trademark No. 1,783,204VERIDIEN® registered September 5, 1995, Trademark No. 1,917,134VIRAGUARD® registered September 1, 1998, Trademark No. 2,186,559VIRAGUARD® design registered February 20, 2001, Registration No. 2429809BUGSWIPE® registered August 19, 2003, Trademark No. 2,753,718SUNSWIPE® registered February 10, 2004, Trademark No. 2,811,976The Company also has the following copyright property:Assignment #3512-456 of SunSwipe Artwork & Images: registrations #VAu-548-398 & VAu-550-088The Company also has trademark applications pending in the US:SUNSWIPE, filed January 24, 2003, Application No. 76/484748SIT SECURE filed July 31, 2003, Application No. 76/533712
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PART II
 
  Market Information
  Quarter Ended
    
    High Bid
    
    
    Low BidDecember 31, 2005
    
    $
    .054
    
    
    
    .025September 30, 2005
    
    
    .05
    
    
    
    .038June 30, 2005
    
    
    .056
    
    
    
    .04March 31, 2005
    
    
    .056
    
    
    
    .043December 31, 2004
    
    $
    .065
    
    
    
    .045September 30, 2004
    
    
    .108
    
    
    
    .045June 30, 2004
    
    
    .09
    
    
    
    .051March 31, 2004
    
    
    .09
    
    
    
    .06
  Holders
  Dividends
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1.
    
    At present there is a series of 100,000 shares of Preferred Stock, created on April 3,
1995, titled 10% Cumulative Convertible Redeemable Preferred Stock, of which 6,000 shares
are issued and outstanding. These shares are entitled to receive an annual dividend of
$1.00 per share before any dividend is paid to holders of the Common Stock. Any dividend
not declared and paid is accumulated and must be paid before any dividend or distribution
is made on our Common Stock.2.
    
    Also, at present there is a series of 244,678 shares of Preferred Stock created on
December 15, 1997, titled Series B Convertible Preferred Stock, of which 174,219 shares
are issued and outstanding. These shares are entitled to receive an annual dividend equal
to the greater of:
 
    
    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.
     17




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Number of
    
    
    Weighted
    
    
    Number of securitiessecurities to be
    
    
    average
    
    
    remaining available forissued upon
    
    
    exercise price
    
    
    future issuance underexercise of
    
    
    of outstanding
    
    
    equityoutstanding
    
    
    options,
    
    
    compensation plansoptions, warrants &
    
    
    warrants &
    
    
    (excluding securitiesrights
    
    
    rights
    
    
    reflected in column(a))(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    0
    
    
    
    0
    
    
    
    0Equity compensation
plans not approved
by security holders
    
    
    2,000,000
    
    
    $
    0.0635
    
    
    
    2,162,783Total
    
    
    2,000,000
    
    
    
    
    
    
    
    2,162,783
  Sales of Unregistered Securities During Fiscal Year 2005
  Common Stock
  Issuance of Convertible Debentures
  18




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Common Stock Warrants
  19




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Overview
   Ò ® ® ® ®
 Ò Ò ® ®
 ® ®
 ®
   21




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Results of Operations
 Fiscal 2005 Compared With Fiscal 2004
 Year Ended December 31, 2005 vs. Year Ended December 31, 2004
 Year Ended
    
    Percentage ofDecember 31
    
    net revenue2005
    
    2004
    
    2005
    
    2004Revenues
    
    $
    1,063,745
    
    
    $
    1,802,154
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    773,604
    
    
    
    675,927
    
    
    
    73
    %
    
    
    38
    %Gross Profit
    
    
    290,141
    
    
    
    1,126,227
    
    
    
    27
    %
    
    
    62
    %Operating ExpensesGeneral & Administrative
    
    
    1,066,105
    
    
    
    923,255
    
    
    
    100
    %
    
    
    51
    %Research & Development
    
    
    110,849
    
    
    
    163,512
    
    
    
    10
    %
    
    
    9
    %Research & Development  VIE
    
    
    852,192
    
    
    
    325,000
    
    
    
    80
    %
    
    
    18
    %(Loss) from Operations
    
    
    (1,739,005
    )
    
    
    (285,540
    )
    
    
    (163
    )%
    
    
    (16
    )%Other Income (expense) Net
    
    
    (780,467
    )
    
    
    (351,188
    )
    
    
    (73
    )%
    
    
    (19
    )%Net income (loss) before minority
Interest
    
    
    (2,519,472
    )
    
    
    (636,728
    )
    
    
    (237
    )%
    
    
    (35
    )%Minority interest in Mycosol loss
    
    
    543,604
    
    
    
    -0-
    
    
    
    51
    %
    
    
    0
    %Net (Loss) Before Taxes
    
    
    (1,975,868
    )
    
    
    (636,728
    )
    
    
    (186
    )%
    
    
    (35
    )%Income Taxes
    
    
    -0-
    
    
    
    -0-
    
    
    
    0
    %
    
    
    0
    %Net (Loss)
    
    
    (1,975,868
    )
    
    
    (636,728
    )
    
    
    (186
    )%
    
    
    (35
    )%
  
    
    Gross revenue from product sales decreased in 2005 by $86,409, or 8%, to $1,063,745
compared with $1,150,154 in 2004. The decrease in sales revenue was due primarily to a
decrease in sales in the SunSwipe  line. We continue active promotion of our product line
through trade-show presentations, contracts, and direct calls on both existing and
potential customers. Our goal is to continue to expand our product lines and we anticipate
new products, which are scheduled with various releases this year, will generate new
revenue in this and future years. In addition, we continue to pursue strategic alliances
with other corporations that have existing distribution networks. Our goal for these
alliances is to create immediate distribution and fulfillment avenues for our products,
while focusing on our capital resources. Gross revenue from licensing and service fees
decreased by $652,000 or 100% to $-0- compared with $652,000 in 2004. During 2004, the
Company earned gross revenue from an agreement signed with H-Quotient, Inc. (HQNT) which
involves the sale of product, licensing and service fees. The initial amount earned in
2004 reflects 400,000 HQNT restricted common shares which are reflected at December 31,
2004 at $652,000.
    
