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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________

FORM 10-Q

________

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2019
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2019
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File No. 000-28423

VALIDIAN CORPORATION

(Exact name of Registrant as specified in its charter)

NEVADA		58-2541997
(State or other jurisdiction of		(I.R.S. Employer
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
incorporation or organization)		Identification No.)

6 Gurdwara Rd., Suite 205, Ottawa, Ontario, Canada K2E 8A3

(Address of principal executive offices)

Registrant’s telephone number: 613-230-7211

~~Check~~Securities ~~whether~~registered ~~the~~pursuant ~~issuer (1) filed all reports required~~ to ~~be filed by~~ Section ~~13 or 15~~12(dg) of the ~~Exchange~~ Act ~~during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo ¨~~:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	VLDI	OTC

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer ¨x ~~(Do not check if a smaller reporting company)~~ Small Reporting Company x Emerging Growth Company ¨

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

At ~~May~~August 101, 2019, 688,287,060 shares of the registrant’s common stock were outstanding.

SEC 1296 (15-1219)Potential persons who are to respond to the collection of information contained in this form are not

required to respond unless the form displays a currently valid OMB control number.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VALIDIAN CORPORATION AND SUBSIDIARIES Consolidated, Condensed Balance Sheets (In United States dollars)
	March 31, 2019 (Unaudited)	December 31, 2018
	June 30, 2019 (Unaudited)	December 31, 2018
Assets
Current assets:
Value added taxes recoverable	$ 3,516	$ 1,828
Cash	$13	$--
Prepaid expenses	33,823	–
Value added taxes recoverable	11,851	1,828
Total Current assets	3711,~~339~~864	1,828
Total assets	$ 3711,~~339~~864	$ 1,828
Liabilities and Stockholders’ deficit
Liabilities and Stockholders’ Deficit
Current liabilities:
Bank indebtedness	$ --	$ 171
Accounts payable and accrued liabilities (note 7)	3,~~060~~053,~~096~~709	3,174,~~606~~605
Accrued interest on 10% senior convertible notes
Accrued interest on 10% senior convertible notes payable to related parties (note 7)	4,001	4,001
payable to related parties (note 7)	4,001	4,001
Promissory notes payable to a related party (notes 2, 7)	569,506	258,750
Deferred revenue	320,000	320,000
Promissory notes payable (notes 2)	736,446	258,750
10% Senior convertible notes (notes 3, 7)	1,148,974	1,148,974
Total current liabilities	5,~~102~~263,~~577~~130	4,906,501
Total liabilities	5,~~102~~263,~~577~~130	4,906,501
Stockholders’ deficit (note 4):
Series A Convertible Preferred stock ($0.001 par value, $1,000 stated value. Authorized 10,000 shares; issued and outstanding 2,230 shares at March 31, 2019 and December 31, 2018)	2	2
Series A Convertible Preferred stock ($0.001 par value, $1,000 stated value. Authorized 10,000 shares; issued and outstanding 2,230 shares at June 30, 2019 and December 31, 2018)	2	2
Series B Convertible Preferred stock ($0.001 par value, $1,000 stated value. Authorized 5,000 shares; issued and outstanding 3,900 shares at March 31, 2019 and December 31, 2018)	4	4
Series B Convertible Preferred stock ($0.001 par value, $1,000 stated value. Authorized 5,000 shares; issued and outstanding 3,900 shares at June 30, 2019 and December 31, 2018)	4	4
Series C Convertible Preferred stock ($0.001 par value, $1,000 stated value. Authorized 5,000 shares; issued and outstanding 3,409 shares at March 31, 2019 and December 31, 2018)	3	3
Series C Convertible Preferred stock ($0.001 par value, $1,000 stated value. Authorized 5,000 shares; issued and outstanding 3,409 shares at June 30, 2019 and December 31, 2018)	3	3
Common stock, ($0.001 par value. Authorized 700,000,000 shares; issued and outstanding 688,287,060 shares at March 31, 2019 and December 31, 2018)	688,287	688,287
Common stock, ($0.001 par value. Authorized 700,000,000 shares; issued and outstanding 688,287,060 shares at June 30, 2019 and December 31, 2018)	688,287	688,287
Additional paid in capital	49,729,993	49,729,993
Accumulated deficit	(55,~~433~~619,~~789~~817)	(55,273,224)
Treasury stock (7,000 shares at March 31, 2019 and December 31, 2018, at cost)	(49,738)	(49,738)
Treasury stock (7,000 shares at June 30, 2019 and December 31, 2018, at cost)	(49,738)	(49,738)
Total stockholders’ deficit	(5,~~065~~251,~~238~~266)	(4,904,673)
Total liabilities and stockholders’ deficit	$3711,~~339~~864	$ 1,828

See accompanying notes to unaudited interim consolidated condensed financial statements.

VALIDIAN CORPORATION AND SUBSIDIARIES Consolidated, Condensed Statements of Operations For the three months ended March 31, 2019 and 2018 (In United States dollars) (Unaudited)
VALIDIAN CORPORATION AND SUBSIDIARIES Consolidated, Condensed Statements of Operations For the three and six months ended June 30, 2019 and 2018 (In United States dollars) (Unaudited)
	Three Months Ended March 31,
	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Expenses:
Selling, general and administrative	$ 8044,~~393~~671	$ 7169,~~249~~731	$101,063	$140,980
Research and development	482,~~666~~504	--22,089	87,170	22,089
Total expenses	85127,~~059~~175	7191,~~249~~820	188,233	163,069
Loss from Operations	(85,059)	(71,249)
Loss from operations	(127,175)	(91,820)	(188,233)	(163,069)
Other income (expenses):
Interest and financing costs (notes 6 and 8)	(37,816)	(118,882)
Interest and financing costs (notes 5 and 7)	(48,898)	(153,285)	(86,826)	(272,167)
Foreign exchange gain (loss)	(3732,~~690~~824)	6339,~~257~~089	(71,534)	102,346
Total other income (expenses)	(7581,~~506~~722)	(55114,~~625~~196)	(158,360)	(169,821)
Net loss	$ (~~160~~208,~~565~~897)	$ (~~126~~206,~~874~~016)	$(346,593)	$(332,890)
Loss per common share – basic and diluted (note 6)	$(0.00)	$(0.00)	$(0.00)	$(0.00)
Weighted average number of common shares outstanding during period	~~688~~686,~~287~~787,060	~~611~~666,~~045~~887,~~340~~766	686,787,060	639,120,814

See accompanying notes to unaudited interim consolidated condensed financial statements.

