##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-QSB

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|x |  | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|  |  |                                                                                         
|  |  | For the quarterly period ended September 30, 2002                                       
|  |  |                                                                                         
|o |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|  |  |                                                                                         
|  |  | For the transition period from      to                                                  
|  |  |                                                                                         
|  |  | Commission file number 000-25555                                                        

Veridien Corporation




(Name of Small Business Issuer in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 59-3020382                       
|                                                               |  |                                  
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (IRS Employer
Identification No.)
|                                                               |  |                                  
|2875 MCI Drive, Suite B, Pinellas Park, Florida                |  | 33782                            
|                                                               |  |                                  
|(Address of principal executive offices)                       |  | (Zip Code)                       

(727) 576-1600




(Issuers telephone number, including Area Code)


Indicate by check mark whether the issuer: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   x   
No   o





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TABLE OF CONTENTS



|                                                                                              |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION                                                                 
|Item 1. Financial Statements                                                                 
|Notes to the Unaudited Interim Consolidated Financial Statements at September 30, 2002:      
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II OTHER INFORMATION                                                                    
|Item 1. Legal Proceedings                                                                    
|Item 2. Changes in Securities                                                                
|Item 5. Other Information                                                                    
|Item 6. Exhibits and Report on Form 8-K                                                      
|SIGNATURES                                                                                   
|CEO Certification                                                                            
|CFO Certification                                                                            



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##### Table of Contents



TABLE OF CONTENTS

|                                                                                              |                                                                                                                                           |  |  |  |  |  |       |      | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | ----- | ---- | 
|                                                                                              |                                                                                                                                           |  |  |  |  |  | Pages
|                                                                                              |                                                                                                                                           |  |  |  |  |  |      
|PART I FINANCIAL INFORMATION                                                                  |                                                                                                                                           |  |  |  |  |  |       |     
|Item 1. Financial Statements                                                                  |                                                                                                                                           |  |  |  |  |  | 3-6   |     
|                                                                                              | Notes to Financial Statements                                                                                                             |  |  |  |  |  |       | 7-10 | 
|Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                                                                                                           |  |  |  |  |  | 11-18 |     
|PART II OTHER INFORMATION                                                                     |                                                                                                                                           |  |  |  |  |  |       |     
|Item 1. Legal Proceedings                                                                     |                                                                                                                                           |  |  |  |  |  | 19    |     
|Item 2. Changes in Securities                                                                 |                                                                                                                                           |  |  |  |  |  | 19    |     
|Item 5. Other                                                                                 |                                                                                                                                           |  |  |  |  |  | 19    |     
|Item 6. Exhibits and Report on Form 8-K                                                       |                                                                                                                                           |  |  |  |  |  |       |     
|                                                                                              | (a) Exhibit 99.1 - Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |       | 20   | 
|                                                                                              | (b) Exhibit 99.2  Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |       | 20   | 

2



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##### Table of Contents






PART I FINANCIAL INFORMATION




Item 1. Financial Statements

Veridien Corporation
and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
September 30, 2002 and December 31, 2001

|                              |                                                                             |                      |         |                    |           |                   |         |         |           | 
|----------------------------- | --------------------------------------------------------------------------- | -------------------- | ------- | ------------------ | --------- | ----------------- | ------- | ------- | --------- | 
|                              |                                                                             |                      |         | September 30, 2002 |           | December 31, 2001
|                              |                                                                             |                      |         |                    |           |                  
|Assets                        |                                                                             |                      |         |                    |           |                   |         |        
|Current Assets:               |                                                                             |                      |         |                    |           |                   |         |        
|                              | Cash                                                                        |                      | $       | 10,958             |           |                   | $       | 7,219   |          
|                              | Accounts receivable  trade                                                 |                      |         |                    |           |                   |         |         |          
|                              | Less allowance for doubtful accounts of
$57,120 and $46,900 respectively    |                      |         | 157,472            |           |                   |         | 158,127 |          
|                              | Inventory                                                                   |                      |         | 386,575            |           |                   |         | 586,313 |          
|                              | Marketable securities                                                       |                      |         | 419,840            |           |                   |         | 124,500 |          
|                              | Prepaid expenses and other current assets                                   |                      |         | 40,101             |           |                   |         | 54,728  |          
|                              |                                                                             |                      |         |                    |           |                   |         |        
|                              |                                                                             | Total current assets |         |                    | 1,014,946 |                   |         |         | 930,887   | 
|Property and equipment:       |                                                                             |                      |         |                    |           |                   |         |        
|                              | Furniture and fixtures                                                      |                      |         | 390,211            |           |                   |         | 390,211 |          
|Less accumulated depreciation |                                                                             |                      | 373,576 |                    |           |                   | 364,560 |        
|                              |                                                                             |                      |         |                    |           |                   |         |        
|                              |                                                                             |                      | 16,635  |                    |           |                   | 25,651  |        
|Other Assets:                 |                                                                             |                      |         |                    |           |                   |         |        
|                              | Investment in common stock, cost basis                                      |                      |         | -0-                |           |                   |         | 64,500  |          
|                              | Patents less accumulated amortization
of $495,909 and $493,202 respectively |                      |         | 18,473             |           |                   |         | 21,179  |          
|                              | Security deposits and other assets                                          |                      |         | 29,875             |           |                   |         | 37,022  |          
|                              |                                                                             |                      |         |                    |           |                   |         |        
|                              |                                                                             |                      | 48,348  |                    |           |                   | 122,701 |        
|                              |                                                                             |                      |         |                    |           |                   |         |        
|                              |                                                                             | Total assets         |         | $                  | 1,079,929 |                   |         | $       | 1,079,239 | 
|                              |                                                                             |                      |         |                    |           |                   |         |        

See accompanying notes to the financial statements.

