##### Table of Contents



UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2008
 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
  Delaware
    
    59-3020382(State or Other Jurisdiction of Incorporation or Organization)
    
    (IRS Employer Identification No.)7600 Bryan Dairy Road, Suite F, Largo, Florida
    
    33777-1433(Address of principal executive offices)
    
    (Zip Code)
  (Registrants telephone number, including area code)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PagesPART I FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)
    
    
    3Notes to Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis
    
    
    12Item 4. Controls and Procedures
    
    
    20PART II OTHER INFORMATIONItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 5. Other Information
    
    
    21Item 6. Exhibits and Reports on Form 8-K
    
    
    21Exhibits(a) Exhibit 31.1 - Rule 13a-14(a)/15d-14(a)
Certification, Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    23(b) Exhibit 31.2 - Rule 13a-14(a)/15d-14(a)
Certification, Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    24(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
    
    
    25(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
    
    
    26EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Veridien Corporation
and Subsidiaries
 
 September 30,2008
    
    
    December 31, 2007AssetsCurrent assets:Cash
    
    $
    27,597
    
    
    $
    75,389Marketable securities
    
    
    19,561
    
    
    
    20,591Accounts receivable, net of allowance
of $21,606 and $53,893
    
    
    94,310
    
    
    
    607,449Inventory
    
    
    719,825
    
    
    
    572,689Prepaid expenses and other current assets
    
    
    25,517
    
    
    
    66,456Total current assets:
    
    
    886,810
    
    
    
    1,342,574Property and equipment, net of accumulated
depreciation of $440,608 and $434,999
    
    
    26,872
    
    
    
    32,432Other assets:Patents, net of accumulated amortization of
of $525,241 and $521,408
    
    
    695,410
    
    
    
    614,604Goodwill
    
    
    1,151,751
    
    
    
    1,151,751Security deposits
    
    
    3,400
    
    
    
    5,695Total Assets:
    
    $
    2,764,243
    
    
    $
    3,147,056
  3




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 
 September
    
    
    December30, 2008
    
    
    31, 2007Liabilities and Shareholders EquityCurrent liabilities:Notes payable
    
    $
    19,901
    
    
    $
    46,286Notes payable  related party
    
    
    354,102
    
    
    
    234,102Current portion of convertible debentures, net of debt discount
of $883 and $3,535 at September 30, 2008 and December 31, 2007
    
    
    458,117
    
    
    
    205,465Current portion of convertible debentures  related party
    
    
    275,000
    
    
    
    275,000Accounts payable
    
    
    829,474
    
    
    
    739,129Accounts payable  related party
    
    
    765,002
    
    
    
    638,526Accrued liabilities
    
    
    175,490
    
    
    
    191,759Accrued liabilities  related party
    
    
    219,976
    
    
    
    166,528Total current liabilities:
    
    
    3,097,062
    
    
    
    2,496,795Long-term liabilities:Convertible debentures
    
    
    -0-
    
    
    
    50,000Total liabilities:
    
    
    3,097,062
    
    
    
    2,546,795Minority interest
    
    
    21,824
    
    
    
    90,049Shareholders equity:Preferred stock - 23,200,000 undesignated, $.001 par value at September 30,
2008 and December 31, 2007
    
    
    201
    
    
    
    201Series 2006-A preferred stock, $.001 par value, 300,000
authorized, and 200,607 issued
and outstanding at September
30, 2008 and December 31, 2007Series 2006-B preferred stock, $.001
par value, 1,200,000
authorized, and 999,141 and
1,008,955 issued and
outstanding at September 30, 2008
and December 31, 2007
    
    
    999
    
    
    
    1,009Series 2006-C preferred stock, $.001 par value,
300,000 authorized, and 0
issued and outstanding at
September 30 ,2008 and December 31, 2007
    
    
    -0-
    
    
    
    -0-Common Stock  $.001 par value; 800,000,000 shares authorized,
266,825,170 and 262,549,196
issued and outstanding at
September 30, 2008 and December 31, 2007
    
    
    266,825
    
    
    
    262,549Cumulative foreign exchange adjustment
    
    
    (1,404
    )
    
