<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 September 30, 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
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(Name of Small Business Issuer in its charter)
Delaware 59-3020382
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
11800 28th Street North, St. Petersburg, Florida 33716
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(Address of principal executive offices) (Zip Code)
(727) 572-5500
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(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>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................................................3-6
Notes to Financial Statements...............................................................7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................10-16
PART II OTHER INFORMATION
Item 3. Defaults Upon Senior Securities..............................................................17
Item 5. Other Information............................................................................17
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule...........................................................17
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Assets September 30, 2000 December 31, 1999
------- ------------------ -----------------
<S> <C> <C>
Current Assets:
Cash $ 121,160 $ 6,734
Accounts receivable - trade
Less allowance for doubtful account of
$60,564 and $10,564, respectively 528,896 300,436
Note receivable 15,000 22,500
Advances 59,573 --
Inventory 332,882 156,932
Prepaid expenses and other current assets 9,565 13,939
----------- ---------
Total current assets 1,067,076 500,541
Property and equipment:
Furniture and fixtures 656,962 656,962
Leasehold improvements 98,874 97,180
----------- ---------
755,836 754,142
Less accumulated depreciation (700,127) (683,045)
----------- ---------
55,709 71,097
Other Assets:
Investment in Equity Securities -
Restricted 376,686 --
Patents, less accumulated amortization
of $488,692 and $485,986 respectively 25,690 28,396
Loan costs, less accumulated amortization
of $77,260 and $65,192 respectively 533 12,601
Security deposits and other assets 89,480 39,947
----------- ---------
492,389 80,944
----------- ---------
Total assets $ 1,615,174 $ 652,582
=========== =========
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets - Continued
(Unaudited)
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Liabilities and Deficit in Stockholders' Equity September 30, 2000 December 31, 1999
----------------------------------------------- ------------------ -----------------
<S> <C> <C>
Current liabilities:
Notes payable $ 620,779 $ 585,779
Convertible debentures due 874,108 1,569,215
Accounts payable 772,813 582,107
Accrued compensation 2,140 57,869
Accrued interest 419,714 296,650
Other accrued liabilities 12,747 21,796
Customer deposits 32,914 46,516
Due to stockholders 168,334 166,787
------------ ------------
Total current liabilities 2,903,549 3,326,719
Long-term liabilities:
Convertible debentures 1,332,000 --
Obligation under capital lease 19,143 21,815
------------ ------------
Total long-term liabilities 1,351,143 21,815
Minority Interest: 14,608 --
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
September 30, 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 September 30, 2000 and
December 31, 1999 194 194
Common Stock - $.001 par value; 200,000,000 shares
authorized, 129,635,579 and 119,958,735 shares
issued and outstanding at September 30, 2000 and
December 31, 1999 129,636 119,960
Additional paid-in capital 27,708,059 26,789,390
Common stock warrants 26,399 26,399
Accumulated deficit (29,686,895) (27,589,451)
Current period profit/(loss) (886,519) (2,097,444)
------------ ------------
(2,649,126) (2,690,952)
Stock subscriptions receivable (5,000) (5,000)
------------ ------------
Total stockholders' deficit (2,654,126) (2,695,952)
------------ ------------
$ 1,615,174 $ 652,582
============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Sales $ 629,538 $ 116,789 $ 1,551,884 $ 292,826
Operating costs and expenses:
Cost of sales 607,720 57,227 1,386,480 175,456
General, selling, and
Administrative 374,914 480,110 1,136,907 1,328,220
Research and Development 49,736 72,013 150,970 220,932
------------- ------------- ------------- ------------
1,032,370 609,350 2,624,357 1,724,608
------------- ------------- ------------- ------------
Loss from Operations (402,832) (492,561) (1,122,473) (1,431,782)
Other income (expense):
Interest expense (76,460) (65,638) (226,204) (215,803)
Operations/production services -- -- -- 171,000
Rental income 34,766 26,005 86,776 78,014
Miscellaneous -- 13,482 -- 60,693
Interest income 3,082 220 13,304 2,119
Sale of Cash Credits 376,686 -- 376,686 --
------------- ------------- ------------- ------------
