##### Table of Contents



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 1934
 For the
quarterly period ended September 30, 2004 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.)
 2875 MCI Drive, Suite B, Pinellas Park, Florida
    
    33782-6105(Address of principal executive offices)
    
    (Zip Code)
 (727) 576-1600 
  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
þ No o State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date: 210,017,310 shares of common
stock, par value $0.001 were outstanding at November 8, 2004. Transitional Small Business Disclosure Format (check one): Yes
o No þ




---



TABLE OF CONTENTS  
 PagesPART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Notes to Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    13Item 3.
    
    Controls and Procedures
    
    
    22PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    22Item 2.
    
    Changes in Securities and Small Business Issuer Purchases of Equity Securities
    
    
    22Item 5.
    
    Other Information
    
    
    23Item 6
    
    Exhibits and Reports 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
    
    
    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
    
    
    23(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
    
    
    23(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
    
    
    23Ex-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32.1 Section 906 CEO CertificationEx-32.2 Section 906 CFO Certification
  2




---



##### Table of Contents



PART I    FINANCIAL INFORMATION 
 Item 1. Financial Statements
Veridien Corporation
and Subsidiaries Consolidated Balance Sheets
(Unaudited)
September 30, 2004 and December 31, 2003 Assets
    
    September 30, 2004
    
    December 31, 2003Current Assets:Cash
    
    $
    279,365
    
    
    $
    101,506Accounts receivable  tradeLess allowance for doubtful accounts of
$10,523 and $12,640 respectively
    
    
    373,946
    
    
    
    70,323Inventory
    
    
    209,205
    
    
    
    125,500Investment escrow
    
    
    110,000
    
    
    
    -0-Due from shareholders
    
    
    67,076
    
    
    
    69,764Marketable securities
    
    
    214,069
    
    
    
    475,416Note receivable
    
    
    350,000
    
    
    
    -0-Prepaid expenses and other current assets
    
    
    38,794
    
    
    
    63,637Total current assets
    
    
    1,642,455
    
    
    
    906,146Property and equipment:Furniture and fixtures
    
    
    410,898
    
    
    
    409,211Less accumulated depreciation
    
    
    395,703
    
    
    
    385,73115,195
    
    
    
    23,480Other Assets:Investments in preferred stock, cost basis
    
    
    125,000
    
    
    
    50,000Investments in securities, restricted basis
    
    
    461,119
    
    
    
    -0-Patents less accumulated amortization
of $564,382 and $500,967 respectively
    
    
    59,771
    
    
    
    63,415Security deposits and other assets
    
    
    1,625
    
    
    
    1,625647,515
    
    
    
    115,040Total assets
    
    $
    2,305,165
    
    
    $
    1,044,666
 See accompanying notes to the financial statements. 3




---



##### Table of Contents



Veridien Corporation
And Subsidiaries Consolidated Balance Sheets  Continued
(Unaudited)
September 30, 2004 and December 31, 2003 Liabilities and Deficit in Stockholders' Equity
    
    September 30, 2004
    
    December 31, 2003Current Liabilities:Current capital lease obligations
    
    $
    1,590
    
    
    $
    6,022Note payable
    
    
    269,911
    
    
    
    878,845Convertible debentures due
    
    
    628,291
    
    
    
    304,291Accounts payable
    
    
    336,185
    
    
    
    890,595Accrued compensation
    
    
    4,826
    
    
    
    2,692Accrued interest
    
    
    882,268
    
    
    
    1,156,537Other accrued liabilities
    
    
    4,027
    
    
    
    23,221Customer deposits
    
    
    303,564
    
    
    
    62,064Due to stockholders
    
    
    35,586
    
    
    
    34,039Total current liabilities
    
    
    2,466,248
    
    
    
    3,358,306Long-term Liabilities:Convertible debentures
    
    
    3,277,682
    
    
    
    1,687,086Total liabilities:
    
    
    5,743,930
    
    
    
    5,045,392Deficit 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, 2004 and December 31, 2003
    
    
    60,000
    
    
    
    60,000Series B Preferred Stock, $.001 par value, 245,344
Authorized, 174,219 and 174,219 issued and
outstanding at September 30, 2004 and December 31, 2003
    
    
    175
    
    
    
    175Common Stock  $.001 par value; 300,000,000 shares
authorized, 210,017,310 and 205,745,290 shares
issued and outstanding at September 30, 2004 and
December 31, 2003
    
    
    210,017
    
    
    
    205,745Additional paid-in capital
    
    
    30,914,259
    
    
    
    30,678,313Common stock warrants
    
    
    26,399
    
    
    
    26,399Accumulated deficit
    
    
    (34,966,358
    )
    
    
    (34,229,321
    )Current period profit (loss)
    
    
    321,743
    
    
    
    (737,037
    )(3,433,765
    )
    
    
    (3,995,726
    )Stock subscriptions receivable
    
    
    (5,000
    )
    
    
    (5,000
    )Total stockholders deficit
    
    
    (3,438,765
    )
    
    
    (4,000,726
    )$
    2,305,165
    
    
    $
    1,044,666
 See accompanying notes to financial statements. 4




---



##### Table of Contents



Veridien Corporation
and Subsidiaries Consolidated Statements of Operations
(Unaudited) Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Revenue
    
    $
    685,985
    
    
    $
    406,192
    
    
    $
    1,488,402
    
    
    $
    1,300,669Operating costs and expenses:Cost of revenue
    
    
    399,110
    
    
    
    186,038
    
    
    
    532,200
    
    
    
    710,068General, selling, and
administrative
    
    
    208,715
    
    
    
    346,542
    
    
    
    696,205
    
    
    
    844,186Research and development
    
    
    43,576
    
    
    
    26,014
    
    
    
    124,744
    
    
    
    73,546651,401
    
    
    
    558,594
    
    
    
    1,353,149
    
    
    
    1,627,800Income (Loss) from Operations
    
    
    34,584
    
    
    