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Veridien Corporation
And Subsidiaries
Consolidated Balance Sheets  Continued
(Unaudited)
September 30, 2002 and December 31, 2001

|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |             |            |  
|----------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ---------- | ------------------ | ---------- | ----------------- | ---------- | ----------- | ---------- | -
|                                                |                                                                                                                                                                                                                                           |                             |            | September 30, 2002 |            | December 31, 2001
|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                  
|Liabilities and Deficit in Stockholders Equity |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|Current liabilities:                            |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                | Current capital lease obligations                                                                                                                                                                                                         |                             | $          | 4,951              |            |                   | $          | 5,886       |           
|                                                | Note payable                                                                                                                                                                                                                              |                             |            | 365,792            |            |                   |            | 343,792     |           
|                                                | Convertible debentures due                                                                                                                                                                                                                |                             |            | 920,000            |            |                   |            | 100,000     |           
|                                                | Accounts payable                                                                                                                                                                                                                          |                             |            | 1,348,720          |            |                   |            | 1,257,102   |           
|                                                | Accrued compensation                                                                                                                                                                                                                      |                             |            | 9,953              |            |                   |            | 6,506       |           
|                                                | Accrued interest                                                                                                                                                                                                                          |                             |            | 903,901            |            |                   |            | 684,968     |           
|                                                | Other accrued liabilities                                                                                                                                                                                                                 |                             |            | 35,146             |            |                   |            | 23,719      |           
|                                                | Customer deposits                                                                                                                                                                                                                         |                             |            | 9,827              |            |                   |            | 20,327      |           
|                                                | Due to stockholders                                                                                                                                                                                                                       |                             |            | 51,010             |            |                   |            | 49,463      |           
|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                |                                                                                                                                                                                                                                           | Total current liabilities   |            |                    | 3,649,300  |                   |            |             | 2,491,763  |  
|Long-term liabilities:                          |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                | Capital lease obligations less current                                                                                                                                                                                                    |                             |            | 6,322              |            |                   |            | 11,173      |           
|                                                | Convertible debentures                                                                                                                                                                                                                    |                             |            | 1,411,096          |            |                   |            | 2,162,500   |           
|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                |                                                                                                                                                                                                                                           | Total long-term liabilities |            |                    | 1,417,418  |                   |            |             | 2,173,673  |  
|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                |                                                                                                                                                                                                                                           | Total liabilities:          |            |                    | 5,066,718  |                   |            |             | 4,665,436  |  
|                                               
|Deficit in Stockholders Equity:                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                | Undesignated preferred stock, $.001 par
value, 25,000,000 shares authorized
Convertible redeemable preferred stock,
$10 par value, 100,000 authorized; 6,000
and 6,000 issued and outstanding at
September 30, 2002 and December 31, 2001 |                             |            | 60,000             |            |                   |            | 60,000      |           
|                                                | Series B Preferred Stock, $.001 par value, 245,344
Authorized, 174,219 and 174,219 issued and
outstanding at September 30, 2002 and December
31, 2001                                                                                     |                             |            | 175                |            |                   |            | 175         |           
|                                                | Common Stock  $.001 par value; 300,000,000 shares
authorized, 179,468,220 and 174,179,487 shares
issued and outstanding at September 30, 2002 and
December 31, 2001                                                                      |                             |            | 179,468            |            |                   |            | 174,181     |           
|                                                | Additional paid-in capital                                                                                                                                                                                                                |                             |            | 29,784,388         |            |                   |            | 29,574,065  |           
|                                                | Common stock warrants                                                                                                                                                                                                                     |                             |            | 26,399             |            |                   |            | 26,399      |           
|                                                | Accumulated deficit                                                                                                                                                                                                                       |                             |            | (33,416,017        | )          |                   |            | (31,342,593 | )         
|                                                | Current period profit/(loss)                                                                                                                                                                                                              |                             |            | (616,202           | )          |                   |            | (2,073,424  | )         
|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                |                                                                                                                                                                                                                                           |                             | (3,981,789 | )                  |            |                   | (3,581,197 | )          
|                                                | Stock subscriptions receivable                                                                                                                                                                                                            |                             |            | (5,000             | )          |                   |            | (5,000      | )         
|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                |                                                                                                                                                                                                                                           | Total stockholders deficit |            |                    | (3,986,789 | )                 |            |             | (3,586,197 | )
|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            
|                                                |                                                                                                                                                                                                                                           | $                           | 1,079,929  |                    |            | $                 | 1,079,239  |            
|                                                |                                                                                                                                                                                                                                           |                             |            |                    |            |                   |            |            

See accompanying notes to financial statements.

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Veridien Corporation
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)

