##### Table of Contents



UNITED STATES OF AMERICA SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-QSB
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2006
 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
(State or Other Jurisdiction of
Incorporation or Organization)
    
    59-3020382
(IRS Employer Identification No.)7600 Bryan Dairy Road, Suite F, Largo, Florida
(Address of principal executive offices)
    
    33777-1433
(Zip Code)
 (Issuers telephone number, including Area Code)
  þ o
  o þ
   o þ




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##### 



TABLE OF CONTENTS
 PagesPART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Notes to Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis
    
    
    9Item 3.
    
    Controls and Procedures
    
    
    17PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    17Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 5.
    
    Other Information
    
    
    18Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    18A.
    
    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
    
    
    20(b)
    
    Exhibit 31.2  Rule 13a-14(a)/15d-14(a) Certification,
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    21(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
    
    
    22(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 CertificationEx-31.2 Section 302 CertificationEx-32.1 Section 906 CertificationEx-32.2 Section 906 Certification
  2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 Veridien Corporation
and Subsidiaries
 
 June 30, 2006
    
    
    December 31, 2005AssetsCurrent assets:Cash
    
    $
    143,476
    
    
    $
    115,493Marketable Securities
    
    
    105,430
    
    
    
    137,795Accounts receivable, net of allowance
of $36,930 and $27,494
    
    
    191,657
    
    
    
    324,952Inventory
    
    
    387,144
    
    
    
    376,624Prepaid expenses and other current assets
    
    
    47,932
    
    
    
    82,399Total current assets:
    
    
    875,639
    
    
    
    1,037,263Property and equipment, net of accumulated
depreciation of $421,914 and $417,365
    
    
    25,531
    
    
    
    29,762Other assets:Patents, net of accumulated amortization of
of $513,743 and $511,188
    
    
    336,872
    
    
    
    286,280Goodwill
    
    
    410,000
    
    
    
    410,000Security deposits
    
    
    13,754
    
    
    
    9,965Total Assets:
    
    $
    1,661,796
    
    
    $
    1,773,270
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##### Table of Contents



Veridien Corporation
and Subsidiaries
 June 30, 2006
    
    
    December 31, 2005Liabilities
and Shareholders DeficitCurrent liabilities:Note payable
    
    $
    169,298
    
    
    $
    571,522Notes payable  related party
    
    
    -0-
    
    
    
    260,000Current
portion of convertible debentures,  net of debt discount of $18,005 and $0
at June 30, 2006 and  December 31, 2005
    
    
    1,233,061
    
    
    
    671,066Current portion of convertible debentures  related party
    
    
    2,604,907
    
    
    
    824,096Accounts payable
    
    
    386,845
    
    
    
    452,904Accounts payable  related party
    
    
    39,890
    
    
    
    232,049Accrued liabilities
    
    
    618,355
    
    
    
    534,686Accrued liabilities  related party
    
    
    957,382
    
    
    
    769,192Customer deposits
    
    
    1,011
    
    
    
    16,977Total current liabilities
    
    
    6,010,749
    
    
    
    4,332,492Long-term liabilities:Convertible
debentures
    
    
    1,130,000
    
    
    
    1,130,000Convertible debentures  related party
    
    
    767,032
    
    
    
    1,780,811Total liabilities:
    
    
    7,907,781
    
    
    
    7,243,303Minority interest
    
    
    69,447
    
    
    
    178,756Shareholders deficit:Undesignated preferred stock, $.001 par value
25,000,000 shares authorized, none issued
Convertible redeemable preferred stock,
$10 par value, 100,000 authorized; 6,000
issued and outstanding at June 30, 2006
and December 31, 2005
    
    
    60,000
    
    
    
    60,000Series B Preferred Stock, $.001 par value, 245,344
authorized, and 174,219 issued and
outstanding at June 30, 2006 and December 31, 2005
    
    
    175
    
    
    
    175Common Stock  $.001 par value; 300,000,000 shares
authorized, 230,005,679 and 228,282,857
issued and outstanding at June 30, 2006 and
December 31, 2005
    
    
    230,005
    
    
    
    228,283Additional paid-in capital
    
    
    31,921,279
    
    
    
    31,819,544Accumulated deficit
    
    
    (37,756,791
    )
    
    
    (35,780,923
    )Current period profit (loss)
    
    
    (770,100
    )
    
    
    (1,975,868
    )Total shareholders deficit:
    
