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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 1934For the Fiscal Year Ended December 31, 2004ORo
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d)OF THE SECURITIES AND EXCHANGE
ACT OF 1934for the transaction period from          to
 Commission File Number 0-02555 Veridien Corporation 
  Delaware
    
    59-3020382(State or other jurisdiction
    
    (I.R.S. Employerof incorporation)
    
    Identification No.)
 2875 MCI Drive, Suite B, Pinellas Park, Florida
    
    33782-6105(Address of principal executive offices)
    
    (Zip code)
 Issuers telephone number (727) 576-1600 Securities registered under Section 12(b) of the Exchange Act: Title of each class
    
    Name of each exchange on which Registered
 Securities registered under Section 12(g) of the Exchange Act: Common Stock 
     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 þ No
o 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. þ State issuers revenues for its most recent fiscal year. $1,606,154. 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
11, 2005 of $0.0535, the aggregate market value of voting stock held by non-affiliates is
$8,739,075. As of March 11, 2005
227,564,973 shares of Common Stock, $.001 par value, of the registrant were issued and outstanding.   1




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TABLE OF CONTENTS 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
    
    
    20Item 7. Financial Statements
    
    
    27Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    45Item 8A. Controls and Procedures

    
    
    45PART IIIItem 9. Directors and Executive Officers of the Registrant
    
    
    46Item 10. Executive Compensation
    
    
    49Item 11. Security Ownership of Certain Beneficial Owners and Management
    
    
    51Item 12. Certain Relationships and Related Transactions
    
    
    52Item 13. Exhibits and Reports on Form 8-K
    
    
    54Item 14. Principal Accountant Fees and Services
    
    
    57Ex-21.6 Subisdiaries (as of December 31, 2004)Ex-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32.1 Section 906 CEO CertificationEx-32.2 Section 906 CFO Certification
  2




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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®, 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® 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® (now marketed under the brand name of VIRAGUARD®)  A ready-to-use, hard surface
disinfectant/cleaner that is a tuberculocide, bactericide, virucide, and fungicide. VIRAGEL® (now marketed under the brand name of VIRAGUARD®)  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®/VIRAGUARD®
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 In 2001 we began the development of an evolving 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. A plan, structured by Management, was implemented and included
division of the Companys business into two areas of focus. The first area, the Infection Control Division, was essentially the Companys line of infection
control products with the liquid and gel product lines enhanced with the addition of new product
delivery configurations such as canisters, towelettes and private labeling. The second area, the Healthy Lifestyles Division, was focused on new products for which we had
obtained distribution/sales rights, including: 1. the SunSwipe product line (sunscreen
impregnated towelettes in SPF 15, SPF 30, SPF 45, Baby 45 and after-tanning; all in a towelette
product delivery configuration) and 2. BugSwipe® (an insect repellant in the towelette product delivery configuration). 3




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This Revised Business Plan was not intended to de-emphasize or abandon VIRAHOL®/VIRAGUARD® or the
disinfectant market. Rather, the Infection Control Division was to actively enhance the marketing
of those historic products plus add new product introductions and expand beyond the medical and
dental markets. During 2001, the Company applied to the EPA to expand its label claims. In addition, the product
delivery configurations were strengthened by being broadened to include canisters and towelettes in
two sizes each. The Company expanded marketing to the janitorial and sanitation industries and to
the restaurant industry, rather than only the medical and dental market. At the same time, the
other new division gave the Company many new and profitable products which could be offered to a
wide variety of larger markets, including especially the retail and specialty markets. 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 that 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; butii)
    if the submission is not deemed to be in compliance it is
returned to the Company for amendment;  6.
    if, during the scientific review, errors and/or omissions are found in the
submission, it is returned at the end of the 120-day period, and upon refiling, the
120-day period begins again;7.
    if, at the end of the 120-day period 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. As noted above with respect to hospital requirements, sales of our products are directly affected
by the kill claims. Thus, regardless of the specifics of our Business Plan at any given time,
implementation of certain programs may be dependent upon timing of EPA approvals. Furthermore,
securing EPA approvals may have larger or smaller sales impact than anticipated, requiring
reevaluation. 4




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Since implementing the revised plan in 2001 we have received a number of additional EPA approvals
(NOTE: In addition to those listed previously above): 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
 Our potential market for these products has increased as a result of the additional approvals. Our COMPLETE listing of currently approved claims is as follows: 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 #VR26
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Rotavirus (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
 CURRENT FOCUS During 2004 we continued to focus our sales efforts on our Infection Control products. We expanded
our product line to include five new products for the Infection Control market. These products are:  
    Viraguard® Heavy Duty Textured Wipes  rugged, roughened wipes designed for use in very
rigorous and bloody environments such as ambulances and emergency rooms.
    Viraguard® Medical Instrument Wipes  pocket size handy wipes for cleaning Stethoscopes,
scissors, otoscopes, etc.
    Viraguard® Telephone & Keyboard Wipes- for disinfecting office equipment, cellular
phones and computers.
    Water Cooler Cleaning Kits  special unscented formula for removal of bacteria, fungus
and mold that can accumulate in water cooler equipment.
    Viraguard® Toilet Seat Wipes wipes which are available for use in restrooms in hotels,
restaurants, airports and other public places as well as in hospitals and physicians
offices, and other places where disinfection is critical to controlling the spread of
disease carrying organisms. 6




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We are aggressively continuing to pursue possible strategic alliances with a number of major
corporations to further strengthen our Company. During 2002, we entered into a five (5) year Distribution Agreement with DuPont for all Viraguard®
products in the United States of America for specific market segments. The Agreement includes
certain exclusivity rights for the Emergency Services and Industrial markets. The products
concerned are Viraguard® Hard Surface Disinfectant Towelettes, Viraguard® Antiseptic Hand Wipes,
Viraguard® Disinfectant solution in one gallon, 16 ounce and 2 ounce formats all of which are being
produced for DuPont under their brand label. Deliveries commenced in February 2003 and continued
throughout 2004. In addition, we entered into a global distribution agreement with E.I. DuPont de Nemours and
Company to market Veridiens line of sunscreen towelettes. DuPont has commenced marketing
Veridiens towelettes and sales of these products in the Emergency Services and Industrial markets
began in the second quarter of 2003. In 2003, DuPont and Veridien agreed to test the Virahol® formulation for efficacy on Hepatitis A, B
and C in order to create superior kill claims for the Viraguard® product line. Hepatitis outbreaks
across North America in 2002 and 2003 have increased demand for products with Hepatitis kill
claims, particularly in the Healthcare and First Responder markets. As of December 2003, Veridien
has received label claim approval representing effectiveness against Hepatitis A, B and C on
Viraguard® Disinfectant liquids for Hard Surfaces. Veridien has also drug listed all the
Viraguard® Hand Antiseptic products with the FDA, which products reflect effectiveness against
Hepatitis A, B and C based on in vitro testing. These new Hepatitis kill claims should provide
Veridien and its subregistrants (i.e. Dupont) with a strong competitive advantage in 2005. During 2003 we signed a supply contract with the American Red Cross. The original contract was
renewed by the Red Cross for a further year (covering September 2004  September 2005). Our
patented Viraguard® disinfectants and wipes may be used by the Red Cross to meet regulatory
requirements concerning the type of hard surface disinfectants used in Red Cross Biomedical
Services facilities across America. The products the American Red Cross have contracted for are:
Viraguard® Hospital Hard Surface Disinfectant Cleaner and Instrument Presoak, Viraguard® Antiseptic
Hand Spray, Viraguard® Hospital Surface Disinfectant Towelettes and Viraguard® Antiseptic Hand
Wipes. The Viraguard® products will be used for personal hand sanitation, disinfection of clinic
surfaces and for maintenance of blood collection equipment. Early in 2004 we signed a multi-year contract with H2O to Go, LLC. Purified Water to Go operates
a fast growing chain of retail franchises marketing purified water, nutrition and healthy lifestyle
products. They will be using our patented Viraguard® infection control products for cleaning and
disinfecting their stores and operating equipment, as well as providing hand hygiene for their
staff and customers when water refilling in stores. The full Viraguard® line of infection control
products and our unique SunSwipe Sunscreen Towelettes will be sold to retail customers in H2O to
Go stores across the United States and Canada. In December 2004, Veridien engaged the services of Medical Strategies International, a medical
marketing and consulting company whose expertise is the development of large scale contracts with
Group Purchasing Organizations, Veterans Administration and Integrated Delivery Networks. These
organizations collectively account for 85% of all hospital purchasing, representing more than $52
billion dollars of annual purchases across all sectors of the medical industry. Dennis Daar, Thomas
Filer and Howard Lewis are the three senior executives of Medical Strategies International.
Together they have over 80 years experience in placing medical devices and medical supplies in
hospital purchasing groups. Medical Strategies International significantly extends our reach into
the large medical markets in North America. 7




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Veridien believes that our Viraguard® products, with their new Hepatitis and other kill claims, are
now ready for entry into consumer markets. We are aggressively pursuing a strategy of establishing
partnerships with major Consumer Packaged Goods companies to develop Viraguard® Infection Control
products for sale in large retail chains (food stores, drug chains and mass merchandise chains).
Veridien seeks an alliance with a major retail brand name that already has penetration into these
retail chains. To that purpose, Veridien has retained Marc Pearl, an expert
consultant in the development of retail branded name products. Mr. Pearls last position was
National Sales Director at Reckitt Benckiser, manufacturer of Lysol® products. Mr. Pearl will be
working with Veridien to establish retail marketing programs, retail product launches and to assist
in negotiating business relationships with major Packaged Consumer Goods companies. Employees Our core team encompasses thirteen (13) people including employees, active Board
members, and primary consultants. We employ three persons, all of whom are full-time employees (1 Management & Finance, 1 Sales & 1
Administration/Regulatory. In addition, we also utilize ten (10) primary consultants (some
full-time and some part-time) to assist with administration, sales, operations, and marketing. Since 2002, we have contracted the services of Dunnigan Developments Ltd. to coordinate sales and
marketing activities with our large multi-national and other major corporate customers. Paul
Dunnigan, the principal of Dunnigan Developments Ltd., has 22 years experience in marketing and
merchandising consumer products, as well as in supply-chain management for large retailing
operations, including many years with a multi-national corporation. MYCOSOL, INC.  Veridiens Investment in Future Technology In June 2004, we announced that we had entered into an Agreement with Mycosol, Inc., a
development-stage chemical and pharmaceutical company, located in the Research Triangle Park area
of North Carolina. While our focus is on anti-infectives killing bacteria, mold, mildew, and
viruses  through our ViraguardÒ product line of proprietary, alcohol-based liquid and
towelette antiseptics and disinfectants, Mycosol is developing complementary, non-alcohol-based
technologies of safe, potent, long lasting products that it believes will not only kill, but retard
the regrowth of infective microbials  particularly mold. We believe the integration of the two
companies will provide benefits to both in the areas of product development & commercialization,
sales and management. Under the Agreement, we have an option to acquire the majority ownership of
Mycosol. Veridien also has two seats on Mycosols four-Director Board. Mycosol will continue to
focus its technology on the further development of unique anti-microbials (bacteria, mold, yeast)
to feed the Veridien product pipeline and distribution channels. Mycosol was founded in late 2002. The Company has a unique, proprietary, low-cost platform
technology that it believes can safely and effectively prevent or treat microbial-induced and
microbial-exacerbated problems. Mycosols primary
technology is based on M301 -  an analog derivative of a drug compound originally
developed by the pharmaceutical company, Burroughs Wellcome (BW), to orally treat diseases of the
digestive system. Although found to be safe and efficacious in Phase III clinical studies, due to
changes in corporate market strategies, the drug was never commercialized. More than a decade
later, an internal research development project found M301 to also be a unique, safe, multi-active
compound exhibiting potent, topical, anti-inflammatory (rivaling steroids), anti-fungal,
anti-allergic, and anti-bacterial properties. But, as before, corporate re-prioritization of drug
development projects again sidelined the technology. 8