VALIDIAN CORPORATION AND SUBSIDIARIES

Consolidated, Condensed Statements of Changes in Stockholders’ ~~Equity (deficit)~~Deficit

For the three months ended ~~March~~June 3130, 2018 and ~~March~~June 3130, 2019

(In United States dollars)

(Unaudited)

	Number	Common stock amount	Ser. A Conv. Pref Stock Number	Ser. A Conv. Pref Stock Amount	Ser. B Conv. Pref Stock Number	Ser. B Conv. Pref Stock Amount	Ser. C Conv. Pref Stock Number	Ser.C Conv. Pref Stock Amount	Additional paid-in capital	Accumulated deficit	Treasury stock	Total
Balances at January 1, 2018	600,502,343	$600,520	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,567,976	$(54,759,828)	$(49,738)	$(4,641,061)
Balances at April 1, 2019	688,287,060	$688,287	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,729,993	$(55,410,920)	$(49,738)	$(5,042,369)
Shares issued in connection
Net loss	–	–	–	–	–	–	–	–	–	(208,897)	–	(208,897)
with the conversion of
Balances at June 30, 2019	688,287,060	$688,287	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,729,993	$(55,619,817)	$(49,738)	$(5,251,266)
convertible promissory notes
and accrued interest
thereon (note 7(a))	34,075,552	34,058	–	–	–	–	–	–	60,757	–	–	94,814
Net loss	–	–	–	–	–	–	–	–	–	(126,874 )	–	(126,874)
Balances at March 31, 2018	634,577,895	$634,578	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,628,732	$(54,886,702)	$(49,738)	$(4,673,121)

	Number	Common stock amount	Ser. A Conv. Pref Stock Number	Ser. A Conv. Pref Stock Amount	Ser. B Conv. Pref Stock Number	Ser. B Conv. Pref Stock Amount	Ser. C Conv. Pref Stock Number	Ser.C Conv. Pref Stock Amount	Additional paid-in capital	Accumulated deficit	Treasury stock	Total
Balances at January 1, 2019	688,287,060	$688,284	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,729,994	$(55,273,224)	$(49,738)	$(4,904,672)
Balances at April 1, 2018	634,577,895	$634,578	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,628,732	$(54,886,702)	$(49,738)	$(4,673,121)
Net loss	–	–	–	–	–	–	–	–	–	(160,565)	–	(160,565)
Shares issued in connection
Balances at March 31, 2019	688,287,060	$688,287	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,729,993	$(55,433,789)	$(49,738)	$(5,065,238)
with the conversion of
convertible promissory notes
and accrued interest
thereon	53,709,165	53,709	–	–	–	–	–	–	101,261	–	–	154,970
Net loss	–	–	–	–	–	–	–	–	–	(206,017)	–	(206,017)
Balances at June 30, 2018	688,287,060	$688,287	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,729,993	$(55,092,719)	$(49,738)	$(4,724,168)

See accompanying notes to unaudited interim consolidated condensed financial statements.

VALIDIAN CORPORATION AND SUBSIDIARIES Consolidated, Condensed Statements of Cash Flow For the three months ended March 31, 2019 and 2018 (In United States dollars) (Unaudited)
	Three months Ended March 31,
	2019	2018
Cash flows from operating activities:
Net loss	$ (160,565)	$ (126,874)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	--	20,100
Non-cash interest and financing expense	37,816	118,601
Increase (decrease) in cash resulting from changes in:
Value added taxes recoverable	(1,688)	(1,236)
Prepaid expenses	(33,823)	3,064
Accounts payable and accrued liabilities	(152,325)	(68,818)
Net cash used in operating activities	(310,585)	(55,163)
Cash flows from investing activities:
Net cash used in investing activities	--	--
Cash flows from financing activities:
Bank indebtedness	--	(103)
Issuance of promissory notes	310,756	57,000
Repayment of promissory notes	--	(1,551)
Net cash provided by financing activities	310,756	55,346
Net increase (decrease) in cash and cash equivalents	171	183
Cash and cash equivalents:
Beginning of period	(171)	--
End of period	$ --	$ 183

VALIDIAN CORPORATION AND SUBSIDIARIES

~~Supplementary~~Consolidated, ~~information~~Condensed ~~(note~~Statements 8)of Changes in Stockholders’ Deficit

For the six months ended June 30, 2018 and June 30, 2019

(In United States dollars)

(Unaudited)

	Number	Common stock amount	Ser. A Conv. Pref Stock Number	Ser. A Conv. Pref Stock Amount	Ser. B Conv. Pref Stock Number	Ser. B Conv. Pref Stock Amount	Ser. C Conv. Pref Stock Number	Ser.C Conv. Pref Stock Amount	Additional paid-in capital	Accumulated deficit	Treasury stock	Total
Balances at January 1, 2019	688,287,060	$688,287	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,729,993	$(55,273,224)	$(49,738)	$(4,904,673)

Net loss	–	–	–	–	–	–	–	–	–	(346,593)	–	(346,593)
Balances at June 30, 2019	688,287,060	$688,287	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,729,993	$(55,619,817)	$(49,738)	$(5,251,266)

	Number	Common stock amount	Ser. A Conv. Pref Stock Number	Ser. A Conv. Pref Stock Amount	Ser. B Conv. Pref Stock Number	Ser. B Conv. Pref Stock Amount	Ser. C Conv. Pref Stock Number	Ser.C Conv. Pref Stock Amount	Additional paid-in capital	Accumulated deficit	Treasury stock	Total
Balances at January 1, 2018	600,520,343	$600,520	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,567,976	$(54,759,828)	$(49,738)	$(4,641,061)
Shares issued in connection
with the conversion of
convertible promissory notes
and accrued interest
thereon	87,766,717	87,767	–	–	–	–	–	–	162,017	–	–	249,784
Net loss	–	–	–	–	–	–	–	–	–	(332,891)	–	(332,891)
Balances at June 30, 2018	688,287,060	$688,287	2,230	$ 2	3,900	$ 4	3,409	$ 3	$49,729,993	$(55,092,719)	$(49,738)	$(4,724,168)

See accompanying notes to unaudited interim consolidated condensed financial statements.

VALIDIAN CORPORATION AND SUBSIDIARIES Consolidated, Condensed Statements of Cash Flow For the six months ended June 30, 2019 and 2018 (In United States dollars) (Unaudited)
	Six months Ended June 30,
	2019	2018
Cash flows from operating activities:
Net loss	$ (346,593)	$ (332,890)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	--	22,910
Non-cash interest and financing expense	86,855	271,843
Increase (decrease) in cash resulting from changes in:
Value added taxes recoverable	(10,023)	4,254
Prepaid expenses	--	3,064
Accounts payable and accrued liabilities	(207,751)	(104,935)
Net cash used in operating activities	(477,512)	(135,754)

Cash flows from investing activities:
Net cash used in investing activities	--	--

Cash flows from financing activities:
Bank indebtedness	(171)	(103)
Issuance of promissory notes	477,696	139,500
Repayment of promissory notes	--	(3,527)
Net cash provided by financing activities	477,525	135,870

Net increase (decrease) in cash	13	116

Cash, Beginning of period	--	--
Cash, End of period	$ 13	$ 116

Supplementary information (note 8)

See accompanying notes to unaudited interim consolidated condensed financial statements.

VALIDIAN CORPORATION AND SUBSIDIARIES

Notes to Consolidated, Condensed Financial Statements

~~March~~June 3130, 2019

(In United States dollars)

(Unaudited)

Validian Corporation (the “Company”) was incorporated in the State of Nevada on April 12, 1989 as CCC Funding Corp. The Company underwent several name changes before being renamed to Validian Corporation on January 28, 2003.

Since August 3, 1999, the efforts of the Company have been devoted primarily to the development of a high speed, highly secure method of transacting business using the Internet, and to the sale and marketing of the Company’s products.

1. Basis of presentation

The accompanying consolidated financial statements include the accounts of Validian Corporation and its wholly owned subsidiaries, ~~Sochrys Technologies Inc. and Evolusys S.A.~~ (collectively, the "Company") after elimination of all significant intercompany balances and transactions. The financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While management has based its assumptions and estimates on the facts and circumstances currently known, final amounts may differ from such estimates.

