<PAGE>   1
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 --------------

                                   FORM 10-Q


     (Mark One)

         [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1996

                                       OR
         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

              For the transition period from ________ to ________

                         Commission file number 1-7427


                                Veritas DGC Inc.
             (Exact name of registrant as specified in its charter)


                   DELAWARE                                    76-0343152
        (State or other jurisdiction of                     (I.R.S. Employer
        incorporation or organization)                     Identification No.)

3701 KIRBY DRIVE, SUITE #112, HOUSTON, TEXAS                     77098
   (Address of principal executive offices)                    (Zip Code)

                                 (713) 512-8300
              (Registrant's telephone number, including area code)

                                   NO CHANGES
              (Former name, former address and former fiscal year,
                         if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x    No
                                             ---     ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

     The number of shares of the Company's common stock, $.01 par value (the
"Common Stock"), outstanding at November 30, 1996 was 18,446,568 (including
3,495,630 Veritas Energy Services Inc. exchangeable shares which are identical
to the Common Stock in all material respects).

================================================================================
<PAGE>   2
                       VERITAS DGC INC. AND SUBSIDIARIES

                                     INDEX




<TABLE>
<CAPTION>
                                                                          Page
                                                                         Number
                                                                         ------
<S>                                                                         <C>
PART I.   Financial Information

          Item 1.  Financial Statements

          Consolidated Balance Sheets -
            July 31, 1996 and October 31, 1996                               1

          Consolidated Statements of Operations -
            For the Three Months Ended October 31, 1995 and 1996             3

          Consolidated Statements of Cash Flows -
            For the Three Months Ended October 31, 1995 and 1996             4

          Notes to Consolidated Financial Statements                         7

          Item 2.  Management's Discussion and Analysis
                    of Financial Condition and Results of Operations        14


PART II.  Other Information

          Item 1.  Legal Proceedings                                        18

          Item 2.  Changes in Securities                                    18

          Item 4.  Submission of Matters to a Vote of Security Holders      18

          Item 6.  Exhibits and Reports on Form 8-K                         19
</TABLE>



<PAGE>   3
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                         PART I. FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

                       VERITAS DGC INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           (In thousands of dollars)

<TABLE>
<CAPTION>
                                                                             (Unaudited)
                                                               July 31,      October 31,
                                                                 1996           1996
                                                             ------------   ------------

ASSETS                                                        (AS COMBINED - SEE NOTE 2)
<S>                                                          <C>            <C>         
Current assets:
   Cash and short-term investments                           $     10,072   $     32,737
   Restricted cash investments                                        327            530
   Accounts and notes receivable (net of allowance for
       doubtful accounts:  July, $740; October, $383)              65,447         80,468
   Materials and supplies inventory                                 1,659          2,289
   Prepayments and other                                            8,199          8,462
                                                             ------------   ------------

          Total current assets                                     85,704        124,486

Property and equipment                                            165,104        178,937
Less accumulated depreciation                                      86,094         94,051
                                                             ------------   ------------

          Property and equipment - net                             79,010         84,886

Multi-client data library                                          25,628         28,075

Investments in and advances to joint venture                        1,463          3,030

Goodwill (net of accumulated amortization:
    July, $2,214; October, $2,340)                                  3,674          3,548

Other assets                                                        3,113          3,860
                                                             ------------   ------------

              Total                                          $    198,592   $    247,885
                                                             ============   ============
</TABLE>




---------
See Notes to Consolidated Financial Statements.




                                       1
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<TABLE>
<CAPTION>
                                                                            (Unaudited)
                                                              July 31,      October 31,
                                                               1996            1996
                                                           ------------    ------------
LIABILITIES AND STOCKHOLDERS' EQUITY                        (AS COMBINED - SEE NOTE 2)
<S>                                                        <C>             <C>         
Current liabilities:
  Current maturities of long-term debt                     $     13,739    $        876
  Accounts payable - trade                                       27,454          33,224
  Accrued interest                                                  313             336
  Other accrued liabilities                                      19,905          21,369
  Income taxes payable                                            1,814           2,229
                                                           ------------    ------------

