SecProbe.io

CORRESP
1
filename1.htm

Veridien Corporation

Table of Contents

VIA EDGAR

September 30, 2005

Securities and Exchange Commission

Washington, D.C.

20549-0510

Mail Stop 0510

Attn: Ms. Tracey Houser, Division of Corporation Finance

Dear Ms. Houser:

    Re:

    File # 0-2555
Form 10-KSB for fiscal YE December 31, 2004 / Filed March 31, 2005

We are in receipt of your letter of September 19, 2005 and in connection with responding to your
comments:

    1.

    Note P – Restatement of 2004, page 31

    We have filed an 8-K Item 4.02 (a) today to inform the market that it should not rely on our
previously filed December 31, 2004 financial statements but
instead, should rely on the Restated financial statements file therewith. In the filing we have filed the
Restated Financial Statements for December 31, 2004. You will note that we have revised Note
P to more fully disclose the nature of the error identified. We will be filing a 10QSB/A
for March 31, 2005 and a 10QSB/A for June 30, 2005 to reflect the changes in the comparative
numbers for December 31, 2004 as referenced therein.

    2.

    Item 8A Controls and Procedures, page 34

    We have revised this section in our draft 10KSB/A and include the new wording herein for your
review.

    3.

    Form 10-QSB for the Fiscal Quarter Ended March 31, 2005 Item 3 Controls and Procedures

    We will revise this section and include the new wording herein for your review. Our 10ASB/A
for March 31, 2005 referred to in (1) above will contain the new wording for Item 3.

Table of Contents

Upon confirmation from you that our draft 10KSB/A with the noted further amendments contained
herein addresses your comments, we will file same.

Sincerely,

VERIDIEN CORPORATION

Per:

/s/ Sheldon C. Fenton

Sheldon C. Fenton

President & C.E.O.

Exhibits:

    A)

    8-K filed September 30, 2005

    B)

    Revised Note P wording (restated December 31, 2004 Financial Statements)

    C)

    Revised wording for Item 8A (to replace pervious paragraph in Draft 10KSB/A –dated July 7,
2005 already provided)

    D)

    Revised wording for Item 3 – 10QSB March 31, 2005

Table of Contents

EXHIBIT A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

Current Report Pursuant

To Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date
of Report (Date of earliest event reported)  September 30, 2005

Veridien Corporation

(Exact Name of Registrant as Specified in its charter)

Delaware

(State or Other Jurisdiction of Incorporation or Organization)

    000-25555

    59-3020382

    (Commission File Number)

    (IRS Employer Identification No.)

    2875 MCI Drive, Suite B, Pinellas Park, Florida

    33782-6105

    (Address of principal executive offices)

    (Zip Code)

(727) 576-1600

(Registrant’s telephone number, including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2.below):

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

ITEM 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

ITEM 9.01 Financial Statements and Exhibits

SIGNATURE

Item 8A Controls and Procedures

Item 3 Controls and Procedures

Table of Contents

ITEM 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

In connection with questions raised by the Securities and Exchange Commission in a comment letter
of May 2005, the Company has discovered errors in the accounting for marketable securities in the Company’s Audited December 31, 2004 financial statements.
Accordingly, the financial statements for that period should no longer be relied upon. As the
balance sheet numbers from these statements appear as comparatives in our 10QSB filed for the
period ended March 31, 2005 and in our 10QSB filed for the period ended June 30, 2005, the Balance
Sheets of those financial statements should no longer be relied upon.

The errors in our December 31, 2004 statements resulted from recording of the valuation, at the
insistence of our previous auditors, of securities we owned at a discounted price when the shares
should have been reported as non-impaired marketable securities.  The
Company accepted restricted common shares of HQNT as payment for
services provided. The Company recorded the income for the services
at a discount due to the fact the share were restricted.  We have
since been advised that although the shares were restricted, with no
other conditions relating to their sale present, they should have been
recorded at market value without a discount. The accounting impact of the
correction was (i) an increase in our sales, as the original value of the securities received as
payment of license services was discounted when it should not have been; and (ii) changes in our
realized and unrealized gains and losses as a result of the initial valuation and valuation of the
securities throughout our ownership of them.

These corrections have been made in the financial statements being filed herein and resulted in a
decrease in the Company’s reported loss for 2004 by $ 121,065.