The ~~interim~~accompanying unaudited financial ~~statements~~information ~~are~~as ~~unaudited~~of ~~but~~and for the three and six months ended June 30, 2019 and 2018 has been prepared in accordance with GAAP in the U.S. for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the financial statements include all adjustments (consisting only of normal recurring entries) necessary for a fair presentation of the financial position and results of operations of the Company for the periods presented. The results of operations for the ~~three~~six months ended ~~March~~June 3130, 2019 are not necessarily indicative of the operating results for the full fiscal year ending December 31, 2019. These unaudited interim financial statements have been prepared following accounting principles consistent with those used in the annual audited financial statements and should be read in conjunction with the annual audited financial statements for the year ended December 31, 2018 filed with the SEC on April 9, 2019. The consolidated condensed balance sheet at December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

The consolidated condensed balance sheet at December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

Going concern

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has no revenues, has negative working capital of $5,~~065~~251,~~247~~266, and stockholders’ deficit of $5,~~065~~251,~~238~~266 as at ~~March~~June 3130, 2019, and has incurred a loss of $~~160~~346,~~585~~593 and negative cash flow from operations of $~~310~~477,~~586~~512 for the ~~three~~six months then ended. Furthermore, the Company failed to settle certain 10% senior convertible notes and promissory notes plus accrued interest when they matured on various dates between October 2008 and December 2018. As a result of these non-payment defaults, all of the 10% senior convertible notes, as well as the promissory notes were in default at ~~March~~June 3130, 2019, in accordance with the default provisions of the respective notes, and consequently are due and payable on demand. In addition, the Company expects to continue to incur operating losses for the foreseeable future, and has no lines of credit or other financing facilities in place.

The Company expects to incur operating expenses of approximately $1,472,000 for the year ending December 31, 2019, subject to the availability of adequate funding. In the event the Company cannot raise the additional funds necessary to finance its research and development and sales and marketing activities, it may have to cease operations.

All of the factors above raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan to address these issues includes raising capital through the private placement of equity, the exercise of previously-issued equity instruments and through the issuance of additional promissory notes. The Company’s ability to continue as a going concern is subject to management’s ability to successfully implement these plans. Failure to do so could have a material adverse effect on the Company’s position and or results of operations and could also result in the Company ceasing operations. The consolidated financial statements do not include adjustments that would be required if the assets are not realized and the liabilities settled in the normal course of operations.

Even if successful in obtaining financing in the near term, the Company cannot be certain that cash generated from its future operations will be sufficient to satisfy its liquidity requirements in the longer term, and it may need to continue to raise capital by issuing additional equity or by obtaining credit facilities. The Company’s future capital requirements will depend on many factors, including, but not limited to, the market acceptance of its products and the level of its promotional activities and advertising required to generate product sales. No assurance can be given that any such additional funding will be available or that, if available, it can be obtained on terms favorable to the Company.

VALIDIAN CORPORATION AND SUBSIDIARIES

Notes to Consolidated, Condensed Financial Statements

March 31, 2019

(In United States dollars)

(Unaudited)

2. Promissory notes payable

The following table sets forth the financial statement presentation of the promissory note proceeds on issuance, and the changes in the financial statement presentation of the balance allocated to the notes as at and for the periods ended March 31, 2019 and December 31, 2018:

	Three months	Year ended
	ended March 31, 2019	December 31, 2018
	(unaudited)
Balance beginning of period	$ 258,750	$ 65,750
Note proceeds on issuance	310,756	197,500
	--	--
Proceeds allocated to promissory notes on issuance	310,756	197,500
Principal repaid	--	(4,500)
Balance end of period	569,506	258,750
Balance end of period, net of related party	$ 569,506	$ 258,750

During the three months ended March 31, 2019, the Company did not repay any of the promissory notes.

The notes outstanding at March 31, 2019 bear interest at the rate of 12% per annum and are payable on demand.

Included in interest and financing costs for the three months ended March 31, 2019 is $9,485 (2018: $2,281). Interest on the promissory notes paid in cash during the three months ended March 31, 2019 is $nil (2018: $280).

VALIDIAN CORPORATION AND SUBSIDIARIES

Notes to Consolidated, Condensed Financial Statements

~~March~~June 3130, 2019

(In United States dollars)

(Unaudited)

2. Promissory notes payable

	Six months ended June 30, 2019 (unaudited)	Year ended December 31, 2018
Balance beginning of period	$258,750	$65,750

Net proceeds on issuance	477,696	197,500

Principal repaid	--	(4,500)

Balance end of period	$736,446	$258,750

During the six months ended June 30, 2019, the Company did not repay any of the promissory notes.

The notes outstanding at June 30, 2019 bear interest at the rate of 12% per annum and are due on demand.

During the six months ended June 30, 2019 the Company entered into various new promissory notes with the two parties, which bear interest at 12% and are due on demand. Included in interest and financing costs for the three and six months ended June 30, 2019 is $20,252 (2018: $5,024) and $29,850 (2018: $7,305), respectively, of interest on the promissory notes. Interest on the promissory notes paid in cash during the three and six months ended June 30, 2019 is $nil (2018: $44) and $nil (2018: $323), respectively.

3. 10% Senior convertible notes

The following table sets forth the financial statement presentation of the note proceeds on issuance, and the changes in financial statement presentation of the balance allocated to the 10% senior convertible notes for the periods ended ~~March~~June 3130, 2019 and December 31, 2018:

	Three months	Year
	Six months Ended June 30, 2019 (unaudited)	Year Ended December 31, 2018
	Ended	Ended
Balance beginning of period	$ 1,148,974	$ 1,168,974
	March 31, 2019	December 31, 2018
Payments made	--	(20,000)
	(unaudited)
Balance end of period	$ 1,148,974	$ 1,148,974
Balance beginning of period	$ 1,148,972	$ 1,168,972
Principal repaid in cash	--	(20,000)
Balance end of period	$ 1,148,972	$ 1,148,972

Holders are permitted, at any time, to convert all or a portion of the outstanding principal plus accrued interest into common stock of the company, at a ~~rate~~rates ranging from one common share for each $0.03 of debt converted, to one common share for each $0.10 of debt converted. ~~The Company has the option of pre-paying all or any portion of the balance outstanding on the notes at any time, without penalty or bonus, with the permission of the holders.~~ Interest on the notes is accrued until the notes are either repaid by the Company or converted by the holder. At the Company’s option, interest may be paid either in cash or in common shares of the Company. If interest is paid in common shares, the number of shares required for settlement will be calculated at the rate of conversion in effect for the conversion of the note principal.

~~Notwithstanding~~The ~~the~~Company ~~stated~~failed ~~maturity~~to settle certain of its 10% senior convertible notes plus accrued interest thereon when they matured on various dates between October 1, 2008 and December 31, 2018. At June 30, 2019, a significant portion of these notes remained in default for non-payment. As a result of these non-payment defaults, all of the 10% senior convertible notes are ~~payable~~in ondefault ~~demand~~at June 30, ~~pursuant~~2019, toin accordance with the default provisions of the notes, asand ~~described~~consequently ~~below~~are payable on demand. Interest is accrued at the default rate (10%) on all notes outstanding past the maturity date.