|                                 |                                          |   |                    |         |                   |   |             |         |      |   |             |          |   |   |             |           |  
|-------------------------------- | ---------------------------------------- | - | ------------------ | ------- | ----------------- | - | ----------- | ------- | ---- | - | ----------- | -------- | - | - | ----------- | --------- | -
|                                 |                                          |   | Three Months Ended |         | Nine Months Ended
|                                 |                                          |   | September 30,      |         | September 30,    
|                                 |                                          |   |                    |         |                  
|                                 |                                          |   | 2002               |         | 2001              |   | 2002        |         | 2001
|                                 |                                          |   |                    |         |                   |   |             |         |     
|Sales                            |                                          | $ | 121,949            |         |                   | $ | 150,569     |         |      | $ | 689,104     |          |   | $ | 736,459     |          
|Operating costs and expenses:    |                                          |   |                    |         |                   |   |             |         |      |   |             |          |   |   |             |          
|                                 | Cost of sales                            |   |                    | 84,513  |                   |   |             | 78,243  |      |   |             | 402,274  |   |   |             | 467,286   |  
|                                 | General, selling, and administrative     |   |                    | 264,640 |                   |   |             | 377,309 |      |   |             | 964,259  |   |   |             | 1,187,786 |  
|                                 | Research and development                 |   |                    | 27,629  |                   |   |             | -0-     |      |   |             | 107,032  |   |   |             | 37,146    |  
|                                 |                                          |   |                    |         |                   |   |             |         |      |   |             |          |   |   |             |          
|                                 |                                          |   | 376,782            |         |                   |   | 455,552     |         |      |   | 1,473,565   |          |   |   | 1,692,218   |          
|                                 |                                          |   |                    |         |                   |   |             |         |      |   |             |          |   |   |             |          
|Loss from Operations             |                                          |   | (254,833           | )       |                   |   | (304,983    | )       |      |   | (784,461    | )        |   |   | (955,759    | )        
|                                
|Other income (expense):          |                                          |   |                    |         |                   |   |             |         |      |   |             |          |   |   |             |          
|                                 | Interest expense                         |   |                    | (80,959 | )                 |   |             | (66,842 | )    |   |             | (237,102 | ) |   |             | (201,848  | )
|                                 | Interest income                          |   |                    | 146     |                   |   |             | 77      |      |   |             | 227      |   |   |             | 874       |  
|                                 | Rental income                            |   |                    | -0-     |                   |   |             | -0-     |      |   |             | -0-      |   |   |             | 5,351     |  
|                                 | Unrealized gain on marketable securities |   |                    | 256,000 |                   |   |             | -0-     |      |   |             | 269,570  |   |   |             | (252,186  | )
|                                 | Realized gain or loss                    |   |                    | -0-     |                   |   |             | -0-     |      |   |             | 35,130   |   |   |             | -0-       |  
|                                 | Realized gain or loss on sale of assets  |   |                    | 23,964  |                   |   |             | -0-     |      |   |             | 35,934   |   |   |             | (21,834   | )
|                                 | Realized sale of cash credits            |   |                    | -0-     |                   |   |             | -0-     |      |   |             | 64,500   |   |   |             | 129,000   |  
|                                 | Sale of labs and equipment               |   |                    | -0-     |                   |   |             | -0-     |      |   |             | -0-      |   |   |             | 85,000    |  
|                                 |                                          |   |                    |         |                   |   |             |         |      |   |             |          |   |   |             |          
|                                 |                                          |   | 199,151            |         |                   |   | (66,765     | )       |      |   | 168,259     |          |   |   | (255,643    | )        
|Net loss before taxes            |                                          |   | (55,682            | )       |                   |   | (371,748    | )       |      |   | (616,202    | )        |   |   | (1,211,402  | )        
|Income taxes                     |                                          |   | -0-                |         |                   |   | -0-         |         |      |   | -0-         |          |   |   | -0-         |          
|                                 |                                          |   |                    |         |                   |   |             |         |      |   |             |          |   |   |             |          
|Net loss                         |                                          | $ | (55,682            | )       |                   | $ | (371,748    | )       |      | $ | (616,202    | )        |   | $ | (1,211,402  | )        
|                                 |                                          |   |                    |         |                   |   |             |         |      |   |             |          |   |   |             |          
|Net loss per common share        |                                          | $ | (0.0003            | )       |                   | $ | (0.0024     | )       |      | $ | (0.0035     | )        |   | $ | (0.0081     | )        
|Weight average share outstanding |                                          |   | 179,401,553        |         |                   |   | 154,915,740 |         |      |   | 177,741,891 |          |   |   | 148,621,486 |          

See accompanying notes to financial statements.

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Veridien Corporation
and Subsidiaries

Consolidated Statements of Cash Flows
(Unaudited)

For the nine months ended
September 30, 2002 and September 30, 2001

|                                                |                                                                                 |                                                      |        |                    |          |                    |        |            |           |  
|----------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------- | ------ | ------------------ | -------- | ------------------ | ------ | ---------- | --------- | -
|                                                |                                                                                 |                                                      |        | September 30, 2002 |          | September 30, 2001
|                                                |                                                                                 |                                                      |        |                    |          |                   
|Cash flows from operating activities            |                                                                                 |                                                      |        |                    |          |                    |        |           
|                                                | Net (loss)                                                                      |                                                      | $      | (616,202           | )        |                    | $      | (1,211,402 | )        
|                                                | Adjustments to reconcile net (loss) to net cash
(used) by operating activities: |                                                      |        |                    |          |                    |        |            |          
|                                                |                                                                                 | Depreciation and amortization                        |        |                    | 11,722   |                    |        |            | 13,197    |  
|                                                |                                                                                 | Realized (gains) losses                              |        |                    | (135,564 | )                  |        |            | -0-       |  
|                                                |                                                                                 | Exchange of barter credits                           |        |                    | -0-      |                    |        |            | (124,500  | )
|                                                |                                                                                 | Net
(increase) decrease on marketable securities     |        |                    | (94,454  | )                  |        |            | 252,186   |  
|                                                |                                                                                 | Stock issuances for services                         |        |                    | 65,696   |                    |        |            | 79,441    |  
|                                                |                                                                                 | Allowance for doubtful accounts                      |        |                    | 10,220   |                    |        |            | (7,128    | )
|                                                |                                                                                 | Accounts receivable                                  |        |                    | (9,565   | )                  |        |            | (118,526  | )
|                                                |                                                                                 | Inventories                                          |        |                    | 199,738  |                    |        |            | (444,524  | )
|                                                |                                                                                 | Licensing fees receivable                            |        |                    | -0-      |                    |        |            | 49,997    |  
|                                                |                                                                                 | Prepaid and other current assets                     |        |                    | 14,627   |                    |        |            | (3,621    | )
|                                                |                                                                                 | Other assets                                         |        |                    | 6,325    |                    |        |            | (8,168    | )
|                                                |                                                                                 | Accounts payable and accrued expenses                |        |                    | 325,425  |                    |        |            | 1,279,682 |  
|                                                |                                                                                 | Due to stockholders                                  |        |                    | 1,547    |                    |        |            | 1,547     |  
|                                                |                                                                                 | Customer deposits                                    |        |                    | (10,500  | )                  |        |            | 2,087     |  
|                                                |                                                                                 |                                                      |        |                    |          |                    |        |           
|                                                | Net cash (used) by operating activities                                         |                                                      |        | (230,985           | )        |                    |        | (239,732   | )        
|                                               
|Cash flow from investing activities:            |                                                                                 |                                                      |        |                    |          |                    |        |           
|                                                |                                                                                 | Net purchases and disposal of property and equipment |        |                    | -0-      |                    |        |            | 19,360    |  
|                                                |                                                                                 |                                                      |        |                    |          |                    |        |           
|                                                | Net cash (provided) by investing activities                                     |                                                      |        | -0-                |          |                    |        | 19,360     |          
|                                               
|Cash flow from financing activities:            |                                                                                 |                                                      |        |                    |          |                    |        |           
|                                                |                                                                                 | Proceeds from convertible debentures                 |        |                    | 204,000  |                    |        |            | 85,000    |  
|                                                |                                                                                 | Net proceeds from borrowings                         |        |                    | 16,214   |                    |        |            | (522,000  | )
|                                                |                                                                                 | Proceeds from issuance of preferred and common stock |        |                    | 14,510   |                    |        |            | 677,682   |  
|                                                |                                                                                 |                                                      |        |                    |          |                    |        |           
|                                                | Net cash (provided) by financing activities                                     |                                                      |        | 234,724            |          |                    |        | 240,682    |          
|                                               
|Net increase (decrease) in cash and equivalents |                                                                                 |                                                      | 3,739  |                    |          |                    | 20,310 |           
|Cash and equivalents, beginning of year         |                                                                                 |                                                      | 7,219  |                    |          |                    | 20,960 |           
|                                                |                                                                                 |                                                      |        |                    |          |                    |        |           
|Cash and equivalents, end of quarter            |                                                                                 | $                                                    | 10,958 |                    |          | $                  | 41,270 |           
|                                                |                                                                                 |                                                      |        |                    |          |                    |        |           