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Years later, Jeffrey Selph, the Project Manager for M301 at BW, opted for early retirement and
subsequently formed Mycosol with medical industry executive and Co-Founder, Richard Klein, and VP
of Business Development, Jim Hriso. These senior executives, with nearly 100 years of combined
health sciences technology and market development experience, sought to create and develop an M301
technology platform and products targeted to a myriad of new, multi-billion dollar market
applications. The Company is supported by a cadre of outside consultant experts and strategic
alliance partners in the areas of biochemistry, chemical development, safety and efficacy testing,
regulatory, marketing, and administrative services. Mycosol acquired access to the original technical and preclinical database through a license with
BWs successor, GlaxoSmithKline, to use as a reference and for guidance in developing new,
anti-inflammatory and anti-microbial applications for M301. Mycosol has since developed a broad
technology platform, a large library of related compounds, expanded the safety and efficacy
database, and filed for five U.S. patents and a world patent covering commercial applications in
medical, veterinary, diagnostics, industrial, and agriculture. For example: further and recent
testing of the lead compound, M301, and several analogs have shown them to be potent fungicidal
(kills fungus) and fungistatic (prevents the growth of fungi) agents against a broad spectrum of
yeast and mold. Some forms of yeast and mold are known to cause human infection and inherently
produce a significant inflammatory response in the tissue or organ involved. Mycosol has
identified several medical indications in dermatology, otolaryngology (ENT), and inflammatory bowel
disease that are caused by fungi and/or allergic reactions to biomaterials and in which
steroid-type drugs are currently the gold standard of treatment. These targets were selected
because they represent very large market potential and because Mycosol believes that the M301
technologys multi-activity can dramatically improve the level of care: palliative (faster
reduction of itching and inflammation) and curative (kill fungi, allergens, and other
infectives) and with fewer side effects (because they are not absorbed by the body).
Mycosol can also leverage M301s unique anti-fungal properties and the publics concern over
mold-infiltrated buildings (a.k.a. sick building syndrome) to focus on industrial market
opportunities such as pre-treated construction materials, e.g., sheetrock, structural lumber, air
filters, HVAC systems, etc. To help underwrite much of those anticipated development expenses and
to provide for a future license revenue stream, Mycosol intends to form collaborative partnerships
with companies, where applicable. The medical and agricultural opportunities are examples
where the high cost of development and long and rigorous regulatory paths (FDA and EPA,
respectively) would strongly suggest strategic alliances with companies specialized in those
fields. To help facilitate this overall collaborative strategy, Mycosol entered into a comprehensive
strategic alliance with us (in June 2004) to jointly focus on both the burgeoning
anti-microbial/anti-infectives market in which we currently participate, and other life science
opportunities being developed around the M301 technology. More recently, Mycosols core technology efforts developed and validated the use of an M301
formulation as a unique staining reagent. Staining reagents are used extensively to study
cell-based assays in laboratory research and development, an unregulated market. The proprietary
M301 reagent formulation has demonstrated significant competitive advantages, which include: user
safety, reagent stability, non-toxicity to cells, very quick absorption by cells, real-time and
selective staining of the cell nucleus, and the ability to repeatedly stain living cells. Mycosol
intends to commercialize its first new staining reagent products in 2005,
and to explore licensing opportunities for the research laboratory market. In the not-too-distant
future, Mycosol sees further development of a pipeline of staining reagent products based on the
M301 library of analogs, as well as expansion into the similarly-sized, but FDA-regulated clinical
diagnostics market. The Infection Control Division Competitive Advantage In the field, there are many competitors in our major product categories:
(i) hard surface disinfectants and (ii) instant hand sanitizers. Our competitors include
companies currently marketing 9




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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 somewhat to very harmful to the skin and respiratory system and
usually require gloves and other protection when being used. Our Virahol®/Viraguard® 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 make the formulation more effective than
alcohol alone. As well, the new Hepatitis A, B and C kill claims on our Virahol®/Viraguard®
formulation provide a significant new competitive advantage in the marketplace. 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 and claims
related to same. 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® 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 2002 and again in 2004 to
take advantage of various size containers which are in demand and to adjust to new market
conditions for raw materials and finished products. We still believe that our current pricing
structure allows us margins which can support the Company at the anticipated volume of sales during
the next year and yet provide our customers with competitive pricing. Expanded Marketing While we continue with our sales representatives to sell to the medical and
dental market, we are positioning to move into the janitorial and sanitation market and the
restaurant market, for both our surface disinfectant, which has EPA approval, and the hand
sanitizer, which is FDA drug listed. While there is substantial competition in the retail market
for towelettes, the competition within niche markets we seek is not so intensive and the addition
of the towelettes in the product line expands our configurations for delivery of our patented
formulation. ManufacturingOur products are manufactured in various locations primarily by contract formulators
and contract packagers. Availability of Raw Materials The largest ingredients by weight for the VIRAHOL® composition are
isopropanol and propylene glycol. Both of these chemicals are readily available from a wide
variety of sources nationally and internationally, at competitive prices. Although we prefer to
use isopropanol as the monohydric alcohol and propylene glycol as the polyhydric alcohol, our
patent covers the full range of both of these alcohols so that a wide variety of choices are
available should a shortage in one or more chemicals occur, subject to EPA approval. Substantial
numbers of companies produce both the plastic and corrugated packaging used by the Company. Trade
secret ingredients are employed for fragrances used in the Companys products but are available
from several sources. 10




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Governmental Regulation Those who develop products to control pests are subject to regulation
under several Federal Laws. The products that are manufactured and sold by Veridien specifically
come under the authority of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) as
amended by the Food Quality Protection Act (FQPA) of August 3, 1996 and the Federal Food, Drug, and
Cosmetic Act (FFDCA). FIFRA requires that before any person in any state or foreign country can
sell or distribute any pesticide in the United States, they must obtain a registration from the U.
S. Environmental Protection Agency (EPA). The term pesticide, as defined in FIFRA section 2 (u),
means any substance or mixture of substances intended for preventing, destroying, repelling, or
mitigating any pest, virus, bacteria, or other micro-organism (except viruses, bacteria, or other
micro-organism on or in living man or other living animals). Pesticides include fungicides,
disinfectants, sanitizers, and germicides. After the registration process and submission of
required data, an accepted label is stamped accepted and returned to the registrant for the
registered product. Annual Pesticide Maintenance Fees are required for registered products.
Anyone who sells/distributes a pesticide (including antimicrobial products such as disinfectants,
sanitizers, and germicides) must register that product in every state that they intend to
sell/distribute and pay a registration fee. As of this date, Alaska does not require a
registration fee but does require registration. In order to produce, defined to mean to manufacture, prepare, propagate, compound, or process
any pesticide . . . or to repackage or otherwise change the container of any pesticide . . . the
plant(s) and/or facility must be registered. Upon registration an establishment number is
assigned. The label and/or container must bear the registration number as well as the
establishment number. Annual reports are required to be submitted to the U.S. EPA indicating the
amount produced, repackaged/relabeled for the past year, amount sold/distributed for the past year
U.S. and Foreign, and amount to be produced/repackaged/ relabeled for the current year. The Company currently has two products registered with the United States Environmental Protection
Agency. They are as follows:  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. Additional brand names for these two products (e.g. VIRAGUARD®, Viraguard® Toilet Seat Wipes, etc.)
are also registered. The Company is registered and has been assigned EPA Establishment No. 60142-FL-1. Also our
contract manufacturers are registered EPA establishments. Our antiseptic hand sanitizing products are regulated under the provisions of the FFDCA as carried
out by the U. S. Food and Drug Administration (FDA). Antiseptic hand sanitizing products are
classified as over the counter (OTC) pharmaceuticals and are regulated to a less stringent standard
than prescription or otherwise controlled pharmaceutical products. The manufacture of OTC
antiseptic hand sanitizers are subject to the review and inspection of the FDA and must be
formulated, packaged, and handled in accordance with current Good Manufacturing Practices for
Finished Pharmaceuticals (cGMP) as published and amended from time to time by the FDA. The Company
contract manufactures and distributes these products in accordance with 21 11




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CFR Parts 333 and 369 and respective monographs. Veridien Corporations establishment is registered with the FDA and a
Labeler Code Number was assigned, permitting the Company to assign National Drug Code (NDC) numbers
to our FDA regulated products. Per Title 21, Part 207 of the Code of Federal Regulations (CFR),
the products are drug listed with the Food and Drug Administration (FDA) using those NDC numbers. The Healthy Lifestyles Division This division is focused on new products for which we have obtained distribution/sales rights.
Products in this division include our SunSwipe line and BugSwipe® product. We adopted a new approach to marketing SunSwipe and BugSwipe® products during 2003 which we
continue to pursue. We are developing Master Distributor Agreements with companies who have strong
market penetration in specific areas. These include Emergency Services, Healthcare, Retail Mass
Merchandise, Sporting Goods, Supermarkets, Convenience Stores, Industrial and Institutional sales
channels. Master Distribution agreements allow us to take advantage of the Distributors extensive
abilities to place products in these markets. There are many sources of raw materials for all of the products in this division and many
manufacturing alternatives available to us. We will be competing with numerous other companies
when introducing these products; however, we believe that our innovative delivery systems for these
conventional products will give us a competitive edge. The Company manufactures and distributes sunscreen towelette products per 21 CFR Part 352 and
respective tentative monographs, Sunscreen Drug Products for Over-the-Counter Human Use. A Labeler
Code Number has been assigned to Veridiens subsidiary, The SunSwipe Corporation L.L.C. The
Companys contract manufacturers are registered FDA establishments. Per Title 21, Part 207 of the
Code of Federal Regulations (CFR), the products are drug listed with the Food and Drug
Administration (FDA). Canadian Licensing We have entered into an agreement with a Canadian company to produce and market the VIRAHOL® line
in Canada on a non-exclusive basis. The products have been approved with Health Canada and are
marketed under the VIRAGUARD® trade name. Compliance with Environmental Laws We have had no need to spend monies on compliance with local, state and federal environmental laws.
We are current for our annual filing of the Pesticide Registration Maintenance Fee Filing Form for
2004, 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 where the registered products are
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. 12