The Company failed to settle certain of its 10% senior convertible notes plus accrued interest thereon when they matured on various dates between October 1, 2008 and December 31, 2018. At March 31, 2019, a significant portion of these notes remained in default for non-payment. As a result of these non-payment defaults, all of the 10% senior convertible notes are in default at March 31, 2019, in accordance with the default provisions of the notes, and consequently are payable on demand. Interest is accrued at the coupon rate on all notes outstanding past the maturity date.

The notes are unsecured, and are convertible as follows:

Note	Conversion
Principal	Rate
$ 642,468	$0.03
6,506	0.038
500,000	0.10
$ 1,148,974

VALIDIAN CORPORATION AND SUBSIDIARIES

Notes to Consolidated, Condensed Financial Statements

~~March~~June 3130, 2019

(In United States dollars)

(Unaudited)

~~3. 10%~~The ~~Senior~~notes are unsecured, and are convertible ~~notes~~as ~~(continued)~~follows:

Included in interest and financing costs for the three months ended March 31, 2019 is $28,330 (2018: $28,824), in coupon rate interest accrued on the 10% senior convertible notes.

Note	Conversion
Principal	Rate
$ 642,468	$0.03
6,506	0.038
500,000	0.10
$ 1,148,974

AtIncluded ~~March~~in ~~31,~~interest ~~2019,~~and ~~the~~financing ~~fair~~costs ~~value~~for of the ~~stock~~three ~~issuable~~and tosix ~~fully~~months ~~convert~~ended ~~the~~June ~~10%~~30, ~~senior~~2019 ~~convertible~~is ~~note principal~~$28,646 ~~was~~(2018: $~~279~~29,~~161,~~144) ~~which~~and is$56,976 (2018: $~~869~~57,~~813~~968), ~~less~~respectively, ~~than~~in ~~the~~coupon ~~principal~~rate ~~outstanding~~interest accrued on ~~that~~the ~~date~~10% senior convertible notes.

4. Stockholders’ deficit

(a) Common stock transactions

During the ~~three~~six months ended ~~March~~June 3130, 2019, holders of the convertible promissory notes did not exercise the conversion feature of the notes.

(b)Stock-based compensation

The following table presents the total of stock-based compensation included in the expenses of the Company for the three and six months ended ~~March~~June 3130, 2019 and 2018:

	Three months ended March 31,
	Three months ended June 30,		Six months ended June 30,
	2019	2018	2019	2018
Selling, general and administrative	--	$ 202,~~100~~810	--	$ 22,910
Research and development	--	--
Total stock-based compensation included in expenses	--	$ 2,810	--	$ 22,910
Total stock-based compensation included in expenses	--	$ 20,100

5. ~~Interest~~Loss ~~and~~per ~~financing costs~~share

~~Interest~~As ~~and~~the ~~financing~~Company ~~costs~~incurred ~~include~~a ~~accrued~~net ~~and~~loss ~~paid~~during ~~coupon~~the ~~rate~~six ~~interest~~months ~~and~~ended ~~accretion~~June ~~and~~30, ~~financing~~2019, ~~costs~~and ~~relating~~during to the ~~10%~~three ~~senior~~months ~~convertible~~ended ~~notes~~June 30, ~~promissory~~2019, ~~notes~~the loss and ~~convertible~~diluted ~~promissory~~loss ~~notes~~per common share are based on the weighted-average common shares outstanding during the period. The following outstanding instruments could have a dilutive effect in the future:

6. Loss per share

	June 30, 2019	June 30, 2018
	(unaudited)	(unaudited)
Shares issuable on conversion of 10% senior convertible notes	26,586,767	27,253,434
Common shares issuable on conversion of the Series A convertible preferred stock	22,300,000	22,300,000
Common shares issuable on conversion of the Series B convertible preferred stock	130,000,000	130,000,000
Common shares issuable on conversion of the Series C convertible preferred stock	113,633,333	113,633,333
Stock options	7,500,000	7,500,000
Total	300,020,100	300,686,767

As the Company incurred a net loss during the three months ended March 31, 2019, and during the three months ended March 31, 2018, the loss and diluted loss per common share are based on the weighted-average common shares outstanding during the period. The following outstanding instruments could have a dilutive effect in the future:

	March 31, 2019	March 31, 2018
	(unaudited)	(unaudited)
Shares issuable on conversion of 10% senior convertible notes	26,586,767	27,253,434
Shares issuable on conversion of convertible promissory notes and accrued interest thereon	--	48,247,318
Common shares issuable on conversion of the Series A convertible preferred stock	22,300,000	22,300,000
Common shares issuable on conversion of the Series B convertible preferred stock	130,000,000	130,000,000
Common shares issuable on conversion of the Series C convertible preferred stock	113,633,333	113,633,333
Stock options	7,500,000	7,500,000
Total	300,020,100	348,934,085

VALIDIAN CORPORATION AND SUBSIDIARIES

Notes to Consolidated, Condensed Financial Statements

~~March~~June 3130, 2019

(In United States dollars)

(Unaudited)

76. Related party transactions

$4,001 (2018: $4,025) in accrued interest charges relating to the 10% senior convertible notes and 12% promissory notes previously issued to a director and a company controlled by a director is included in ~~current~~accrued liabilities at ~~March~~June 3130, 2019.

87. Supplementary cash flow information

The Company paid no income taxes during the ~~three~~six months ended ~~March~~June 3130, 2019, nor during the ~~three~~six months ended ~~March~~June 3130, 2018. Interest paid in cash during the ~~three~~six months ended ~~March~~June 3130, 2019 was $nil (2018: $~~280~~323).

Non-cash financing activities are excluded from the consolidated statements of cash flows. The following is a summary of such activities for the ~~three~~six months ended ~~March~~June 3130, 2019 and 2018:

	2019	2018
Issuance of the Company’s common stock on conversion of convertible
Issuance of the Company’s common stock on conversion of convertible promissory notes plus accrued interest thereon	--	$ 248,784
promissory notes plus accrued interest thereon	--	$ 94,814
Total	--	$ 248,784
Total	--	$ 94,814

98. Fair value measurements

The carrying value of cash ~~and cash equivalents~~, amounts receivable, accounts payable and accrued liabilities approximates fair value due to the short term to maturity of these instruments. The carrying value of the 10% senior convertible notes, ~~the convertible promissory notes,~~ and the promissory notes approximate fair value, due to the issuance of certain of these debt instruments during the ~~three~~six months prior and/or subsequent to the period ended ~~March~~June 3130, 2019, under conditions substantially identical to those existing at ~~March~~June 3130, 2019.

109. Recent accounting pronouncements

Management does not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

1110. Subsequent events

On ~~April~~July 85, 2019, the Company issued $350,~~829~~800 CDN ($38,782 U.S.) of its promissory notes for cash. The ~~notes~~note ~~are~~is payable on demand, and ~~bear~~bears interest at the rate of 12% per annum.

On ~~April~~July 911, 2019, the Company issued $1330,~~574~~000 of its promissory notes for cash. The ~~notes~~note ~~are~~is payable on ~~demand~~December 31, 2019, and ~~bear~~bears interest at the rate of 12% per annum.

On April 22, 2019, the Company issued $17,400 of its promissory notes for cash. The notes are payable on demand, and bear interest at the rate of 12% per annum.

On May 1, 2019, the Company issued $74,035 of its promissory notes for cash. The notes are payable on demand, and bear interest at the rate of 12% per annum.

On May 2, 2019, the Company issued $1,400 of its promissory notes for cash. The notes are payable on demand, and bear interest at the rate of 12% per annum.

