##### 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 September 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
    
    59-3020382(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (IRS Employer Identification No.)7600 Bryan Dairy Road, Suite F, Largo, Florida
    
    33777-1433(Address of principal executive offices)
    
    (Zip Code)
  
   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 of Financial Condition and Results of Operation
    
    
    10Item 3.
    
    Controls and Procedures
    
    
    17PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    18Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 5.
    
    Other Information
    
    
    18Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    19(a)
    
    Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification,Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    21(b)
    
    Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification,Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    22(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
    
    
    24EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO
  2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Veridien Corporation
and Subsidiaries
 
 September 30,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash
    
    $
    239,406
    
    
    $
    115,493Marketable Securities
    
    
    50,540
    
    
    
    137,795Accounts receivable, net of allowance
of $55,563 and $27,494
    
    
    378,810
    
    
    
    324,952Inventory
    
    
    568,246
    
    
    
    376,624Prepaid expenses and other current assets
    
    
    119,674
    
    
    
    82,399Total current assets:
    
    
    1,356,676
    
    
    
    1,037,263Property and equipment, net of accumulated
depreciation of $424,199 and $417,365
    
    
    23,248
    
    
    
    29,762Other assets:Patents, net of accumulated amortization of
of $515,020 and $511,188
    
    
    345,822
    
    
    
    286,280Goodwill
    
    
    870,748
    
    
    
    410,000Security deposits
    
    
    13,754
    
    
    
    9,965Total Assets:
    
    $
    2,610,248
    
    
    $
    1,773,270
  3




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##### Table of Contents



Veridien Corporation
And Subsidiaries
 
 September
    
    
    December30, 2006
    
    
    31, 2005Liabilities and Shareholders DeficitCurrent liabilities:Notes payable
    
    $
    188,900
    
    
    $
    571,522Notes payable  related party
    
    
    145,000
    
    
    
    260,000Current portion of convertible debentures, net of debt discount
of $16,288 and $0 at Sept. 30, 2006 and December 31, 2005
    
    
    1,234,778
    
    
    
    671,066Current portion of convertible debentures  related party
    
    
    2,604,907
    
    
    
    824,096Accounts payable
    
    
    500,201
    
    
    
    452,904Accounts payable  related party
    
    
    65,198
    
    
    
    232,049Accrued liabilities
    
    
    700,744
    
    
    
    534,686Accrued liabilities  related party
    
    
    1,061,588
    
    
    
    769,192Customer deposits
    
    
    1,011
    
    
    
    16,977Total
current liabilities:
    
    
    6,502,327
    
    
    
    4,332,492Long-term liabilities:Convertible debentures
    
    
    1,640,000
    
    
    
    1,130,000Convertible debentures  related party
    
    
    767,032
    
    
    
    1,780,811Total liabilities:
    
    
    8,909,359
    
    
    
    7,243,303Minority interest
    
    
    99,121
    
    
    
    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 September 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
September 30, 2006 and December 31, 2005
    
    
    175
    
    
    
    175Common Stock  $.001 par value; 300,000,000 shares
authorized, 240,000,963 and 228,282,857
issued and outstanding at September 30,
2006 and December 31, 2005
    
    
    240,000
    
    
    
    228,283Additional paid-in capital
    
    
    32,310,494
    
    
    
    31,819,544Cumulative foreign exchange adjustment
    
    
    (18,456
    )
    
    
    -0-Accumulated deficit
    
    
    (37,756,791
    )
    
    
    (35,780,923
    )Current period profit (loss)
    
    
    (1,233,654
    )
    
    
    (1,975,868
    )Total shareholders deficit:
    
    
    (6,398,232
    )
    
    
    (5,648,789
    )Total Liabilities and Shareholders Deficit:
    
    $
    2,610,248
    
    
    $
    1,773,270
  4




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##### Table of Contents



Veridien Corporation
and Subsidiaries
 
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    461,517
    
    
    $
    172,152
    
    
    $
    881,694
    
    
    $
    642,869Operating costs and expenses:Cost of revenue
    
    
    355,204
    
    
    
    104,676
    
    
    
    598,808
    
    
    
    428,141General, selling, and
administrative
    
    
    264,254
    
    
    