See accompanying notes to financial statements.

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Veridien Corporation
and
Subsidiaries




Notes to the Unaudited Interim Consolidated Financial Statements at September 30, 2002:

These unaudited interim consolidated financial statements and notes to
unaudited interim consolidated financial statements should be read in
conjunction with the financial statements and related footnotes included in the
Companys Form 10Ksb filed with the SEC in March 2002.

Note A  Summary of Significant Accounting Policies

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

1. Principles of Consolidation

The accompanying financial statements include the accounts of the company and
its subsidiaries, each of which is wholly-owned.

2. 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.

3. Accounts Receivable

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

4. 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 September 30, 2002, raw materials and finished goods
amounted to approximately $386,575.

5. Fair Value of Financial Instruments

The Company considers the recorded value of its financial assets and
liabilities, consisting principally of accounts receivable, investments in
marketable securities, accounts payable, accrued expenses and debt to
approximate the fair value of the respective assets and liabilities at
September 30, 2002, and December 31, 2001.

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Note A  Summary of Significant Accounting Policies  Continued

6. Reclassification

Certain reclassifications have been made to the December 31, 2001 audited
consolidated financial statements to be in conformity with the September 30,
2002 unaudited interim financial statements.

7. Net Loss per Share

Net loss per common 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 179,401,553 and
154,915,740 for the quarter ending September 30, 2002 and 2001, respectively.
Common stock equivalents (stock options, warrants, convertible debentures and
convertible redeemable preferred stock) are not included in the weighted
average number of common shares because the effects would be anti-dilutive.

Note B  Realization of Assets

The accompanying unaudited interim consolidated financial statements of the
Company as of September 30, 2002 and for the three months and nine months ended
September 30, 2002 and 2001, included herein have been prepared in accordance
with the instructions for Form 10-Qsb under the Securities Exchange Act of
1934, as amended, and Article 10 of Regulation S-X under the Securities Act of
1933, as amended. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations relating to interim financial statements.

In the opinion of management, the accompanying unaudited interim consolidated
financial statements of the Company reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position of the Company as of September 30, 2002, and the results of its
operations and its cash flows for the three months and nine months ended
September 30, 2002 and September 30, 2001, respectively. The results for the
three months and nine months ended September 30, 2002 are not necessarily
indicative of the expected results for the full fiscal year or any future
period.

The preparation 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.

Since inception, the Company has incurred losses of approximately $34 million,
resulting primarily from research and development, sales and marketing, and
administrative expenses being substantially in excess of sales revenue.

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Note B  Realization of Assets  Continued

The Company has a deficit in stockholders equity of $4 million, a deficit in
working capital of $2.6 million and is experiencing a continuing cash flow
deficiency. Those conditions raise substantial doubt about the Companys
ability to continue as a going concern.

The company plans to utilize its current debt financing arrangements and pursue
additional equity and debt financing while managing cash flow in an effort to
provide funds to increase revenues to support operations, research and
development activities.

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

The unaudited interim 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  Marketable Securities and Investments

On May 4, 2001 the Company exchanged cash credits with a stated value of
$129,000 for 430,000 shares of restricted common shares of H-Quotient Inc. The
Company recognized $64,500 of other income from this transaction which
represents 50% of fair market value of the shares after an estimated
marketability discount due to restrictions. The investment in the common
shares was recorded at the cost of $64,500 at December 31, 2001 and had not
been recognized as a marketable security due to the restrictions that existed
on its disposition. On May 4, 2002, the restrictions expired and the Company
reclassified the shares to marketable securities, trading securities. The
Company has made an adjustment in the amount of $64,500 reflect the current
market value at June 30, 2002. The shares were recorded to marketable
securities and valued at $137,600. An unrealized gain in the amount of $64,500
was recognized for the difference between book value and fair market value.