    Interest income for 2005 increased by $607, or 29%, to $2,709 compared to $2,102 in
2004. The increase in interest income is due primarily to an increase in cash on hand.
    
    Dividend income for 2005 increased by $15,151, or 1,085%, to $16,547 compared to $1,396 in
2004.
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
    
    The cost of revenue for 2005 increased as a percentage of total revenue to 73% in 2005
from 38% in 2004. The cost of goods sold from product sales for 2005 increased by $97,677,
or 14%, to $773,604 compared with $675,927 in 2004. The cost of goods ratio as a
percentage of product sales increased to 73% in 2005 compared to 59% in 2004. Part of this
increase can be attributed to increased costs of Isopropyl Alcohol and part to freight
surcharges being levied due to the increasing costs of oil. The Company is continuing to
work toward decreasing the cost of goods ratio as a percentage by improving the product mix
with higher margins by sourcing new manufacturers and adding new higher margin products.
The Company did not increase pricing on its product line in 2005.
    
    General, selling, and administrative expenses for 2005 increased overall by $142,850, or
15%, to $1,066,105 compared with $923,255 in 2004. The increase in general, selling and
administrative costs was mostly attributable to an increase in professional  legal,
consulting, and accounting  service expenses for 2005 which increased by 30% to $261,326
compared with $201,615 in 2004. Legal and consulting fees increased by 23% while accounting
fees increased by 50%. Accounting fees increased due to a change in auditors during 2005
and additional audit fees incurred in connection with responding to certain SEC inquiries
during 2005 (see Item 8A  paragraph #2). Additionally, there was a small increase in
sales expenses for 2005 by 1% to $374,676 compared with $369,397 in 2004.. Decreases in
general, selling and administrative costs were mostly attributable to a decrease in
administrative wages for 2005 by 7% to $129,716 compared with $138,754 in 2004.
    
    Research and development expenses for 2005 decreased by $52,663, or 32%, to $110,849
compared with $163,512 in 2004. The decrease was due primarily to reduced cost on research
focusing on broadening the range of claims we can assert on our existing products and on
testing new products for commercialization.
    
    Research and development  Variable Interest Entity (VIE) expenses for 2005 increased
by $527,192, or 162%, to $852,192 compared with $325,000 in 2004. In December 2003, the
FASB issued revised FASB Interpretation 46 (FIN 46), Consolidation of Variable Interest
Entities. FIN 46 requires that a Company that holds variable interests in an entity
consolidate the entity if the Companys interest in the variable interest entity (VIE) is
such that the Company will absorb a majority of the VIEs expected losses and/or receive a
majority of the VIEs expected residual returns, if they occur. In such cases, the Company
is the primary beneficiary of the VIE. FIN 46 also requires additional disclosures by
primary beneficiaries and other significant variable interest holders. Effective June 7,
2004, the Company reached an understanding to create an alliance with
Mycosol, an unrelated drug
development company. The Company is considered the primary beneficiary as it stands to
absorb the majority of the VIEs expected losses as the equity owners have insufficient
capital invested to absorb the expected losses. The purpose of the VIE is to bring to
market mutually beneficial products that utilize existing technologies of the Company and
new technologies being developed by the VIE. It is anticipated that both the Company and
the VIE will provide logistic
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support to each other. The accounts of the VIE that have been consolidated with Veridien
and subsidiaries at December 31, 2005 are as follows:
 Cash
    
    $
    134Inventory  raw materials
    
    
    50,641Property and equipment
    
    
    18,119Deposits and other
    
    
    8,000Patents  pending
    
    
    233,086Accounts payable
    
    
    (63,383
    )Notes payable
    
    
    (34,102
    )Minority interest
    
    
    (178,756
    )33,739Research and development expenses
    
    
    852,192Minority interest Mycosol loss
    
    
    (543,604
    )$
    342,327Veridiens investment in Mycosol is 40.55%:Investment in preferred stock
    
    
    1,490,000Investment in common shares
    
    
    229,167Investment in common share warrants
    
    
    307,875
 
    
    Interest expense for 2005 increased by $80,445, or 18%, to $523,960 compared with
$443,515 in 2004. The increase in interest expense was due primarily to additional
Convertible Debenture holders in 2005 and interest continues to accrue on other various
debts.
    
    During 2005 the Company sold 300 Standard Global Holding Group (SNDH) shares for a
realized loss of $3. This represents a net realized loss of $3 for the twelve months of
2005. During 2004 the Company had a Realized Loss on Investments of $9,694 from sale of
703,369 H-Quotient, Inc. (HQNT) common shares.At December 31, 2005 the Company held 719,507 shares H-Quotient, Inc. (HQNT), 10,741 shares
of Healthnostics, Inc. (HNST) and 71,651 shares of SNDH for a total net fair market value of
$137,795. At December 31, 2004 the Company had 719,432 HQNT shares and 10,741 HNST shares
for a total value of marketable securities at $397, 083.
    