    
    (6,315,432
    )
    
    
    (5,648,789
    )Total Liabilities and Shareholders Deficit:
    
    $
    1,661,796
    
    
    $
    1,773,270
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##### Table of Contents



Veridien Corporation
and Subsidiaries
 
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    265,054
    
    
    $
    153,339
    
    
    $
    420,177
    
    
    $
    470,717Operating costs and expenses:Cost of revenue
    
    
    155,618
    
    
    
    97,361
    
    
    
    243,604
    
    
    
    323,465General, selling, and
administrative
    
    
    249,364
    
    
    
    245,731
    
    
    
    453,149
    
    
    
    508,902Research and development
    
    
    131,558
    
    
    
    250,914
    
    
    
    249,801
    
    
    
    500,501536,540
    
    
    
    594,006
    
    
    
    946,554
    
    
    
    1,332,868Other income (expense):Interest expense
    
    
    (167,252
    )
    
    
    (125,981
    )
    
    
    (323,227
    )
    
    
    (247,315
    )Unrealized gain (loss)
on investments
    
    
    (42,045
    )
    
    
    (85,906
    )
    
    
    (158,279
    )
    
    
    (166,506
    )Interest income
    
    
    1,435
    
    
    
    330
    
    
    
    2,561
    
    
    
    774Dividend income
    
    
    -0-
    
    
    
    16,547
    
    
    
    125,914
    
    
    
    16,547(207,862
    )
    
    
    (195,010
    )
    
    
    (353,031
    )
    
    
    (396,500
    )Net income (loss) before minority
interest
    
    
    (479,348
    )
    
    
    (635,677
    )
    
    
    (879,408
    )
    
    
    (1,258,651
    )Minority interest in Mycosol loss
    
    
    56,520
    
    
    
    144,805
    
    
    
    109,308
    
    
    
    297,104Net income (loss)
    
    $
    (422,828
    )
    
    $
    (490,872
    )
    
    $
    (770,100
    )
    
    $
    (961,547
    )Basic and diluted net income (loss) per common
share
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )Weighted
average shares outstanding
    
    
    229,484,344
    
    
    
    227,921,635
    
    
    
    228,905,267
    
    
    
    226,828,127
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Veridien Corporation
and Subsidiaries
 2006
    
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    (770,100
    )
    
    $
    (961,547
    )Adjustments to reconcile net income (loss) to net cash
(used) by operating activities:Depreciation and amortization
    
    
    7,104
    
    
    
    16,571Amortization of debt discount associated with BCF
    
    
    2,601
    
    
    
    -0-Non cash dividends
    
    
    (125,914
    )
    
    
    (16,547
    )Unrealized (gain) loss on marketable securities
    
    
    158,279
    
    
    
    166,506Stock issuances for services
    
    
    32,850
    
    
    
    15,373Minority interest
    
    
    (109,308
    )
    
    
    (297,104
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    133,295
    
    
    
    58,753Inventory
    
    
    (10,520
    )
    
    
    (34,956
    )Prepaid expenses and other current assets
    
    
    34,467
    
    
    
    41,445Deposits
    
    
    (3,789
    )
    
    
    3,000Customer deposits
    
    
    (15,966
    )
    
    
    -0-Accounts payable
    
    
    7,814
    
    
    
    165,829Accrued expenses  third party
    
    
    83,669
    
    
    
    42,103Accrued expenses  related party
    
    
    188,190
    
    
    
    153,869Net cash provided (used) by operating activities:
    
    
    (387,328
    )
    
    
    (646,705
    )Cash flow from investing activities:Purchase of property and equipment
    
    
    (318
    )
    
    
    (12,646
    )Increase in patents
    
    
    (53,147
    )
    
    
    (31,097
    )Net cash used by investing activities:
    
    
    (53,465
    )
    
    
    (43,743
    )Cash flow from financing activities:Proceeds from Mineola advance
    
    
    -0-
    
    
    
    500,000Proceeds from convertible debentures
    
    
    270,000
    
    
    
    200,000Proceeds from notes payable  third party
    
    
    -0-
    
    
    
    44,423Proceeds from notes payable  related party
    
    
    271,000
    
    
    
    -0-Payments on notes payable  third party
    
    
    (42,224)
    
    
    
    -0-Payments on notes payable  related party
    
    
    (30,000)
    
    
    
    -0-Net cash provided by financing activities:
    