The specifics of the restatement are detailed in Note P to the financial statements which reads as
follows:

NOTE P – RESTATEMENT OF 2004

In early 2004, H-Quotient, Inc. (HQNT) issued 400,000 of its common shares to Veridien as payment
for products developed and licensing fees valued at the fair market value of the HQNT shares of
$652,000. In 2004, Veridien recorded the stock in error at a discounted value of $456,000 and
should have reported it using a non-impaired marketable securities value of $652,000; a difference
of $196,000. This recording error resulted in errors in the subsequent calculation of realized and
unrealized gains and losses for 2004. The corrected Realized (Loss) on investment of ($9,694)
replaces the previously reported Realized Gain of $216,173. The corrected Unrealized Gain of
$98,523 replaces the previously reported Unrealized (Loss) of ($52,409). The summation of the
corrections is a reduction in the previously reported loss of ($757,793) by $121,065 to ($636,728).
Also see Note D – Marketable Securities for more explanation on 2004 end of the year value.

    As Originally

    Reported

    Corrections

    As Restated

    As of December 31, 2004

    Assets

    Cash

    $
    126,027

    $
    —

    $
    126,027

    Accounts receivable

    180,678

    —

    180,678

    Inventory

    331,702

    —

    331,702

Table of Contents

    As Originally

    Reported

    Corrections

    As Restated

    Marketable securities

    167,225

    229,858

    397,083

    Other current assets

    67,587

    8,500

    76,087

    Property and equipment, net

    27,648

    —

    27,648

    Long-term portion of marketable
securities

    108,793

    (108,793
    )

    —

    Other assets, net

    297,305

    —

    297,305

    Total Assets

    $
    1,306,965

    $
    129,565

    $
    1,436,530

    Liabilities

    Accounts payable

    $
    275,505

    $
    —

    $
    275,505

    Notes payable

    289,347

    —

    289,347

    Convertible debentures

    3,955,973

    —

    3,955,973

    Accrued liabilities

    1,027,641

    —

    1,027,641

    Customer deposits

    160,855

    (160,855
    )

    —

    Total Liabilities

    5,709,321

    (160,855
    )

    5,548,466

    Stockholders’ Deficit

    Par and paid in capital

    31,499,633

    169,355

    31,668,988

    Accumulated deficit at
December 31, 2003

    (35,144,196
    )

    —

    (35,144,196
    )

    Net loss for 2004

    (757,793
    )

    121,065

    (636,728
    )

    Total stockholders’ deficit

    (4,402,356
    )

    290,420

    (4,111,936
    )

    $
    1,306,965

    $
    129,565

    $
    1,436,530

    Changes made:

    Marketable securities pricing errors

    $
    121,065

    Net decrease in reported loss

    $
    121,065

The Company’s management has discussed the matters disclosed in this Item 4.02 with the Company’s
previous independent registered public accounting firm, Carter, Cartier, Melby & Guarino, C.P.A.’s
P.A. and with the Company’s current independent registered public accounting firm, Malone & Bailey,
PC.

The Company intends to file amended Forms 10-QSB (March 31, 2005 & June 30, 2005) and 10-KSB
(December 31, 2004) to include restated financial statements as soon as practicable.

ITEM 9.01 Financial Statements and Exhibits

(c) Exhibit 99.1 Restated December 31, 2004 Audited Financial Statements

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.

VERIDIEN CORPORATION

    Dated: September 30, 2005

    By: /s/ Sheldon C. Fenton

    Sheldon C. Fenton

    President & Chief Executive Officer

    By: /s/ Russell Van Zandt

    Russell Van Zandt

    Chief Financial Officer

Table of Contents

EXHIBIT B

NOTE P – RESTATEMENT OF 2004

In early 2004, H-Quotient, Inc. (HQNT) issued 400,000 of its common shares to Veridien as payment
for products developed and licensing fees valued at the fair market value of the HQNT shares of
$652,000. In 2004, Veridien recorded the stock in error at a discounted value of $456,000 and
should have reported it using a non-impaired marketable securities value of $652,000; a difference
of $196,000. This recording error resulted in errors in the subsequent calculation of realized and
unrealized gains and losses for 2004. The corrected Realized (Loss) on investment of ($9,694)
replaces the previously reported Realized Gain of $216,173. The corrected Unrealized Gain of
$98,523 replaces the previously reported Unrealized (Loss) of ($52,409). The summation of the
corrections is a reduction in the previously reported loss of ($757,793) by $121,065 to ($636,728).
Also see Note D – Marketable Securities for more explanation on 2004 end of the year value.