    During 2005 the Company recorded an unrealized loss on investments in the amount of
$275,760. 99% of this loss can be attributed to the decline in the FMV of H-Quotient,
Inc (HQNT) shares to $.17 at December 31, 2005 from $.55 at December 31, 2004. During 2004
the Company recorded an unrealized gain on investments in the amount of $98,523.
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Liquidity and Working Capital
  
    
    During the fourth quarter of 2005 we issued a convertible
debenture for cash proceeds of $50,000. This debenture carries an
interest rate of 8%, has a term of 3 years and has a conversion
rate of $0.051
    
    During the third quarter of 2005 we issued a convertible debenture
for cash proceeds of $200,000. This debenture carries an interest
rate of 8%, has a term of 3 years and has a conversion rate of
$0.051
    
    During the first quarter of 2005 we issued 2 convertible
debentures for cash proceeds of $200,000. These debentures carry
interest rates of 8%, have terms of 3 years and have conversion
rates of $0.051
    
    During the third and fourth quarters of 2005 we borrowed a total
of $620,000 in short term loans. These loans are due on demand
and accrue interest at the rate of 8% per annum. $260,000 of
these advances were from a company which has as its senior officer
and director the wife of Sheldon Fenton, our President and CEO.
    
    During 2005, 133,878 common shares were issued under the
companys S8 Registration Statement to an employee under the terms
of his employment contract. The average effective price per share
was $0.045.
    
    During the 2005, 400,000 common shares were earned by the
Chairman of the Board under the terms of his consulting agreement
with the company. The effective price per share was $0.043.
    
    During the second quarter of 2005 57,500 common shares were
issued, under the companys S8 Registration Statement, to staff as
employment bonuses. The value of the shares issued was $2,473.
 25




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
    
    During the first quarter of 2005 $110,000 and 6,000,000 shares of
common stock were issued to the three Founding Shareholders of
Mycosol in exchange for 687,500 shares of Mycosol common stock.
    
    During the first quarter of 2005 $113,489 of the Loan and Security
Agreement principal was converted by the holders to 0- shares of
Series B Preferred Stock and 7,321,857 shares of Common Stock.
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Report of Independent Registered Public Accounting Firm
 
     /s/ Malone & Bailey, PC
  28




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CARTER, CARTIER, MELBY & GUARINO, C.P.A.s, P.A. LOGO
 Report of Independent Registered Public Accounting Firm
 
      
  29




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Veridien Corporation
and Subsidiaries
   December 31,
    
    
    December 31,2005
    
    
    2004AssetsCurrent Assets:Cash
    
    $
    115,493
    
    
    $
    126,027Marketable Securities
    
    
    137,795
    
    
    
    397,083Accounts receivable, net of allowance
of $27,494 and $12,640
    
    
    324,952
    
    
    
    180,678Inventory
    
    
    376,624
    
    
    
    331,702Prepaid expenses and other current assets
    
    
    82,399
    
    
    
    76,087Total current assets
    
    
    1,037,263
    
    
    
    1,111,577Property and equipment, net of accumulated
depreciation of $417,365 and $397,250
    
    
    29,762
    
    
    
    27,648Other Assets:Patents, net of accumulated amortization
of $511,188 and $506,077
    
    
    286,280
    
    
    
    176,305Goodwill
    
    
    410,000
    
    
    
    110,000Security deposits
    
    
    9,965
    
    
    
    11,000Total Assets
    
    $
    1,773,270
    
    
    $
    1,436,530Liabilities and Shareholders DeficitCurrent Liabilities:Notes payable
    
    $
    571,522
    
    
    $
    289,347Notes payable  related party
    
    
    260,000
    
    
    
    Current portion of convertible debentures
    
    
    671,066
    
    
    
    100,000Current
portion of convertible debentures  related party
    
    
    824,096
    
    
    
    349,000Accounts payable
    
    
    452,904
    
    
    
    243,931Accounts payable  related party
    
    
    232,049
    
    
    
    31,573Accrued liabilities
    
    
    534,686
    
    
    
    572,177Accrued liabilities  related party
    
    
    769,192
    
    
    
    455,464Customer deposits
    
    
    16,977
    
    
    
    Total current liabilities
    
    
    4,332,492
    
    
    
    2,041,492Long term liabilities:Convertible debentures
    
    
    1,130,000
    
    
    
    1,251,066Convertible debentures  related party
    
    
    1,780,811
    
    
    
    2,255,907Total liabilities
    
    
    7,243,303
    
    
    
    5,548,465Minority interest
    
    
    178,756
    
    
    
    Shareholders deficit:Undesignated Preferred Stock $.001 par value,
25,000,000 shares authorized, none issued
    
    
    
    
    
    
    Convertible Redeemable Preferred Stock,
$10 par value; 100,000 authorized, 6,000 issued and
outstanding at December 31, 2005 and 2004
    
    
    60,000
    
    
    
    60,000Series B Preferred Stock, $.001 par value,
245,344 authorized, 174,219 issued
and outstanding at December 31, 2005 and 2004
    
    
    175
    
    
    
    175Common Stock, $.001 par value; 300,000,000 shares
authorized, 228,282,857 and 214,369,622 shares issued
and outstanding at December 31, 2005 and 2004
    
    
    228,283
    
    
    
    214,370Additional paid-in capital
    
    
    31,819,544
    
    
    
    31,394,443Accumulated deficit
    
    
    (35,780,923
    )
    
    
    (35,144,195
    )Current period profit (loss)
    
    
    (1,975,868
    )
    
    
    (636,728
    )Total Shareholders deficit
    
    
    (5,648,789
    )
    
    
    (4,111,935
    )Total Liabilities and Shareholders Deficit:
    
    $
    1,773,270
    
    
    $
    1,436,530
  30




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##### Table of Contents



Veridien Corporation
and Subsidiaries
   Year EndedDecember 31,2005
    
    
    2004Revenues
    
    $
    1,063,745
    
    
    $
    1,802,154Operating costs and expenses:Cost of revenue
    
    
    773,604
    
    
    
    675,927General, selling and administrative
    
    
    1,066,105
    
    
    
    923,255Research and development
    
    
    963,041
    
    
    
    488,5122,802,750
    
    
    
