<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 June 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
----------------------------------------------
(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
Pages
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
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Assets June 30, 2000 December 31, 1999
------ ------------- -----------------
<S> <C> <C>
Current Assets:
Cash $ 334,704 $ 6,734
Accounts receivable - trade
Less allowance for doubtful account of
$10,564 and $10,564, respectively 499,714 300,436
Note receivable 20,000 22,500
Advances 68,502 --
Inventory 353,309 156,932
Prepaid expenses and other current assets 20,292 13,939
----------- ---------
Total current assets 1,296,521 500,541
Property and equipment:
Furniture and fixtures 656,962 656,962
Leasehold improvements 98,874 97,180
----------- ---------
755,836 754,142
Less accumulated depreciation (694,433) (683,045)
----------- ---------
61,403 71,097
Other Assets:
Patents, less accumulated amortization
of $487,790 and $485,986 respectively 26,592 28,396
Loan costs, less accumulated amortization
of $73,237 and $65,192 respectively 4,555 12,601
Security deposits and other assets 101,797 39,947
----------- ---------
132,944 80,944
----------- ---------
Total assets $ 1,490,868 $ 652,582
=========== =========
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets - Continued
(Unaudited)
June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Liabilities and Deficit in Stockholders' Equity June 30, 2000 December 31, 1999
----------------------------------------------- ------------- -----------------
<S> <C> <C>
Current liabilities:
Notes payable $ 628,279 $ 585,779
Convertible debentures due 880,497 1,569,215
Accounts payable 633,022 582,107
Accrued compensation 2,137 57,869
Accrued interest 345,623 296,650
Other accrued liabilities 28,149 21,796
Customer deposits 38,284 46,516
Due to stockholders 167,819 166,787
------------ ------------
Total current liabilities 2,723,810 3,326,719
Long-term liabilities:
Convertible debentures 1,332,000 --
Obligation under capital lease 19,036 21,815
------------ ------------
Total long-term liabilities 1,351,036 21,815
Minority Interest: 9,166 --
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
June 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 June 30, 2000 and
December 31, 1999 194 194
Common Stock - $.001 par value; 200,000,000 shares
authorized, 129,522,121 and 119,958,735 shares
issued and outstanding at June 30, 2000 and
December 31, 1999 129,522 119,960
Additional paid-in capital 27,698,955 26,789,390
Common stock warrants 26,399 26,399
Accumulated deficit (29,686,895) (27,589,451)
Current period profit/(loss) (816,319) (2,097,444)
------------ ------------
(2,588,144) (2,690,952)
Stock subscriptions receivable (5,000) (5,000)
------------ ------------
Total stockholders' deficit (2,593,144) (2,695,952)
------------ ------------
$ 1,490,868 $ 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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Sales $ 840,879 $ 95,782 $ 922,346 $ 176,037
Operating costs and expenses:
Cost of sales 712,802 41,289 778,760 118,229
General, selling, and
Administrative 373,049 388,617 761,993 848,110
Research and Development 45,759 93,101 101,234 148,919
------------- ------------ ------------- ------------
1,131,610 523,007 1,641,987 1,115,258
------------- ------------ ------------- ------------
Loss from Operations (290,731) (427,225) (719,641) (939,221)
Other income (expense):
Interest expense (80,400) (87,646) (149,744) (150,165)
Operations/production services -- -- -- 171,000
Rental income 26,005 25,759 52,010 52,009
Miscellaneous -- 21,179 -- 47,211
Interest income 6,377 529 10,222 1,899
------------- ------------ ------------- ------------
(48,018) (40,179) (87,512) 121,954
Loss before elimination of
minority interest (338,749) (467,404) (807,153) (817,267)
Elimination of minority interest (9,166) -- (9,166) --
------------- ------------ ------------- ------------
Net loss $ (347,915) $ (467,404) $ (816,319) $ (817,267)
============= ============ ============= ============
Net loss per common share $ (0.003) $ (0.005) $ (0.006) $ (0.009)
Weight average share outstanding 125,655,255 95,840,843 125,655,255 95,840,843
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended
June 30, 2000 and June 30, 1999
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (816,319) $ (817,267)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Depreciation and amortization 11,388 15,960
Minority Interest 9,166 -0-
(Increase) decrease in:
Accounts receivable (199,278) (218,663)
Note receivable 2,500 -0-
Prepaid and other current assets (6,353) 13,720
Inventories (196,377) (53,572)
Other assets (52,000) -0-
Increase (decrease) in:
Accounts payable and accrued expenses 47,730 (109,139)
Due to Stockholders 1,032 -0-
Customer Deposits (8,232) -0-
----------- -----------
Net cash (used) by operating activities: (1,206,743) (1,168,961)
Cash flow from investing activities:
Investment in subsidiaries (68,502) -0-
Purchases of property and equipment (1,694) (15,845)
----------- -----------
Net cash (used) by investing activities (70,196) (15,845)
Cash flow from financing activities:
Proceeds from convertible debentures 1,332,000 (640,569)
Net proceeds from borrowings (646,218) (84,475)
Proceeds from issuance of preferred and common stock 919,127 1,898,464
----------- -----------
Net cash provided by financing activities 1,604,909 1,173,420
Net increase/(decrease) in cash 327,970 (11,386)
Cash at beginning of year 6,734 17,158
----------- -----------
Cash at end of quarter $ 334,704 $ 5,772
=========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
VERIDIEN CORPORATION
AND
SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT JUNE 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. 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 June 30, 2000, raw materials and finished goods amounted to
approximately $353,309.