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They can be affected by inaccurate assumptions we
might make or by known or unknown risks and uncertainties. Many factors, such as product
acceptance, competition and marketing capabilities, will be important in determining future
results. Consequently, no forward-looking statements can be guaranteed. Actual future results may
vary materially. We undertake no obligation to publicly update any forward-looking statements, whether as a result
of new information, future events or otherwise. You are advised, however, to consult any future
disclosures we make on related subjects in our 10-QSB, 8-KSB, and 10-KSB reports to the SEC. We provide the following cautionary discussion of risks, uncertainties and possible inaccurate
assumptions relevant to our business and our products. These are factors that we think could cause
our actual results to differ materially from expected results. Other factors besides those listed
here could adversely affect us. Risks of Our Business We are a small and relatively new company. To date, we have expended much of our efforts and funds
on development of products. We are initiating sales and marketing efforts. We are uncertain about
the market acceptance of our products. As a small company, we are highly dependent upon the efforts and abilities of our management. The
loss of the services of any of them could have a substantial adverse effect on us. We have not
purchased key man insurance policies on any of them. To date the Company has not had significant sales. We expect the growth in our sales to come
primarily from others, such as independent manufacturers representatives and accessing existing
distribution and fulfillment systems. We cannot be certain about our ability to attract and retain
representatives until we have had greater experience with these groups and organizations. We are
also uncertain about their sales effectiveness for our products. 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 contract
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®, which is
patented, that change will take time. Therefore, under present circumstances, if VIRAHOL® 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. 13




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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® product is EPA registered. We are uncertain about approvals of future products. Any failure of our products to fulfill their stated purpose could result in lawsuits for product
liability or breech of contract. We currently maintain product liability insurance. A successful
claim against us in excess of our insurance coverage could have a material adverse effect on our
results of operations, financial condition or business. Even unsuccessful claims would result in
expenditure of funds in litigation, as well as diversion of management time and resources. 
 ITEM 2. DESCRIPTION OF PROPERTY During 2004 we leased approximately 2,600 square feet of office space in a building located at
2875 MCI Drive, Suite B, Pinellas Park, Florida 33782-6105.
Our last lease commenced on January 1, 2003, at the rate of $1,625.00 per month and was for a period of 2 years expiring December
31, 2004. In addition to the rent, we paid 3.5% of the utilities and the real estate taxes,
allocated to the percentage of the total building occupied by us. The building was sold in December
2004 and we are currently on a month-to-month lease while the party we sub-lease from negotiates
more permanent terms with the new owners. We have contracted with North American Warehousing
Company in Bedford Park, Illinois to provide us with fulfillment services for our products, i.e.
warehousing and distribution. Our telephone number is (727) 576-1600, our facsimile number is
(727) 576-1611 and our website address is www.veridien.com. We currently lease a postage meter and copier. 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. 14




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##### Table of Contents



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. 1,917,134VIRASCRUB® registered June 16, 1998, Trademark No. 2,166,503VIRAGUARD® 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
 15




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##### Table of Contents



ITEM 3. LEGAL PROCEEDINGS 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. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of shareholders in 2004 
 PART II 
 ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES
OF EQUITY SECURITIES 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 2004 and 2003,
the high and low bid and asked prices were as follows: Quarter Ended
    
    High Bid
    
    
    Low BidDecember 31, 2004
    
    $
    .065
    
    
    
    .045September 30, 2004
    
    
    .108
    
    
    
    .045June 30, 2004
    
    
    .09
    
    
    
    .051March 31, 2004
    
    
    .09
    
    
    
    .06December 31, 2003
    
    $
    .095
    
    
    $
    .057September 30, 2003
    
    
    .095
    
    
    
    .05June 30, 2003
    
    
    .11
    
    
    
    .027March 31, 2003
    
    
    .043
    
    
    
    .03
 On March 11, 2005 the closing prices of the Companys Common Stock were $0.052 bid and $0.055
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 5,589 (which includes an estimated 5,000 shareholders whose holdings are in street
name). 16




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##### Table of Contents



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 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. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS On June 11, 2002 the Company filed a Form S-8 Registration Statement with the Securities and
Exchange Commission. The Form S-8 proposed the issuance of up to 10,000,000 shares of the
Companys common stock pursuant to the then recently adopted Employees & Consultants Compensation
and Stock Option Plan (see Exhibit 10.34). These shares have not all been allocated. This
compensation plan was approved by the Board of Directors but has not been put forth to the stockholders for their approval. At December 31, 2004 a total of 5,645,839 common shares had been issued to employees and
consultants under this plan. In addition 2,000,000 stock options have been issued under this plan
as follows: 17




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##### Table of Contents



Number of
    
    Weightedsecurities to be
    
    average
    
    Number of securitiesissued upon
    
    exercise price
    
    remaining available forexercise of
    
    of outstanding
    
    future issuance under 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
    
    $0.06
    
    2,354,161Total
    
    2,000,000
    
    
    
    2,354,161
 The plan was designed to (i) compensate employees and consultants in lieu of cash and (ii)
incentivize and compensate employees and consultants with stock options. The material features of
the plan include the ability of the company, for a five year period commencing March 26, 2002, to
issue shares and/or stock options in any combination thereof to a combined maximum of 10,000,000
common shares. No person or entity shall be issued more than $100,000 worth of stock and no more
than $100,000 worth of options per year. Any options granted will have a 5 year expiration from
their date of issuance and will have an exercise price of not less than 100% of the fair market
value of the Companys stock at the time the options are granted. Sales of Unregistered Securities During Fiscal Year 2004 The following issuances of equity securities (including debt securities immediately convertible
into equity securities) without registration under the Securities Act of 1933 occurred during the
fourth quarter of 2004 (all other issuances during fiscal 2004 have been previously reported in the
Companys Quarterly Reports on Form 10-QSB): Common Stock On December 22, 2003 the Registrant issued 3,225,806 shares of its common stock to a supplier in
exchange for an Inventory deposit credit of $250,000. This issuance was considered exempt from
registration by reason of Section 4(2) of the Securities Act. Issuance of Convertible Debentures On December 10, 2004 the Registrant issued a convertible debenture for cash proceeds of $50,000 to
a third party, unrelated, accredited investor. This debenture carries an interest rate of 8% and
has a term of 3 years. This instrument is immediately convertible into common shares, at the
option of the holder, at the conversion rate of $ 0.051. This issuance was considered exempt from
registration by reason of Section 4(2) of the Securities Act. 18




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##### Table of Contents



Common Stock Warrants On December 31, 2004 the Registrant issued 1,000,000 warrants for the purchase of Common Stock with
an exercise price of $0.07 and an expiry of 24 months, to a consultant providing marketing and
management services to the Company. These warrants were issued in fulfillment of part of the
compensation portion of a consulting agreement with this party. This issuance was considered exempt
from registration by reason of Section 4(2) of the Securities Act 19




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##### Table of Contents



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, 2004 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 Life Sciences and Anti-Infectives 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, INSTRUMENT PRESOAK, and SUN
PROTECTANT PRODUCTS. The flagship product, Viraguard® Hospital Disinfectant/Cleaner and Instrument Presoak is a skin
friendly, patented, U.S.- EPA and Health Canada registered, surface disinfectant. Viraguard®
Antiseptic Hand Gel, Viraguard® Antiseptic Hand Spray and Viraguard® Antiseptic Hand Wipes are
U.S.- FDA and Health Canada drug listed products utilizing
Veridiens patented Virahol(R)
formulation. Product line extensions have included sales of sunscreen impregnated towelettes being marketed
under the SunSwipeÔ label. The Company has incurred losses since its incorporation. At December 31, 2004, the Company had an
accumulated deficit of $35,901,988. The Company has financed its ongoing business activities
through a combination of sales, equity financing, sale of marketable securities and debt. 20




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##### Table of Contents



Results of Operations Fiscal 2004 Compared With Fiscal 2003 Year Ended December 31, 2004 vs. Year Ended December 31, 2003 Year Ended
    
    
    Percentage ofDecember 31
    
    
    net revenue2004
    
    
    2003
    
    
    2004
    
    
    2003Revenues
    
    $
    1,606,154
    
    
    $
    1,661,911
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    675,927
    
    
    
    948,215
    
    
    
    42
    %
    
    
    57
    %Gross Profit
    
    
    930,227
    
    
    
    713,696
    
    
    
    58
    %
    
    
    43
    %Operating ExpensesGeneral & Administrative
    
    
    923,255
    
    
    
    1,238,098
    
    
    
    57
    %
    
    
    74
    %Research & Development
    
    
    163,512
    
    
    
    101,838
    
    
    
    10
    %
    
    
    6
    %Research & Development  VIE
    
    
    325,000
    
    
    
    -0-
    
    
    
    20
    %
    
    
    0
    %(Loss) from Operations
    
    
    (481,540
    )
    
    
    (626,232
    )
    
    
    (30
    )%
    
    
    (38
    )%Other Income (Expense) Net
    
    
    (276,253
    )
    
    
    (288,642
    )
    
    
    (17
    )%
    
    
    (17
    )%Net (Loss) Before Taxes
    
    
    (757,793
    )
    
    
    (914,874
    )
    
    
    (47
    )%
    
    
    (55
    )%Income Taxes
    
    
    -0-
    
    
    
    -0-
    
    
    
    0
    %
    
    
    0
    %Net (Loss)
    
    
    (757,793
    )
    
    
    (914,874
    )
    
    
    (47
    )%
    
    
    (55
    )%
 Consolidated gross revenues for 2004 decreased by $22,258, or 1%, to $1,825,825 compared with
$1,848,083 in 2003.  
    Gross revenue from licensing and service fees increased by $456,000 or 100% to $456,000
compared with $-0- in 2003. 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 50% of fair market value. Gross
revenue from product sales decreased in 2004 by $511,757, or 31%, to $1,150,154 compared
with $1,661,911 in 2003. 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 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.
    During 2004, the Company had a Realized Gain on Investments of $216,173, comprised of (i) sale of 703,369 H-Quotient, Inc. (HQNT) common shares for a net realized gain of
$511,079; (ii) sale of 46,875 common share warrants for a realized gain of $51,094; and
(iii) the write-down of investment in 400,000 common shares of restricted HQNT stock for a
realized loss of $346,000. During 2003, the Company sold 876,000 H-Quotient, Inc. (HQNT)
common shares and realized a net gain of $84,141. 21




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##### Table of Contents




    During 2003, the Company reported some convertible debenture conversions incorrectly.
The Company underreported interest expense by $206,537 and did not report an offsetting
gain from debt extinguishments of $101,700. This adjustment (net $104,837) has been
reflected in the 2003 consolidated financial statement comparatives.
    Interest income for 2004 increased by $1,770, or 535%, to $2,101 compared to $331 in
2003. The increase in interest income is due primarily to an increase in cash on hand.
    Dividend income for 2004 increased by $1,397, or 100%, to $1,397 compared to $-0- in
2003. The dividend income recorded is for 10,741 Healthnostics, Inc. (HNST) common shares
which were received in December 2004 as a dividend. At December 31, 2004 the Company owned
10,741 HNST common shares and recorded them at fair market value. During 2004, the
Company also received 18,001 restricted dividend common shares of H-Quotient, Inc. (HQNT).
At December 31, 2004 the Company owned 418,001 restricted HQNT common shares and recorded
them at an adjusted value of $108,793 which approximates 50% of fair market value. The
Company also owned 301,506 unrestricted HQNT common shares and recorded them at fair market
value at December 31, 2004. Consolidated gross expenses for 2004 decreased by $179,339, or 6%, to $2,583,618 compared with
$2,762,957 in 2003.  
    The cost of revenue for 2004 decreased as a percentage of total revenue to 42% in 2004
from 57% in 2003. The cost of goods sold from product sales for 2004 decreased by
$282,691, or 30%, to $665,524 compared with $948,215 in 2003. The cost of goods ratio as a
percentage of product sales increased to 58% in 2004 compared to 57% in 2003. 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 has also increased pricing on some of their product
line for 2005.
    General, selling, and administrative expenses for 2004 decreased overall by $314,843, or
25%, to $923,255 compared with $1,238,098 in 2003. The decrease in general, selling and
administrative costs was mostly attributable to a decrease in professional - legal,
consulting, and accounting - service expenses for 2004 which decreased by 10% to $201,615
compared with $223,273 in 2003. Legal and consulting fees decreased by 18% while accounting
fees increased by 32%. Additionally, there was a decrease in sales expenses for 2004 by
32% to $369,397 compared with $539,280 in 2003. The decreases in sales expenses were
attributable to utilizing outside sales staff opposed to inside sales staff. Increases in
general, selling and administrative costs were mostly attributable to an increase in
administrative wages for 2004 by 34% to $138,754 compared with $103,828 in 2003. The
increase in administrative wages reflects the increase in permanent staff from temporary
services.
    Research and development expenses for 2004 increased by $61,682, or 61%, to $163,512
compared with $101,830 in 2003. The increase was due primarily to additional research on
the focus of broadening the range of claims we can assert on our existing products and on
testing new products for commercialization.
    Research and development  Variable Interest Entity
(VIE) expenses, arising from our investment in Mycosol, Inc., for 2004 increased by
$325,000, or 100%, to $325,000 compared with $-0- in 2003. In December 2003, the FASB
issued 22