    
    (17,421
    )Additional paid-in capital
    
    
    43,034,926
    
    
    
    43,005,938Accumulated deficit
    
    
    (42,742,064
    )
    
    
    (40,571,437
    )Current period profit (loss)
    
    
    (914,126
    )
    
    
    (2,170,627
    )Total shareholders equity:
    
    
    (354,643
    )
    
    
    510,212Total Liabilities and Shareholders Equity:
    
    $
    2,764,243
    
    
    $
    3,147,056
  4




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##### Table of Contents



Veridien Corporation
and Subsidiaries
 
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    222,632
    
    
    $
    341,560
    
    
    $
    1,039,379
    
    
    $
    1,609,191Operating costs and expenses:Cost of revenue
    
    
    169,991
    
    
    
    159,052
    
    
    
    766,504
    
    
    
    1,028,778General, selling, and
administrative
    
    
    309,174
    
    
    
    404,909
    
    
    
    944,136
    
    
    
    1,717,882Research and development
    
    
    44,677
    
    
    
    161,747
    
    
    
    248,070
    
    
    
    506,163523,842
    
    
    
    725,708
    
    
    
    1,958,710
    
    
    
    3,252,823Other income (expense):Interest and dividend expense
    
    
    (29,921
    )
    
    
    (18,615
    )
    
    
    (87,642
    )
    
    
    (63,046
    )Realized gain on sale of
Mycosol warrants
    
    
    -0-
    
    
    
    -0-
    
    
    
    25,000
    
    
    
    -0-Unrealized loss
on investments
    
    
    (926
    )
    
    
    (1,820
    )
    
    
    (1,029
    )
    
    
    (13,247
    )Interest income
    
    
    7
    
    
    
    2,457
    
    
    
    652
    
    
    
    8,254(30,840
    )
    
    
    (17,978
    )
    
    
    (63,019
    )
    
    
    (68,039
    )Net loss before minority interest
    
    
    (332,050
    )
    
    
    (402,126
    )
    
    
    (982,350
    )
    
    
    (1,711,671
    )Minority interest in Mycosol loss
    
    
    3,858
    
    
    
    39,726
    
    
    
    68,224
    
    
    
    151,261Net loss
    
    $
    (328,192
    )
    
    $
    (362,400
    )
    
    $
    (914,126
    )
    
    $
    (1,560,410
    )Deemed dividend on preferred stock
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    (96,625
    )Net loss attributable to common
shareholders
    
    $
    (328,192
    )
    
    $
    (362,400
    )
    
    $
    (914,126
    )
    
    $
    (1,657,035
    )Weighted average common shares
outstanding  basic and diluted
    
    
    266,403,742
    
    
    
    262,128,659
    
    
    
    264,761,645
    
    
    
    260,176,821Net loss attributable to common
shareholders per share 
basic and diluted
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.01
    )
  5




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##### Table of Contents



Veridien Corporation
and Subsidiaries
 
 2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (914,126
    )
    
    $
    (1,560,410
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    9,442
    
    
    
    11,217Non-cash expense fair market value of warrants
    
    
    4,688
    
    
    
    639,594Amortization of debt discount associated with BCF
    
    
    2,652
    
    
    
    2,652Realized gain on sale of Mycosol warrants
    
    
    (25,000
    )
    
    
    -0-Non-cash dividends
    
    
    4,217
    
    
    
    6,883Unrealized loss on marketable securities
    
    
    1,029
    
    
    
    13,247Stock issued for services
    
    
    24,350
    
    
    
    19,615Minority interest in Mycosol
    
    
    (68,224
    )
    
    
    (151,261
    )Changes in operating assets and liabilities:Accounts receivable (net of allowance)
    
    
    513,139
    
    
    
    446,718Inventory
    
    
    (147,136
    )
    
    
    (86,372
    )Prepaid expenses and other current assets
    
    
    40,939
    
    
    
    27,628Accounts payable  third party
    
    
    90,345
    
    
    
    (283,126
    )Accounts payable  related party
    
    
    126,476
    
    
    
    320,625Accrued expenses  third party
    
    
    (16,269
    )
    
    
    (31,993
    )Accrued expenses  related party
    
    
    53,448
    
    
    