    2,087,694Income (loss) from operations
    
    
    (1,739,005
    )
    
    
    (285,540
    )Other income (expense):Interest expense
    
    
    (523,960
    )
    
    
    (443,515
    )Realized gain (loss)
on marketable investments
    
    
    (3
    )
    
    
    (9,694
    )Unrealized gain (loss)
on investments
    
    
    (275,760
    )
    
    
    98,523Interest and dividend income
    
    
    19,256
    
    
    
    3,498(780,467
    )
    
    
    (351,188
    )Net income (loss) before minority interest
    
    
    (2,519,472
    )
    
    
    (636,728
    )Minority interest in Mycosol
    
    
    543,604
    
    
    
    Net Income (loss)
    
    $
    (1,975,868
    )
    
    $
    (636,728
    )Net loss per common share  basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.00
    )Weighted average shares outstanding
    
    
    227,474,605
    
    
    
    209,484,117
  31




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##### Table of Contents



Veridien Corporation
and Subsidiaries
   Number of SharesConvertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders'Redeemable
    
    
    Series B
    
    
    Common
    
    
    Capital
    
    
    Accumulated
    
    
    EquityPreferred
    
    
    Preferred
    
    
    Shares
    
    
    Stock
    
    
    Deficit
    
    
    (Deficit)Balances at January 1, 2004
    
    
    6,000
    
    
    
    174,219
    
    
    
    205,745,290
    
    
    $
    31,143,079
    
    
    $
    (35,144,195
    )
    
    $
    (4,001,116
    )Conversion of convertible debentures
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    25,000
    
    
    
    
    
    
    
    25,000Common stock issued for- cash received for exercise of warrants
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    30,000
    
    
    
    
    
    
    
    30,000- payment of debt
    
    
    
    
    
    
    
    
    
    
    1,552,272
    
    
    
    77,614
    
    
    
    
    
    
    
    77,614- services
    
    
    
    
    
    
    
    
    
    
    2,346,254
    
    
    
    143,295
    
    
    
    
    
    
    
    143,295- inventory deposit
    
    
    
    
    
    
    
    
    
    
    3,225,806
    
    
    
    250,000
    
    
    
    
    
    
    
    250,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (636,728
    )
    
    
    (636,728
    )Balances at December 31, 2004
    
    
    6,000
    
    
    
    174,219
    
    
    
    214,369,622
    
    
    
    31,668,988
    
    
    
    (35,780,923
    )
    
    
    (4,111,935
    )Common stock issued for- payment of debt
    
    
    
    
    
    
    
    
    
    
    7,321,857
    
    
    
    113,489
    
    
    
    
    
    
    
    113,489- services
    
    
    
    
    
    
    
    
    
    
    591,378
    
    
    
    25,525
    
    
    
    
    
    
    
    25,525- investment in Mycosol
    
    
    
    
    
    
    
    
    
    
    6,000,000
    
    
    
    300,000
    
    
    
    
    
    
    
    300,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,975,868
    )
    
    
    (1,975,868
    )Balances at December 31, 2005
    
    
    6,000
    
    
    
    174,219
    
    
    
    228,282,857
    
    
    $
    32,108,002
    
    
    $
    (37,756,791
    )
    
    $
    (5,648,789
    )Less par values:Convertible redeemable preferred
    
    
    
    (60,000
    )Series B preferred
    
    
    
    (175
    )Common
    
    
    
    (228,283
    )Paid in Capital
    
    
    $
    31,819,544
  32




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##### Table of Contents



Veridien Corporation
and Subsidiaries
   Year EndedDecember 31,2005
    
    
    2004Cash flows from operating activitiesNet (loss)
    
    $
    (1,975,868
    )
    
    $
    (636,728
    )Adjustments to reconcile net (loss) to net cash
used by operating activities:Depreciation and amortization
    
    
    25,226
    
    
    
    16,629Common stock issued for services
    
    
    25,525
    
    
    
    143,295Realized (gain) loss on marketable securities
    
    
    3
    
    
    
    9,694Unrealized (gain) loss on marketable securities
    
    
    275,760
    
    
    
    (98,523
    )Marketable securities received as revenue
    
    
    
    
    
    
    (652,000
    )Writeoff of Mycosol investment in 2004 consolidation
    
    
    
    
    
    
    50,000Proceeds from sale of marketable securities
    
    
    67
    
    
    
    998,528Minority interest
    
    
    (543,604
    )
    
    
    Change in:Accounts receivable
    
    
    (144,274
    )
    
    
    (110,355
    )Inventories
    
    
    (44,922
    )
    
    
    (206,202
    )Due from stockholders
    
    
    
    
    
    
    69,764Marketable securities
    
    
    (16,547
    )
    
    
    62,134Other current assets
    
    
    (6,312
    )
    
    
    (3,950
    )Accounts payable
    
    
    409,449
    
    
    
    (65,377
    )Accrued expenses
    
    
    498,596
    
    
    
    393,302Customer deposits
    
    
    16,977
    
    
    
    (62,064
    )Due to shareholders
    
    
    
    
    
    
    (34,039
    )Net cash (used) by operating activities
    
    
    (1,479,924
    )
    
    
    (125,892
    )Cash flow from investing activities:Decrease in deposits
    
    
    1,035
    
    
    
    (9,375
    )Purchase of property and equipment
    
    
    (22,229
    )
    
    
    (15,687
    )Escrow deposit
    
    
    
    
    
    
    (110,000
    )Increase in patents
    
    
    (115,086
    )
    
    
    (118,000
    )Net cash (used) by investing activities
    
    
    (136,280
    )
    
    
    (253,062
    )Cash flow from financing activities:Proceeds from Mineola advance
    
    
    500,000
    
    
    
    Proceeds from convertible debentures
    
    
    450,000
    
    
    