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##### Table of Contents



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 an
unrelated chemical and drug development
company. The Company obtained the rights to acquire 37.5% of the company based on future
purchase of preferred stock. The Company has no common stock equity ownership in the VIE at
December 31, 2004. 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 support to each other. At December 31, 2004, the Company has
advanced $470,000 of loans that are convertible into preferred stock of the VIE and has
purchased $125,000 of preferred stock. These amounts as well as a $100,000 fee paid by the
VIE to the Company for management services have been eliminated in consolidation. The
accounts of the VIE that have been consolidated with the Company at December 31, 2004 are as
follows: Cash
    
    $
    3,000Inventory  raw materials
    
    
    58,000Property and equipment
    
    
    14,000Deposits and other
    
    
    11,000Patents  pending
    
    
    118,000Accrued expenses
    
    
    (34,000
    )Accumulated deficit
    
    
    (70,000
    )100,000Elimination of fee paid by VIE
    
    
    100,000Research and development expenses
    
    
    325,000$
    525,000Veridien accounts eliminated against VIE accounts consolidated:Investment in preferred stock
    
    $
    125,000Notes receivable
    
    
    470,000Elimination of deficit in VIE
    
    
    (70,000
    )$
    525,000
  
    Interest expense for 2004 increased by $59,307, or 15%, to $443,515 compared with
$384,208 in 2003. The increase in interest expense was due primarily to additional
Convertible Debenture holders in 2004 and interest continues to accrue on other various
debts.
    During 2004, the Company recognized a change in the market value of marketable equity
securities of $52,409. At December 31, 2004, the Company owned 301,506 common shares of
H-Quotient, Inc. (HQNT) and 10,741 common shares of Healthnostics, Inc. (HNST) with a fair
market value of $167,225. During 2003, the Company recognized a change in the market value
of marketable equity securities of $90,606. At December 31, 2003, the Company owned
660,300 common shares of H-Quotient, Inc. (HQNT) with a fair market value of $475,416. 23




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##### Table of Contents




    Loss from Operations for 2004 decreased by $144,692, or 23%, to $481,540 compared to
$626,232 in 2003. The decrease in loss from operations is primarily due to an overall
decrease in the general, selling and administrative expenses in 2004. 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, 2004 and
December 31, 2003 we had working capital deficits of approximately $1,329,128 and $2,452,161
respectively. Our independent certified public accountants stated in their report on the 2004 and
2003 consolidated financial statements that due to losses from operations and a working capital
deficit, there is substantial doubt about the Companys ability to continue as a going concern. We
are addressing the going concern issue in virtually every aspect of our operation. We continue to
cut operating expenses and are successfully changing our product mix such that the company is
achieving improved margins. Because of our significant losses incurred since inception, we have
become dependent on (1) loans from officers, directors, and third parties, (2) private placements
of our securities (3) revenue from sales, and (4) liquidation of our marketable securities to fund
operations. These financings and equity placements are included in the following descriptions.  
    During the twelve months ended December 31, 2004 1,856,627
common shares were issued to providers of various services to
the company. Said services amounted to the cash equivalent
of $120,242 and included sales consulting services and legal
services. The average effective price per share was $0.065.
    During the fourth quarter of 2004 3,225,806 restricted
common shares were issued to a supplier in exchange for an
Inventory deposit of $250,000.
    During the fourth quarter 2004 we issued 1 convertible
debenture for cash proceeds of $50,000. This debenture
carries an interest rate of 8%, has a term of 3 years and a
conversion rate of $0.051.
    During the twelve months ended December 31, 2004, 94,627
common shares were issued under the companys S-8 Registration
Statement to an employee under the terms of their employment
contract. The average effective price per share was $0.063.
    During the twelve months ended December 31, 2004 400,000
restricted common shares were issued to 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 2004 the company liquidated a
portion of its marketable securities for a net cashflow of
$754,314.
    During the second quarter of 2004 $471,215 of existing
convertible debenture principal, along with $427,773 of
convertible debenture accrued interest and $1,181,822 of
payable debt was rolled into 2 convertible debentures. These
debentures carry interest rates of 10% and have terms of 3
years. These instruments are immediately convertible into
common shares, at the option of the holder, at conversion
rates of $0.051. One debenture in the principal amount of
$300,000 is held by a person not affiliated or related to the
company and one debenture in the principal amount of
$1,780,811 is held by Dunvegan Mortgage Corporation a company
of which Veridiens President & C.E.O., Mr. Sheldon
Fenton, is
an officer and a director. 24




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##### Table of Contents




    During the first quarter of 2004 the company liquidated a
portion of its marketable securities for a net cashflow of
$244,214.
    During the first quarter of 2004 we issued 2 convertible
debentures for cash proceeds of $330,000. These debentures
carry interest rates of 10%, have terms of 3 years and have
conversion rates of $0.06.
    During the first quarter of 2004 a Convertible Debenture
with a principal balance of $25,000 (accrued interest waived)
was converted into 500,000 shares of common stock.
    During the first quarter of 2004, as allowed under its
agreement, the Company repaid its accounts receivable
factoring debt of $77,614 with the issuance of 1,552,272
common shares. During 2004, accounts receivable increased by $110,355 to $180,678 from $70,323 at December 31,
2003. This increase can be attributed to a number of orders which were received and shipped in the
month of December 2004, including one large order for one of our multi-national customers. During 2004, accounts payable and accrued expenses decreased by $769,901 to $1,303,145 from
$2,073,046 at December 31, 2003. The decrease can mostly be attributed to a reduction in accrued
interest debt by 18% and a reduction of accounts payable debt by 69%. During 2004, inventory increased by 164% to $331,702 compared with $125,500 at December 31, 2003.
The increase is mostly attributable to an increase in raw goods by 647% to $209,431 compared with
$28,035 at December 31, 2003. At December 31, 2004 the Company had $46,436 of raw goods in work in
process for completion of a large order to a multi-national customer and $15,115 of raw goods in
work in process at a manufacturer for completion of three new products to be released in 2005. The
consolidation of the Variable Interest Entity (VIE) resulted in an additional $58,000 of raw goods
for the Company at December 31, 2004. 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, 2005, we have cash of approximately $470,978 and during April and May 2005, we
expect cash flow of $300,000 from operating activities, private placements and possible sale of
marketable securities. This level of liquidity should be sufficient to operate the Company for 180
days. The Company anticipates increasing sales, reduced operating expenses, and additional private
placement funding will contribute to continuous operations of the Company. We anticipate utilizing a portion of our funds to support the working capital requirements of our
anticipated increase in sales. If disruptions occur in third party vendors that supply raw materials to our contract fill
manufacturers, we may experience the inability to have product inventory for sale to our customers.
Such events could have a 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 25




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##### Table of Contents



Veridiens liquid products, another the canister products and the third and fourth the SunSwipe
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. 26




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##### Table of Contents



ITEM 7. FINANCIAL STATEMENTS CARTER, CARTIER, MELBY & GUARINO, C.P.A.s, P.A. LOGOReport of Independent Registered Public Accounting Firm
 To the Board of Directors
Veridien Corporation
Pinellas Park, Florida We have audited the accompanying consolidated balance sheets of Veridien Corporation (a Delaware
corporation) and subsidiaries as of December 31, 2004 and 2003, 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 standards of the Public Accounting Oversight Board
(United States). 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.
The Company has determined that it is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express
no such opinion. An audit also 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, 2004 and 2003, and the results of their operations and their cash flows for the years
then ended in conformity with standards of the Public Accounting Oversight Board (United States). 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 18, 2005 27




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##### Table of Contents



Veridien Corporation
and Subsidiaries Consolidated Balance Sheets December 31, 2004 and 2003 2004
    
    
    2003AssetsCurrent Assets:Cash
    
    $
    126,027
    
    
    $
    101,506Accounts receivable  trade
less allowance for doubtful accounts of
$12,640 and $20,584, respectively
    
    
    180,678
    
    
    
    70,323Inventory
    
    
    331,702
    
    
    
    125,500Due from shareholder
    
    
    
    
    
    
    69,764Marketable equity securities, trading, at fair value
(cost: 2004, $145,769 - 2003, $402,758)
    
    
    167,225
    
    
    
    475,416Prepaid expenses and other current assets
    
    
    67,587
    
    
    
    63,637Total current assets
    
    
    873,219
    
    
    
    906,146Property and equipment:Furniture and fixtures
    
    
    424,898
    
    
    
    409,211424,898
    
    
    
    409,211Less accumulated depreciation
    
    
    397,250
    
    
    
    385,73127,648
    

    
    
    23,480Other Assets:Escrow deposit
    
    
    110,000
    
    
    
    Investment in variable interest entity
    
    
    
    
    
    
    50,000Investment in restricted stock, cost basis
    
    
    108,793
    
    
    
    Patents, less accumulated amortization of
$506,077 and $500,967, respectively
    
    
    176,305
    
    
    
    63,415Security deposits and other assets
    
    
    11,000
    
    
    
    1,625406,098
    
    
    
    115,040$
    1,306,965
    
    
    $
    1,044,666
 See accompanying notes to the consolidated financial statements. 28




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##### Table of Contents



Veridien Corporation
and Subsidiaries Consolidated Balance Sheets - Continued
December 31, 2004 and 2003 2004
    
    
    2003Liabilities and Deficit in Stockholders EquityCurrent Liabilities:Current capital lease obligations
    
    $
    
    
    
    $
    6,022Notes payable
    
    
    289,347
    
    
    
    878,845Convertible debentures due
    
    
    449,000
    
    
    
    304,291Accounts payable
    
    
    275,504
    
    
    
    890,596Accrued compensation
    
    
    8,480
    
    
    
    2,692Accrued interest
    
    
    948,032
    
    
    
    1,156,537Other accrued liabilities
    
    
    71,129
    
    
    
    23,221Customer deposits
    
    
    160,855
    
    
    
    62,064Due to stockholders
    
    
    
    
    
    
    34,039Total current liabilities
    
    
    2,202,347
    
    
    
    3,358,307Long term liabilities:Convertible debentures
    
    
    3,506,973
    
    
    
    1,687,086Total liabilities
    
    
    5,709,320
    
    
    