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

In February 2002 the Company realized a gain on marketable securities. The
Company received 6,000 common shares of Nutraceutical Clinical Laboratories
International, Inc. (NCCL) for payment on an aged accounts receivable. A net
gain of $3,630 was realized for the difference of the debt paid and the fair
market value of the common shares received. During the quarter ending June 30,
2002 these shares were sold and a loss in the amount of $2,425 was recognized.

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Note C  Marketable Securities and Investments  Continued

During the quarter ending June 30, 2002, an additional 166,500 shares
H-Quotient Inc. (HQNT) shares were sold and a gain was recognized in the amount
of $25,115.

During the quarter ending September 30, 2002 an additional 166,500 shares
H-Quotient Inc. (HQNT) shares were sold and a gain was recognized in the amount
of $23,964.

At September 30, 2002 and December 31, 2001 the Company owned 512,000 and
415,000 shares, respectively of H-Quotient Inc.(HQNT) representing a carrying
value of $419,840 and $124,500. An unrealized gain in the amount of $256,000
and $269,570 was recognized for the quarter and nine months ended September
30, 2002 to adjust the carrying value to market value. The Company also owned
an additional 430,000 restricted shares of HQNT at December 31, 2001. (see
note above)

Note D  Supplemental Cash Flow Disclosures

During the nine months ended September 30, 2002 the Company exchanged accounts
receivable and inventory in the amount of $38,370 for marketable securities.
The Company recognized an increase in carrying value and change in
classifications on an investment in the amount of $64,500 due to the elapsing
of time restrictions.







These unaudited interim consolidated financial statements and notes to
unaudited interim consolidated financial statements should be read in
conjunction with the financial statements and related footnotes included in the
Companys Form 10Ksb filed with the SEC in March 2002.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Third Quarter  September 30, 2002 Compared with September 30, 2001, and
Nine-Months Ended September 30, 2002 Compared with September 30, 2001

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 as of September 30, 2002 for the three months and nine
months ended September 30, 2002 and September 30, 2001, respectively. This
discussion should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Report.
This Report also contains certain forward-looking statements and information.
This cautionary statement should be read as being applicable to all related
forward-looking statements wherever they may appear. Our actual future results
could differ materially from those discussed herein.

OVERVIEW

We are a Health Care company incorporated in Delaware focusing on infection
control and other Healthy Lifestyle products. The Company has developed and/or
focused on PATENTED as well as UNIQUE PRODUCTS including SURFACE DISINFECTANTS,
ANTISEPTIC HAND CLEANSERS, FRUIT & VEGETABLE WASH and SUN PROTECTION PRODUCTS.

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

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

The Company has incurred losses since its incorporation. At September 30,
2002, the Company had an accumulated deficit of $34,032,219. The Company has
financed its ongoing business activities through a combination of sales, equity
financing, and debt.

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Results of Operations

Third Quarter ended September 30, 2002 vs. Third Quarter ended September 30, 2001

|                                  |  |               |          |               |  |      |          |      |  |  |      |    |  |  |      |   
|--------------------------------- |  | ------------- | -------- | ------------- |  | ---- | -------- | ---- |  |  | ---- | -- |  |  | ---- | --
|                                  |  | Third Quarter |          | Percentage of
|                                  |  | September 30, |          | Net Revenue  
|                                  |  |               |          |              
|                                  |  | 2002          |          | 2001          |  | 2002 |          | 2001
|                                  |  |               |          |               |  |      |          |     
|Net Sales                         |  | $             | 121,949  |               |  | $    | 150,569  |      |  |  | 100  | %  |  |  | 100  | % 
|Cost of Goods Sold                |  |               | 84,513   |               |  |      | 78,243   |      |  |  | 69   | %  |  |  | 52   | % 
|Gross Profit                      |  |               | 37,436   |               |  |      | 72,326   |      |  |  | 31   | %  |  |  | 48   | % 
|Operating Expenses:               |  |               |          |               |  |      |          |      |  |  |      |    |  |  |      |   
|General, Selling & Administrative |  |               | 264,640  |               |  |      | 377,309  |      |  |  | 217  | %  |  |  | 251  | % 
|Research & Development            |  |               | 27,629   |               |  |      | -0-      |      |  |  | 23   | %  |  |  | 0    | % 
|(Loss) from Operations            |  |               | (254,833 | )             |  |      | (304,983 | )    |  |  | (209 | )% |  |  | (203 | )%
|                                 
|Other Income (Expense) Net        |  |               | 199,151  |               |  |      | (66,765  | )    |  |  | 163  | %  |  |  | (44  | )%
|                                 
|(Loss) Before Minority Interest   |  |               | (55,682  | )             |  |      | (371,748 | )    |  |  | (46  | )% |  |  | (247 | )%
|Elimination of Minority Interest  |  |               | -0-      |               |  |      | -0-      |      |  |  | 0    | %  |  |  | 0    | % 
|                                 
|Net (Loss) Before Taxes           |  |               | (55,682  | )             |  |      | (371,748 | )    |  |  | (46  | )% |  |  | (247 | )%
|Income Taxes                      |  |               | -0-      |               |  |      | -0-      |      |  |  | 0    | %  |  |  | 0    | % 
|Net (Loss)                        |  | $             | (55,682  | )             |  | $    | (371,748 | )    |  |  | (46  | )% |  |  | (247 | )%

Third Quarter  September 30, 2002 Compared with September 30, 2001

Consolidated gross revenues for third quarter 2002 increased by $251,413, or
167%, to $402,059 compared with $150,646 in third quarter 2001.



