##### 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, 2005
 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)
 
   þ o
  o o
  o þ




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TABLE OF CONTENTS
 PagesPART I FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    3Notes to Financial Statements
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operation
    
    8Item 3.
    
    Controls and Procedures
    
    17PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    18Item 2.
    
    Changes in Securities and Small Business Issuer Purchases
of Equity Securities
    
    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 CEOEX-31.2: Section 302 Certification of CFOEX-32.1: Section 906 Certification of CEOEX-32.2: Section 906 Certification of CFO
  2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Veridien Corporation
and Subsidiaries
 
 (Restated)September 30, 2005
    
    
    December 31, 2004AssetsCurrent assets:Cash
    
    $
    259,534
    
    
    $
    126,027Marketable Securities
    
    
    222,123
    
    
    
    397,083Accounts receivable, net of allowance
of $22,771 and $12,640
    
    
    108,755
    
    
    
    180,678Inventory
    
    
    389,827
    
    
    
    331,702Prepaid expenses and other current assets
    
    
    49,491
    
    
    
    76,087Total current assets:
    
    
    1,029,730
    
    
    
    1,111,577Property and equipment, net of accumulated
depreciation of $413,669 and $397,250
    
    
    26,337
    
    
    
    27,648Other assets:Patents, net of accumulated amortization of
of $509,910 and $506,077
    
    
    215,534
    
    
    
    176,305Goodwill
    
    
    410,000
    
    
    
    110,000Security deposits
    
    
    8,786
    
    
    
    11,000Total Assets:
    
    $
    1,690,387
    
    
    $
    1,436,530
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##### Table of Contents



Veridien Corporation
And Subsidiaries
 
 (Restated)Sept 30, 2005
    
    
    December 31, 2004Liabilities and Deficit in Stockholders EquityCurrent liabilities:Note payable
    
    $
    600,983
    
    
    $
    289,347Current portion of convertible debentures
    
    
    628,291
    
    
    
    449,000Accounts payable
    
    
    403,213
    
    
    
    275,504Accrued liabilities
    
    
    1,114,473
    
    
    
    1,027,641Total current liabilities
    
    
    2,746,960
    
    
    
    2,041,492Long-term liabilities:Convertible debentures
    
    
    3,727,682
    
    
    
    3,506,973Total liabilities:
    
    
    6,474,642
    
    
    
    5,548,465Minority interest
    
    
    287,319
    
    
    
    -0-Shareholders deficit:Undesignated preferred stock, $.001 par
value, 25,000,000 shares authorized
Convertible redeemable preferred stock,
$10 par value, 100,000 authorized; 6,000
issued and outstanding at September 30, 2005
and December 31, 2004
    
    
    60,000
    
    
    
    60,000Series B Preferred Stock, $.001 par value, 245,344
authorized, and 174,219 issued and
outstanding at September 30, 2005 and
December 31, 2004
    
    
    175
    
    
    
    175Common Stock  $.001 par value; 300,000,000 shares
authorized, 228,142,473 and 214,369,622 shares
issued and outstanding at September 30, 2005 and
December 31, 2004
    
    
    228,142
    
    
    
    214,370Additional paid-in capital
    
    
    31,814,934
    
    
    
    31,394,443Accumulated deficit
    
    
    (35,780,923
    )
    
    
    (35,144,195
    )Current period profit (loss)
    
    
    (1,393,902
    )
    
    
    (636,728
    )Total shareholders deficit:
    
    
    (5,071,574
    )
    
    
    (4,111,935
    )Total Liabilities and Shareholders Deficit:
    
    $
    1,690,387
    
    
    $
    1,436,530
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Veridien Corporation
and Subsidiaries
 
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue
    
    $
    172,152
    
    
    $
    685,985
    
    
    $
    642,869
    
    
    $
    1,488,402Operating costs and expenses:Cost of revenue
    
    
    104,676
    
    
    
    399,110
    
    
    
    428,141
    
    
    
    532,200General, selling, and
administrative
    
    
    248,565
    
    
    
    208,715
    
    
    
    740,920
    
    
    