338,074 (25,931) 250,562 (96,023)
Loss before elimination of
minority interest (64,758) (518,492) (871,911) (1,335,759)
Elimination of minority interest (5,442) -- (14,608) --
------------- ------------- ------------- ------------
Net loss $ (70,200) $ (518,492) $ (886,519) $ (1,335,759)
============= ============= ============= ============
Net loss per common share $ (0.0005) $ (0.0049) $ (0.0070) $ (0.0139)
Weight average share outstanding 129,568,912 105,377,222 126,182,713 95,892,546
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the nine months ended
September 30, 2000 and September 30, 1999
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (886,519) $(1,335,759)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Depreciation and amortization 17,082 24,070
Minority Interest 14,608 -0-
(Increase) decrease in:
Accounts receivable (228,460) (251,143)
Note receivable 7,500 -0-
Prepaid and other current assets 4,374 (31,413)
Inventories (175,950) (35,948)
Other assets (411,445) -0-
Increase (decrease) in:
Accounts payable and accrued expenses 281,320 (236,840)
Due to Stockholders 1,547 -0-
Customer Deposits (13,602) -0-
----------- -----------
Net cash (used) by operating activities: (1,389,545) (1,867,033)
Cash flow from investing activities:
Investment in subsidiaries (59,573) -0-
Purchases of property and equipment (1,694) (17,436)
----------- -----------
Net cash (used) by investing activities (61,267) (17,436)
Cash flow from financing activities:
Proceeds from convertible debentures 1,347,000 (1,374,266)
Net proceeds from borrowings (710,107) 215,525
Proceeds from issuance of preferred and common stock 928,345 3,058,045
----------- -----------
Net cash provided by financing activities 1,565,238 1,899,304
Net increase/(decrease) in cash 114,426 14,835
Cash at beginning of year 6,734 17,158
----------- -----------
Cash at end of quarter $ 121,160 $ 31,993
=========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
VERIDIEN CORPORATION
AND
SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER
30, 2000:
These unaudited interim consolidated financial statements and notes to unaudited
interim consolidated financial statements should be read in conjunction with the
financial statements and related footnotes included in the Company's Form 10Ksb
filed with the SEC in March 2000.
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying unaudited interim consolidated financial
statements follows.
1. PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the company and
its subsidiaries, each of which is wholly-owned excluding subsidiary, The
SunSwipe(TM) Corporation, L.L.C, of which is fifty percent owned. All
intercompany balances and transactions have been eliminated in consolidation.
2. ACCOUNTING ESTIMATES
The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. ACCOUNTS RECEIVABLE
The Company uses the allowance method of accounting for doubtful accounts. The
balance is based on historical collections and management's review of the
current status of existing receivables and estimate as to their collectibility.
4. INVENTORIES
Inventories, consisting primarily of raw materials and finished goods, are
stated at the lower of cost or market. Cost is determined by the first-in,
first-out method. At September 30, 2000, raw materials and finished goods
amounted to approximately $332,882.
5. RECLASSIFICATION
Certain reclassifications have been made to the December 31, 1999 audited
consolidated financial statements to be in conformity with the September 30,
2000 unaudited interim financial statements.
6. NET LOSS PER SHARE
Net loss per common share is calculated by dividing the net loss by the weighted
average number of common shares outstanding during the period. Weighted average
number of common shares outstanding is calculated as the sum of the month-end
balances of shares outstanding, divided by the number of months. The weighted
average shares outstanding were 129,568,912 and 105,377,222 for the quarter
ending September 30, 2000 and 1999, respectively. Common stock equivalents
(stock options, warrants, convertible debentures and convertible redeemable
preferred stock) are not included in the weighted average number of common
shares because the effects would be anti-dilutive.
7
<PAGE> 8
NOTE B - REALIZATION OF ASSETS
The accompanying unaudited interim consolidated financial statements of the
Company as of September 30, 2000 and for the three months and nine months ended
September 30, 2000 and 1999, included herein have been prepared in accordance
with the instructions for Form 10-Qsb under the Securities Exchange Act of 1934,
as amended, and Article 10 of Regulation S-X under the Securities Act of 1933,
as amended. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and regulations
relating to interim financial statements.