    (152,402
    )
    
    
    135,253
    
    
    
    (327,131
    )Other income (expense):Interest expense
    
    
    (115,348
    )
    
    
    120,577
    
    
    
    (328,209
    )
    
    
    (77,396
    )Realized gain (loss)
on marketable securities
    
    
    -0-
    
    
    
    32,377
    
    
    
    511,079
    
    
    
    (53,201
    )Unrealized gain (loss)
on marketable securities
    
    
    (84,099
    )
    
    
    125,560
    
    
    
    (3,014
    )
    
    
    110,758Dividend income
    
    
    5,173
    
    
    
    -0-
    
    
    
    5,173
    
    
    
    -0-Interest income
    
    
    642
    
    
    
    22
    
    
    
    1,461
    
    
    
    187(193,632
    )
    
    
    278,536
    
    
    
    186,490
    
    
    
    (19,652
    )Net income (loss) before taxes
    
    
    (159,048
    )
    
    
    126,134
    
    
    
    321,743
    
    
    
    (346,783
    )Income taxes
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Net income (loss)
    
    $
    (159,048
    )
    
    $
    126,134
    
    
    $
    321,743
    
    
    $
    (346,783
    )Net income (loss) per common share
    
    $
    (0.0008
    )
    
    $
    0.0007
    
    
    $
    0.0015
    
    
    $
    (0.0018
    )Weight average share outstanding
    
    
    209,778,926
    
    
    
    191,155,159
    
    
    
    208,822,795
    
    
    
    188,502,533
 See accompanying notes to financial statements. 5




---



##### Table of Contents



Veridien Corporation
and Subsidiaries Consolidated Statements of Cash Flows
(Unaudited) For the nine months ended
September 30, 2004 and September 30, 2003 September 30, 2004
    
    September 30, 2003Cash flows from operating activities:Net income (loss)
    
    $
    321,743
    
    
    $
    (346,783
    )Adjustments to reconcile net income (loss)
to net cash (used) by operating activities:Depreciation and amortization
    
    
    13,616
    
    
    
    13,017Stock issuances for services
    
    
    137,605
    
    
    
    41,288Stock issuances for interest expense, non-cash
    
    
    -0-
    
    
    
    6,726Other, not affecting cash
    
    
    (461,173
    )
    
    
    (461,373
    )Realized (gains) loss on marketable securities
    
    
    (511,079
    )
    
    
    53,201Unrealized (gains) loss on marketable securities
    
    
    3,014
    
    
    
    (110,758
    )Proceeds from sale of marketable securities
    
    
    998,528
    
    
    
    408,088(Increase) decrease in:Accounts receivable
    
    
    (303,623
    )
    
    
    (6,926
    )Notes receivable
    
    
    (350,000
    )
    
    
    -0-Prepaid and other current assets
    
    
    24,843
    
    
    
    14,431Inventories
    
    
    (83,705
    )
    
    
    (43,616
    )Increase (decrease) in:Accounts payable and accrued expenses
    
    
    111,464
    
    
    
    301,990Due to stockholders
    
    
    (1,141
    )
    
    
    (87,379
    )Customer
deposits (2004 non-cash)
    
    
    241,500
    
    
    
    (16,799
    )Net cash (used) by operating activities:
    
    
    141,592
    
    
    
    (234,893
    )Cash flow from investing activities:Purchase of investment  preferred stock
    
    
    (185,000
    )
    
    
    -0-Net purchases and disposal of property and equipment
    
    
    (1,687
    )
    
    
    -0-Net cash (used) by investing activities
    
    
    (186,687
    )
    
    
    -0-Cash flow from financing activities:Proceeds from convertible debentures
    
    
    330,000
    
    
    
    133,200Net payment on capital leases
    
    
    (4,432
    )
    
    
    (3,936
    )Net proceeds from borrowings
    
    
    (102,614
    )
    
    
    51,529Net cash provided by financing activities
    
    
    222,954
    
    
    
    180,793Net increase/(decrease) in cash
    
    
    177,859
    
    
    
    (54,100
    )Cash at beginning of year
    
    
    101,506
    
    
    
    89,048Cash at end of quarter
    
    $
    279,365
    
    
    $
    34,948
 See accompanying notes to financial statements. 6




---



##### Table of Contents



Veridien Corporation
and
Subsidiaries 
 Notes to the Unaudited Interim Consolidated Financial Statements at September 30, 2004 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 2004. 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. Nature of Operations The Company produces Health-Care and Anti-Infective products. The Company is
incorporated in Delaware. The Company has developed patented and unique
products including surface disinfectants, antiseptic hand cleansers, instrument
presoak, antiseptic hand cleansers, and sun protection products.
The flagship product, VIRAHOL® Hospital Disinfectant/Cleaner & Instrument
Presoak, is a skin friendly, patented, U.S.  EPA and Health Canada registered,
surface disinfectant. Viraguard® Antiseptic Hand Gel, Viraguard® Antiseptic
Hand Wipes are U.S.  FDA and Health Canada drug listed products utilizing
Veridiens patented Virahol® formulation. Recent product line extensions have
included sales of sunscreen impregnated towelettes being marketed under the
SunSwipe label. 2. Principles of Consolidation The accompanying financial statements include the accounts of the company and
its subsidiaries, each of which is wholly-owned. 3. Accounting Estimates The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. 4. 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. 5. 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, 2004 raw materials and finished goods
amounted to approximately $209,205. 7