3. RECLASSIFICATION
Certain reclassifications have been made to the December 31, 1999 audited
consolidated financial statements to be in conformity with the June 30, 2000
unaudited interim financial statements.
4. 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 125,655,255 and 95,840,843 for the quarter
ending June 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 June 30, 2000 and for the three months and six months ended June
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 June 30, 2000, and the results of its operations and its
cash flows for the three months and six months ended June 30, 2000 and June 30,
1999, respectively. The results for the three months and six months ended June
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 $30.5 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 $1.4 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.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SECOND QUARTER - JUNE 30, 2000 COMPARED WITH JUNE 30, 1999, AND SIX-MONTHS
ENDED JUNE 30, 2000 COMPARED WITH JUNE 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 AND SUNPROTECTION 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 Corporation has incurred losses since its incorporation. At June 30, 2000,
the Corporation had an accumulated deficit of $30,503,214. The Corporation has
financed its ongoing research program and business activities through a
combination of sales, equity financing, and debt.
10
<PAGE> 11
RESULTS OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 2000 VS. SECOND QUARTER ENDED JUNE 30, 1999
Second Quarter Percentage of
June 30, Net Revenue
2000 1999 2000 1999
--------- --------- ---- ----
[S] [C] [C] [C] [C]
Net Sales $ 840,879 $ 95,782 100% 100%
Cost of Goods Sold 712,802 41,289 85% 43%
Gross Profit 128,077 54,493 15% 57%
Operating Expenses:
General, Selling & Administrative 373,049 388,617 44% 406%
Research & Development 45,759 93,101 5% 97%
(Loss) from Operations (290,731) (427,225) (35)% (446)%
Other Income (Expense) Net (48,018) (40,179) (6)% (42)%
(Loss) Before Minority Interest (338,749) (467,404) (40)% (488)%
Elimination of Minority Interest (9,166) 0 (1)% 0%
Net (Loss) Before Taxes (347,915) (467,404) (41)% (488)%
Income Taxes 0 0 0% 0%
Net (Loss) $(347,915) $(467,404) (41)% (488)%
SECOND QUARTER - JUNE 30, 2000 COMPARED WITH JUNE 30, 1999
Consolidated gross revenues for second quarter 2000 increased by $730,012, or
510%, to $873,261 compared with $143,249 in second quarter 1999.
o Gross revenue from product sales increased for second quarter 2000 by
$745,097, or 778%, to $840,879 compared with $95,782 in second 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 and sunscreen towelettes to our product line. This
shift in product mix accounted for 77% and 8%, respectively, of the
increase in gross revenue from product sales.
o Gross rental income for second quarter 2000 increased by 1% to $26,005
compared with $25,759 in second quarter 1999. A portion of the Company's
leased 38,000 square foot manufacturing facility is subleased to a
contract fill manufacturer.
o Gross miscellaneous income for second quarter 2000 decreased by $21,179 to
$-0- compared to $21,179 in second quarter 1999. All of the decrease is
due to reclassification of miscellaneous income collected from lessee for
percentage of their utilities.
11
<PAGE> 12
o Interest income for second quarter 2000 increased by $5,848 or 1,105% to
$6,377 compared with $529 in second quarter 1999. The increase in interest
income is due primarily to an increased daily cash balance earning
interest.
