##### Table of Contents



UNITED STATES OF AMERICA SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-QSB
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended March 31, 2006
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period
from  to
 Commission file number 000-25555
 Veridien Corporation
  Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
    
    59-3020382
(IRS Employer Identification No.)
 2875 MCI Drive, Suite B, Pinellas Park, Florida
(Address of principal executive offices)
    
    33782-6105
(Zip Code)
 
   þ o
  o þ
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TABLE OF CONTENTS
 PagesPART I FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Notes to Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
    
    
    8Item 3. Controls and Procedures
    
    
    14PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    14Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    14Item 6. Exhibits and Report on Form 8-K(a) Exhibit 31.1  Rule 13a-14(a)/15d-14(a) Certification, Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    15(b) Exhibit 31.2
 Rule 13a-14(a)/15d-14(a) Certification, Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    15(c) Exhibit 32.1  Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
    
    
    15(d) Exhibit 32.2  Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
    
    
    15Ex-31.1 Section 302 CertificationEx-31.2 Section 302 CertificationEx-32.1 Section 906 CertificationEx-32.1 Section 906 Certification
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##### Table of Contents



PART 1
 
 FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Veridien Corporation
and Subsidiaries
 
  March 31, 2006
    
    
    December 31, 2005AssetsCurrent assets:Cash

    
    $
    120,992
    
    
    $
    115,493Marketable securities
    
    
    147,474
    
    
    
    137,795Accounts receivable, net of allowance
of $34,825 and $27,494
    
    
    139,301
    
    
    
    324,952Inventory
    
    
    410,136
    
    
    
    376,624Prepaid expenses and other current assets
    
    
    69,443
    
    
    
    82,399Total current assets
    
    
    887,346
    
    
    
    1,037,263Property and equipment, net of accumulated
depreciation of $419,638 and $417,365
    
    
    27,489
    
    
    
    29,762Other assets:Patents, net of accumulated amortization of
$512,465 and $511,188, respectively
    
    
    307,164
    
    
    
    286,280Goodwill
    
    
    410,000
    
    
    
    410,000Security deposits
    
    
    10,354
    
    
    
    9,965Total Assets:$
    1,642,353
    
    
    $
    1,773,270
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Veridien Corporation
and Subsidiaries
 
  March 31, 2006
    
    
    December 31, 2005Liabilities and Shareholders DeficitCurrent liabilities:Note payable
    
    $
    551,136
    
    
    $
    571,522Notes
payable  related party
    
    
    401,000
    
    
    
    260,000Current portion of convertible debentures
    
    
    671,066
    
    
    
    671,066Current
portion of convertible debentures  related party
    
    
    824,096
    
    
    
    824,096Accounts payable
    
    
    380,867
    
    
    
    452,904Accounts
Payable  related party
    
    
    266,031
    
    
    
    232,049Accrued liabilities
    
    
    563,496
    
    
    
    534,686Accrued
liabilities  related party
    
    
    859,861
    
    
    
    769,192Customer deposits
    
    
    16,977
    
    
    
    16,977Total current liabilities:
    
    
    4,534,530
    
    
    
    4,332,492Long term liabilities:Convertible debentures
    
    
    1,180,000
    
    
    
    1,130,000Convertible debentures  related party
    
    
    1,780,811
    
    
    
    1,780,811Total liabilities:
    
    
    7,495,341
    
    
    
    7,243,303Minority interest
    
    
    125,968
    
    
    
    178,756Shareholders deficit:Undesignated preferred stock $.001 par value,
25,000,000 shares authorized, none issuedConvertible redeemable preferred stock,
$10 par value, 100,000 authorized; 6,000
issued and outstanding at March 31, 2006 and
December 31, 2005
    
    
    60,000
    
    
    
    60,000Series B preferred stock,
$.001 par value, 245,344 authorized, 174,219
issued and outstanding at March 31, 2006
and December 31, 2005
    
    
    175
    
    
    
    175Common stock
 $.001 par value; 300,000,000 shares
authorized, 228,412,857 and 228,282,857 issued
and outstanding at March 31, 2006 and December 31,2005
    
    
    228,413
    
    
    
    228,283Additional paid-in capital
    
    
    31,836,519
    
    
    
    31,819,544Accumulated deficit
    
    
    (37,756,791
    )
    
    
    (35,780,923
    )Current period profit (loss)
    
    
    (347,272
    )
    
    
    (1,975,868
    )Total shareholders deficit:
    
    
    (5,978,956
    )
    
    
    (5,648,789
    )Total Liabilities and Shareholders Deficit:
    
    $
    1,642,353
    
    
    $
    1,773,270
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Veridien Corporation
and Subsidiaries
 