---



##### Table of Contents



Note A  Summary of Significant Accounting Policies  Continued 6. Marketable Equity  Securities, Trading Marketable Equity  Securities, Trading are comprised of common stock and are
carried at estimated fair value. The associated unrealized gains and losses,
net of income tax are included in the statement of operations. 7. Property and Equipment Property and equipment are stated at cost. Depreciation on property and
equipment is calculated on the straight-line method over their estimated useful
lives ranging from three to seven years. Leasehold improvements are amortized
on the straight-line method over the shorter of the lease term or estimated
useful life. Major renewals, betterments and replacements are capitalized.
Maintenance and repairs are charged to expense as incurred. 8. Patents The Company capitalizes certain costs, primarily legal and other fees, related
to patents. Accumulated costs are amortized over the estimated lives of the
patents using the straight-line method, commencing at the time the patents are
issued. 9. Loan Costs Loan coast are amortized by the straight-line method over the term of the
respective loans. 10. Investment in Preferred Stock  Cost Basis During the fourth quarter of 2003 the Company invested $50,000 in preferred
stock of an unrelated entity. During the first quarter of 2004 the Company
invested an additional $75,000 in preferred stock in the same entity. The
investee company is an early stage development company. 11. Investment in Securities  Restricted Basis During the third quarter 2004 the Company recorded receipt of 14,421 restricted
common shares of H-Quotient, Inc. (HQNT) at $5,119 which represents 50% of FMV
at September 30, 2004. These 14,421 shares of HQNT were received as dividends. During second quarter 2004 the Company received 344,500 shares of free trading
common stock of H-Quotient, Inc. (HQNT) from an investor in exchange for
486,875 restricted common shares of H-Quotient, Inc. (HQNT). The 486,875
restricted common shares represents H-Quotients customer deposit for products
to be delivered in fourth quarter 2004. The amount of the deposit is $241,500
which also represents the cost basis of the 344,500 shares of common stock. During first quarter 2004 the Company executed an agreement with H-Quotient,
Inc. (HQNT) which encompasses the sale of product, licensing and service fees.
The Company recorded licensing and service fees of $456,000 in first quarter
2004 which reflects 400,000 HQNT restricted common shares received at
two-thirds fair market value (FMV). No unrealized gain or loss will be
recognized on the 400,000 restricted common shares until the restrictions have
expired and/or the shares are sold. 8




---



##### Table of Contents



Note A  Summary of Significant Accounting Policies   Continued 12. Income Taxes Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
that not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment. 13. Reclassification Certain reclassifications have been made to the December 31, 2003 audited
consolidated financial statements to be in conformity with the September 30,
2004 unaudited interim financial statements. 14. 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 209,778,926 and
191,155,159 for the quarter ending September 30, 2004 and 2003, respectively.
Common stock equivalents (stock options, warrants, convertible debentures and
convertible redeemable preferred stock) are not included in the weighted
average number of common shares because the effects would be anti-dilutive. Note B  Realization of Assets The accompanying unaudited interim consolidated financial statements of the
Company as of September 30, 2004 and for the three months and nine months ended
September 30, 2004 and 2003, 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, 2004, and the results of its
operations and its cash flows for the three months and nine months ended
September 30, 2004 and September 30, 2003, respectively. The results for the
three months and nine months ended September 30, 2004 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. 9




---



##### Table of Contents



Note B  Realization of Assets  Continued Prior to this year, the Company had incurred losses since its incorporation.
At September 30, 2004, the Company had an accumulated deficit of $34,644,615,
resulting primarily from research and development, sales and marketing, and
administrative expenses being substantially in excess of sales revenue. The Company has a deficit in stockholders equity of $3.4 million, a deficit in
working capital of $823,793 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 During the third quarter 2004 the Company recorded an unrealized loss in the
amount of $84,099 which reflects the decline in the FMV of 301,431 H-Quotient,
Inc. (HQNT) common shares from June 30, 2004 at $.989 to $.71 at September 30,
2004. During the third quarter 2004 the Company recorded receipt of 14,421 restricted
common shares of H-Quotient, Inc. (HQNT) at $5,119 which represents 50% of FMV
at September 30, 2004. Additionally, the Company recorded receipt of 75 common
shares of HQNT at $53. These 14,496 shares of HQNT were received as dividends.
The Company currently holds 301,506 common shares of HQNT and 414,421
restricted common shares of HQNT at September 30, 2004. During the third quarter 2003 the Company received 605,000 shares of marketable
securities at September 3, 2003 in payment of a current accounts receivable.
At the end of third quarter 2003 these 605,000 shares of a marketable security
resulted in an unrealized gain of $125,560 due to the increase in the FMV from
$.6024 to $.81. During the third quarter 2003 the Company purchased and sold 165,700 marketable
securities and realized a gain in the amount of $32,377. During the second quarter 2004 the Company sold 344,500 HQNT shares and
realized a gain at time of sale of $519,524 due to the increase in the sale
price from the cost basis of $.70 at time of acquisition. During second
quarter 2004 the Company received these 344,500 shares of common stock from an
investor in exchange for 486,875 restricted common shares of H-Quotient, Inc.
(HQNT). The 486,875 restricted common shares represents H-Quotients customer
deposit for products to be delivered in fourth quarter 2004. The amount of the
deposit is $241,500 which also represents the cost basis of the 344,500 shares
of common stock. 10