    248,565
    
    
    
    717,403
    
    
    
    740,920Research and development
    
    
    110,726
    
    
    
    253,520
    
    
    
    360,527
    
    
    
    754,021730,184
    
    
    
    606,761
    
    
    
    1,676,738
    
    
    
    1,923,082Other income (expense):Interest expense
    
    
    (181,445
    )
    
    
    (127,806
    )
    
    
    (504,672
    )
    
    
    (375,121
    )Unrealized gain (loss)
on investments
    
    
    (54,890
    )
    
    
    (8,454
    )
    
    
    (213,169
    )
    
    
    (191,507
    )Interest income
    
    
    2,534
    
    
    
    577
    
    
    
    5,095
    
    
    
    1,351Dividend income
    
    
    -0-
    
    
    
    -0-
    
    
    
    125,914
    
    
    
    16,547(233,801
    )
    
    
    (135,683
    )
    
    
    (586,832
    )
    
    
    (548,730
    )Net income (loss) before minority
interest
    
    
    (502,468
    )
    
    
    (570,292
    )
    
    
    (1,381,876
    )
    
    
    (1,828,943
    )Minority interest in Mycosol loss
    
    
    38,914
    
    
    
    137,937
    
    
    
    148,222
    
    
    
    435,041Net income (loss)
    
    $
    (463,554
    )
    
    $
    (432,355
    )
    
    $
    (1,233,654
    )
    
    $
    (1,393,902
    )Basic and diluted net income (loss)
per common share
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    (.01
    )
    
    $
    (.01
    )Weight average share outstanding
    
    
    239,748,419
    
    
    
    228,052,898
    
    
    
    232,315,664
    
    
    
    227,236,384
  5




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##### Table of Contents



Veridien Corporation
and Subsidiaries
 2006
    
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    (1,233,654
    )
    
    $
    (1,393,902
    )Adjustments to reconcile net income (loss) to net cash
(used) by operating activities:Depreciation and amortization
    
    
    10,666
    
    
    
    20,252Amortization of debt discount associated with BCF
    
    
    4,318
    
    
    
    -0-Non cash dividends
    
    
    (125,914
    )
    
    
    (16,547
    )Unrealized (gains) losses on marketable securities
    
    
    213,169
    
    
    
    191,507Stock issuances for services
    
    
    25,320
    
    
    
    20,775Minority interest
    
    
    (148,222
    )
    
    
    (435,041
    )Changes inAccounts receivable
    
    
    (53,858
    )
    
    
    71,923Inventory
    
    
    (191,622
    )
    
    
    (58,125
    )Prepaid expenses and other current assets
    
    
    (37,275
    )
    
    
    26,596Deposits
    
    
    (3,789
    )
    
    
    2,214Customer deposits
    
    
    (15,966
    )
    
    
    -0-Accounts payable  third party
    
    
    28,841
    
    
    
    3,025Accounts payable  related party
    
    
    99,181
    
    
    
    124,684Accrued expenses  third party
    
    
    180,639
    
    
    
    77,113Accrued expenses  related party
    
    
    292,396
    
    
    
    232,078Net cash provided (used) by operating activities:
    
    
    (955,770
    )
    
    
    (1,133,448
    )Cash flow from investing activities:Purchase of property and equipment
    
    
    (319
    )
    
    
    (15,108
    )Increase in patents
    
    
    (63,375
    )
    
    
    (43,062
    )Net cash used by investing activities:
    
    
    (63,694
    )
    
    
    (58,170
    )Cash flow from financing activities:Proceeds from Mineola for Mycosol interest
    
    
    -0-
    
    
    
    500,000Proceeds from convertible debentures
    
    
    780,000
    
    
    
    400,000Proceeds on notes payable  third party
    
    
    24,944
    
    
    
    375,125Proceeds on notes payable  related party
    
    
    458,000
    
    
    
    50,000Payments on notes payable  third party
    
    
    (47,567
    )
    
    
    -0-Payments on notes payable  related party
    
    
    (72,000
    )
    
    
    -0-Net cash provided by financing activities:
    
    
    1,143,377
    
    
    
    1,325,125Net increase/(decrease) in cash
    
    
    123,913
    
    
    
