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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2014
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                                    to

VALIDIAN CORPORATION

(Name of registrant as specified in its charter)

NEVADA	000-28423	58-2541997
(State or other jurisdiction of incorporation or organization)	Commission File No.	(I.R.S. Employer Identification Number)

6 Gurdwara Rd., Suite 205, Ottawa, Ontario, Canada	K2E 5A3
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number:  613-224-3535

Securities registered under Section 12(b) of the Exchange Act:   none

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.001 per share

Check whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:  Yes o  No þ

Check whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act o

Check whether the registrant (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 þ  NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactice Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  þ Yes   o No

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

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

Large accelerated filer o    Accelerated filer o     Non-accelerated filer o    Smaller reporting company þ      

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No þ  

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average between the closing bid ($0.044) and asked ($0.044) price of the registrant’s Common Stock as of June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, was $10,721,187, based upon the average between the closing bid and asked price ($0.044) multiplied by the 243,663,349 shares of the issuer’s Common Stock held by non-affiliates. (In computing this number, issuer has assumed all record holders of greater than 5% of the common equity and all directors and officers are affiliates of the registrant.)

The number of shares outstanding of each of registrant’s classes of common equity as of April 7, 2015: 329,272,476.

DOCUMENTS INCORPORATED BY REFERENCE:  None.

SEC 2337 (3-10) Persons who potentially 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.

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VALIDIAN CORPORATION

Form 10-K

December 31, 2014

Table of Contents

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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

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," "will," 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 these things are:

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

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our business and growth strategies;

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our technology;

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the Internet; and

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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:

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our limited operating history;

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our lack of sales to date;

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our future requirements for additional capital funding;

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

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the discontinuance of growth in the use of the Internet;

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the enactment of new adverse government regulations; and

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the development of better technology and products by others.

The information contained in the following sections of this report identify important additional factors that could materially adversely affect actual results and performance:  

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"Part I. Item 1. Description of Business" especially the disclosures set out under the heading "Risk Factors"; and

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"Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations"

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.

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PART I

Item 1.  Description of Business.

Summary

Validian Corporation provides software products to assist public and private enterprises address the increasingly complex issues surrounding the protection of digital information and application security.  Validian Protect is a software only Intrusion Prevention and Dynamic Policy Management system that enables secure remote storage, access and transfer of digital information with variable compression on wired, wireless or mobile networks over the Internet, and helps to protect mission-critical applications against hack attacks and unauthorized access, which often occur at the application.  Validian Protect makes secure data exchange between applications, including distributed applications, straightforward and affordable for any organization, regardless of size and resources.  Validian Protect facilitates security audit compliance and assurance, whether mandated by government, industry or internal policy; helps to prevent hacking and unauthorized access through application authentication and authorization; delivers confidentiality through application authentication and authorization; and prevents theft of data in transit through encryption of all exchanges from inside the sending application and decryption inside the receiving application, so that unencrypted data cannot be stolen just before encryption or just after decryption.  Incorporated in the United States, Validian has offices in the United States and Canada.

Our Technology

Our technology is based upon our intellectual property and was used to develop our products.

Our Intellectual Property

Our intellectual property includes an addressing scheme, an authentication process and a key exchange process for all parties and end points to a communication, thus offering an authentication model for secure data exchanges. It also includes an encryption function using standard algorithms that encrypts data from within an originating application and decrypts the data within the receiving application. It also enables IT managers on demand to change information policies including encryption algorithms, keys, key life time and level of compression and to distribute these automatically, immediately and transparently to all end points without having to re-develop or re-install the software.      

Our technology provides benefits, by enabling users:

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to integrate security and transport in all communication and document exchanges through an integrated approach; and

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to develop and use existing interactive, distributed applications (like e-commerce and m-commerce, e-banking and m-banking, e-health and m-health and e-loyalty and m-loyalty as well as mobile messaging and social media applications) with an integrated security model; and

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to dynamically change and distribute to all end points encryption algorithms, keys, key life time and level of compression, without having to re-develop or re-install the software.

Based on this technology, we have developed the products described below.

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Target Market

Our business strategy is to license our technology either directly or through distribution channels to medium to large organizations that develop, market, sell, distribute or use software products where interaction with a distributed customer, employee and/or partner base is essential.  This includes:

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IT departments that serve their organization with a variety of applications and implementation environments, according to the needs of the various internal departments. This implies writing applications to ensure the security of communication between applications and over distributed networks; and

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independent software vendors and developers serving a relatively large group of customers, on a regional or national basis and who must respond to a variety of conditions and platforms, as imposed by their customers in specific industrial sectors and secure the exchanges between their customers’ partners, suppliers and other participants.

Potential customer industrial sectors include, among others:

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health care providers and suppliers;

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governments;

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post-production houses, studios and production companies in the digital media industry;

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transportation industry;

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manufacturers in supply management chains;

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financial institutions and insurance companies; and

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software distribution services.

Marketing Strategy and Distribution Channels

We have initiated a marketing program in North America to bring our products to the marketplace. This program has two components: direct and channel sales.

Direct Sales

The direct sales approach entails making high-level contacts within the organizations of target customers to present the benefits and competitive advantages of our products.  Leads to such presentations are generated through existing contacts of management and sales representatives, and through attendance at and participation in specialized e-commerce and computer security trade shows, and the presentation of the benefits of our products in technical seminars attended by personnel with a mandate for application security.  

Channel Sales

In order to penetrate the market for our products, we are attempting to partner with value-added resellers ("VARs"), independent marketing representatives (“IMRs”), system integrators (“SIs”), independent software vendors (“ISVs”) and application service providers (“ASPs”).  Potential partners are identified based upon their ability to penetrate specific markets more easily than we can. We believe major customers also will act as VARs in their sector.  

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Sales representatives and sales agents are promoting our products within these two channels.  The representatives are responding to queries and expressions of interest from those interested in becoming early adopters of our working models.  These early customers and distributors may have an impact on the product development schedule, as we will develop interfaces with users’ existing systems in response to their feedback and individual requirements.

Currently, we have agreements with VARs and IMRs in the U.S.

Marketing Analysis

During the year ended December 31, 2014, we utilized the services of industry specialists in the health care, defense, public safety, banking, government and entertainment sectors. Their mandate was to identify specific areas and a limited number of organizations where our products would facilitate secure communication and the implementation of a strong security infrastructure with ease of deployment and management.

To support our sales force and these specialists, we have developed technical literature on the following topics:

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security;

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features and benefits;

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integration into current systems;

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openness of the architecture;

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future developments; and

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implementation procedures.

Estimated Sales Cycles

We expect that individual sales cycles will be from four to eight months in duration.  The territories where most potential customers reside are expected to be in North America, Europe and Asia Pacific.  At April 7, 2015 we had two sales representatives.

Marketing Expenses

The main expense factors for our marketing campaign are for:

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personnel, both internal and outside specialists;

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direct marketing to potential customers;

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participation in trade shows;

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travel and living expenses;

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web site development and maintenance; and

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literature preparation and distribution.

For more information, please see "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.”

Our Products

Currently, we offer four main products on a commercial basis.

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Validian Protect (previously known as “Application Security Infrastructure (ASI)”)

Our Validian Protect is an application security middleware for authenticating applications, securing data transport between distributed applications and Web services and dynamically managing information policies. Validian Protect is specifically designed to enable secure access of applications and secure storage, access and transfer of digital information on wired, wireless and mobile networks over the Internet, including secure communication between distributed applications and distributed networks. It automatically manages all critical security functions for any application, including authentication, encryption, key generation, key distribution, addressing and data transport. Validian Protect delivers messages and files to, and only to, the target destination, and data never travels unencrypted at any time between applications.

Supplemental to our Validian Protect product, we offer a Software Development Kit (SDK), for rapidly and simply integrating Validian Protect with an application. The SDK includes a complete, integrated and built-in set of control, transport and security features, which are automatically inherited by any applications linked to Validian Protect through the SDK.  Application developers who use the Validian SDK do not have to learn and master any of the various transport and security products or mechanisms to implement security on their applications.  Our SDK establishes low-level IP addresses and ports, and implements complex security features automatically.  This provides the application with a complete communication security chain, as the Validian Protect protection initiates from within the originating application and transports data to within the destination application.  The SDK is offered free of charge to qualified developers and system integrators.

Validian ShareProtect (previously known as “Secure Send and Receive (SSR)”)

Our ShareProtect product transforms a user’s desktop or mobile PC into a secure communication facility for uploading sensitive, proprietary information to a shared repository.  The solution also transforms any server into an efficient download manager that simplifies the distribution of proprietary files to authorized users.  Our ShareProtect protects file exchanges against malicious interference, interception by rogue applications and unwanted leaks.

Validian MedicalProtect

Our MedicalProtect product is designed and developed specifically to provide secure remote storage, access and transfer of digital medical health and medical records, information and files and thereby prevent hacking, theft and improper access of this digital information.

Our MedicalProtect solution enables the eHealth industry including hospitals, clinics, emergency responders,   laboratories, research facilities and their professionals and administrators to handle health and medical   digital information securely, including storage, remote access, transfer of large files and sharing across communities, including:

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to authenticate health, medical and insurance professionals and staff using fingerprint signatures;

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to store health and medical records, information and files in encrypted form on portable media storage drives;

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to transfer encrypted media files of any size and any format between authenticated doctors, workers and/or personnel across the Internet;

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to track health and medical file activity such as create, rename, modify, transfer and delete, transparently and in real-time over the Internet; and

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to set universal policies which govern security and tracking levels applied on a per patient or project basis.

Validian MediaProtect (previously known as “Biometric Media Seal (BMS)”)

Our MediaProtect product is designed and developed specifically to prevent hacking, theft and piracy of digital media including films, videos, television programs and music during the production and post-production process.

Our MediaProtect solution enables post-production houses, studios and production companies:

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to authenticate project workers using fingerprint signatures;

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to store media files in encrypted form on portable media storage drives;

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to transfer encrypted media files of any size and any format between authenticated workers and/or reviewers across the Internet;

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to track media file activity such as create, rename, modify, transfer and delete, transparently and in real-time over the Internet; and

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to set universal policies which govern security and tracking levels applied on a per project basis.

Competition

There are different competitors for the Validian Protect, ShareProtect, MedicalProtect and MediaProtect markets.

Validian Protect competition

Our Validian Protect product competes primarily with the products described below.

VPN

Virtual Private Networks (VPN) is a technology that ensures a secure communication link between two devices linked to the Internet or any communication network. This type of network security ensures that between those two hardware devices, the data cannot be intercepted and tampered with.

The main supplier of VPN is Check Point Software Technologies Ltd., but a number of suppliers are also offering competing products.

PKI

Public Key Infrastructure (PKI) is a sophisticated method of authenticating communicating parties by providing each party with a set of two uniquely linked keys, one private key that is kept by the party and one public key that is published for everyone to see. When communicating, messages are encrypted with the private key of the sender and decrypted by the receiver using the public key of the sender. Since both keys are mathematically linked, the receiver is assured that the message is coming from that sender and no-one else.

This exchange mechanism has been extended to protect more applications but we believe that its implementation on a large scale for distributed environments proves difficult and costly.  The main suppliers of PKI include Entrust and Verisign.

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SSL & TLS

Secure Socket Layer (SSL) is a browser level protection offered by a wide range of suppliers and incorporated in most browsers. SSL establishes a secure connection from a server to a browser requesting access to an application on this server. SSL is an industry standard widely used across a large number of platforms and systems. TLS (Transpost Layer Security) is an extension of SSL. However, we believe that both SSL and TLS rely on a rather weak authentication model, has a number of security gaps and takes a significant period of time to integrate.

ShareProtect Competition

File transfer protocol (FTP) is freeware available to organizations that don’t require security controls.  Secure FTP provides minimal file protection.  A number of companies compete in the growing secure file transfer market space, including Tumbleweed Communications, Proginet Corporation, Aspera, Inc. and Radiance Technologies.

MedicalProtect Competition

We are not aware of an integrated solution featuring biometric access control and file tracking and logging.

MediaProtect Competition

To date, the only productized competition we are aware of in the digital media industry is the Aspera solution, which focuses on file transfer speed for large files.  We are not aware of an integrated solution featuring biometric access control and file tracking and logging.

Research and Development

We spent the following amounts during the periods mentioned on research and development activities:

Year ended December 31,
2014	2013
$313,975	$145,174

For more information, see: "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.”

Intellectual Property Protection

We rely on common law and statutory protection of trade secrets and confidentiality agreements. We claim copyright in specific software products and various elements of our core technology, and have registered several trademarks in North America and in Europe.  

Our intellectual property includes an addressing scheme, an authentication process and a key exchange process for all parties to a communication, thus offering a strong trust model for secure exchanges. It also includes an encryption function using standard algorithms that encrypts data from within an originating application and decrypts within the receiving application.

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We believe, but we cannot assure, that our technology and its implementation may be patentable.  We may file patent applications as we extend the development of our current technology, or as we develop new technology.  We have defined migration paths for the various products and developed schedules for that migration.  This defines the requirement for patent, trademarks and copyright protection, which we may apply for as required in order to prevent unauthorized use of our technology.

We cannot assure that we will be able to obtain or to maintain the foregoing intellectual property protection.  We also cannot assure that our technology does not infringe upon the intellectual property rights of others.  In the event that we are unable to obtain the foregoing protection or our technology infringes intellectual property rights of others, our business and results of operations could be materially and adversely affected.  For more information please see “Risk Factors - We may not be able to protect and enforce our intellectual property rights, which could result in the loss of our rights, loss of business or increased costs.” and “Claims by third parties that we infringe upon their proprietary technology could hurt our financial condition,” below.

Employees

As at December 31, 2014, we had 9 employees and contractual personnel, including one executive officer, two sales and marketing staff, five in research and development and one in administration.  Eight are located in Ottawa, Canada, and one is located in Memphis, TN.  We also regularly engage technical consultants and independent contractors to provide specific advice or to perform certain marketing or technical tasks.

Item 1A.  Risk Factors

Our business operations and our securities are subject to a number of substantial risks, including those described below. If any of these or other risks actually occur, our business, financial condition and operating results, as well as the trading price or value of our securities could be materially adversely affected.

Risks relating to our Business

We are a development stage company, and our limited operating history makes evaluating our business and prospects difficult.

We are a development stage company, and our limited operating history makes it difficult to evaluate our current business and prospects or to accurately predict our future revenues or results of operations. The commercial acceptance of our products is unproven and therefore we may not be able to generate a sufficient number of revenue-paying customers to sustain operations.  Our revenue and income potential are unproven, and our business plan is constantly evolving. The Internet is constantly changing and software technology is constantly improving, therefore we may need to continue to modify our business plan to adapt to these changes. As a result of our being in the early stages of development, particularly in the emerging technology industry, we are more vulnerable to risks, uncertainties, expenses and difficulties than more established companies.  As a result, we may never achieve profitability and we may not be able to continue operations if we cannot successfully address the risks associated with early stage development companies in emerging technologies.

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We have a history of operating losses and we anticipate losses and negative cash flow for the foreseeable future.  Unless we are able to generate profits and positive cash flow we may not be able to continue operations.  

We incurred a net loss of $2,315,003 and negative cash flow from operations of $615,719 during the year ended December 31, 2014.  During the year ended December 31, 2013, we incurred a net loss of $3,349,497 and negative cash flow from operations of $635,234.  We expect operating losses and negative cash flow from operations to continue for the foreseeable future.

We will need to generate significant revenues to achieve profitability. Consequently, we may never achieve profitability.  Even if we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future. If we are unable to achieve or sustain profitability in the future, we may be unable to continue our operations.  See “Part II.  Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We have drawn readers’ attention to the uncertainty of our ability to continue as a going concern.

We have added an explanatory paragraph in our consolidated financial statements.  It states that our ability to continue as a going concern is uncertain due to our history of operating losses and difficulty in generating operating cash flows.  Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  These adjustments might include changes in the possible future recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

We will require additional capital to proceed with our business plan.  If we are unable to obtain such capital, we will be unable to proceed with our business plan and we will be forced to limit or curtail our operations.

We have an immediate requirement for additional working capital in order to proceed with our business plan.  We are currently pursuing alternatives regarding the raising of additional capital to fund operations.  For a discussion of our capital requirements, see the disclosure in "Part II. Item 7. Management's Discussion of Financial Condition and Results of Operation.”  We do not currently have a commitment from any third party to provide financing and may be unable to obtain financing on reasonable terms or at all.  Furthermore, if we raise additional working capital through equity, our shareholders will experience dilution.  If we are unable to raise additional financing in the immediate future, and thereafter as required, we will be unable to grow or maintain our current level of business operations and, in fact, we will be forced to limit or curtail our operations.

The loss of any of our key personnel would likely have an adverse effect on our business.

Our future success depends, to a significant extent, on the continued services of our key personnel.  Our loss of any of these key people most likely would have an adverse effect on our business.  Competition for personnel throughout the industry is intense and we may be unable to retain our current personnel or attract, integrate or retain other highly qualified personnel in the future.  If we do not succeed in retaining our current personnel or in attracting and motivating new personnel, our business could be materially adversely affected.

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The business environment is highly competitive and, if we do not compete effectively, we may experience material adverse effects on our operations.

The market for Internet security products and services is intensely competitive and we expect competition to increase in the future.  We compete with large and small companies that provide products and services that are similar to some aspects of our security products and services.  Our competitors may develop new technologies in the future that are perceived as being more secure, effective or cost efficient than the technology underlying our security products and services.  In particular, the Internet security market has historically been characterized by low financial entry barriers.

Some of our competitors have longer operating histories, greater name recognition, access to larger customer bases and significantly greater financial, technical and marketing resources than we do.  As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the promotion and sale of their products than we will.  We believe that there may be increasing consolidation in the Internet security market and this consolidation may materially adversely affect our competitive position.  In addition, our competitors may have established or may establish financial or strategic relationships among themselves, with existing or potential customers, resellers or other third parties and rapidly acquire significant market share.  If we cannot compete effectively, we may experience future price reductions, reduced gross margins and loss of market share, any of which will materially adversely affect our business, operating results and financial condition.

If we are unable to develop market recognition, we may be unable to generate significant revenues and our results of operations may be materially adversely affected.

To attract customers we may have to develop a market identity and increase public awareness of our technology and products. To increase market awareness of our technology and our products, we will continue to make significant expenditures for marketing initiatives. However, these activities may not result in significant revenue and, even if they do, any revenue may not offset the expenses incurred in building market recognition. Moreover, despite these efforts, we may not be able to increase public awareness of our technology and our products, which would have a material adverse effect on our results of operations.

We must establish and maintain strategic and other relationships.

One of our significant business strategies has been to enter into strategic or other similar collaborative relationships in order to reach a larger customer base than we could reach through our direct sales and marketing efforts.  We may need to enter into additional relationships to execute our business plan.  We may not be able to enter into additional, or maintain our existing, strategic relationships on commercially reasonable terms.  If we fail to enter into additional relationships, or maintain our existing relationships, we would have to devote substantially more resources to the distribution, sale and marketing of our security services and communications services than we would otherwise.

Our success in obtaining results from these relationships will depend both on the ultimate success of the other parties to these relationships and on the ability of these parties to market our products successfully.

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Furthermore, our ability to achieve future growth will also depend on our ability to continue to establish direct seller channels and to develop multiple distribution channels.  Failure of one or more of our strategic relationships to result in the development and maintenance of a market for our products and services could harm our business.  If we are unable to maintain our relationships or to enter into additional relationships, this could harm our business.

If we are unable to respond to rapid technological change and improve our products and services, our business could be materially adversely affected.

The Internet security industry is characterized by rapid technological advances, changes in customer requirements, frequent new product introductions and enhancements and evolving industry standards in computer hardware and software technology.  As a result, we must continually change and improve our products in response to changes in operating systems, application software, computer and communications hardware, networking software, programming tools and computer language technology.  The introduction of products embodying new technologies and the emergence of new industry standards may render existing products obsolete or unmarketable.  In particular, the market for Internet and intranet applications is relatively new and is rapidly evolving.  Our future operating results will depend upon our ability to enhance our current products and to develop and introduce new products on a timely basis that address the increasingly sophisticated needs of our end-users and that keep pace with technological developments, new competitive product offerings and emerging industry standards.  If we do not respond adequately to the need to develop and introduce new products or enhancements of existing products in a timely manner in response to changing market conditions or customer requirements, our operating results may be materially diminished.

New products and services developed or introduced by us may not result in any significant revenues.

We must commit significant resources to developing new products and services before knowing whether our investments will result in products and services the market will accept.  The success of new products and services depends on several factors, including proper new definition and timely completion, introduction and market acceptance.  There can be no assurance that we will successfully identify new product and service opportunities, develop and bring new products and services to market in a timely manner, or achieve market acceptance of our products and services, or that products, services and technologies developed by others will not render our products, services or technologies obsolete or non-competitive.  Our inability to successfully market new products and services may harm our business.

We may not be able to protect and enforce our intellectual property rights, which could result in the loss of our rights, loss of business or increased costs.

Our success depends to a significant degree upon the protection of our software and other proprietary technology.  The unauthorized reproduction or other misappropriation of our proprietary technology would enable third parties to benefit from our technology without paying us for it.  We rely on a combination of patent, trademark, trade secret and copyright laws, license agreements and non-disclosure and other contractual provisions to protect proprietary and distribution rights of our products.  We have filed a patent application covering certain aspects of our products in the United States, Canada and the European Union.  Although we have taken steps to protect our proprietary technology, they may be inadequate and the unauthorized use thereof could have a material adverse effect on our business, results of operations and financial condition.  Existing trade secret, copyright and trademark laws offer only limited protection.  Moreover, the laws of other countries in which we market our products may afford little or no effective protection of our intellectual property.  If we resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome and expensive, even if we were to prevail.

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Claims by third parties that we infringe upon their proprietary technology could hurt our financial condition.

If we discover that any of our products or technology we license from third parties violates third party proprietary rights, we may not be able to reengineer our product or obtain a license on commercially reasonable terms to continue offering the product without substantial reengineering.    In addition, product development is inherently uncertain in a rapidly evolving technology environment in which there may be numerous patent applications pending for similar technologies, many of which are confidential when filed.  Although we sometimes may be indemnified by third parties against claims that licensed third party technology infringes proprietary rights of others, this indemnity may be limited, unavailable or, where the third party lacks sufficient assets or insurance, ineffective.  We currently do not have liability insurance to protect against the risk that our technology or future licensed third party technology infringes the proprietary rights of others.  Any claim of infringement, even if invalid, could cause us to incur substantial costs defending against the claim and could distract our management from our business.  Furthermore, a party making such a claim could secure a judgment that requires us to pay substantial damages.  A judgment could also include an injunction or other court order that could prevent us from selling our products.  Any of these events could have a material adverse effect on our business, operating results and financial condition.

If our electronic security technology were breached, our business would be materially adversely affected.

A key element of our technology and products is our Internet security feature.  If anyone is able to circumvent our security measures, they could misappropriate proprietary information or cause interruptions or problems with hardware and software of customers using our products.  Any such security breaches could significantly damage our reputation.  In addition, we could be liable to our customers for the damages caused by such breaches or we could incur substantial costs as a result of defending claims for those damages. We may need to expend significant capital and other resources to protect against such security breaches or to address problems caused by such breaches. Security measures taken by us may not prevent disruptions or security breaches.    In the event that future events or developments result in a compromise or breach of the technology we use to protect a customer's personal information, our financial condition and business could be materially adversely affected.  

We face restrictions on the exportation of our encryption technology, which could limit our ability to market our products outside of the United States, Canada and Europe.

