<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000
--------------
[ ] 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
- -------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Delaware 59-3020382
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
11800 28th Street North, St. Petersburg, Florida 33716
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(727) 572-5500
- -------------------------------------------------------------------------------
(Issuer's telephone number, including Area Code)
Indicate by check mark whether the issuer: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements............................................................... 3-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................... 8-13
PART II OTHER INFORMATION
Item 3. Defaults Upon Senior Securities.................................................... 13
Item 6. Exhibits and Report on Form 8-K
(a) 10.25 Scott R. Dotson Agreement............................................... 13
(b) 27.1 Financial Data Schedule................................................. 13
</TABLE>
2
<PAGE> 3
Part I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LOGO Carter, Cartier, Melby & Guarino, C.P.A.'s. P.A.
Independent Accountant's Report
May 11, 2000
Board of Directors
Veridien Corporation and Subsidiaries
We have reviewed the accompanying consolidated financial statements of Veridien
Corporation and Subsidiaries as of March 31, 2000, and for the three-month
period then ended. These financial statements are the responsibility of the
company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists primarily of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company, since its inception,
has sustained substantial losses in the amount of $30,155,300, has a deficit in
stockholders' equity of $2,713,338, a deficit in working capital of
$1,556,612, and is experiencing a continued cash flow deficiency. Those
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding these matters are described in Item
2, Management's Discussion and Analysis that accompanies these financial
statements. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Carter, Cartier, Melby & Guarino, C.P.A.'s, P.A.
- ----------------------------------------------------
CARTER, CARTIER, MELBY & GUARINO, C.P.A.'s, P.A.
3
<PAGE> 4
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Current assets:
Cash $ 769,649 $ 6,734
Accounts receivable - trade
Less allowance for doubtful accounts of
$10,564 and $10,564 respectively 316,913 300,436
Note receivable 20,000 22,500
Investment in subsidiaries 47,211 -0-
Inventory 372,301 156,932
Prepaid expenses and other current assets 37,648 13,939
---------- ----------
Total current assets 1,563,722 500,541
Property and equipment:
Furniture and fixtures 656,962 656,962
Leasehold improvements 97,180 97,180
---------- ----------
754,142 754,142
Less accumulated depreciation 688,739 683,045
---------- ----------
65,403 71,097
Other Assets:
Patents, less accumulated amortization of
$485,986 and $485,986, respectively 28,396 28,396
Loan costs, less accumulated amortization of
$69,214 and $65,192, respectively 8,578 12,601
Security deposits and other assets 87,897 39,947
---------- ----------
124,871 80,944
---------- ----------
$1,753,996 $ 652,582
========== ==========
</TABLE>
4
<PAGE> 5
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets - Continued
(Unaudited)
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
Liabilities and Deficit in Stockholders' Equity
<S> <C> <C>
Current liabilities:
Notes payable $ 615,779 $ 585,779
Convertible debentures 1,222,215 1,569,215
Accounts payable 694,936 582,107
Accrued compensation 67,868 57,869
Accrued interest 295,248 296,650
Other accrued liabilities 11,241 43,611
Customer deposits 45,744 46,516
Due to stockholders 167,303 166,787
------------ ------------
Total current liabilities 3,120,334 3,348,534
Long term liabilities:
Convertible debentures 1,347,000 -0-
------------ ------------
Total liabilities 4,467,334 3,348,534
Deficit in Stockholders' Equity:
Undesignated preferred stock, $.001 par value,
25,000,000 shares authorized
Convertible redeemable preferred stock,
$10 par value, 100,000 authorized; 6,000 and 6,000
issued and outstanding at March 31, 2000 and
December 31, 1999 60,000 60,000
Series B Preferred Stock,
$.001 par value, 245,344 authorized, 193,534 and
193,534 issued and outstanding at March 31, 2000