| |  | Gross revenue from product sales decreased for third quarter 2002 by
$28,620 or 19%, to $121,949 compared with $150,569 in third quarter
2001. 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 next year, will generate new revenue in this and future
years. In addition, we continue to pursue strategic alliances with
other corporations that have existing distribution networks. Our goal
for these alliances is to create immediate distribution and
fulfillment avenues for our products, while focusing on our capital
resources.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Interest income for third quarter 2002 increased by $69, or 90% to
$146 compared with $77 in third quarter 2001. The increase in
interest income is due primarily to an increased daily cash balance
earning interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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| |  | Additionally, other income for third quarter 2002 increased by
$279,964, or 100% to $279,964 compared with $-0- in third quarter
2001. The unrealized gain in marketable securities for third quarter
2002 recognizes an increase of $256,000 in the value of the marketable
securities held by the Company. The Company recognized realized gains
of $23,964 and $-0- on the sale of marketable securities for the
quarter ended September 30 2002 and 2001, respectively.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Consolidated gross expenses for third quarter 2002 decreased by $64,653, or 12%
to $457,741 compared with $522,394 in third quarter 2001.



| |  | The cost of goods sold for third quarter 2002 increased by $6,270, or
8% to $84,513 compared with $78,243 in third quarter 2001. There was
an increase in the cost of goods ratio as a percentage of sales to 69%
in third quarter 2002 compared to 52% in third quarter 2001. The
increase in the cost of sales resulted primarily in a combination of
decreased sales at 19% over the same period of 2001 and the write-off
of recently expired inventory. The Company is currently working
toward decreasing the cost of goods ratio as a percentage by improving
the product mix with higher margins.                                                                                                                                                                                               
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | General, selling, and administrative expenses for third quarter 2002
decreased by $112,669, or 30% to $264,640 compared with $377,309 in
third quarter 2001. The decrease in general and administrative costs
were attributable to the reduction and reclassification of senior
management expenses from administrative wages to consulting for third
quarter 2002 that decreased by 63% to $42,312 compared with $113,757
in third quarter 2001. Additional decreases that affected general and
administrative costs were associated with professional service
expenses for third quarter 2002 that decreased by 24% to $75,596
compared with $99,002 in third quarter 2001. Increases during third quarter 2002
included sales expenses by 13% to $88,651 compared with $78,471 in
third quarter 2001.
| 
| |  | Research and development for third quarter 2002 increased $27,629, or
100% to $27,629 compared with $-0- in third quarter 2001. The
increase was due primarily to additional research on the focus of
broadening the range of claims we can assert on our existing products
and on testing new products for commercialization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| 
| |  | Interest expense for third quarter 2002 increased by $14,117 or 21% to
$80,959 compared with $66,842 in third quarter 2001. The increase in
interest expense was due primarily to the increased value of various
debts and the addition of interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| 
| |  | Operating losses decreased to $254,833 in third quarter 2002 from
$304,983 in third quarter 2001. This represented a 16% decrease in
operating losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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Nine Months ended September 30, 2002 vs. Nine Months ended September 30, 2001

|                                  |  |                   |          |               |  |      |            |      |  |  |      |    |  |  |      |   
|--------------------------------- |  | ----------------- | -------- | ------------- |  | ---- | ---------- | ---- |  |  | ---- | -- |  |  | ---- | --
|                                  |  | Nine Months ended |          | Percentage of
|                                  |  | September 30,     |          | Net Revenue  
|                                  |  |                   |          |              
|                                  |  | 2002              |          | 2001          |  | 2002 |            | 2001
|                                  |  |                   |          |               |  |      |            |     
|Net Sales                         |  | $                 | 689,104  |               |  | $    | 736,459    |      |  |  | 100  | %  |  |  | 100  | % 
|Cost of Goods Sold                |  |                   | 402,274  |               |  |      | 467,286    |      |  |  | 58   | %  |  |  | 63   | % 
|Gross Profit                      |  |                   | 286,830  |               |  |      | 269,173    |      |  |  | 42   | %  |  |  | 37   | % 
|Operating Expenses:               |  |                   |          |               |  |      |            |      |  |  |      |    |  |  |      |   
|General, Selling &
Administrative |  |                   | 964,259  |               |  |      | 1,187,786  |      |  |  | 140  | %  |  |  | 161  | % 
|Research & Development            |  |                   | 107,032  |               |  |      | 37,146     |      |  |  | 16   | %  |  |  | 5    | % 
|(Loss) from Operations            |  |                   | (784,461 | )             |  |      | (955,759   | )    |  |  | (114 | )% |  |  | (130 | )%
|                                 
|Other Income (Expense) Net        |  |                   | 168,259  |               |  |      | (255,643   | )    |  |  | 24   | %  |  |  | (35  | )%
|                                 
|(Loss) Before Minority Interest   |  |                   | (616,202 | )             |  |      | (1,211,402 | )    |  |  | (89  | )% |  |  | (164 | )%
|Elimination of Minority Interest  |  |                   | -0-      |               |  |      | -0-        |      |  |  | 0    | %  |  |  | 0    | % 
|                                 
|Net (Loss) Before Taxes           |  |                   | (616,202 | )             |  |      | (1,211,402 | )    |  |  | (89  | )% |  |  | (164 | )%
|Income Taxes                      |  |                   | 0-       |               |  |      | -0-        |      |  |  | 0    | %  |  |  | 0    | % 
|Net (Loss)                        |  | $                 | (616,202 | )             |  | $    | (1,211,402 | )    |  |  | (89  | )% |  |  | (164 | )%

Nine months ended September 30, 2002 Compared with Nine Months ended September 30, 2001

Consolidated gross revenues for the nine months ended September 30, 2002
increased by $137,781, or 14% to $1,094,465, compared with $956,684 during the
same period of 2001.



| |  | Gross revenue from product sales decreased for the nine months ended
September 30, 2002 by $47,355, or 6% to $689,104 compared with
$736,459 in 2001. 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 next year, will generate new revenue in this and future
years. In addition, we continue to pursue strategic alliances with
other corporations that have existing distribution networks. Our goal
for these alliances is to create immediate distribution and
fulfillment avenues for our products, while focusing on our capital
resources.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Gross rental income for the nine months ended September 30, 2002
decreased by $5,351, or 100% to $-0- compared with $5,351 in the same
period of 2001. The Company previously subleased a portion of the
38,000 square foot manufacturing facility to a medical manufacturer.
On May 1, 2001 our company entered into an agreement with Vin-Dotco,
Inc.                                                                                                                                                                                                                                                                                                                                                                                                                     