On May 6, 2019, the Company issued $16,000 of its promissory notes for cash. The notes are payable on demand, and bear interest at the rate of 12% per annum.

Except for the foregoing, we have evaluated subsequent events through the date the financial statements were issued. All material events have been disclosed.

Item 2. Management’s Discussion and Analysis or Plan of Operations

FORWARD-LOOKING INFORMATION

We caution readers that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking statements that we make in this report. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. This report contains statements that constitute “forward-looking statements.” These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as “believes,” “anticipates,” “expects,” “estimates,” “plans,” “may,” or similar terms. These statements appear in a number of places in this report and include statements regarding our intent, belief or current expectations with respect to many things, some of which are:

trends affecting our financial condition or results of operations for our limited history;

our business and growth strategies;

our technology;

the Internet; and

our financing plans.

We caution readers that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties. In fact, actual results most likely will differ materially from those projected in the forward-looking statements as a result of various factors. Some factors that could adversely affect actual results and performance include:

our limited operating history;

our lack of sales to date;

our requirements for additional capital and operational funding;

the failure of our technology and products to perform as specified;

the discontinuance of growth in the use of the Internet;

the enactment of new adverse government regulations; and

the development of better technology and products by others.

You should carefully consider and evaluate all of these factors. In addition, we do not undertake to update forward-looking statements after we file this report with the SEC, even if new information, future events or other circumstances have made them incorrect or misleading.

CRITICAL ACCOUNTING POLICIES

We prepare our financial statements in accordance with generally accepted accounting principles in the United States of America. 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 related disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant accounting policies and methods used in preparation of the financial statements are described in note 2 to our 2018 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. We evaluate our estimates and assumptions on a regular basis, based on historical experience and other relevant factors. Actual results could differ materially from these estimates and assumptions. The following critical accounting policies are impacted by judgments, assumptions and estimates used in preparation of our ~~March~~June 3130, 2019 Interim Consolidated Financial Statements.

Research and development expenses:

We expense all of our research and development expenses in the period in which they are incurred. At such time as our product is determined to be commercially available, we will capitalize those development expenditures that are related to the maintenance of the commercial products, and amortize these capitalized expenditures over the estimated life of the commercial product. The estimated life of the commercial product will be based on management’s estimates, including estimates of current and future industry conditions. A significant change to these assumptions could impact the estimated useful life of our commercial product resulting in a change to amortization expense and impairment charges.

Stock based compensation:

The Company accounts for its stock-based payments in accordance with FASB Accounting Standards Codification Topic 718 “Compensation – Stock Compensation”, which requires all share-based payments, including stock options granted by the Company to its employees, to be recognized as expenses, based on the fair value of the share-based payments at the date of grant. For purposes of estimating the grant date fair value of stock-based compensation, the Company uses the Black Scholes option-pricing model, and has elected to treat awards with graded vesting as a single award. The fair value of awards granted is recognized as compensation expense on a straight-line basis over the requisite service period, which in the Company’s circumstances is the stated vesting period of the award.

Financial instruments

We have issued convertible notes and convertible notes with common shares. The fair value of the convertible notes is required to be estimated as well as the fair value of the convertible notes issued with common shares. There are significant assumptions and management estimates used in determining these amounts. A significant change to these assumptions could result in a significant change to the fair value of the convertible notes.

RESULTS OF OPERATIONS

The ~~Three~~three months ended ~~March~~June 3130, 2019 compared to the three months ended ~~March~~June 3130, 2018

Revenue: We had no revenue during the three months ended ~~March~~June 3130, 2019, nor during the three months ended ~~March~~June 3130, 2018. Since August 1999 we have directed all of our attention towards the completion, and sales and marketing of our software applications. We believe that if we are successful in our development and sales and marketing efforts, we will generate a source of revenue in the future from sales and/or licensing of our software applications.

Selling, general and administrative expenses: Selling, general and administrative expenses consist primarily of personnel costs, professional fees, communication expenses, travel and other miscellaneous costs associated with supporting our research and development, sales and marketing and investor relations activities. During the three months ended ~~March~~June 3130, 2019, we incurred a total of $8044,~~393~~671, as compared to $7169,~~249~~731 during the three months ended ~~March~~June 3130, 2018. There was an overall decrease in selling, general and administrative expenses of $925,~~144~~060 (1336%) during the three months ended ~~March~~June 3130, 2019 as compared to the three months ended ~~March~~June 3130, 2018.

This decrease occurred primarily as a result of a decrease in the fair value of stock-based compensation recognized as expense during the three months ended ~~March~~June 3130, 2019 as compared with the three months ended ~~March~~June 3130, 2018, relating to the amortization of prepaid balances for service contracts.

We have made efforts to minimize selling, general and administrative expenses wherever possible, through measures such as reducing the number of personnel, postponing our Annual General Meeting, reducing the number of trade shows in which we participate, reducing travel costs, delaying production of new promotional material, and reducing our occupancy costs. We will continue to carefully monitor our selling, general and administrative expenses as we work within current budgetary limits leading up to the full commercial release of our products.

Research and development expenses : Research and development expenses consist primarily of personnel costs directly associated with the research and development of our technology and of the use of our technology in the proposed software applications of our prospective customers. During the three months ended ~~March~~June 3130, 2019, ~~$4,666~~we ofincurred ~~research~~a ~~and~~total ~~development~~of ~~costs were incurred~~$82,504, as compared to no$22,089 ~~research and development costs being incurred~~ during the three months ended ~~March~~June 3130, 2018 on research and development activities. There was an overall increase in research and development expenses of $460,~~666~~415 (~~100~~274%) during the three months ended ~~March~~June 3130, 2019 as compared to the three months ended ~~March~~June 3130, 2018.

The increase in research and development expenses occurred as a result of ~~concentrating~~an onincrease ~~discussions with prospective customers instead of development activities which lead to a decrease~~ in fees paid to consultants during the three months ended ~~March~~June 3130, ~~2018~~2019 as compared with the three months ended ~~March~~June 3130, ~~2019, during which a higher level of development activity undertaken~~2018.

During Q1the three months ended June 30, 2019, the primary focus of our development activity was supporting customer and prospect technical reviews as well as development of the next versions of our ValidianProtect and Data Protection Module technology.

During the three months ended ~~March~~June 3130, 2018, the primary focus of our development activity was ~~supporting~~research ~~analysis~~on bysecuring ~~our~~web ~~prospective~~applications ~~customers~~and ofbrowsers ~~what~~including ~~cyber~~design, ~~security~~architecture ~~risks~~and ~~that Validian's core technology could protect against in our prospective customers' technical environments~~testing.

Interest and financing costs: Interest and financing costs during the three months ended ~~March~~June 3130, 2019 and during the three months ended ~~March~~June 3130, 2018 consisted of costs associated with our 10% senior convertible notes, our promissory notes, and our convertible promissory notes. During the three months ended ~~March~~June 3130, 2019, we incurred $3748,~~816~~898 in interest and financing costs, a decrease of $81104,~~066~~387 (68%) from the $~~118~~153,~~882~~285 in interest and financing costs incurred during the three months ended ~~March~~June 3130, 2018.