and December 31, 1999 194 194
Common stock - $.001 par value; 200,000,000 shares
authorized, 123,620,304 and 119,958,735 shares issued
and outstanding at March 31, 2000 and December 31,
1999 123,620 119,960
Additional paid-in capital 27,236,749 26,789,390
Common stock warrants 26,399 26,399
Accumulated deficit (29,686,895) (27,589,451)
Current Period Profit/(Loss) (468,405) (2,097,444)
------------ ------------
(2,708,338) (2,690,952)
Stock subscriptions receivable (5,000) (5,000)
------------ ------------
Total Stockholders' Deficit (2,713,338) (2,695,952)
------------ ------------
$ 1,753,996 $ 652,582
============ ============
</TABLE>
5
<PAGE> 6
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
For the three months ended
March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Sales $ 81,467 $ 80,255
Operating costs and expenses:
Cost of sales 65,958 76,940
General, selling, and administrative 388,944 459,494
Research and development 55,475 55,818
------------- -------------
510,377 592,252
------------- -------------
Loss from operations (428,910) (511,997)
Other income (expense):
Interest expense (69,345) (62,518)
Operations/Production Services -0- 171,000
Rental income 26,005 26,250
Miscellaneous -0- 26,032
Interest income 3,845 1,370
------------- -------------
(39,495) 162,134
------------- -------------
Net loss $ (468,405) $ (349,863)
============= =============
Net loss per common share $ (.004) $ (.004)
============= =============
Weighted average share outstanding 121,789,519 86,459,575
============= =============
</TABLE>
6
<PAGE> 7
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended
March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (468,405) $ (349,863)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Depreciation and amortization 5,694 7,849
(Increase) decrease in:
Accounts receivable (16,477) (151,699)
Note receivable 2,500 -0-
Prepaid and other current assets (23,709) -0-
Inventories (215,369) (51,782)
Other assets (43,927) -0-
Increase (decrease) in:
Accounts payable and accrued expenses 89,056 (85,036)
Due to Stockholders 516 -0-
Customer Deposits (772) -0-
----------- -----------
Net cash (used) by operating activities: (670,893) (630,531)
Cash flow from investing activities:
Investment in subsidiaries (47,211) -0-
Purchases of property and equipment -0- (7,395)
----------- -----------
Net cash (used) by investing activities (47,211) (7,395)
Cash flow from financing activities:
Proceeds from convertible debentures 1,347,000 -0-
Net proceeds from borrowings (317,000) 1,851
Proceeds from issuance of preferred and common stock 451,019 674,878
----------- -----------
Net cash provided by financing activities 1,481,019 676,729
Net increase/(decrease) in cash 762,915 38,803
Cash at beginning of quarter 6,734 17,158
----------- -----------
Cash at end of quarter $ 769,649 $ 55,961
=========== ===========
</TABLE>
With regard to commitments and contingencies at March 31, 2000, there are no
material changes from the financial statement footnotes
as presented December 31, 1999.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER - MARCH 31, 2000 COMPARED WITH MARCH 31, 1999
The following discussion and analysis should be read in conjunction with the
financial statements in Part I, Item 1. contained elsewhere in this document.
OVERVIEW
We are organized as a Delaware corporation to engage in the development,
manufacture, distribution, and sale of disinfectants, antiseptics, and
sterilants which are inherently non-toxic, posing no hazard to people who use
them, and which are environmentally friendly, decomposing into harmless,
naturally occurring organic molecules. To this end, the Company has developed
and patented a hard surface disinfectant, VIRAHOL(R), which has been registered
with the Environmental Protection Agency (EPA), and an antiseptic hand gel
sanitizer, made in accordance with the applicable FDA Monograph. The
Corporation has incurred losses since its incorporation. At March 31, 2000, the
Corporation had an accumulated deficit of $30,155,300. The Corporation has
financed its ongoing research program and business activities through a
combination of sales, equity financing, and debt.
RESULT OF OPERATIONS
First Quarter - March 31, 2000 Compared with March 31, 1999
Consolidated gross revenues for first quarter 2000 decreased by $193,590 or 63%
to $111,317 compared with $304,907 in first quarter 1999.