In the opinion of management, the accompanying unaudited interim consolidated
financial statements of the Company reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of September 30, 2000, and the results of its operations and
its cash flows for the three months and nine months ended September 30, 2000 and
September 30, 1999, respectively. The results for the three months and nine
months ended September 30, 2000 are not necessarily indicative of the expected
results for the full fiscal year or any future period.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Since inception, the Company has incurred losses of approximately $30.6 million,
resulting primarily from research and development, sales and marketing, and
administrative expenses being substantially in excess of sales revenue.
The Company has a deficit in stockholders' equity of $2.6 million, a deficit in
working capital of $1.8 million and is experiencing a continuing cash flow
deficiency. Those conditions raise substantial doubt about the Company's ability
to continue as a going concern.
The Company plans to utilize its current debt financing arrangements and pursue
additional equity and debt financing while managing cash flow in an effort to
provide funds to increase revenues to support operations, research and
development activities.
In view of the matters described in the preceding paragraphs, recoverability of
a major portion of the recorded asset amounts shown in the accompanying
consolidated balance sheet is dependent upon the continued operations of the
Company and that such operations will be profitable and provide adequate cash
flows. Further, the ability of the Company to continue its operations and
successfully defend itself against potential claims or assessments is dependent
on the ability to obtain additional debt and equity financing, employ cash
management techniques and aggressively market its products.
8
<PAGE> 9
NOTE B - REALIZATION OF ASSETS - CONTINUED
The unaudited interim consolidated financial statements do not contain any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary
should the Company be unable to continue in existence.
NOTE C - INVESTMENT IN EQUITY AND SALE OF CASH CREDITS
On September 29, 2000, the Company exchanged cash credits with a stated value of
$623,000 for 415,000 shares of restricted common shares of H-Quotient Inc. The
Company recognized $376,686 of other income from this transaction which
represents the fair market value of the assets initially surrendered for the
cash credits acquired. The investment in the common shares was recorded at the
cost of $376,686 and has not been recognized as a marketable security due to the
restrictions that exist on it's disposition. Therefore no unrealized gain or
loss will be recognized until the restrictions have expired or the shares are
sold.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRD QUARTER - SEPTEMBER 30, 2000 COMPARED WITH SEPTEMBER 30, 1999, AND
NINE-MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH SEPTEMBER 30, 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 a Health Care Company incorporated in Delaware focusing on infection
control and have developed UNIQUE PATENTED PRODUCTS including DISINFECTANTS,
ANTISEPTIC HAND GELS, SKIN CLEANSERS, LENS CARE, FRUIT & VEGGIE WASH and SUN
PROTECTION PRODUCTS.
The flagship product, Virahol(R) Hospital Disinfectant/Cleaner & Instrument
Presoak, is now being marketed as VIRAGUARD(R) Hospital Disinfectant/Cleaner &
Instrument Presoak. VIRAGUARD(R) Hospital Disinfectant/Cleaner & Instrument
Presoak and VIRAGUARD(R) Hospital Surface Disinfectant Towelette are EPA
registered disinfectants designed for effective disinfecting, cleaning and
deodorizing of hard, inanimate nonporous surfaces. VIRAGUARD(R) Antiseptic Hand
Gel and VIRAGUARD(R) Antimicrobial Hand Wipes, which are regulated by the FDA
and utilize Veridien's patented formulation, are effective against germs when
soap and water hand washing is not possible.
Recent product line extensions have included sales of private label canisters
and sunscreen impregnated towelettes being marketed under the SunSwipe(TM)
label.
The Company has incurred losses since its incorporation. At September 30, 2000,
the Company had an accumulated deficit of $30,573,414. The Company has financed
its ongoing research program and business activities through a combination of
sales, equity financing, and debt.