Some of our Internet security products utilize and incorporate encryption technology.  Exports of software products utilizing encryption technology are generally restricted by the United States and various other governments, particularly in response to the terrorist acts of September 11, 2001.  If we do not obtain the required approvals, we may not be able to sell some of our products in international markets, which could materially adversely affect our results of operations.

Our operating results may prove unpredictable, and may fluctuate significantly.

Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which are outside of our control.  Factors which may cause operating results to fluctuate significantly include the following:

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new technology or products introduced by us or by our competitors;

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the timing and uncertainty of sales cycles and seasonal declines in sales;

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our success in marketing and market acceptance of our products and services by our existing customers and by new customers;

*

a decrease in the level of spending for information technology-related products and services by our existing and potential customers; and

*

general economic conditions, as well as economic conditions specific to users of our products and technology.

Our operating results may be volatile and difficult to predict.  As such, future operating results may fall below the expectations of securities analysts and investors.  In this event, the trading price of our common stock may fall significantly.  

We expect to generate some revenues and incur some operating expenses outside of the United States.  If applicable currency exchange rates fluctuate our revenues and results of operations may be materially and adversely affected.

We expect that some portion of our revenues will be based on sales provided outside of the United States.  In addition, a significant portion of our operating expenses are incurred outside of the United States, and we expect that this will continue to be the case.  As a result, our financial performance will be affected by fluctuations in the value of the U.S. dollar to foreign currency. At the present time, we have no plan or policy to utilize forward contracts or currency options to minimize this exposure, and even if these measures are implemented there can be no assurance that such arrangements will be available, be cost effective or be able to fully offset such future currency risks.

Other risks associated with international operations could adversely affect our business operations and our results of operations.

There are certain risks inherent in doing business on an international level, such as:

*

unexpected changes in regulatory requirements, export and import restrictions;

*

controls relating to encryption technology that may limit sales in the future;

*

legal uncertainty regarding liability and compliance with foreign laws;

*

competition with foreign companies or other domestic companies entering into the foreign markets in which we operate;

*

tariffs and other trade barriers and restrictions;

*

difficulties in staffing and managing foreign operations;

*

longer sales and payment cycles;

*

problems in collecting accounts receivable;

*

political instability;

*

fluctuations in currency exchange rates;

*

software piracy;

*

seasonal reductions in business activity during the summer months in Europe and elsewhere; and

*

potentially adverse tax consequences.

Any of these factors could adversely impact the success of our international operations. One or more of such factors may impair our future international operations and our overall financial condition and business prospects.

15

Risks relating to our Common Stock

Our common stock price may be volatile.

The market prices of securities of Internet and technology companies are extremely volatile and sometimes reach unsustainable levels that bear no relationship to the past or present operating performance of such companies. Factors that may contribute to the volatility of the trading price of our common stock include, among others:

*

our quarterly results of operations;

*

the variance between our actual quarterly results of operations and predictions by stock analysts;

*

financial predictions and recommendations by stock analysts concerning Internet companies and companies competing in our market in general, and concerning us in particular;

*

public announcements of technical innovations relating to our business, new products or technology by us or our competitors, or acquisitions or strategic alliances by us or our competitors;

*

public reports concerning our products or technology or those of our competitors; and

*

the operating and stock price performance of other companies that investors or stock analysts may deem comparable to us.

In addition to the foregoing factors, the trading prices for equity securities in the stock market in general, and of Internet-related companies in particular, have been subject to wide fluctuations that may be unrelated to the operating performance of the particular company affected by such fluctuations.  Consequently, broad market fluctuations may have an adverse effect on the trading price of our common stock, regardless of our results of operations.

There is a limited market for our common stock.  If a substantial and sustained market for our common stock does not develop, our shareholders' ability to sell their shares may be materially and adversely affected.

Our common stock trades in the over-the-counter market and is quoted on the OTC Markets QB. Many institutional and other investors refuse to invest in stocks that are traded at levels below the Nasdaq Small Cap Market which could make our efforts to raise capital more difficult.  In addition, the firms that make a market for our common stock could discontinue that role.  OTC Markets QB stocks are often lightly traded or not traded at all on any given day.  We cannot predict whether a more active market for our common stock will develop in the future.  In the absence of an active trading market:

*

investors may have difficulty buying and selling or obtaining market quotations;

*

market visibility for our common stock may be limited; and

*

a lack of visibility for our common stock may have a depressive effect on the market price for our common stock.

Shares issuable upon the exercise of options, warrants and convertible debentures, or under anti-dilution provisions in certain agreements, could dilute stock holdings and adversely affect our stock price.

As of April 7, 2015, we have no outstanding options or warrants to purchase shares of our common stock.

16

We have two existing stock option plans, one of which had 3,912,302 shares remaining for issuance as of April 7, 2015, the second of which had 6,087,698 shares remaining for issuance as of April 7, 2015.  Future options issued under these plans may have dilutive effects.

Issuance of shares pursuant to the exercise of options, warrants, or anti-dilution provisions, could lead to subsequent sales of the shares in the public market, which could depress the market price of our stock by creating an excess in supply of shares for sale.  Issuance of these shares and sale of these shares in the public market could also impair our ability to raise capital by selling equity securities.

A large number of shares will be eligible for future sale and may depress our stock price.

As of April 7, 2015, we had outstanding 329,272,476 shares of our common stock, of which approximately 51,702,808 shares were "restricted securities" as that term is defined under Rule 144 promulgated under the Securities Act of 1933.  These restricted shares are eligible for sale under Rule 144 at various times, upon the expiry of the applicable holding period.  No prediction can be made as to the effect, if any, that sales of shares of common stock or the availability of such shares for sale will have on the market prices prevailing from time to time.  Nevertheless, the possibility that substantial amounts of our common stock may be sold in the public market may adversely affect prevailing market prices for the common stock and could impair our ability to raise capital through the sale of our equity securities.

We do not intend to pay dividends in the near future.

Our board of directors determines whether to pay dividends on our issued and outstanding shares.  The declaration of dividends will depend upon our future earnings, our capital requirements, our financial condition and other relevant factors.  Our board does not intend to declare any dividends on our shares for the foreseeable future.

Our common stock may be deemed to be a "penny stock."  As a result, trading of our shares may be subject to special requirements that could impede our shareholders' ability to resell their shares.

Our common stock may be deemed to be a "penny stock" as that term is defined in Rule 3a51-1 of the Securities and Exchange Commission.  Penny stocks include stocks:

*

that are not traded on a national securities exchange that has been continuously registered since April 20, 1992 and has maintained quantitative initial and continued listing standards that are substantially similar to or stricter than the listing standards in place at January 8, 2004;

*

that are not traded on a securities exchange, a “junior tier” of an exchange or an automated quotation system sponsored by a registered national securities association that has established initial listing standards that meet or exceed specified criteria an maintains similar quantitative continued listing standards; or:

*

whose prices are not quoted on the NASDAQ automated quotation system ; or

*

of issuers with net tangible assets less than:

*

$2,000,000 if the issuer has been in continuous operation for at least three years; or

*

$5,000,000 if in continuous operation for less than three years, or

*

of issuers with average revenues of less than $6,000,000 for the last three years.

17

Section 15(g) of the Exchange Act, and Rule 15g-2 of the Securities and Exchange Commission, require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks not less than two business days before a transaction is effected, and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account.  Moreover, Rule 15g-9 of the Securities and Exchange Commission requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor.  This procedure requires the broker-dealer:

*

to obtain from the investor information concerning his or her financial situation, investment experience and investment objectives;

*

to determine reasonably, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions;

*

to provide, not less than two business days before a transaction is effected, the investor with a written statement setting forth the basis on which the broker-dealer made the determination in the second bullet above; and

*

to receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives.  

Compliance with these requirements may make it more difficult for holders of our common stock to resell their shares to third parties or to otherwise dispose of them.

Our current executive officer and director, and major stockholders own a significant percentage of our voting stock. As a result, they exercise significant control over our business affairs and policy.

As of April 7, 2015, our current executive officer and director, and holders of 5% or more of our outstanding common stock together beneficially owned approximately 10.4% of the outstanding common stock..  These stockholders are able to significantly influence all matters requiring approval by stockholders, including the election of directors and the approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying, deterring or preventing a change in control and may make some transactions more difficult or impossible to complete without the support of these shareholders.

Our restated articles of incorporation contain provisions that could discourage an acquisition or change of control of our company.

Our restated articles of incorporation authorize our board of directors to issue preferred stock without stockholder approval.  Provisions of our certificate of incorporation, such as the provision allowing our board of directors to issue preferred stock with rights more favorable than our common stock, could make it more difficult for a third party to acquire control of us, even if that change of control might benefit our stockholders.

18

Certain of our debt instruments are secured.

Certain of our 10% senior convertible notes are secured by a general assignment of all of the assets of the Company, and also provide collateral to the note holder.  The security agreements further provide that in the event of a default, the secured party would have the right to take possession of the collateral and operate the Company.  As of April 7, 2015, all of the 10% senior convertible notes are in default.  If the secured parties were to choose to exercise their rights in accordance with the security agreements, we could lose ownership and or control over our assets, which could have a negative effect on our business operations and the trading price of our common stock.

We currently do not have an effective system of internal controls, and therefore we may not be able to detect fraud or report our financial results accurately, which could harm our business.

Effective internal controls are necessary for us to provide reliable financial reports and to detect and prevent fraud.  We periodically assess our system of internal controls to review their effectiveness and identify potential areas of improvement.  These assessments may conclude that enhancements, modifications or changes to our system of internal controls are necessary.  Performing assessments of internal controls, implementing necessary changes, and maintaining an effective internal controls process is expensive and requires considerable management attention.  Internal control systems are designed in part upon assumptions regarding the likelihood of future events, and all such systems, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. A consequence of these and other inherent limitations of control systems is that there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.  If we fail to implement and maintain an effective system of internal controls or prevent fraud, we could suffer losses, could be subject to costly litigation, investors could lose confidence in our reported financial information, and our image and operating results could be harmed, which could have a negative effect on the trading price of our common stock.

We performed an assessment of our internal controls and our assessment has identified the existence of material weakness in internal controls.  In particular, the following weaknesses in our internal control system were identified:  (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.  Due to the size and resources of our company we may not be able to remediate in the foreseeable future all of the deficiencies identified.  If we are unable to remediate the identified material weaknesses, 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.

Material weakness in our internal control over financial reporting require Validian to perform additional analyses and post-closing procedures that, if not performed effectively, may prevent Validian from reporting its financial results in an accurate and timely manner.

We may have difficulty implementing in a timely manner the internal controls procedures necessary to allow our management to report on the effectiveness of our internal controls, and we may incur substantial costs in order to comply with the requirements of the Sarbanes-Oxley Act of 2002.

19

The Sarbanes-Oxley Act of 2002 has introduced many new requirements applicable to us regarding corporate governance and financial reporting.  Among many other requirements is the requirement under Section 404 of the Act for management to report on our internal controls over financial reporting.    Although our management has begun the necessary processes and procedures for issuing its report on our internal controls, we cannot be certain that we will be successful in complying with Section 404, due to the limitations imposed by our size and resultant inadequate staffing, as is more fully described under “Item 9a.  Controls and Procedures”.  We expect to devote substantial time and to incur costs to implement appropriate controls and procedures to ensure compliance, at such time as our size permits us to do so.  If we are not able to timely comply with the requirements set forth in Section 404, we might be subject to sanctions or investigations by regulatory authorities.  Any such action could adversely affect our business and financial results.

Our Corporate History

We were incorporated in Nevada on April 12, 1989 as CCC Funding Corp. to seek out one or more potential business ventures.  On January 28, 2003, we changed our name from Sochrys.com Inc. to Validian Corporation.

Item 2.  Description of Properties.

Our Canadian office is located at 6 Gurdwara Rd., Suite 205, Ottawa, Canada, K2E 8A3. The telephone number is (613) 224-3535.  Our United States office is located at 4651 Roswell Road, Suite B-106, Atlanta, Georgia 30342, telephone number (404) 256-1963.

Our Ottawa office is leased from a non-affiliated party per oral arrangement on a month-by-month basis .  The lease provides shared access to and use of 2,500 square feet.  Our Atlanta office is leased from a non-affiliated party per oral arrangement on a month-by-month basis.  The lease provides shared access to and use of 1,000 square feet.  

Item 3.  Legal Proceedings.  .

On or around August 3, 2010, an agent of the Company was served notice of the commencement of legal action against the Company by a former consultant of the Company.  The plaintiff was seeking approximately $171,900 in unpaid fees relating to a service contract entered into by the Company and the consultant in January of 2007, plus legal and other costs.  The Company contended that Mobile Secure, Inc. had failed to deliver certain software it had contracted with the Company to develop and deliver, and consequently were not entitled to payment of the balance of the contracted amount pursuant to the contract, which set out amounts to be paid to Mobile Secure, Inc. by the Company against the achievement of pre- determined deliverables to, and testing and acceptance by, the Company.

In accordance with a settlement agreement reached by the parties in January 2013, the Company paid Mobile Secure a total of $47,500 in scheduled installments over the period from January 2013 to February 2014.  The settlement allowed the Company to reacquire certain contractual rights that it may otherwise have transferred under the prior contractual arrangements.

Item 4.  Mine Safety Disclosures

Not applicable.

20

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

(a)

Market Information -- The principal U.S. market in which our common stock, all of which are of one class, $.001 par value per share, is traded is in the over-the-counter market.  Our stock is quoted on the OTC Market QB under the symbol “VLDI”.  

The following table sets forth the range of high and low bid quotes of our common stock for the periods noted as reported by the OTC Market QB .  These quotes reflect inter-dealer prices without retail mark-up, markdown or commission and may not necessarily represent actual transactions.  

MARKET PRICE OF COMMON STOCK

	BID
Quarter Ending	High	Low
2013
January 1 to March 31	0.028	0.0056
April 1 to June 30	0.095	0.00966
July 1 to September 30	0.097	0.00385
October 1 to December 31	0.098	0.005
2014
January 1 to March 31	0.0849	0.0039
April 1 to June 30	0.06	0.0303
July 1 to September 30	0.0488	0.0242
October 1 to December 31	0.0598	0.029
2015
January 1 to March 31	0.057	0.034

On March 31, 2015, the closing price of our common stock was $0.03506 per share.

(b)

Holders -- There were approximately 232 holders of record of our common stock as of March 31, 2015, inclusive of those brokerage firms and/or clearing houses holding our securities for their clientele, with each such brokerage house and/or clearing house being considered as one holder.  The aggregate number of shares of common stock outstanding as of March 31, 2015 was 329,272,476 shares.  

(c)

Dividends -- We have not paid or declared any dividends upon our common stock since inception and, by reason of our present financial status and our contemplated financial requirements, we do not contemplate or anticipate paying any dividends in the foreseeable future (see Part I.  Item 1.  Description of Business:  Risk Factors).

(d)

Sales of Unregistered Securities--During the three months ended December 31, 2014, we issued the following:

21

*

An aggregate of 4,000,000 shares of our common stock to accredited investors on October 6 and December 29, 2015 pursuant to the terms of two advisory agreements, as payment for services;

*

An aggregate of 10,000,001 shares of our common stock to an accredited investor pursuant to the conversions on various dates between October 21 and December 29, 2014 of $213,398 in principal amount and $86,602 of accrued interest on our 10% senior convertible notes issued on various dates between June 30, 2011 and April 28, 2014 at an effective conversion rate of $0.03 per share;

*

3,339,265 shares of our common stock to an accredited investor pursuant to the conversions on October 30 and November 4 and 5, 2014 of $46,000 in principal amount and $2,120 in accrued interest on our convertible promissory notes;

*

2,900,929 shares of our common stock to an accredited investor pursuant to the conversions on November 21, 24 and 25, 2014 in settlement of  $42,500 in principal amount and $1,700 in accrued interest on our convertible promissory notes;

*

An aggregate of 340,500 shares of our common stock to accredited investors pursuant to the 10% senior convertible notes at issuance on October 1, 2014 and on December 19, 2014.

During the period from January 1 to March 31, 2015, we issued the following:  

*

An aggregate of 3,000,000 shares of our common stock to accredited investors on January 1, and March 16, 2015 pursuant to the terms of two advisory agreements, as payment for services;

*

an aggregate of 1,185,000 shares of our common stock to accredited investors pursuant to our 10% senior convertible notes, having an aggregate principal amount $395,000, which were issued on various dates between January 12, and March 9, 2015;

*

5,000,001 shares of our common stock to an accredited investor pursuant to the conversions on January 6, 8 and 19, 2015 of $150,000 in principal amount of our 10% senior convertible notes issued February 1, 2013 at an effective conversion rate of $0.03 per share;

*

6,666,668 shares of our common stock to an accredited investor pursuant to the conversions on January 28 and February 6, 18 and March 5, 2015 of $200,000 in accrued interest amount of our 10% senior convertible notes issued December 31, 2013 at an effective conversion rate of $0.03 per share;

*

2,697,440 shares of our common stock to an accredited investor pursuant to the conversions on February 23 and 24, 2015 in settlement of  $53,000 in principal amount and $2,120 in accrued interest on our convertible promissory notes;

*

200,000 shares of our common stock to an accredited investor on February 23, 2015 in settlement of $6,000 in accrued interest amount of our 10% senior convertible note issued February 23, 2013 at an effective conversion rate of $0.03 per share;

22

*

1,474,352 shares of our common stock to an accredited investor on March 2, 2015 in settlement of $44,230.56 in accrued interest amount of our convertible promissory note issued February 1, 2013 at an effective conversion rate of $0.03 per share;

*

133,333 shares of our common stock to an accredited investor on March 16, 2015 in settlement of $4,000 in accrued interest amount of our 10% senior convertible note issued March 16, 2013 at an effective conversion rate of $0.03 per share;

The foregoing securities were issued in reliance upon the exemption provided by Sections 3(a)(9) or 4(2) under the Securities Act of 1933 and the rules promulgated thereunder

Item 6.  Selected Financial Data.

The selected financial data set forth below with respect to our consolidated statements of operations and cash flows for each of the two fiscal years ended December 31, 2014 and 2013 and with respect to the consolidated balance sheets as at December 31, 2014 and 2013, are derived from our audited consolidated financial statements included in Item 8 of this report.  The following selected financial data should be read in conjunction with our consolidated financial statements and the notes thereto.

	Year Ended December 31
	2014	2013
Operations Data
Selling, general and administrative	$ 739,680	$ 1,447,993
Research and development	313,975	145,174
Depreciation of property and equipment	2,508	3,072
Other expenses, net	1,258,840	1,753,258
Net loss	$ 2,315,003	$ 3,349,497

	Year Ended December 31
	2014	2013
Cash Flows Data
Net cash used in operating activities	$ (615,719)	$ (635,234)
Net cash used in investing activities	--	(1,690)
Net cash provided by financing activities	608,733	739,398
Effects of exchange rates on cash and cash equivalents	--	(195)
Net increase (decrease) in cash and cash equivalents	$     (6,986)	$     102,279

	December 31
Balance Sheet Data	2014	2013
Cash	$         97,403	$         104,389
Total current assets	187,358	113,027
Property and equipment (net)	847	3,355
Total assets	188,205	116,382
Total current liabilities	11,470,684	11,366,696
Stockholders’ deficiency	$ (11,282,479)	$ (11,250,314)

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Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

In this section, we explain our consolidated financial condition and results of operations for the years ended December 31, 2014 and December 31, 2013. As you read this section, you may find it helpful to refer to our Consolidated Financial Statements in Item 8 of this annual report.

Until we acquired our former subsidiary, Graph-O-Logic, S.A. in August 1999, we had no material or substantive business operations.  Since then, our business has been as more fully described in " Part I, Item 1: Description of Business".  Accordingly, in this section we focus solely on the historical business operations of the subsidiary and our current business plan and operations.

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 2014 Consolidated Financial Statements included with this Annual Report on Form 10-K for the year ended December 31, 2014.  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 December 31, 2014 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 products are 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 products resulting in a change to amortization expense and impairment charges.

Stock-based compensation:

The Corporation accounts for stock-based compensation in accordance with the provisions of ASC Topic 718 ”Compensation – stock compensation”).  ASC Topic 718 requires all share-based payments, including stock options granted by the Corporation 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 Corporation 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 Corporation’s circumstances is the stated vesting period of the award.  

24

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.

Plan of Operations

We are a development stage enterprise.  As such, our historical results of operations are unlikely to provide a meaningful understanding of the activities expected to take place during the period through December 31, 2015.  Our major initiatives through December 31, 2015 are:

*

obtaining commercial sales of our products, and continuing our current marketing program;

*

developing and improving product agents to perform specialized functions common to many e-commerce sites and m-commerce; and

*

furthering the development of our products.

For more information, please see “Part 1. Item 1: Description of Business – Our Technology.”

Sales and Marketing Plans:  We will continue our marketing process with our focus being potential customers located in North America, Europe, and Asia Pacific.  The potential customers and our current marketing program are more fully described in “Part 1. Item 1: Description of Business - Target Market.”  

We will continue to focus our marketing efforts on identifying potential customers by presenting technical seminars, participating in trade shows, using the services of public relations firms, market research, the creation and dissemination of technical and commercial collateral materials, the maintenance and periodic re-design of our website, and the placement of advertisements in print and electronic publications.  Subject to our ability to obtain adequate funding, we plan on spending $30,000 on our marketing efforts during the year ending December 31, 2015.

Our sales representatives, who are compensated on a base compensation plus commission basis, will follow up with potential customers identified through our marketing efforts, with the objective of more fully explaining the benefits of our products and negotiating the terms of the licensing of our products.  Subject to our ability to obtain adequate funding, we expect to spend approximately $90,000 on our sales initiatives, including compensation and travel expenses, during the year ending December 31, 2015.  

Subject to our ability to obtain adequate funding, our sales and marketing expenditures for the year ending December 31, 2015 are expected to total $120,000.

Cost of Sales and Services:  In the event that our sales efforts are successful, we will need to assist our customers in the implementation of our products.  Depending on the success of our sales efforts, and subject to our ability to obtain adequate funding, we expect to spend $10,000 on training and related activities during the year ending December 31, 2015.

Product Development:  We plan on continuing to fund third parties to develop our key technology and related products, under the direction and management of our product management group and our senior management.  For more information please see “Part 1.  Item 1.  Description of Business - Our Technology”.

25

We will improve and further develop our products based on responses from potential customers.  The costs associated with our product development activities are primarily those currently planned and thus are subject to a high degree of control.  Subject to our ability to obtain adequate funding, we estimate that the cost of our product development program during the year ending December 31, 2015 will be $480,000.

General and Administrative Expenses:  Subject to our ability to obtain adequate funding, we expect to spend $260,000 on general and administrative activities during the year ending December 31, 2015.

In summary, provided we are able to obtain adequate funding, we expect to spend a total of $870,000 for all expenses during the year ending December 31, 2015, subject to our ability to generate revenues from the licensing of our products and our ability to raise additional capital.

Since entering the development stage, we have obtained financing through the private placement of debt, convertible debentures, common stock and warrants, and through the exercise of some of these warrants.     Until such time as we generate sufficient revenues from the licensing of our software applications, we will continue to be dependent on raising substantial amounts of additional capital through any one or a combination of debt offerings or equity offerings, including but not limited to:

*

debt instruments, including demand notes and convertible notes similar to those discussed below in “Liquidity and Capital Resources”;

*

private placements of common stock;

*

exercise of stock options at a weighted average exercise price of $0.04 per share; or

*

funding from potential clientele or future industry partners.

Results of Operations

In this section, we discuss our operations for the periods indicated and the factors affecting them that resulted in changes from one period to the other.