- - Gross revenue from product sales increased for first quarter 2000 by
$1,212 or 1% to $81,467 compared with $80,255 in first quarter 1999. We
began actively promoting our product line through trade-show presentations
and direct calls on both existing and potential customers which management
believes will significantly increase sales during the third and fourth
quarters of Year 2000. Our goal is to offer a broad product line which
provides a broad range of infection control for our customers. We
anticipate our new towelette products for surface, hand and body
applications will generate substantial revenue during the third and fourth
quarters of this year.
- - Gross revenue from operations/production services (OPS) for first quarter
2000 decreased to zero compared with $171,000 in first quarter 1999.
Revenue had been earned during 1999 by providing quality assurance,
research and development, purchasing assistance and freight-handling fees
to our contract fill manufacturer who occupies a major portion of our
facility. We cannot anticipate or measure future demand, if any, for these
services.
8
<PAGE> 9
- - Gross rental income for first quarter 2000 remained constant at $26,005
compared with $26,250 in first quarter 1999. A portion of the company's
leased 38,000 square foot manufacturing facility is subleased to a
contract filler that manufactures Veridien's products. They relocated to
our facility in August 1998. This space is leased for a two-year period,
which will generate approximately $100,000 per annum.
- - Gross miscellaneous income for first quarter 2000 decreased by $26,032.
Virtually all the decrease was due to a one-time recognition in 1999 of
gain on the finalization of previous year accrued expenses.
- - Interest income for first quarter 2000 increased by $2,475 or 181% to
$3,845 compared with $1,370 in first quarter 1999.
Consolidated gross expenses for first quarter 2000 decreased by $75,048 or
11.5% to $579,722 compared with $654,770 in first quarter 1999.
- - The cost of goods sold for first quarter 2000 decreased by 14% to $65,958
compared with $76,940 in first quarter 1999. The cost of goods ratio as a
percentage of sales was 81% in first quarter 2000 compared to 96% in first
quarter 1999. The decrease in the cost of sales resulted primarily from
the decreased overhead of the contract fill operator fulfilling production
within the plant facility.
- - General, selling, and administrative expenses for first quarter 2000
decreased by 15.4% to $388,944 compared with $459,494 in first quarter
1999. The decrease that affected general and administrative costs were
associated with professional consulting and accounting fees for first
quarter 2000 that decreased by 28% to $140,766 compared with $195,742 in
first quarter 1999. During first quarter 2000, sales expense increased by
49% to $57,478 compared with $38,488 in first quarter 1999. This increase
was due to the increased attendance at trade shows.
- - Research and development for first quarter 2000 decreased $343 or 1% to
$55,475 compared with $55,818 in first quarter 1999. Our microbiology and
chemistry laboratory continues to focus on broadening the range of claims
we can assert for our existing products. We are also focusing on testing
new products for commercialization.
- - Interest expense for first quarter 2000 increased by 10.9% to $69,345
compared with $62,518 in first quarter 1999. The increase in interest
expense was due primarily to the issuance of Convertible Debentures during
first quarter 2000.
- - Operating losses increased to $468,405 first quarter 2000 from $349,863 in
first quarter 1999. This represented a 33.9% increase in operating losses.
9
<PAGE> 10
- - In March 2000, we acquired 50% of SunSwipe, Inc., a company that develops
and markets products and packaging for the mass merchandise consumer
market. Negotiations continue with respect to our acquiring an even more
significant interest in the SunSwipe opportunity. The product line
currently includes single use towelette applications that are impregnated
with sunscreens, repellants and anti-microbial agents. The product line is
sold at major retailers in the U.S. such as Wal-Mart, K-Mart, CVS
drugstores, Walgreens, Price Chopper and Albertsons. These products will
be produced by our strategic alliance manufacturing partner in Canada.
- - We are in the process of increasing our supplier capacity through new
agreements with two manufacturers and one marketing company that represent
a foreign manufacturer. We believe that diversifying our manufacturing
sources will ensure the timely production and consistent quality of our
expanding product line.
- - We continue to hold our wholesale prices on products to approximate our
competitors' prices. We believe this allows our products a strategic
advantage by offering our toxic-free, broad-range disinfectants at or near
the same cost as competitors' products which are toxic.