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|  |  | to lease 15,000 square feet of their building located at 2875 MCI Drive
Pinellas Park, Florida 33782. Our lease with our previous landlord expired
on May 18, 2001 and the company moved into our new facility during the
second and third weeks of May 2001. The rental agreement for our new
facility is for a 19 month period ended December 31, 2002 and the reduction
in rent as compared to our old facility will result in net savings of in
excess of $180,000 annually. On October 29, 2002 our company entered into a
new agreement with Vin-Dotco, Inc. to lease 2,600 square feet of office
space of their building at the same location of our current lease. This new
rental agreement will commence January 1, 2003 and is for a 24 month period
ending December 31, 2004. The facility has sufficient office space to
satisfy our current needs and allow for future expansion. All warehousing
of products will be at various locations which will be strategically located
in the U.S. for distribution.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Interest income for the nine months ended September 2002 decreased by
$647, or 74% to $227 compared with $874 during the same period of
2001. The decrease in interest income is due to a decreased daily
cash balance earning interest in 2002 compared with 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
| |  | Additionally, other income for the nine months ended September 30,
2002 increased by $191,134 or 89% to $405,134 compared with $214,000
during the same period of 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| 
| |  | The unrealized gain on marketable securities for the nine months ended
September 30, 2002 recognizes a total increase of $269,570 in the
value of the marketable securities held by the Company. During the
nine months ended September 30, 2001 the amount of $252,186 was
recognized as a loss because of a permanent write down of an
investment in common stock, restricted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| 
| |  | Realized gain or loss for the nine months ended September 30, 2002
includes a realized gain on the receipt of 6,000 common shares of
Nutraceutical Clinical Laboratories International, Inc. (NCCL) for
payment on an aged accounts receivable. A net gain of $3,630 was
realized for the difference of the debt paid and the fair market value
of the common shares. Also during the nine months ended September 30,
2002 the Company realized a gain on the sale of obsolete inventory by
receipt of 18,000 common shares of Nutraceutical Clinical Laboratories
International, Inc. (NCCL). The investment in common shares was
recorded at $31,500 which represents fair market value of the
security.                                                                                                                                                                                                                                                                                                                
| 
| |  | Realized gain or loss on sale of assets for the nine months ended
September 30, 2002 recognized a net gain of $35,934 on the sale of
marketable securities. During the nine months ended September 30,
2001 the amount of $21,834 was recognized for a loss on sale and
disposal of assets during the Companys relocation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| 
| |  | During the nine months ending September 30, 2002 a realized sale of
cash credits recognized a net gain on the sale of cash credits in the
amount of $64,500. This investment has now been reclassified as a
marketable security at the fair market value as of June 30, 2002. The
cash credits were originally received when the Company sold inventory
in May 2001 to SGD International Corporation. These credits were
originally recorded in June 2001 in the amount of $129,000 with a
stated value of $150,500. These credits were exchanged for 430,000
shares of restricted common shares of H-Quotient, Incorporated (HQNT).
At December 31, 2001 the $129,000 was written down to $64,500 due to
their restrictions. Currently, a remainder of $23,000 cash credits
still remains with SGD International. During the nine
months ending September 30, 2001 an amount of $129,000 was recognized for
the sale of cash credits with a stated value of $150,500.                                                    

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Consolidated gross expenses for the first nine months of 2002 decreased by
$457,419, or 21% to $1,710,667 compared with $2,168,086 during the same period
of 2001.



| |  | The cost of goods sold for the nine months ended September 30, 2002
decreased by $65,012, or 14% to $402,274 compared with $467,286 during
the same period of 2001. There was a decrease in the cost of goods
ratio as a percentage of sales to 58% during the current year 2002
compared to 63% in the same period of 2001. The decrease in the cost
of sales resulted primarily from a combination of decreased sales at
6% over the same period of 2001 and a change in product mix. The
Company is currently working toward decreasing the cost of goods ratio
as a percentage by improving the product mix with higher margins.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | General, selling, and administrative expenses for the nine months
ended September 30, 2002 decreased by $223,527, or 19% to $964,259
compared with $1,187,786 during the same period of 2001. The decrease
in general and administrative costs were attributable to the
re-allocation of senior management expenses from administrative wages
to consulting for the first nine months of 2002 that decreased by 49%
to $164,288 compared with $324,500 during the same period of 2001.
Additional decreases that affected general and administrative costs
were associated with rental expenses for the first nine months of 2002
that decreased by 56% to $53,100 compared with $121,576 during the
same period of 2001. Increases that affected general and
administrative costs were associated with professional service
expenses for the first nine months of 2002 that increased by 46% to
$351,082 compared with $239,891 during the same period of 2001.
During the nine months ended September 30, 2002, sales expense
increased by 1% to $304,776 compared with $303,257 during the same
period of 2001.
| 
| |  | Research and development for the first nine months of 2002 increased
by $69,886 or 188%, to $107,032 compared with $37,146 during the same
period of 2001. The increase was due primarily to additional research
on the focus of broadening the range of claims we can assert on our
existing products and on testing new products for commercialization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| 
| |  | Interest expense for the first nine months of 2002 increased by
$35,254, or 17% to $237,102 compared with $201,848 during the same
period of 2001. The increase in interest expense was due primarily to
the increased value of various debts and the addition of interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
| |  | Operating losses decreased to $784,461 during the first nine months of
2002 from $955,759 during the same period of 2001. This represented
an 18% decrease in operating losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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##### Table of Contents