The fiscal year ended December 31, 2014 compared to the fiscal year ended December 31, 2013

Revenue:  On January 1, 2006 we entered into an agreement with a Value Added Reseller (“VAR”), pursuant to which we granted the VAR a license to sell our software to the VAR’s customers for a period of three years.  As a result of subsequent delays in completing certain of our software products to a market ready stage, and in consideration of the general market decline during 2009, we have agreed to extend the expiry of this agreement, with terms to be negotiated upon completion of our current development initiatives.  Our fee for this license, excluding applicable sales taxes, was $155,000, of which $151,650 has been collected.  We will recognize revenue in connection with this sale once all of the criteria required for us to do so as set out in our accounting policies, have been met.

During the year ended December 31, 2010, we entered into an agreement with a VAR, pursuant to which we granted the VAR a license to sell our software to the VAR’s customers for a period of one year.  A nonrefundable deposit of $165,000 was received in connection with this contract; revenue will be recognized under this contract as the conditions for recognizing revenue as set out in our accounting policies have been met.

We did not make any commercial sales during the year ended December 31, 2014.

26

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, occupancy costs and other miscellaneous costs associated with supporting our research and development, sales and marketing and investor relations activities.  During the year ended December 31, 2014 we incurred a total of $739,680, as compared to $1,447,993, during the year ended December 31, 2013.  There was an overall decrease in selling, general and administrative expenses of $708,313 (49%).

The decrease in selling, general and administrative expenses occurred primarily as a result of a decrease in stock-based fees paid to consultants engaged in our investor relations activities.  We also granted 1,000,000 shares of our common stock as a bonus to a sales consultant during 2013; there was no comparable transaction during the year ended December 31, 2014.

We have made efforts to reduce these costs wherever possible, through measures such as reducing the number of personnel, reducing our occupancy costs, postponing our Annual General Meeting, reducing the number of trade shows in which we participate, reducing travel costs, and delaying production of new promotional material.  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, consulting fees and travel expenses directly associated with the development of our software applications.  During the year ended December 31, 2014, we spent $313,975 developing our software applications, compared to $145,174 during the year ended December 31, 2013.  There was an overall increase in research and development expenses of $168,801 (116%).

During the first quarter of the year ended December 31, 2014, we evaluated the development options and identified the methodology and skill sets required to enable the next version of our software server component and client component of our software to function on the latest Android mobile operating systems as well as the three other major mobile operating systems.  We determined that we would need to engage additional consultants in order to have the breadth of skill sets required for this next level of our software development, and we succeeded in engaging a qualified consulting team to assist with the design and commence development during the first quarter. We completed work with this team during April and then engaged two additional qualified consulting development teams as of mid-May.

During the period from May 13 to September 30, 2014, we completed development of Version 3.0 of the Validian Core Technology Platform supporting eight encryption algorithms and most addressing configurations, which was an upgrade to extend our platform to secure mobile applications using Android mobile operating systems. Development also included a Java for Android API that enables application developers to use Java for Android to integrate Version 3.0 with their existing or new mobile applications, noting that a significant number of mobile applications are developed using Java. Migration of the client component to the other three main operating systems was also started.  

27

During the period from October 1 to December 31, 2014, we did extensive testing of the Version 3.0 server component and client component to identify and fix bugs and to stabilize the server and client components. Since Android Studio had just been recently released by Google, we also completed an Android Studio API, that enables application developers to use Android Studio to integrate Version 3.0 with their existing or new mobile applications that work on the various versions of the Android mobile operating system.

We also continued the research, architecture and design of the client component to extend support to 26 encryption algorithms and to all addressing configurations.

The development work undertaken during the year ended December 31, 2013 was focused primarily on extending to web and non-mobile platforms, addressing “bugs” and deficiencies in earlier versions of our software in response to our internal testing and feedback from evaluation installations of our software products, which involved fewer resources than the development initiatives undertaken during the year ended December 31, 2014, which is the primary reason for the increase in these costs during 2014 as compared with 2013.

Depreciation of property and equipment: Depreciation of property and equipment was $2,508 during the year ended December 31, 2014, a decrease of $564 (18%), from the $3,072 charged to depreciation expense during the year ended December 31, 2013.  Some of our capital assets became fully depreciated during the year ended December 31, 2013, which eliminated the periodic depreciation charges associated with those assets, resulting in a reduction in expense year-to-year.

Interest and financing costs:  Interest and financing costs during the year ended December 31, 2014 and during the year ended December 31, 2013 consisted of interest and financing costs associated with our 10% senior convertible notes, our convertible promissory notes, and our promissory notes.  During the year ended December 31, 2014, we incurred $1,361,498 in interest and financing costs, a decrease of $582,191 (30%) over the $1,943,689 in interest and financing costs incurred during the year ended December 31, 2013.  

The $1,361,498 in interest and financing costs we incurred during the year ended December 31, 2014 is comprised of $746,842 of interest paid and payable to the holders of our debt; $500,665 of accretion on our 10% senior convertible notes and convertible promissory notes; $95,374 in stock-based fees relating to the modification of the terms of the 10% senior convertible notes; and $18,617 of financing costs.  The $1,943,689 in interest and financing costs we incurred during the year ended December 31, 2013 is comprised of $793,531 of interest paid and payable to the holders of our debt; $1,136,958 of accretion on our 10% senior convertible notes and convertible promissory notes; and $13,200 of financing costs.  

Aggregate interest and financing costs decreased by $582,191 (30%) during the year ended December 31, 2014 as compared with the year ended December 31, 2013. There was a decrease of $46,689 (6%) in coupon rate interest charges, which occurred primarily as a result of an overall decrease of $224,698 in the principal balance of interest-bearing notes during the year, which resulted in lower average balances on which coupon interest was charged. We also incurred $23,840 in prepayment bonus in accordance with the prepayment provision on our convertible promissory notes during 2014, a decrease of $37,010 (61%) from the $60,850 in prepayment bonus we incurred during 2013.  

Charges to interest as a result of accretion decreased by $636,293 (56%), as a result of the equity components of notes issued during 2014 having a lower relative fair value than those issued during 2013.  

28

During the year ended December 31, 2014 we issued shares of our common stock as compensation for the modification of certain of our 10% senior convertible notes.  The fair value of the shares issued was $95,374, which was charged to interest and financing costs during the year.  There was no comparable transaction during the year ended December 31, 2013.

Financing costs relate to our convertible promissory notes, and are deferred at issuance and amortized over the life of the note.  During the year ended December 31, 2014, we paid $26,500 in finance costs on new notes issued, as compared with $14,000 paid on new notes issued during the year ended December 31, 2013.  Financing costs recognized as expense through periodic amortization charges increased by $5,417 (41%) during the year ended December 31, 2014 as compared with the year ended December 31, 2013.

Gain on extinguishment of debt and accrued liabilities:  During the year ended December 31, 2013, we recognized a net loss of $67,544 on the issuance of an aggregate of 3,465,287 shares of our common stock in settlement of an aggregate of $123,500 in accounts payable and accrued liabilities.  Also during the year ended December 31, 2013, the Corporation settled stock-based remuneration for 2,081,953 shares less than the number of shares issuable pursuant to the contract terms; a gain of $174,676 was recognized on this settlement.  There were no comparable transactions during the year ended December 31, 2014.

Other income (expense):  Other income (expense) is comprised of realized and unrealized gains and losses on foreign currency translations, the majority of which relate to accounts payable and accrued liabilities, and obligations under our promissory notes, denominated in Canadian dollars.  During the years ended December 31, 2014 and December 31, 2013, the Canadian dollar lost strength in relation to the United States dollar, resulting in net gains of $102,658 and $83,299, respectively, on foreign currency translations.  

Net loss: We incurred a loss of $2,315,003 ($0.01 per share) for the year ended December 31, 2014, compared to a loss of $3,349,497 ($0.02 per share) for the year ended December 31, 2013.   Our revenues and future profitability and future rate of growth are substantially dependent on our ability to:

*

license the 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 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.  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.

29

Our cash and cash equivalents decreased by $6,986 during the year ended December 31, 2014, from a balance of $104,389 at December 31, 2013, to $97,403 at December 31, 2014, primarily as a result of our net loss of $2,315,003 for the year, which resulted in net cash used in operations of $615,719.  This decrease in cash was substantially offset by our financing activities, which generated $608,733 from the issuance of 10% senior convertible notes and convertible promissory notes, net of repayments and finance fees relating to these notes, and the repayment of our promissory notes.  Our cash and cash equivalents increased by $102,279 during the year ended December 31, 2013, from a balance of $2,110 at December 31, 2012, to $104,389 at December 31, 2013, primarily as a result of our financing activities, which generated $739,398 in net cash proceeds from the issuance of our promissory notes, 10% senior convertible notes and convertible promissory notes, net of repayments and finance fees.  This increase in cash was substantially offset by our net loss of $3,349,497 for the year, which resulted in net cash used in operations of $635,234.

As discussed elsewhere in this report, we have added an explanatory paragraph to our consolidated financial statements for the year ended December 31, 2014.  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, and our accumulated deficit, raise substantial doubt regarding our ability to continue as a going concern.  At December 31, 2014, we had negative working capital of $11,283,326 and an accumulated deficit of $44,974,810; we incurred a net loss of $2,315,003, and negative cash flow from operations of $615,719 for the year then ended; and note 2(a) to our consolidated financial statements for the year ended December 31, 2014 also discusses the continuing substantial doubt regarding our ability to continue as a going concern.

We anticipate commercial sales during the second or third quarter of 2015, however we cannot be assured that this will be the case.  During the year ended December 31, 2014, we terminated our engagement with two consultants, pursuant to the terms of the related contract; we did not hire any new employees.  We do not expect to hire any additional personnel during the next six months unless we are successful in raising significant funds through the issuance of our debt or equity securities.  We have not made, nor do we 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.  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 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 sales 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 made an effort to keep our expenses relatively low and conserve available cash until we begin generating sufficient operating cash flow.

30

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 year ended December 31, 2014, we issued $262,822, net of repayments, of our 10% senior convertible notes, and $357,000, net of finance fees and repayments, in convertible promissory notes, which generated cash for funding operations.  We also issued $13,500 of our 10% senior convertible notes in settlement of accounts payable; 26,767,580 shares of our common stock in settlement of 10% senior convertible notes and accrued interest thereon; and 16,666,751 shares of our common stock in settlement of our convertible promissory notes and accrued interest thereon, all of which reduced the cash which would otherwise have been required to settle these liabilities.  We issued 907,000 shares of our common stock pursuant to the terms of 10% senior convertible notes issued during the year, which reduced the rate of coupon interest which would otherwise have been reflected in these transactions.  In addition to these financing activities, we issued an aggregate of 11,500,000 shares of our common stock to consultants as consideration for services rendered and to be rendered, which reduced the amount of cash which would otherwise be required to engage these personnel.

During the period from January 1 to March 31, 2015, we issued $182,237, net of repayments, of our 10% senior convertible notes.  We also issued $100,000, net of finance fees, of our convertible promissory notes, and prepaid $96,000 of convertible promissory notes and $46,860 in accrued interest and bonus interest thereon.  Aggregate net proceeds of $139,377 from the issuance and repayment of our notes were used to fund operations.  In connection with these financing transactions, we issued 1,185,000 shares of our common stock to the holders of the notes, which reduced the rate of coupon interest which would otherwise have been required.  Additionally, we issued 11,666,669 shares of our common stock to holders of our 10% senior convertible notes on conversion of the notes and accrued interest thereon; 1,807,685 shares in settlement of accrued interest on the 10% senior convertible notes; and 2,697,440 shares to holders of our convertible promissory notes on conversion of the notes and accrued interest thereon, all of which reduced the cash which would otherwise have been required to settle these liabilities.  We also issued an aggregate of 3,000,000 shares of our common stock to consultants as consideration for services rendered and to be rendered, which reduced the amount of cash which would otherwise have been required to engage these personnel.

The Corporation has not entered into any off-balance sheet arrangement which would have provided the Corporation with a source of capital.

Uses of Capital:  Over the past several years, we have scaled our development activities to the level of available cash resources.  Research and development expenses for the year ended December 31, 2014 increased by approximately 116% as compared to the year ended December 31, 2013.  Selling, general and administrative expenses for the year ended December 31, 2014 decreased by approximately 49% as compared to the year ended December 31, 2013.  The changes in these expenses occurred as a result of several factors, as explained under “Results of Operation.”

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.

The cost to implement appropriate controls and procedures to ensure compliance with Section 404 of the Act is included in our budget for 2015.

Commitments:  We are not currently a party to any operating lease agreement, nor do we have any contingent liabilities.  

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Item 8. Financial Statements.

Consolidated Financial Statements of

VALIDIAN CORPORATION

Years ended December 31, 2014 and 2013

32

PCAOB Registered Auditors – www.sealebeers.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Validian Corporation

We have audited the accompanying balance sheets of Validian Corporation as of December 31, 2013 and 2014, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2014. Validian Corporation’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Validian Corporation as of December 31, 2013 and 2014, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company has no revenues, has negative working capital at December 31, 2014, and has incurred recurring losses and recurring negative cash flow from operating activities, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Seale and Beers, CPAs

Seale and Beers, CPAs

Las Vegas, Nevada

April 15, 2015

33

VALIDIAN CORPORATION Consolidated Balance Sheets December 31, 2014 and 2013 (In U.S. dollars)
	2014	2013
Assets
Current assets:
Cash and cash equivalents	$      97,403	$     104,389
Value added taxes recoverable	34,955	8,638
Prepaid expenses	55,000	–
Total current assets	187,358	113,027
Property and equipment (note 3)	847	3,355
Total assets	$     188,205	$     116,382
Liabilities and Stockholders’ Deficiency
Current liabilities:
Accounts payable	$    341,374	$    381,526
Accrued liabilities	3,638,325	3,091,574
Accrued interest on 10% notes payable to related parties (note 11)	306,564	244,252
Deferred revenue	320,000	320,000
Promissory notes payable (note 4)	46,250	51,350
Promissory notes payable to related parties (notes 4 and 11)	–	5,989
10% Senior convertible notes (note 5)	6,182,441	6,593,050
10% Senior convertible notes payable to related parties (notes 5 and 11)	623,445	631,945
Convertible promissory notes (note 6)	12,285	47,010
Total current liabilities	11,470,684	11,366,696
Total liabilities	11,470,684	11,366,696
Stockholders’ deficiency:
Preferred stock ($0.001 par value.  Authorized 50,000,000
shares; issued and outstanding Nil shares in 2014
and 2013)	–	–
Common stock ($0.001 par value.  Authorized 700,000,000 shares in 2014
and in 2013; Issued and outstanding 308,915,682 shares
in 2014 and 251,023,302 shares in 2013 (note 7(a))	308,916	251,023
Additional paid-in capital	33,433,153	31,208,208
Deficit	(44,974,810)	(42,659,807)
Treasury stock (7,000 shares in 2014 and 2013 at cost)	(49,738)	(49,738)
Net stockholders’ deficiency	(11,282,479)	(11,250,314)
Future operations (note 2(a))
Guarantees and commitments (note 12)
Subsequent events (note 17)
Total liabilities and stockholders deficiency	$     188,205	$     116,382

See accompanying notes to consolidated financial statements

34

VALIDIAN CORPORATION Consolidated Statements of Operations Years ended December 31, 2014 and 2013 (In U.S. dollars)
	2014	2013
Expenses:
Selling, general and administrative	$    739,680	$    1,447,993
Research and development	313,975	145,174
Depreciation of property and equipment	2,508	3,072
Total Expenses	1,056,163	1,596,239
Loss before the undernoted	(1,056,163)	(1,596,239)
Other income (expenses):
Gain on extinguishment of debt and accrued
liabilities (note 9)	-	107,132
Interest and financing costs (notes 9 and 11)	(1,361,498)	(1,943,689)
Other	102,658	83,299
Total other income (expenses)	(1,258,840)	(1,753,258)
Net loss	$(2,315,003)	$(3,349,497)
Loss per common share – basic
and diluted (note 10)	$(0.01)	$(0.02)
Weighted average number of common shares
outstanding	271,695,680	214,045,458

See accompanying notes to consolidated financial statements.

35

VALIDIAN CORPORATION Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) Years ended December 31, 2013 and 2014 (In U.S. dollars)
	Number	Common  stock amount	Additional paid-in capital	Deficit	Treasury stock	Total
Balances at December 31,
2012	184,399,565	$184,400	$28,291,884	$(39,310,310)	$(49,738)	$(10,883,764)
Shares issued pursuant to the
terms of the 10% senior
convertible notes at issuance
(note 5)	7,989,993	7,990	211,789	–	–	219,779
Intrinsic value of the beneficial
conversion feature of the
10% senior convertible notes
at date of issuance  (note 5)	–	–	765,217	–	–	765,217
Shares issued as partial
consideration for consulting
services rendered and to be
rendered (note 7(a) )	14,251,380	14,251	736,039	–	–	750,290
Shares issued in settlement
of accounts payable and
accrued liabilities (note 7(a) )	3,465,287	3,465	187,579	–	–	191,044
Shares issued in connection
with the conversion of 10%
senior convertible notes
(note 7(a))	26,245,039	26,245	761,106	–	–	787,351
Shares issued in settlement
of accrued interest on the
10% senior convertible
notes (note 7(a))	1,511,997	1,512	43,848	–	–	45,360
Shares issued in connection
with the conversion of
convertible promissory notes
(note 7(a) )	13,160,041	13,160	59,640	–	–	72,800
Intrinsic value of the beneficial
conversion feature of the
Convertible promissory notes
at date of issuance  (note 6 )	--	--	151,106	--	--	151,106
Net loss	–	–	–	(3,349,497)	–	(3,349,497)
Balances at December 31,
2013	251,023,302	$251,023	$31,208,208	$(42,659,807)	$(49,738)	$(11,250,314)

36

VALIDIAN CORPORATION Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) Years ended December 31, 2013 and 2014 (In U.S. dollars)
	Number	Common  stock amount	Additional paid-in capital	Deficit	Treasury stock	Total
Balances at December 31,
2013	251,023,302	$251,023	$31,208,208	$(42,659,807)	$(49,738)	$(11,250,314)
Shares issued pursuant to the
terms of the 10% senior
convertible notes at issuance
(note 5)	907,000	907	35,865	–	–	36,772
Intrinsic value of the beneficial
conversion feature of the
10% senior convertible notes
at date of issuance  (note 5)	–	–	190,144	–	–	190,144
Shares issued as partial
consideration for consulting
services rendered and to be
rendered (note 7(a) )	11,500,000	11,500	451,350	–	–	462,850
Shares issued in connection
with the conversion of 10%
senior convertible notes
and accrued interest thereon
(note 7(a))	26,767,580	26,768	776,259	–	–	803,027
Shares issued in connection
the modification of the terms
of the 10% senior
convertible notes (note 7(a))	2,051,049	2,051	93,323	–	–	95,374
Shares issued in connection
with the conversion of
convertible promissory notes
and accrued interest
thereon(note 7(a) )	16,666,751	16,667	258,413	–	–	275,080
Intrinsic value of the beneficial
conversion feature of the
Convertible promissory notes
at date of issuance  (note 6 )	--	--	419,591	--	--	419,591
Net loss	–	–	–	(2,315,003)	–	(2,315,003)
Balances at December 31,
2014	308,915,682	$308,916	$33,433,153	$(44,974,810)	$(49,738)	$(11,282,479)

37

VALIDIAN CORPORATION Consolidated Statements of Cash Flows Years ended December 31, 2014 and 2013 (In U.S. dollars)
	2014	2013
Cash flows from operating activities:
Net loss	$   (2,315,003)	$     (3,349,497)
Items not involving cash:
Depreciation of property and equipment	2,508	3,072
Stock-based compensation expense (note 7(c))	407,850	924,967
Non-cash interest expense	1,310,411	1,876,444
Gain on extinguishment of debt and accrued  liabilities	–	(107,132)
Change in non-cash operating working
capital (note 15)	(21,485)	16,912
Net cash used in operating activities	(615,719)	(635,234)
Cash flows from investing activities:
Additions to property and equipment	–	(1,690)
Net cash used in investing activities	–	(1,690)
Cash flows from financing activities:
Issuance of promissory notes	–	23,156
Issuance of 10% senior convertible notes	289,000	732,500
Debt issuance costs	(26,500)	(14,000)
Repayment of promissory notes	(11,089)	(58,630)
Issuance of convertible promissory notes	436,500	234,000
Repayment of 10% senior convertible notes	(26,178)	(49,628)
Repayment of convertible promissory notes	(53,000)	(128,000)
Net cash provided by financing activities	608,733	739,398
Effects of exchange rates on cash and cash equivalents	–	(195)
Net increase (decrease) in cash and cash equivalents	(6,986)	102,279
Cash and cash equivalents, beginning of period	104,389	2,110
Cash and cash equivalents, end of period	$          97,403	$     104,389

Supplementary information (note 16)

See accompanying notes to consolidated financial statements.

38

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

1.

General:

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

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

2.

Summary of significant accounting policies:

(a)

Future operations:

The consolidated financial statements have been prepared assuming that the Corporation will continue as a going concern.  The Corporation has no revenues, has negative working capital of $11,283,326, has accumulated a deficit of $44,974,810 as at December 31, 2014, and has incurred a loss of $2,315,003 and negative cash flow from operations of $615,719 for the year then ended.  Furthermore, the Corporation failed to settle certain of its promissory notes and 10% senior convertible notes when they matured on various dates during the years 2007 through 2014, resulting in a condition of default for all of the 10% senior convertible notes and $36,250 of the promissory notes; a significant portion of these notes remain in default as at December 31, 2014.  In addition, the Corporation expects to continue to incur operating losses for the foreseeable future, and has no lines of credit or other financing facilities in place.  

If the Corporation obtains further financing and generates revenue, it expects to incur operating expenditures of approximately $725,000 for the year ending December 31, 2015. In the event the Corporation cannot raise the 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 Corporation’s ability to continue as a going concern.  Management’s plans to address these issues include raising capital through the private placement of equity, the exercise of previously-issued equity instruments and through the issuance of additional promissory notes and convertible notes.  

The Corporation’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 Corporation’s position and or results of operations and could also result in the Corporation’s 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 Corporation 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 Corporation’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 Corporation.

39

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

2.

Summary of significant accounting policies (continued):

(b)

Principles of consolidation:

These consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America and include the accounts of Validian Corporation and its wholly-owned subsidiaries, Sochrys Technologies Inc. and Evolusys S.A.  All intercompany balances and transactions have been eliminated.

(c)

Cash and cash equivalents:

Cash and cash equivalents include liquid investments with original maturity dates of three months or less.

(d)

Property and equipment:

Property and equipment is stated at cost less accumulated depreciation, and includes computer hardware and software.  These assets are being depreciated on a straight-line basis over their estimated useful lives, as follows:  computer hardware:  3 years; computer software:  1 year.

(e)

Leases:

Leases are classified as either capital or operating in nature.  Capital leases are those which substantially transfer the benefits and risk of ownership to the Corporation.  Assets acquired under capital leases are depreciated as described in note 1(d).  Obligations recorded under capital leases are reduced by the principal portion of lease payments.  The imputed interest portion of lease payments is charged to expense.

(f)

Prepaid expenses:

Prepaid consulting fees related to services to be rendered within twelve months from the balance sheet date are included in prepaid expenses.  These costs are charged to expenses as the services are rendered.  If for any reason circumstances arise which would indicate that the services will not be performed in the future, any remaining balance included in prepaid expenses will be charged to expense immediately.

(g)

Income taxes:

Deferred income taxes are determined using the asset and liability method, whereby deferred income tax is recognized based on temporary differences using enacted tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Temporary differences between the carrying values of assets or liabilities used for tax purposes and those used for financial reporting purposes arise in one period and reverse in one or more subsequent periods.  In assessing the realizability of deferred tax assets, management considers known and anticipated factors impacting whether some portion or all of the deferred tax assets will not be realized.  To the extent that the realization of deferred tax assets is not considered to be more likely than not, a valuation allowance is provided.