Consolidated gross expenses for second quarter 2000 increased by $601,357, or
98%, to $1,212,010 compared with $610,653 in second quarter 1999.
o The cost of goods sold for second quarter 2000 increased by 1,626% to
$712,802 compared with $41,289 in second quarter 1999. There was an
increase in the cost of goods ratio as a percentage of sales to 85% in
second quarter 2000 compared to 43% in second quarter 1999. The increase
in the cost of sales resulted primarily from increased sales at 778% over
the same period of 1999 and a decrease in profit margin on specific new
products. Veridien is currently working towards decreasing the cost of
goods ratio as a percentage by improving the product mix with higher
margins.
o General, selling, and administrative expenses for second quarter 2000
decreased by 4% to $373,049 compared with $388,617 in second quarter 1999.
The decreases that affected general and administrative costs were
associated with reduced wage expenses of general operation personnel for
second quarter 2000 that decreased by 40% to $66,224 compared with
$111,032 in second quarter 1999. Additionally, during second quarter 2000,
sales expense decreased by 17% to $58,725 compared with $70,538 in second
quarter 1999. Increases that affected general and administrative costs
were associated with professional service expenses for second quarter 2000
that increased by 20% to $123,703 compared with $103,065 in second quarter
1999.
o Research and development for second quarter 2000 decreased $47,432, or
51%, to $45,759 compared with $93,101 in second quarter 1999. The decrease
can be contributed 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.
o Interest expense for second quarter 2000 decreased by 8% to $80,400
compared with $87,646 in second quarter 1999. The decrease in interest
expense was due primarily to the conversion of various debts and accrued
interest to equity.
o Operating losses decreased to $347,915 second quarter 2000 from $467,404
in second quarter 1999. This represented a 26% decrease in operating
losses.
12
<PAGE> 13
SIX MONTHS ENDED JUNE 30, 2000 VS. SIX MONTHS ENDED JUNE 30, 1999
Six Months ended Percentage of
June 30, Net Revenue
2000 1999 2000 1999
--------- --------- ---- ----
[S] [C] [C] [C] [C]
Net Sales $ 922,346 $ 176,037 100% 100%
Cost of Goods Sold 778,760 118,229 84% 67%
Gross Profit 143,586 57,808 16% 33%
Operating Expenses:
General, Selling & Administrative 761,993 848,110 83% 482%
Research & Development 101,234 148,919 11% 85%
(Loss) from Operations (719,641) (939,221) (78)% (534)%
Other Income (Expense) Net (87,512) 121,954 (9)% 69%
(Loss) Before Minority Interest (807,153) (817,267) (88)% (464)%
Elimination of Minority Interest (9,166) 0 (1)% 0%
Net (Loss) Before Taxes (816,319) (817,267) (89)% (464)%
Income Taxes 0 0 0% 0%
Net (Loss) $(816,319) $(817,267) (89)% (464)%
SIX-MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS PRIOR YEAR ENDED
JUNE 30, 1999
Consolidated gross revenues for the six months ended June 30, 2000 increased by
$536,422, or 120%, to $984,578, compared with $448,156 during the same period
of 1999.
o Gross revenue from product sales increased for the first six months of
2000 by $746,309, or 424%, to $922,346 compared with $176,037 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 and sunscreen towelettes to our product line. This
shift in product mix accounted for 70% and 7%, respectively, of the
increase in gross revenue from product sales.
o Gross revenue from operations/production services (OPS) decreased for the
first six months of 2000 by $171,000, to $-0- compared with $171,000 for
the six months ended June 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
o Gross rental income for the six months ended June 30, 2000 increased by
$1, to $52,010 compared with $52,009 in the same period of 1999. A portion
of the Company's leased 38,000 square foot manufacturing facility is
subleased to a contract fill manufacturer.
o Gross miscellaneous income for the first six months of 2000 decreased by
$47,211 to $-0- compared to $47,211 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.
o Interest income for the first six months of 2000 increased by $8,323 or
438% to $10,222 compared with $1,899 during the same period of 1999. The
increase in interest income is due to an increased daily cash balance
earning interest.
Consolidated gross expenses for the first six months of 2000 increased by
$526,308, or 42%, to $1,791,731 compared with $1,265,423 during the same period
of 1999.
o The cost of goods sold for the six months ended June 30, 2000 increased by
559% to $778,760 compared with $118,229 during the same period of 1999.
There was an increase in the cost of goods ratio as a percentage of sales
to 84% during the current year 2000 compared to 67% in the same period of
1999. The increase in the cost of sales resulted primarily from increased
sales at 424% over the same period of 1999 and a decrease in profit margin
on specific new products. Veridien is currently working towards decreasing
the cost of goods ratio as a percentage by improving the product mix with
higher margins.
o General, selling, and administrative expenses for six months ended June
30,2000 decreased by 10% to $761,993 compared with $848,110 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 six months of 2000 that decreased by 28%
to $149,342 compared with $206,177 during the same period of 1999.