    696,205Research and development
    
    
    253,520
    
    
    
    43,576
    
    
    
    754,021
    
    
    
    124,744606,761
    
    
    
    651,401
    
    
    
    1,923,082
    
    
    
    1,353,149Income (loss) from operations
    
    
    (434,609
    )
    
    
    34,584
    
    
    
    (1,280,213
    )
    
    
    135,253Other income (expense):Interest expense
    
    
    (127,806
    )
    
    
    (115,348
    )
    
    
    (375,121
    )
    
    
    (328,209
    )Realized gain (loss)
on marketable investments
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    511,079Unrealized gain (loss)
on investments
    
    
    (8,454
    )
    
    
    (84,099
    )
    
    
    (191,507
    )
    
    
    (3,014
    )Interest income
    
    
    577
    
    
    
    642
    
    
    
    1,351
    
    
    
    1,461Dividend income
    
    
    -0-
    
    
    
    5,173
    
    
    
    16,547
    
    
    
    5,173(135,683
    )
    
    
    (193,632
    )
    
    
    (548,730
    )
    
    
    186,490Net income (loss) before minority
interest
    
    
    (570,292
    )
    
    
    (159,048
    )
    
    
    (1,828,943
    )
    
    
    321,743Minority interest in Mycosol loss
    
    
    137,937
    
    
    
    -0-
    
    
    
    435,041
    
    
    
    -0-Net income (loss)
    
    $
    (432,355
    )
    
    $
    (159,048
    )
    
    $
    (1,393,902
    )
    
    $
    321,743Basic and diluted net income (loss)
per common share
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    (.01
    )
    
    $
    -0-Weight average share outstanding
    
    
    228,052,898
    
    
    
    209,778,926
    
    
    
    227,236,384
    
    
    
    208,822,795
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Veridien Corporation
and Subsidiaries
 
 2005
    
    
    2004Cash flows from operating activities:Net income (loss)
    
    $
    (1,393,902
    )
    
    $
    321,743Adjustments to reconcile net income (loss) to net cash(used) by operating activities:Depreciation and amortization
    
    
    20,252
    
    
    
    13,616Stock issuances for services
    
    
    20,775
    
    
    
    137,605Revenue  non-cash (stock)
    
    
    -0-
    
    
    
    (556,000
    )Realized (gains) losses on marketable securities
    
    
    -0-
    
    
    
    (511,079
    )Unrealized (gains) losses on marketable securities
    
    
    191,507
    
    
    
    3,014Proceeds from sale of marketable securities
    
    
    -0-
    
    
    
    998,528Minority interest
    
    
    (435,041
    )
    
    
    -0-Changes in
Marketable securities
    
    
    (16,547
    )
    
    
    -0-Accounts receivable
    
    
    71,923
    
    
    
    (303,623
    )Inventory
    
    
    (58,125
    )
    
    
    (83,705
    )Other current assets
    
    
    26,596
    
    
    
    24,843Accounts payable
    
    
    127,709
    
    
    
    (166,798
    )Accrued expenses
    
    
    309,191
    
    
    
    111,464Due to stockholders
    
    
    -0-
    
    
    
    1,547Net cash provided (used) by operating activities:
    
    
    (1,135,662
    )
    
    
    (8,845
    )Cash flow from investing activities:Purchase of property and equipment
    
    
    (15,108
    )
    
    
    (1,687
    )Increase in patents
    
    
    (43,062
    )
    
    
    -0-Decrease in deposits
    
    
    2,214
    
    
    
    241,500Investment in unconsolidated subsidiary (Mycosol)
    
    
    -0-
    
    
    
    (310,000
    )Net cash used by investing activities:
    
    
    (55,956
    )
    
    
    (70,187
    )Cash flow from financing activities:Proceeds from Mineola advance
    
    
    500,000
    
    
    
    -0-Proceeds from convertible debentures
    
    
    400,000
    
    
    
    330,000Proceeds on notes payable
    
    
    425,125
    
    
    
    (73,109
    )Net cash provided by financing activities:
    
    
    1,325,125
    
    
    