40

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

2.

Summary of significant accounting policies (continued):

(h)

Revenue recognition:

Revenue from sale of product licenses is recognized when all of the following criteria are met:  persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is probable.

Revenue from product support contracts is recognized ratably over the life of the contract.  Revenue from services is recognized at the time such services are rendered.

For contracts with multiple elements such as product licenses, product support and services, the Corporation follows the residual method.  Under this method, the total fair value of the undelivered elements of the contract, as indicated by vendor specific objective evidence, is deferred and subsequently recognized when all criteria for recognizing revenue have been met.  The difference between the total contract fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements.  Vendor specific objective evidence for support and consulting services is obtained from contracts where these elements have been sold separately.  Where the Corporation cannot determine the fair value of all of the undelivered elements, revenue is deferred until such time as it can be determined, or until all of the elements are delivered.

Revenues that have been prepaid but for which all elements have not been delivered, are reflected as deferred revenue on the consolidated balance sheet.

(i)

Research and development:

Costs related to research, design and development of software products are charged to research and development expenses as incurred unless they meet the generally accepted criteria for deferral and amortization.  Software development costs incurred prior to the establishment of technological feasibility do not meet these criteria and are expensed as incurred.  To date the Corporation has not capitalized any software development costs.  

(j)

Advertising expense:

Advertising costs are expensed upon the start of the scheduled advertising.  

(k)

Foreign currency translation:

The functional currency for the financial statements of the Corporation is the United States dollar.  Exchange gains or losses are realized due to differences in the exchange rate at the transaction date versus the rate in effect at the settlement or balance sheet date.  Exchange gains and losses are recorded in the statement of operations.

41

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

2.

Summary of significant accounting policies (continued):

(l) Stock-based compensation:

The Corporation accounts for stock-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – stock compensation” (ASC Topic 718).  ASC Topic 718 requires all share-based payments, including stock options granted by the Corporation 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 Corporation 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 Corporation’s circumstances is the stated vesting period of the award.

In adopting ASC Topic 718, the Corporation applied the modified-prospective transition method.  Under this method, the Corporation has recognized compensation costs for all share-based payments granted, modified, or settled after January 1, 2006, as well as for any awards that were granted prior to January 1, 2006 for which the requisite service had not been provided as of that date (unvested awards).  

(m) Impairment or disposal of long-lived assets:

The Corporation accounts for long-lived assets in accordance with ASC Topic 360-10 “Impairment or disposal of long-lived assets”.  This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

(n) Use of estimates:

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results may differ from those estimates.  Significant management estimates include assumptions used in estimating the fair value of convertible notes issued with common stock.                   

(o) Accounting for uncertainty in income taxes:

The Corporation does not recognize adjustments in the liability for unrecognized income tax benefits.  As of December 31, 2014, the Corporation had approximately $10,450,000 of unrecognized tax benefits, all of which would affect the Corporation’s effective tax rate if recognized.

42

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

3.

Property and equipment:

			2014
		Accumulated	Net book
	Cost	depreciation	value
Computer hardware and software	$     34,590	$   33,743	$    847
	$     34,590	$   33,743	$    847
			2013
		Accumulated	Net book
	Cost	depreciation	value
Computer hardware and software	$     34,590	$   31,235	$    3,355
	$     34,590	$   31,235	$    3,355

4.

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 years ended December 31, 2014 and 2013:

	2014	2013
Balance at beginning of year	$  57,339	$  93,008
Notes issued during the year	--	23,156
Principal repaid	(11,089)	(58,630)
Adjustment for foreign currency translation	--	(195)
Balance at end of year	$  46,250	$  57,339
Payable to related parties (note 13)	--	5,989
	$  46,250	$  51,350

The promissory notes are due on demand, bear interest at 12%, and are unsecured.

Included in interest and financing costs for the year ended December 31, 2014 is $6,319 (2013: $9,270) of interest on the promissory notes.  Interest on the promissory notes paid in cash during the year ended December 31, 2014 was $2,293 (2013:  $3,531).  

43

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

5.

10% Senior convertible notes:

The following table sets forth the financial statement presentation of the 10% senior convertible note proceeds on issuance, and the changes in the financial statement presentation of the balance allocated to the notes as at and for the years ended December 31, 2014 and 2013:

	2014	2013
Balance at beginning of year	$     7,224,995	$     6,896,749
Note principal on issuance	302,500	1,965,090
Allocated to common stock and additional paid-in capital for
market value of stock issued to holders of the notes:
Allocated to common stock	(907)	(7,990)
Allocated to additional paid-in capital	(35,865)	(211,789)
	(36,772)	(219,779)
Allocated to additional paid-in capital for the intrinsic value of the
beneficial conversion feature	(190,144)	(765,217)
Proceeds allocated to 10% senior convertible notes on issuance	75,584	980,094
Accretion recorded as a charge to interest and financing costs	226,916	984,996
Principal repayments in cash	(26,178)	(49,628)
Principal converted pursuant to the terms of the note	(695,431)	(446,667)
Principal matured and settled through the issuance of new notes	--	(1,140,549)
Balance at end of year	6,805,886	7,224,995
Payable to related parties (note 13)	(623,445)	(631,945)
	$ 6,182,441	$ 6,593,050

During the year ended December 31, 2014, the Corporation issued an aggregate of $302,500 of its 10% senior convertible notes, and settled an aggregate of $721,609 of these notes.  $289,000 of the notes issued during the year, were issued for cash; $13,500 of the notes were issued in settlement of $13,500 in accounts payable.During the year, holders of the notes exercised the conversion feature and converted $695,431 in principal, plus $107,596 in accrued interest thereon, into 26,767,580 common shares of the Corporation’s common stock; and $26,178 in principal of the notes, and $22,794 in accrued interest thereon, was repaid in cash.  Also during the year ended December 31, 2014, 2,051,049 shares, with a fair value of $95,374, were issued to holders of the notes as compensation for the extension of the maturity date of the notes from December 31, 2014 to December 31, 2015.

Under the terms of the notes issued during the year ended December 31, 2014, the holders are permitted, at any time, to convert all or a portion of the outstanding principal plus accrued interest thereon into common stock of the company, at a rate of one common share for each $0.03 of debt converted.  The Corporation 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 Corporation or converted by the holders.  At the Corporation’s option, interest may be paid either in cash or in common shares of the Corporation.  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.  $260,000 of the notes are payable on demand; $42,500 of the notes mature on December 31, 2015.

Notwithstanding the stated maturity dates, all of the notes issued during the year ended December 31, 2014 are payable on demand, pursuant to the default provisions of the notes, as described below.

Holders of the notes issued during the year ended December 31, 2014 were granted 907,000 common shares of the Corporation upon issuance of the notes; $36,772, representing the relative fair value of the common

shares at the issuance date, was allocated to the common shares par value and additional paid in capital.

44

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

5.

10% Senior convertible notes (continued):

At the date of issuance, the conversion feature of the notes issued during the year ended December 31, 2014 was in-the-money.  $190,144, representing the relative fair value of the beneficial conversion feature, was allocated to additional paid in capital.

The Corporation 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, 2014.  At December 31, 2014, 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 December 31, 2014, 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.

During the year ended December 31, 2013, the Corporation issued an aggregate of $1,965,090 of its 10% senior convertible notes, and settled an aggregate of $1,636,844 of these notes.  $732,500 of the notes issued during the year, were issued for cash; $26,000 of the notes were issued in settlement of $26,000 in accounts payable; and $1,206,590 of the notes were issued as consideration for the repayment of $1,140,549 in previously issued 10% senior convertible notes, and $66,041 in accrued interest thereon. During this period the Company settled $45,360 in accrued interest on the 10% senior convertible notes through the issuance of 1,511,997 shares of the Company’s common stock; holders of the notes exercised the conversion feature and converted $446,667 in principal, plus $340,684 in accrued interest thereon, into 26,245,039 common shares of the Company’s common stock; and $49,628 in principal of the notes was repaid in cash.

Under the terms of the notes issued during the year ended December 31, 2013, the holders are permitted, at any time, to convert all or a portion of the outstanding principal plus accrued interest thereon into common stock of the company, at a rate of one common share for each $0.03 of debt converted.  The Corporation 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 Corporation or converted by the holders.  At the Corporation’s option, interest may be paid either in cash or in common shares of the Corporation.  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.  $637,900 of the notes are payable on demand; $1,327,190 of the notes mature on December 31, 2014.

Notwithstanding the stated maturity dates, all of the notes issued during the year ended December 31, 2013 are payable on demand, pursuant to the default provisions of the notes, as described below.

Holders of the notes issued during the year ended December 31, 2013 were granted 7,989,993 common shares of the Corporation upon issuance of the notes; $219,779, representing the relative fair value of the common

shares at the issuance date, was allocated to the common shares par value and additional paid in capital.

At the date of issuance, the conversion feature of $1,060,158 of the notes was in-the-money.  $765,217, representing the relative fair value of the beneficial conversion feature, was allocated to additional paid in capital.

45

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

5.

10% Senior convertible notes (continued):

The following table summarizes information regarding the 10% senior convertible notes outstanding at December 31, 2014:

Note	Conversion
Principal	Rate
$  5,794,380	$ 0.030
511,506	0.038
500,000	0.100
$  6,805,886

The maximum number of shares issuable on conversion of all 10% senior convertible notes outstanding at December 31, 2014 was 211,606,662.  Interest is payable in stock or in cash, at the discretion of the Corporation, therefore the potential conversion of the interest portion has not been included in our calculated issuance requirement (note 9(a)).

At December 31, 2014, $2,835,025 of the 10% senior convertible notes were secured by a first position lien on all of the assets of the Corporation; the remaining $3,970,861 were unsecured.  As a result of the event of default noted above, holders of the secured notes have the right to exercise their lien on all of the assets of the Corporation.

Included in interest and financing costs for the year ended December 31, 2014 is $701,261 (2013: $716,392) in coupon rate interest accrued on the 10% senior convertible notes; $226,916, (2013: $984,994) in accretion related to the relative fair value of the equity components of the 10% senior convertible notes at issuance; and.$95,374 (2013: $nil) representing the fair value of 2,051,049 of the Corporation’s common shares issued to holders of the notes as compensation for extending the maturity date of the notes.

At December 31, 2014, the fair value of the stock issuable to fully convert the 10% senior convertible note principal, was $9,839,710, which exceeds the principal amount of the notes by $3,033,823.

6.  Convertible promissory notes:

During the year ended December 31, 2014, the Corporation issued $436,500 of its convertible promissory notes for cash.  

$63,000 of the notes issued during the year ended December 31, 2014 had a maturity date of October 29, 2014, and could be prepaid during the period from issuance to July 25, 2014, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at July 25, 2014 or thereafter, into common stock of the Company.  

$53,000 of the notes issued during the year ended December 31, 2014 had a maturity date of December 18, 2014, and could be prepaid during the period from issuance to September 9, 2014, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at September 9, 2014, or thereafter, into common stock of the Company.  .

46

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

6.  Convertible promissory notes (continued):

$53,000 of the notes of the notes issued during the year ended December 31, 2014 matured on January 22, 2015 and could be prepaid during the period from issuance to October 15, 2014, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which is unpaid at October 15, 2014, or thereafter, into common stock of the Company.  

$42,500 of the notes of the notes issued during the year ended December 31, 2014 matured on February 19, 2015, and could be prepaid during the period from issuance to November 11, 2014, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which is unpaid at November 11, 2014, or thereafter, into common stock of the Company.  

$42,500 of the notes of the notes issued during the year ended December 31, 2014 mature on May 5, 2015, and could be prepaid during the period from issuance to January 28, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at January 28, 2015, or thereafter, into common stock of the Company.  

$53,000 of the notes of the notes issued during the year ended December 31, 2014 mature on May 22, 2015 and may be prepaid during the period from issuance to February 16, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at February 16, 2015, or thereafter, into common stock of the Company.  

$53,500 of the notes of the notes issued during the year ended December 31, 2014 mature on July 8, 2015 and may be prepaid during the period from issuance to April 4, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at April 4, 2015, or thereafter, into common stock of the Company.  

$38,000 of the notes of the notes issued during the year ended December 31, 2014 mature on July 24, 2015 and may be prepaid during the period from issuance to April 20, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at April 20, 2015, or thereafter, into common stock of the Company.  

$38,000 of the notes of the notes issued during the year ended December 31, 2014 mature on August 28, 2015 and may be prepaid during the period from issuance to May 24, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at May 24, 2015, or thereafter, into common stock of the Company.  

The rate of conversion for the notes issued by the Corporation during the year ended December 31, 2014 was calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%.  

$419,591, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital; the notes are being accreted to their face value over the term of the notes, through periodic charges to interest expense using the effective interest rate method.

47

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

6.  Convertible promissory notes (continued):

$26,500 in finance fees were incurred in relation to the convertible promissory notes issued during 2014, and is being charged to interest and financing costs over the term of the notes, using the effective interest rate method.  

During the year ended December 31, 2014, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted $264,500 of note principal, and $10,580 of accrued interest on the notes, into 16,666,751 common shares of the Corporation.

Also during the year ended December 31, 2014, the Corporation exercised the prepayment option and issued a cash payment of $79,000 in settlement of $53,000 in principal amount, plus accrued interest and prepayment bonus thereon of $26,000.

During the year ended December 31, 2013, the Corporation issued $234,000 of its convertible promissory notes for cash.  

$32,500 of the notes issued during the year ended December 31, 2013 had a maturity date of November 6, 2013, and could be prepaid during the period from issuance to August 3, 2013, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at August 3, 2013 or thereafter, into common stock of the Corporation.  The Corporation exercised the prepayment option and issued a cash payment of $49,884 in settlement of principal, accrued interest and prepayment bonus.

$32,500 of the notes issued during the year ended December 31, 2013 had a maturity date of February 3, 2014, and could be prepaid during the period from issuance to October 27, 2013, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at October 27, 2013 or thereafter, into common stock of the Corporation.  The Corporation exercised the prepayment option and issued a cash payment of $48,080 in settlement of principal, accrued interest and prepayment bonus.

$63,000 of the notes issued during the year ended December 31, 2013 had a maturity date of June 5, 2014, and could be prepaid during the period from issuance to January 5, 2014, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which is unpaid at January 5, 2014 or thereafter, into common stock of the Corporation. The Corporation exercised the prepayment option and issued a cash payment of $93,750 in settlement of principal, accrued interest and prepayment bonus.

$53,000 of the notes issued during the year ended December 31, 2013 mature on April 11, 2014, and may be prepaid during the period from issuance to March 2, 2014, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at March 2, 2014 or thereafter, into common stock of the Corporation.

$53,000 of the notes issued during the year ended December 31, 2013 mature on July 28, 2014, and may be prepaid during the period from issuance to April 22, 2014, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at April 22, 2014 or thereafter, into common stock of the Corporation.

The rate of conversion for $65,000 in notes issued by the Corporation during the year ended December 31, 2013 was calculated as the average of the lowest three trading prices during the thirty trading days immediately preceding such conversion, discounted by 55%.  The rate of conversion for $169,000 in notes issued during the year ended December 31, 2013 is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%.  

48

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

6.  Convertible promissory notes (continued):

$151,106, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital; the notes are being accreted to their face value over the term of the notes, through periodic charges to interest expense using the effective interest rate method.

$14,000 in finance fees were incurred in relation to the convertible promissory notes issued during 2013, and are being charged to interest and financing costs over the term of the notes, using the effective interest rate method.  

During the year ended December 31, 2013, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted $70,000 of note principal, and $2,800 of accrued interest on the notes, into 13,160,041 common shares of the Corporation.  

The convertible promissory notes bear interest at the rate of 8% until they mature, or until there is an event of default.  The notes contain penalty provisions relating to events of default, pursuant to which the Company could be required not only to pay interest at the rate of 22% following such an event, but also to pay immediately 150% of the principal outstanding plus accrued interest and penalty interest; alternatively, the Company could be required, at the discretion of the holder, to issue stock in satisfaction of the value determined under such penalty provisions, at the rate of conversion in effect at such time as the holder so elects.  In addition to non-payment of the note principal and interest at maturity or failure to transfer stock on receipt of a notice of conversion from the holder, events of default include making an assignment or appointment of a receiver or trustee, ceasing operations, liquidating assets or entering into bankruptcy proceedings; certain money judgments filed against the Company; breach of covenants, representations or warranties under the note; delisting of the Company’s stock or failure to comply with the exchange act; failure to maintain property or rights which are necessary to the Company’s business; certain restatements of the Company’s financial statements as filed with the SEC during the preceding two years; effectuating a reverse stock split without first providing the holder with 20 days’ notice of such occurrence; replacing the Company’s transfer agent without

first providing to the successor transfer agent, the necessary instructions to effect a transfer of stock to the holder pursuant to the terms of the note.  

The discount to market conversion feature of the convertible promissory notes causes a theoretical possibility that the Corporation may be required to settle the notes by issuing more shares than are authorized.  Furthermore, this feature causes the notes to fall within the FAS 133 definition of a derivative liability.  Management has calculated that the maximum number of shares required to convert the principal plus accrued interest on the convertible notes at December 31, 2014 was 12,551,083, which represents approximately .3% of the authorized, unissued shares at that date, and has also estimated that the fair value of the notes at December 31, 2014 approximates face value, therefore no adjustment for fair value restatement has been made.

At December 31, 2014, the fair value of the stock issuable to fully convert the convertible promissory note principal was $571,305, which exceeds the principal amount by $346,305.

49

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

7.

Stockholders’ deficiency:

(a)

Common stock transactions:

In connection with the issuance of the Corporation’s 10% senior convertible notes during the year ended December 31, 2014, the Corporation issued 907,000 shares of its common stock, with a relative fair value of $36,772, to the holders of the notes (note 5).

During the year ended December 31, 2014, the Corporation issued an aggregate of 11,500,000 shares of its common stock to consultants as partial consideration for services rendered and to be rendered. $462,850, representing the fair value of the stock at issuance, was allocated to shares and to additional paid in capital.  $55,000, representing the value of services not yet rendered as at December 31, 2014, was charged to prepaid expense; $407,850 was charged to expense.  

On various dates during the year ended December 31, 2014, holders of the 10% senior convertible notes exercised the conversion feature of the notes, and converted an aggregate of $695,431 in principal and $107,596 in accrued interest, in exchange for 26,767,580 common shares of the Corporation (note 5).

On December 31, 2014, the Corporation issued an aggregate of 2,051,049 of its common shares to holders of certain of its 10% senior convertible notes, as compensation for extending the maturity date of the notes from December 31, 2014 to December 31, 2015.

On various dates during the year ended December 31, 2014, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted an aggregate of $264,500 in principal and $10,580 in accrued interest, in exchange for 16,666,751 common shares of the Corporation (note 6).

(a)

Common stock transactions (continued):

In connection with the issuance of the Corporation’s 10% senior convertible notes during the year ended December 31, 2013, the Corporation issued 7,989,993 shares of its common stock, with a relative fair value of $219,779, to the holders of the notes (note 5).

During the year ended December 31, 2013, the Corporation issued an aggregate of 14,251,380 shares of its common stock to consultants as partial consideration for services rendered and to be rendered. $750,290, representing the fair value of the stock at issuance, was allocated to shares and to additional paid in capital, and was charged to expense.  Included was a settlement of stock-based remuneration for 2,081,953 shares less than the number of shares issuable pursuant to the contract terms; a gain of $174,676 was recognized on this settlement.

During the year ended December 31, 2013, the Corporation issued an aggregate of 3,465,287 shares of its common stock in settlement of $123,500 in accounts payable and accrued liabilities.  An aggregate loss of $67,544 was recognized on these transactions.

On various dates during the year ended December 31, 2013, holders of the 10% senior convertible notes exercised the conversion feature of the notes, and converted an aggregate of $446,667 in principal and $340,684 in accrued interest, in exchange for 26,245,039 common shares of the Corporation (note 5).

During the year ended December 31, 2013, the Corporation issued an aggregate of 1,511,997 of its common shares in settlement of $45,360 in accrued interest on the 10% senior convertible notes.  

On various dates during the year ended December 31, 2013, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted an aggregate of $70,000 in principal and $2,800 in accrued interest, in exchange for 13,160,041 common shares of the Corporation (note 6)

50

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

7.

Stockholders’ deficiency (continued):

(b)

Transactions involving stock options:

The Corporation has two incentive equity plans, under which a maximum of 10,000,000 options to purchase 10,000,000 common shares may be granted to officers, employees and consultants of the Corporation.  The granting of options, and the terms associated with them, occurs at the discretion of the board of directors, who administers the plan.   

The fair value of unvested options are determined at the date of grant and are included in expense over the vesting period.

During the year ended December 31, 2012, 300,000 of the options granted under these plans were forfeited in accordance with the terms of the options, on the termination of the engagement with the consultant to which the options had been granted.

There were no stock options outstanding and exercisable at December 31, 2014, nor at December 31, 2013.

(c)

Summary of stock-based compensation:

The following table presents the total of stock-based compensation included in the expenses of the Corporation for the years ended December 31, 2014 and 2013:

	2014	2013
Selling, general and administrative	$ 407,850	$ 924,967
Total stock-based compensation included in expenses	$ 407,850	$ 924,967

8.

Interest and financing costs:

Interest and financing costs include accrued interest, accretion and amortization of deferred financing costs relating to the 10% senior convertible notes; accrued interest and accretion on the promissory notes; and accrued interest and accretion on the convertible promissory notes.

9.

Gain on extinguishment of debt and accrued liabilities:

During the year ended December 31, 2013, the Corporation issued an aggregate of 3,465,287 shares of its common stock, valued at $191,044, in settlement of $123,500 in accounts payable and accrued liabilities.  An aggregate loss of $67,544 was recognized.  Also during the year ended December 31, 2013, the Corporation settled stock-based remuneration for 2,081,953 shares less than the number of shares issuable pursuant to the contract terms; a gain of $174,676 was recognized on this settlement.

51

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

10.

Loss per share:

As the Corporation incurred a net loss during the years ended December 31, 2014 and 2013, the loss and diluted loss per common share are based on the weighted-average common shares outstanding during the year.  The following outstanding instruments could have a dilutive effect in the future:

	2014	2013
Stock issuable on conversion of the 10% senior
convertible notes	211,606,662	225,576,968
Stock issuable on conversion of the convertible
promissory  notes and accrued interest thereon	12,551,083	3,094,232
	224,157,745	228,671,200

11.

Related party transactions:

Included in 10% senior convertible notes (note 5) is $575,887 (2013 - $584,387) payable to the director and to a company controlled by the director, and $47,558 (2013 - $47,558) payable to an individual related to the director and a company controlled by an individual related to the director.  

Included in promissory notes payable (note 4) is $nil (2013 - $5,989) payable to the director.

$306,564 (2013 - $244,252) in accrued interest charges relating to these notes is included in accrued liabilities; $63,678 (2013 - $69,184) in coupon-rate interest on these notes is included in interest and finance costs.

12.

Guarantees and Commitments:

a)

Guarantees

The Corporation has entered into agreements which contain features which meet the definition of a guarantee under ASC Topic 460 “Guarantees” (Topic 460).  Topic 460 defines a guarantee to be a contract that contingently requires the Corporation to make payments (either in cash, financial instruments, other assets, common stock of the Corporation or through the provision of services) to a third party based on changes in an underlying economic characteristic (such as interest rates or market value) that is related to an asset, liability or an equity security of the other party.