    3,167Net cash used in operating activities:
    
    
    (300,030
    )
    
    
    (621,816
    )Cash flow from investing activities:Purchase of property and equipment
    
    
    (49
    )
    
    
    (4,719
    )Purchase of additional interest in Mycosol
    
    
    -0-
    
    
    
    (25,000
    )Proceeds from sale of Mycosol warrants
    
    
    25,000
    
    
    
    -0-Increase in patents
    
    
    (84,639
    )
    
    
    (101,242
    )Decrease in security deposits
    
    
    2,295
    
    
    
    2,588Net cash used in investing activities:
    
    
    (57,393
    )
    
    
    (128,373
    )Cash flow from financing activities:Proceeds from convertible debentures
    
    
    200,000
    
    
    
    -0-Proceeds from preferred stock issuances
    
    
    -0-
    
    
    
    750,000Proceeds on notes payable  third party
    
    
    26,936
    
    
    
    29,130Proceeds on notes payable  related party
    
    
    120,000
    
    
    
    100,000Payments on notes payable  third party
    
    
    (53,322
    )
    
    
    (65,507
    )Payments on notes payable  related party
    
    
    -0-
    
    
    
    (100,000
    )Net cash provided by financing activities:
    
    
    293,614
    
    
    
    713,623Net effect of exchange rates on cash
    
    
    16,017
    
    
    
    25,757Net change in cash
    
    
    (47,792
    )
    
    
    (10,809
    )Cash at beginning of year
    
    
    75,389
    
    
    
    185,656Cash at end of quarter
    
    $
    27,597
    
    
    $
    174,847Non-cash investing and financing activities:Conversion of debt to convertible debentures
    
    
    -0-
    
    
    $
    125,000Conversion of convertible debentures to common stock
    
    
    -0-
    
    
    
    -0-Conversion of preferred stock to common stock
    
    $
    102,357
    
    
    
    277,123Conversion of debt to preferred stock
    
    
    -0-
    
    
    
    20,000Issuance of common shares for additional Mycosol interest
    
    
    -0-
    
    
    
    50,000
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Veridien Corporation
and
Subsidiaries
 
 Notes to the Unaudited Interim Consolidated Financial Statements at September 30, 2008
  Note A  Going Concern
     Note B  Fair Value Measurements
  7




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Note B  Fair Value Measurements  Continued
   Note C  Stock-Based Compensation
  (i)
    
    1,011,370 shares of common stock valued at the market price at the date of grant [$15,000],
to a consultant for services rendered. Pursuant to our agreement with the consultant, they
will continue to receive $1,000 of Veridien stock every month during 2008.
 (ii)
    
    705,686 shares of common stock valued at the market price at the date of grant [$9,350], to
an employee and two consultants for services rendered.
  (i)
    
    300,000 to a consultant (exercise price $0.06 / expiry December 31,
2011 / vesting immediately), the fair value of which was $1,503, $1,093 of which
was expensed during the first nine months of 2008;(ii)
    
    1,000,000 to a consultant (exercise price $0.05 / expiry December 31,
2010 / vesting at 12/31/08), the fair value of which was $5,317, $3,987 of which
was expensed during the first nine months of 2008;(iii)
    
    1,000,000 to a consultant (exercise price $0.08 / expiry December
31, 2011 / vesting at 12/31/09), the fair value of which was $4,784, $1,794 of
which was expensed during the first nine months of 2008.
  (a)
    
    To the consultant in (i) above, 350,000 if sales procured by them
during 2008 exceed $500,000, 350,000 if sales procured by them during 2008 exceed
$1 million;(b)
    
    To the consultant in (ii) above, 400,000 if 2008 Revenue exceeds $4.6
million;(c)
    
    To the consultant in (iii) above, 200,000 if 2009 Revenue exceeds $6
million;(d)
    
    To another consultant, maximum 1,000,000 per year for 3 years:
 
    
    Year 1  175,000 warrants for every $1 million in 2008 sales over 2007
sales level (exercise price $0.08 / vest February 15, 2009 / expiry
February 15, 2011);
    
    Year 2  175,000 warrants for every $1 million in 2009 sales over 2008
sales level (exercise price $0.10 / vest February 15, 2010 / expiry
February 15, 2012);
 