---



##### Table of Contents



Note C  Marketable Securities and Investments  Continued During the second quarter 2004 the Company recorded an unrealized loss in the
amount of $214,317 which reflects the decline in the FMV of 301,431 HQNT shares
from March 31, 2004 at $1.70 to $.989 at June 30, 2004. During second quarter 2003, the Company sold 380,000 HQNT shares and realized a
loss of $20,733 due to the decline in the FMV of the stock from March 31, 2003
at $.59. During the first quarter 2004 the Company sold 358,869 HQNT shares and realized
a loss at time of sale of $8,445 due to the decline in the FMV of the stock
from December 31, 2003 closing price of $.72 During the first quarter 2004 the Company recorded an unrealized gain in the
amount of $295,402 which reflects the increase in the FMV of 301,431 HQNT
shares from $.72 to $1.70 at March 31, 2004. During first quarter 2003, the Company sold 100,000 HQNT shares and realized a
loss of $64,845 due to the decline in the FMV of the stock from December 31,
2002 at $1.34 During the first quarter 2003 the Company issued 5,000,000 restricted common
shares which were in exchange for 276,267 free trading common shares of H.
Quotient, Inc. (HQNT) (a publicly traded company) which resulted in an initial
cost basis of $100,000. The Company recorded an unrealized gain of $62,998
which reflects the increase in the FMV of 276,267 HQNT shares from $.362 to
$.59 at March 31, 2003. During the first quarter 2003 the Company recorded an
unrealized loss in the amount of $77,800 which reflects the decline in the FMV
of 103,733 HQNT shares from $1.34 to $.59 at March 31, 2003. Note D  Supplemental Cash Flow Disclosures During the nine months ended September 30, 2003 the Company received 605,000
shares of marketable securities for payment of a current accounts receivable.
At September 30, 2003 the fair market value of the marketable securities was
$490,050. Note E  Related Party Transactions In February 2003, the Company sold raw materials and finished goods in the
amount of $94,836 to a manufacturing company owned by a director of Veridien
Corporation. The Company received a credit note with the manufacturing company
in the amount of $47,418 to be applied against product purchases. Also, a
promissory note for $47,418 was received with an interest rate of 10% per annum
which shall accrue from May 1, 2003 until paid. The Company at September 30,
2004 has received $27,761 in product purchases as an offset to the credit note.
The Company expects to fully realize the remaining balance of $67,076 through
credits via product purchases. The note is personally guaranteed by the now
former director. Note E  Note Receivables During the nine months ending September 30, 2004 the Company has received five
promissory notes from Mycosol, Inc. for a total of $350,000. The note
receivables may be settled on or after January 30, 2005 by delivery to Veridien
350,000 shares of Series A Convertible Preferred Stock of Mycosol, $0.001 par
value per share and such additional common shares and warrants as contemplated
under the Memorandum of Agreement dated June 1, 2004. 11




---



##### Table of Contents



Note E  Note Receivables  Continued Veridien may also convert the Notes, at its option, on or before the due date,
into 350,000 shares of Series A Convertible Preferred Stock of Mycosol, $0.001
par value per share and such additional common shares and warrants as
contemplated under the Memorandum of Agreement dated June 1, 2004. Interest
after the due date shall accrue at the rate of 10% per annum. 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 2004. 12




---



##### Table of Contents



Item 2.
    Managements Discussion and Analysis of Financial Condition and Results of Operations Third Quarter  September 30, 2004 Compared with September 30, 2003, and
Nine-Months Ended September 30, 2004 Compared with September 30, 2003 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, 2004 for the three months and nine
months ended September 30, 2004 and September 30, 2003, 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 and Anti-Infectives company incorporated in Delaware
focusing on infection control and other Healthy Lifestyle products. The
Company has developed PATENTED and UNIQUE PRODUCTS including SURFACE
DISINFECTANTS, ANTISEPTIC HAND CLEANSERS, INSTRUMENT PRESOAK, ANTISEPTIC HAND
CLEANSERS, and SUN PROTECTION PRODUCTS. The flagship product, VIRAHOL® Hospital Disinfectant/Cleaner & Instrument
Presoak, is a skin friendly, patented, U.S.  EPA and Health Canada registered,
surface disinfectant. Viraguard® Antiseptic Hand Gel, Viraguard® Antiseptic
Hand Wipes are U.S.  FDA and Health Canada drug listed products utilizing
Veridiens patented Virahol® formulation. Recent product line extensions have included sales of sunscreen impregnated
towelettes being marketed under the SunSwipe label. 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. During 2003 and early 2004, we continued to focus our sales efforts on our
Infection Control products. We have expanded our product line to include
Viraguard® Toilet Seat Wipes, which are available for use in restrooms in
hotels, restaurants, airports and other public places as well as in hospitals
and physicians offices, and other places where disinfection is critical to
controlling the spread of disease carrying organisms. Since 2002, we have contracted the services of Dunnigan Developments Ltd. to
coordinate sales and marketing activities with our large multi-national and
other major corporate customers. Paul Dunnigan, the principal of Dunnigan
Developments Ltd., has 22 years experience in marketing and merchandising
consumer products, as well as in supply-chain management for large retailing
operations, including many years with a multi-national corporation. We are aggressively continuing to pursue possible strategic alliances with a
number of major corporations to further strengthen our Company. 13