          Total current liabilities                              63,225          58,034

Non-current liabilities:
  Long-term debt-less current maturities                         27,351          75,681
  Other non-current liabilities                                   2,093           2,006
                                                           ------------    ------------

          Total non-current liabilities                          29,444          77,687

Stockholders' equity:
  Common stock, $.01 par value; authorized:
     40,000,000 shares; issued: 11,334,352 shares and
     14,685,528 shares at July and October, respectively            113             146

  Additional paid-in capital                                    104,469         105,236

  Retained earnings (from August 1, 1991
     with respect to Digicon Inc.)                                2,275           7,443

  Cumulative foreign currency translation adjustment               (934)           (661)
                                                           ------------    ------------

           Total stockholders' equity                           105,923         112,164
                                                           ------------    ------------

                  Total                                    $    198,592    $    247,885
                                                           ============    ============
</TABLE>



---------
See Notes to Consolidated Financial Statements.




                                       2
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                       VERITAS DGC INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                   UNAUDITED
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                 October 31,
                                                          -----------------------
                                                             1995         1996
                                                          ----------   ----------

                                                         (AS COMBINED - SEE NOTE 2)
<S>                                                       <C>          <C>       
Revenues                                                  $   59,824   $   76,405

Costs and expenses:
    Operating expenses                                        46,806       58,320
    Depreciation and amortization                              6,352        8,692
    Selling, general and administrative                        1,580        1,950
    Other (income) expense:
       Merger related costs                                      597
       Interest                                                1,287        1,263
       Other                                                     116         (256)
                                                          ----------   ----------

          Total costs and expenses                            56,141       70,566
                                                          ----------   ----------

Income before provision for income taxes
   and equity in (earnings) loss of 50%
   or less-owned companies and joint ventures                  3,683        5,839

Provision for income taxes                                     1,664        1,238

Equity in (earnings) loss of 50% or less-owned
   companies and joint ventures                                  329         (567)
                                                          ----------   ----------

Net income                                                $    1,690   $    5,168
                                                          ==========   ==========

Per share of common stock:
   Primary:
      Income per share of common stock                    $      .10   $      .28
                                                          ==========   ==========
      Weighted average shares                                 17,399       18,382
                                                          ==========   ==========
   Fully diluted:
      Income per share of common stock and common
        stock equivalent                                               $      .27
                                                          ==========   ==========
      Weighted average shares                                              18,950
                                                          ==========   ==========
   Cash dividends                                            None         None
                                                          ==========   ==========
</TABLE>


---------
See Notes to Consolidated Financial Statements.




                                       3
<PAGE>   6

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                       VERITAS DGC INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   UNAUDITED
                           (In thousands of dollars)

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                October 31,
                                                         ------------------------
                                                            1995          1996
                                                         ----------    ----------

                                                        (AS COMBINED - SEE NOTE 2)
<S>                                                      <C>           <C>       
Operating activities:
  Net income                                             $    1,690    $    5,168
  Non-cash items included in net income:
     Depreciation and amortization                            6,352         8,692
     Amortization of deferred gain on sale/leaseback            (60)
     Loss on disposition of property and equipment              303           224
     Equity in (earnings) loss of 50% or less-owned
        companies and joint ventures                            329          (567)
     Write-down of multi-client data library to market           99           436
  Change in operating assets/liabilities:
     Accounts and notes receivable                              487       (15,021)
     Materials and supplies inventory                            69          (630)
     Prepayments and other                                      217            89
     Multi-client data library                                 (716)       (2,883)
     Other                                                      753         1,421
     Accounts payable - trade                                (3,597)        4,481
     Accrued interest                                           (10)           23
     Other accrued liabilities                               (1,734)        1,464
     Income taxes payable                                     2,242           415
     Other non-current liabilities                             (955)          (87)
                                                         ----------    ----------
          Total cash provided by operating activities         5,469         3,225

Financing activities:
  Borrowing of senior notes                                                75,000
  Debt issues costs                                                        (2,461)
  Borrowings of long-term debt                                  256           781
  Payments of long-term debt                                 (1,314)      (28,398)
  Net borrowings (payments) under credit agreements             813       (11,458)
  Payment of secured term loan                                             (6,000)
  Net proceeds from sale of common stock                         13           800
  Net proceeds from sale of treasury stock                    3,982
                                                         ----------    ----------
          Total cash provided by financing activities         3,750        28,264
</TABLE>


---------
See Notes to Consolidated Financial Statements.