    133,507Cash at beginning of year
    
    
    115,493
    
    
    
    126,027Cash at end of quarter
    
    $
    239,406
    
    
    $
    259,534Non-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 9,803,992 in 2006 and
6,000,000 shares in 2005 of Veridien common stock
    
    
    392,160
    
    
    
    300,000
  6




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##### Table of Contents



Veridien Corporation
and
Subsidiaries
 
 Notes to the Unaudited Interim Consolidated Financial Statements at September 30, 2006
  Note A  Stock-Based Compensation
   Note B  Consolidation Mycosol Investment
   7




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Note C  Convertible Debentures
   Note D  Subsequent Event
    8




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##### Table of Contents



Outstanding
    
    ProjectedPre-Plan
    
    OutstandingNovember 7/06
    
    Post-Plan *(1)Common Shares
    
    
    247,859,113
    
    
    
    249,359,113Class A Pref. Shares
    
    
    6,000
    
    
    
    0Series B Pref. Shares
    
    
    201,670
    
    
    
    02006-A Pref. Shares (new)
    
    
    0
    
    
    
    200,6072006-B Pref. Shares (new)
    
    
    0
    
    
    
    959,5552006-C Pref. Shares (new)
    
    
    0
    
    
    
    0Class A Pref. Shares Accrued & Unpaid Dividends
    
    $
    66,000
    
    
    $
    0Series B Pref. Shares Accrued & Unpaid Dividends
    
    $
    2,042,624
    
    
    $
    0Convertible Debentures Principal & Accrued Interest
    
    $
    8,023,877
    
    
    $
    481,570
 
 *(1)
    
    Assumes participation in the Plan by all existing Preferred Shares holders and by
the holders of
$ 7.5 Million of convertible debenture debt. Readers are cautioned
that not all
holders may elect to participate and that the actual result of the Plan may differ
materially. 9




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##### Table of Contents



Item 2. Managements Discussion and Analysis
 Third Quarter  September 30, 2006 Compared with September 30, 2005
  Overview
   Ò ® ® ® ®
 Ò Ò ® ®
 ® ®
 ®
  10




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Results of Operations
 Third Quarter ended September 30, 2006 vs. Third Quarter ended September 30, 2005
 Third Quarter
    
    
    Percentage ofSeptember 30,
    
    
    Net Revenue2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    461,517
    
    
    $
    172,152
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    355,204
    
    
    
    104,676
    
    
    
    77
    %
    
    
    61
    %Gross Profit
    
    
    106,313
    
    
    
    67,476
    
    
    
    23
    %
    
    
    39
    %Operating Expenses:General, Selling & Administrative
    
    
    264,254
    
    
    
    248,565
    
    
    
    57
    %
    
    
    144
    %Research & Development
    
    
    110,726
    
    
    
    253,520
    
    
    
    24
    %
    
    
    147
    %Income (Loss) from Operations
    
    
    (268,667
    )
    
    
    (434,609
    )
    
    
    (58
    )%
    
    
    (252
    )%Other Income (Expense) Net
    
    
    (233,801
    )
    
    
    (135,683
    )
    
    
    (51
    )%
    
    
    (79
    )%Net Income (Loss) Before
Minority Interest
    
    
    (502,468
    )
    
    
    (570,292
    )
    
    
    (109
    )%
    
    
    (331
    )%Minority Interest
    
    
    38,914
    
    
    
    137,937
    
    
    
    8
    %
    
    
    80
    %Net Income (Loss)
    
    $
    (463,554
    )
    
    $
    (432,355
    )
    
    
    (100
    )%
    
    
    (251
    )%
 Third Quarter  September 30, 2006 Compared with September 30, 2005
  
    
    Gross revenue from product sales increased for third quarter 2006 by $289,365, or 168%,
to $461,517 compared with $172,152 in third 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. We have begun expanding our revenue base to
include not only sale of our proprietary products but also the sale of licensing rights
relating to our existing and/or new technology, as well as service fees. We intend to
continue to broaden this initiative from new technology created by Mycosol including their
seven patents pending.
    