 8




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##### Table of Contents



Note C  Stock-Based Compensation  Continued
 
    
    Year 3  175,000 warrants for every $1 million in 2010 sales over 2009
sales level (exercise price $0.10 / vest February 15, 2011 / expiry
February 15, 2013).
   Note D  Consolidation of Mycosol
  Consolidation of Variable Interest Entities,
  Note E  Marketable Securities
  9




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##### Table of Contents



Note F  Inventory
  Note G  Convertible Debentures
     Note H  Preferred Stock
   Note I  Santius LifeSciences, Inc.
  Consolidation of Variable Interest Entities
 10




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##### Table of Contents



Note I  Santius LifeSciences, Inc.  Continued
   Note J  Related Party Transactions
      11




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##### Table of Contents



Item 2. Managements Discussion and Analysis
 Third Quarter  September 30, 2008 Compared with September 30, 2007
  Overview
   Ò
 Ò Ò
    12




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##### Table of Contents



Results of Operations
 Third Quarter ended September 30, 2008 vs. Third Quarter ended September 30, 2007
 Third Quarter
    
    
    Percentage ofSeptember 30,
    
    
    Net Revenue2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    222,632
    
    
    $
    341,560
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    169,991
    
    
    
    159,052
    
    
    
    76
    %
    
    
    47
    %Gross Profit
    
    
    52,641
    
    
    
    182,508
    
    
    
    24
    %
    
    
    53
    %Operating Expenses:General, Selling & Administrative
    
    
    309,174
    
    
    
    404,909
    
    
    
    139
    %
    
    
    119
    %Research & Development
    
    
    44,677
    
    
    
    161,747
    
    
    
    20
    %
    
    
    47
    %Loss from Operations
    
    
    (301,210
    )
    
    
    (384,148
    )
    
    
    (135
    )%
    
    
    (112
    )%Other Expense Net
    
    
    (30,840
    )
    
    
    (17,978
    )
    
    
    (14
    )%
    
    
    (5
    )%Net Loss Before Minority Interest
    
    
    (332,050
    )
    
    
    (402,126
    )
    
    
    (149
    )%
    
    
    (118
    )%Minority Interest
    
    
    3,858
    
    
    
    39,726
    
    
    
    2
    %
    
    
    8
    %Net Loss
    
    
    (328,192
    )
    
    
    (362,400
    )
    
    
    (147
    )%
    
    
    (106
    )%Deemed Dividend on Preferred Stock
    
    
    -0-
    
    
    
    -0-
    
    
    
    0
    %
    
    
    0
    %Net Loss Attributable to Common
Shareholders
    
    $
    (328,192
    )
    
    $
    (362,400
    )
    
    
    (147
    )%
    
    
    (106
    )%
 Third Quarter  September 30, 2008 Compared with September 30, 2007
  
    
    Gross revenue from product sales decreased for third quarter 2008 by $118,928, or 35%,
to $222,632 compared with $341,560 in third quarter 2007. 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. This should generate
new revenue in 2009 and in futures years. In addition, we launched in March 2008 a
national sales drive for medical markets across the United States, encompassing 26 new
sales representatives. As a result of their efforts several clinical trials are underway
and we expect orders to begin from the results in the fourth quarter.
 
    
    Interest income for third quarter 2008 decreased by $2,450, or 100%, to $7 compared with
$2,457 in third quarter 2007. The decrease in interest income is attributed to a lower
cash balance earning interest at lower rates at the bank over the same period in the prior
year.
  13




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
    
    The cost of goods sold from product sales for third quarter 2008 increased by $10,939 or
7% to $169,991 compared with $159,052 in third quarter 2007. The cost of goods ratio as a
percentage of product sales was 76% in third quarter 2008 compared to 47% in third quarter
2007. The increase in ratio of the cost of goods from product sales as a percentage of
sales resulted primarily from an increase in the sale of a product mix with lower margins.
Profit margins for product sales were at 24% and 53%, respectively.
    