The Corporation has the following guarantees which are subject to the disclosure and measurement requirements of Topic 460:

The Corporation includes standard intellectual property indemnification clauses in its software license and service agreements.  Pursuant to these clauses, the Corporation holds harmless and agrees to defend the indemnified party, generally the Corporation’s business partners and customers, in connection with certain patent, copyright or trade secret infringement claims by third parties with respect to the Corporation’s products.  The term of the indemnification clauses is generally perpetual from the date of execution of the software license and service agreement.  In the event an infringement claim against the Corporation or an indemnified party is successful, the Corporation, at its sole option, agrees that it will do one of the following:  (i) procure for the indemnified party the right to continue use of the software; (ii) provide a modification to the software so that its use becomes non-infringing; (iii) replace the software with software which is substantially similar in functionality and performance; or (iv) refund the residual value of the software license fees paid by the indemnified party for the infringing software.  The Corporation believes the estimated fair value of these intellectual property indemnification clauses is minimal.

Historically, the Corporation has not made any significant payments related to the above-noted indemnities and accordingly, no liability related to the contingent features of these guarantees has been accrued in the financial statements.

52

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

13.  Fair value measurements:

The carrying value of cash and cash equivalents, value added taxes recoverable, accounts payable and accrued liabilities approximates fair value due to the short term to maturity of these instruments.  The carrying value of the promissory notes, 10% senior convertible notes and convertible promissory notes, approximates fair value due to the issuance subsequent to December 31, 2014 of new debt instruments having similar terms and conditions.  

14.

Income taxes:

Deferred income taxes reflect the impact of temporary differences between amounts of assets and liabilities as reported for financial reporting purposes and such amounts as measured by tax laws.  The tax effects of temporary differences that gave rise to significant portions of the deferred tax asset and deferred tax liability are as follows:

	2014	2013
Deferred tax asset:
Net operating loss carryforwards	$   9,400,000	$   8,900,000
Capital loss carryforwards	1,050,000	1,050,000
Total gross deferred tax asset	10,450,000	9,950,000
Valuation allowance	(10,450,000)	(9,950,000)
Net deferred taxes	$                --	$                --

Income tax expense attributable to loss before income taxes was $nil (2013 - $nil) and differed from the amounts computed by applying the U.S. federal income tax rate of 34% (2013 - 34%) to the net loss as a result of the following:

	2014	2013
Expected tax rate	34%	34%
Expected tax recovery applied to net
loss before income taxes	$  (787,100)	$  (1,138,830)
Increase (decrease) in taxes resulting from:
Change in valuation allowance	500,000	400,000
Compensation expense	139,000	314,000
Interest and financing costs	203,000	387,000
Other	(54,900)	(37,830)
	$                 --	$                 --

The Corporation has net operating losses of $27,816,000 which are available to reduce U.S. taxable income and which expire as follows:

53

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

14.

Income taxes (continued):

2019	$        391,000
2020	675,000
2021	521,000
2022	897,000
2023	1,671,000
2024	4,205,000
2025	3,381,000
2026	3,088,000
2027	2,623,000
2028	2,401,000
2029	1,299,000
2030	1,258,000
2031	1,298,000
2032	1,229,000
2033	1,475,000
2034	1,404,000
	$    27,816,000

The losses noted above are estimates, as the related tax returns have not been filed by the Corporation.

15.

Change in non-cash operating working capital:

	2014	2013
Value added taxes recoverable	$    (26,317)	$      (6,144)
Accounts payable	(26,650)	(29,751)
Accrued liabilities	31,482	52,807
	$    (21,485)	$      16,912

54

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

16.  Supplementary cash flow information:

The Corporation paid no income taxes during the year ended December 31, 2014, nor during the year ended December 31, 2013.  Interest paid in cash during the years ended December 31, 2014 and December 31, 2013 were $51,087 and $67,245, respectively.

Non-cash financing activities are excluded from the consolidated statement of cash flows.  The following is a summary of such activities:

	2014	2013
Issuance of the Corporation’s 10% senior convertible notes in settlement
of accounts payable	$      13,500	$      26,000
Issuance of the Corporation’s common stock as consideration for extending
the maturity date of the 10% senior convertible notes	95,374
Issuance of the Corporation’s common stock as partial consideration for
services rendered	462,850	750,290
Issuance of the Corporation’s common stock in settlement of 10%
senior convertible notes and accrued interest, on the holders’
exercise of the conversion feature	803,027	787,351
Issuance of the Corporation’s common stock in settlement of convertible
promissory notes, and accrued interest thereon	275,080	72,800
Issuance of the Corporation’s 10% senior convertible notes in
settlement of previously issued 10% senior convertible notes
and accrued interest thereon	--	1,206,590
Issuance of the Corporation’s common stock in settlement of
accrued interest on the 10% senior convertible notes	--	45,360
Issuance of the Corporation’s common stock in settlement of
accounts payable and accrued liabilities		123,500
Total	$  1,649,831	$  3,011,891

17.

Subsequent events:

During the period from January 1 to April 7, 2015, the Corporation issued an aggregate of 3,000,000 shares as consideration for consulting services rendered and to be rendered.

During the period from January 1 to April 7, 2015, the Corporation issued an aggregate of $395,000 of its 10% senior convertible notes, for cash.  The notes are payable on demand; the holders are permitted, at any time, to convert all or a portion of the outstanding principal plus accrued interest into common stock of the Corporation at a ratio of one common share for each $0.03 of debt converted; the Corporation may pre-pay all or any portion of the balance outstanding on the notes at any time without penalty or bonus, with permission from the holder; interest is payable on conversion of the notes, and may, at the Corporation’s option, be paid in either cash, or in common shares of the Corporation at the rate of one common share for each $0.03 of interest paid.  The Corporation issued an aggregate of 1,185,000 shares of its common stock to the holders pursuant to the terms of these notes.

During the period from January 1 to April 7, 2015, holders of the 10% senior convertible notes exercised the conversion feature of the notes and converted an aggregate of $150,000 in principal, and $200,000 in accrued interest, in exchange for 11,666,669 shares of the Corporation’s common stock.

55

VALIDIAN CORPORATION

Notes to Consolidated Financial Statements

Years ended December 31, 2014 and 2013

(In U.S. dollars)

17.

Subsequent events (continued):

During the period from January 1 to April 7, 2015, the Corporation issued an aggregate of 333,333 shares of its common stock to holders of the 10% senior convertible notes, in settlement of $10,000 in accrued interest on the notes.

During the period from January 1 to April 7, 2015, the Corporation settled an aggregate of $96,000 in principal amount of the convertible promissory notes, plus an aggregate of $46,860 in accrued interest and bonus interest thereon, pursuant to the prepayment terms of the notes.  

On January 8, 2015, the Corporation issued $53,500 of its convertible promissory notes for cash. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum.  The notes mature on October 12, 2015, and may be prepaid in full during the period from issuance to July 7, 2014, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at July 7, 2014 or thereafter, into common stock of the Corporation. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%.

On March 2, 2015, the Corporation issued $53,500 of its convertible promissory notes for cash. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum.  The notes mature on December 4, 2015, and may be prepaid in full during the period from issuance to August 29, 2015, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at August 29, 2015 or thereafter, into common stock of the Corporation. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%.

On February 23 and 24, 2014, holders of the Corporation’s convertible promissory notes exercised the conversion feature of the notes and converted $53,000 in principal, plus $2,120 in accrued interest thereon, in exchange for 2,697,440 shares of the Corporation’s common stock.

On March 2, 2015, the Corporation paid cash in settlement of $212,703 of its 10% senior convertible notes, and issued 1,474,352 shares of its common stock in settlement of $44,231 of accrued interest thereon.

Except for the foregoing, we have evaluated subsequent events through the date the financial

56

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosures.

There have been no disagreements with accountants with respect to accounting and/or financial statements.

A change in our Independent Auditor firms took place in a prior period; details of the change were disclosed in our report on Form 10K for the period ended December 31, 2011.

Item 9A(T).  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 our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective, as a result of the material weaknesses noted below, 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 Controls

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The Company’s internal control over financial reporting is not supported by written policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to further periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

57

Under the supervision and with the participation of management, including its principal executive officer and principal financial officer, our management assessed the design and operating effectiveness of internal control over financial reporting as of December 31, 2014 based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on its evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was not effective as of December 31, 2014, as a result of the material weaknesses noted below. The effectiveness of our internal control over financial reporting as of December 31, 2014 has not been audited by Seale & Beers, CPA's, an independent registered public accounting firm, as stated in their report which is included herein.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2014, our management identified the existence of certain significant internal control deficiencies that they considered to be material weaknesses.  In particular, we identified the following weaknesses in our internal control system at December 31, 2014:  (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.  The independent registered public accounting firm indicated that they considered these deficiencies to be reportable conditions as that term is defined under the standards established by the American Institute of Certified Public Accountants.  Notwithstanding the material weakness identified by our independent registered public accountants, we believe that the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operation and cash flows of the Corporation as of, and for, the periods represented in this report.

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.

Set forth below is a discussion of the significant internal control deficiencies that have not been remediated.

Lack of segregation of duties.  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.  Effective July 2008, we have had only two individuals, our controller and our chief financial officer, involved in the accounting functions of the Corporation, including the processing of accounting entries and generating interim and year-end financial reports.  Additionally, our chief financial officer is also our chief executive officer and sole officer and director.  We are therefore inadequately staffed at this time to ensure a sufficient level of segregation of duties.  As a result, this significant internal control 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 2014 and 2013, we were able to complete most of our back up schedules prior to the arrival of our independent registered public accountants’ audit staff, however, during this time we consistently experienced a lack of complete preparedness.  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 deficiency 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 procedures, and to make changes wherever practicable which will assist in remediating this deficiency.

58

Finance 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 external 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 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, 2014, 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.   

Item 9B.  Other Information.

None.

59

PART III

Item 10.  Directors, Executive Officers, Promoters and Control Persons: Compliance with Section 16(a) of the Exchange Act.

The following table sets forth certain information concerning our director and executive officer as of December 31, 2014:

Name	Age	Position
Bruce I. Benn	61	Director, President, Chief Executive Officer,
		Chief Financial Officer,
		Executive Vice President, Secretary and Treasurer

Effective May 6, 2005, the Board of Directors of the Company appointed Bruce I. Benn to the positions of President and Chief Executive Officer of the Company.  Effective July 11, 2008, the Board of Directors of the Company appointed Bruce I. Benn also to the positions of Chief Financial Officer and Treasurer of the Company.  Mr. Benn has served as a Director, Executive Vice President and Secretary of the Company since February 2004.  From 1999 until February 2004, he provided services to the Company through Capital House Corporation.  Mr. Benn plays a major role in making key management and strategic decisions and oversees all aspects of corporate finance for the Company.  He has been principally responsible for arranging in excess of $20 million of capital investment for the Company from 1999 to date. Since 1989, Mr. Benn has been the President, Director and co-founder of Capital House Corporation, a boutique investment bank that has provided and/or arranged early and mid stage venture capital and hands-on managerial assistance to a portfolio of leading technology software companies. Mr. Benn was also a founder, Director and Officer of DevX Energy, Inc. from 1995 until October 2000. From 1980 to 1993, he was with Corporation House Ltd., where he was a Vice President and a Director from 1985 to 1993. He is an attorney and holds a Masters of Law degree from the University of London, England, a Baccalaureate of Laws from the University of Ottawa, Canada, and a Bachelor of Arts in Economics from Carleton University in Ottawa, Canada.

Audit Committee Financial Expert

The SEC has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees. One of the rules adopted by the SEC requires a company to disclose whether it has an “audit committee financial expert” serving on its audit committee. We do not have an audit committee financial expert.  The Company and its Board of Directors have experienced difficulties in identifying a suitable candidate to serve as its audit committee financial expert because of the size of the Company, 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 for the audit committee financial expert and director liability insurance.

Code of Ethics Policy

We have adopted a code of ethics that applies to our officers, directors and employees in accordance with applicable federal securities laws. We have filed a copy of our code of ethics as an exhibit to our Annual Report on Form 10-K as filed on April 15, 2011. This document may be reviewed by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the code of ethics will be provided without charge upon request to us. We intend to disclose any amendments to or waivers of certain provisions of our code of ethics in a Current Report on Form 8-K

60

Compliance with Section 16(a) of The Securities Exchange Act of 1934

To our knowledge, based solely on a review of such materials as are required by the Securities and Exchange Commission, none of our officers, directors or beneficial holders of more than ten percent of our issued and outstanding shares of common stock failed to timely file with the Securities and Exchange Commission any form or report required to be so filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, during the year ended December 31, 2014.

Item 11.  Executive Compensation.

The following table shows all the cash compensation paid or to be paid by us or our subsidiaries, as well as certain other compensation paid or accrued, during the fiscal years indicated, to our chief executive officer and other executive officers who received total annual salary and bonus in excess of $100,000 during the past fiscal year in all capacities in which the person served.  

Summary Compensation Table

(a)	(b)	( c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compen- sation ($)	Nonqualified Deferred Compen- sation Earnings($)	All Other Compensa- tion	Total $
Benn,Bruce	2014	108,805	0	0	0	0	0	0	108,805
(1)(4)	2013	116,544	0	0	0	0	0	0	116,544
(1)(4)	2012	119,818	0	0	0	0	0	0	119,818
	2011	121,276	0	0	0	0	0	0	121,276
	2010	116,494	0	0	0	0	0	0	116,494
	2009	105,579	0	0	0	0	0	0	105,579
	2008	113,292	0	0	27,910	0	0	0	141,202
	2007	112,278	0	0	17,681	0	0	0	129,959
	2006	105,847	0	0	0	0	0	0	105,847
	2005	99,146	0	0	500,000	0	0	0	599,146
Benn, Ronald	2007	98,243			18,339				116,582
(2)(5)	2006	105,847	0	0	0	0	0	0	105,847
Maisonneuve, Andre (3)	2006 2005 2004	105,847 103,848 100,353	0 0 0	0 0 0	0 0 0	0 0 0	0 0 0	0 0 0	105,847 103,848 100,353

(1) Became Director, President, Chief Executive Officer, Executive Vice President and Secretary in May 2005 and Chief Financial Officer in July, 2008.  In addition, Mr. Benn served as Executive Vice President and Secretary from February 2004 to May 2005.

(2)  Became Director, Chief Financial Officer and Treasurer in February 2004, until his resignation in July 2008

(3) Became Director, Executive Vice President and Secretary in July, 2001.  In addition, Mr. Maisonneuve served as Chairman, President, Chief Executive Officer, and Chief Financial Officer from January, 2002 to February, 2004; as Chairman, President, Chief Executive Officer from January 2002 until May 2005; and as Chairman and Vice- President – Strategic Marketing from May 2005 until his retirement effective December 31, 2006.

(4) Reported salary for August 2006 to December 2014 has been accrued but not paid.

(5) Reported salary for August 2006 to July 2008 has been accrued but not paid.

61

Outstanding Equity Awards at Fiscal Year-End

	Option/SSAR Awards					Stock Awards
(a)	(b)	( c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
Name	Number of Securities Underlying Unexercised Options Exercisable (#)	Number of Securities Underlying Unexercised Option Unexercisable (#)	Equity Incentive plan awards:   Number of securities underlying unexercised unearned options (#)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have not Vested (#)	Market Value of Shares or Units of Stock That have not vested ($)	Equity Incentive Plan Awards:   Number of unearned (#)	Equity Incentive Plan Awards Market Payout Value of Unearned Shares, Units or other Rights that have not vested $
Benn, Bruce	0	0	0	0	0	0	0	0	0
Benn, Ronald	0	0	0	0	0	0	0	0	0
Maisonneuve, André	0	0	0	0	0	0	0	0	0

Long-Term Incentive Plans – Awards In Last Fiscal Year

There were no incentive awards granted to our officer and director during the year ended December 31, 2014.

Directors are not compensated for acting in their capacity as directors.  Directors are reimbursed for their accountable expenses incurred in attending meetings and conducting their duties.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information as of March 31, 2015, with respect to any person known by us to own beneficially more than 5% of our common stock; common stock beneficially owned by each of our officers and directors named in Item 10; and the amount of common stock beneficially owned by our officers and directors as a group.

		Approximate Percent
Name & Address of	Number of Shares	of Common Stock
Beneficial Owner	Beneficially Owned	Outstanding  (1)
Leonid Frenkel (2)	30,046,559	9.1%
401 City Avenue
Suite 800
Bala Cynwyd, PA 19004
Bruce Benn* (3)	4,220,454	1.3%
All Executive Officers and Directors
As a Group	4,220,454	1.3%
*Executive Officer and/or a Director.
(1)  Based upon 329,272,476 shares of common stock issued and outstanding as of April 7, 2015 and includes for each person the shares issuable upon exercise of the options and warrants owned by them. (2)  Based on information contained in Schedule 13G as filed by Mr. Frenkel on February 17, 2015. (3)  Includes (a) 330,860 shares held directly by Bruce Benn, (b) 2,650,000 shares owned of record by Valdosta Corporation; and (c) 1,239,594 shares owned of record by White Haven Capital Inc..

62

The following table sets forth details regarding our common stock authorized for issuance under equity compensation plans as at March 31, 2015:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	0	0	10,000,000
Equity compensation plans not approved by security holders	--	--	--
Total	0	0	10,000,000

We have granted options pursuant to our Amended and Restated Incentive Equity Plan, which was adopted by our board of directors and became effective on May 30, 2003.  The plan, as amended and restated, was approved by our stockholders on February 25, 2005.  The amended and restated plan is administered by the board of directors, who has the authority to grant stock options and stock appreciation rights to our officers, employees and consultants.  A total of 3,912,302 shares of common stock were reserved for issuance under the terms of the Amended and Restated Incentive Equity Plan.  In the event of certain mergers, sales of assets, reorganizations, consolidations, recapitalizations, stock dividends or other changes in corporate structure affecting our common stock, the committee administering the plan must make an equitable substitution or adjustment in the aggregate number of shares reserved for issuance under the plan and in the number of shares exercisable under, and the exercise price of, outstanding options under the plan.

Of the 5,117,302 options granted from time to time under this plan, none were exercised, and none are currently outstanding.

On December 15, 2004, the board of directors adopted the 2004 Incentive Equity Plan, which was approved by our stockholders on February 25, 2005.  The 2004 Incentive Equity Plan is administered by the board of directors, who has the authority to grant stock options and stock appreciation rights to our officers, employees and consultants, and to establish the option vesting schedule.  The total number of shares of common stock reserved for issuance under the terms of the 2004 Incentive Equity Plan was increased to 6,087,698 as approved by our stockholders at our Annual General Meeting on October 4, 2007.  In the event of certain mergers, sales of assets, reorganizations, consolidations, recapitalizations, stock dividends or other changes in corporate structure affecting our common stock, the committee administering the plan must make an equitable substitution or adjustment in the aggregate number of shares reserved for issuance under the plan and in the number of shares exercisable under, and the exercise price of, outstanding options under the plan.

Of the 6,212,698 options originally granted from time to time under this plan, none were exercised, and none are currently outstanding.

63

Item 13.  Certain Relationships and Related Transactions.

Included in 10% senior convertible notes at December 31, 2014 is $575,887 payable to the director and to a company controlled by the director, and $47,558 payable to an individual related to the director and to a company controlled by an individual related to the director.  

$306,564 in accrued interest charges relating to these notes is included in accrued liabilities; $63,678 in interest on these notes is included in interest and finance costs for the year.

Item 14.

 Principal Accountant Fees and Services

The following table sets out fees billed by the Company’s principal accountant for audit and related services for each of the previous two fiscal years:

Description of services	Fees billed for 2014 fiscal year	Fees billed for 2013 fiscal year
Audit fees	$62,500	$62,500

We do not currently have an audit committee, however it is our policy to have all audit and audit-related fees pre-approved by the board of directors.  All of the above fees were pre-approved by the board of directors.

There were no tax-related, audit-related or other fees incurred during the year.

64

PART IV

Item 15.  Exhibits and Financial Statement Schedules

(a)

(1)

The List of Financial Statements are filed as Item 8 of Part II of this Form 10-K

(2)

List of Financial Statement Schedules None - see Notes to Financial Statements included in Item 8 of Part II of this Form 10-K

(3)

List of Exhibits follows

The exhibits listed in the accompanying Index to Exhibits are filed as part of this Form 10-K

Exhibit No.	Document Description
3.1	Restated Articles of Incorporation (1)
3.2	Amendment to Articles of Incorporation (5)
3.3	By-Laws (2)
3.4	Amendment to By-Laws (1)
4.1	Form of Class B Warrants (2)
4.2	Form of Class E Warrants (1)
4.3	Form of Class F Warrants (1)
4.4	Form of Class G Warrants (1)
4.5	Form of Class H Warrants (1)
4.6	Form of Class I Warrants (3)
4.7	Form of Class J Warrants (6)
4.8	Form of 12% Promissory Note (1)
4.9	Form of 4% Convertible Debenture (1)
4.10	Form of 10% senior secured convertible note and security agreement (6)
10.1	Registration Rights Agreement, dated as of March 8, 2004 by and among the Company and each entity named on the signature page thereto (3)
10.2	Securities Purchase Agreement, dated as of March 8, 2004 by and among the Company and each entity named on the signature page thereto (3)
10.3	Securities Purchase Agreement in respect of the 4% Convertible Debenture, dated as of December 30, 2003 by and between Validian Corporation and each individual or entity named on a signature page thereto (1)
10.4	Registration Rights Agreement, dated as of December 30, 2004 by and between the Company and each entity named on the signature page thereto (1)
10.5	Amended and Restated Incentive Equity Plan (4)
10.6	Validian Corporation 2004 Incentive Equity Plan (4)
10.7	Validian Corporation 2004 Amended Incentive Equity Plan(7)
10.8	Commercial Lease dated April 15, 2004 between Validian Corporation and National Capital Commission (5)
10.9	Commercial Renewal Lease dated March 20, 2007 (6)
10.10	Employment Agreement with Andre Maisonneuve * (5)
10.11	Employment Agreement with Bruce Benn * (5)
10.12	Employment Agreement with Ronald Benn * (5)
14.1	Code of Ethics (8)
21.1	List of Subsidiaries (5)
23.1	Consent of Seale & Beers, CPAs
31.1	Certification of Chief Executive Officer Pursuant to Section 302
31.2	Certification of Chief Financial Officer Pursuant to Section 302
32.1	Certification of Chief Executive Officer Pursuant to Section 906
32.2	Certification of Chief Financial Officer Pursuant to Section 906
101**	The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2014 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) Statement of Changes in Stockholders’ Equity, (iv) the Statements of Cash Flows, and (v) Notes to Financial Statements

___________________________________________

*

Denotes management contract

(1)

Previously filed as an exhibit to our Annual Report on Form 10-KSB, SEC File No. 0-28423, filed with the Commission on March 30, 2004 and incorporated herein by reference.

(2)

Previously filed as an Exhibit to our Registration Statement on Form 10-SB, SEC File No. 0-28423, filed with the Commission on December 9, 1999 and incorporated herein by reference.

(3)

Previously filed as an Exhibit to our Current Report on Form 8-K, SEC File No. 0-28423, filed with the Commission on March 8, 2004 and incorporated herein by reference.

(4)

Previously filed as an Exhibit to our Amended Proxy Statement, filed with the Commission on January 12, 2005 and incorporated herein by reference.

(5)

Previously filed as an Exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2004, filed with the Commission on April 14, 2005 and incorporated herein by reference.

(6)

Previously filed as an Exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2006, filed with the Commission on May 18, 2007 and incorporated herein by reference.

(7)

Previously filed as an Exhibit to our Current Report on Form 8-K, SEC File No. 0-28423, filed with the Commission on August 24, 2007 and incorporated herein by reference.

(8)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 1010, and incorporated herein by reference.