---



##### Table of Contents



During 2002, we entered into a global distribution agreement with E.I. DuPont
de Nemours and Company to market Veridiens line of sunscreen towelettes.
DuPont has commenced marketing Veridiens towelettes and sales of these
products in the Emergency Services and Industrial markets began in the second
quarter of 2003. In addition, we entered into a five (5) year Distribution Agreement with DuPont
for all Viraguard® products in the United States of America for specific market
segments. The Agreement includes certain exclusivity rights for the Emergency
Services and Industrial markets. The products concerned are Viraguard® Hard
Surface Disinfectant Towelettes, Viraguard® Antiseptic Hand Wipes, Viraguard®
Disinfectant solution in one gallon, 16 ounce and 2 ounce formats all of which
are being produced for DuPont under their brand label. Deliveries commenced in
February 2003. In 2003, DuPont and Veridien agreed to test the Virahol® formulation for
efficacy on Hepatitis A, B and C in order to create superior kill claims for
the Viraguard® product line. Hepatitis outbreaks across North America in 2002
and 2003 have increased demand for products with Hepatitis kill claims,
particularly in the Healthcare and First Responder markets. As of December
2003, Veridien has received label claim approval representing effectiveness
against Hepatitis A, B and C on Viraguard® Disinfectant liquids for Hard
Surfaces. Veridien has also drug listed all the Viraguard® Hand Antiseptic
products with the FDA, which products reflect effectiveness against Hepatitis
A, B and C based on in vitro testing. These new Hepatitis kill claims should
provide Veridien and its subregistrants (ie. Dupont) with a strong competitive
advantage in 2004 and 2005. During 2003 we signed a supply contract with the American Red Cross. Our
patented Viraguard® disinfectants and wipes may be used by the Red Cross to
meet regulatory requirements concerning the type of hard surface disinfectants
used in Red Cross Biomedical Services facilities across America. The products
the American Red Cross have contracted for are: Viraguard® Hospital Hard
Surface Disinfectant Cleaner and Instrument Presoak, Viraguard® Antiseptic Hand
Spray, Viraguard® Hospital Surface Disinfectant Towelettes and Viraguard®
Antiseptic Hand Wipes. The Viraguard® products will be used for personal hand
sanitation, disinfection of clinic surfaces and for maintenance of blood
collection equipment. Early in 2004 we signed a multi-year contract with H2O to Go, LLC. Purified
Water to Go operates a fast growing chain of retail franchises marketing
purified water, nutrition and healthy lifestyle products. They will be using
our patented Viraguard® infection control products for cleaning and
disinfecting their stores and operating equipment, as well as providing hand
hygiene for their staff and customers when water refilling in stores. The full
Viraguard® line of infection control products and our unique SunSwipe
Sunscreen Towelettes will be sold to retail customers in H2O to Go stores
across the United States. During 2004 we finalized an Agreement with Mycosol, Inc., a development-stage
chemical and pharmaceutical company, located in the Research Triangle Park area
of North Carolina. Veridiens focus is on anti-infectives killing bacteria,
mold, mildew, and viruses  through its Viraguard® product line of proprietary,
alcohol-based liquid and towelette antiseptics and disinfectants. Mycosol is
developing complementary, non-alcohol-based technologies of safe, potent, long
lasting products that it believes will not only kill, but retard the regrowth
of infective microbials  particularly mold. The core chemistry was
originally developed by the drug company, Burroughs Wellcome (now part of
GlaxoSmithKline), and subsequently the data related thereto was licensed from
GSK (NYSE symbol: GSK) by Mycosol. Mycosol has since developed and expanded
this anti-infectives technology, adding five patents pending and a myriad of
potential industrial, agricultural, medical and veterinary applications. Under the Agreement, Veridien has initiated making equity investments in
Mycosol with an option to acquire the majority ownership. Veridien will also
have two seats on Mycosols four-Director Board. Mycosol will continue to
focus its technology on the further development of unique anti-microbials 14




---



##### Table of Contents



(bacteria, mold, yeast) to feed the Veridien product pipeline and distribution
channels. The agreement has been signed and finalization of the documents that
flow thereform is currently being completed. During third quarter 2004 we entered into a distribution agreement with a
multi-national pharmaceutical company with 500+ sales
representatives expected to
introduce, distribute and provide Viraguard Infection Control products
initially to up to 36,000 physicians and their offices across the United
States. This program commenced in the third quarter of 2004. This arrangement
is an ideal method to promote and introduce Viraguard Infection Control
products directly to thousands of end-user medical practitioners and their staff.
To date, the program has generated over $450,000 in sales orders. Prior to this year, the Company had incurred losses since its incorporation.
At September 30, 2004, the Company had an accumulated deficit of $34,644,615.
The Company has financed its ongoing business activities through a combination
of sales, equity financing, sale of marketable securities and debt. 15




---



##### Table of Contents



Results of Operations Third Quarter ended September 30, 2004 vs. Third Quarter ended September 30, 2003 Third Quarter
    
    Percentage ofSeptember 30,
    
    Net Revenue2004
    
    2003
    
    
    2004
    
    
    2003Net Revenue
    
    $
    685,985
    
    
    $
    406,192
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    399,110
    
    
    
    186,038
    
    
    
    58
    %
    
    
    46
    %Gross Profit
    
    
    286,875
    
    
    
    220,154
    
    
    
    42
    %
    
    
    54
    %Operating Expenses:General, Selling & Administrative
    
    
    208,715
    
    
    
    346,542
    
    
    
    30
    %
    
    
    85
    %Research & Development
    
    
    43,576
    
    
    
    26,014
    
    
    
    6
    %
    
    
    6
    %Income (Loss) from Operations
    
    
    34,584
    
    
    
    (152,402
    )
    
    
    5
    %
    
    
    (38
    )%Other Income (Expense) Net
    
    
    (193,632
    )
    
    
    278,536
    
    
    
    (28
    )%
    
    
    69
    %Net Income (Loss) Before Taxes
    
    
    (159,048
    )
    
    
    126,134
    
    
    
    (23
    )%
    
    
    31
    %Income Taxes
    
    
    -0-
    
    
    
    -0-
    
    
    
    0
    %
    
    
    0
    %Net Income (Loss)
    
    
    (159,048
    )
    
    
    126,134
    
    
    
    (23
    )%
    
    
    31
    %
 Third Quarter  September 30, 2004 Compared with September 30, 2003 Consolidated gross revenues for third quarter 2004 increased by $127,649, or
23%, to $691,800 compared with $564,151 in third quarter 2003.  
    
    Gross revenue from product sales increased for third quarter 2004 by
$279,793 or 69%, to $685,985 compared with $406,192 in third quarter
2003. 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 next 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.
    
    Dividend income for third quarter 2004 increased by $5,173, or 100% to
$5,173 compared with $-0- in the third quarter 2003. Dividend income
was earned on marketable securities held by the Company.
    
    Interest income for third quarter 2004 increased by $620, or 2,818% to
$642 compared with $22 in third quarter 2003.
    
    Additionally, other income for third quarter 2004 decreased by
$157,937, or 100% to $-0- compared with $157,937 in third quarter
2003. The Company recognized realized gains of $32,377 on the sale of
marketable securities for the quarter ended September 30, 2003. The
unrealized gain in marketable
securities for third quarter 2003 recognizes an increase of $125,560 in the
value of the marketable securities held by the Company for the quarter ended
September 30, 2003. 16




---



##### Table of Contents



Consolidated gross expenses for third quarter 2004 increased by $412,831, or
94% to $850,848 compared with $438,017 in third quarter 2003.  
    