- - We are continuing to work under an agreement with the Founders of "Koala
Bear Kare Baby Changing Stations" to combine their premium towelette with
our patented product VIRAHOL(R) to create a towelette to be competitively
marketed for restrooms worldwide.
- - We are continuing to enhance our website which was created during 1999.
Initially, we have provided information for shareholders and consumers to
learn more about our patented products. During the second quarter of this
year we anticipate offering products available for purchase through
Internet transactions.
- - During the first quarter of 2000, we continued to enhance our ability to
electronically exchange information with our strategic alliance partners
as well as our subsidiaries.
- - In March 2000, we acquired an exclusive 10-year license right to market a
newly patented pre-packaged Contact Lens Wearer Hand Neutralizing
Towelette and Contact Lens Rewetting Agent. We are refining the
development of this product and anticipate revenue generation during the
Year 2001. We believe this innovative product strongly compliments our
expanding towelette line of products.
10
<PAGE> 11
FIRST QUARTER ENDED MARCH 31, 2000 VS. FIRST QUARTER ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
First Quarter Percentage of
March 31 Net Revenue
2000 1999 2000 1999
(In thousands)
<S> <C> <C> <C> <C>
Net Sales $ 81 $ 80 100% 100%
Cost of Goods Sold 66 77 81% 96%
Gross Profit 15 3 19% 4%
Operating Expenses:
General, Selling & Administrative 389 459 480% 573%
Research & Development 55 56 68% 70%
(Loss) from Operations (429) (512) (529)% (640)%
Other Income (Expense) Net (39) 162 (48)% 203%
Net (Loss) Before Taxes (468) (350) (577)% (438)%
Income Taxes 0 0 0% 0%
Net (Loss) $ (468) $ (350) (577)% (438)%
</TABLE>
Liquidity and Working Capital
Historically, our principal source of financing for our research and
development and business activities has been through sales, equity offerings,
and debt. As of March 31, 2000, and March 31, 1999, we had working capital
deficits of approximately $1,556,612 and $1,894,010, respectively. Our
independent certified public accountants stated in their report on the 1999
consolidated financial statements that due to losses from operations and a
working capital deficit, there is substantial doubt about the Company's ability
to continue as a going concern. We are addressing the going concern issue in
virtually every aspect of our operation. We have cut operating expenses which
we expect will provide improved profit margins beginning in third quarter of
2000. Because of our significant losses incurred since inception, we have
become substantially dependent on loans from officers, directors, and third
parties, and from private placements of our securities to fund operations.
These financings and equity placements are included in the following
descriptions.
- - During first quarter 2000, we issued three year Convertible Debentures in
the amount of $1,347,000. The Convertible Debentures carry interest at the
rate of 10%, which has been accrued through March 31, 2000. The principal
and interest amounts are convertible into common shares of Veridien at
two-thirds of the average of the mid-point between the closing bid and ask
prices for the 10 business days prior to the election date, however,
conversion price shall not be less than $0.065 during the first year,
$0.10 during the second year and $0.15 during the third year. In addition,
conversion can be accomplished during the first twelve months at a
conversion price of $0.10. As of April 2000, we are continuing to generate
funding through the continuation of private placement efforts.
11
<PAGE> 12
- - During the first quarter 2000, we utilized sales consultant services for
which we issued common stock valued at $26,524.
- - During first quarter 2000, we acquired a purchase option and an exclusive
license right to market a newly patented pre-packaged Contact Lens Wearer
Hand Neutralizing Towelette. As part of the agreement we issued common
stock valued at $11,250.
- - During first quarter 2000, $347,000 of Convertible Debenture principal and
$66,247 of accrued interest was converted into 3,221,787 shares of common
stock at conversion rates ranging between $0.105 to $0.16 per share.
- - During the quarter ended March 31, 2000, accounts receivable increased
$16,477 primarily due to increased obligations of our contract fill
manufacturer for services provided by our company.
- - During the first quarter 2000, inventory increased 137% to $372,301
compared with $156,932 at December 31, 1999. The increase is due to the
purchase of inventory to fulfill orders which will be delivered during the
second quarter 2000.