    380,000Proceeds from notes payable
    
    
    655,670
    
    
    
    23,475Net cash provided by financing activities
    
    
    1,605,670
    
    
    
    403,475Net increase (decrease) in cash and equivalents
    
    
    (10,534
    )
    
    
    24,521Cash and equivalents, beginning of year
    
    
    126,027
    
    
    
    101,506Cash and equivalents, end of year
    
    $
    115,493
    
    
    $
    126,027Non-cash investing and financing activities:Conversion of convertible debentures to common stock
    
    $
    113,489
    
    
    $
    25,000Payment of accrued interest with Mycosol warrants
    
    
    222,360
    
    
    
    Purchase of Mycosol interest with 6,000,000 shares
    
    
    300,000
    
    
    
    of Veridien common stock
  33




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Organization, Business and Control
  ® ®
 Principles of Consolidation
  Accounting Estimates
  Cash Equivalents
  34




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED
 Revenue Recognition
  Accounts Receivable
  Inventories
  Marketable Securities
  35




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED
 Property and Equipment
  Patents
  Stock-Based Compensation
   2004
    
    2005Expected dividend yield
    
    
    0
    
    
    
    0Discount Rate
    
    
    3%
    
    
    
    3%Expected lives
    
    2 years
    
    
    2 yearsExpected volatility
    
    
    82%
    
    
    
    101%
  36




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED
 2004
    
    2005Net Income (Loss)
    
    As reported
    
    
    $(636,728
    )
    
    
    $(1,975,868
    )Stock based compensation included in Net Income
    
    
    
    
    
    Fair Value of stock base compensation
    
    
    28,274
    
    
    
    13,198Pro forma
    
    
    $(665,002
    )
    
    
    $(1,989,066
    )Net (Loss) per share
    
    As reported
    
    $
    (0.00
    )
    
    $
    (0.01
    )Stock based compensation included in Net Income
    
    
    
    
    
    Fair Value of stock base compensation
    
    $
    (0.00
    )
    
    $
    (0.00
    )Pro forma
    
    $
    (0.00
    )
    
    $
    (0.01
    )
 Asset Impairment
  37




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED
 Income Taxes
  Reclassification
  Net Loss per Share
  Recently Issued Accounting Standards
  NOTE B  GOING CONCERN
  38




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE B  GOING CONCERN  CONTINUED
    NOTE C  CONSOLIDATION OF MYCOSOL
    39




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE C  CONSOLIDATION OF MYCOSOL  CONTINUED
  2005
    
    
    2004Cash
    
    $
    134
    
    
    $
    3,000Inventory  raw materials
    
    
    50,641
    
    
    
    58,000Property and equipment
    
    
    18,119
    
    
    
    14,000Deposits and other
    
    
    8,000
    
    
    
    11,000Patents  pending
    
    
    233,086
    
    
    
    118,000Accounts payable
    
    
    (63,383
    )
    
    
    Notes payable
    
    
    (34,102
    )
    
    
    Minority Interest
    
    
    (178,756
    )
    
    
    Accrued Expenses
    
    
    
    
    
    
    (34,000
    )Accumulated deficit
    
    
    
    
    
    
    (70,000
    )33,739
    
    
    
    100,000Research and development expenses
    
    
    852,192
    
    
    
    325,000Elimination of fee paid by VIE
    
    
    
    
    
    
    100,000Minority interest Mycosol loss
    
    
    (543,604
    )
    
    
    $
    342,327
    
    
    $
    525,000Veridiens investment in Mycosol at December 31, 2005 is 40.55%:Investment in preferred stock
    
    
    1,490,000Investment in common shares
    
    
    229,167Investment in common share warrants
    
    
    307,875
 NOTE D  MARKETABLE SECURITIES
  40




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Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE D  MARKETABLE SECURITIES  CONTINUED
  NOTE E  NOTES PAYABLE
    NOTE F  CONVERTIBLE DEBENTURES
 rd
  Year
    
    3rd Parties
    
    
    Related Parties
    
    
    Total2006
    
    $
    671,066
    
    
    $
    824,096
    
    
    $
    1,495,1622007
    
    
    680,000
    
    
    
    1,780,811
    
    
    
    2,460,8112008
    
    
    450,000
    
    
    
    0
    
    
    
    450,000Total
    
    $
    1,801,066
    
    
    $
    2,604,907
    
    
    $
    4,405,973
  41




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE G  COMMITMENTS AND CONTINGENCIES
    Year
    
    Amount2006
    
    $
    22,8002007
    
    $
    22,8002008
    
    $
    13,300
 NOTE H  CONVERTIBLE REDEEMABLE PREFERRED STOCK
   42




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE I  SERIES B CUMULATIVE PREFERRED STOCK
   NOTE J  STOCK WARRANTS
     43




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE J  STOCK WARRANTS  CONTINUED
    Exercise
    
    
    PriceCommon Stock
    
    Warrants
    
    
    RangeOutstanding at January 1, 2004
    
    
    17,540,007
    
    
    $
    .001  -  .20Granted
    
    
    1,000,000
    
    
    
    .07Expired
    
    
    (250,000
    )
    
    
    .20Exercised
    
    
    (1,000,000
    )
    
    
    .03Outstanding at December 31, 2004
    
    
    17,290,007
    
    
    
    .001 - .07Granted
    
    
    1,000,000
    
    
    
    .057Expired
    
    
    (1,000,000
    )
    
    
    .05Loan & Security
Agreement Conversion
    
    
    (7,321,857
    )
    
    
    .016Outstanding at December 31, 2005
    
    
    9,968,150
    
    
    $
    .001 -.07
  Equivalent #Common SharesPreferred
    
    
    Preferred
    
    
    on PreferredShare
    
    
    Exercise
    
    
    ShareWarrants
    
    
    Price
    
    
    ConversionOutstanding at December 31, 2004
    
    
    27,451
    
    
    $
    10.00
    
    
    
    550,121Outstanding at December 31, 2005
    
    
    27,451
    
    
    $
    10.00
    
    
    
    550,121Series B
    
    
    27,451
    
    
    
    
    
    
    
    550,121
  44




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE K  INCOME TAXES
  Deferred tax assets  NOLs
    
    $
    8,296,000Valuation allowance
    
    
    (8,296,000
    )Net deferred taxes
    
    $
    
 NOTE L  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    NOTE M  RELATED PARTY TRANSACTIONS
    45




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE M  RELATED PARTY TRANSACTIONS  CONTINUED
   NOTE N  MAJOR CUSTOMERS
   NOTE O  SUBSEQUENT EVENTS
  46




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##### Table of Contents



1.
    