                                       4
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                       VERITAS DGC INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   UNAUDITED
                           (In thousands of dollars)

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                                   October 31,
                                                            ------------------------
                                                               1995          1996
                                                            ----------    ----------

                                                           (AS COMBINED - SEE NOTE 2)
<S>                                                         <C>           <C>        
Investing activities:
  Increase in restricted cash investments                   $      (11)   $     (203)
  Increase in investment in and advances to joint venture       (1,235)       (1,000)
  Purchase of property and equipment                            (5,486)       (8,502)
  Sale of property and equipment                                   150           667
                                                            ----------    ----------

      Total cash used by investing activities                   (6,582)       (9,038)

Currency (gain) loss on foreign cash                                57           214
                                                            ----------    ----------

Change in cash and cash equivalents                              2,694        22,665

Beginning cash and cash equivalents balance                      6,691        10,072
                                                            ----------    ----------

Ending cash and cash equivalents balance                    $    9,385    $   32,737
                                                            ==========    ==========
</TABLE>



---------
See Notes to Consolidated Financial Statements.



                                       5
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                       VERITAS DGC INC. AND SUBSIDIARIES
        SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   UNAUDITED
                           (In thousands of dollars)

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                               October 31,
                                                           -------------------
                                                             1995       1996
                                                           --------   --------

                                                        (AS COMBINED - SEE NOTE 2)
<S>                                                        <C>        <C>     
Schedule of non-cash investing and financing activities:

Increase in property and equipment for:
  Equipment purchase obligations                           $  2,975   $  5,542
  Accounts payable - trade                                      382      1,289

Supplemental disclosures of cash flow information:

Cash paid for:
   Interest -
     Revolving credit agreement                                 529        205
     Secured term loans                                         121        274
     Equipment purchase obligations                             425        689
     Other                                                      220         11
   Income taxes                                                 235        613
</TABLE>




                                       6
<PAGE>   9
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                       VERITAS DGC INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   UNAUDITED



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     OPINION OF MANAGEMENT

     In the opinion of Management, the accompanying unaudited consolidated
     financial statements contain all adjustments of a normal and recurring
     nature necessary to present fairly the financial position of Veritas DGC
     Inc. and subsidiaries at October 31, 1996, and the results of its
     operations and its cash flows for the three months ended October 31, 1995
     and 1996. The results of operations for any interim period are not
     necessarily indicative of the results to be expected for a full year, as
     such results could be affected by changes in demand for geophysical
     services and products, which is directly related to the level of oil and
     gas exploration and development activity. Governmental actions, foreign
     currency exchange rate fluctuations, seasonal factors, weather conditions
     and equipment problems also could impact future operating results.

     EARNINGS PER SHARE

     Weighted average shares and earnings per share for all periods presented
     have been restated to reflect the effect of shares issuable upon exchange
     of Veritas Energy Services Inc. Exchangeable Shares (See Note 2).

     Primary earnings per share is computed based on the weighted average
     number of shares of common stock. Fully diluted earnings per share is
     computed based on the weighted average number of shares of common stock
     and common stock issuable upon the conversion of stock options and
     warrants, which are common stock equivalents, calculated under the
     treasury stock method.

     TRANSLATION OF FOREIGN CURRENCIES

The Company has determined that the United States ("U.S.") dollar is its primary
functional currency and, accordingly, translates property and equipment (and
related depreciation) and inventories into U.S. dollars at the exchange rate in
effect at the time of their acquisition while other assets and liabilities are
translated at period end rates. Operating results (other than depreciation) are
translated at the average rates of exchange prevailing during the period and
remeasurement gains and losses are included in the determination of net income
and reflected in other (income) expense (See Note 5). Prior to the Combination
(See Note 2), VES used the Canadian dollar as its functional currency and
translated all assets and liabilities at period end exchange rates and operating
results at average exchange rates prevailing during the period. Adjustments
resulting from the translation of assets and liabilities are recorded in the
cumulative foreign currency translation adjustment account in the stockholders'
equity section.