- - 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 April 2000, we have cash of approximately $367,000 and during May
and June, we expect cash flow of $300,000 from operating activities and
private placements. This level of liquidity is sufficient to operate the
Company for 180 days, excluding the potential repayment of Convertible
Debenture due before December 2000. The Company anticipates increasing
sales to begin in the second quarter of 2000, reduced operating expenses,
and additional private placement funding will contribute to continuous
operations of the Company.
- - At the present time, we have committed to fund up to $100,000 to acquire
50% of Communication Gear, Inc., a newly formed company, which anticipates
creating and producing an innovative protective cover for cell phones and
palm pilots. We believe the demand for hand held devices will rise
dramatically during the next three years.
- - We anticipate utilizing a portion of our funds to acquire a larger volume
of product inventory to support an anticipated increase in orders.
- - 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. While we believe our existing contract fill manufacturer has
12
<PAGE> 13
been successful in locating sources of our commonly available raw
materials and converting these into finished products, we have reached an
agreement with two additional contract fill manufacturers who we believe
will assure us of the timely production of products. We anticipate our
products will be produced by these two manufacturers beginning in the
second quarter of 2000.
PART II
OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We have been in technical default on our Loan and Security Agreement since
March 1996. As of March 31,2000, we are indebted to 1192615 Ontario Ltd. for
the remaining principal balance outstanding of $519,340 and $97,146 of accrued
interest. The lender has not waived compliance regarding the loan criteria and
has continued to fund the monthly working capital needs of the Company, as
previously agreed.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibit 10.25 R. Scott Dotson
(b) Exhibit 27.1 Financial Data Schedule
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Veridien Corporation
---------------------------------------
(Registrant)
Date May 15, 2000 By /s/ Sheldon C. Fenton
----------------------- -------------------------------------
Sheldon C. Fenton
Chief Executive Officer
Date May 15, 2000 By /s/ Andrew T. Libby, Jr.
----------------------- -------------------------------------
Andrew T. Libby, Jr.
Chief Financial Officer
14
<PAGE> 1
EXHIBIT 10.25 R. SCOTT DOTSON AGREEMENT
R. Scott Dotson Phone: (941)-350-5798
850 S. Tamiami Trail, Ste 607 Fax: (941)--362-0706
R. SCOTT DOTSON Sarasota, FL 34236 E-Mail: [email protected]
Friday, February 11th, 2000
Mr. Sheldon C. Fenton, President
Veridien Corporation
11800 28th Street North
St. Petersburg, FL 33716
RE:
Terms of Licenses and Purchase Option relating to:
U.S. Patent No. 5,984,089 PREPACKAGED CONTACT LENS WEARER
HAND NEUTRALIZING TOWELETTE AND CONTACT LENS REWETTING AGENT
U.S. Patent Application No. 09/365,073 filed July 30, 1999
PREPACKAGED DISPOSABLE CLEANING AND NEUTRALIZING TOWELETTE
And any and all amendments, variances of, continuations,
continuations in part
And any and all improvements thereof; and any and all
proprietary products
Relating to PREPACKAGED CONTACT LENS WEARER HAND NEUTRALIZING
TOWELETTE AND CONTACT LENS REWETTING AGENT, PREPACKAGED
DISPOSABLE CLEANING AND NEUTRALIZING TOWELETTE and eye
ophthalmology and related products developed by Dotson;
Hereinafter referred to as "THE TECHNOLOGY"
Dear Shelley:
This letter agreement reflects the terms of all license rights and
purchase options relating to The Technology provided by R. Scott Dotson
("Dotson") to Veridien Corporation ("Veridien"). The terms of the agreement are
as follows:
1. Dotson represents and warrants he owns The Technology free
and clear and will not, during the term of this agreement,
encumber same.
2. Dotson grants to Veridien an exclusive license right and
non-exclusive rights (if applicable) related to The
Technology (License Rights) in accordance with the terms of
this letter. The License Rights Dotson grants shall be for an
initial period
1
<PAGE> 2
of ten (10) years and automatically renews annually
thereafter for yearly periods to extend this agreement to the
termination of the last date of protection with respect to
any patents or patent pendings relating to The Technology.