Additionally, decreases that affected general and administrative costs
were associated with professional service expenses for the first six
months of 2000 that decreased by 6% to $249,147 compared with $263,772
during the same period of 1999. Furthermore, decreases that affected
general and administrative costs were associated with public company
expenses for the first six months of 2000 by 14% to $36,465 compared with
$32,000 during the same period of 1999. During the six months ended June
30, 2000, sales expense decreased by 3% to $116,188 compared with $119,736
during the same period of 1999.
o Research and development for the first six months of 2000 decreased by
$47,685 or 32% to $101,234 compared with $148,919 during the same period
of 1999. The decrease can be contributed 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.
o Interest expense for the first six months of 2000 decreased by less than
1% to $149,745 compared with $150,165 during the same period of 1999.
o Operating losses decreased to $816,319 during the first six months of 2000
from $817,267 during the same period of 1999. This represented a less than
1% decrease in operating losses.
14
<PAGE> 15
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 June 30, 2000, and June 30, 1999, we had working capital
deficits of approximately $1,427,289 and $1,773,860 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 fourth 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.
o 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 June 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 August 2000, we are continuing to
generate funding through the continuation of private placement efforts.
o During the six months ended June 30, 2000, we utilized sales consultant
services for which we issued common stock valued at $34,024.
o During the second quarter 2000, we settled $ 76,850 of payables for the
issuance of 500,000 common shares.
o 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.
o During the six months ended June 30, 2000, $703,718 of Convertible
Debenture principal and $93,287 of accrued interest was converted into
8,573,604 shares of common stock at conversion rates ranging between
$0.071 to $0.16 per share.
o During the six months ended June 30, 2000, accounts receivable increased
by $199,278, or 66%, to $499,714 compared to $300,436 at December 31,
1999. This increase can be attributed primarily to increased obligations
of our contract fill manufacturer for services provided by our company and
to increased sales during the last month of second quarter 2000.
o During the six months ended June 30, 2000, inventory increased by
$196,377, or 125%, to $353,309 compared to $156,932 at December 31, 1999.
The increase is due to the purchase of inventory to fulfill orders at our
increasing sales levels.
15
<PAGE> 16
o 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.
o As of August 2000, we have cash of approximately $258,018. And during
September and October we expect an additional 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, reduced operating expenses, and additional
private placement funding will contribute to continuous operations of the
Company.
o We anticipate utilizing a portion of our funds to acquire a larger volume
of product inventory to support an anticipated increase in orders.
o 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. 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 June 30,2000, we are indebted to 1192615 Ontario Ltd. for the
remaining principal balance outstanding of $519,340 and $110,275 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.
ITEM 5. OTHER INFORMATION
During the quarter, our company announced the acquisition of the exclusive
licensing rights to a newly patented product "Neutral Eyes" for contract lens
wearers. Neutral Eyes is a credit card size, disposable, complete care packet
for contact lens wearers when traveling. The product is planned to include in
each individual packet a sterile saline solution, a Viraguard(R) towelette
contained in a separate compartment and a foil mirror on the back. This will
allow contact lens wearers to replace lenses quickly and safely anywhere.
During the quarter, our company announced receipt of additional purchase orders
for towelette canisters, bringing the initial orders for international sales
to in excess of $2 million. As of June 30, 2000, $587,848 of the purchase
orders have been fulfilled.
On May 31, 2000, the Company accepted the resignation of Andrew T. Libby Jr. as
Chief Operating Officer, Chief Financial Officer, Executive Vice-President and
Corporate Secretary to pursue other opportunities. Mr. Libby will continue to
contribute to the company as an active member of the Board of Directors. Mr.
Ken Chester, Managing Director of Operations has assumed the management of
daily operations, working in tandem with Mr. Sheldon Fenton, CEO.
On July 11, 2000, our company announced that KT Medical Sales, Inc., a highly
acclaimed network of professional sales brokers, has agreed to represent the
Veridien line of products to the medical and dental community. KT Medical has
assembled twenty-eight representatives nationally with a wealth of experience
and contracts to launch and expand the Viraguard(R) products to distributors,
hospitals, emergency medical services, and long-term care facilities.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibit 27.1 Financial Data Schedule
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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 August 14, 2000 By /s/ Sheldon C. Fenton
--------------- --------------------------------------
Sheldon C. Fenton
Chief Executive Officer
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