    General, selling, and administrative expenses for third quarter 2008 decreased by
$95,735 or 24% to $309,174 compared with $404,909 during the third quarter 2007.Decreases that affected general and administrative expenses were associated with:
 (1)
    
    professional management compensation expenses for the third quarter 2008 that
decreased by 100% to $-0- compared with $87,500 in third quarter 2007. This decrease is
attributable to a compensation package for Sheldon Fenton and Kenneth Cancellara which
was implemented in second quarter 2007; however, was eliminated for Cancellara in 2008.
Also, during the third quarter 2008 the 2008 compensation for Sheldon Fenton was
re-structured to reduce his overall cost for the year to the Company; and(2)
    
    equity based compensation expenses for the third quarter 2008 that decreased by
54% to $15,268 compared with $33,104 in third quarter 2007. These expenses are
non-cash and are the fair market value of the warrants issued as calculated using the
Black-Scholes model. These expenses are attributable to the summation of (i) $5,884
for the third quarter 2008 and $14,336 in third quarter 2007 for options issued to
third party consultants; (ii) $9,384 for the third quarter 2008 and $18,768 in third
quarter 2007 for options issued under compensation packages for management.
 
    
    Research and development expenses for third quarter 2008 decreased by $117,070, or 72%
to $44,677 compared with $161,747 in third quarter 2007. Veridien Corporation had an
increase of $1,801 or 6% to $33,424 for the third quarter 2008 compared with $31,623 in
third quarter 2007. Also, as of March 31, 2008 Santius LifeSciences is no longer
classified as a variable interest entity (VIE) of Veridien Corporation and is not
consolidated in Veridiens statements; however, Santius had expenses of $14,878 in third
quarter of 2007. Mycosol, Inc research and development expenses decreased by $103,993 or
90% to $11,253 for the third quarter 2008 compared with $115,246 in third quarter 2007.
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.
    
    Interest and dividend expense for third quarter 2008 increased by $11,306, or 61% to
$29,921 compared with $18,615 in third quarter 2007. The increase in interest expense was
due primarily to an increase in debt for funding. Also the Company expensed $884 in
convertible debenture discount per Black Scholes calculations in third quarter 2008 and
2007.
    
    During third quarter 2008 the Company recorded an unrealized loss in the amount of $926
which reflected a net decline in the FMV of 370,495 Healthnostics, Inc. (HNSO) shares and
431,404 Standard Global Holding Group (SNDH) shares. During third quarter 2007 the Company
recorded an unrealized loss in the amount of $1,820 which reflected a net decline in the
FMV of 370,495 Healthnostics, Inc. (HNSO) shares and a decline in the FMV of 431,404
Standard Global Holding Group (SNDH) shares. The current fair market value of all
marketable securities is $19,561 at September 30, 2008 and $20,591 at December 31, 2007.
    
    Net loss decreased to a net loss before Minority interest in Mycosol to $332,050 for
third quarter 2008 from a net loss of $402,126 in third quarter 2007. Net loss decreased
to a net loss after Minority interest in Mycosol to $328,192 for third quarter 2008 from a net loss of $362,400
in
 14




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third quarter 2007. There were no deemed dividends in third quarter 2008 and the same
period 2007.
 Nine Months ended September 30, 2008 vs. Nine Months ended September 30, 2007
 Nine Months ended
    
    
    Percentage ofSeptember 30,
    
    
    Net Revenue2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    1,039,379
    
    
    $
    1,609,191
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    766,504
    
    
    
    1,028,778
    
    
    
    74
    %
    
    
    64
    %Gross Profit
    
    
    272,875
    
    
    
    580,413
    
    
    
    26
    %
    
    
    36
    %Operating Expenses:General, Selling & Administrative
    
    
    944,136
    
    
    
    1,717,882
    
    
    
    91
    %
    
    
    107
    %Research & Development
    
    
    248,070
    
    
    
    506,163
    
    
    
    24
    %
    
    
    31
    %Loss from Operations
    
    
    (919,331
    )
    
    
    (1,643,632
    )
    
    
    (88
    )%
    
    
    (102
    )%Other Expense Net
    
    
    (63,019
    )
    
    
    (68,039
    )
    
    
    (6
    )%
    
    
    (4
    )%Net Loss Before Minority Interest
    
    
    (982,350
    )
    