    In connection with an inspection (which began in October 2004) by the Public Company
Accounting Oversight Board of our auditors (at that time) Carter, Cartier, Melby & Guarino,
C.P.A.s, P.A. (CCMG), the Company discovered the following errors in the accounting for
transactions in the 2003 fiscal period:
 47




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##### Table of Contents




    
    Some Convertible Debenture conversions were reported in error. We
underreported interest expense by $206,537 and did not report a gain from debt
extinguishment of $101,700.
    
    We overstated a realized gain on sale of marketable securities by
$72,667 which should have been credited to additional paid in capital
 These corrections were quantified by the Company in March 2005 through consultation with
external accounting professionals and resulted in an additional loss of $177,837 to the 2003 net
loss. The Restated financials were included in the Companys Form 10KSB filed March 31, 2005.2.
    
    In connection with questions raised by the Securities and Exchange Commission in a comment
letter of May 2005, the Company discovered errors in the accounting for marketable securities
in the 2004 fiscal period. These errors resulted from recording of the valuation, at the
insistence of our previous auditors (CCMG), of securities we owned at a discounted price when
the shares should have been reported as non-impaired marketable securities. The accounting
impact of the correction was (i) an increase in our sales, as the original value of the
securities received as payment of license services was discounted when it should not have
been; and (ii) changes in our realized and unrealized gains and losses as a result of the
initial valuation and valuation of the securities throughout our ownership of them.These corrections were made in the financial statements filed November 2, 2005 in our 10KSB/A
for the year ended December 31, 2004 and resulted in a decrease in the Companys reported loss
for 2004 by $121,065.
  
    
    On March 30, 2005 the Board of Directors directed the Audit Committee to begin the
process of seeking alternative auditors for the Company and to engage such alternative firm
as they deemed acceptable. There were no disagreements with the Companys auditors CCMG,
on any matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedures, which disagreements, if not resolved to the satisfaction of
CCMG would have caused it to make reference to such disagreements in its reports. The
decision of the Board to change auditors was made on the basis of their belief that the
Company required the expertise and experience of an auditing firm with broader experience
in the auditing of public companies and compliance with current SEC reporting requirements,
than that of the Companys previous auditors (CCMG).The Audit Committee conducted a search and on April 27, 2005 the Company retained the
accounting firm of Malone & Bailey, PC to act as its independent registered public
accountants.
    
    At the direction of Management, financial staff attended training provided by the SEC
Institute in June 2005. Attendance at this seminar was designed to ensure staff are
current on changes in SEC policy and requirements. It is the intention of management that
this type of professional development be supported and continued by the Company.
    
    On June 27, 2005 Mr. Russell Van Zandt, Chairman of the Veridien Board of Directors, at
the request of the Audit Committee agreed to take on the additional operational
responsibility of Chief Financial Officer of the Company. Mr. Van Zandt will manage and
oversee the accounting functions of the Company.
    
    Management has adopted a policy and procedure whereby financial management, when
dealing with the reporting of transactions that involve complex and unusual accounting
matters, will formally research relevant accounting literature relating to the issues and,
if necessary, retain the services of a qualified certified public accountant, other than our independent auditor, to
assist us with respect to
 48




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##### Table of Contents



accounting for the transaction(s).
 There were changes made to our internal control over financial reporting that occurred
during this period that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. The Company will continue to evaluate the
effectiveness of internal controls and procedures on an on-going basis.
 
 ITEM 8B OTHER INFORMATION
  49




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##### Table of Contents



PART III
 
  Directors and Executive Officers
 Name
    
    Age
    
    PositionRussell D. Van Zandt
    
    
    65
    
    
    Chairman of the Board of Directors/Chief
Financial OfficerRene A. Gareau
    
    
    64
    
    
    Vice Chairman of the Board of Directors/Corporate
SecretarySheldon C. Fenton
    
    
    54
    
    
    President and CEO/DirectorAlfred A. Ritter
    
    
    62
    
    
    DirectorRichard Klein
    
    
    61
    
    
    Director
    50




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51




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##### Table of Contents



AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
  Compliance with Section 16(A) of The Exchange Act
  
  Compensation of Directors
  Compensation of Management
  Name & Principal
    
    
    
    
    
    
    
    OtherPosition
    
    Year
    
    Salary
    
    Bonus
    
    CompensationSheldon C. Fenton, President
& CEO
    
    7/98-Present
    
    -0-1
    
    -0-
    
    -0-Russell Van Zandt, CFO
    
    6/05-Present
    
    $30,0002
    
    -0-
    
    $17,0502
 
 1
    
    Tanlon Management Services Inc. (of which Mr. Fenton is an officer and a director)
charges the Company an annual management fee of $120,000 at the rate of $30,000 per quarter;
however, such fee covers the services of Tanlon employees and is not intended as compensation
for Mr. Fenton. At December 31, 2005 these fees remain unpaid in the amount of $150,000 and
are included in accounts payable.2
    
    During the fourth quarter 2003 the Company entered into a Consulting Agreement with
Russell Van Zandt, who is the Chairman of the Board of Directors. This Agreement has been
renewed annually. The Agreement calls for $30,000 annually in cash payment for services and
100,000 common shares per quarter. In June 2005 Mr. Van Zandt took on the added
responsibilities as Chief Financial Officer of the Company. 52




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##### Table of Contents



1.
    