    5,045,393Deficit in stockholders equity:Undesignated Preferred Stock $.001 par value,
25,000,000 shares authorizedConvertible Redeemable Preferred Stock,
$10 par value; 100,000 authorized, 6,000 issued and
outstanding at December 31, 2004 and 2003
    
    
    60,000
    
    
    
    60,000Series B Preferred Stock, $.001 par value,
245,344 authorized, 174,219 issued
and outstanding at December 31, 2004 and 2003
    
    
    175
    
    
    
    175Common Stock, $.001 par value; 300,000,000 shares
authorized, 214,369,622 and 205,745,290 shares issued
and outstanding at December 31, 2004 and 2003
    
    
    214,370
    
    
    
    205,745Additional paid-in capital
    
    
    31,203,689
    
    
    
    30,856,150Common Stock warrants
    
    
    26,399
    
    
    
    26,399Accumulated deficit
    
    
    (35,901,988
    )
    
    
    (35,144,196
    )(4,397,355
    )
    
    
    (3,995,727
    )Stock subscriptions receivable
    
    
    (5,000
    )
    
    
    (5,000
    )Total stockholders deficit
    
    
    (4,402,355
    )
    
    
    (4,000,727
    )$
    1,306,965
    
    
    $
    1,044,666
 See accompanying notes to the consolidated financial statements. 29




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##### Table of Contents



Veridien Corporation
and Subsidiaries Consolidated Statements of Operations Years ended December 31, 2004 and 2003 2004
    
    

    2003Revenues
    
    $
    1,606,154
    
    
    $
    1,661,911Operating costs and expenses:Cost of sales
    
    
    675,927
    
    
    
    948,215General and administrative
    
    
    923,255
    
    
    
    1,238,098Research and development
    
    
    163,512
    
    
    
    101,830Research and development  VIE
    
    
    325,000
    
    
    
    2,087,694
    
    
    
    2,288,143Loss from operations
    
    
    (481,540
    )
    
    
    (626,232
    )Other income (expense):Interest expense
    
    
    (443,515
    )
    
    
    (384,208
    )Change in market value of marketable securities
    
    
    (52,409
    )
    
    
    (90,606
    )Realized gain (loss) on investments
    
    
    216,173
    
    
    
    84,141Gain on extinquishment of debt
    
    
    
    
    
    
    101,700Interest income
    
    
    2,101
    
    
    
    331Dividend income
    
    
    1,397
    
    
    
    (276,253
    )
    
    
    (288,642
    )Net loss before income tax
    
    
    (757,793
    )
    
    
    (914,874
    )Income tax
    
    
    
    
    
    
    Net loss
    
    $
    (757,793
    )
    
    $
    (914,874
    )Net loss per common share
    
    $
    (.0036
    )
    
    $
    (.0048
    )Net loss per common share before restatement
    
    $
    (.0036
    )
    
    $
    (.0038
    )Weighted average shares outstanding
    
    
    209,484,117
    
    
    
    191,916,724
 See accompanying notes to the consolidated financial statements. 30




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##### Table of Contents



Veridien Corporation
and Subsidiaries CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT IN STOCKHOLDERS EQUITY Years ended December 31, 2004 and 2003 ConvertibleRedeemable
    
    
    Series B
    
    
    Number
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    StockholdersPreferred
    
    
    Preferred
    
    
    Common
    
    
    Common
    
    
    Paid-in
    
    
    Stock
    
    
    Accumulated
    
    
    Subscriptions
    
    
    EquityStock
    
    
    Stock
    
    
    Shares
    
    
    Stock
    
    
    Capital
    
    
    Warrants
    
    
    Deficit
    
    
    Receivable
    
    
    (Deficit)Balances at January 1, 2003
    
    
    60,000
    
    
    
    175
    
    
    
    183,274,887
    
    
    $
    183,275
    
    
    $
    29,842,331
    
    
    $
    26,399
    
    
    $
    (34,229,322
    )
    
    $
    (5,000
    )
    
    $
    (4,122,142
    )Conversion of convertible debentures
    
    
    
    
    
    
    
    
    
    
    15,660,763
    
    
    
    15,661
    
    
    
    684,797
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700,458Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    1,409,640
    
    
    
    1,409
    
    
    
    50,385
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,794Partial conversion of
loan & security agreements
    
    
    
    
    
    
    
    
    
    
    400,000
    
    
    
    400
    
    
    
    5,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,200Issuance of stock for investment
    
    
    
    
    
    
    
    
    
    
    5,000,000
    
    
    
    5,000
    
    
    
    95,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (737,037
    )
    
    
    
    
    
    
    (737,037
    )Balances at December 31, 2003 as
previously reported
    
    
    60,000
    
    
    
    175
    
    
    
    205,745,290
    
    
    $
    205,745
    
    
    $
    30,678,313
    
    
    $
    26,399
    
    
    $
    (34,966,359
    )
    
    $
    (5,000
    )
    
    $
    (4,000,727
    )Correction of error:Conversion of convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,837
    
    
    
    
    
    
    
    (104,837
    )Adjustment to realized gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    73,000
    
    
    
    
    
    
    
    (73,000
    )Balances at December 31, 2003 as restated
    
    
    60,000
    
    
    
    175
    
    
    
    205,745,290
    
    
    
    205,745
    
    
    
    30,856,150
    
    
    
    26,399
    
    
    
    (35,144,196
    )
    
    
    (5,000
    )
    
    
    (4,000,727
    )Conversion of convertible debentures
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    500
    
    
    
    24,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    1,000
    
    
    
    29,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Issuance of stock for debt repayment
    
    
    
    
    
    
    
    
    
    
    1,552,272
    
    
    
    1,552
    
    
    
    76,062
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,614Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    5,572,060
    
    
    
    5,573
    
    
    
    217,977
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223,550Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (757,793
    )
    
    
    
    
    
    
    (757,793
    )Rounding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Balances at December 31, 2004
    
    
    60,000
    
    
    
    175
    
    
    
    214,369,622
    
    
    $
    214,370
    
    
    $
    31,203,689
    
    
    $
    26,399
    
    
    $
    (35,901,988
    )
    
    $
    (5,000
    )
    
    $
    (4,402,355
    )
 See accompanying notes to the consolidated financial statements 31




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##### Table of Contents



Veridien Corporation
and Subsidiaries Consolidated Statements of Cash Flows Years ended December 31, 2004 and 2003 2004
    
    
    2003Cash flows from operating activitiesNet (loss)
    
    $
    (757,793
    )
    
    $
    (914,874
    )Adjustments to reconcile net (loss) to net cash
used by operating activities:Depreciation and amortization
    
    
    16,629
    
    
    
    12,690Stock issuances, warrants and options for services
    
    
    223,550
    
    
    
    51,794Other, not affecting cash
    
    
    (463,029
    )
    
    
    (323,537
    )Realized (gain) losses
    
    
    (216,173
    )
    
    
    (157,141
    )Net unrealized (gain) losses on marketable securities
    
    
    52,409
    
    
    
    90,606Proceeds from sale of marketable securities
    
    
    998,528
    
    
    
    546,744Change in:Accounts receivable
    
    
    (110,355
    )
    
    
    27,882Inventories
    
    
    (206,202
    )
    
    
    101,188Prepaid and other current assets
    
    
    (3,950
    )
    
    
    (1,084
    )Other assets
    
    
    (9,375
    )
    
    
    Accounts payable and accrued expenses
    
    
    370,494
    
    
    
    330,713Customer deposits
    
    
    
    
    
    
    20,658Due to stockholders
    
    
    
    
    
    
    (67,701
    )Escrow deposit
    
    
    (110,000
    )
    
    
    Total adjustments
    
    
    542,526
    
    
    
    632,812Net cash (used) by operating activities
    
    
    (215,267
    )
    
    
    (282,062
    )Cash flow from investing activities:Purchase of investment  preferred stock
    
    
    
    
    
    
    (50,000
    )Purchases of property and equipment
    
    
    (15,687
    )
    
    
    Patent development
    
    
    (118,000
    )
    
    
    (50,000
    )Net cash (used) by investing activities
    
    
    (133,687
    )
    
    
    (100,000
    )Cash flow from financing activities:Proceeds from convertible debentures
    
    
    380,000
    
    
    
    291,775Net payment on capital leases
    
    
    (6,022
    )
    
    
    (5,150
    )Net proceeds from borrowings
    
    
    (503
    )
    
    
    107,895Net cash provided by financing activities
    
    
    373,475
    
    
    
    394,520Net increase (decrease) in cash and equivalents
    
    
    24,521
    
    
    
    12,458Cash and equivalents, beginning of year
    
    
    101,506
    
    
    
    89,048Cash and equivalents, end of year
    
    $
    126,027
    
    
    $
    101,506
 See accompanying notes to the consolidated financial statements. 32




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##### Table of Contents



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 re-domesticated 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 (VIRAHOLâ/VIRAGUARD®), 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®/VIRAGUARD® formula is now
marketed in liquid form, in an antiseptic hand gel, in single use towelettes and in 60-160 count
towelette canisters for both hand and hard surface applications. The Company has recently expanded
its product offerings to include unique Healthy Lifestyle products including sun protection
products. In October 1995, the Company entered into a 10% Convertible Senior Secured Term Loan agreement to
finance marketing efforts for its line of products, to fund operating cash flow deficiencies, and
to continue its research and development activities. The original agreement required the Company to issue to the lender warrants, in sufficient
quantity, that at all times the loan agreement is in force the lender could obtain 51% of all
classes of outstanding stock for a $2,500,000 exercise price. This provision was waived and the
number of warrants fixed effective January 1, 2001. During 2004 and 2003, $-0- and $6,200 of the
lenders debt were converted into -0- and 400,000 common shares respectively, and -0- and -0-
Series B preferred shares respectively. 2. Principles of Consolidation The accompanying financial statements include the accounts of the company and its subsidiaries,
each of which is wholly owned. Our Consolidated Financial Statements also include the accounts of
any Variable Interest Entities (VIEs) where we are deemed the primary beneficiary, regardless of
our ownership percentage. All significant intercompany balances and transactions with consolidated
subsidiaries are 33




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##### Table of Contents



NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED eliminated in our consolidated financial statements. Where our ownership interest is
less than 100 percent, the minority ownership interests are reported in our Consolidated Statements
of Financial Position as a liability. 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. Fair Value of Financial Instruments The carrying amount of Cash and Cash Equivalents, Receivables and Accounts Payable approximate fair
value due to the short-term maturities of these financial instruments. The fair value of the
Companys investment in marketable securities is discussed under the caption Marketable Equity 
Securities, Trading in this Note 8. The fair value of the Companys debt is discussed in Notes F
& G. 5. Cash Equivalents The Company considers all highly liquid instruments purchased with maturities of three months or
less to be cash equivalents. The Companys Cash and Cash Equivalents are carried at fair market
value and consist primarily of cash. 6. 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. 7. 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, 2004, raw
materials and finished goods amounted to approximately $209,431 and $122,271, respectively. At
December 31, 2003, raw materials and finished goods amounted to approximately $28,035 and $97,465,
respectively. 8. Marketable Equity  Securities, Trading Marketable Equity  Securities, Trading the Companys investments are comprised of common stock,
and are carried at estimated fair value. The changes in the fair value unrealized gains and
losses, are included in the statement of operations. 9. Property and Equipment Property and equipment are stated at cost. Depreciation on property and equipment is calculated on
the 34