    
    (1,711,671
    )
    
    
    (95
    )%
    
    
    (106
    )%Minority Interest
    
    
    68,224
    
    
    
    151,261
    
    
    
    7
    %
    
    
    9
    %Net Loss
    
    
    (914,126
    )
    
    $
    (1,560,410
    )
    
    
    (88
    )%
    
    
    (97
    )%Deemed Dividend on Preferred Stock
    
    
    -0-
    
    
    
    (96,625
    )
    
    
    0
    %
    
    
    (6
    )%Net Loss Attributable to Common
Shareholders
    
    $
    (914,126
    )
    
    $
    (1,657,035
    )
    
    
    (88
    )%
    
    
    (103
    )%
 Nine-months ended September 30, 2008 Compared with Nine Months Prior Year ended Nine 30, 2007
  
    
    Gross revenue from product sales decreased for the first nine months of 2008 by
$569,812, or 35%, to $1,039,379 compared with $1,609,191 in 2007. 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 and in
2009. This should generate new revenue in 2009 and in futures years. In addition, we
launched in March 2008 a national sales drive for medical markets across the United States,
encompassing 26 new sales representatives. As a result of their efforts several clinical
trials are underway and we expect orders to begin from the results in the fourth quarter.
    
    Interest income for the first nine months of 2008 decreased by $7,602 or 92% to $652
compared with $8,254 during the same period of 2007. The decrease in interest income is
attributed to a lower average cash balance earning interest at lower rates at the bank over
the same period in the prior year. Realized gains for the first nine months of 2008
increased by $25,000, or 100% to $25,000 compared with $-0- in the same period of 2007.
During the first nine months of 2008 the Company sold 12,500 Mycosol common share purchase
warrants that it held to a third-party investor for $25,000 cash and recognized a realized
gain from the sale. Veridien had obtained these warrants as part of its subscription under
the Mycosol Series A Preferred Share Offering. For each dollar invested, Mycosol issued
Veridien one Mycosol Series A Preferred Share (value $1) and 0.375 Warrants to purchase Mycosol common stock at $0.001. Veridien continues to
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hold ownership of the Series A Preferred Shares, but sold 12,500 of their un-exercised
Mycosol warrants to a third-party for $25,000 cash. The sale of the warrants was treated as
a sale of less than a controlling interest in a subsidiary with no basis and the entire
$25,000 was recorded as other income [SAB.T.5H].
 
    
    Consolidated gross expenses for the first nine months of 2008 decreased by $1,281,735 or
39%, to $2,047,381 compared with $3,329,116 during the same period of 2007.
    
    The cost of goods sold from product sales for the nine months ended September 30, 2008
decreased by $262,274 or 25% to $766,504 compared with $1,028,778 during the same period of
2007. The cost of goods ratio as a percentage of product sales was 74% during the nine
months ended September 30, 2008 compared to 64% in the same period 2007. The increase in
ratio of the cost of goods from product sales as a percentage of sales resulted primarily
from an increase in the sale of a product mix with lower margins. Profit margins for
product sales were at 26% and 36%, respectively.
    
    General, selling, and administrative expenses for nine months ended September 30, 2008
decreased by $773,746 or 45% to $944,136 compared with $1,717,882 during the same period of
2007.Decreases that affected general and administrative expenses were associated with:
 (1)
    
    professional management compensation expenses for the nine months ended
September 2008 that decreased by 50% to $87,500 compared with $175,000 in the same
period in 2007. This decrease is attributable to a compensation package for Sheldon
Fenton and Kenneth Cancellara which was implemented in second quarter 2007; however,
was eliminated for Cancellara in all of 2008. Also, during the third quarter 2008 the
2008 compensation for Sheldon Fenton was re-structured to reduce his overall cost for
the year to the Company;(2)
    