The $3748,~~816~~898 in interest and financing costs we incurred during the three months ended ~~March~~June 3130, 2019 is comprised of $3748,~~816~~898 of interest paid and payable to the holders of our debt; $nil of accretion of our promissory notes; $nil of accretion of our convertible promissory notes; and $nil of amortized deferred finance fees and original issue discount relating to the promissory notes and convertible promissory notes. The $~~118~~153,~~882~~285 in interest and financing costs we incurred during the three months ended ~~March~~June 3130, 2018 is comprised of $3941,~~626~~144 of interest paid and payable to the holders of our debt; $nil of accretion of our promissory notes; $7496,~~488~~493 of accretion of our convertible promissory notes; and $415,~~768~~648 of amortized deferred finance fees and original issue discount relating to the promissory notes and convertible promissory notes.

We failed to settle certain of our promissory notes and 10% senior convertible notes, and accrued interest thereon, when they became due on various dates between October 1, 2008, and ~~March~~June 3130, 2019; a significant portion of these notes remain in default as at ~~March~~June 3130, 2019. In accordance with the default provision of the 10% senior convertible notes, and of the promissory notes outstanding at ~~March~~June 3130, 2019, this has resulted in all of these notes becoming due and payable on demand as of the date of the default, or in the case of notes issued subsequent to the default, on the date of issuance, notwithstanding any other stated maturity date. Consequently, the accretion relating to the equity components of these notes issued since the initial event of default, and the amortization of any finance charges incurred thereon, has occurred in the period of issuance.

Accretion of our convertible promissory notes decreased by $7496,~~488~~493 (100%) due to no conversions made in the ~~first~~second quarter of 2019 versus conversions made in the ~~first~~second quarter of 2018 in excess of the value of convertible promissory notes historically issued.

Foreign exchange gain (loss): Foreign exchange gain (loss) is comprised of realized gains and losses on foreign currency conversions, the majority of which relate to accounts payable and accrued liabilities denominated in Canadian dollars. During the three months ended ~~March~~June 3130, 2019, ~~and~~the ~~during~~Canadian dollar gained strength relative to the United States dollar, resulting in an overall loss on foreign currency transactions of $32,824. During the three months ended ~~March~~June 3130, 2018, the ~~Canadian~~United States dollar gained strength relative to the ~~United~~Canadian ~~States~~ dollar, resulting in an overall ~~(loss)~~ gain on foreign currency transactions of ($3739,~~690) and $63,257, respectively~~089.

Net loss: We incurred a loss of $~~160~~208,~~565~~897 (rounded to $0.00 per share) for the three months ended ~~March~~June 3130, 2019, compared to a loss of $~~126~~206,~~874~~016 (rounded to $0.00 per share) for the three months ended ~~March~~June 3130, 2018. Our revenues and future profitability are substantially dependent on our ability to:

raise additional capital to fund operations;

license software applications to a sufficient number of clients;

be cash-flow positive on an ongoing basis;

modify the successful software applications, over time, to provide enhanced benefits to then-existing users; and

successfully develop related software applications.

The six months ended June 30, 2019 compared to the six months ended June 30, 2018

Revenue: We had no revenue during the six months ended June 30, 2019, nor during the three months ended June 30, 2018. Since August 1999 we have directed all of our attention towards the completion, and sales and marketing of our software applications. We believe that if we are successful in our development and sales and marketing efforts, we will generate a source of revenue in the future from sales and/or licensing of our software applications.

Selling, general and administrative expenses: Selling, general and administrative expenses consist primarily of personnel costs, professional fees, communication expenses, travel and other miscellaneous costs associated with supporting our research and development, sales and marketing and investor relations activities. During the six months ended June 30, 2019, we incurred a total of $101,063, as compared to $140,980 during the six months ended June 30, 2018. There was an overall decrease in selling, general and administrative expenses of $39,917 (28%) during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.

This decrease occurred primarily as a result of a decrease in the fair value of stock-based compensation recognized as expense during the six months ended June 30, 2019 as compared with the six months ended June 30, 2018, relating to the amortization of prepaid balances for service contracts.

Research and development expenses: Research and development expenses consist primarily of personnel costs directly associated with the research and development of our technology and of the use of our technology in the proposed software applications of our prospective customers. During the six months ended June 30, 2019, we incurred a total of $87,170, as compared to $22,089 during the six months ended June 30, 2018 on research and development activities. There was an overall increase in research and development expenses of $65,081 (295%) during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.

The increase in research and development expenses occurred as a result of an increase in fees paid to consultants during the six months ended June 30, 2019 as compared with the six months ended June 30, 2018.

During the six months ended June 30, 2019, the primary focus of our development activity was supporting customer and prospect technical reviews as well as development of the next versions of our ValidianProtect and Data Protection Module technology.

During the six months ended June 30, 2018, the primary focus of our development activity was supporting analysis by our prospective customers of what cyber security risks that Validian's core technology could protect against in our prospective customers' technical environments; and research on securing web applications and browsers including design, architecture and testing.

Interest and financing costs: Interest and financing costs during the six months ended June 30, 2019 and during the six months ended June 30, 2018 consisted of costs associated with our 10% senior convertible notes, our promissory notes, and our convertible promissory notes. During the six months ended June 30, 2019, we incurred $86,826 in interest and financing costs, a decrease of $185,341 (68%) from the $272,167 in interest and financing costs incurred during the six months ended June 30, 2018.

The $86,826 in interest and financing costs we incurred during the six months ended June 30, 2019 is comprised of $86,826 of interest paid and payable to the holders of our debt; $nil of accretion of our promissory notes; $nil of accretion of our 10% senior convertible notes; $nil of accretion of our convertible promissory notes; and $nil of amortized deferred finance fees and original issue discount relating to the promissory notes and convertible promissory notes. The $272,167 in interest and financing costs we incurred during the six months ended June 30, 2018 is comprised of $80,770 of interest paid and payable to the holders of our debt; $nil of accretion of our promissory notes; $nil of accretion of our 10% senior convertible notes; $170,981 of accretion of our convertible promissory notes; and $20,416 of amortized deferred finance fees and original issue discount relating to the promissory notes and convertible promissory notes.

We failed to settle certain of our promissory notes and 10% senior convertible notes, and accrued interest thereon, when they became due on various dates between October 1, 2008, and December 31, 2018; a significant portion of these notes remain in default as at June 30, 2019. In accordance with the default provision of the 10% senior convertible notes, and of the promissory notes outstanding at June 30, 2019, this has resulted in all of these notes becoming due and payable on demand as of the date of the default, or in the case of notes issued subsequent to the default, on the date of issuance, notwithstanding any other stated maturity date. Consequently, the accretion relating to the equity components of these notes issued since the initial event of default, and the amortization of any finance charges incurred thereon, has occurred in the period of issuance.

Accretion of our convertible promissory notes decreased by $170,981 (100%) due to no conversions made during the six months ended June 30, 2019 versus conversions made during the six months ended June 30, 2018 in excess of the value of convertible promissory notes historically issued.

Foreign exchange gain: Foreign exchange gain (loss) is comprised of realized gains and losses on foreign currency conversions, the majority of which relate to accounts payable and accrued liabilities denominated in Canadian dollars. During the six months ended June 30, 2019, the Canadian dollar gained strength relative to the United States dollar, resulting in an overall loss on foreign currency transactions of $71,534. During the six months ended June 30, 2018 the United States dollar gained strength relative to the Canadian dollar, resulting in an overall gain on foreign currency transactions of $102,346.