Statements contained in this Form 10-K as to the contents of any agreement or other document referred to are not complete, and where such agreement or other document is an exhibit to this Report or is included in any forms indicated above, each such statement is deemed to be qualified and amplified in all respects by such provisions.

65

SIGNATURES

In accordance with Section 13 or 15(d) 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

(Registrant)

By:  /s/  Bruce Benn

Bruce Benn

President, Chief Executive Officer and director

(principal executive officer)

Dated:  April 15, 2015

By:  /s/  Bruce Benn

Bruce Benn

Chief Financial Officer and Treasurer

(principal financial and accounting officer)

Dated:  April 15, 2015

66

Exhibits.

Exhibit No.	Document Description
3.1	Restated Articles of Incorporation (1)
3.2	Amendment to Articles of Incorporation (5)
3.3	By-Laws (2)
3.4	Amendment to By-Laws (1)
4.1	Form of Class B Warrants (2)
4.2	Form of Class E Warrants (1)
4.3	Form of Class F Warrants (1)
4.4	Form of Class G Warrants (1)
4.5	Form of Class H Warrants (1)
4.6	Form of Class I Warrants (3)
4.7	Form of Class J Warrants (6)
4.8	Form of 12% Promissory Note (1)
4.9	Form of 4% Convertible Debenture (1)
4.10	Form of 10% senior secured convertible note and security agreement (6)
10.1	Registration Rights Agreement, dated as of March 8, 2004 by and among the Company and each entity named on the signature page thereto (3)
10.2	Securities Purchase Agreement, dated as of March 8, 2004 by and among the Company and each entity named on the signature page thereto (3)
10.3	Securities Purchase Agreement in respect of the 4% Convertible Debenture, dated as of December 30, 2003 by and between Validian Corporation and each individual or entity named on a signature page thereto (1)
10.4	Registration Rights Agreement, dated as of December 30, 2004 by and between the Company and each entity named on the signature page thereto (1)
10.5	Amended and Restated Incentive Equity Plan (4)
10.6	Validian Corporation 2004 Incentive Equity Plan (4)
10.7	Validian Corporation 2004 Amended Incentive Equity Plan(7)
10.8	Commercial Lease dated April 15, 2004 between Validian Corporation and National Capital Commission (5)
10.9	Commercial Renewal Lease dated March 20, 2007 (6)
10.10	Employment Agreement with Andre Maisonneuve * (5)
10.11	Employment Agreement with Bruce Benn * (5)
10.12	Employment Agreement with Ronald Benn * (5)
14.1	Code of Ethics (8)
21.1	List of Subsidiaries (5)
23.1	Consent of Seale & Beers, CPAs
31.1	Certification of Chief Executive Officer Pursuant to Section 302
31.2	Certification of Chief Financial Officer Pursuant to Section 302
32.1	Certification of Chief Executive Officer Pursuant to Section 906
32.2	Certification of Chief Financial Officer Pursuant to Section 906
101**	The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2014 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) Statement of Changes in Stockholders’ Equity, (iv) the Statements of Cash Flows, and (v) Notes to Financial Statements

___________________________________________

*

Denotes management contract

(1)

Previously filed as an exhibit to our Annual Report on Form 10-KSB, SEC File No. 0-28423, filed with the Commission on March 30, 2004 and incorporated herein by reference.

(2)

Previously filed as an Exhibit to our Registration Statement on Form 10-SB, SEC File No. 0-28423, filed with the Commission on December 9, 1999 and incorporated herein by reference.

(3)

Previously filed as an Exhibit to our Current Report on Form 8-K, SEC File No. 0-28423, filed with the Commission on March 8, 2004 and incorporated herein by reference.

(4)

Previously filed as an Exhibit to our Amended Proxy Statement, filed with the Commission on January 12, 2005 and incorporated herein by reference.

(5)

Previously filed as an Exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2004, filed with the Commission on April 14, 2005 and incorporated herein by reference.

(6)

Previously filed as an Exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2006, filed with the Commission on May 18, 2007 and incorporated herein by reference.

(7)

Previously filed as an Exhibit to our Current Report on Form 8-K, SEC File No. 0-28423, filed with the Commission on August 24, 2007 and incorporated herein by reference.

(8)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 1010, and incorporated herein by reference.

67

EX-23

Exhibit 23.1

PCAOB Registered Auditors – www.sealebeers.com

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Annual Report on Form 10-K of Validian Corporation for the year ended December 31, 2014 of our report dated April 15, 2015, relating to the financial statements for the two years ended December 31, 2014.

/s/ Seale and Beers, CPAs

Seale and Beers, CPAs

Las Vegas, Nevada

April 15, 2015

EX-31

Exhibit 31.1

CERTIFICATION

I, Bruce Benn of Validian Corporation, certify that:

(1) I have reviewed this annual report on Form 10-K of Validian Corporation;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors, or persons performing the equivalent functions:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: April 15, 2015

/s/Bruce Benn

Bruce Benn

Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION

I, Bruce Benn of Validian Corporation, certify that:

(1) I have reviewed this annual report on Form 10-K of Validian Corporation;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors, or persons performing the equivalent functions:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: April 15, 2015

/s/Bruce Benn

Bruce Benn

Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION

I, Bruce Benn, Principal Executive Officer of Validian Corporation (the “Company”), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 hereby certify, to the best of my knowledge, in connection with the Annual Report on Form 10-K for the period ended December 31, 2014 as filed with the Securities and Exchange Commission (the “Report”) on the date hereof, that:

The Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  April 15, 2015

/s/Bruce Benn

Bruce Benn

President and Chief Executive Officer

EX-32

Exhibit 32.2

CERTIFICATION

I, Bruce Benn, Principal Financial Officer of Validian Corporation (the “Company”), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 hereby certify, to the best of my knowledge, in connection with the Annual Report on Form 10-K for the period ended December 31, 2014 as filed with the Securities and Exchange Commission (the “Report”) on the date hereof, that:

The Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  April 15, 2015

/s/Bruce Benn

Bruce Benn

Chief Financial Officer

XML

3. Property and Equipment: Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Property, Plant and Equipment

			2014
		Accumulated	Net book
	Cost	depreciation	value
Computer hardware and software	$     34,590	$   33,743	$    847
	$     34,590	$   33,743	$    847
			2013
		Accumulated	Net book
	Cost	depreciation	value
Computer hardware and software	$     34,590	$   31,235	$    3,355
	$     34,590	$   31,235	$    3,355

XML

6. Convertible Promissory Notes (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Details
Promissory notes issued for cash	$ 436,500	$ 234,000
Fair value beneficial conversion feature other	419,591	151,106
Finance fees on convertible notes	$ 26,500	$ 14,000
Stock issued for convertible notes	16,666,751	13,160,041

XML

1. General (Details)	12 Months Ended
	Dec. 31, 2014
Details
Entity Incorporation, State Country Name	Nevada
Entity Incorporation, Date of Incorporation	Apr. 12, 1989

XML

7. Stockholders' Deficiency (Details)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Details
Shares issued with convertible notes	907,000	7,989,993
Fair value shares issued with convertible notes	36,772	219,779
Shares issued for conversion of senior convertible notes		26,245,039
Shares issued for extension of senior convertible notes	2,051,049
Stock issued for convertible notes	16,666,751	13,160,041
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period			300,000

XML

15. Change in Non-cash Operating Working Capital: Schedule of changes in non-cash operating working capital (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Schedule of changes in non-cash operating working capital

	2014	2013
Value added taxes recoverable	$    (26,317)	$      (6,144)
Accounts payable	(26,650)	(29,751)
Accrued liabilities	31,482	52,807
	$    (21,485)	$      16,912

XML

2. Summary of Significant Accounting Policies: (j) Advertising Expense (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(j) Advertising Expense:

(j)         Advertising expense:

Advertising costs are expensed upon the start of the scheduled advertising. 

XML

9. Gain On Extinguishment of Debt and Accrued Liabilities (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
Details
Shares issued in settlement of accounts payable and accrued liabilities	$ 191,044	[1]

[1] Note 7a

XML

2. Summary of Significant Accounting Policies: (b) Principles of Consolidation (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(b) Principles of Consolidation:

(b)        Principles of consolidation:

These consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America and include the accounts of Validian Corporation and its wholly-owned subsidiaries, Sochrys Technologies Inc. and Evolusys S.A.  All intercompany balances and transactions have been eliminated.

XML

2. Summary of Significant Accounting Policies: (o) Accounting For Uncertainty in Income Taxes (Details) (USD $)	Dec. 31, 2014
Details
Unrecognized Tax Benefits	$ 10,450,000

XML

10. Loss Per Share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

	2014	2013
Stock issuable on conversion of the 10% senior
convertible notes	211,606,662	225,576,968
Stock issuable on conversion of the convertible
promissory  notes and accrued interest thereon	12,551,083	3,094,232
	224,157,745	228,671,200

XML

2. Summary of Significant Accounting Policies: (n) Use of Estimates (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(n) Use of Estimates:

(n) Use of estimates:

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results may differ from those estimates.  Significant management estimates include assumptions used in estimating the fair value of convertible notes issued with common stock.                  

XML

4. Promissory Notes Payable (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Details
Notes Payable, Current	$ 46,250	$ 51,350
Interest paid on promissory notes	6,319	9,270
Interest paid on promissory notes paid in cash	$ 2,293	$ 3,531

XML

14. Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Details
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	34.00%	34.00%
Effective Income Tax Rate Reconciliation at Federal Statutory Income Tax Rate, Amount	$ (787,100)	$ (1,138,830)
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount	500,000	400,000
Effective Income Tax Rate Reconciliation, Deduction, Amount	139,000	314,000
Effective Income Tax Rate Reconciliation, Deduction, Other, Amount	203,000	387,000
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount	(54,900)	(37,830)
Current Federal Tax Expense (Benefit)	$ 0	$ 0

XML

16. Supplementary Cash Flow Information: Schedule of Cash Flow, Supplemental Disclosures (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Schedule of Cash Flow, Supplemental Disclosures

	2014	2013
Issuance of the Corporation’s 10% senior convertible notes in settlement of accounts payable	$      13,500	$      26,000
Issuance of the Corporation’s common stock as consideration for extending the maturity date of the 10% senior convertible notes	95,374
Issuance of the Corporation’s common stock as partial consideration for services rendered	462,850	750,290
Issuance of the Corporation’s common stock in settlement of 10% senior convertible notes and accrued interest, on the holders’ exercise of the conversion feature	803,027	787,351
Issuance of the Corporation’s common stock in settlement of convertible promissory notes, and accrued interest thereon	275,080	72,800
Issuance of the Corporation’s 10% senior convertible notes in settlement of previously issued 10% senior convertible notes and accrued interest thereon	--	1,206,590
Issuance of the Corporation’s common stock in settlement of accrued interest on the 10% senior convertible notes	--	45,360
Issuance of the Corporation’s common stock in settlement of accounts payable and accrued liabilities		123,500
Total	$  1,649,831	$  3,011,891

XML

3. Property and Equipment

12 Months Ended

Dec. 31, 2014

Notes

3. Property and Equipment:

3.   Property and equipment:

			2014
		Accumulated	Net book
	Cost	depreciation	value
Computer hardware and software	$     34,590	$   33,743	$    847
	$     34,590	$   33,743	$    847
			2013
		Accumulated	Net book
	Cost	depreciation	value
Computer hardware and software	$     34,590	$   31,235	$    3,355
	$     34,590	$   31,235	$    3,355

XML

14. Income Taxes: Summary of Tax Credit Carryforwards (Details) (USD $)	12 Months Ended
	Dec. 31, 2014
Details
Effective Income Tax Rate Reconciliation, Tax Credit, Amount	$ 27,816,000

XML

14. Income Taxes: Schedule of Components of Income Tax Expense (Benefit) (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Schedule of Components of Income Tax Expense (Benefit)

	2014	2013
Deferred tax asset:
Net operating loss carryforwards	$   9,400,000	$   8,900,000
Capital loss carryforwards	1,050,000	1,050,000
Total gross deferred tax asset	10,450,000	9,950,000
Valuation allowance	(10,450,000)	(9,950,000)
Net deferred taxes	$                 0	$                 0

XML

2. Summary of Significant Accounting Policies: (f) Prepaid Expenses (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(f) Prepaid Expenses:

(f)         Prepaid expenses:

Prepaid consulting fees related to services to be rendered within twelve months from the balance sheet date are included in prepaid expenses.  These costs are charged to expenses as the services are rendered.  If for any reason circumstances arise which would indicate that the services will not be performed in the future, any remaining balance included in prepaid expenses will be charged to expense immediately.

XML

2. Summary of Significant Accounting Policies: (e) Leases (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(e) Leases:

(e)        Leases:

Leases are classified as either capital or operating in nature.  Capital leases are those which substantially transfer the benefits and risk of ownership to the Corporation.  Assets acquired under capital leases are depreciated as described in note 1(d).  Obligations recorded under capital leases are reduced by the principal portion of lease payments.  The imputed interest portion of lease payments is charged to expense.

XML

7. Stockholders' Deficiency: Summary of stock based compensation included in expenses (Details) (USD $)	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013
Details
Stock-based compensation expense	$ 407,850	[1]	$ 924,967	[1]

[1] Note 7c

XML

14. Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Schedule of Effective Income Tax Rate Reconciliation

	2014	2013
Expected tax rate	34%	34%
Expected tax recovery applied to net
loss before income taxes	$  (787,100)	$  (1,138,830)
Increase (decrease) in taxes resulting from:
Change in valuation allowance	500,000	400,000
Compensation expense	139,000	314,000
Interest and financing costs	203,000	387,000
Other	(54,900)	(37,830)
	$                  0	$                  0

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2. Summary of Significant Accounting Policies: (g) Income Taxes (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(g) Income Taxes:

(g)     Income taxes:

Deferred income taxes are determined using the asset and liability method, whereby deferred income tax is recognized based on temporary differences using enacted tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Temporary differences between the carrying values of assets or liabilities used for tax purposes and those used for financial reporting purposes arise in one period and reverse in one or more subsequent periods.  In assessing the realizability of deferred tax assets, management considers known and anticipated factors impacting whether some portion or all of the deferred tax assets will not be realized.  To the extent that the realization of deferred tax assets is not considered to be more likely than not, a valuation allowance is provided.

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2. Summary of Significant Accounting Policies: (h) Revenue Recognition (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(h) Revenue Recognition:

(h)        Revenue recognition:

Revenue from sale of product licenses is recognized when all of the following criteria are met:  persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is probable.

Revenue from product support contracts is recognized ratably over the life of the contract.  Revenue from services is recognized at the time such services are rendered.

For contracts with multiple elements such as product licenses, product support and services, the Corporation follows the residual method.  Under this method, the total fair value of the undelivered elements of the contract, as indicated by vendor specific objective evidence, is deferred and subsequently recognized when all criteria for recognizing revenue have been met.  The difference between the total contract fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements.  Vendor specific objective evidence for support and consulting services is obtained from contracts where these elements have been sold separately.  Where the Corporation cannot determine the fair value of all of the undelivered elements, revenue is deferred until such time as it can be determined, or until all of the elements are delivered.

Revenues that have been prepaid but for which all elements have not been delivered, are reflected as deferred revenue on the consolidated balance sheet.

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2. Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2014

Notes

2. Summary of Significant Accounting Policies:

2.   Summary of significant accounting policies:

(a)  Future operations:

The consolidated financial statements have been prepared assuming that the Corporation will continue as a going concern.  The Corporation has no revenues, has negative working capital of $11,283,326, has accumulated a deficit of $44,974,810 as at December 31, 2014, and has incurred a loss of $2,315,003 and negative cash flow from operations of $615,719 for the year then ended.  Furthermore, the Corporation failed to settle certain of its promissory notes and 10% senior convertible notes when they matured on various dates during the years 2007 through 2014, resulting in a condition of default for all of the 10% senior convertible notes and $36,250 of the promissory notes; a significant portion of these notes remain in default as at December 31, 2014.  In addition, the Corporation expects to continue to incur operating losses for the foreseeable future, and has no lines of credit or other financing facilities in place. 

If the Corporation obtains further financing and generates revenue, it expects to incur operating expenditures of approximately $725,000 for the year ending December 31, 2015. In the event the Corporation cannot raise the 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 Corporation’s ability to continue as a going concern.  Management’s plans to address these issues include raising capital through the private placement of equity, the exercise of previously-issued equity instruments and through the issuance of additional promissory notes and convertible notes. 

The Corporation’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 Corporation’s position and or results of operations and could also result in the Corporation’s 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 Corporation 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 Corporation’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 Corporation.

(b)        Principles of consolidation:

These consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America and include the accounts of Validian Corporation and its wholly-owned subsidiaries, Sochrys Technologies Inc. and Evolusys S.A.  All intercompany balances and transactions have been eliminated.

(c)        Cash and cash equivalents:

Cash and cash equivalents include liquid investments with original maturity dates of three months or less.

(d)        Property and equipment:

Property and equipment is stated at cost less accumulated depreciation, and includes computer hardware and software.  These assets are being depreciated on a straight-line basis over their estimated useful lives, as follows:  computer hardware:  3 years; computer software:  1 year.

(e)        Leases:

Leases are classified as either capital or operating in nature.  Capital leases are those which substantially transfer the benefits and risk of ownership to the Corporation.  Assets acquired under capital leases are depreciated as described in note 1(d).  Obligations recorded under capital leases are reduced by the principal portion of lease payments.  The imputed interest portion of lease payments is charged to expense.

(f)         Prepaid expenses:

Prepaid consulting fees related to services to be rendered within twelve months from the balance sheet date are included in prepaid expenses.  These costs are charged to expenses as the services are rendered.  If for any reason circumstances arise which would indicate that the services will not be performed in the future, any remaining balance included in prepaid expenses will be charged to expense immediately.

(g)     Income taxes:

Deferred income taxes are determined using the asset and liability method, whereby deferred income tax is recognized based on temporary differences using enacted tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Temporary differences between the carrying values of assets or liabilities used for tax purposes and those used for financial reporting purposes arise in one period and reverse in one or more subsequent periods.  In assessing the realizability of deferred tax assets, management considers known and anticipated factors impacting whether some portion or all of the deferred tax assets will not be realized.  To the extent that the realization of deferred tax assets is not considered to be more likely than not, a valuation allowance is provided.

(h)        Revenue recognition:

Revenue from sale of product licenses is recognized when all of the following criteria are met:  persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is probable.

Revenue from product support contracts is recognized ratably over the life of the contract.  Revenue from services is recognized at the time such services are rendered.

For contracts with multiple elements such as product licenses, product support and services, the Corporation follows the residual method.  Under this method, the total fair value of the undelivered elements of the contract, as indicated by vendor specific objective evidence, is deferred and subsequently recognized when all criteria for recognizing revenue have been met.  The difference between the total contract fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements.  Vendor specific objective evidence for support and consulting services is obtained from contracts where these elements have been sold separately.  Where the Corporation cannot determine the fair value of all of the undelivered elements, revenue is deferred until such time as it can be determined, or until all of the elements are delivered.

Revenues that have been prepaid but for which all elements have not been delivered, are reflected as deferred revenue on the consolidated balance sheet.

(i)         Research and development:

Costs related to research, design and development of software products are charged to research and development expenses as incurred unless they meet the generally accepted criteria for deferral and amortization.  Software development costs incurred prior to the establishment of technological feasibility do not meet these criteria and are expensed as incurred.  To date the Corporation has not capitalized any software development costs. 

(j)         Advertising expense:

Advertising costs are expensed upon the start of the scheduled advertising. 

(k)        Foreign currency translation:

The functional currency for the financial statements of the Corporation is the United States dollar.  Exchange gains or losses are realized due to differences in the exchange rate at the transaction date versus the rate in effect at the settlement or balance sheet date.  Exchange gains and losses are recorded in the statement of operations.

(l) Stock-based compensation:

The Corporation accounts for stock-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – stock compensation” (ASC Topic 718).  ASC Topic 718 requires all share-based payments, including stock options granted by the Corporation 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 Corporation 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 Corporation’s circumstances is the stated vesting period of the award.

In adopting ASC Topic 718, the Corporation applied the modified-prospective transition method.  Under this method, the Corporation has recognized compensation costs for all share-based payments granted, modified, or settled after January 1, 2006, as well as for any awards that were granted prior to January 1, 2006 for which the requisite service had not been provided as of that date (unvested awards). 

(m) Impairment or disposal of long-lived assets:

The Corporation accounts for long-lived assets in accordance with ASC Topic 360-10 “Impairment or disposal of long-lived assets”.  This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

(n) Use of estimates:

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results may differ from those estimates.  Significant management estimates include assumptions used in estimating the fair value of convertible notes issued with common stock.                  

(o) Accounting for uncertainty in income taxes:

The Corporation does not recognize adjustments in the liability for unrecognized income tax benefits.  As of December 31, 2014, the Corporation had approximately $10,450,000 of unrecognized tax benefits, all of which would affect the Corporation’s effective tax rate if recognized.

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2. Summary of Significant Accounting Policies: (i) Research and Development (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(i) Research and Development:

(i)         Research and development:

Costs related to research, design and development of software products are charged to research and development expenses as incurred unless they meet the generally accepted criteria for deferral and amortization.  Software development costs incurred prior to the establishment of technological feasibility do not meet these criteria and are expensed as incurred.  To date the Corporation has not capitalized any software development costs. 