    The management of the Company is limited to four (4) persons;2.
    
    All of the management team have now been associated with the Company for
several years and have become familiar with the requirements applicable to them;3.
    
    The management of the Company is so small and in such regular
communication that the conduct of any one member of management is apparent to all;
and4.
    
    The Company has centralized the collection and disclosure of material
information and the control of public communications to persons familiar with the
applicable requirements and having direct professional access in the event of
perceived problems.
 53




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##### Table of Contents



Shares of
    
    PercentageCommon
    
    as ofName and Address of Beneficial Owners
    
    Stock
    
    03/6/20061Sheldon C. Fenton
    
    64,111,9462
    
    
    28.1
    %160 Eglinton Avenue East, Suite 500Toronto, Ontario M4P 3B5Rene A. Gareau
    
    
    125,000
    
    
    
    0.05
    %603 Sarasota QuaySarasota, Florida 34236Dunvegan Mortgage Corporation
    
    63,728,9463
    
    
    27.9
    %222 Delaware Ave., PO Box 2306Wilmington, Delaware 19899Russell D. Van Zandt
    
    
    1,291,560
    
    
    
    0.57
    %100 Beach Drive NE, Suite 1002St. Petersburg, Florida 33701Alfred A. Ritter
    
    
    0
    
    
    Rua Baronesa DeBeck 130Malveira Da Serra3755-153 Alcabideche, PortugalRichard B. Klein
    
    
    2,700,000
    
    
    
    1.18
    %107 Marseille PlaceCary, North Carolina 27511H. Quotient Inc.
    
    
    18,175,854
    
    
    
    8.0
    %(& subsidiary Quotient Capital Corp.)8150 Leesburg Pike, Suite 503Vienna, VA 22182Milfen Limited
    
    1,594,0144
    
    
    0.7
    %33 Jackes Avenue, #303Toronto, OntarioM4T 1E2
 54




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##### Table of Contents



All Directors and Officers
    
    
    68,228,506
    
    
    
    29.9
    %as a Group (5 persons)
 
 1
    
    Based on 228,282,857 shares issued and outstanding as of March 6, 2006.2
    
    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 41,395,932 shares issuable in the event of conversion of the
$1,780,811 of Convertible Debentures [principal] owned by Dunvegan Mortgage Corporation and
the $330,382 of interest thereon as of December 31, 2005. For informational purposes,
also does not include 8,408,271 Series I ($.499) and Series II ($.001) Warrants previously
owned by Dunvegan Mortgage Corporation but assigned (in 1998) to 1192615 Ontario Limited et al
and in which he disclaims any beneficial interest. For informational purposes, does not
include holdings of his adult daughter including (i) 6,446,804 shares and (ii) the 4,050,373
shares issuable in the event of conversion of the $90,000 Convertible Debenture (principal)
and $49,641 of interest thereon as of December 31, 2005; in which he disclaims any beneficial
interest. For informational purposes does not include holdings of his adult son, including
(i) 6,225,778 shares and (ii) the 5,082,482 shares issuable in the event of conversion of the
$95,000 of Convertible Debentures (principal) and $49,513 of interest thereon as of December
31, 2005; in which he disclaims any beneficial interest. For informational purposes does not
include holdings of Milfen Limited, a Corporation owned by Mr. Fentons mother, in which he
disclaims any beneficial interest.3
    
    Includes 41,395,932 shares issuable in the event of conversion of the $1,780,811 of
Convertible Debentures [principal] owned by Dunvegan Mortgage Corporation and the $330,382 of
interest thereon as of December 31, 2005. Does not include 154,163 shares of Series B
Preferred Stock.4
    
    Does not include 20,042,184 shares issuable in the event of conversion of the $599,096
of Convertible Debentures [principal] owned by Milfen Limited and the $312,812 of interest
thereon as of December 31, 2005. 
     55




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##### Table of Contents



Tanlon Management Services, Inc.
 th
    RUSSELL VAN ZANDT
  56




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##### Table of Contents



Exhibit Index
 No.
    
    Description of Exhibit* 3.1
    
    Certificate of Incorporation of VCT Acquisitions II, Inc.  Dated June 4, 1991* 3.2
    
    Restated Certificate of Incorporation of VCT Acquisitions II, Inc.  Dated September
13, 1991* 3.3
    
    Certificate of Amendment of Restated Certificate of Incorporation  November 6, 1991* 3.4
    
    Bylaws of Veridien Corporation  1998 as amended to date* 3.5
    
    Certificate of the Powers, Preferences, Rights, Qualifications, Limitations and
Restrictions of Series B Convertible Preferred Stock  Dated September 11, 1998* 3.6
    
    Certificate of Designation  Dated April 3, 1995* 3.7
    
    Certificate of Amendment to the Certificate of Incorporation  Dated February 16, 1996* 3.8
    
    Certificate of Amendment of Restated Certificate of Incorporation* 3.9
    
    Certificate of Amendment of Certificate of Incorporation  Dated May 27, 2002* 4.1
    
    Debenture Sample* 4.2
    
    General Security Agreement between Veridien Corp. and Dunvegan Mortgage Corp. 
Dated October 19, 1995* 4.3
    
    Loan and Security Agreement between Veridien Corp. and Dunvegan Mortgage Corp. 
Dated October 19, 1995* 4.4
    