    Interest income for third quarter 2006 increased by $1,957, or 339% to $2,534 compared
with $577 in third quarter 2005.
  11




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##### Table of Contents




    
    The cost of goods sold from product sales for third quarter 2006 increased by $250,528
or 239% to $355,204 compared with $104,676 in third quarter 2005. The cost of goods ratio
as a percentage of product sales was 77% in third quarter 2006 compared to 61% in third
quarter 2005. The increase in ratio of the cost of goods from product sales as a
percentage of sales resulted primarily from increased sales and sale of a product mix with
decreased margins. Profit margins for product sales were at 23% and 39%, respectively.
    
    General, selling, and administrative expenses for third quarter 2006 increased by
$15,689 or 6% to $264,254 compared with $248,565 during the third quarter 2005. Increases
that affected general and administrative costs were associated with administrative wages
which increased in third quarter 2006 by 31% to $38,710 compared with $29,491 in third
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 third quarter 2006 that increased by 15% to $58,255 compared with $50,543 in third
quarter 2005. This increase is attributable to the increased costs in accounting and legal
fees. Decreases that affected general and administrative costs were associated with
selling expenses which decreased for third quarter 2006 by 5% to $84,897 compared with
$89,437 in third quarter 2005. This decrease is attributable to the decrease in
advertising and outside sales services. Additional decreases in general and administrative
costs were associated with public company expenses for third quarter 2006 the decrease in
this category decreased by 47% to $6,370 compared with $11,984 in third quarter 2005. This
decrease is mainly attributable to a decrease in the amount of filing SEC reports by 55%
from 2006 to 2005.
    
    Research and development expenses for third quarter 2006 decreased by $142,794, or 56%
to $110,726 compared with $253,520 in third quarter 2005. This represents $25,444 for the
Company and $85,282 from consolidation of expenses for the VIE  Mycosol, Inc. with respect
to their development of their seven patents pending. The Company continues to research and
focus on broadening the range of claims they can assert on existing products and on testing
new products for commercialization.
    
    Interest expense for third quarter 2006 increased by $53,639, or 42% to $181,445
compared with $127,806 in third quarter 2005. The increase in interest expense was due
primarily to the increase in Convertible Debentures and continuing current debt financing
arrangements.
    
    During third quarter 2006 the Company recorded an unrealized loss in the amount of
$54,890 which reflects the decline in the FMV of 719,507 H-Quotient, Inc (HQNT) shares from
June 30, 2006 at $.05 to $.01 at September 30, 2006 and a decrease in the FMV of 431,404
Standard Global Holding Group (SNDH) shares of $.16 at June 30, 2006 to $.10 at September
30, 2006. During third quarter 2005 the Company recorded an unrealized loss in the amount
of $8,454 which reflects the decline in the FMV of 719,507 H-Quotient, Inc (HQNT) shares
from June 30, 2005 at $.30 to $.29 at September 30, 2005 and a decrease in the FMV of
71,951 Standard Global Holding Group (SNDH) shares of $.27 at June 30, 2005 to $.25 at
September 30, 2005.
    
    Net income (loss) decreased to a net loss before Minority interest in Mycosol of
($502,468) for third quarter 2006 from a net loss of ($570,292) in third quarter 2005. Net
income (loss) increased to a net loss after Minority interest in Mycosol of ($463,554) for
third quarter 2006 from a net loss of ($432,355) in third quarter 2005.
 12




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Nine Months ended September 30, 2006 vs. Nine Months ended September 30, 2005
 Nine Months ended
    
    
    Percentage ofSeptember 30,
    
    
    Net Revenue2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    881,694
    
    
    $
    642,869
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    598,808
    
    
    
    428,141
    
    
    
    68
    %
    
    
    67
    %Gross Profit
    
    
    282,886
    
    
    
    214,728
    
    
    
    32
    %
    
    
    33
    %Operating Expenses:General, Selling & Administrative
    
    
    717,403
    
    
    
    740,920
    
    
    
    81
    %
    
    
    115
    %Research & Development
    
    
    360,527
    
    
    
    754,021
    
    
    
    41
    %
    
    
    117
    %Income (Loss) from Operations
    
    
    (795,044
    )
    
    
    (1,280,213
    )
    
    
    (90
    )%
    
    
    (199
    )%Other Income (Expense) Net
    
    
    (586,832
    )
    