    256,891Net increase/(decrease) in cash
    
    
    133,507
    
    
    
    177,859Cash at beginning of year
    
    
    126,027
    
    
    
    101,506Cash at end of quarter
    
    $
    259,534
    
    
    $
    279,365Non-cash investing and financing activities:Conversion of convertible debentures to common stock
    
    $
    113,489
    
    
    $
    25,000Payment 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 September 30, 2005
  Note A  Consolidation of Variable Interest Entity  Mycosol Investment
   Note B  Convertible Debentures
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Item 2. Managements Discussion and Analysis
 Third Quarter  September 30, 2005 Compared with September 30, 2004
  Overview
   Ò
 Ò Ò
    8




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Ò
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and and
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Results of Operations
 Third Quarter ended September 30, 2005 vs. Third Quarter ended September 30, 2004
 Third Quarter
    
    
    Percentage ofSeptember 30,
    
    
    Net Revenue2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue
    
    $
    172,152
    
    
    $
    685,985
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    104,676
    
    
    
    399,110
    
    
    
    61
    %
    
    
    58
    %Gross Profit
    
    
    67,476
    
    
    
    286,875
    
    
    
    39
    %
    
    
    42
    %Operating Expenses:General, Selling & Administrative
    
    
    248,565
    
    
    
    208,715
    
    
    
    144
    %
    
    
    30
    %Research & Development
    
    
    253,520
    
    
    
    43,576
    
    
    
    147
    %
    
    
    6
    %Income (Loss) from Operations
    
    
    (434,609
    )
    
    
    34,584
    
    
    
    (252
    )%
    
    
    5
    %Other Income (Expense) Net
    
    
    (135,683
    )
    
    
    (193,632
    )
    
    
    (79
    )%
    
    
    (28
    )%Net Income (Loss) Before
Minority Interest
    
    
    (570,292
    )
    
    
    (159,048
    )
    
    
    (331
    )%
    
    
    (23
    )%Minority Interest
    
    
    137,937
    
    
    
    -0-
    
    
    
    80
    %
    
    
    0
    %Net Income (Loss) Before Taxes
    
    
    (432,355
    )
    
    
    (159,048
    )
    
    
    (251
    )%
    
    
    (23
    )%Income Taxes
    
    
    -0-
    
    
    
    -0-
    
    
    
    0
    %
    
    
    0
    %Net Income (Loss)
    
    $
    (432,355
    )
    
    $
    (159,048
    )
    
    
    (251
    )%
    
    
    (23
    )%
 Third Quarter  September 30, 2005 Compared with September 30, 2004
  
    
    Gross revenue from product sales decreased for third quarter 2005
by $513,833, or 75%, to $172,152 compared with $685,985 in third
quarter 2004. We continue active promotion of our product line
through trade-show presentations and direct calls on both existing
and potential customers. Our goal is to continue to expand our
product lines and we anticipate new products, which are scheduled
with various releases this year, will generate new revenue in this
and future years. In addition, we continue to pursue strategic
alliances with other corporations that have existing distribution
networks. Our goal for these alliances is to create immediate
distribution and fulfillment avenues for our products, while
focusing on our capital resources. We have recently begun
expanding our revenue base to include not only sale of our
proprietary products but also the sale of licensing rights
relating to our existing and/or new technology, as well as service
fees. We intend to continue to broaden this initiative from new
technology created by Mycosol including their seven patents
pending.
    
    Interest income for third quarter 2005 decreased by $65, or 10% to
$577 compared with $642 in third quarter 2004.
    
    Dividend income for third quarter 2005 decreased by $5,173, or
100% to $-0- compared with $5,173 in third quarter 2004. The
Company received no dividend income in third quarter 2005 compared
with $5,173 in third quarter 2004.
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
    
    The cost of goods sold from product sales for third quarter 2005 decreased by $294,434
or 74% to $104,676 compared with $399,110 in third quarter 2004. The cost of goods ratio
as a percentage of product sales was 61% in third quarter 2005 compared to 58% in third
quarter 2004. The increase in ratio of the cost of goods from product sales as a
percentage of sales resulted primarily from sale of a product mix with decreased margins.
Profit margins for product sales were at 39% and 42%, respectively.
    
