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.
Veridien Corp · 8-K · For 9/30/5
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 of 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.
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EX-99.1 · Ex-99.1: Restated December 31, 2004 Audited Financial Statements
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ITEM 7. FINANCIAL STATEMENTS
CARTER, CARTIER, MELBY & GUARINO, C.P.A.s, P.A. LOGO
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Veridien Corporation
Pinellas Park, Florida
We have audited the accompanying consolidated balance sheets of Veridien Corporation (a Delaware corporation) and subsidiaries as of December 31, 2004 and 2003, and the related statements of operations, changes in deficit in stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Veridien Corporation and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note B to the consolidated financial statements, the Company, since its inception, has sustained substantial losses, has a deficit in stockholders’ equity, a deficit in working capital, 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 Note B. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Notes P and O to these 2004 and 2003 financial statements, errors resulting in overstatements and understatements of previously reported assets, liabilities, stockholders equity and net loss were discovered by the management of Veridien during 2005. Accordingly, adjustments have been made to 2004 and 2003 to correct the errors.
Carter, Cartier, Melby & Guarino, C.P.A.s, P.A.
St. Petersburg, Florida
March 19, 2005
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