10
<PAGE> 11
RESULTS OF OPERATIONS
THIRD QUARTER ENDED SEPTEMBER 30, 2000 VS. THIRD QUARTER ENDED
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Third Quarter Percentage of
September 30, Net Revenue
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Sales $ 629,538 $ 116,789 100% 100%
Cost of Goods Sold 607,720 57,227 97% 49%
Gross Profit 21,818 59,562 3% 51%
Operating Expenses:
General, Selling & Administrative 374,914 480,110 60% 411%
Research & Development 49,736 72,013 8% 62%
(Loss) from Operations (402,832) (492,561) (64)% (422)%
Other Income (Expense) Net 338,074 (25,931) 54% (22)%
(Loss) Before Minority Interest (64,758) (518,492) (10)% (444)%
Elimination of Minority Interest (5,442) 0 (1)% 0%
Net (Loss) Before Taxes (70,200) (518,492) (11)% (444)%
Income Taxes 0 0 0% 0%
Net (Loss) $ (70,200) $(518,492) (11)% (444)%
</TABLE>
THIRD QUARTER - SEPTEMBER 30, 2000 COMPARED WITH SEPTEMBER 30, 1999
Consolidated gross revenues for third quarter 2000 increased by $887,576, or
567%, to $1,044,072 compared with $156,496 in third quarter 1999.
- Gross revenue from product sales increased for third quarter 2000 by
$512,749, or 439%, to $629,538 compared with $116,789 in third quarter
1999. During this time, we devoted a substantial amount of effort towards
implementing our marketing strategy and adding new products for
distribution. The increase in sales revenue was due primarily to the
addition of canisters, swabs and sunscreen towelettes to our product line.
This shift in product mix accounted for 83%, 3% and 1%, respectively, of
the increase in gross revenue from product sales.
- Gross rental income for third quarter 2000 increased by $8,761, or 34%, to
$34,766 compared with $26,005 in third quarter 1999. A portion of the
Company's leased 38,000 square foot manufacturing facility was subleased to
a contract fill manufacturer.
11
<PAGE> 12
- Gross miscellaneous income for third quarter 2000 decreased by $13,482 to
$-0- compared to $13,482 in third quarter 1999. All of the decrease is due
to reclassification of miscellaneous income collected from lessee for
percentage of their utilities.
- Interest income for third quarter 2000 increased by $2,862 or 1,301% to
$3,082 compared with $220 in third quarter 1999. The increase in interest
income is due primarily to an increased daily cash balance earning
interest.
- Additionally, other income for third quarter 2000 increased $376,686 which
recognized the sale of cash credits which were valued at fair market value
of the assets initially surrendered. The cash credits with a stated value
of $623,000 were exchanged for 415,000 shares of restricted common shares
of H-Quotient, Incorporated (HQNT). The cash credits were originally
received when the Company sold inventory in prior periods to SGD
International Corporation. Currently, a remainder of 23,000 cash credits
still remains with SGD International.
Consolidated gross expenses for third quarter 2000 increased by $433,842, or
64%, to $1,108,830 compared with $674,988 in third quarter 1999.
- The cost of goods sold for third quarter 2000 increased by 962% to $607,720
compared with $57,227 in third quarter 1999. There was an increase in the
cost of goods ratio as a percentage of sales to 97% in third quarter 2000
compared to 49% in third quarter 1999. The increase in the cost of sales
resulted primarily from increased sales at 439% over the same period of
1999 and a decrease in profit margin on specific new products. Veridien is
currently working toward decreasing the cost of goods ratio as a percentage
by improving the product mix with higher margins.
- General, selling, and administrative expenses for third quarter 2000
decreased by 22% to $374,914 compared with $480,110 in third quarter 1999.
The decreases that affected general and administrative costs were
associated with reduced wage expenses of general operation personnel for
third quarter 2000 that decreased by 61% to $35,667 compared with $91,081
in third quarter 1999. Additionally, during third quarter 2000, sales
expense decreased by 50% to $72,833 compared with $144,411 in third quarter
1999. Increases that affected general and administrative costs were
associated with professional service expenses for third quarter 2000 that
increased by 37% to $89,756 compared with $65,468 in third quarter 1999.
- Research and development for third quarter 2000 decreased $22,277, or 31%,
to $49,736 compared with $72,013 in third quarter 1999. The decrease can be
attributed primarily to a reduction in wage expenses and the completion of
a substantial portion of activity associated with the development of
Sterihol-Plus, a cold chemical sterilant.
- Interest expense for third quarter 2000 increased by 16% to $76,460
compared with $65,638 in third quarter 1999. The increase in interest
expense was due primarily to accrued interest on convertible debentures not
converted.
- Operating losses decreased to $402,832 in third quarter 2000 from $492,561
in third quarter 1999. This represented a 18% decrease in operating losses.