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NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED 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. 10. 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. 11. Loan Costs Loan costs are amortized by the straight-line method over the term of the respective loans. 12. Investment in Preferred Stock  Cost Basis During the fourth quarter of 2003, the Company invested $50,000 in preferred stock of an unrelated
entity. 13. Revenue Recognition Revenue is recognized on sales of products when title has transferred and services when performed. 14. Stock-Based Compensation Compensation cost is measured on the date of grant only if the current market price of the
underlying stock exceeds the exercise price. The Company is aware of the requirement and provides
pro forma net income and pro forma net earnings per share disclosures for employee stock option
grants made in 1995 and subsequent years as if the fair value based method had been applied in
accordance with SFAS No. 123, Accounting for Stock Based Compensation. The Company believes that this information is insignificant due to the fact that its effect would
be anti-dilutive due to continuing losses the Company is experiencing. 15. Asset Impairment The Company is required to test its other assets and intangibles with indefinate useful lives for
impairment on a periodic basis, which could have an adverse effect on the Companys consolidated
financial statements if these assets are deemed impaired. 16. 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 35




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##### Table of Contents



NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  CONTINUED 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. 17. Reclassification Certain reclassifications have been made to the 2003 financial statements to be in conformity with
the 2004 presentation. 18. 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 209,484,117 and 191,916,724 for the years
ended December 31, 2004 and 2003, 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 $36 million, resulting primarily
from research and development, sales and marketing, and administrative expenses being substantially
in excess of sales revenue. The Company has a deficit in stockholders equity of $4.4 million, a
deficit in working capital of $1.3 million and is experiencing a continuing cash flow deficiency. For the year ended December 31, 2004, the Companys operating activities resulted in cash outflows
of $215,267. In addition, the Company used $118,000 for patent development and made a $15,687
addition to property and equipment. In order to fund these cash outflows, the Company received net
proceeds of $380,000 from the sale of convertible debentures and received proceeds of $998,528 from
the sale of some of the Companys equity investments. These proceeds, together with the cash balance at the beginning of the year, provided the Companys
cash needs, resulting in a net cash increase of $24,521 for the year ended December 31, 2004. The Company plans to continue to liquidate its marketable securities and pursue additional equity
and debt financing while managing cash flow in an effort to provide funds to increase revenues to
support operations, research and development activities. Management anticipates cash flow from
product sales and/or strategic equity financing will meet and exceed cash requirements in the Fall
of 2005. 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 36




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##### Table of Contents



NOTE B  REALIZATION
OF ASSETS - CONTINUED 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  CONSOLIDATION OF VARIABLE INTEREST ENTITIES 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 an
unrelated drug development company. The Company obtained the rights to acquire 37.5% of the
company based on future purchase of preferred stock. The Company has no common stock equity
ownership in the VIE at December 31, 2004. 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 support to each other. At December 31, 2004, the Company has advanced $470,000 of loans that are convertible into
preferred stock of the VIE and has purchased $125,000 of preferred stock. These amounts as well as
a $100,000 fee paid by the VIE to the Company for management services have been eliminated in
consolidation. The accounts of the VIE that have consolidated with Veridien and subsidiaries at December 31, 2004
are as follows: Cash
    
    $
    3,000Inventory  raw materials
    
    
    58,000Property and equipment
    
    
    14,000Deposits and other
    
    
    11,000Patents  pending
    
    
    118,000Accrued expenses
    
    
    (34,000
    )Accumulated deficit
    
    
    (70,000
    )100,000Elimination of fee paid by VIE
    
    
    100,000Research and development expenses
    
    
    325,000$
    525,000
 37




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##### Table of Contents



NOTE C 
CONSOLIDATION OF VARIABLE INTEREST ENTITIES - CONTINUED Veridien accounts eliminated against VIE accounts consolidated: Investment in preferred stock
    
    $
    125,000Notes receivable
    
    
    470,000Elimination of deficit in VIE
    
    
    (70,000
    )$
    525,000
 NOTE D  MARKETABLE EQUITY SECURITIES, TRADING The Company owned 312,247 and 660,300 shares of marketable equity securities with a fair value of
$167,225 and $475,416 at December 31, 2004 and 2003, respectively. During 2004, the Company sold
703,369 shares and realized a gain of $511,079. During 2003, the Company sold 876,000 shares and
realized a net gain of $84,141. On December 27, 2004, the Company exchanged warrants in the VIE (See Note C) for accrued interest
owed to an unrelated person. This transaction resulted in a realized gain of $51,094. NOTE E  INVESTMENT IN RESTRICTED STOCK At December 31, 2004, the Company incurred a realized loss of $346,000 due to a permanent writedown
of its investment in the restricted shares of H-Quotient, Inc. At December 31, 2004, the Company
owns 418,001 shares of restricted common stock with an adjusted value of $108,793 which
approximates 50% of fair value. 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 2004 and 2003, the holder converted $-0- and $6,200 of debt into
-0- and 400,000 common shares and 0- 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 with the entire principal
balance due January 10, 2006. As of December 31, 2004, the remaining principal balance outstanding
was $243,342, and $210,800 of interest has accrued under the agreement. During 2003, the Company received a short term loan in the amount of $75,000. This loan was due on
demand with a stated interest rate of 10% per annum and there remained $75,000 outstanding at
December 31, 2003. At December 31, 2003, the Company owed $472,326 as a result of the conversion of an account
payable. The note carries interest at 10% per annum and is due on demand. This note was converted
into a convertible debenture during 2004. 38




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##### Table of Contents



NOTE G  CONVERTIBLE DEBENTURES During 2004 and 2003, the Company received $380,000 and $291,775, respectively of proceeds from the
sale of convertible debentures. Interest is accrued at a rate of 8 - 10% per annum, compounded in
full, with various maturities from January 2005 to December 2007. 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. Maturities of convertible debentures for the next three years are as follows: 2005
    
    $
    449,0002006
    
    $
    1,046,1622007
    
    $
    2,460,811
 NOTE H  COMMITMENTS AND CONTINGENCIES The Company from time to time is involved in lawsuits and actions by third parties arising in the
ordinary course of business. With respect to these matters, management believes that it has
adequate legal defenses that can be asserted. The Company is not aware of any additional
litigation, claims or assessments that were pending that could have a material adverse effect on
the Companys business, financial condition and results of operations. During 2004 and 2003, the Company leased office and warehouse facilities for $1,625 per month under
a lease that expired December 31, 2004. The building was sold in December 2004 and the Company is
currently on a month-to-month lease at the previous rates while the party they sublease from
negotiates more permanent terms with the new owners. Rent expense was approximately $19,093 and
$19,500 for 2004 and 2003, respectively. NOTE I  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, 2004, $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 2004 or 2003. At December 31, 2004, preferred
stock dividends in arrears totaled approximately $60,000. 39




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##### Table of Contents



NOTE J  SERIES B CUMULATIVE PREFERRED STOCK The Series B Cumulative Preferred Stock was created on December 31, 1997, as a mechanism of
permitting the conversion of part of the indebtedness under the Loan and Security Agreement,
without sacrificing the intent of the original Loan and Security Agreement warrants. The Series B
Cumulative Preferred Stock has a par value of $.001 per share and an initial stated capital of $10
per share, which is subject to adjustment. This Series is senior to the Common Stock and is senior
to all other classes and series except that it is junior to the Convertible Redeemable Preferred
Stock (Note I) with respect to the payment of dividends. Each share has that number of votes equal
to the number of share of Common Stock into which it is convertible on the record date. Subject to
adjustment in the event of certain future Common Stock or convertible security issuances, each
share is convertible into 20.04010695 shares of Common Stock. These shares are entitled to receive
an annual dividend equal to the greater of 10% of the stated value and the actual dividend per
share of common stock declared by the Companys Board of Directors times the number shares of
Common stock into which each share of Series B is convertible on the dividend record date. The
dividend is cumulative, whether or not earned and, to the extent not paid on a quarterly dividend
payment date is added to the stated value. NOTE K  STOCK WARRANTS During 2004, 1,000,000 warrants issued under the terms of a consulting contract were exercised at
the price of $0.03 for proceeds of $30,000 to the Company. In addition, during 2004, 1,000,000
warrants were issued under the terms of a consulting contract at an exercise price of $0.07 and
250,000 warrants expired. During 2003, 500,000 warrants were issued under the terms of an employment contact at an exercise
price of $.08 and 1,000,000 warrants were issued under the terms of a consulting contract at an
exercise price of $.05. In addition, during 2003, 5,604,539 warrants expired. As described in Note I, 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, 2003, the lender(s) had converted $2,256,658 of the debt
and the lenders warrants were exercised into 64,514,388 common shares and 213,590 Series B
preferred shares (convertible into 4,280,350 common shares) at a combined cost of equivalent to
$0.033 per common share. 40




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##### Table of Contents



NOTE K  STOCK WARRANTS  CONTINUED The Company has no formal plans with regards to the issuance of stock warrants. Periodically,
the Company may issue warrants to an employee or vendor. The warrants are typically issued with an
exercise price equal to fair value at issuance and are typically vested immediately. Warrants issued and exercised are summarized as follows: ExercisePriceCommon Stock
    
    Warrants
    
    
    RangeOutstanding at January 1, 2003
    
    
    22,044,546
    
    
    
    .001  -  .20Granted
    
    
    1,500,000
    
    
    
    .05  -  .08Expired
    
    
    (5,604,539
    )
    
    
    .08  -  .20Loan & Surety
Agreement Conversion
    
    
    (400,000
    )
    
    
    .016Outstanding at December 31, 2003
    
    
    17,540,007
    
    
    
    .001  -  .20Granted
    
    
    1,000,000
    
    
    
    .07Expired
    
    
    (250,000
    )
    
    
    .20Exercised
    
    
    (1,000,000
    )
    
    
    .03December 31, 2004
    
    
    17,290,007
    
    
    
    .001  -  .07
 Effective December 31, 1997, the Board of Directors created the Series B Cumulative Preferred Stock
(as discussed in Note J) 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 January 10, 2006 and have
a $10 exercise price. During 2004 and 2003, none of these warrants were exercised by the holder.
At December 31, 2004, 27,451 of these warrants are still outstanding. Preferred warrants issued and exercised are summarized as follows: Equivalent #Common SharesPreferred
    
    
    Preferred
    
    
    on PreferredShare
    
    
    Exercise
    
    
    ShareWarrants
    
    
    Price
    
    
    ConversionOutstanding at December 31, 2003
    
    
    27,451
    
    
    
    
    
    
    
    550,121Outstanding at December 31, 2004
    
    
    27,451
    
    
    
    
    
    
    
    550,121Series B
    
    
    27,451
    
    
    
    
    
    
    
    550,121
 41




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##### Table of Contents



NOTE L  INCOME TAXES There is no income tax provision for the years ended December 31, 2004 and 2003 due to net
operating losses for which no benefit is currently available. The Company has net operating loss
carryforwards of approximately $22,400,000 at December 31, 2004, available to offset future taxable
income from 2005 through 2025. 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 $22,407,000 remaining net
operating loss carry forwards. A reconciliation of income tax expense at the federal statutory rate of 35% to actual tax expense
is as follows:  Years ended December 31,
    
    2004
    
    
    2003Income taxes (benefit) at
federal statutory rates
    
    $
    (263,000
    )
    
    $
    (320,200
    )Losses in VIE not included
in consolidated return
    
    
    148,800
    
    
    
    Increase in valuation allowance
    
    
    114,200
    
    
    
    320,200Other
    
    
    
    
    
    
    Income tax expense
    
    $
    
    
    