    
    468,776
    
    
    
    744,423Net increase/(decrease) in cash
    
    
    27,983
    
    
    
    53,975Cash at beginning of year
    
    
    115,493
    
    
    
    126,027Cash at end of quarter
    
    $
    143,476
    
    
    $
    180,002Non-cash investing and financing activities:Conversion of convertible debentures to common stock
    
    $
    50,000
    
    
    $
    113,489Conversion of debt to convertible debentures
    
    
    1,127,032Payment of accrued interest with Mycosol warrants
    
    
    
    
    
    
    222,360Purchase of Mycosol interest with 6,000,000 shares
of Veridien common stock
    
    
    
    
    
    
    300,000




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Veridien Corporation
and
Subsidiaries
 
 Notes to the Unaudited Interim Consolidated Financial Statements at June 30, 2006
  Note A  Stock-Based Compensation
   Note B  Consolidation of Variable Interest Entity  Mycosol Investment
   Note C  Convertible Debentures
  7




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8




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Item 2.
    
    Managements Discussion and Analysis
 First Quarter  June 30, 2006 Compared with June 30, 2005
  Overview
   Ò ® ® ® ®
 Ò Ò ® ®
 ® ®
 ®
  9




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Results of Operations
 Second Quarter ended June 30, 2006 vs. Second Quarter ended June 30, 2005
 Second Quarter
    
    
    Percentage ofJune 30,
    
    
    Net Revenue2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    265,054
    
    
    $
    153,339
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    155,618
    
    
    
    97,361
    
    
    
    59
    %
    
    
    63
    %Gross Profit
    
    
    109,436
    
    
    
    55,978
    
    
    
    41
    %
    
    
    37
    %Operating Expenses:General, Selling & Administrative
    
    
    249,364
    
    
    
    245,731
    
    
    
    94
    %
    
    
    160
    %Research & Development
    
    
    131,558
    
    
    
    250,914
    
    
    
    50
    %
    
    
    164
    %Income (Loss) from Operations
    
    
    (271,486
    )
    
    
    (440,667
    )
    
    
    (102
    )%
    
    
    (287
    )%Other Income (Expense) Net
    
    
    (207,862
    )
    
    
    (195,010
    )
    
    
    (78
    )%
    
    
    (127
    )%Net Income (Loss) Before
Minority Interest
    
    
    (479,348
    )
    
    
    (635,677
    )
    
    
    (181
    )%
    
    
    (415
    )%Minority Interest
    
    
    56,520
    
    
    
    144,805
    
    
    
    21
    %
    
    
    94
    %Net Income (Loss)
    
    
    (422,828
    )
    
    
    (490,872
    )
    
    
    (160
    )%
    
    
    (320
    )%
 Second Quarter  June 30, 2006 Compared with June 30, 2005
  
    
    Gross revenue from product sales increased for second quarter 2006 by $111,715, or 73%,
to $265,054 compared with $153,339 in second quarter 2005. 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.
    
    Interest income for second quarter 2006 increased by $1,105, or 335% to $1,435 compared
with $330 in second quarter 2005.
    
    Dividend income for second quarter 2006 decreased by $16,547, or 100% to $-0- compared
with $16,547 in second quarter 2005. The Company received 71,951 common shares of Standard
Global Holdings Group (SNDH) as a dividend during second quarter 2005.
  
    
    The cost of goods sold from product sales for second quarter 2006 increased by $58,257
or 60% to $155,618 compared with $97,361 in second quarter 2005. The cost of goods ratio
as a percentage of product sales was 59% in second quarter 2006 compared to 63% in second
quarter
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2005. The decrease in ratio of the cost of goods from product sales as a
percentage of sales resulted primarily from sale of a product mix with increased margins.
Profit margins for product sales were at 41% and 37%, respectively for Quarter 2 2006 and
Quarter 2 2005.
 
    
    General, selling, and administrative expenses for second quarter 2006 increased by
$3,633 or 1% to $249,364 compared with $245,731 during the same period of 2005. Increases
that affected general and administrative costs were associated with administrative wages
which increased in second quarter 2006 by 49% to $45,189 compared with $30,363 in second
quarter 2005. This increase is attributable to the increase in permanent staff versus
contracting staff from outside agencies. Increases that affected general and
administrative expenses were associated with professional legal, consulting and accounting
fees for second quarter 2006 that increased by 17% to $63,456 compared with $54,272 in
second quarter 2005. Decreases that affected general and administrative costs were
associated with selling expenses which decreased for second quarter 2006 by 7% to $75,191
compared with $80,425 in second quarter 2005. This decrease is attributable to a reduction
in advertising expenses. Additional decreases in general and administrative costs were
associated with public company expenses for second quarter 2006 the decrease in this
category decreased by 32% to $6,753 compared with $9,909 in second quarter 2005.
    