    
    (548,730
    )
    
    
    (67
    )%
    
    
    (85
    )%Net Income (Loss) Before
Minority Interest
    
    
    (1,381,876
    )
    
    
    (1,828,943
    )
    
    
    (157
    )%
    
    
    (284
    )%Minority Interest
    
    
    148,222
    
    
    
    435,041
    
    
    
    17
    %
    
    
    68
    %Net Income (Loss)
    
    $
    (1,233,654
    )
    
    $
    (1,393,902
    )
    
    
    (140
    )%
    
    
    (217
    )%
 Nine-months ended September 30, 2006 Compared with Nine Months Prior Year ended Nine 30, 2005
  
    
    Gross revenue from product sales increased for the first nine months of 2006 by
$238,825, or 37%, to $881,694 compared with $642,869 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. We have begun expanding our revenue base to
include not only sale of our proprietary products but also the sale of licensing rights
relating to our existing and/or new technology, as well as service fees. We intend to
continue to broaden this initiative from new technology created by Mycosol including their
seven patents pending
    
    Interest income for the first nine months of 2006 increased by $3,744 or 277% to $5,095
compared with $1,351 during the same period of 2005.
    
    Dividend income for the first nine months of 2006 increased by $109,367, or 661% to
$125,914 compared with $16,547 in the same period of 2005. The Company received 359,753
common shares of Standard Global Holdings Group (SNDH) as a dividend during the first nine
months of 2006. The Company received 71,951 common shares of Standard Global Holdings
Group (SNDH) as a dividend during the first nine months of 2005.
 13




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##### Table of Contents




    
    The cost of goods sold from product sales for the nine months ended September 30, 2006
increased by $170,667 or 40% to $598,808 compared with $428,141 during the same period of
2005. The cost of goods ratio as a percentage of product sales was 68% during the nine
months ended September 30, 2006 compared to 67% in the same period 2005. The increase in
ratio of the cost of goods from product sales as a percentage of sales resulted primarily
from increased sales and sale of a product mix with decreased margins. Profit margins for
product sales were at 32% and 33%, respectively.
    
    General, selling, and administrative expenses for nine months ended September 30, 2006
decreased by $23,517 or less than 3% to $717,403 compared with $740,920 during the same
period of 2005. Decreases that affected general and administrative expenses were associated
with professional legal, consulting and accounting fees for nine months ended September 30,
2006 that decreased by 6% to $161,928 compared with $172,719 in the same period 2005. This
decrease is attributable to the decreased costs in legal fees. Additional decreases in
general and administrative costs were associated with public company expenses for nine
months ended September 30, 2006 the decrease in this category decreased by 26% to $18,306
compared with $24,614 in the same period 2005. This decrease is mainly attributable to a
decrease in the amount of filing SEC reports by 31% from 2006 to 2005. Additional
decreases that affected general and administrative costs were associated with selling
expenses which decreased for nine months ended September 30, 2006 by 7% to $229,380
compared with $246,109 in the same period 2005. This decrease is attributable to a
reduction in advertising expenses and outside services. Increases that affected general
and administrative costs were associated with administrative wages which increased for nine
months ended September 30, 2006 by 30% to $120,378 compared with $92,908 in the same period
2005. This increase is attributable to the increase in permanent staff versus contracting
staff from outside agencies for the nine months.
    
    Research and development expenses for the first nine months of 2006 decreased by
$393,494, or 52% to $360,527 compared with $754,021 during the same period of 2005. This
represents $84,758 for the Company and $275,769 from consolidation of expenses for the VIE
 Mycosol, Inc. with respect to their development of their seven patents pending. The
Company continues to research and focus on broadening the range of claims they can assert
on existing products and on testing new products for commercialization.
    