    equity based compensation expenses for the nine months ended September 2008
that decreased by 99% to $4,688 compared with $639,594 in the same period of 2007.
These expenses are non-cash and are the fair market value of the warrants issued as
calculated using the Black-Scholes model. These expenses are attributable to the
summation of (i) $13,927 for the nine months ended September 2008 and $43,489 for the
same period of 2007 for options issued to third party consultants; (ii) $37,536 for the
first nine months ended September 2008 and $135,058 for the same period of 2007 for
options issued under compensation packages for management; (iii) $(46,775) in the first
nine months ended September 2008 and $-0- for the same period of 2007 for the
cancellation of non-vested warrants from a management compensation package and a third
party consultant package; and (iv) $-0- for the first nine months ended September 2008
and $461,047 for the same period of 2007 for the issuance of warrants for the purchase
of 49.9% of Santius Lifesciences, Inc.; and(3)
    
    sales and marketing expenses for the nine months ended September 2008 that
decreased by 20% to $303,126 compared with $377,362 in the same period 2007. The
decrease is attributable to the net effect of a launch of a national sales drive for
medical markets across the United States which encompasses 26 new sales representatives
and a change in the sales program in Canada.
 
    
    Research and development expenses for the first nine months of 2008 decreased by
$258,093, or 51% to $248,070 compared with $506,163 during the same period of 2007.
Veridien Corporation had a decrease of $4,709 or 5% to $85,878 during the first nine months
of 2008 compared with $90,587 in the same period 2007. As of March 31, 2008 Santius
LifeSciences is no longer classified as a variable interest entity (VIE) of Veridien
Corporation and is not consolidated in Veridiens statements; however, Santius had expenses
of ($36,771) during the first nine months
of 2008 and $19,286 during the first nine months of 2007. Mycosol, Inc research and
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development expenses decreased by $197,327 or 50% to $198,963 during the first nine months
of 2008 compared with $396,290 in the same period of 2007. 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 the first nine months of 2008 the Company recorded an unrealized loss in the
amount of $1,029 which reflected a net decline in the FMV of 370,495 Healthnostics, Inc.
(HNSO) shares and 431,404 Standard Global Holding Group (SNDH) shares. During the first
nine months of 2007 the Company recorded an unrealized loss in the amount of $13,247 which
reflected a net decline in the FMV of 370,495 Healthnostics, Inc. (HNSO) shares and a
decline in the FMV of 431,404 Standard Global Holding Group (SNDH) shares. The current
fair market value of all marketable securities is $19,561 at September 30, 2008 and $20,591
at December 31, 2007.
    
    Interest and dividend expense for the first nine months of 2008 increased by $24,596, or
39% to $87,642 compared with $63,046 during the same period of 2007. The increase in
interest expense was due primarily to an increase in debt for funding. The Company
expensed $2,652 in convertible debenture discount per Black Scholes calculations in the
first nine months of 2008 and in the same period 2007.
    
    Net loss decreased to a net loss before Minority interest in Mycosol to $982,350 for the
first nine months of 2008 from a net loss of $1,711,671 in the same period of 2007. Net
loss decreased to a net loss after Minority interest in Mycosol to $914,126 for the first
nine months of 2008 from a net loss of $1,560,410 in the same period of 2007. Net loss
attributable to common shareholders as of the first nine months of 2007 was $1,657,035 due
to deemed dividends of $96,625 on preferred shares issued and preferred shares converted in
2007. There were no deemed dividends in 2008 during this same period.
 Liquidity and Working Capital
  
    
    During the three months ended September 30, 2008 177,381 common shares were issued to a
consultant under the terms of their consulting agreement. The average effective price per
share was $0.008.
 
    
    During the second quarter 2008 the holder of 9,814 Preferred Shares of series 2006-B
elected to convert their Preferred Shares and accrued and unpaid dividends thereon of $4,217
into 2,558,918 common shares. As per the terms of the Preferred Shares, the effective price
per share was $0.04.
 
    
    During the six months ended June 30, 2008 50,000 common shares were issued to an employee
under the terms of their employment contract. The average effective price per share was
$0.011.
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##### Table of Contents




    
    During the six months ended June 30, 2008 178,305 common shares were issued to an employee
under the terms of their employment contract. The average effective price per share was
$0.017.
 
    
    During the nine months ended September 30, 2008 300,000 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 $0.0143.
 
    
    During the nine months ended September 30, 2008 1,011,370 common shares were issued to a
consultant under the terms of their consulting agreement. The average effective price per
share was $0.0148.
 