    Research and development expenses for second quarter 2006 decreased by $119,356, or 48%
to $131,558 compared with $250,914 in second quarter 2005. This represents $32,085 for the
Company and $99,473 from the consolidation of expenses for the VIE  Mycosol, Inc. for the
second quarter 2006 compared to $25,748 for the Company and $225,166 from the consolidation
of expenses for the VIE  Mycosol, Inc. for the second quarter of 2005. 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 expense for second quarter 2006 increased by $41,271, or 33% to $167,252
compared with $125,981 in second quarter 2005. The increase in interest expense was due
primarily to the increase in Convertible Debentures issued in the amount of $1,347,032 in
second quarter 2006 compared to $-0- in second quarter 2005. Also the Company expensed
$1,717 in convertible debenture discount per Black Scholes calculations in second quarter
2006 compared to $-0- in second quarter 2005. The Company continues current debt financing
arrangements.
    
    During second quarter 2006 the Company recorded an unrealized loss in the amount of
$42,045 which reflects the decline in the FMV of 719,507 HQNT shares from March 31, 2006 at
$.09 to $.05 at June 30, 2006; a decline in the FMV of 10,741 Healthnostics, Inc. (HNST)
shares from March 31, 2006 at $.07 to $.04 at June 30, 2006; and a decrease in the FMV of
431,404 Standard Global Holding Group (SNDH) shares of $.19 at March 31, 2006 to $.16 at
June 30, 2006. During second quarter 2005 the Company recorded an unrealized loss in the
amount of $85,906 which reflects the decline in the FMV of 701,506 HQNT shares from March
31, 2005 at $.45 to $.30 at June 30, 2005; a decline in the FMV of 10,741 Healthnostics,
Inc. (HNST) shares from March 31, 2005 at $.075 to $.065 at June 30, 2005; an increase in
the FMV of 71,951 Standard Global Holding Group (SNDH) shares of $.23 at June 6, 2005 to
$.27 at June 30, 2005.
 
    
    Net (loss) decreased to a net loss before Minority interest in Mycosol to
($479,348) for second quarter 2006 from a net loss of ($635,677) in second quarter 2005.
Net (loss) decreased to a net loss after Minority interest in Mycosol to
($422,828) for second quarter 2006 from a net loss of ($490,872) in second quarter 2005.
 12




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Six Months ended June 30, 2006 vs. Six Months ended June 30, 2005
 Six Months ended
    
    
    Percentage ofJune 30,
    
    
    Net Revenue2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    420,177
    
    
    $
    470,717
    
    
    
    100
    %
    
    
    100
    %Cost of Goods Sold
    
    
    243,604
    
    
    
    323,465
    
    
    
    58
    %
    
    
    69
    %Gross Profit
    
    
    176,573
    
    
    
    147,252
    
    
    
    42
    %
    
    
    31
    %Operating Expenses:General, Selling & Administrative
    
    
    453,149
    
    
    
    508,902
    
    
    
    108
    %
    
    
    108
    %Research & Development
    
    
    249,801
    
    
    
    500,501
    
    
    
    59
    %
    
    
    106
    %Income (Loss) from Operations
    
    
    (526,377
    )
    
    
    (862,151
    )
    
    
    (125
    )%
    
    
    (183
    )%Other Income (Expense) Net
    
    
    (353,031
    )
    
    
    (396,500
    )
    
    
    (84
    )%
    
    
    (84
    )%Net Income (Loss) Before
Minority Interest
    
    
    (879,408
    )
    
    
    (1,258,651
    )
    
    
    (209
    )%
    
    
    (267
    )%Minority Interest
    
    
    109,308
    
    
    
    297,104
    
    
    
    26
    %
    
    
    63
    %Net Income (Loss)
    
    
    (770,100
    )
    
    
    (961,547
    )
    
    
    (183
    )%
    
    
    (204
    )%
 Six-months ended June 30, 2006 Compared with Six Months Prior Year ended June 30, 2005
  