    During the first nine months 2006 the Company recorded a net unrealized loss in the
amount of $213,169 which reflects the decline in the FMV of 719,507 H-Quotient, Inc (HQNT)
shares from December 31, 2005 at $.17 to $.01 at September 30, 2006, a decrease in the FMV
of 431,404 Standard Global Holding Group (SNDH) shares of $.24 at December 31, 2005 to $.10
at September 30, 2006, and a decline in the FMV of 10,741 Healthnostics, Inc. (HNST) shares
from December 31, 2005 at $.125 to $.019 at September 30, 2006. During the first nine
months 2005 the Company recorded a net unrealized loss in the amount of $191,507 which
reflects the decline in the FMV of 719,507 H-Quotient, Inc (HQNT) shares from December 31,
2004 at $.55 to $.29 at September 30, 2005, a decrease in the FMV of 71,951 Standard Global
Holding Group (SNDH) shares of $.27 at June 30, 2005 to $.25 at September 30, 2005, and a
decline in the FMV of 10,741 Healthnostics, Inc. (HNST) shares from December 31, 2004 at
$.13 to $.065 at September 30, 2005.
    
    Interest expense for the first nine months of 2006 increased by $129,551, or 35% to
$504,672 compared with $375,121 during the same period of 2005. The increase in interest
expense was due primarily to an increase in Convertible Debentures and continuing current
debt financing arrangements.
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Liquidity and Working Capital
  
    
    During the third quarter of 2006 we issued a convertible debenture for cash proceeds of
$500,000. This debenture carries an interest rate of 8%, has a term of 3 years and has a
conversion rate of $0.036.
    
    During the third quarter of 2006 we issued a convertible debenture for cash proceeds of
$10,000. This debenture carries an interest rate of 8%, has a term of 3 years and has a
conversion rate of $0.04.
    
    During the third quarter, under the terms of an Investment Agreement (as amended) [see
Exhibit 10.37 as filed with our 10QSB for the period ended
March 31, 2005 and see 8K filed May 23, 2006], we issued
9,803,992 common shares to a third party in exchange for 458,333 shares of the common stock
of Mycosol, Inc. The 458,333 Mycosol common shares were originally sold to the unrelated
third party (by Veridien) for $500,000 cash in March 2005. The effective price of the
9,803,992 shares of the Companys common stock as issued in July was $ 0.04 per share.
    
    During the nine months ended September 30, 2006, 157,476 common shares were issued under
the companys S8 Registration Statement to employees under the terms of their employment
contracts. The average effective price per share was $0.041.
    
    During the nine months of 2006 300,000 common shares were earned by the Chairman of the
Board under the terms of his consulting agreement with the Company. The effective price
per share was $0.042.
    
    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
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##### Table of Contents



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 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 nine months ended September 30, 2006, accounts receivable increased by
$53,858 to $378,810 from $324,952 at December 31, 2005.
    
    During the nine months ended September 30, 2006, inventory increased by $191,622 to
$568,246 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 revenues from operations from product sales and ongoing
royalties from technologies. If such sources of funds are not adequate, we may seek to
obtain financing to meet operating and research expenses from other sources including, but
not limited to, future equity or debt financings.
    
    As of November 10, 2006, we have cash of approximately $336,356 and during November and
December, we expect cash flow of $300,000 from operating activities, private placements and
possible sale of marketable securities. This level of liquidity should be sufficient to
operate the Company for more than 180 days. The Company anticipates increasing sales,
reduced operating expenses, and additional private placement funding will contribute to
continuous operations of the Company.
    
    We anticipate utilizing a portion of our funds to support the working capital
requirements of our anticipated increase in sales and to cover new product development
costs for Veridien and 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.
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Critical Accounting Estimates
        
 Item 3. Controls and Procedures
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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) without registration under the Securities Act of 1933 occurred
during the Quarter ended September 30, 2006, in addition to those previously disclosed in
the Companys 8-Ks filed July 24, 2006 and August 17, 2006:
 Common Stock
  (b)
    
    Not applicable.(c)
    
    Not applicable.(d)
    
    During the quarter ended September 30, 2006 the Company did not repurchase any of its
equity securities.
 
 Item 5. Other Information
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##### Table of Contents



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-K
  I. July 24, 2006
   II. August 15, 2006
   III. August 17, 2006
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SIGNATURES
  Veridien Corporation(Registrant)Date: November 14, 2006
    
    By
    
    /s/ Sheldon C. FentonSheldon C. FentonChief Executive OfficerDate: November 14, 2006
    
    By
    
    /s/ Russell Van ZandtRussell Van ZandtChief Financial Officer & Chairman
 20