    As Originally

    Reported

    Corrections

    As Restated

    As of December 31, 2004

    Assets

    Cash

    $
    126,027

    $
    —

    $
    126,027

    Accounts receivable

    180,678

    —

    180,678

    Inventory

    331,702

    —

    331,702

    Marketable securities

    167,225

    229,858

    397,083

    Other current assets

    67,587

    8,500

    76,087

    Property and equipment, net

    27,648

    —

    27,648

    Long-term portion of marketable
securities

    108,793

    (108,793
    )

    —

    Other assets, net

    297,305

    —

    297,305

    Total Assets

    $
    1,306,965

    $
    129,565

    $
    1,436,530

    Liabilities

    Accounts payable

    $
    275,505

    $
    —

    $
    275,505

    Notes payable

    289,347

    —

    289,347

    Convertible debentures

    3,955,973

    —

    3,955,973

    Accrued liabilities

    1,027,641

    —

    1,027,641

    Customer deposits

    160,855

    (160,855
    )

    —

    Total Liabilities

    5,709,321

    (160,855
    )

    5,548,466

    Stockholders’ Deficit

    Par and paid in capital

    31,499,633

    169,355

    31,668,988

    Accumulated deficit at
December 31, 2003

    (35,144,196
    )

    —

    (35,144,196
    )

    Net loss for 2004

    (757,793
    )

    121,065

    (636,728
    )

Table of Contents

    As Originally

    Reported

    Corrections

    As Restated

    Total stockholders’ deficit

    (4,402,356
    )

    290,420

    (4,111,936
    )

    $
    1,306,965

    $
    129,565

    $
    1,436,530

    Changes made:

    Marketable securities pricing errors

    $
    121,065

    Net decrease in reported loss

    $
    121,065

Table of Contents

EXHIBIT C

Item 8A Controls and Procedures

Pursuant to rules adopted by the SEC as directed by Section 302 of the Sarbanes-Oxley Act of 2002,
the Company has performed an evaluation of its disclosure controls and procedures (as defined by
Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. The Company’s
disclosure controls and procedures are designed to ensure (i) that information required to be
disclosed by the Company in the reports the Company files or submits under the Exchange Act are
recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules
and forms; and (ii) that information required to be disclosed by the Company in the reports it
files or submits under the Exchange Act is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding required
disclosure. Based on that evaluation, the Chief Executive Officer and Acting Chief Financial
Officer concluded that the Company’s disclosure controls and procedures were not effective as of
December 31, 2004 for the reasons described below.

1. In connection with an inspection (which began in October 2004) by the Public Company
Accounting Oversight Board of our auditors Carter, Cartier, Melby & Guarino, C.P.A.’s, P.A.
(“CCMG”), the Company discovered the following errors in the accounting for transactions in
the 2003 fiscal period:

    •

    Some Convertible Debenture conversions were reported in error. We underreported
interest expense by $ 206,537 and did not report a gain from debt extinguishment of
$ 101,700.

    •

    We overstated a realized gain on sale of marketable securities by $ 72,667 which
should have been credited to additional paid in capital

These corrections were quantified by the Company in March 2005 through consultation with
external accounting professionals and resulted in an additional loss of $177,837 to the 2003
net loss. The Restated financials were included in the Company’s Form 10KSB filed March 31,
2005.

2. In connection with questions raised by the Securities and Exchange Commission in a comment
letter of May 2005, the Company discovered errors in the accounting for marketable securities
in the 2004 fiscal period. These errors resulted from recording of the valuation, at the
insistence of our previous auditors (CCMG), of securities we owned at a discounted price when
the shares should have been reported as non-impaired marketable
securities. The Company accepted restricted common shares of HQNT as
payment for services provided.  The Company recorded the income for
the services at a discount due to the fact the share were
restricted.  We have since been advised that although the shares were
restricted, with no other conditions relating to their sale present,
they should have been recorded at market value without a discount. The accounting
impact of the correction was (i) an increase in our sales, as the original value of the
securities received as payment of license services was discounted when it should not have
been; and (ii) changes in our realized and unrealized gains and losses as a result of the
initial valuation and valuation of the securities throughout our ownership of them.

Table of Contents

These corrections have been made in the financial statements being filed herein and resulted
in a decrease in the Company’s reported loss for 2004 by $ 121,065.

Because of the issues raised by one or both of these situations the Comp