    
    Gross revenue from product sales decreased for the first six months of 2006 by $50,540,
or 11%, to $420,177 compared with $470,717 in 2005. 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 first six months of 2006 the Company recorded an unrealized loss in the
amount of $158,279 which reflects the decline in the FMV of 719,507 HQNT shares from
December 31, 2005 at $.17 to $.05 at June 30, 2006; and a decline in the FMV of 10,741 HNST
shares from December 31, 2005 at $.125 to $.04 at June 30, 2006 and a decline in the FMV of
431,404 SNDH shares from December 21, 2005 at $.24 to $.16 at June 30, 2006. During the
first six months of 2005 the Company recorded an unrealized loss in the amount of $166,506
which reflects the decline in the FMV of 701,506 HQNT shares from December 31, 2004 at $.55
to $.30 at June 30, 2005; and a decline in the FMV of 10,741 HNST shares from December 31,
2004 at $.13 to $.065 at June 30, 2005 and an increase in the FMV of 71,951 SNDH shares of $.23 at June 6, 2005 to
$.27 at June 30, 2005.
    
    Interest income for the first six months of 2006 increased by $1,787, or 231% to $2,561
compared with $774 during the same period of 2005.
 13




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##### Table of Contents




    
    Dividend income for second quarter 2006 increased by $109,367, or 661% to $125,914
compared with $16,547 in second quarter 2005. The Company received 359,753 common shares
of Standard Holdings Group (SNDH) as a dividend during the first six months of 2006 and
71,951 common shares of Standard Global Holdings Group (SNDH) as a dividend during the
first six months of 2005.
  
    
    The cost of goods sold from product sales for the six months ended June 30, 2006
decreased by $79,861 or 25% to $243,604 compared with $323,465 during the same period of
2005. The cost of goods ratio as a percentage of product sales was 58% during the six
months ended June 30, 2006 compared to 69% in the same period 2005. The decrease in ratio
of the cost of goods from product sales as a percentage of sales resulted primarily from
sale of a product mix with increased margins. Profit margins for product sales were at 42%
and 31%, respectively for year-to date 2006 and year-to-date 2005.
    
    General, selling, and administrative expenses for six months ended June 30, 2006
decreased by $55,753 or 11% to $453,149 compared with $508,902 during the same period of
2005. Decreases that affected general and administrative expenses were associated with
professional legal, consulting and accounting fees for six months ended June 30, 2006 that
decreased by 15% to $103,674 compared with $122,541 in the same period 2005. Decreases
that affected general and administrative costs were associated with selling expenses which
decreased for six months ended June 30, 2006 by 23% to $139,581 compared with $180,673 in
the same period 2005. This decrease is attributable to a reduction in advertising
expenses. Additional decreases in general and administrative costs were associated with
public company expenses for six months ended June 30, 2006 the decrease in this category
decreased by 1% to $11,936 compared with $12,631 in the same period 2005. This decrease is
attributable to the reduction of costs in maintaining the Companys website. Increases
that affected general and administrative costs were associated with administrative wages
which increased for six months ended June 30, 2006 by 29% to $81,968 compared with $63,417
in the same period 2005. This increase is attributable to the increase in permanent staff
versus contracting staff from outside agencies.
    
    Research and development expenses for the first six months of 2006 decreased by
$250,700, or 50% to $249,801 compared with $500,501 during the same period of 2005. This
represents $59,314 for the Company and $190,487 consolidation of expenses for the VIE 
Mycosol, Inc. for the first six months of 2006 and $53,616 for the Company and $446,885
consolidation of expenses for the VIE  Mycosol, Inc for the same period of 2005. 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 expense for the first six months of 2006 increased by $75,912, or 31% to
$323,227 compared with $247,315 during the same period of 2005. The increase in interest
expense was due primarily to the increase in Convertible Debentures issued in the amount of
$1,397,032 in the first six months of 2006 compared to $200,000 during the same period
2005. Also the Company expensed $2,601 in convertible debenture discount per Black Scholes
calculations in the first six months of 2006 compared to $-0- in the same period 2005. The Company continues current debt
financing arrangements.
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Liquidity and Working Capital
  
    
    During the second quarter a convertible debenture with a principal
balance of $50,000 and accrued interest of $14,582 was converted
into 1,291,638 common shares at the conversion rate of $0.05.
    