                                       7
<PAGE>   10
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     NEW ACCOUNTING PRONOUNCEMENTS

     In March 1995, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting
     for Impairment of Long-Lived Assets and for Long-Lived Assets to Be
     Disposed Of." This statement establishes accounting standards for the
     impairment of long-lived assets, certain identifiable intangibles and
     goodwill related to those assets to be held and used and for long-lived
     assets and certain identifiable intangibles to be disposed of. This
     statement is effective for financial statements with fiscal years
     beginning after December 15, 1995. The Company implemented this statement
     at the beginning of the fiscal year 1997. Implementation of this
     pronouncement did not have a material effect on the Company's consolidated
     financial statements.

     In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock Based
     Compensation." This statement establishes a fair value method of
     accounting for stock-based compensation plans either through recognition
     or disclosure. This statement is effective for fiscal years beginning
     after December 15, 1995. The Company will be required to implement this
     statement for the fiscal year 1997. The Company intends to adopt this
     standard by disclosing the pro forma net income (loss) and net income
     (loss) per share amounts assuming the fair value method was adopted on
     August 1, 1995. The adoption of this statement will have no material
     impact on the Company's consolidated financial statements.


2.   BUSINESS COMBINATION

     Veritas DGC Inc. was formerly named Digicon Inc. ("Digicon"). On August
     30, 1996, Digicon and Veritas Energy Services Inc. ("VES"), a Canadian
     company, consummated a business combination (the "Combination"). VES
     became a wholly-owned subsidiary of Digicon and Digicon changed its name
     to Veritas DGC Inc. (the "Company"). As a result of the Combination, each
     share of VES no par value common shares outstanding was converted into the
     right to receive a VES no par value exchangeable share (the "Exchangeable
     Shares") at an exchange ratio of 0.8 of an Exchangeable Share per VES
     common share. All of the holders of VES common shares, except for those
     shareholders who perfected and properly exercised their right to dissent
     from the Combination and received fair value of their shares in cash,
     became holders of Exchangeable Shares and, accordingly, 7,023,701 shares
     of Exchangeable Shares were issued. The aggregate stated capital of the
     Exchangeable Shares is equal to the aggregate stated capital immediately
     prior to the Combination of the VES common shares that were exchanged or
     approximately $30.0 million. The Exchangeable Shares are convertible, at
     the discretion of the stockholder, on a one-for-one basis into shares of
     the Company's $0.01 par value



                                       8
<PAGE>   11

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     common stock and their holders have rights identical to the holders of the
     Company's common stock. Options to purchase shares of VES common stock
     ("VES Option") were converted into options to purchase shares of the
     Company's common stock at an exchange ratio of 0.8 of an option in the
     Company's common stock per VES Option. The VES articles of amalgamation
     were amended to reduce the number of authorized VES common shares to one
     which is held by the Company

     The Combination has been accounted for as a pooling of interests and,
     accordingly, the consolidated financial statements of Digicon and VES have
     been combined and all prior periods have been restated to give effect to
     the Combination. Information concerning common stock and per share data
     has been restated on an equivalent share basis. As a result of differing
     year ends of Digicon and VES, results of operations for dissimilar year
     ends will be combined. The Company's results of operations for the years
     ended July 31, 1995 and prior will be combined with VES' results of
     operations for the years ended October 31, 1995 and prior. To conform year
     ends, Digicon's results of operations for the year ended July 31, 1996
     will be combined with VES' results of operations for the twelve months
     ended July 31, 1996. Accordingly, VES' operating results for the period
     August 1, 1995 through October 31, 1995 will be included in the years
     ended July 31, 1995 and July 31, 1996. An adjustment in an amount equal to
     the results of operations for this three-month period will be included in
     the consolidated statements of changes in stockholders' equity. VES'
     revenues, net income and net income per share were $22,150,000, $938,000
     and $0.05, respectively, for the period August 1, 1995 through October 31,
     1995.