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 September 30, 2002 and September 30, 2001 we had working
capital deficits of approximately $2,634,354 and $2,484,939 respectively. Our
independent certified public accountants stated in their report on the 2001
consolidated financial statements that due to losses from operations and a
working capital deficit, there is substantial doubt about the Companys ability
to continue as a going concern. We are addressing the going concern issue in
virtually every aspect of our operation. We continue to cut operating expenses
and are successfully changing our product mix such that the company is
achieving improved margins. Because of our significant losses incurred since
inception, we have become substantially dependent on loans from officers,
directors, and third parties, and from private placements of our securities to
fund operations. These financings and equity placements are included in the
following descriptions.



| |  | During the nine months ended September 30, 2002 a total of 292,207
common shares were issued to an employee under the terms of their
employment contract. The average effective price per share was $0.03.
The second and third quarter components were issued under the
companys S8 Registration Statement.          
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | During the third quarter 2002 51,545 common shares, previously
allocated to various staff in recognition of performance during 2001,
vested and were issued under the companys S8 Registration Statement.                                                                                                             
| 
| |  | During the third quarter the company liquidated a portion of its
marketable securities for a net cashflow of $73,308.                                                                                                                                                                                                  
| 
| |  | During the second quarter 2 Convertible Debentures with principal
balances of $85,000 and accrued interest of $9,747.22 were converted
into 2,225,278 shares of common stock at an average conversion rate of
$0.043 per share                                                                                         
| 
| |  | During the second quarter 1,619,703 common shares were issued to
providers of various services to the company. Said services amounted
to the cash equivalent of $55,150 and included general consulting
services, R&D consulting services and shareholder relations services.
The effective price per share was $0.034.
| 
| |  | During the second quarter the company liquidated a portion of its
marketable securities for a net cashflow of $101,808.                                                                                                                                                                                                
| 
| |  | During the three months ended March 31, 2002 we borrowed $204,000 by
way of the issuance of Convertible Debentures.                                                                                                                                                                                                    
| 
| |  | During the three months ended
March 31, 2002 2 Convertible Debentures with principal balances of $50,404 and accrued interest of $4,762
were converted into 1,100,000 shares of common stock at an average
conversion rate of $0.05 per share.                                                                         
| 
| |  | During the nine months ended September 30, 2002, accounts receivable
decreased by $655 to $157,472 from $158,127 at December 31, 2001.                                                                                                                                                                                 

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| |  | During the nine months ended September 30, 2002, inventory decreased
by 34% to $386,575 compared with $586,313 at December 31, 2001. The
decrease can be attributed to the sale of SunSwipe inventory in the
first and second quarters. Production to replenish this inventory for
the upcoming sunscreen season will begin within the next few months.                                                                                                                                                                                                                                                                                                              
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 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 November 4, 2002, we have cash of approximately $43,000 and
during November and December, we expect cash flow of $300,000 from
operating activities, private placements and possible sale of
marketable securities. This level of liquidity should be sufficient
to operate the Company for 180 days. The Company anticipates
increasing sales, reduced operating expenses, and additional private
placement funding will contribute to continuous operations of the
Company.                                                                                                                                                                                  
| 
| |  | We anticipate utilizing a portion of our funds to acquire a larger
volume of product inventory to support an anticipated increase in
orders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| 
| |  | If disruptions occur in third party vendors that supply raw materials
to our contract fill manufacturers, we may experience the inability to
have product inventory for sale to our customers. Such events could
have material adverse effect on Veridien to compete effectively in the
marketplace. We continue to utilize the services of a number of
contract fill manufacturers. These 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.

18



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##### Table of Contents






PART II                                                                      OTHER INFORMATION




Item 1. Legal Proceedings

The previously reported suit filed (June 2001) against Veridien by Unico
International Trading Corp. in the claimed amount of $922,326 was settled
for a cash payment of $58,000 with no liability acknowledged by either
party. Mutual releases have been exchanged by the parties.

There have been no changes in any other previously reported litigation.




Item 2. Changes in Securities



| | (a) |  | Not applicable.                                                                                                                                                                                                      
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Not applicable.                                                                                                                                                                                                      
|
| | (c) |  | No issuances of equity securities (including debt securities
immediately convertible into equity securities) without registration
under the Securities Act of 1933 occurred during quarter ending
September 30, 2002.
|
| | (d) |  | Not applicable.                                                                                                                                                                                                      




Item 5. Other Information

Veridien and E.I. DuPont de Nemours and Company have entered into an exclusive
distribution agreement to market Veridiens line of sunscreen
towelettes. Sales of these products in the Emergency Services and
Industrial markets are expected to commence in the first quarter of
2003.

In addition, Veridien is finishing negotiations of
a distribution agreement with Dupont for all Viraguard® products in the United States of America in specific market
segments. The revised agreement is expected to be completed in the
fourth quarter 2002 and will include 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. Initial
deliveries thereunder are expected to commence in January 2003.

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Item 6. Exhibits and Report on Form 8-K



| | (a) |  | Exhibit 99.1  Certification Pursuant to 18
U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Exhibit 99.2  Certification Pursuant 18 U.S.C.
Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   

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SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|     |  |                   |  |                      |  |                                               
|---- |  | ----------------- |  | -------------------- |  | ----------------------------------------------
|     |  |                   |  | Veridien Corporation
|     |  |                   |  |                     
|     |  |                   |  | (Registrant)        
|    
|Date |  | November 14, 2002 |  | By                   |  | /s/ Sheldon C. Fenton                         
|     |  |                   |  |                      |  |                                               
|     |  |                   |  |                      |  | Sheldon C. Fenton
Chief Executive Officer     
|    
|Date |  | November 14, 2002 |  | By                   |  | /s/ Rene A. Gareau                            
|     |  |                   |  |                      |  |                                               
|     |  |                   |  |                      |  | Rene A. Gareau
Exec.Vice President & Secretary