    During the second quarter we issued 6 convertible debentures (i) 3
for cash proceeds totaling $220,000; (ii) 1 for extinguishment of
Notes Payable (cash proceeds already received by the company) of
$360,000; (iii) 1 for extinguishment of Notes Payable-related
Party (cash proceeds already received by the company) of $501,000;
and (iv) 1 for extinguishment of Accounts Payable  related Party
(fees and expenses due from the company) of $266,032. These
debentures all carry an interest rate of 8%, have 3-year terms and
have conversion rates of $0.035.
    
    During the second quarter, 165,000 common shares were issued under
the companys S8 Registration Statement to two employees in
recognition of past performance. The average effective price per
share was $0.038.
    
    During the six months ended June 30, 2006, 66,184 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 $0.045.
    
    During the six months of 2006 200,000 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
$0.045.
    
    During the first quarter of 2006 we issued a convertible debenture
for cash proceeds of $50,000. This debenture carries an interest
rate of 8%, has a term of 3 years and has a conversion rate of
$0.033.
    
    During the six months ended June 30, 2006, accounts receivable
decreased by $133,295 to $191,657 from $324,952 at December 31,
2005.
    
    During the six months ended June 30, 2006, inventory increased by
$10,520 to $387,144 compared with $376,624 at December 31, 2005.
    
    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
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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 July 31, 2006, we have cash of approximately $126,951 and
during August and September, we expect cash flow of $300,000 from
operating activities, private placements and possible sale of
marketable securities. This level of liquidity should be
sufficient to operate the Company for more than 180 days. The
Company anticipates increasing sales, reduced operating expenses,
and additional private placement funding will contribute to
continuous operations of the Company.
    
    We anticipate utilizing a portion of our funds to support the
working capital requirements of our anticipated increase in sales
and to cover new product development costs for Veridien and our
VIE, Mycosol.
    
    If disruptions occur in third party vendors that supply raw
materials to our contract fill manufacturers, we may experience
the inability to have product inventory for sale to our customers.
Such events could have material adverse effect on Veridien to
compete effectively in the marketplace. We continue to utilize
the services of a number of contract fill manufacturers. These
contract fill manufacturers have been successful in locating
sources of our commonly available raw materials and converting
these into finished products and we believe that use of these
contract fill manufacturers will assure us of the timely
production of products.
 Critical Accounting Estimates
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Item 3. Controls and Procedures
   
 PART II
    
    OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 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 securities) without registration under the Securities Act of 1933
occurred during the quarter ending June 30, 2006, in addition to those previously disclosed
in the Companys 8-K filed May 30, 2006:Convertible SecuritiesOn June 2, 2006 the Registrant issued a convertible debenture for cash proceeds of $50,000
to a third party, unrelated, accredited investor. This debenture carries an interest rate
of 8% and has a term of 3 years. This instrument is immediately convertible into common
shares, at the option of the holder, at the conversion rate of $0.035. This issuance was
considered exempt from registration by reason of Section 4(2) of the Securities Act.Common StockAt June 30, 2006, the Chairman of the Board was entitled to the issuance of 100,000 common
shares under the terms of his consulting agreement with the company. These shares were
accounted for in the second quarter but have not yet been issued.. The 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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(d)
    
    During the quarter ended June 30, 2006 the Company did not repurchase any of its equity
securities.
 
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits and Report on Form 8-K
 A.
    
    Exhibits
 (e)
    
    Exhibit 31.1  Rule 13a-14(a)/15d-14(a) Certification,
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(f)
    
    Exhibit 31.2  Rule 13a-14(a)/15d-14(a) Certification,
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(g)
    
    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(h)
    
    Exhibit 32.2  Certification Pursuant 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 B.
    
    Report on Form 8-KDuring the second quarter of 2006 there was 1 report on Form 8-K issued by the
Company on May 30, 2006 with disclosures under (i) Item 2.03  Obligations under an
Off Balance Sheet Arrangement; and (ii) Item 3.02 Unregistered Sales of Equity
Securities.
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SIGNATURES
  Veridien Corporation(Registrant)Date
    
    August 14, 2006
    
    
    
    By
    
    /s/ Sheldon C. FentonSheldon C. FentonChief Executive OfficerDate
    
    August 14, 2006
    
    
    
    By
    
    /s/ Russell Van ZandtRussell Van ZandtChief Financial Officer & Chairman
 19