 For the three months ended,March 31, 2006
    
    
    March 31, 2005Revenue
    
    $
    155,123
    
    
    $
    317,378Operating costs and expenses:Cost of revenue
    
    
    87,986
    
    
    
    226,104General, selling, and administrative
    
    
    203,785
    
    
    
    263,171Research and development
    
    
    118,243
    
    
    
    249,587410,014
    
    
    
    738,862Other income (expense):Interest expense
    
    
    (155,975
    )
    
    
    (121,334
    )Unrealized gain (loss) on investments
    
    
    (116,234
    )
    
    
    (80,600
    )Interest income
    
    
    1,126
    
    
    
    444Dividend income
    
    
    125,914
    
    
    
    -0-(145,169
    )
    
    
    (201,490
    )Net income (loss) before minority interest
    
    
    (400,060
    )
    
    
    (622,974
    )Minority interest in Mycosol loss
    
    
    52,788
    
    
    
    152,299Net income (loss)
    
    $
    (347,272
    )
    
    $
    (470,675
    )Basic and
diluted net income (loss) per common share
    
    $
    (0.00
    )
    
    $
    (0.00
    )Weighted average share outstanding
    
    
    228,326,190
    
    
    
    225,734,619
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Veridien Corporation
and Subsidiaries
 2006
    
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    (347,272
    )
    
    $
    (470,675
    )Adjustments to reconcile net income (loss) to net cash
(used) by operating activities:Depreciation and amortization
    
    
    3,550
    
    
    
    11,658Common stock issued for services
    
    
    6,500
    
    
    
    6,600Realized (gain) loss on marketable securities
    
    
    
    
    
    
    Unrealized (gain) loss on marketable securities
    
    
    116,234
    
    
    
    Proceeds from sale of marketable securities
    
    
    
    
    
    
    80,600Minority interest
    
    
    (52,788
    )
    
    
    (152,299
    )Changes inMarketable securities
    
    
    (125,914
    )
    
    
    Accounts receivable
    
    
    185,651
    
    
    
    78,333Inventories
    
    
    (33,512
    )
    
    
    (26,563
    )Other current assets
    
    
    12,956
    
    
    
    23,585Accounts payable
    
    
    (38,055
    )
    
    
    122,005Accrued expenses
    
    
    130,085
    
    
    
    88,364Net cash (used) by operating activities:
    
    
    (142,565
    )
    
    
    (238,392
    )Cash flow from investing activities:Purchase of property and equipment
    
    
    
    
    
    
    (9,805
    )Increase in patents
    
    
    (22,161
    )
    
    
    (14,800
    )Increase in security deposits
    
    
    (389
    )
    
    
    3,000Net cash (used) by investing activities:
    
    
    (22,550
    )
    
    
    (21,605
    )Cash flow from financing activities:Proceeds from Mineola advance
    
    
    
    
    
    
    500,000Proceeds from convertible debentures
    
    
    50,000
    
    
    
    200,000Proceeds
from notes payable - related party
    
    
    141,000
    
    
    
    Payments on notes payable
    
    
    (20,386
    )
    
    
    (19,671
    )Net cash provided by financing activities:
    
    
    170,614
    
    
    
    680,329Net increase/(decrease) in cash
    
    
    5,499
    
    
    
    420,332Cash at beginning of quarter
    
    
    115,493
    
    
    
    126,027Cash at end of quarter
    
    $
    120,992
    
    
    $
    546,359Non-cash investing and financing activities:Conversion of convertible debentures to common stock
    
    
    
    
    
    $
    113,489Payment of accrued interest with Mycosol warrants
    
    
    
    
    
    
    222,360Purchase of Mycosol interest with 6,000,000 shares
of Veridien common stock
    
    
    
    
    
    
    300,000
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Veridien Corporation
and
Subsidiaries
 
 Notes to the Unaudited Interim Consolidated Financial Statements at March 31, 2006
  Note
A  Stock-Based Compensation
   Note
B  Consolidation of Variable Interest Entity  Mycosol Investment
   Note
C  Convertible Debentures
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Item 2. Managements Discussion and Analysis
 First Quarter  March 31, 2006 Compared with March 31, 2005
  Overview
   Ò ® ® ® ®
 Ò Ò ® ®
 ® ®
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®
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Result of Operations
 First Quarter ended March 31, 2006 vs. First Quarter ended March 31, 2005
 First Quarter
    
    Percentage ofMarch 31
    
    Gross Revenue2006
    
    2005
    
    2006
    
    2005Revenue
    
    $
    155,123
    
    
    $
    317,378
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    87,986
    
    
    