    General, selling, and administrative expenses for third quarter 2005 increased by
$39,850 or 19% to $248,565 compared with $208,715 during the third quarter 2004. Increases
that affected general and administrative costs were associated with selling expenses which
increased for third quarter 2005 by 6% to $89,437 compared with $84,377 in third quarter
2004. This increase is attributable to an increase in trade show participation in third
quarter 2005. Increases that affected general and administrative costs were associated
with administrative wages which increased in third quarter 2005 by 3% to $29,491 compared
with $28,704 in third quarter 2004. This small increase is attributable to the increase in
permanent staff versus contracting staff from outside agencies. Additional increases in
general and administrative costs were associated with public company expenses for third
quarter 2005 the increase in this category increased by 40% to $11,984 compared with $8,540
in third quarter 2004. This increase is attributable to the increased costs in press
releases and reporting to the SEC. Increases that affected general and administrative
expenses were associated with professional legal, consulting and accounting fees for third
quarter 2005 that increased by 63% to $50,543 compared with $30,915 in third quarter 2004.
This increase is attributable to the increased costs in accounting and legal fees.
    
    Research and development expenses for third quarter 2005 increased by $209,944, or 482%
to $253,520 compared with $43,576 in third quarter 2004. This represents $30,826 for the
Company and $222,694 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 2005 increased by $12,458, or 11% to $127,806
compared with $115,348 in third quarter 2004. The increase in interest expense was due
primarily to the increase in Convertible Debentures and continuing current debt financing
arrangements.
    
    During third quarter 2005 the Company recorded an unrealized loss in the amount of
$8,454 which reflects the decline in the FMV of 701,506 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. 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 HQNT shares from June
30, 2004 at $.989 to $.71 at September 30, 2004.
    
    Net income (loss) increased to a net loss before Minority interest in Mycosol of
$570,292 for third quarter 2005 from a net loss of $159,048 in third quarter 2004. Net
income (loss) increased to a net loss after Minority interest in Mycosol of $432,355 for
third quarter 2005 from a net loss of $159,048 in third quarter 2004.
 12




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Nine Months ended September 30, 2005 vs. Nine Months ended September 30, 2004
 Nine Months ended
    
    
    Percentage ofSeptember 30,
    
    
    Net Revenue2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue
    
    $
    642,869
    
    
    $
    1,488,402
    
    
    
    100
    %
    
    
    100
    %Cost of Revenue
    
    
    428,141
    
    
    
    532,200
    
    
    
    67
    %
    
    
    36
    %Gross Profit
    
    
    214,728
    
    
    
    956,202
    
    
    
    33
    %
    
    
    64
    %Operating Expenses:General, Selling & Administrative
    
    
    740,920
    
    
    
    696,205
    
    
    
    115
    %
    
    
    47
    %Research & Development
    
    
    754,021
    
    
    
    124,744
    
    
    
    117
    %
    
    
    8
    %Income (Loss) from Operations
    
    
    (1,280,213
    )
    
    
    135,253
    
    
    
    (199
    )%
    
    
    9
    %Other Income (Expense) Net
    
    
    (548,730
    )
    
    
    186,490
    
    
    
    (85
    )%
    
    
    13
    %Net Income (Loss) Before
Minority Interest
    
    
    (1,828,943
    )
    
    
    321,743
    
    
    
    (284
    )%
    
    
    22
    %Minority Interest
    
    
    435,041
    
    
    
    -0-
    
    
    
    68
    %
    
    
    -0-Net Income (Loss) Before Taxes
    
    
    (1,393,902
    )
    
    
    321,743
    
    
    
    (217
    )%
    
    
    22
    %Income Taxes
    
    
    -0-
    
    
    
    -0-
    
    
    
    0
    %
    
    
    0
    %Net Income (Loss)
    
    $
    (1393,902
    )
    
    $
    321,743
    
    
    
    (217
    )%
    
    
    22
    %
 Nine-months ended September 30, 2005 Compared with Nine Months Prior Year ended Nine 30, 2004
  