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5. 10% Senior Convertible Notes: Summary of ten percent senior convertible notes (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Summary of ten percent senior convertible notes

Note	Conversion
Principal	Rate
$  5,794,380	$ 0.030
511,506	0.038
500,000	0.100
$  6,805,886

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5. 10% Senior Convertible Notes (Details) (USD $)	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013
Details
10% Senior convertible notes	$ 6,182,441	[1]	$ 6,593,050	[1]
Senior convertible notes issued	302,500		1,965,090
Senior convertible notes settled	721,609		1,636,844
Senior convertible notes issued for cash	289,000		732,500
Senior convertible notes issued for accounts payable	13,500		26,000
Shares issued for conversion of senior convertible notes			26,245,039
Senior convertible notes principal paid in cash	26,178		49,628
Senior convertible notes interest paid in cash	22,794
Shares issued for extension of senior convertible notes	2,051,049
Fair value shares issued for extension of senior convertible notes	95,374
Shares issued with convertible notes	907,000		7,989,993
Fair value shares issued with convertible notes	36,772		219,779
Fair value beneficial conversion feature	190,144		765,217
Senior convertible notes issued to repay notes			1,206,590
Shares issued for interest on senior convertible notes value	$ 45,360
Shares issued for interest on senior convertible notes	1,511,997

[1] Note 5

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VALIDIAN CORPORATION Consolidated Balance Sheets (USD $)	Dec. 31, 2014		Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 97,403	[1]	$ 104,389	[1]
Value added taxes recoverable	34,955		8,638
Prepaid expenses	55,000
Total current assets	187,358		113,027
Property and equipment	847	[2]	3,355	[2]
Total assets	188,205		116,382
Current liabilities:
Accounts payable	341,374		381,526
Accrued liabilities	3,638,325		3,091,574
Accrued interest on 10% notes payable to related parties	306,564	[3]	244,252	[3]
Deferred revenue	320,000		320,000
Promissory notes payable	46,250	[4]	51,350	[4]
Promissory notes payable to related parties		[5]	5,989	[5]
10% Senior convertible notes	6,182,441	[6]	6,593,050	[6]
10% Senior convertible notes payable to related parties	623,445	[7]	631,945	[7]
Convertible promissory notes	12,285	[8]	47,010	[8]
Total current liabilities	11,470,684		11,366,696
Total liabilities	11,470,684		11,366,696
Stockholders' deficiency:
Preferred stock ($0.001 par value. Authorized 50,000,000 shares; issued and outstanding Nil shares in 2014 and 2013)	0		0
Common stock ($0.001 par value. Authorized 700,000,000 shares in 2014 and in 2013; Issued and outstanding 308,915,682 shares in 2014 and 251,023,302 shares in 2013	308,916	[9]	251,023	[9]
Additional paid-in capital	33,433,153		31,208,208
Deficit	(44,974,810)		(42,659,807)
Treasury stock (7,000 shares in 2014 and 2013 at cost)	(49,738)		(49,738)
Net stockholders' deficiency	(11,282,479)		(11,250,314)
Total liabilities and stockholders deficiency	$ 188,205	[10]	$ 116,382	[10]

[1] Supplementary information. Note 16

[2] Note 3

[3] Note 11

[4] Note 4

[5] Note 4, 11

[6] Note 5

[7] Note 5, 11

[8] Note 6

[9] Note 7a

[10] See notes 2a, 12 and 17

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14. Income Taxes: Summary of Tax Credit Carryforwards (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Summary of Tax Credit Carryforwards

2019	$        391,000
2020	675,000
2021	521,000
2022	897,000
2023	1,671,000
2024	4,205,000
2025	3,381,000
2026	3,088,000
2027	2,623,000
2028	2,401,000
2029	1,299,000
2030	1,258,000
2031	1,298,000
2032	1,229,000
2033	1,475,000
2034	1,404,000
	$    27,816,000

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VALIDIAN CORPORATION Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013
Cash flows from operating activities:
Net loss	$ (2,315,003)		$ (3,349,497)
Items not involving cash:
Depreciation of property and equipment	2,508		3,072
Stock-based compensation expense	407,850	[1]	924,967	[1]
Non-cash interest expense	1,310,411		1,876,444
Loss (gain) on extinguishment of debt and accrued liabilities			(107,132)	[2]
Change in non-cash operating working capital	(21,485)	[3]	16,912	[3]
Net cash used in operating activities	(615,719)		(635,234)
Cash flows from investing activities:
Additions to property and equipment			(1,690)
Net cash used in investing activities			(1,690)
Cash flows from financing activities:
Issuance of promissory notes			23,156
Issuance of 10% senior convertible notes	289,000		732,500
Debt issuance costs	(26,500)		(14,000)
Repayment of promissory notes	(11,089)		(58,630)
Issuance of convertible promissory notes	436,500		234,000
Repayment of 10% senior convertible notes	(26,178)		(49,628)
Repayment of convertible promissory notes	(53,000)		(128,000)
Net cash provided by financing activities	608,733		739,398
Effects of exchange rates on cash and cash equivalents			(195)
Net increase (decrease) in cash and cash equivalents	(6,986)		102,279
Cash and cash equivalents, beginning of period	104,389	[4]	2,110
Cash and cash equivalents, end of period	$ 97,403	[4]	$ 104,389	[4]

[1] Note 7c

[2] Note 9

[3] Note 15

[4] Supplementary information. Note 16

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11. Related Party Transactions (Details)	12 Months Ended
	Dec. 31, 2014
Details
Related Party Transaction, Description of Transaction	Included in 10% senior convertible notes (note 5) is $575,887 (2013 - $584,387) payable to the director and to a company controlled by the director, and $47,558 (2013 - $47,558) payable to an individual related to the director and a company controlled by an individual related to the director. Included in promissory notes payable (note 4) is $nil (2013 - $5,989) payable to the director. $306,564 (2013 - $244,252) in accrued interest charges relating to these notes is included in accrued liabilities; $63,678 (2013 - $69,184) in coupon-rate interest on these notes is included in interest and finance costs.

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2. Summary of Significant Accounting Policies: (l) Stock-based Compensation (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(l) Stock-based Compensation:

(l) Stock-based compensation:

The Corporation accounts for stock-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – stock compensation” (ASC Topic 718).  ASC Topic 718 requires all share-based payments, including stock options granted by the Corporation 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 Corporation 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 Corporation’s circumstances is the stated vesting period of the award.

In adopting ASC Topic 718, the Corporation applied the modified-prospective transition method.  Under this method, the Corporation has recognized compensation costs for all share-based payments granted, modified, or settled after January 1, 2006, as well as for any awards that were granted prior to January 1, 2006 for which the requisite service had not been provided as of that date (unvested awards). 

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17. Subsequent Events (Details)	12 Months Ended
	Dec. 31, 2014
Event 1
Subsequent Event, Date	Apr. 07, 2015
Subsequent Event, Description	the Corporation issued an aggregate of 3,000,000 shares as consideration for consulting services rendered and to be rendered
Event 2
Subsequent Event, Date	Apr. 07, 2015
Subsequent Event, Description	the Corporation issued an aggregate of $395,000 of its 10% senior convertible notes, for cash
Event 3
Subsequent Event, Date	Apr. 07, 2015
Subsequent Event, Description	holders of the 10% senior convertible notes exercised the conversion feature of the notes and converted an aggregate of $150,000 in principal, and $200,000 in accrued interest, in exchange for 11,666,669 shares of the Corporation’s common stock
Event 4
Subsequent Event, Date	Apr. 07, 2015
Subsequent Event, Description	the Corporation issued an aggregate of 333,333 shares of its common stock to holders of the 10% senior convertible notes, in settlement of $10,000 in accrued interest on the notes
Event 5
Subsequent Event, Date	Apr. 07, 2015
Subsequent Event, Description	the Corporation settled an aggregate of $96,000 in principal amount of the convertible promissory notes, plus an aggregate of $46,860 in accrued interest and bonus interest thereon, pursuant to the prepayment terms of the notes
Event 6
Subsequent Event, Date	Jan. 08, 2015
Subsequent Event, Description	the Corporation issued $53,500 of its convertible promissory notes for cash
Event 7
Subsequent Event, Date	Mar. 02, 2015
Subsequent Event, Description	the Corporation issued $53,500 of its convertible promissory notes for cash
Event 8
Subsequent Event, Date	Feb. 24, 2014
Subsequent Event, Description	holders of the Corporation’s convertible promissory notes exercised the conversion feature of the notes and converted $53,000 in principal, plus $2,120 in accrued interest thereon, in exchange for 2,697,440 shares of the Corporation’s common stock
Event 9
Subsequent Event, Date	Mar. 02, 2015
Subsequent Event, Description	the Corporation paid cash in settlement of $212,703 of its 10% senior convertible notes, and issued 1,474,352 shares of its common stock in settlement of $44,231 of accrued interest thereon

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16. Supplementary Cash Flow Information

12 Months Ended

Dec. 31, 2014

Notes

16. Supplementary Cash Flow Information:

16.  Supplementary cash flow information:

The Corporation paid no income taxes during the year ended December 31, 2014, nor during the year ended December 31, 2013.  Interest paid in cash during the years ended December 31, 2014 and December 31, 2013 were $51,087 and $67,245, respectively.

Non-cash financing activities are excluded from the consolidated statement of cash flows.  The following is a summary of such activities:

	2014	2013
Issuance of the Corporation’s 10% senior convertible notes in settlement of accounts payable	$      13,500	$      26,000
Issuance of the Corporation’s common stock as consideration for extending the maturity date of the 10% senior convertible notes	95,374
Issuance of the Corporation’s common stock as partial consideration for services rendered	462,850	750,290
Issuance of the Corporation’s common stock in settlement of 10% senior convertible notes and accrued interest, on the holders’ exercise of the conversion feature	803,027	787,351
Issuance of the Corporation’s common stock in settlement of convertible promissory notes, and accrued interest thereon	275,080	72,800
Issuance of the Corporation’s 10% senior convertible notes in settlement of previously issued 10% senior convertible notes and accrued interest thereon	--	1,206,590
Issuance of the Corporation’s common stock in settlement of accrued interest on the 10% senior convertible notes	--	45,360
Issuance of the Corporation’s common stock in settlement of accounts payable and accrued liabilities		123,500
Total	$  1,649,831	$  3,011,891

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2. Summary of Significant Accounting Policies: (m) Impairment Or Disposal of Long-lived Assets (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(m) Impairment Or Disposal of Long-lived Assets:

(m) Impairment or disposal of long-lived assets:

The Corporation accounts for long-lived assets in accordance with ASC Topic 360-10 “Impairment or disposal of long-lived assets”.  This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

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2. Summary of Significant Accounting Policies: Liquidity Disclosure (Policies)

12 Months Ended

Dec. 31, 2014

Policies

Liquidity Disclosure

(a)  Future operations:

The consolidated financial statements have been prepared assuming that the Corporation will continue as a going concern.  The Corporation has no revenues, has negative working capital of $11,283,326, has accumulated a deficit of $44,974,810 as at December 31, 2014, and has incurred a loss of $2,315,003 and negative cash flow from operations of $615,719 for the year then ended.  Furthermore, the Corporation failed to settle certain of its promissory notes and 10% senior convertible notes when they matured on various dates during the years 2007 through 2014, resulting in a condition of default for all of the 10% senior convertible notes and $36,250 of the promissory notes; a significant portion of these notes remain in default as at December 31, 2014.  In addition, the Corporation expects to continue to incur operating losses for the foreseeable future, and has no lines of credit or other financing facilities in place. 

If the Corporation obtains further financing and generates revenue, it expects to incur operating expenditures of approximately $725,000 for the year ending December 31, 2015. In the event the Corporation cannot raise the 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 Corporation’s ability to continue as a going concern.  Management’s plans to address these issues include raising capital through the private placement of equity, the exercise of previously-issued equity instruments and through the issuance of additional promissory notes and convertible notes. 

The Corporation’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 Corporation’s position and or results of operations and could also result in the Corporation’s 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 Corporation 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 Corporation’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 Corporation.

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1. General

12 Months Ended

Dec. 31, 2014

Notes

1. General:

1.   General:

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

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

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Statement of Financial Position - Parenthetical (USD $)	Dec. 31, 2014	Dec. 31, 2013
Statement of financial position
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	50,000,000	50,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par Value	$ 0.001	$ 0.001
Common Stock, Shares Authorized	700,000,000	700,000,000
Common Stock, Shares Issued	308,915,682	251,023,302
Common Stock, Shares Outstanding	308,915,682	251,023,302
Treasury Stock, Shares	7,000	7,000
Treasury stock	$ 49,738	$ 49,738

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11. Related Party Transactions

12 Months Ended

Dec. 31, 2014

Notes

11. Related Party Transactions:

11.  Related party transactions:

Included in 10% senior convertible notes (note 5) is $575,887 (2013 - $584,387) payable to the director and to a company controlled by the director, and $47,558 (2013 - $47,558) payable to an individual related to the director and a company controlled by an individual related to the director. 

Included in promissory notes payable (note 4) is $nil (2013 - $5,989) payable to the director.

$306,564 (2013 - $244,252) in accrued interest charges relating to these notes is included in accrued liabilities; $63,678 (2013 - $69,184) in coupon-rate interest on these notes is included in interest and finance costs.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2014	Apr. 07, 2015	Jun. 30, 2014
Document and Entity Information:
Entity Registrant Name	Validian Corp
Document Type	10-K
Document Period End Date	Dec. 31, 2014
Amendment Flag	false
Entity Central Index Key	0001100644
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		329,272,476
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Entity Incorporation, State Country Name	Nevada
Entity Incorporation, Date of Incorporation	Apr. 12, 1989
Entity Public Float			$ 10,721,187

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12. Guarantees and Commitments

12 Months Ended

Dec. 31, 2014

Notes

12. Guarantees and Commitments:

12.  Guarantees and Commitments:

a)         Guarantees

The Corporation has entered into agreements which contain features which meet the definition of a guarantee under ASC Topic 460 “Guarantees” (Topic 460).  Topic 460 defines a guarantee to be a contract that contingently requires the Corporation to make payments (either in cash, financial instruments, other assets, common stock of the Corporation or through the provision of services) to a third party based on changes in an underlying economic characteristic (such as interest rates or market value) that is related to an asset, liability or an equity security of the other party.

The Corporation has the following guarantees which are subject to the disclosure and measurement requirements of Topic 460:

The Corporation includes standard intellectual property indemnification clauses in its software license and service agreements.  Pursuant to these clauses, the Corporation holds harmless and agrees to defend the indemnified party, generally the Corporation’s business partners and customers, in connection with certain patent, copyright or trade secret infringement claims by third parties with respect to the Corporation’s products.  The term of the indemnification clauses is generally perpetual from the date of execution of the software license and service agreement.  In the event an infringement claim against the Corporation or an indemnified party is successful, the Corporation, at its sole option, agrees that it will do one of the following:  (i) procure for the indemnified party the right to continue use of the software; (ii) provide a modification to the software so that its use becomes non-infringing; (iii) replace the software with software which is substantially similar in functionality and performance; or (iv) refund the residual value of the software license fees paid by the indemnified party for the infringing software.  The Corporation believes the estimated fair value of these intellectual property indemnification clauses is minimal.

Historically, the Corporation has not made any significant payments related to the above-noted indemnities and accordingly, no liability related to the contingent features of these guarantees has been accrued in the financial statements.

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VALIDIAN CORPORATION Consolidated Statements of Operations (USD $)	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013
Expenses:
Selling, general and administrative	$ 739,680		$ 1,447,993
Research and development	313,975		145,174
Depreciation of property and equipment	2,508		3,072
Total Expenses	1,056,163		1,596,239
Loss before the undernoted	(1,056,163)		(1,596,239)
Other income (expenses):
Gain on extinguishment of debt and accrued liabilities			107,132	[1]
Interest and financing costs	(1,361,498)	[2]	(1,943,689)	[2]
Other	102,658		83,299
Total other income (expenses)	(1,258,840)		(1,753,258)
Net loss	$ (2,315,003)		$ (3,349,497)
Loss per common share - basic and diluted	$ (0.01)	[1]	$ (0.02)	[1]
Weighted average number of common shares outstanding	271,695,680		214,045,458

[1] Note 9

[2] Notes 9, 11

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6. Convertible Promissory Notes

12 Months Ended

Dec. 31, 2014

Notes

6. Convertible Promissory Notes:

6.  Convertible promissory notes:

During the year ended December 31, 2014, the Corporation issued $436,500 of its convertible promissory notes for cash. 

$63,000 of the notes issued during the year ended December 31, 2014 had a maturity date of October 29, 2014, and could be prepaid during the period from issuance to July 25, 2014, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at July 25, 2014 or thereafter, into common stock of the Company. 

$53,000 of the notes issued during the year ended December 31, 2014 had a maturity date of December 18, 2014, and could be prepaid during the period from issuance to September 9, 2014, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at September 9, 2014, or thereafter, into common stock of the Company.  .

$53,000 of the notes of the notes issued during the year ended December 31, 2014 matured on January 22, 2015 and could be prepaid during the period from issuance to October 15, 2014, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which is unpaid at October 15, 2014, or thereafter, into common stock of the Company. 

$42,500 of the notes of the notes issued during the year ended December 31, 2014 matured on February 19, 2015, and could be prepaid during the period from issuance to November 11, 2014, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which is unpaid at November 11, 2014, or thereafter, into common stock of the Company. 

$42,500 of the notes of the notes issued during the year ended December 31, 2014 mature on May 5, 2015, and could be prepaid during the period from issuance to January 28, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at January 28, 2015, or thereafter, into common stock of the Company. 

$53,000 of the notes of the notes issued during the year ended December 31, 2014 mature on May 22, 2015 and may be prepaid during the period from issuance to February 16, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at February 16, 2015, or thereafter, into common stock of the Company. 

$53,500 of the notes of the notes issued during the year ended December 31, 2014 mature on July 8, 2015 and may be prepaid during the period from issuance to April 4, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at April 4, 2015, or thereafter, into common stock of the Company. 

$38,000 of the notes of the notes issued during the year ended December 31, 2014 mature on July 24, 2015 and may be prepaid during the period from issuance to April 20, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at April 20, 2015, or thereafter, into common stock of the Company. 

$38,000 of the notes of the notes issued during the year ended December 31, 2014 mature on August 28, 2015 and may be prepaid during the period from issuance to May 24, 2015, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at May 24, 2015, or thereafter, into common stock of the Company. 

The rate of conversion for the notes issued by the Corporation during the year ended December 31, 2014 was calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. 

$419,591, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital; the notes are being accreted to their face value over the term of the notes, through periodic charges to interest expense using the effective interest rate method.

$26,500 in finance fees were incurred in relation to the convertible promissory notes issued during 2014, and is being charged to interest and financing costs over the term of the notes, using the effective interest rate method. 

During the year ended December 31, 2014, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted $264,500 of note principal, and $10,580 of accrued interest on the notes, into 16,666,751 common shares of the Corporation.

Also during the year ended December 31, 2014, the Corporation exercised the prepayment option and issued a cash payment of $79,000 in settlement of $53,000 in principal amount, plus accrued interest and prepayment bonus thereon of $26,000.

During the year ended December 31, 2013, the Corporation issued $234,000 of its convertible promissory notes for cash. 

$32,500 of the notes issued during the year ended December 31, 2013 had a maturity date of November 6, 2013, and could be prepaid during the period from issuance to August 3, 2013, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at August 3, 2013 or thereafter, into common stock of the Corporation.  The Corporation exercised the prepayment option and issued a cash payment of $49,884 in settlement of principal, accrued interest and prepayment bonus.

$32,500 of the notes issued during the year ended December 31, 2013 had a maturity date of February 3, 2014, and could be prepaid during the period from issuance to October 27, 2013, in full, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which was unpaid at October 27, 2013 or thereafter, into common stock of the Corporation.  The Corporation exercised the prepayment option and issued a cash payment of $48,080 in settlement of principal, accrued interest and prepayment bonus.

$63,000 of the notes issued during the year ended December 31, 2013 had a maturity date of June 5, 2014, and could be prepaid during the period from issuance to January 5, 2014, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder had the option to convert any balance of principal and interest which is unpaid at January 5, 2014 or thereafter, into common stock of the Corporation. The Corporation exercised the prepayment option and issued a cash payment of $93,750 in settlement of principal, accrued interest and prepayment bonus.

$53,000 of the notes issued during the year ended December 31, 2013 mature on April 11, 2014, and may be prepaid during the period from issuance to March 2, 2014, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at March 2, 2014 or thereafter, into common stock of the Corporation.

$53,000 of the notes issued during the year ended December 31, 2013 mature on July 28, 2014, and may be prepaid during the period from issuance to April 22, 2014, in full, at various rates ranging from 125% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at April 22, 2014 or thereafter, into common stock of the Corporation.

The rate of conversion for $65,000 in notes issued by the Corporation during the year ended December 31, 2013 was calculated as the average of the lowest three trading prices during the thirty trading days immediately preceding such conversion, discounted by 55%.  The rate of conversion for $169,000 in notes issued during the year ended December 31, 2013 is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%. 

$151,106, representing the relative fair value of the beneficial conversion feature of the notes at date of issuance, was allocated to additional paid in capital; the notes are being accreted to their face value over the term of the notes, through periodic charges to interest expense using the effective interest rate method.

$14,000 in finance fees were incurred in relation to the convertible promissory notes issued during 2013, and are being charged to interest and financing costs over the term of the notes, using the effective interest rate method. 

During the year ended December 31, 2013, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted $70,000 of note principal, and $2,800 of accrued interest on the notes, into 13,160,041 common shares of the Corporation. 

The convertible promissory notes bear interest at the rate of 8% until they mature, or until there is an event of default.  The notes contain penalty provisions relating to events of default, pursuant to which the Company could be required not only to pay interest at the rate of 22% following such an event, but also to pay immediately 150% of the principal outstanding plus accrued interest and penalty interest; alternatively, the Company could be required, at the discretion of the holder, to issue stock in satisfaction of the value determined under such penalty provisions, at the rate of conversion in effect at such time as the holder so elects.  In addition to non-payment of the note principal and interest at maturity or failure to transfer stock on receipt of a notice of conversion from the holder, events of default include making an assignment or appointment of a receiver or trustee, ceasing operations, liquidating assets or entering into bankruptcy proceedings; certain money judgments filed against the Company; breach of covenants, representations or warranties under the note; delisting of the Company’s stock or failure to comply with the exchange act; failure to maintain property or rights which are necessary to the Company’s business; certain restatements of the Company’s financial statements as filed with the SEC during the preceding two years; effectuating a reverse stock split without first providing the holder with 20 days’ notice of such occurrence; replacing the Company’s transfer agent without first providing to the successor transfer agent, the necessary instructions to effect a transfer of stock to the holder pursuant to the terms of the note. 

The discount to market conversion feature of the convertible promissory notes causes a theoretical possibility that the Corporation may be required to settle the notes by issuing more shares than are authorized.  Furthermore, this feature causes the notes to fall within the FAS 133 definition of a derivative liability.  Management has calculated that the maximum number of shares required to convert the principal plus accrued interest on the convertible notes at December 31, 2014 was 12,551,083, which represents approximately .3% of the authorized, unissued shares at that date, and has also estimated that the fair value of the notes at December 31, 2014 approximates face value, therefore no adjustment for fair value restatement has been made.

At December 31, 2014, the fair value of the stock issuable to fully convert the convertible promissory note principal was $571,305, which exceeds the principal amount by $346,305.

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5. 10% Senior Convertible Notes

12 Months Ended

Dec. 31, 2014

Notes

5. 10% Senior Convertible Notes:

5.   10% Senior convertible notes:

The following table sets forth the financial statement presentation of the 10% senior convertible note proceeds on issuance, and the changes in the financial statement presentation of the balance allocated to the notes as at and for the years ended December 31, 2014 and 2013:

	2014	2013
Balance at beginning of year	$     7,224,995	$     6,896,749
Note principal on issuance	302,500	1,965,090
Allocated to common stock and additional paid-in capital for
market value of stock issued to holders of the notes:
Allocated to common stock	(907)	(7,990)
Allocated to additional paid-in capital	(35,865)	(211,789)
	(36,772)	(219,779)
Allocated to additional paid-in capital for the intrinsic value of the
beneficial conversion feature	(190,144)	(765,217)
Proceeds allocated to 10% senior convertible notes on issuance	75,584	980,094
Accretion recorded as a charge to interest and financing costs	226,916	984,996
Principal repayments in cash	(26,178)	(49,628)
Principal converted pursuant to the terms of the note	(695,431)	(446,667)
Principal matured and settled through the issuance of new notes	--	(1,140,549)
Balance at end of year	6,805,886	7,224,995
Payable to related parties (note 13)	(623,445)	(631,945)
	$ 6,182,441	$ 6,593,050

During the year ended December 31, 2014, the Corporation issued an aggregate of $302,500 of its 10% senior convertible notes, and settled an aggregate of $721,609 of these notes.  $289,000 of the notes issued during the year, were issued for cash; $13,500 of the notes were issued in settlement of $13,500 in accounts payable. During the year, holders of the notes exercised the conversion feature and converted $695,431 in principal, plus $107,596 in accrued interest thereon, into 26,767,580 common shares of the Corporation’s common stock; and $26,178 in principal of the notes, and $22,794 in accrued interest thereon, was repaid in cash.  Also during the year ended December 31, 2014, 2,051,049 shares, with a fair value of $95,374, were issued to holders of the notes as compensation for the extension of the maturity date of the notes from December 31, 2014 to December 31, 2015.

Under the terms of the notes issued during the year ended December 31, 2014, the holders are permitted, at any time, to convert all or a portion of the outstanding principal plus accrued interest thereon into common stock of the company, at a rate of one common share for each $0.03 of debt converted.  The Corporation 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 Corporation or converted by the holders.  At the Corporation’s option, interest may be paid either in cash or in common shares of the Corporation.  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.  $260,000 of the notes are payable on demand; $42,500 of the notes mature on December 31, 2015.