The License Rights may be assigned only with Dotson's written
consent, not to be unreasonably withheld.
A) Dotson will receive a four point five (4.5%) percent
royalty, paid quarterly, as consideration during the life of
The Technology, which will be calculated on any and all not
wholesale revenue received and collected worldwide by
Veridien based upon product distributed under The Technology
effective immediately.
B) Quarterly detailed written reports beginning
immediately and accompanying each royalty payment
will be provided to Dotson from Veridien due on the
15th day of the month immediately following said
quarter and on reasonable notice, Dotson will be
provided with access to the books and records of
Veridien related to The Technology on an annual
basis.
C) During the year 2000, there will be no minimum
royalty requirement. During the year 2001 the
minimum yearly sales requirement must equal or
exceed two million five hundred thousand (2,500,000)
units or twelve thousand ($12,000) dollars in
royalties. During the year 2002, minimum yearly
sales must equal or exceed five million (5,000,000)
units or eighteen thousand ($18,000) dollars in
royalties. During the year 2003 and beyond, the
minimum yearly sales must equal or exceed ten
million (10,000,000) units or twenty five thousand
($25,000) dollars in royalties. Minimum sales units
or royalties must be met during each calendar year
to maintain the exclusive license arrangements.
Should the royalties paid during any given period
fail to meet these minimum requirements, Veridien
will have the option to pay the additional amounts
to make up the difference to meet the dollar royalty
requirement, notwithstanding that actual sales
multiplied by four point five (4.5%) percent does
not require a royalty amount equal to the minimum
royalty amount. Accordingly, Veridien will have the
ability to pay the difference in cash to meet the
minimum royalty requirement and maintain the
exclusive license.
3. In the event that Veridien does not meet the minimum royalty
requirement in any given year, and upon ninety (90) days notice to
allow for curing of failure to meet minimum payment to Dotson, then
Dotson will be free to enter into a license agreement with another
party with respect to his Technology and Veridien's exclusive license
arrangement will then become a non-exclusive license arrangement with
no minimums required. However, Dotson would still be entitled to
receive the four point five (4.5%) percent royalty during the life of
the license, whether or not same is exclusive or non-exclusive. After
the license has become a non-exclusive license and in the event that
Veridien does not meet minimum royalty requirements for a second year,
then Dotson may upon ninety (90) days notice, cancel the license.
Veridien may meet its obligation by paying the amount equal to both
years' royalty less any payments made that year. In the
2
<PAGE> 3
event that Dotson cancels the license, Veridien has the right to
renegotiate with both parties acting reasonably.
4. In addition, Veridien will also have an option to purchase The
Technology, including without limitation, any other continuations,
continuations in part, and approval thereof. This option to purchase
will be transferable only with the written consent of Dotson. This
option to purchase will be exercisable for three (3) years from the
date of this letter at an exercise price to be determined by a major
CPA firm agreeable to both parties, which firm will act reasonably and
fairly to determine the fair market value price of the value of The
Technology and any benefits running the same. The minimum exercise
price for the purchase of The Technology will be the sum of two
hundred fifty thousand ($250,000) dollars at which time, all royalty
provisions and obligations to Dotson will terminate.
5. Dotson will be available, upon request, to assist Veridien regarding
manufacturing, marketing distribution of The Technology and any
products related thereto at reasonable times and places so long as
requests do not interfere or conflict with Dotson's then current
responsibilities and Veridien pays Dotson's out-of-pocket expenses.
6. As consideration for the Licenses and purchase option and all matters
related thereto, Dotson will receive seventy five thousand (75,000)
commons shares of Veridien stock (an OTC public company) as a private
placement entitlement. These shares will be placed in the possession
of Dotson and the share certificates will reflect R. Scott Dotson as
holder of said certificates.