    The cost of revenue and the cost of goods sold from product sales for
third quarter 2004 increased by $213,072, or 115% to $399,110 compared
with $186,038 in third quarter 2003. There was an increase in the
cost of goods ratio as a percentage of product sales to 58% in third
quarter 2004 compared to 46% in third quarter 2003. The increase in
the cost of product sales resulted primarily of a combination of
increased product sales at 69% over the same period of 2003 offset by
a change in product mix with a lower profit margin. The Company is
continuing to work towards 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 2004
decreased by $137,827, or 40% to $208,715 compared with $346,542 in
third quarter 2003. Decreases that affected general, selling, and
administrative expenses were associated with professional legal,
consulting and accounting fees for third quarter 2004 that decreased
by 63% to $30,915 compared with $83,018 in third quarter 2003.
Additionally, selling expenses decreased for third quarter 2004 by 19%
to $84,377 compared with $103,663 in third quarter 2003. Increases in
general, selling, and administrative costs were associated with public
company expenses for third quarter 2004 the increase in this category
increased by 81% to $8,540 compared with $4,719 in third quarter 2003.
Increases that affected general, selling, and administrative costs
were associated with administrative wages which increased in third
quarter 2004 by 31% to $28,704 compared with $21,851 in third quarter
2003. This increase is attributable to the increase in permanent
staff versus contracting staff from outside agencies.
    
    Research and development for third quarter 2004 increased $17,562, or
68% to $43,576 compared with $26,014 in third quarter 2003. The
increase was due primarily to additional research on the focus of
broadening the range of claims we can assert on our existing products
and on testing new products for commercialization.
    
    Interest expense for third quarter 2004 increased by $235,925 or 196%
to a negative $115,348 compared with a positive $120,577 in third
quarter 2003. The lower interest expense during 2003 was due
primarily to negotiation with certain expired Convertible Debenture
holders to waive accrued interest in the amount of $206,537 in
exchange for closer to market conversion rates for their debt
instruments. Interest continues to accrue on other various debts.
    
    During the third quarter 2004 the Company recorded an unrealized loss
in the amount of $84,099 which reflects the decline in the FMV of
301,431 H-Quotient, Inc. (HQNT) common shares from June 30, 2004 at
$.989 to $.71 at September 30, 2004.
    
    Net income (losses) decreased to a net loss of $159,048 for third
quarter 2004 from a net income of $126,134 for third quarter 2003.
This represented a 226% decrease in net income (losses). 17




---



##### Table of Contents



Nine Months ended September 30, 2004 vs. Nine Months ended September 30, 2003 Nine Months ended
    
    Percentage ofSeptember 30,
    
    Net Revenue2004
    
    2003
    
    
    2004
    
    
    2003Net Revenue
    
    $
    1,488,402
    
    
    $
    1,300,669
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    532,200
    
    
    
    710,068
    
    
    
    36
    %
    
    
    55
    %Gross Profit
    
    
    956,202
    
    
    
    590,601
    
    
    
    64
    %
    
    
    45
    %Operating Expenses:General, Selling & Administrative
    
    
    696,205
    
    
    
    844,186
    
    
    
    47
    %
    
    
    65
    %Research & Development
    
    
    124,744
    
    
    
    73,546
    
    
    
    8
    %
    
    
    6
    %Income (Loss) from Operations
    
    
    135,253
    
    
    
    (327,131
    )
    
    
    9
    %
    
    
    (25
    )%Other Income (Expense) Net
    
    
    186,490
    
    
    
    (19,652
    )
    
    
    13
    %
    
    
    (2
    )%Net income (Loss) Before Taxes
    
    
    321,743
    
    
    
    (346,783
    )
    
    
    22
    %
    
    
    (27
    )%Income Taxes
    
    
    -0-
    
    
    
    -0-
    
    
    
    0
    %
    
    
    0
    %Net income (Loss)
    
    $
    321,743
    
    
    $
    (346,783
    )
    
    
    22
    %
    
    
    (27
    )%
 Nine months ended September 30, 2004 Compared with Nine Months ended September 30, 2003 Consolidated gross revenues for the nine months ended September 30, 2004
increased by $594,501, or 42% to $2,006,115, compared with $1,411,614 during
the same period of 2003.  
    
    Gross revenue from licensing and service fees increased for the first
nine months of 2004 by $556,000 or 100% to $556,000 compared with $-0-
in 2003. During the first nine months of 2004 the Company earned
gross revenue from an agreement signed with H-Quotient, Inc. (HQNT)
which involves the sale of product, licensing and service fees. The
initial amount earned there under in first quarter 2004 reflects
400,000 HQNT restricted common shares which are reflected at
two-thirds fair market value until the restricted shares become free
trading and/or are disposed of. Also during the first nine months of
2004 the Company earned service fees for services provided for
Mycosol, Inc. Gross revenue from product sales decreased for the
first nine months of 2004 by $368,267, or 28%, to $932,402 compared
with $1,300,669 in 2003. We continue active promotion of our product
line through trade-show presentations and direct calls on both
existing and potential customers. Our goal is to continue to expand
our product lines and we anticipate new products, which are scheduled
with various releases this year, will generate new revenue in this and
future years. In addition, we continue to pursue strategic alliances
with other corporations that have existing distribution networks. Our
goal for these alliances is to create immediate distribution and
fulfillment avenues for our products, while focusing on our capital
resources.
    