    
    Gross revenue from product sales decreased for the first nine
months of 2005 by $289,533, or 31%, to $642,869 compared with
$932,402 in 2004. We continue active promotion of our product
line through trade-show presentations and direct calls on both
existing and potential customers. Our goal is to continue to
expand our product lines and we anticipate new products, which are
scheduled with various releases this year, will generate new
revenue in this and future years. In addition, we continue to
pursue strategic alliances with other corporations that have
existing distribution networks. Our goal for these alliances is
to create immediate distribution and fulfillment avenues for our
products, while focusing on our capital resources. We have
recently begun expanding our revenue base to include not only sale
of our proprietary products but also the sale of licensing rights
relating to our existing and/or new technology, as well as service
fees. We intend to continue to broaden this initiative from new
technology created by Mycosol including their seven patents
pending. Gross revenue from licensing and service fees decreased
for the first nine months of 2005 by $556,000 or 100% to $-0-
compared with $556,000 in 2004. 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. Also during the first nine months of
2004 the Company earned service fees for services provided for
Mycosol, Inc.
    
    During the first 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
 13




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486,875 restricted common shares represents H-Quotients customer deposit for products to be
delivered in future quarters. During the second 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
the from December 31, 2003 closing price of $.72. This represents a net realized gain of
$511,079 for the first nine months of 2004.
    
    Interest income for the first nine months of 2005 decreased by
$110 or 8% to $1,351 compared with $1,461 during the same period
of 2004.
    
    Dividend income for the first nine months of 2005 increased by
$11,374, or 220% to $16,547 compared with $5,173 in the same
period of 2004. The Company received 71,951 common shares of
Standard Global Holdings Group (SNDH) as a dividend during second
quarter 2005. During 2004 the Company received 14,496 common
shares of H-Quotient, Inc. (HQNT) as dividiend income in the
amount of $5,173. At September 30, 2005 the Company currently
holds 701,506 common shares of HQNT at a FMV of $203,437, 10,741
common shares of Healtnostics, Inc. (HNST) at a FMV of $698, and
71,951 common shares of (SNDH) at a FMV of $17,988.
  
    
    The cost of revenue for the first nine months of 2005 increased as
a percentage of total revenue to 67% in 2004 from 36% during the
same period of 2004. The cost of goods sold from product sales
for the nine months ended September 30, 2005 decreased by $93,656
or 18% to $428,141 compared with $521,797 during the same period
of 2004. The cost of goods ratio as a percentage of product sales
was 67% during the nine months ended September 30, 2005 compared
to 56% in the same period 2004. The increase in ratio of the cost
of goods from product sales as a percentage of sales resulted
primarily from sale of a product mix with decreased margins.
Profit margins for product sales were at 33% and 44%,
respectively.
    
    General, selling, and administrative expenses for nine months
ended September 30, 2005 increased by $44,715 or 6% to $740,920
compared with $696,205 during the same period of 2004. Increases
that affected general and administrative expenses were associated
with professional legal, consulting and accounting fees for nine
months ended September 30, 2005 that increased by 38% to $172,719
compared with $125,377 in the same period 2004. This increase is
attributable to the increased costs in accounting and legal fees.
Additional increases in general and administrative costs were
associated with public company expenses for nine months ended
September 30, 2005 the increase in this category increased by 9%
to $24,614 compared with $22,499 in the same period 2004. This
increase is attributable to the increased costs in press releases
and reporting to the SEC. Decreases that affected general and
administrative costs were associated with selling expenses which
decreased for nine months ended September 30, 2005 by 7% to
$246,109 compared with $264,735 in the same period 2004. This
decrease is attributable to a reduction in advertising expenses.
Decreases that affected general and administrative costs were
associated with administrative wages which decreased for nine
months ended September 30, 2005 by 9% to $92,908 compared with
$101,947 in the same period 2004. This decrease is attributable to
the decrease in permanent staff versus contracting staff from
outside agencies for the nine months.
    