7. A) Dotson will receive an option to purchase one hundred fifty
thousand (150,000) common shares of Veridien stock at a purchase price
of twenty five ($0.25) cent per share, provided that the net wholesale
revenue of Veridien from The Technology and any products produced
relating thereto reaches five hundred thousand ($500,000) dollars or a
total of five million (5,000,000) units of products from The
Technology are sold or otherwise distributed within the first five (5)
years from the date of the first unit sold. Once either of the events
referenced herein occur, Dotson will have a twelve (12) month period
from that date to exercise the option to purchase the one hundred
fifty thousand (150,000) Veridien shares upon payment of thirty seven
thousand five hundred ($37,500) dollars.
B) Dotson will also receive an option to purchase three hundred
thousand (300,000) common shares of Veridien stock at a
purchase price of twenty five ($0.25) cent per share,
provided that a total of one hundred fifty million
(150,000,000) units per year of products from The Technology
are sold or otherwise distributed from an agreement procured
by Dotson within either of the first two (2) years from the
date of the first unit sold. Once the event referenced herein
occurs, Dotson will have a twelve (12) month period from that
date to exercise the option to purchase the three hundred
thousand (300,000) Veridien shares upon payment of seventy
five thousand (75,000) dollars.
3
<PAGE> 4
C) As well, Dotson will receive a cash credit of twenty two
thousand ($22,500) dollars upon the vesting of the warrants
in paragraph 8A and Dotson will receive a cash credit of
fifteen thousand ($15,000) dollars upon the vesting of the
warrants in paragraph 8B. The funds will be applied to the
payment obligation of Dotson pursuant to the payment of
shares with respect to paragraph 8A and/or 8B as applicable.
8. Dotson will provide Veridien with all Information relating to The
Technology, including copies of patents, patent pendings, proposed
amendments, business plans, etc.
9. Veridien shall have ten (10) business days to review the material
provided to it by Dotson and find same to its complete satisfaction.
In the even that Veridien advises Dotson within the ten (10) day
period of its dissatisfaction and of its desire not to proceed with
the transaction then this letter of agreement shall become null and
void and of no further force and effect. In the even that Veridien
does not notify Dotson of its desire to cancel this letter of
agreement within the ten (10) day period, then this agreement will be
fully binding on all parties and will continue in full force and
effect.
10. The parties agree to execute such further and other documentation as
reasonably required to implement the terms of this agreement.
Please confirm your agreement with the terms of this agreement by executing a
copy and returning a copy to the writer's attention. The seventy five thousand
(75,000) shares of Veridien stock will be delivered immediately upon the
passing of the ten (10) day due diligence period.
Acknowledged and accepted: Sincerely,
VERIDIEN CORPORATION /s/ R. Scott Dotson
("VRDE")
R. Scott Dotson
By: /s/ Sheldon C. Fenton
------------------------------------
Sheldon C. Fenton, President
Date: March 15, 2000
-----------------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VERIDIEN CORPORATION FOR THE THREE MONTHS ENDED MARCH
31, 2000 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000<F1>
<EXCHANGE-RATE> 1
<CASH> 769,649
<SECURITIES> 0
<RECEIVABLES> 347,477
<ALLOWANCES> 10,564
<INVENTORY> 372,301
<CURRENT-ASSETS> 1,563,722
<PP&E> 754,142
<DEPRECIATION> 688,739
<TOTAL-ASSETS> 1,753,996
<CURRENT-LIABILITIES> 3,120,334
<BONDS> 2,569,215
0
60,194
<COMMON> 123,620
<OTHER-SE> (2,713,338)
<TOTAL-LIABILITY-AND-EQUITY> 1,753,996
<SALES> 81,467
<TOTAL-REVENUES> 111,317
<CGS> 65,958
<TOTAL-COSTS> 510,377
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,345
<INCOME-PRETAX> (468,405)
<INCOME-TAX> 0
<INCOME-CONTINUING> (468,405)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (468,405)
<EPS-BASIC> (.004)
<EPS-DILUTED> (.002)
<FN>
<F1>WITH REGARD TO COMMITMENTS AND CONTINGENCIES AT MARCH 31, 2000, THERE ARE NO
MATERIAL CHANGES FROM THE FINANCIAL STATEMENT FOOTNOTES AS PRESENTED DECEMBER
31, 1999.
</FN>
</TABLE>