    $
    
 The tax effects of temporary differences that give rise to significant portions of the deferred tax
assets as of December 31, 2004 and 2003 are as follows: 2004
    
    
    2003Deferred tax assetsNet operating loss carryforwards
    
    $
    7,840,100
    
    
    $
    7,847,000Permanent writedown of investment
not recognized for tax
    
    
    121,100
    
    
    
    Deferred tax assets
    
    
    7,961,200
    
    
    
    7,847,000Less valuation allowance
    
    
    (7,961,200
    )
    
    
    (7,847,000
    )Deferred tax assets, net of
valuation allowance
    
    $
    
    
    
    $
    
 42




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##### Table of Contents



NOTE M  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest amounted to $562 and $1,309 for 2004 and 2003, respectively. During 2004, the Company issued 500,000 common shares in conversion of convertible securities in
the amount of $25,000; 1,000,000 common shares for the exercise of warrants with cash proceeds of
$30,000; 3,225,806 to one of the Companys contract manufacturers for a deposit of $80,645 which
can be used for future inventory purchases; 1,552,272 common shares to extinguish debt of $77,614;
and 2,351,254 common shares in exchange for services of $143,295. The Company issued $2,080,811 of
convertible debentures (Note G) in exchange for $472,387 of existing notes payable, $549,714 of
accounts payable, $587,495 of accrued interest and $471,215 of existing convertible debentures. During 2003, the Company issued 14,101,323 common shares in conversion of convertible securities in
the amount of $630,709; 1,559,440 common shares in exchange for interest of $69,749; 5,000,000
common shares in exchange for marketable securities of $100,000 (which were subsequently sold for
net proceeds of approximately $144,142); and 1,349,640 common shares in exchange for services of
$51,794. During 2003, the Company received 1 million shares of marketable securities in exchange for
$581,322 of product sales. (See Notes D and N) During 2004, the Company received 400,000 restricted shares of H. Quotient, Inc. in exchange for
$456,000 of licensing and service fees provided. NOTE N  RELATED PARTY TRANSACTIONS 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 2004 and 2003, the Company utilized the services of a management company which has as its
senior director and officer the individual who serves as the Companys President/CEO and a director
to assist with administrative and organizational functions of the Company. The Company incurred
expenses of $150,122 and $122,770 in 2004 and 2003, respectively for professional services and
related costs. At December 31, 2004, these fees remain unpaid in the amount of $31,573 and are
included in accounts payable. During the fourth quarter 2003, a company which has as its senior officer and director the
individual who serves as the Companys President /CEO and a director, advanced a short term loan in
the amount of $75,000 to the Company. This loan with interest accrued at 10% was repaid during the
first quarter of 2004. During 2004, the Company utilized the consulting services of the Chairman of the Veridien Board of
Directors to assist with corporate and sales functions. Compensation in cash of $30,000 and
400,000 common shares were paid. 43




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##### Table of Contents



NOTE O  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 2004, the Company recorded sales from six customers which comprise 73% of total sales and
range from 2% to 40 % each. During 2003 the Company recorded sales from eight customers which comprise 75% of total sales and
range from 2% to 35% each. Thirty-five percent of sales were exchanged for marketable securities
(See Note D). NOTE P  PRIOR PERIOD ADJUSTMENT In 2003, the Company reported some convertible debenture conversions in error. The Company
underreported interest expense by $206,537 and did not report a gain from debt extinguishment of
$101,700. In 2003, the Company overstated a realized gain on sale of marketable securities by $73,000 which
should have been credited to additional paid in capital. These corrections have been reflected in the 2003 consolidated financial statements and added an
additional loss of $177,837 to the 2003 net loss. NOTE Q  SUBSEQUENT EVENTS On February 28, 2005, the
Company amended its previously reported agreement with Mycosol, Inc. and
Mycosols three founding shareholders (see Form 10-QSB June 30, 2004) by increasing the maximum
Series A Preferred Stock subscription amount available to the Company from $1,500,000 to
$1,875,000. On February 28, 2005, the Company exercised its option with Mycosol, Inc. and their three founding
shareholders to exchange 6,000,000 shares of its common stock (issued to the three founding
shareholders of Mycosol) for 687,500 shares of Mycosol common stock. On March 7, 2005, an unrelated third party, participating with the Company as permitted under the
Companys agreement with Mycosol, Inc. and their three founding shareholders acquired 458,333
shares of the common stock of Mycosol, Inc. from the Company. The Company agreed with the
unrelated third party to permit such third person at their option to (i) exchange until December
31, 2005 their 458,333 common shares of Mycosol, Inc. for 9,803,992 common shares of the Company;
or if not so exchanged (ii) commencing January 1, 2007 for a period of 3 months after notice by the
Company, to Put to the Company 229,167 common shares of Mycosol, Inc. for $250,000 payable in cash
or the Companys common stock at the Companys option. On March 8, 2005, the Company acquired
from Mycosol a further 250,000 shares of its Series A
Preferred Stock for $250,000. 44




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##### Table of Contents



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
have audited our financial statements for the previous seven (7) fiscal years ended December 31,
1997 to 2003, have audited our financial statements for the current fiscal year ended December 31,
2004. 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. 
 ITEM 8A. CONTROLS AND PROCEDURES Pursuant to rules adopted by the SEC as directed by Section 302 of the Sarbanes-Oxley Act of
2002, the Company has performed an evaluation of its disclosure controls and procedures (as defined
by Exchange Act rule 13a-14) as of the end of the period covered by this report. Based on this
evaluation, the Companys Chief Executive Officer and Acting Chief Financial Officer has concluded
that these procedures are effective in ensuring that information required to be disclosed by the
Company is recorded, processed, summarized, and reported within the time periods specified in the
SECs rules and forms. In addition, there have not been any significant changes in internal
controls or other factors that could significantly affect internal controls subsequent to the date
of the Companys most recent evaluation. 45




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##### Table of Contents



PART III 
 ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors and Executive Officers. The position(s) held by each of our executive
officers and Directors as of March 12, 2004 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. Name
    
    Age
    
    PositionRussell D. Van Zandt
    
    64
    
    Chairman of the Board of DirectorsRene A. Gareau
    
    63
    
    Vice Chairman of the Board of Directors/Corporate SecretarySheldon C. Fenton
    
    53
    
    President and CEO/DirectorAlfred A. Ritter
    
    61
    
    DirectorRichard Klein
    
    60
    
    Director
 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 retired as President and CEO of Ela Medical in Plymouth, MN as of May 2003. Ela
Medical is a manufacturer and marketer of pacemakers and implantable defibrillators. He is now a
consultant to Veridien and ELA, as well as other companies. 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
responsibilities for overseeing all retail and mortgage banking operations in Canada. From 1974 to
1981 he was Senior Vice 46




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##### Table of Contents



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 graduated with honors with a Bachelor of Science degree from the University of Toronto
in 1974 and was graduated from the Faculty of Law with an L.L.B. degree from the University of
Western Ontario, Canada. ALFRED A. RITTER was first named to the Board of Directors on March 26, 1993. Mr. Ritter has been
the co-owner and director of EXPORATLAS, Lisbon, Portugal since 1981. The company is an
import/export firm involved in the paper and pulp industry. Since 1996, Mr. Ritter has been the
owner and director of TEOTONIO INVESTMENTS, a commercial real estate and project development
company based in Vaduz, Liechtenstein. Additionally, since 1996, Mr. Ritter has been co-owner and
director of EUROVENTOS, which is developing alternative energy sources in Portugal, France, Germany
and Austria. 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. RICHARD KLEIN was named to the Board of Directors on June 23, 2004. Mr. Klein is a Co-Founder,
Chairman, and Chief Executive Officer of Mycosol, Inc., an early-stage chemical and pharmaceutical
development company. He is a 28-year veteran of the healthcare industry, having served in a
general management capacity at both large and small (early-stage) companies. From July 1998
through the sale of his company in December 2002, Mr. Klein was President, CEO, and a member of the
Board of Directors of ArgoMed, Inc., a company whose thermotherapy technology was used to treat
diseases of the prostate. Between January 1993 and June 1998, Mr. Klein held several executive
positions  President, Chief Operating Officer, Executive Vice President, and Director  of
Angiosonics, Inc., a therapeutic ultrasound company. Previously, Mr. Klein was Vice President and
General Manager of the Edward Weck Company, a surgical instrument and implant subsidiary of
Bristol-Myers Squibb. Mr. Klein also served as an executive with C.R. Bard, Inc., for 14 years,
ten as President of the Bard Medsystems Division, a recognized leader in drug delivery systems.
During his career, Mr. Klein has led some significant product development efforts and market
introductions, including: balloon angioplasty, patient controlled analgesia (PCA), the Mini-Infuser
and Smart Pump delivery systems, minimally invasive surgery (laparoscopy), endometrial and
prostatic ablation by thermotherapy, and ultrasound thrombus ablation. He holds both a BS and an
MS in Engineering from Northeastern University, an MBA from Babson College, and was the subject of
a Harvard Case Study on intrapreneurs  i.e., entrepreneurs who work in large companies  which was
featured in a 1988 business 47




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##### Table of Contents



text, General Managers In Action, by Francis Joseph Agular. He also holds numerous patents, issued
or pending, in medical devices. AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT The Companys Audit Committee is comprised of two of its Directors, Mr. Rene Gareau (Chairman of
the Audit Committee) and Mr. Alfred Ritter. The Company does not have an Audit Committee
Financial Expert as a member of its audit committee. The Company does not have available any
person with the requisite background and experience, nor has the Company been able to attract
anyone to its Board with the requisite background. Compliance with Section 16(A) of The Exchange Act All of our officers, directors and beneficial owners were in compliance with Section 16(A) during
fiscal year 2004. 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 including: JEFFREY L. SELPH, B.S., Veridiens Chief Scientific Officer is currently a co-founder and the
President & CSO of Mycosol Inc., a biochemical development company and has over 31 years experience
in the pharmaceutical industry at Burroughs Wellcome, GlaxoWellcome and GlaxoSmithKline. He held
leadership positions in various facets of drug discovery and drug development areas and was the
project leader for four drug development projects and was the research representative to two
international development programs. Jeff has co-authored over 50 publications and abstracts and
authored three issued patents and six patents pending. In addition to his expertise in
pharmaceutical development, Jeff has significant experience and knowledge in
anti-infective/anti-microbial agents and technologies. 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. 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 48




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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 2004 there were four meetings of the Board
of Directors. All current directors attended all meetings except for Mr. Ritter who attended three
of the meetings and Mr. Klein who attended two of the meetings (all meetings since his appointment
to the Board in June 2004). 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 (see
footnote 1). Except for the individuals named, no executive officers had a total annual salary and
bonus of $100,000 or more. Name & Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherPosition
    
    Year

    
    Salary
    
    
    Bonus
    
    
    CompensationSheldon C. Fenton, President
& CEO
    
    7/98-Present
    
    
    -0-
    2
    
    
    -0-
    
    
    
    -0-Kenneth J. Chester, former COO
    

    2003

    
    
    -0-
    
    
    
    -0-
    
    
    $
    17,688
    3
 Except for Mr. Chesters shares of Common Stock, none of the named persons has received stock
options or other such non-cash compensation.   1
    
    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 was renewed
for fiscal 2005 in December 2004. See details in Item 12 Certain Relationships and Related
Transactions.2
    
    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, 2004 these fees remain
unpaid in the amount of $31,573 and
are included in accounts payable.3
    
    Mr. Chester received 660,000 shares of restricted Common Stock, having an assigned
value of $17,688, during 2003 in full and final settlement of all obligations to him under his
employment contract with the Company. 49




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##### Table of Contents



CODE OF ETHICS The Company has not adopted a Code of Ethics as defined in Item 406 of Regulation S-B. We have not
adopted such a Code for the following reasons:  1.
    The management of the Company is limited to three (3) 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. 50




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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March 11, 2005, 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 11, 2005, there were
227,564,973 shares issued and outstanding of record, as well as 94,702,946 shares issuable in the
event of the conversion of the $3,955,972 of Convertible Debentures outstanding and the $737,232 of
interest thereon as of December 31, 2004. Shares of
    
    
    PercentageCommon
    
    
    as ofName and Address of Beneficial Owners
    
    Stock
    
    
    03/11/20051Sheldon C. Fenton
    
    
    60,301,223
    2
    
    
    26.5
    %160 Eglinton Avenue East, Suite 500Toronto,
Ontario M4P 3B5Rene A. Gareau
    
    
    125,000
    
    
    
    0.05
    %603 Sarasota QuaySarasota, Florida 34236Dunvegan Mortgage Corporation
    
    
    59,918,223
    3
    
    
    26.3
    %222 Delaware Ave., PO Box 2306Wilmington, Delaware 19899Russell D. Van Zandt
    
    
    1,091,560
    
    
    
    0.48
    %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
    
    
    
    1.19
    %107 Marseille PlaceCary, North Carolina 27511H. Quotient Inc.
    