                                       9
<PAGE>   12

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     Presented below is the effect the pooling of interests will have on the
     Company's reported results of operations. Amounts related to VES have been
     converted into the Company's reporting currency, U.S. dollars, using
     weighted average exchange rates prevailing during the period and reflects
     adjustments for differences between U.S. and Canadian generally accepted
     accounting principles ("GAAP") and reclassifications to conform financial
     statement presentation. Canadian to U.S. GAAP adjustments include
     adjustments to (i) write off foreign exchange gains and (losses) on
     borrowings which are deferred and amortized over the period of the debt
     affecting net income by approximately ($90,000), ($25,000) and ($173,000)
     for the three months ended October 31, 1995 and for the years ended July
     31, 1995, and 1996, respectively, and (ii) reverse the effect of a prior
     period adjustment affecting net income by approximately $90,000, $314,000
     and $102,000 for the three months ended October 31, 1995 and for the years
     ended July 31, 1995 and 1996, respectively. Reclassification of
     $6,985,000, $25,493,000 and $28,842,000 for the three months ended October
     31, 1995 and for the years ended July 31, 1995 and 1996, respectively,
     have been made to net amounts billed to customers for reimbursable costs
     against VES' revenues.

<TABLE>
<CAPTION>
                                 Three Months
                                    Ended
                                  October 31,         Years Ended July 31,
                                 ------------    ----------------------------
                                     1995            1995            1996
                                 ------------    ------------    ------------
                                          (In thousands of dollars)
<S>                              <C>             <C>             <C>         
     Revenues:
        Digicon                  $     37,674    $    131,127    $    160,847
        VES                            29,135         109,996         118,591
        Reclassifications              (6,985)        (25,493)        (28,842)
                                 ============    ============    ============
           Total                 $     59,824    $    215,630    $    250,596
                                 ============    ============    ============

     Net income:
        Digicon                  $        752    $      2,778    $        385
        VES                               938           2,527             967
        Adjustments                                       289             (71)
                                 ------------    ------------    ------------
           Total                 $      1,690    $      5,594    $      1,281
                                 ============    ============    ============

     Net income per share:
        As previously reported   $        .07    $        .25    $        .03
                                 ============    ============    ============

        As restated              $        .10    $        .31    $        .07
                                 ============    ============    ============
</TABLE>

     There are no material adjustments to the net assets of VES as a result of
     adopting the same accounting principles as the Company.

     During the year ended July 31, 1996 and the three months ended October 31,
     1996, the Company incurred and expensed $3,666,000 and $597,000,
     respectively of costs associated with the merger. These costs consists
     primarily of professional fees. Costs for the three months ended October
     31, 1996 include $150,000 payable to a stockholder who was the former
     Chairman of the Board of Directors for consulting services rendered in
     conjunction with the merger.



                                      10
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3.   INVESTMENT IN INDONESIAN JOINT VENTURE

     Summarized financial information for the Company's Indonesian joint
     venture which is accounted for under the equity method is as follows:

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                              October 31,
                                                       ------------------------
                                                          1995          1996
                                                       ----------    ----------
                                                      (In thousands of dollars)
<S>                                                    <C>           <C>       
     Revenues                                          $      504    $    3,296

     Operating expenses                                       720         2,365
     Depreciation and amortization                            107           288
     Other                                                      6             1
                                                       ----------    ----------
               Total                                          833         2,654

     Income (loss) before provision for income taxes         (329)          642
     Provision for income taxes                                              75
                                                       ----------    ----------

     Net income (loss)                                 $     (329)   $      567
                                                       ==========    ==========
</TABLE>



4.   LONG-TERM DEBT

     The Company's long-term debt is as follows:

<TABLE>
<CAPTION>
                                                                   July 31,    October 31,
                                                                     1996         1996
                                                                  ----------   ----------