    
    During the nine months ended September 30, 2008 the Company borrowed $120,000 in short term
loans from a company which has as its senior officer and director the wife of the individual
who serves as Veridiens President/CEO. These loans are due on demand and accrue interest at
the rate of 8%.
 
    
    During the first quarter 2008 we issued a convertible debenture for cash proceeds of
200,000. This debenture carries an interest rate of 8%, has a 1-year term and has a conversion
rate of $0.0215.
 
    
    During the first nine months of 2008 we issued the following warrants to purchase common
stock:
 (i)
    
    300,000 to a consultant (exercise price $0.06 / expiry December 31,
2011 / vesting immediately),; the fair value of which was $1,503, $1,093 of which
was expensed during the first nine months of 2008;(ii)
    
    1,000,000 to a consultant (exercise price $0.05 / expiry December 31,
2010 / vesting at 12/31/08), the fair value of which was $5,317, $3,987 of which
was expensed during the first nine months of 2008;(iii)
    
    1,000,000 to a consultant (exercise price $0.08 / expiry December
31, 2011 / vesting at 12/31/09), the fair value of which was $4,784, $1,794 of
which was expensed during the first nine months of 2008;
  (a)
    
    To the consultant in (i) above, 350,000 if sales procured by them
during 2008 exceed $500,000, 350,000 if sales procured by them during 2008 exceed
$1 million;(b)
    
    To the consultant in (ii) above, 400,000 if 2008 Revenue exceeds $4.6
million;(c)
    
    To the consultant in (iii) above, 200,000 if 2009 Revenue exceeds $6
million;(d)
    
    To another consultant, maximum 1,000,000 per year to a consultant for 3
years
 
    
    Year 1  175,000 warrants for every $1 million in 2008 sales over 2007 sales
level (exercise price $0.08 / vest February 15, 2009 / expiry February 15, 2011);
    
    Year 2  175,000 warrants for every $1 million in 2009 sales over 2008 sales
level (exercise price $0.10 / vest February 15, 2010 / expiry February 15, 2012);
    
    Year 3  175,000 warrants for every $1 million in 2010 sales over 2009 sales
level (exercise price $0.10 / vest February 15, 2011 / expiry February 15, 2013)
 
    
    During the nine months ended September 30, 2008, accounts receivable decreased by $513,139
to $94,310 from $607,449 at December 31, 2007.
 
    
    During the nine months ended September 30, 2008, inventory increased by $147,136 to
$719,825 compared with $572,689 at December 31, 2007.
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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 November 7, 2008, we have cash of approximately $70,354 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 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.
We also anticipate increasing our investment/ownership in Mycosol, Inc.
 
    
    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s ability 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
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Item 4. Controls and Procedures
   
 PART II
 OTHER INFORMATION
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    The following issuances of equity securities (including debt securities immediately
convertible into equity) without registration under the Securities Act of 1933 occurred
during the Quarter ended September 30, 2008:Common StockAt September 30, 2008, 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 third quarter but have not yet been issued. This issuance is
considered exempt from registration by reason of Section 4(2) of the Securities Act.At September 30, 2008 two consultants were entitled to the issuance of 532,142 common shares
as part of their compensation packages for services provided during the third quarter.
These shares were accounted for in the third quarter but were not issued by the end of the
quarter. This issuance is considered exempt from registration by reason of Section 4(2) of
the Securities Act.(b)
    
    Not applicable.(c)
    
    Not applicable.
 
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##### Table of Contents



(d)
    
    During the quarter ended September 30, 2008 the Company did not repurchase any of its
equity securities.
 
 Item 5. Other Information
 Not applicable.
 
 Item 6. Exhibits and Report on Form 8-K
 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 2002B. Report on Form 8-K
 During the third quarter of 2008 there were no reports on Form 8-K issued by the Company.
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##### Table of Contents



SIGNATURES
  Veridien Corporation
(Registrant)Date:   November 14, 2008
    By
    /s/ Sheldon C. FentonSheldon C. FentonChief Executive OfficerDate:   November 14, 2008
    By
    /s/ Russell Van ZandtRussell Van ZandtChief Financial Officer& Chairman 22