    226,104
    
    
    
    57
    %
    
    
    71
    %Gross Profit
    
    
    67,137
    
    
    
    91,274
    
    
    
    43
    %
    
    
    29
    %Operating Expenses:General, Selling &
Administrative
    
    
    203,785
    
    
    
    263,171
    
    
    
    131
    %
    
    
    83
    %Research & Development
    
    
    118,243
    
    
    
    249,587
    
    
    
    76
    %
    
    
    79
    %Other Income (Expense) Net
    
    
    (145,169
    )
    
    
    (201,490
    )
    
    
    (94
    )%
    
    
    (63
    )%Net Income (Loss) Before
Minority Interest
    
    
    (400,060
    )
    
    
    (622,974
    )
    
    
    (258
    )%
    
    
    (196
    )%Minority Interest
    
    
    52,788
    
    
    
    152,299
    
    
    
    34
    %
    
    
    48
    %Net Income (Loss) Before Taxes
    
    $
    (347,272
    )
    
    $
    (470,675
    )
    
    
    (224
    )%
    
    
    (148
    )%Income Taxes
    
    
    -0-
    
    
    
    -0-
    
    
    
    0
    %
    
    
    0
    %Net Income (Loss)
    
    $
    (347,272
    )
    
    $
    (470,675
    )
    
    
    (224
    )%
    
    
    (148
    )%
  
    
    Gross revenue from product sales decreased for first quarter 2006
by $162,255 or 51% to $155,123 compared with $317,378 in first
quarter 2005. The decrease can be attributed to timing of product
production in first quarter which will be delivered in second
quarter 2006. We continue active promotion of our product line
through trade-show presentations and direct calls on both existing
and potential customers. Our goal is to continue to expand our
product lines and we anticipate new products, which are scheduled
with various releases this year, will generate new revenue in this
and future years. In addition, we continue to pursue strategic
alliances with other corporations that have existing distribution
networks. Our goal for these alliances is to create immediate
distribution and fulfillment avenues for our products, while
focusing on our capital resources. We have recently begun
expanding our revenue base to include not only sale of our
proprietary products but also the sale of licensing rights
relating to our existing and/or new technology, as well as service
fees. We intend to continue to broaden this initiative from new
technology created by Mycosol including their eight patents
pending.
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
    
    Interest income for first quarter 2006 increased by $682 or 154%
to $1,126 compared with $444 in first quarter 2005. The increase
in interest income is attributed to a higher balance earning
interest at higher interest rates at the bank over the same period
in the prior year.
 
    
    Dividend income for first quarter 2006 increased by $125,914 or
100% to $125,914 compared with $-0- in first quarter 2005.
Dividend income is attributed to receipt of 359,753 shares of
Standard Holdings Group LTD (SNDH) in first quarter 2006. These
shares were distributed as a dividend based on holdings of
H-Quotient, Inc. (HQNT) stock as of December 30, 2005.
  
    
    The cost of revenue for the first quarter decreased as a percentage of total revenue to
57% in 2006 from 71% in 2005. The cost of goods sold from products sales for first
quarter 2006 decreased by $138,118 or 61% to $87,986 compared with $226,104 in first
quarter 2005. This can be attributed to a decrease in product sales of 51% for the same
period. The cost of goods ratio as a percentage of product sales was 57% in first quarter
2006 compared to 71% in first quarter 2005. The decrease in ratio of the cost of goods
from product sales as a percentage of sales resulted primarily from sale of a product mix
with increased margins.
    
    General, selling, and administrative expenses for first quarter 2006 decreased by
$59,386 or 23% to $203,785 compared with $263,171 in first quarter 2005. Decreases that
affected general and administrative expenses were associated with professional public
company, legal, consulting and accounting fees for first quarter 2006 that decreased by 41%
to $40,217 compared with $68,194 in first quarter 2005. Decreases in general and
administrative costs were associated with insurance fees for first quarter 2006 that
decreased by 1% to $21,927 compared with $22,161 in first quarter 2005. Decreases that
affected general and administrative costs were associated with rent expense for first
quarter 2006 that decreased by 11% to $5,619 compared with $6,347 in first quarter 2005.
Decreases in general and administrative costs were associated with sales and marketing
expenses for first quarter 2006 that decreased by 31% to $69,062 compared with $100,391 in
first quarter 2005.
    
    Research and development expenses for first quarter 2006 decreased by $131,344 or 53% to
$118,243 compared with $249,587 in first quarter 2005. This represents $27,229 for the
Company and $91,014 from consolidation of expenses for the VIE  Mycosol, Inc. with respect
to their development of their eight patents pending. The Company continues to research and
focus on broadening the range of claims they can assert on existing products and on testing
new products for commercialization.
    