Net loss: We incurred a loss of $346,593 (rounded to $0.00 per share) for the six months ended June 30, 2019, compared to a loss of $332,890 (rounded to $0.00 per share) for the six months ended June 30, 2018. Our revenues and future profitability are substantially dependent on our ability to:

raise additional capital to fund operations;

license software applications to a sufficient number of clients;

be cash-flow positive on an ongoing basis;

modify the successful software applications, over time, to provide enhanced benefits to then-existing users; and

successfully develop related software applications.

LIQUIDITY AND CAPITAL RESOURCES

General: Since inception, we have funded our operations from private placements of debt and equity securities. In addition, until September 1999 we derived revenues from consulting contracts with affiliated parties, the proceeds of which were used to fund operations. We have also received an aggregate of $791,650 in proceeds relating to “VAR” licensing agreements. Until such time as we are able to generate adequate revenues from the licensing of our software applications, we cannot assure that we will be successful in raising additional capital, or that cash from the issuance of debt securities, the exercise of existing warrants and options, and the placements of additional equity securities, if any, will be sufficient to fund our long-term research and development and selling, general and administrative expenses.

Our cash ~~and cash equivalents~~ increased by $~~171~~184 during the ~~three~~six months ended ~~March~~June 3130, 2019, from a bank indebtedness balance of $171 at December 31, 2018, to a cash balance of $~~nil~~13 at ~~March~~June 3130, 2019. This increase in cash occurred ~~due to an increase in promissory notes issued~~ from ~~$nil as at March 31, 2018 to $310,756 as at March 31, 2019. Additionally, this resulted from~~ net cash used in operations of $~~310~~477,~~585~~512 during the period, being ~~fully~~less ~~offset~~than by the $~~310~~477,~~756~~525 in net proceeds from financing activities and a reduction in the amount spent on research and development activities.

We added aan explanatory paragraph to our interim consolidated financial statements for the ~~three~~six months ended ~~March~~June 3130, 2019. It states that our economic viability is dependent on our ability to finalize the development of our principal products, generate sales and finance operational expenses, and that these factors, together with our lack of revenues to date; our negative working capital; our loss for the year, as well as negative cash flow from operating activities in the same period; and our accumulated deficit, raise substantial doubt regarding our ability to continue as a going concern. At ~~March~~June 3130, 2019, we had negative working capital of $5,~~065~~251,~~247~~266 and an accumulated deficit of $55,619,817; for the six months then ended we had a net loss of $346,593, and negative cash flow from operations of $477,512. Furthermore, the Company failed to settle certain of its 10% senior convertible notes and promissory notes, plus accrued interest thereon when they matured on various dates from October 1, 2008 to December 31, 2018. A substantial amount of these notes remain unpaid as of June 30, 2019. All of the 10% senior convertible notes, as well as the promissory notes, were in default at June 30, 2019 in accordance with the default provisions of the respective notes, and as a result are due and payable on demand.

accumulated deficit of $55,433,789; for the three months then ended we had a net loss of $160,565, and negative cash flow from operations of $310,586. Furthermore, the Company failed to settle certain of its 10% senior convertible notes and promissory notes, plus accrued interest thereon when they matured on various dates from October 1, 2008 to March 31, 2019. A substantial amount of these notes remain unpaid as of March 31, 2019. All of the 10% senior convertible notes, as well as the promissory notes, were in default at March 31, 2019 in accordance with the default provisions of the respective notes, and as a result are due and payable on demand.

We anticipate commercial sales during the third quarter of 2019, however we cannot be assured that this will be the case. During the next three months we do not expect to hire additional personnel unless we are successful in raising significant funds through the issuance of our debt or equity securities. We do not expect to make any material commitments for capital equipment expenditures during the next twelve months.

We have an immediate requirement for additional working capital in order to proceed with our business plan. We review our cash needs and sources on a month-to-month basis and we are currently pursuing appropriate opportunities to raise additional capital to fund operations. Additional sources of capital could involve issuing equity or debt securities. We have engaged consultants to provide advice to us with respect to the raising of capital. However, additional funding may not be available to us on reasonable terms, if at all. The perceived risk associated with the possible sale of a large number of shares of our common stock could cause some of our stockholders to sell their stock, thus causing the price of our stock to decline. In addition, actual or anticipated downward pressure on our stock price due to actual or anticipated issuance of stock could cause some institutions or individuals to engage in short sales of our common stock, which may itself cause the price of our stock to decline. We may be unable to raise additional capital if our stock price is too low. A sustained inability to raise capital could force us to limit or curtail our operations.

We expect the level of our future operating expenses to be driven by the needs of our research and development and marketing programs, offset by the availability of funds. In addition, we have since inception taken steps to keep our expenses relatively low and conserve available cash until we begin generating sufficient operating cash flow.

Sources of Capital: Our principal sources of capital for funding our business activities have been the private placements of debt and equity securities. During the ~~three~~six months ended ~~March~~June 3130, 2019, we did not issue shares of our common stock.

Uses of Capital: Over the past several years, we have scaled our development activities to the level of available cash resources. Our plans with respect to future staffing will be dependent upon our ability to raise additional capital. We have not entered into any off-balance sheet arrangements which would have resulted in our use of capital.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

N/A

ITEMS 4 AND 4T. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended ~~March~~June 3130, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Controls over Financial Reporting

At December 31, 2018, management of the Company provided a report on internal controls over financial reporting. Reference should be made to our annual report on Form 10-K for that report, wherein we reported that management’s assessment at December 31, 2018 was that the Company’s internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

In connection with the preparation of the consolidated financial statements for the year ended December 31, 2018, our management identified the existence of certain significant internal control deficiencies that they considered to be material weaknesses. In particular, the following weaknesses in our internal control system were identified at December 31, 2018: (1) a lack of segregation of duties; (2) the lack of timely preparation of certain back up schedules; (3) finance staff’s lack of sufficient technical accounting knowledge; (4) a lack of independent Board oversight; and (5) signing authority with respect to corporate bank accounts. A material weakness is a significant ~~deficit~~deficiency in one or more of the internal control components that alone or in the aggregate precludes our internal controls from reducing to an appropriately low level of risk that material misstatements in our financial statements will not be prevented or detected on a timely basis. We considered these matters in connection with the period-end closing of accounts and preparation of the related consolidated financial statements and determined that no prior period financial statements were materially affected by such matters.

Our size has prevented us from being able to employ sufficient resources at this time to enable us to have an adequate level of supervision and segregation of duties within our internal control system. We will continue to monitor and assess the costs and benefits of additional staffing within the Company.

We were unable to eliminate the identified weaknesses with respect to the period covered by this report. Set forth below is a discussion of the significant internal control deficiencies which have not been remediated.

Lack of segregation of duties. Since commencing the development phase of our operations in August 1999, our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. Our accountant is the only person involved in the data entry function, and since the departure of our chief financial officer in 2008, our chief executive officer has assumed the role of chief financial officer. We are inadequately staffed at this time to ensure a sufficient level of segregation of duties. As a result, this significant internal control ~~deficit~~deficiency had not been remediated as of the end of the period covered by this report, nor do we know if we will be able to remediate this weakness in the foreseeable future. However, we will continue to monitor and assess the costs and benefits of additional staffing.