12
<PAGE> 13
NINE MONTHS ENDED SEPTEMBER 30, 2000 VS. NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Nine Months ended Percentage of
September 30, Net Revenue
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Sales $ 1,551,884 $ 292,826 100% 100%
Cost of Goods Sold 1,386,480 175,456 89% 60%
Gross Profit 165,404 117,370 11% 40%
Operating Expenses:
General, Selling & Administrative 1,136,907 1,328,220 73% 454%
Research & Development 150,970 220,932 10% 75%
(Loss) from Operations (1,122,473) (1,431,782) (72)% (489)%
Other Income (Expense) Net 250,562 (96,023) 16% (33)%
(Loss) Before Minority Interest (871,911) (1,335,759) (56)% (456)%
Elimination of Minority Interest (14,608) 0 (1)% 0%
Net (Loss) Before Taxes (886,519) (1,335,759) (57)% (456)%
Income Taxes 0 0 0% 0%
Net (Loss) $ (886,519) $(1,335,759) (57)% (456)%
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1999
Consolidated gross revenues for the nine months ended September 30, 2000
increased by $1,423,998, or 236%, to $2,028,650, compared with $604,652 during
the same period of 1999.
- Gross revenue from product sales increased for the first nine months of
2000 by $1,259,058, or 430%, to $1,551,884 compared with $292,826 in 1999.
During this time, we devoted a substantial amount of effort towards
implementing our marketing strategy and adding new products for
distribution. The increase in sales revenue was due primarily to the
addition of canisters, swabs and sunscreen towelettes to our product line.
This shift in product mix accounted for 71%, 1% and 5%, respectively, of
the increase in gross revenue from product sales.
- Gross revenue from operations/production services (OPS) decreased for the
first nine months of 2000 by $171,000, to $-0- compared with $171,000 for
the nine months ended September 30, 1999. OPS revenue represents quality
assurance, research and development, purchasing fees and freight-handling
fees provided to contract fill companies, which manufacture Veridien's
products. The decrease is due primarily to Veridien utilizing the services
of four new contract fill manufacturers that already provide these services
internally.
13
<PAGE> 14
- Gross rental income for the nine months ended September 30, 2000 increased
by $8,762, or 11%, to $86,776 compared with $78,014 in the same period of
1999. A portion of the Company's leased 38,000 square foot manufacturing
facility was subleased to a contract fill manufacturer.
- Gross miscellaneous income for the first nine months of 2000 decreased by
$60,693 to $-0- compared to $60,693 during the same period in 1999. All of
the decrease is due to reclassification of miscellaneous income collected
from lessee for their percentage of utilities.
- Interest income for the first nine months of 2000 increased by $11,185, or
528%, to $13,304 compared with $2,119 during the same period of 1999. The
increase in interest income is due to an increased daily cash balance
earning interest.
- Additionally, other income for third quarter 2000 increased $376,686 which
recognized the sale of cash credits which were valued at fair market value
of the assets initially surrendered. The cash credits with a stated value
of $623,000 were exchanged for 415,000 shares of restricted common shares
of H-Quotient, Incorporated (HQNT). The cash credits were originally
received when the Company sold inventory in prior periods to SGD
International Corporation. Currently, a remainder of 23,000 cash credits
still remains with SGD International.
Consolidated gross expenses for the first nine months of 2000 increased by
$960,150, or 49%, to $2,900,561 compared with $1,940,411 during the same period
of 1999.
- The cost of goods sold for the nine months ended September 30, 2000
increased by 690% to $1,386,480 compared with $175,456 during the same
period of 1999. There was an increase in the cost of goods ratio as a
percentage of sales to 89% during the current year 2000 compared to 60% in
the same period of 1999. The increase in the cost of sales resulted
primarily from increased sales at 430% over the same period of 1999 and a
decrease in profit margin on specific new products. Veridien is currently
working toward decreasing the cost of goods ratio as a percentage by
improving the product mix with higher margins.
- General, selling, and administrative expenses for the nine months ended
September 30, 2000 decreased by 14% to $1,136,907 compared with $1,328,220
during the same period of 1999. The decreases that affected general and
administrative costs were associated with reduced wage expenses of general
operation personnel for the first nine months of 2000 that decreased by 63%
to $117,881 compared with $314,771 during the same period of 1999.