    
    18,175,854
    
    
    
    7.99
    %(& subsidiary Quotient Capital Corp.)8150 Leesburg Pike, Suite 503Vienna, VA 22182Milfen Limited
    
    
    1,594,014
    4
    
    
    0.7
    %33 Jackes Avenue, #303Toronto, OntarioM4T 1E2All Directors and Officers
    
    
    64,217,783
    
    
    
    28.2
    %as a Group (5 persons)
 51




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##### Table of Contents



1
    
    Based on 227,564,973 shares issued and outstanding as of March 11, 2005.2
    
    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 37,585,209 shares issuable in the event of conversion of the
$1,780,811 of Convertible Debentures [principal] owned by Dunvegan Mortgage Corporation and
the $136,035 of interest thereon as of December 31, 2004. For informational purposes,
also does not include 15,730,128 Series I ($.499) and Series II ($.001) Warrants previously
owned by Dunvegan Mortgage Corporation but assigned (in 1998) to 1192615 Ontario Limited et al
and in which he disclaims any beneficial interest. For informational purposes, does not
include holdings of his adult daughter including (i) 2,509,804 shares and (ii) the 3,677,514
shares issuable in the event of conversion of the $90,000 Convertible Debenture (principal)
and $36,786.37 of interest thereon as of December 31, 2004; in which he disclaims any
beneficial interest. For informational purposes does not include holdings of his adult son,
including (i) 2,879,477 shares and (ii) the 4,614,612 shares issuable in the event of
conversion of the $95,000 of Convertible Debentures (principal) and $36,210.09 of interest
thereon as of December 31, 2004; 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 37,585,209 shares issuable in the event of conversion of the $1,780,811 of
Convertible Debentures [principal] owned by Dunvegan Mortgage Corporation and the $136,035 of
interest thereon as of December 31, 2004. Does not include 154,163 shares of Series B
Preferred Stock.4
    
    Does not include 18,197,191 shares issuable in the event of conversion of the $599,096
of Convertible Debentures [principal] owned by Milfen Limited and the $228,866 of interest
thereon as of December 31, 2004. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS DUNVEGAN MORTGAGE CORPORATION 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, 2004, Dunvegan Mortgage Corporation continued to hold 154,163 shares of Series B
Preferred Stock (88.5%), 22,333,014 shares of our Common Stock (9.8%), Convertible Debentures
(funded 1996-2004) in the principal amount of $1,780,811 (100%), 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 (100%). 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 52




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##### Table of Contents



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. 935934 ONTARIO LTD. During late 2001, 935934 Ontario Ltd., a company of which Sheldon C. Fenton is an officer and
director, purchased $480,000US (plus accrued interest) of the accounts receivable owed for
inventory by The SunSwipe Corporation L.L.C. (a wholly owned subsidiary of Veridien) to Norpak
Manufacturing Inc. During 2004 935934 Ontario Ltd.assigned their interest in these monies to
Dunvegan Mortgage Corporation and a third party non-related party, who subsequently agreed to
transfer these monies to 3 year Convertible Debentures. Tanlon Management Services, Inc. During fiscal years from 1999-2004 we utilized the services of Tanlon Management Services, Inc., a
management company of which Sheldon C. Fenton [the Companys President/CEO] is an officer and a
director. We expensed $120,000 for these professional services for
each of 1999, 2000, 2002, 2003 and
2004 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 and costs of relevant Tanlon employees who provide
various support services; none of the fees are intended to compensate Mr. Fenton. In addition to
the accrued indebtedness for services, the Company owes Tanlon an additional monies for advanced
expenses for related travel, courier/express deliveries, and telephone costs. At January 2004 these
fees and expenses remained unpaid in the amount of $549,714 and during April 2004 Tanlon assigned
these monies to Dunvegan Mortgage Corporation, who agreed to transfer these monies to a 3 year
convertible debenture. At December 31, 2004
these fees and expenses for 2004 remain unpaid in the amount of
$31,573 and
are included in accounts payable. MILFEN LIMITED During fiscal year 2003, Milfen Limited otherwise divested itself of $75,000 of debenture principal
(and interest accrued thereon) to other parties. Milfen Limited is a Canadian corporation
controlled by the mother of Mr. Shelley Fenton, our President and CEO. RUSSELL VAN ZANDT 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 of the Company. Under this agreement, Mr. Van
Zandt provided one-half of his time in consulting services to
Veridien for the period from October 1, 2003 to December 31, 2004. He was compensated via a payment of $2,500 per month, a grant of
100,000 restricted shares per quarter (beginning in 2004) and sales commissions of 10% (to a
maximum of $100,000) on new business generated for the Company by his direct efforts. In December
2004 the Board authorized the renewal of this Agreement, under the same terms, for a further one
year to December 31, 2005. 53




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##### Table of Contents



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 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 
 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
 54




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##### Table of Contents



No.
    
    Description of Exhibit* 10.9
    
    Australian Patent No. 628,932/Virahol* 10.10
    
    Canadian Patent No. 1,337,329/Virahol* 10.11
    
    Mexican Patent No. 185,884/Virahol* 10.12
    
    U.K. Patent No. 2,294,639/Virahol* 10.13
    
    U.K. Patent No. 2,245,171/Virahol* 10.14
    
    U.S. Patent No. 5,405,602/Sterihol* 10.15
    
    U.S. Patent No. 5,145,663/Virahol* 10.16
    
    U.S. Patent No. 5,441,723/Virahol* 10.17
    
    U.S. Patent
No. 5,637,307/Method of Immersion Sterilization & Organic Cold Chemical
 Sterilant* 10.18
    
    New Zealand Patent No. 269,419/Virahol* 10.19
    
    Employment Agreement with Paul Simmons* 10.20
    
    Employment Agreement with Andrew T. Libby, Jr.* 10.21
    
    Norpak Manufacturing Inc. Agreement* 10.22
    
    Consulting Agreement with Kenneth J. Chester* 10.23
    
    Option Agreement re: Purchase of SunSwipe, Inc.* 10.24
    
    Consulting Agreement with Robert P. Belling* 10.25
    
    Scott R. Dotson Agreement* 10.26
    
    Trademark  Veridien* 10.27
    
    Australian Patent No. 695,346/Virahol (DSII)* 10.28
    
    U.S. Patent No. 5,891,052/Diagnostic Syringe Actuator* 10.29
    
    U.S. Patent No. 5,895,354/Integrated Medical Diagnostic Center* 10.30
    
    U.S. Patent No. 5,925,052/Umbilical Surgical Scissors* 10.31
    
    U.S. Patent No. 5,985,929/Cold Chemical Sterilant* 10.32
    
    Canadian Patent No. 2,166,810/Virahol (DSII)* 10.33
    
    Trademark and Design  Viraguard* 10.34
    
    Employees & Consultants Compensation and Stock Option Plan* 10.35
    
    Consulting Agreement with Russell Van Zandt* 10.36
    
    Agreement with Mycosol, Inc.* 21.1
    
    Subsidiaries* 21.2
    
    Subsidiaries (as of December 31, 2000)* 21.3
    
    Subsidiaries (as of December 31, 2001)* 21.4
    
    Subsidiaries (as of December 31, 2002)* 21.5
    
    Subsidiaries (as of December 31, 2003)
 55




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No.
    
    Description of Exhibit21.6
    
    Subsidiaries (as of December 31, 2004)31.1
    
    RULE 13a-14(a)/15d-14(a)
CERTIFICATION, ADOPTED PURSUANT TO SECTION 302 OF THE
 SARBANES-OXLEY ACT OF 200231.2
    
    RULE 13a-14(a)/15d-14(a)
CERTIFICATION, ADOPTED PURSUANT TO SECTION 302 OF THE
 SARBANES-OXLEY ACT OF 200232.1
    
    Certification pursuant to 18 U.S.C.
Section 1350, as Adopted pursuant to Section 906 of
 the Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C.
Section 1350, as Adopted pursuant to Section 906 of
 the Sarbanes-Oxley Act of 2002
   *
    
    Exhibit previously filed. Reports on Form 8-K There were 2 reports on Form 8-K filed in 2004. One was filed on April 1, 2004 and the other on
August 18, 2004. Both reports were disclosing press releases disseminated by Veridien and neither
report contained any financial statements. 56




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The Companys principal accountant is Carter, Cartier, Melby & Guarino, C.P.A.s, P.A. They
have been the Companys principal accountant since the Companys fiscal year ended December 31,
1997. On December 20, 2004, the Companys Audit Committee unanimously approved the engagement of Carter,
Cartier, Melby & Guarino for the audit of the Corporations December 31, 2004 year-end financial
statements. AUDIT FEES The aggregate fees billed for each of the last two fiscal years for professional services rendered
by the Companys principal accountant for the audit of the Companys annual financial statements
and review of financial statements included in the Companys
10-QSB filings were: 2004 - $38,712
and 2003 - $33,795. AUDIT-RELATED FEES No other audit-related fees were billed by the Companys principal accountant in either of 2004 or
2003 except those disclosed under Audit Fees above. TAX FEES The aggregate fees billed for each of the last two fiscal year for professional services rendered
by the Companys principal accountant for tax related items were
: 2004 - $4,600 and 2003 - $4,600. The only services provided under this caption were preparation of the Companys annual tax
return. ALL OTHER FEES No other fees were billed in either 2004 or 2003 by the Companys principal accountant, except
those disclosed above. 57




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##### Table of Contents



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.
    
    , PresidentSheldon C. Fenton, C.E.O.Date
    
    March 31, 2005
 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 31, 2005By
    
    /s/ Russell D. Van Zandt, Chairman of the Board of DirectorsRussell D. Van Zandt, Chairman of the Board of DirectorsDate
    
    March 31, 2005By
    
    /s/ Rene A. Gareau, Vice Chairman of the Board of DirectorsRene A. Gareau, Vice Chairman of the Board of DirectorsDate
    
    March 31, 2005
 58