    General Security Pledge between Veridien Corp. and Dunvegan Mortgage Corp. 
Dated October 19, 1995* 4.5
    
    Warrant Agreement regarding Warrants to purchase Common Stock of Veridien Corporation 
Series I  Dated October 19, 1995* 4.6
    
    Warrant Agreement regarding Warrants to purchase Common Stock of Veridien Corporation
Series II  Dated October 19, 1995* 4.7
    
    Warrant to purchase Common Stock Series I and Series II  Dated December 12, 1995* 4.8
    
    Common Stock Purchase Warrant: $0.135 per share  Dated June 10, 1998* 10.1
    
    Building Lease* 10.2
    
    Canadian Licensing Agreement  Dated February 28, 1998* 10.3
    
    Contract Fill and Sub-lease Agreement with Horizon Pharmaceuticals, Inc.  Dated
August 1, 1998* 10.4
    
    Trademark  Virahol* 10.5
    
    Trademark  Viraguard* 10.6
    
    Trademark  Viragel* 10.7
    
    Trademark  Vira- CD7* 10.8
    
    Australian Patent No. 667,930/Sterihol* 10.9
    
    Australian Patent No. 628,932/Virahol
 57




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##### Table of Contents



* 10.10
    
    Canadian Patent No. 1,337,329/Virahol* 10.11
    
    Mexican Patent No. 185,884/Virahol* 10.12
    
    U.K. Patent No. 2,294,639/Virahol* 10.13
    
    U.K. Patent No. 2,245,171/Virahol* 10.14
    
    U.S. Patent No. 5,405,602/Sterihol* 10.15
    
    U.S. Patent No. 5,145,663/Virahol* 10.16
    
    U.S. Patent No. 5,441,723/Virahol* 10.17
    
    U.S. Patent No. 5,637,307/Method of Immersion Sterilization & Organic Cold Chemical
Sterilant* 10.18
    
    New Zealand Patent No. 269,419/Virahol* 10.19
    
    Employment Agreement with Paul Simmons* 10.20
    
    Employment Agreement with Andrew T. Libby, Jr.* 10.21
    
    Norpak Manufacturing Inc. Agreement* 10.22
    
    Consulting Agreement with Kenneth J. Chester* 10.23
    
    Option Agreement re: Purchase of SunSwipe, Inc.* 10.24
    
    Consulting Agreement with Robert P. Belling* 10.25
    
    Scott R. Dotson Agreement* 10.26
    
    Trademark  Veridien* 10.27
    
    Australian Patent No. 695,346/Virahol (DSII)* 10.28
    
    U.S. Patent No. 5,891,052/Diagnostic Syringe Actuator* 10.29
    
    U.S. Patent No. 5,895,354/Integrated Medical Diagnostic Center* 10.30
    
    U.S. Patent No. 5,925,052/Umbilical Surgical Scissors* 10.31
    
    U.S. Patent No. 5,985,929/Cold Chemical Sterilant* 10.32
    
    Canadian Patent No. 2,166,810/Virahol (DSII)* 10.33
    
    Trademark and Design  Viraguard* 10.34
    
    Employees & Consultants Compensation and Stock Option Plan* 10.35
    
    Consulting Agreement with Russell Van Zandt* 10.36
    
    Agreement with Mycosol, Inc.* 10.37
    
    Investment Agreement  Mineola Holdings Corporation, Veridien Corporation
& Mycosol, Inc* 16.1
    
    Carter, Cartier, Melby and Guarino Letter (re: 8K filed at time of Change in Auditors)* 21.1
    
    Subsidiaries* 21.2
    
    Subsidiaries (as of December 31, 2000)* 21.3
    
    Subsidiaries (as of December 31, 2001)* 21.4
    
    Subsidiaries (as of December 31, 2002)
 58




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##### Table of Contents



*21.5
    
    
    Subsidiaries (as of December 31, 2003)*21.6
    
    
    Subsidiaries (as of December 31, 2004)21.7
    
    
    Subsidiaries (as of December 31, 2005)31.1
    
    
    RULE 13a-14(a)/15d-14(a) CERTIFICATION, ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 200231.2
    
    
    RULE 13a-14(a)/15d-14(a) CERTIFICATION, ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 200232.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 200232.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
 
  Reports on Form 8-K
  Date
    
    Items
    
    DescriptionMarch 9, 2005
    
    
    1.01, 2.01, 2.03 & 3.02
    
    
    Mycosol TransactionApril 29, 2005 [Amended May 11/05]
    
    
    4.01 & 9.01
    
    
    Change in AuditorsJune 28, 2005
    
    
    5.02
    
    
    Appointment of CFOSeptember 30, 2005
    
    
    4.02 & 9.01
    
    
    Restatement of YE 2004November 16, 2005
    
    
    7.01 & 9.01
    
    
    Press Release
  59




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##### Table of Contents



60




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##### Table of Contents



SIGNATURES
   By
    
    /s/ Sheldon C. Fenton, C.E.O.
    ,
    PresidentSheldon C. Fenton, C.E.O.Date
    
    March 30, 2006By
    

/s/
Russell D. Van Zandt, Chief Financial OfficerRussell D. Van
Zandt, C.F.O. and Chairman of the Board of DirectorsDate
    
    March 30, 2006
  By
    
    /s/ Sheldon C. Fenton, C.E.O.Sheldon C. Fenton, C.E.O.Date
    
    March 30, 2006By
    
    /s/
Russell D. Van Zandt, C.F.O. and Chairman of the Board of Directors

Russell D. Van Zandt, C.F.O. and Chairman of the Board of DirectorsDate
    
    March 30, 2006By
    
    /s/ Rene A. Gareau, Vice Chairman of the Board of DirectorsRene A. Gareau, Vice Chairman of the Board of DirectorsDate
    
    March 30, 2006
 61