    During first quarter 2006, the Company recorded an unrealized loss in the amount of
$116,234 which reflects the decline in the fair market value of 719,507 HQNT common shares
from $.17 to $.09, a decline in the fair market value of 10,741 Healthnostics, Inc. (HNST)
common shares from $.125 to $.07, and a decline in the fair market value of 431,404
Standard Holdings Group LTD (SNDH) common shares from $.24 to $.19 at March 31, 2006.
During first quarter 2005, the Company recorded an unrealized loss in the amount of $80,600
which reflects the decline in the fair market value of 701,506
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HQNT common shares from $.55 to $.45 and a decline in the fair market value of 10,741
Healthnostics, Inc. (HNST) common shares from $.13 to $.075 at March 31, 2005.
    
    Interest expense for first quarter 2006 increased by $34,641 or 29% to $155,975 compared
with $121,334 in first quarter 2005. The increase in interest expense was due primarily to
the increase in Convertible Debentures and continuing current debt financing arrangements.
    
    Net income (losses) decreased to a net (loss) before Minority interest in
Mycosol to ($400,060) for first quarter 2006 from a net (loss) of ($622,974) for first
quarter 2005. Net income (losses) decreased to a net (loss) after Minority interest in
Mycosol to ($347,272) for first quarter 2006 from a net (loss) of ($470,675) for first
quarter 2005.
 Liquidity and Working Capital
  
    
    During the first quarter of 2006 we issued a convertible debenture for cash proceeds of
$50,000. This debenture carries an interest rate of 8%, has a term of 3 years and has a
conversion rate of $0.033
    
    During the three months ended March 31, 2006, 30,000 common shares were issued under the
companys S8 Registration Statement to an employee under the terms of their employment
contract. The average effective price per share was $0.05.
    
    During the first three months of 2006 100,000 common shares were earned by the Chairman
of the Board under the terms of his consulting agreement with the company. The effective
price per share was $0.05.
    
    During the three months ended March 31, 2006, accounts receivable decreased by $185,651
to $139,301 from $324,952 at December 31, 2005.
    
    During the three months ended March 31, 2006, inventory increased by $33,512 to $410,136
compared with $376,624 at December 31, 2005.
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
    
    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 May 4, 2006, we have cash of approximately $218,402 and during May and June, 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 more than 180 days. The Company anticipates increasing sales, reduced
operating expenses, and additional private placement funding will contribute to continuous
operations of the Company.
    
    We anticipate utilizing a portion of our funds to support the working capital
requirements of our anticipated increase in sales and to cover new product development
costs for Veridien and our VIE, Mycosol.
    
    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.
 Critical Accounting Estimates
     13




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(a)
    
    The following issuances of equity securities (including debt securities immediately
convertible into equity securities) without registration under the Securities Act of 1933
occurred during the quarter ending March 31, 2006:
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Convertible SecuritiesOn January 23, 2006 the Registrant issued a convertible debenture for cash proceeds of
$50,000 to a third party, unrelated, accredited investor. This debenture carries an
interest rate of 8% and has a term of 3 years. This instrument is immediately convertible
into common shares, at the option of the holder, at the conversion rate of $0.033. This
issuance was considered exempt from registration by reason of Section 4(2) of the Securities
Act.Common StockAt March 31, 2006, the Chairman of the Board was entitled to the issuance of 100,000 common
            shares under the terms of his consulting agreement with the company. These shares were
accounted for in the first quarter but were not issued until April 26, 2006. The issuance is
considered exempt from registration by reason of Section 4(2) of the Securities Act.(b)
    
    Not applicable.(c)
    
    Not applicable.(d)
    
    During the quarter ended March 31, 2006 the Company did not repurchase any of its
equity securities.
 
  A.
    
    Exhibits
 (a)
    
    Exhibit 31.1  Rule 13a-14(a)/15d-14(a) Certification,
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(b)
    
    Exhibit 31.2  Rule 13a-14(a)/15d-14(a) Certification,
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(c)
    
    Exhibit 32.1  Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(d)
    
    Exhibit 32.2  Certification Pursuant 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 B.
    
    Report on Form 8-KDuring the first quarter of 2006 there were no reports on Form 8-K issued by the
Company.
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Veridien Corporation(Registrant)
 Date    May 19, 2006
    
    By    /s/ Sheldon C. Fenton

Sheldon C. FentonChief Executive OfficerDate    May 19, 2006
    
    By    /s/ Russell Van ZandtRussell Van ZandtChief Financial Officer & Chairman
 16