Additionally, decreases that affected general and administrative costs were
associated with public company expenses for the first nine months of 2000,
which decreased by 29% to $14,833 compared with $20,877 during the same
period of 1999. During the nine months ended September 30, 2000, sales
expense decreased by 28% to $189,154 compared with $264,147 during the same
period of 1999. Increases that affected general and administrative costs
were associated with professional service expenses for the first nine
months of 2000 that increased by 9% to $364,725 compared with $334,995
during the same period of 1999.
- Research and development for the first nine months of 2000 decreased by
$69,962, or 32%, to $150,970 compared with $220,932 during the same period
of 1999. The decrease can be
14
<PAGE> 15
attributed primarily to a reduction in wage expenses and the completion of
a substantial portion of activity associated with the development of
Sterihol-Plus, a cold chemical sterilant.
- Interest expense for the first nine months of 2000 increased by less than
5% to $226,204 compared with $215,803 during the same period of 1999. The
increase in interest expense was due primarily to accrued interest on
convertible debentures not converted.
- Operating losses decreased to $1,122,473 during the first nine months of
2000 from $1,431,782 during the same period of 1999. This represented a 22%
decrease in operating losses.
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 September 30, 2000, and September 30, 1999, we had working capital deficits
of approximately $1,836,473 and $1,860,176, 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
continue to provide improved profit margins throughout the first quarter of
2001. 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 September 30, 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 November 2000, we are continuing to
generate funding through the continuation of private placement efforts.
- During the nine months ended September 30, 2000, we utilized sales
consultant services for which we issued common stock valued at $36,141.
- During the nine months ended September 30, 2000, $710,107 of Convertible
Debenture principal and $93,998 of accrued interest was converted into
8,673,604 shares of common stock at conversion rates ranging between $0.071
to $0.16 per share.
- During the second quarter 2000, we settled $76,850 of payables for the
issuance of 500,000 common shares.
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- 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 the nine months ended September 30, 2000, accounts receivable
increased by $228,460 to $528,896 from $300,436 at December 31, 1999. This
increase can be attributed primarily to increased sales during the third
quarter compared to sales at December 31, 1999.
- During the nine months ended September 30, 2000, inventory increased 112%
to $332,882 compared with $156,932 at December 31, 1999. The increase is
due to the purchase of inventory to fulfill orders at our increasing sales
levels.
- 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 2000, we have cash of approximately $61,531 and during
November and December; 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. In late October we were successful at
negotiating a renewal until December 31, 2001 of the Convertible Debentures
which had recently matured. The Company anticipates increasing sales,
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. During the second quarter 2000 Veridien began utilizing the
services of four new contract fill manufacturers. One manufacturer handles
Veridien's gel products, another the liquid products, the third the
canister products and the fourth the SunSwipe(TM)product line. 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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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 September 30, 2000, we are indebted to 1192615 Ontario Ltd. for the
remaining principal balance outstanding of $519,340 and $123,547 of accrued
interest. Although the lender has not waived compliance regarding the loan
criteria they are currently in agreement with deferral of the payment of
interest and have agreed to extend the loan due date for one year from November
18, 2000 to November 18, 2001.
ITEM 5. OTHER INFORMATION
During the quarter, our company announced the launch of a new website,
www.veridien.com. This website provides corporate and product information on
Veridien and its subsidiaries.
During the quarter, our company entered into an agreement with H. Quotient, Inc.
wherein we agreed to purchase 61,500 shares of Internet Guide, Inc. from H.
Quotient Inc. for consideration of the issuance of 8,000,000 restricted common
shares of Veridien Corporation. As security for delivery of the Veridien
Corporation shares, we issued an interest free Promissory Note to H. Quotient,
Inc. in the amount of $ 800,000, which note shall be fully satisfied by the
issuance of 8,000,000 restricted common shares of Veridien Corporation by
December 31, 2000.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibit 27.1 Financial Data Schedule (for SEC use only)
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SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Veridien Corporation
-----------------------------
(Registrant)
Date November 14, 2000 By /s/ Sheldon C. Fenton
-----------------------------
Sheldon C. Fenton
Chief Executive Officer
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