Notwithstanding the stated maturity dates, all of the notes issued during the year ended December 31, 2014 are payable on demand, pursuant to the default provisions of the notes, as described below.

Holders of the notes issued during the year ended December 31, 2014 were granted 907,000 common shares of the Corporation upon issuance of the notes; $36,772, representing the relative fair value of the common shares at the issuance date, was allocated to the common shares par value and additional paid in capital.

At the date of issuance, the conversion feature of the notes issued during the year ended December 31, 2014 was in-the-money.  $190,144, representing the relative fair value of the beneficial conversion feature, was allocated to additional paid in capital.

The Corporation 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, 2014.  At December 31, 2014, 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 December 31, 2014, 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.

During the year ended December 31, 2013, the Corporation issued an aggregate of $1,965,090 of its 10% senior convertible notes, and settled an aggregate of $1,636,844 of these notes.  $732,500 of the notes issued during the year, were issued for cash; $26,000 of the notes were issued in settlement of $26,000 in accounts payable; and $1,206,590 of the notes were issued as consideration for the repayment of $1,140,549 in previously issued 10% senior convertible notes, and $66,041 in accrued interest thereon. During this period the Company settled $45,360 in accrued interest on the 10% senior convertible notes through the issuance of 1,511,997 shares of the Company’s common stock; holders of the notes exercised the conversion feature and converted $446,667 in principal, plus $340,684 in accrued interest thereon, into 26,245,039 common shares of the Company’s common stock; and $49,628 in principal of the notes was repaid in cash.

Under the terms of the notes issued during the year ended December 31, 2013, the holders are permitted, at any time, to convert all or a portion of the outstanding principal plus accrued interest thereon into common stock of the company, at a rate of one common share for each $0.03 of debt converted.  The Corporation 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 Corporation or converted by the holders.  At the Corporation’s option, interest may be paid either in cash or in common shares of the Corporation.  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.  $637,900 of the notes are payable on demand; $1,327,190 of the notes mature on December 31, 2014.

Notwithstanding the stated maturity dates, all of the notes issued during the year ended December 31, 2013 are payable on demand, pursuant to the default provisions of the notes, as described below.

Holders of the notes issued during the year ended December 31, 2013 were granted 7,989,993 common shares of the Corporation upon issuance of the notes; $219,779, representing the relative fair value of the common shares at the issuance date, was allocated to the common shares par value and additional paid in capital.

At the date of issuance, the conversion feature of $1,060,158 of the notes was in-the-money.  $765,217, representing the relative fair value of the beneficial conversion feature, was allocated to additional paid in capital.

The following table summarizes information regarding the 10% senior convertible notes outstanding at December 31, 2014:

Note	Conversion
Principal	Rate
$  5,794,380	$ 0.030
511,506	0.038
500,000	0.100
$  6,805,886

The maximum number of shares issuable on conversion of all 10% senior convertible notes outstanding at December 31, 2014 was 211,606,662.  Interest is payable in stock or in cash, at the discretion of the Corporation, therefore the potential conversion of the interest portion has not been included in our calculated issuance requirement (note 9(a)).

At December 31, 2014, $2,835,025 of the 10% senior convertible notes were secured by a first position lien on all of the assets of the Corporation; the remaining $3,970,861 were unsecured.  As a result of the event of default noted above, holders of the secured notes have the right to exercise their lien on all of the assets of the Corporation.

Included in interest and financing costs for the year ended December 31, 2014 is $701,261 (2013: $716,392) in coupon rate interest accrued on the 10% senior convertible notes; $226,916, (2013: $984,994) in accretion related to the relative fair value of the equity components of the 10% senior convertible notes at issuance; and.$95,374 (2013: $nil) representing the fair value of 2,051,049 of the Corporation’s common shares issued to holders of the notes as compensation for extending the maturity date of the notes.

At December 31, 2014, the fair value of the stock issuable to fully convert the 10% senior convertible note principal, was $9,839,710, which exceeds the principal amount of the notes by $3,033,823.

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17. Subsequent Events

12 Months Ended

Dec. 31, 2014

Notes

17. Subsequent Events:

17.  Subsequent events:

During the period from January 1 to April 7, 2015, the Corporation issued an aggregate of 3,000,000 shares as consideration for consulting services rendered and to be rendered.

During the period from January 1 to April 7, 2015, the Corporation issued an aggregate of $395,000 of its 10% senior convertible notes, for cash.  The notes are payable on demand; the holders are permitted, at any time, to convert all or a portion of the outstanding principal plus accrued interest into common stock of the Corporation at a ratio of one common share for each $0.03 of debt converted; the Corporation may pre-pay all or any portion of the balance outstanding on the notes at any time without penalty or bonus, with permission from the holder; interest is payable on conversion of the notes, and may, at the Corporation’s option, be paid in either cash, or in common shares of the Corporation at the rate of one common share for each $0.03 of interest paid.  The Corporation issued an aggregate of 1,185,000 shares of its common stock to the holders pursuant to the terms of these notes.

During the period from January 1 to April 7, 2015, holders of the 10% senior convertible notes exercised the conversion feature of the notes and converted an aggregate of $150,000 in principal, and $200,000 in accrued interest, in exchange for 11,666,669 shares of the Corporation’s common stock.

During the period from January 1 to April 7, 2015, the Corporation issued an aggregate of 333,333 shares of its common stock to holders of the 10% senior convertible notes, in settlement of $10,000 in accrued interest on the notes.

During the period from January 1 to April 7, 2015, the Corporation settled an aggregate of $96,000 in principal amount of the convertible promissory notes, plus an aggregate of $46,860 in accrued interest and bonus interest thereon, pursuant to the prepayment terms of the notes. 

On January 8, 2015, the Corporation issued $53,500 of its convertible promissory notes for cash. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum.  The notes mature on October 12, 2015, and may be prepaid in full during the period from issuance to July 7, 2014, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at July 7, 2014 or thereafter, into common stock of the Corporation. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%.

On March 2, 2015, the Corporation issued $53,500 of its convertible promissory notes for cash. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum.  The notes mature on December 4, 2015, and may be prepaid in full during the period from issuance to August 29, 2015, at various rates ranging from 130% to 145% of the principal balance plus accrued interest to the date of prepayment.  The holder has the option to convert any balance of principal and interest which is unpaid at August 29, 2015 or thereafter, into common stock of the Corporation. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 49%.

On February 23 and February 24, 2014, holders of the Corporation’s convertible promissory notes exercised the conversion feature of the notes and converted $53,000 in principal, plus $2,120 in accrued interest thereon, in exchange for 2,697,440 shares of the Corporation’s common stock.

On March 2, 2015, the Corporation paid cash in settlement of $212,703 of its 10% senior convertible notes, and issued 1,474,352 shares of its common stock in settlement of $44,231 of accrued interest thereon.

Except for the foregoing, we have evaluated subsequent events through the date the financial

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13. Fair Value Measurements

12 Months Ended

Dec. 31, 2014

Notes

13. Fair Value Measurements:

13.  Fair value measurements:

The carrying value of cash and cash equivalents, value added taxes recoverable, accounts payable and accrued liabilities approximates fair value due to the short term to maturity of these instruments.  The carrying value of the promissory notes, 10% senior convertible notes and convertible promissory notes, approximates fair value due to the issuance subsequent to December 31, 2014 of new debt instruments having similar terms and conditions. 

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9. Gain On Extinguishment of Debt and Accrued Liabilities

12 Months Ended

Dec. 31, 2014

Notes

9. Gain On Extinguishment of Debt and Accrued Liabilities:

9.   Gain on extinguishment of debt and accrued liabilities:

During the year ended December 31, 2013, the Corporation issued an aggregate of 3,465,287 shares of its common stock, valued at $191,044, in settlement of $123,500 in accounts payable and accrued liabilities.  An aggregate loss of $67,544 was recognized.  Also during the year ended December 31, 2013, the Corporation settled stock-based remuneration for 2,081,953 shares less than the number of shares issuable pursuant to the contract terms; a gain of $174,676 was recognized on this settlement.

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14. Income Taxes: Schedule of Components of Income Tax Expense (Benefit) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Details
Unrecognized Tax Benefits Resulting in Net Operating Loss Carryforward	$ 9,400,000	$ 8,900,000
Deferred Tax Assets, Capital Loss Carryforwards	1,050,000	1,050,000
Deferred Tax Assets, Gross	10,450,000	9,950,000
Deferred Tax Assets, Valuation Allowance	(10,450,000)	(9,950,000)
Deferred Tax Assets, Net of Valuation Allowance	$ 0	$ 0

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7. Stockholders' Deficiency

12 Months Ended

Dec. 31, 2014

Notes

7. Stockholders' Deficiency:

7.   Stockholders’ deficiency:

(a)                 Common stock transactions:

In connection with the issuance of the Corporation’s 10% senior convertible notes during the year ended December 31, 2014, the Corporation issued 907,000 shares of its common stock, with a relative fair value of $36,772, to the holders of the notes (note 5).

During the year ended December 31, 2014, the Corporation issued an aggregate of 11,500,000 shares of its common stock to consultants as partial consideration for services rendered and to be rendered. $462,850, representing the fair value of the stock at issuance, was allocated to shares and to additional paid in capital.  $55,000, representing the value of services not yet rendered as at December 31, 2014, was charged to prepaid expense; $407,850 was charged to expense. 

On various dates during the year ended December 31, 2014, holders of the 10% senior convertible notes exercised the conversion feature of the notes, and converted an aggregate of $695,431 in principal and $107,596 in accrued interest, in exchange for 26,767,580 common shares of the Corporation (note 5).

On December 31, 2014, the Corporation issued an aggregate of 2,051,049 of its common shares to holders of certain of its 10% senior convertible notes, as compensation for extending the maturity date of the notes from December 31, 2014 to December 31, 2015.

On various dates during the year ended December 31, 2014, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted an aggregate of $264,500 in principal and $10,580 in accrued interest, in exchange for 16,666,751 common shares of the Corporation (note 6).

In connection with the issuance of the Corporation’s 10% senior convertible notes during the year ended December 31, 2013, the Corporation issued 7,989,993 shares of its common stock, with a relative fair value of $219,779, to the holders of the notes (note 5).

During the year ended December 31, 2013, the Corporation issued an aggregate of 14,251,380 shares of its common stock to consultants as partial consideration for services rendered and to be rendered. $750,290, representing the fair value of the stock at issuance, was allocated to shares and to additional paid in capital, and was charged to expense.  Included was a settlement of stock-based remuneration for 2,081,953 shares less than the number of shares issuable pursuant to the contract terms; a gain of $174,676 was recognized on this settlement.

During the year ended December 31, 2013, the Corporation issued an aggregate of 3,465,287 shares of its common stock in settlement of $123,500 in accounts payable and accrued liabilities.  An aggregate loss of $67,544 was recognized on these transactions.

On various dates during the year ended December 31, 2013, holders of the 10% senior convertible notes exercised the conversion feature of the notes, and converted an aggregate of $446,667 in principal and $340,684 in accrued interest, in exchange for 26,245,039 common shares of the Corporation (note 5).

During the year ended December 31, 2013, the Corporation issued an aggregate of 1,511,997 of its common shares in settlement of $45,360 in accrued interest on the 10% senior convertible notes. 

On various dates during the year ended December 31, 2013, holders of the convertible promissory notes exercised the conversion feature of the notes, and converted an aggregate of $70,000 in principal and $2,800 in accrued interest, in exchange for 13,160,041 common shares of the Corporation (note 6)

(b)        Transactions involving stock options:

The Corporation has two incentive equity plans, under which a maximum of 10,000,000 options to purchase 10,000,000 common shares may be granted to officers, employees and consultants of the Corporation.  The granting of options, and the terms associated with them, occurs at the discretion of the board of directors, who administers the plan.  

The fair value of unvested options are determined at the date of grant and are included in expense over the vesting period.

During the year ended December 31, 2012, 300,000 of the options granted under these plans were forfeited in accordance with the terms of the options, on the termination of the engagement with the consultant to which the options had been granted.

There were no stock options outstanding and exercisable at December 31, 2014, nor at December 31, 2013.

(c)        Summary of stock-based compensation:

The following table presents the total of stock-based compensation included in the expenses of the Corporation for the years ended December 31, 2014 and 2013:

	2014	2013
Selling, general and administrative	$ 407,850	$ 924,967
Total stock-based compensation included in expenses	$ 407,850	$ 924,967

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8. Interest and Financing Costs

12 Months Ended

Dec. 31, 2014

Notes

8. Interest and Financing Costs:

8.   Interest and financing costs:

Interest and financing costs include accrued interest, accretion and amortization of deferred financing costs relating to the 10% senior convertible notes; accrued interest and accretion on the promissory notes; and accrued interest and accretion on the convertible promissory notes.

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10. Loss Per Share

12 Months Ended

Dec. 31, 2014

Notes

10. Loss Per Share:

10.  Loss per share:

As the Corporation incurred a net loss during the years ended December 31, 2014 and 2013, the loss and diluted loss per common share are based on the weighted-average common shares outstanding during the year.  The following outstanding instruments could have a dilutive effect in the future:

	2014	2013
Stock issuable on conversion of the 10% senior
convertible notes	211,606,662	225,576,968
Stock issuable on conversion of the convertible
promissory  notes and accrued interest thereon	12,551,083	3,094,232
	224,157,745	228,671,200

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16. Supplementary Cash Flow Information: Schedule of Cash Flow, Supplemental Disclosures (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Details
Issuance of the Corporation's 10% senior convertible notes in settlement of accounts payable	$ 13,500	$ 26,000
Issuance of the Corporation's common stock as consideration for extending the maturity date of the 10% senior convertible notes	95,374
Issuance of the Corporation's common stock as partial consideration for services rendered	462,850	750,290
Issuance of the Corporation's common stock in settlement of 10% senior convertible notes and accrued interest, on the holders' exercise of the conversion feature	803,027	787,351
Issuance of the Corporation's common stock in settlement of convertible promissory notes, and accrued interest thereon	275,080	72,800
Issuance of the Corporation's 10% senior convertible notes in settlement of previously issued 10% senior convertible notes and accrued interest thereon		1,206,590
Issuance of the Corporation's common stock in settlement of accrued interest on the 10% senior convertible notes		45,360
Issuance of the Corporation's common stock in settlement of accounts payable and accrued liabilities		123,500
Non cash financing activities	$ 1,649,831	$ 3,011,891

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16. Supplementary Cash Flow Information (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Details
Interest Paid	$ 51,087	$ 67,245

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2. Summary of Significant Accounting Policies: (k) Foreign Currency Translation (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(k) Foreign Currency Translation:

(k)        Foreign currency translation:

The functional currency for the financial statements of the Corporation is the United States dollar.  Exchange gains or losses are realized due to differences in the exchange rate at the transaction date versus the rate in effect at the settlement or balance sheet date.  Exchange gains and losses are recorded in the statement of operations.

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3. Property and Equipment: Property, Plant and Equipment (Details) (USD $)	Dec. 31, 2014		Dec. 31, 2013
Details
Property, Plant and Equipment, Gross	$ 34,590		$ 34,590
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	33,743		31,235
Property, Plant and Equipment, Net, Total	$ 847	[1]	$ 3,355	[1]

[1] Note 3

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15. Change in Non-cash Operating Working Capital

12 Months Ended

Dec. 31, 2014

Notes

15. Change in Non-cash Operating Working Capital:

15.  Change in non-cash operating working capital:

	2014	2013
Value added taxes recoverable	$    (26,317)	$      (6,144)
Accounts payable	(26,650)	(29,751)
Accrued liabilities	31,482	52,807
	$    (21,485)	$      16,912

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2. Summary of Significant Accounting Policies: (c) Cash and Cash Equivalents (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(c) Cash and Cash Equivalents:

(c)        Cash and cash equivalents:

Cash and cash equivalents include liquid investments with original maturity dates of three months or less.

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2. Summary of Significant Accounting Policies: Liquidity Disclosure (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2014	Dec. 31, 2013
Details
Working capital		$ 11,283,326
Deficit		44,974,810	42,659,807
Net loss		2,315,003	3,349,497
Net cash used in operating activities	$ 615,719	$ 615,719	$ 635,234

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7. Stockholders' Deficiency: Summary of stock based compensation included in expenses (Tables)

12 Months Ended

Dec. 31, 2014

Tables/Schedules

Summary of stock based compensation included in expenses

	2014	2013
Selling, general and administrative	$ 407,850	$ 924,967
Total stock-based compensation included in expenses	$ 407,850	$ 924,967

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VALIDIAN CORPORATION Consolidated Statements of Changes in Stockholders' Equity (Deficiency) (USD $)		Common stock number	Common stock amount USD ($)	Additional paid-in capital USD ($)	Deficit USD ($)	Treasury stock USD ($)	Total USD ($)
Stockholders' Equity at Dec. 31, 2012			$ 184,400	$ 28,291,884	$ (39,310,310)	$ (49,738)	$ (10,883,764)
Shares issued at Dec. 31, 2012		184,399,565
Shares issued pursuant to the terms of the 10% senior convertible notes at issuance	[1]		7,990	211,789			219,779
Shares issued pursuant to the terms of the 10% senior convertible notes at issuance, stock	[1]	7,989,993
Intrinsic value of the beneficial conversion feature of the 10% senior convertible notes at date of issuance	[1]			765,217			765,217
Shares issued as partial consideration for consulting services rendered and to be rendered	[2]		14,251	736,039			750,290
Shares issued as partial consideration for consulting services rendered and to be rendered, stock	[2]	14,251,380
Shares issued in settlement of accounts payable and accrued liabilities	[2]		3,465	187,579			191,044
Shares issued in settlement of accounts payable and accrued liabilities, stock		3,465,287
Shares issued in connection with the conversion of 10% senior convertible notes	[2]		26,245	761,106			787,351
Shares issued in connection with the conversion of 10% senior convertible notes, stock	[2]	26,245,039
Shares issued in settlement of accrued interest on the 10% senior convertible notes	[2]		1,512	43,848			45,360
Shares issued in settlement of accrued interest on the 10% senior convertible notes, stock	[2]	1,511,997
Shares issued in connection with the conversion of convertible promissory notes	[2]		13,160	59,640			72,800
Shares issued in connection with the conversion of convertible promissory notes, stock	[2]	13,160,041
Intrinsic value of the beneficial conversion feature of the Convertible promissory notes at date of issuance	[3]			151,106			151,106
Net loss					(3,349,497)		(3,349,497)
Stockholders' Equity at Dec. 31, 2013			251,023	31,208,208	(42,659,807)	(49,738)	(11,250,314)
Shares issued at Dec. 31, 2013		251,023,302
Shares issued in connection with the conversion of 10% senior convertible notes and accrued interest thereon	[2]		26,768	776,259			803,027
Shares issued in connection with the conversion of 10% senior convertible notes and accrued interest thereon, stock	[2]	26,767,580
Shares issued in connection the modification of the terms of the 10% senior convertible notes	[2]		2,051	93,323			95,374
Shares issued in connection the modification of the terms of the 10% senior convertible notes, stock	[2]	2,051,049
Shares issued in connection with the conversion of convertible promissory notes and accrued interest thereon	[2]		16,667	258,413			275,080
Shares issued in connection with the conversion of convertible promissory notes and accrued interest thereon, stock	[2]	16,666,751
Shares issued pursuant to the terms of the 10% senior convertible notes at issuance	[1]		907	35,865			36,772
Shares issued pursuant to the terms of the 10% senior convertible notes at issuance, stock	[1]	907,000
Intrinsic value of the beneficial conversion feature of the 10% senior convertible notes at date of issuance	[1]			190,144			190,144
Shares issued as partial consideration for consulting services rendered and to be rendered	[2]		11,500	451,350			462,850
Shares issued as partial consideration for consulting services rendered and to be rendered, stock	[2]	11,500,000
Intrinsic value of the beneficial conversion feature of the Convertible promissory notes at date of issuance	[3]			419,591			419,591
Net loss					(2,315,003)		(2,315,003)
Stockholders' Equity at Dec. 31, 2014			$ 308,916	$ 33,433,153	$ (44,974,810)	$ (49,738)	$ (11,282,479)
Shares issued at Dec. 31, 2014		308,915,682

[1] Note 5

[2] Note 7a

[3] Note 6

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4. Promissory Notes Payable

12 Months Ended

Dec. 31, 2014

Notes

4. Promissory Notes Payable:

4.   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 years ended December 31, 2014 and 2013:

	2014	2013
Balance at beginning of year	$  57,339	$  93,008
Notes issued during the year	--	23,156
Principal repaid	(11,089)	(58,630)
Adjustment for foreign currency translation	--	(195)
Balance at end of year	$  46,250	$  57,339
Payable to related parties (note 13)	--	5,989
	$  46,250	$  51,350

The promissory notes are due on demand, bear interest at 12%, and are unsecured.

Included in interest and financing costs for the year ended December 31, 2014 is $6,319 (2013: $9,270) of interest on the promissory notes.  Interest on the promissory notes paid in cash during the year ended December 31, 2014 was $2,293 (2013:  $3,531). 

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10. Loss Per Share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Details
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	224,157,745	228,671,200

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2. Summary of Significant Accounting Policies: (d) Property and Equipment (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(d) Property and Equipment:

(d)        Property and equipment:

Property and equipment is stated at cost less accumulated depreciation, and includes computer hardware and software.  These assets are being depreciated on a straight-line basis over their estimated useful lives, as follows:  computer hardware:  3 years; computer software:  1 year.

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2. Summary of Significant Accounting Policies: (o) Accounting For Uncertainty in Income Taxes (Policies)

12 Months Ended

Dec. 31, 2014

Policies

(o) Accounting For Uncertainty in Income Taxes:

(o) Accounting for uncertainty in income taxes:

The Corporation does not recognize adjustments in the liability for unrecognized income tax benefits.  As of December 31, 2014, the Corporation had approximately $10,450,000 of unrecognized tax benefits, all of which would affect the Corporation’s effective tax rate if recognized.

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14. Income Taxes

12 Months Ended

Dec. 31, 2014

Notes

14. Income Taxes:

14.  Income taxes:

Deferred income taxes reflect the impact of temporary differences between amounts of assets and liabilities as reported for financial reporting purposes and such amounts as measured by tax laws.  The tax effects of temporary differences that gave rise to significant portions of the deferred tax asset and deferred tax liability are as follows:

	2014	2013
Deferred tax asset:
Net operating loss carryforwards	$   9,400,000	$   8,900,000
Capital loss carryforwards	1,050,000	1,050,000
Total gross deferred tax asset	10,450,000	9,950,000
Valuation allowance	(10,450,000)	(9,950,000)
Net deferred taxes	$                 0	$                 0

Income tax expense attributable to loss before income taxes was $nil (2013 - $nil) and differed from the amounts computed by applying the U.S. federal income tax rate of 34% (2013 - 34%) to the net loss as a result of the following:

	2014	2013
Expected tax rate	34%	34%
Expected tax recovery applied to net
loss before income taxes	$  (787,100)	$  (1,138,830)
Increase (decrease) in taxes resulting from:
Change in valuation allowance	500,000	400,000
Compensation expense	139,000	314,000
Interest and financing costs	203,000	387,000
Other	(54,900)	(37,830)
	$                  0	$                  0

The Corporation has net operating losses of $27,816,000 which are available to reduce U.S. taxable income and which expire as follows:

2019	$        391,000
2020	675,000
2021	521,000
2022	897,000
2023	1,671,000
2024	4,205,000
2025	3,381,000
2026	3,088,000
2027	2,623,000
2028	2,401,000
2029	1,299,000
2030	1,258,000
2031	1,298,000
2032	1,229,000
2033	1,475,000
2034	1,404,000
	$    27,816,000

The losses noted above are estimates, as the related tax returns have not been filed by the Corporation.