    Research and development expenses for the first nine months of
2005 increased by $629,277, or 504% to $754,021 compared with
$124,744 during the same period of 2004. This represents $84,441
for the Company and $669,580 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.
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
    
    During third quarter 2005 the Company recorded an unrealized loss
in the amount of $8,454 which reflects the decline in the FMV of
701,506 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. During second quarter 2005
the Company recorded an unrealized loss in the amount of $102,453
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 HNSTshares from March 31, 2005 at $.075 to $.065 at
June 30, 2005; an increase in the FMV of 71,951 SNDH shares of
$.23 at June 6, 2005 to $.27 at June 30, 2005. During the first
quarter 2005 the Company recorded an unrealized loss in the amount
of $80,600 which reflects the decline in the FMV of 701,506 HQNT
shares from December 31, 2004 at $.55 to $.45 at March 31, 2005;
and a decline in the FMV of 10,741 HNST shares from December 31,
2004 at $.13 to $.075 at March 31, 2005. This represents a net
unrealized loss of $191,507 for the first nine months of 2005.
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 HQNT 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. 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.
    
    Interest expense for the first nine months of 2005 increased by
$46,912, or 14% to $375,121 compared with $328,209 during the same
period of 2004. The increase in interest expense was due primarily
to an increase in Convertible Debentures and continuing current
debt financing arrangements.
  Liquidity and Working Capital
  
    
    During the third quarter of 2005 we issued a convertible debenture
for cash proceeds of $200,000. This debenture carries an interest
rate of 8%, has a term of 3 years and has a conversion rate of
$0.051
    
    During the nine months ended September 30, 2005, 93,494 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 $0.048.
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
    
    During the first nine months of 2005 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 $0.046.
    
    During the second quarter of 2005 57,500 common shares were
issued, under the companys S8 Registration Statement, to staff as
employment bonuses. The value of the shares issued was $2,473.
    
    During the first quarter of 2005 we issued 2 convertible
debentures for cash proceeds of $200,000. These debentures carry
interest rates of 8%, have terms of 3 years and have conversion
rates of $0.051.
    
    During the first quarter of 2005 $110,000 and 6,000,000 shares of
common stock were issued to the three Founding Shareholders of
Mycosol in exchange for 687,500 shares of Mycosol common stock.
    
    During the first quarter of 2005 $113,489 of the Loan and Security
Agreement principal was converted by the holders to 0- shares of
Series B Preferred Stock and 7,321,857 shares of Common Stock.
    
    During the nine ended September 30, 2005, accounts receivable
decreased by $71,923 to $108,755 from $180,678 at December 31,
2004.
    
    During the nine months ended September 30, 2005, inventory
increased by $58,125 to $389,827 compared with $331,702 at
December 31, 2004. This includes Mycosol inventory at $70,282 in
third quarter 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 October 25, 2005, we have cash of approximately $214,987 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 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.
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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. Changes in 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, 2005:Convertible SecuritiesOn September 23, 2005 the Registrant issued a convertible debenture for cash proceeds of
$200,000 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 $0.051. This
issuance was considered exempt from registration by reason of Section 4(2) of the Securities
Act.Common StockAt September 30, 2005, the Chairman of the Board was entitled to the issuance of 100,000
common shares under the terms of his consulting agreement with the company. These shares
were accounted for in the third quarter but are still not issued. The issuance is considered
exempt from registration by reason of Section 4(2) of the Securities Act.(d)
    
    During the quarter ended September 30, 2005 the Company did not repurchase any of its
equity securities.(e)
    
    Not applicable.
 
 Item 5. Other Information
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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 third quarter of 2005 there was 1 report on Form 8-K issued on September
30, 2005. This report disclosed the following:
     The specifics of the restatement are detailed in Note P to the financial statements
which were filed as part of the Form 8-K .
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##### Table of Contents



SIGNATURES
  Veridien Corporation(Registrant)
 Date November 14, 2005
    
    By
    
    /s/ Sheldon C. FentonSheldon C. FentonChief Executive OfficerDate November 14, 2005
    
    By
    
    /s/ Russell Van ZandtRussell Van ZandtChief Financial Officer & Chairman
 20