Lack of timely preparation of back up schedules. Throughout 2018, we were able to complete most of our back up schedules in a timely manner, however, during this time we consistently experienced a lack of complete preparedness at the time our external independent accountants commenced their field work on a quarterly basis. As such, we believe that this material weakness had not been remediated as of the end of the period covered by this report. Inasmuch as this deficit is related to our lack of adequate staffing, which is a condition which our size prohibits us from remediating, we do not know if we will be able to remediate this weakness in the foreseeable future. We will continue to review our interim procedures, and to make changes wherever practicable to assist in remediating this deficit.16

~~Finance~~Lack ~~staff’s~~of ~~lack~~timely preparation of ~~sufficient~~back ~~technical~~up ~~accounting knowledge~~schedules. ~~Due~~Throughout ~~to the limited number of personnel~~2018, ~~our~~we ~~finance~~were ~~staff~~able ~~does not have sufficient technical accounting knowledge~~ to ~~address~~complete ~~all~~most ~~complex~~of ~~and~~our ~~non-routine~~back ~~accounting~~up ~~transactions~~schedules ~~that may arise. These transactions are sometimes extremely technical~~ in ~~nature~~a ~~and~~timely ~~require~~manner, anhowever, ~~in-depth~~during ~~understanding~~this oftime ~~generally~~we ~~accepted~~consistently ~~accounting~~experienced ~~principles. As~~ a ~~result~~lack of ~~this~~complete ~~pervasive~~preparedness ~~deficit,~~at ~~these~~the ~~types~~time ofour ~~transactions~~external ~~may~~independent ~~not~~accountants becommenced ~~recorded~~their ~~correctly,~~field ~~potentially~~work ~~resulting~~on ina ~~material~~quarterly ~~misstatements of the financial statements of the Company~~basis. ToAs ~~address this risk~~such, ~~the~~we ~~Company~~believe ~~has~~that athis ~~control~~material ~~whereby~~weakness ithad ~~consults~~not ~~with~~been ~~its~~remediated ~~auditors and advisors,~~ as ~~needed,~~of ~~in conjunction with~~ the ~~recording~~end ~~and reporting~~ of ~~complex~~the ~~and~~period ~~non-routine~~covered ~~accounting~~by ~~transactions. Management has concluded that~~ this control was operating effectively during the preceding year, as the Company consulted with external advisors on certain complex and non-routine transactions resulting in no material misstatements being identified during the year end auditreport. ~~Although~~Inasmuch ~~management~~as ~~has determined that~~ this ~~control~~deficiency ~~was~~is ~~operating~~related ~~effectively~~to ~~during~~our ~~the year ended December 31, 2018, the finance staff’s~~ lack of ~~sufficient~~adequate ~~technical~~staffing, ~~accounting~~which ~~knowledge~~is ~~nonetheless~~a ~~remains~~condition awhich ~~continued~~our ~~weakness~~size inprohibits ~~our~~us ~~internal~~from ~~control~~remediating, ~~system. Any~~we ~~changes~~do innot ~~the~~know ~~staff~~if ~~complement~~we will be ~~dependant~~able ~~upon~~to ~~the~~remediate ~~growth~~this ofweakness ~~our~~in ~~operations and~~ the ~~number~~foreseeable ~~of our staff to allow further technical accounting knowledge to address all complex and non-routine accounting transactions~~future. ~~Management~~We will continue to review ~~existing~~our ~~consultation~~interim ~~controls~~procedures, and, ifto ~~appropriate,~~make ~~implement~~ changes towherever ~~its~~practicable ~~current~~to ~~internal~~assist ~~control~~in ~~processes~~remediating ~~whereby~~this ~~more effective consultation will be performed~~deficiency.

15Finance staff’s lack of sufficient technical accounting knowledge. Due to the limited number of personnel, our finance staff does not have sufficient technical accounting knowledge to address all complex and non-routine accounting transactions that may arise. These transactions are sometimes extremely technical in nature and require an in-depth understanding of generally accepted accounting principles. As a result of this pervasive deficiency, these types of transactions may not be recorded correctly, potentially resulting in material misstatements of the financial statements of the Company. To address this risk, the Company has a control whereby it consults with its auditors and advisors, as needed, in conjunction with the recording and reporting of complex and non-routine accounting transactions. Management has concluded that this control was operating effectively during the preceding year, as the Company consulted with external advisors on certain complex and non-routine transactions resulting in no material misstatements being identified during the year end audit. Although management has determined that this control was operating effectively during the year ended December 31, 2018, the finance staff’s lack of sufficient technical accounting knowledge nonetheless remains a continued weakness in our internal control system. Any changes in the staff complement will be dependant upon the growth of our operations and the number of our staff to allow further technical accounting knowledge to address all complex and non-routine accounting transactions. Management will continue to review existing consultation controls and, if appropriate, implement changes to its current internal control processes whereby more effective consultation will be performed.

Lack of independent Board oversight. Our Board of Directors consists of only one individual who is also the Company’s sole signing officer. We have experienced difficulties in identifying suitable candidates to serve as independent Board members because of our size, the perceived additional liability to the public by prospective candidates and the excessive additional costs associated with the selection of a candidate including director fees and director liability insurance. As such, our Board lacks the controls, depth of knowledge and perspective that such independence would provide.

Signing authority with respect to corporate bank accounts. Since the departure of our Chief Financial Officer and Treasurer in July 2008, the positions of Director, President, Chief Executive Officer, Chief Financial Officer, Executive Vice President, Secretary and Treasurer have been held by one person. This individual has sole signing authority for the Company’s bank accounts. Our Accountant monitors our bank accounts on a regular basis, however there can be no assurance that unauthorized or unsupported transactions will not occur.

If we are unable to remediate the identified material weakness, there is a more than remote likelihood that a material misstatement to our SEC reports will not be prevented or detected, in which case investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our ability to raise additional capital and could also have an adverse effect on our stock price.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1a. Risk Factors

In addition to other information set forth in this Report, you should carefully consider the risk factors previously disclosed in “Item 1A. to Part 1” of our Annual Report on Form 10-K for the year ended December 31, 2018. There were no material changes to these risk factors during the ~~three~~six months ended ~~March~~June 3130, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities

We failed to settle certain of our 10% senior convertible notes and our promissory notes, plus accrued interest thereon when they matured on various dates between October 1, 2008 and December 31, 2018. A significant amount of these notes remained unpaid as of ~~March~~June 3130, 2019, and were therefore in default and due and payable on demand. Additionally, in accordance with the default provisions of the notes, this failure to settle the matured notes resulted in the remaining 10% senior convertible notes and accrued interest thereon becoming also due and payable on demand. Notwithstanding our obligation to repay these amounts immediately, the note holders have verbally communicated to management their willingness to continue holding the notes until new terms are negotiated. We will accrue interest on these unpaid balances at the coupon rate until a settlement is reached.

Until such time as the matured notes plus accrued interest thereon are settled, all of the 10% senior convertible notes and the promissory notes will remain in default.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

(a) Exhibits.

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following financial information from our Quarterly Report on Form 10-Q for the quarter ended ~~March~~June 3130, 2019 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (iv) Notes to Financial Statements

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SIGNATURES

In accordance with requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

VALIDIAN CORPORATION

By: /s/ Bruce Benn

Bruce Benn

President, Chief Executive Officer

and Chief Financial officer

(principal executive officer)

Dated: ~~May~~August 159, ~~2019~~2018

In accordance with the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ Bruce Benn

Bruce Benn

President, Chief Executive Officer

and Chief Financial officer

(principal financial and accounting officer)

Dated: ~~May~~August 159, ~~2019~~2018

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