    During the second quarter 2004 the Company sold 344,500 HQNT shares
and realized a gain at time of sale of $519,524 due to the increase in
the sale price from the cost basis of $.70 at time of acquisition.
During second quarter 2004 the Company received these 344,500 shares
of common stock from an investor in exchange for 486,875 restricted
common shares of H-Quotient, Inc. (HQNT). The 486,875 restricted
common shares represents H-Quotients customer deposit for products to
be delivered in fourth quarter 2004. The amount of the deposit is
$241,500 which also represents the cost basis of the 344,500 shares of
common stock. And during the first quarter 2004 the Company sold
358,869 HQNT shares and realized a loss at time of sale of $8,445 due
to the decline in the FMV of the stock from December 31, 2003 closing price of
$.72. This represents a net realized gain of $511,079 for the first nine
months of 2004. 18




---



##### Table of Contents




    
    During the third quarter 2003 the Company received 605,000 shares of
marketable securities at September 3, 2003 in payment of a current
accounts receivable. At the end of third quarter 2003 these 605,000
shares of a marketable security resulted in an unrealized gain of
$125,560 due to the increase in the FMV from $.6024 to $.81. And
during the first quarter 2003 the Company issued 5,000,000 restricted
common shares which were in exchange for 276,267 free trading common
shares of H. Quotient, Inc. (HQNT) (a publicly traded company) which
resulted in an initial cost basis of $100,000. The Company recorded
an unrealized gain of $62,998 which reflects the increase in the FMV
of 276,267 HQNT shares from $.362 to $.59 at March 31, 2003. During
the first quarter 2003 the Company recorded an unrealized loss in the
amount of $77,800 which reflects the decline in the FMV of 103,733
HQNT shares from $1.34 to $.59 at March 31, 2003. This represents a
net unrealized gain of $110,758 for the first nine months of 2003.
    
    Dividend income for third quarter 2004 increased by $5,173, or 100% to
$5,173 compared with $-0- in the third quarter 2003. Dividend income
was earned on marketable securities held by the Company.
    
    Interest income for the nine months ended September 2004 increased by
$1,274, or 681% to $1,461 compared with $187 during the same period of
2003. Consolidated gross expenses for the first nine months of 2004 decreased by
$74,025, or 4% to $1,684,372 compared with $1,758,397 during the same period of
2003.  
    
    The cost of revenue for the first nine months of 2004 decreased as a
percentage of total revenue to 36% in 2004 from 55% during the same
period of 2003. The cost of goods sold from product sales for the
nine months ended September 30, 2004 decreased by $188,271 or 27% to
$521,797 compared with $710,068 during the same period of 2003. The
cost of goods ratio as a percentage of product sales was 56% during
the nine months ended September 30, 2004 compared to 55% in the same
period 2003. Profit margins for product sales were at 44% and 45%,
respectively.
    
    General, selling, and administrative expenses for the nine months
ended September 30, 2004 decreased by $147,981, or 18% to $696,205
compared with $844,186 during the same period of 2003. Decreases that
affected general, selling, and administrative costs were associated
with selling expenses which decreased for nine months ended September
30, 2004 by 24% to $264,735 compared with $349,078 in the same period
2003. Decreases that affected general, selling, and administrative
expenses were associated with professional legal, consulting and
accounting fees for the nine months ended September 30, 2004 that
decreased by 14% to $125,377 compared with $145,398 in the same period
2003. Increases that affected general, selling, and administrative
expenses were associated with administrative wages which increased for
the nine months ended September 30, 2004 by 54% to $101,947 compared
with $66,086 in the same period 2003. This increase is attributable
to the increase in permanent staff versus contracting staff from
outside agencies. Additional increases in general, selling, and
administrative costs were associated with public company expenses for
the nine months ended September 30, 2004 the increase in this category
increased by 64% to $22,499 compared with $13,684 in the same period
2003. The higher expenses in 2004 are attributable to the increase in
costs of public company vendors.
    
    Research and development for the first nine months of 2004 increased
by $51,198 or 70%, to $124,744 compared with $73,546 during the same
period of 2003. The increase was due primarily to additional research
on the focus of broadening the range of claims we can assert on our
existing products and on testing new products for commercialization. 19




---



##### Table of Contents




    
    Interest expense for the first nine months of 2004 increased by
$250,813, or 324% to $328,209 compared with $77,396 during the same
period of 2003. The lower interest expense during 2003 was due
primarily to negotiation with certain expired Convertible Debenture
holders to waive accrued interest in the amount of $206,537 in
exchange for closer to market conversion rates for their debt
instruments. Interest continues to accrue on other various debts.
    
    During the third quarter 2003 the Company purchased and sold 165,700
marketable securities and realized a gain in the amount of $32,377.
During second quarter 2003, the Company sold 380,000 HQNT shares and
realized a loss of $20,733 due to the decline in the FMV of the stock
from March 31, 2003 at $.59. And during first quarter 2003, the
Company sold 100,000 HQNT shares and realized a loss of $64,845 due to
the decline in the FMV of the stock from December 31, 2002 at $1.34.
This represents a net realized loss of $53,201 for the first nine
months of 2003.
    
    During the third quarter 2004 the Company recorded an unrealized loss
in the amount of $84,099 which reflects the decline in the FMV of
301,431 H-Quotient, Inc. (HQNT) common shares from June 30, 2004 at
$.989 to $.71 at September 30, 2004. During the second quarter 2004
the Company recorded an unrealized loss in the amount of $214,317
which reflects the decline in the FMV of 301,431 HQNT shares from
March 31, 2004 at $1.70 to $.989 at June 30, 2004. And during the
first quarter 2004 the Company recorded an unrealized gain in the
amount of $295,402 which reflects the increase in the FMV of 301,431
HQNT shares from $.72 to $1.70 at March 31, 2004. This represents a
net unrealized loss of $3,014 for the first nine months of 2004.
    
    Net income (losses) increased to a net income of $321,743 during the
first nine months of 2004 from a net loss of $346,783 during the same
period of 2003. This represented a 193% increase in net income
(losses). Liquidity and Working Capital Historically, our principal source of financing for our research and
development and business activities have been through sales, equity offerings,
and debt. We have successfully reduced our working capital deficit by over $3
million dollars from $3,838,617at September 30, 2003 to $823,793 at September
30, 2004. Our independent certified public accountants stated in their report
on the 2003 consolidated financial statements that due to losses from
operations and a working capital deficit, there is substantial doubt about the
Companys ability to continue as a going concern. We are addressing the going
concern issue in virtually every aspect of our operation. We continue to cut
operating expenses and are successfully changing our product mix such that the
company is achieving improved margins. Because of our significant losses
incurred since inception, we have become substantially dependent on (1) loans
from officers, directors, and third parties, (2) private placements of our
securities, (3) revenue from sales, and (4) liquidation of our marketable
securities to fund operations. These results of these items are included in
the following descriptions.  
    
    During the nine months ended September 30, 2004, 68,121 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 $0.066.
    
    During the nine months ended September 30, 2004 300,000 restricted
common shares were issued to the Chairman of the Board under the terms
of his consulting agreement with the company. The effective price per
share was $0.044. 20




---



##### Table of Contents




    
    During the third quarter of 2004 231,070 common shares were issued
under the companys S8 Registration Statement for legal and consulting
services totaling $11,929. The average price per share was $0.052.
    
    During the second quarter of 2004 the company liquidated a portion of
its marketable securities for a net cashflow of $754,314.
    
    During the second quarter of 2004 $471,215 of existing convertible
debenture principal, along with $427,773 of convertible debenture
accrued interest and $1,181,822 of payable debt was rolled into 2
convertible debentures. These debentures carry interest rates of 10%
and have terms of 3 years. These instruments are immediately
convertible into common shares, at the option of the holder, at
conversion rates of $0.051. One debenture in the principal amount of
$300,000 is held by a person not affiliated or related to the company
and one debenture in the principal amount of $1,780,811 is held by
Dunvegan Mortgage Corporation a company of which Veridiens President
& C.E.O. Mr. Sheldon Fenton is an officer and a director.
    
    During the second quarter of 2004 246,986 common shares were issued
under the companys S8 Registration Statement for legal and consulting
services totaling $15,242. The average price per share was $0.062.
    
    During the first quarter of 2004 the company liquidated a portion of
its marketable securities for a net cashflow of $244,214.
    
    During the first quarter of 2004 we issued 2 convertible debentures
for cash proceeds of $330,000. These debentures carry interest rates
of 10%, have terms of 3 years and have conversion rates of $0.06.
    
    During the first quarter of 2004 a Convertible Debentures with a
principal balance of $25,000 (accrued interest waived) was converted
into 500,000 shares of common stock.
    
    During the first quarter of 2004 1,373,571 common shares were issued
under the companys S8 Registration Statement for legal and consulting
services totaling $92,681. The average price per share was $0.067.
    
    During the first quarter of 2004, as allowed under their agreement,
the company repaid their accounts receivable factoring debt of $77,614
with the issuance of 1,552,272 common shares.
    
    During the nine months ended September 30, 2004, accounts receivable
increased by $303,623 to $373,946 from $70,323 at December 31, 2003.
This increase can be attributed to increased sales levels.
    
    During the nine months ended September 30, 2004, inventory increased
by $83,705 to $209,205 compared with $125,500 at December 31, 2003.
This increase can be attributed to increased sales levels.
    
    We believe that our long-term success depends on revenues from
operations from product sales and ongoing royalties from technologies
and service fees. 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 9, 2004, we have cash of approximately $232,483 and
during November and December, we expect cash flow of $300,000 from
operating activities, private placements and 21




---



##### Table of Contents



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.
    
    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. 
  Item 3.
    Controls and Procedures Pursuant to rules adopted by the SEC as directed by Section 302 of the
Sarbanes-Oxley Act of 2002, the company has performed an evaluation of its
disclosure controls and procedures (as defined by Exchange Act rule 13a-14) as
of the end of the period covered by this report. Based on this evaluation, the
companys Chief Executive Officer and Acting Chief Financial Officer has
concluded that these procedures are effective in ensuring that information
required to be disclosed by the company is recorded, processed, summarized, and
reported within the time periods specified in the SECs rules and forms. In
addition, there have not been any significant changes in internal controls or
other factors that could significantly affect internal controls subsequent to
the date of the companys most recent evaluation. 
 PART II OTHER INFORMATION 
  Item 1.
    Legal Proceedings There have been no changes in the previously reported litigation. 
  Item 2.
    Changes in Securities and Small Business Issuer Purchases of Equity Securities  (a)
    
    Not applicable.(b)
    
    Not applicable.(c)
    
    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 September 30, 2004:Common StockAt September 30, 2004, 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 22




---



##### Table of Contents



were accounted for in the third quarter but were not issued until October
2004. The issuance was considered exempt from registration by reason of
Section 4(2) of the Securities Act.(d)
    
    During the quarter ended September 30, 2004 the Company did not
repurchase any of its equity securities.(e)
    
    Not applicable. 
  Item 5.
    Other Information During third quarter 2004 Veridien entered into a distribution agreement with a
multi-national pharmaceutical company with 500+ sales
representatives expected to
introduce, distribute and provide Viraguard Infection Control products
initially to up to 36,000 physicians and their offices across the United
States. This program commenced in the third quarter of 2004. This arrangement
is an ideal method to promote and introduce Viraguard Infection Control
products directly to thousands of end-user medical practitioners and their staff.
To date, the program has generated over $450,000 in sales orders. 
  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 2002  B.
    
    Report on Form 8-KThere was 1 report on Form 8-K filed in the third quarter of 2004.
This report was filed on August 18, 2004. The report disclosed a
press release disseminated by Veridien and did not contain any
financial statements. 23




---



##### Table of Contents



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 15, 2004
    
    By
    
    /s/ Sheldon C. FentonSheldon C. Fenton
Chief Executive OfficerDate
    
    November 15, 2004
    
    By
    
    /s/ Rene A. GareauRene A. Gareau
ExecVice President & Secretary
 24