                                                                 (AS COMBINED - SEE NOTE 2)
                                                                 (In thousands of dollars)
<S>                                                               <C>          <C>       
     Senior notes due October 2003, at 9.75%                                   $   75,000
     Revolving credit agreement due July 1998, at
         LIBOR plus 2% or prime                                   $   11,458
     Secured term loan due July 1999, at prime plus3/4%                6,000
     Secured term loan due July 1999, at prime plus1/2%                1,240
     Secured term loan due July 1999, at prime plus1/2%                2,832
     Equipment purchase obligations maturing through July 1999,
        at a weighted average rate of 9.59% at October 31, 1996       19,319        1,314
     Mortgage note payable due October 2005, at 10%                      241          243
                                                                  ----------   ----------
                 Total                                                41,090       76,557
     Less current maturities                                          13,739          876
                                                                  ==========   ==========
                 Due after one year                               $   27,351   $   75,681
                                                                  ==========   ==========
</TABLE>

     The senior notes are due in October 2003 with interest payable
     semi-annually at 9 3/4%. The senior notes are unsecured and are
     effectively subordinated to secured debt of the Company with respect to
     the assets securing such debt and to all debt of its subsidiaries whether
     secured or unsecured. The indenture relating to the senior notes contains
     certain



                                      11
<PAGE>   14

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     covenants which limit the Company's ability to, among other things, incur
     additional debt, pay dividends and complete mergers, acquisitions and
     sales of assets. Upon a change in control of the Company, as defined in
     the Indenture, the holders of the senior notes have the right to require
     the Company to purchase all or a portion of such holder's senior note at a
     price equal to 101% of the aggregate principal amount. The Company has the
     right to redeem the senior notes, in whole or in part, on or after October
     15, 2000. Under certain conditions, the Company may redeem up to $20.0
     million in aggregate principle amount of the senior notes prior to October
     15, 1999.

     The revolving credit agreement due July 1998, as amended, is with a
     commercial bank and provides a facility of up to $15.0 million.  Advances
     are secured by substantially all of the receivables of the Company, bear
     interest, at the Company's election, at LIBOR plus two percent or prime
     rate and are limited by a borrowing formula. Covenants in the agreement
     limit, among other things, the Company's right, without consent of the
     lender, to take certain actions, including creating indebtedness and paying
     dividends, and limit the Company's capital expenditures in any fiscal year.
     In addition, the agreement requires minimum cash flow coverage and the
     maintenance of minimum tangible net worth, limits the ratio of funded debt
     to total capitalization, and requires the Company to maintain a minimum
     current ratio.

     The secured term loan due July 1999 was with a commercial bank, was due in
     36 monthly installments of $166,667 plus interest at prime plus 3/4% and
     was secured by a majority of the assets of the Company (except those
     assets directly or indirectly owned by VES). The secured term loan was
     paid with proceeds from the senior notes.

     The secured term loans due July 1999 provided for advances for equipment
     purchases up to Canadian $4.0 million and Canadian $5.5 million,
     respectively, and advances were payable in 36 equal monthly installments.
     Advances bore interest at the prime rates (as defined) plus .5% and were
     secured by the equipment purchased. The agreements required VES to
     maintain certain financial ratios. Advances under the secured term loans
     were paid with proceeds from the senior notes.

     The Company's equipment purchase obligations represent installment loans
     and capitalized lease obligations primarily related to computer and
     seismic equipment. Substantially all the equipment purchase obligations
     were paid with proceeds from the senior notes.

     The mortgage note is payable in monthly installments of Canadian $4,800
     including interest at 10% and is secured by a building.



                                      12
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5.   OTHER (INCOME) EXPENSE

     Other (income) expense consists of the following:

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                              October 31,
                                                         --------------------
                                                           1995        1996
                                                         --------    --------

                                                       (AS COMBINED, SEE NOTE 2)
                                                       (In thousands of dollars)
<S>                                                      <C>         <C>      
     Net foreign currency exchange (gain) loss           $     20    $   (395)
     Net loss on disposition of property and equipment        303         224
     Interest income                                         (173)        (95)
     Other                                                    (34)         10
                                                         --------    --------
               Total                                     $    116    $   (256)
                                                         ========    ========
</TABLE>




                                      13
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The Company's internal sources of liquidity are cash and short-term investments
and cash flow from operations. External sources include the unutilized portion
of a revolving credit facility, equipment financing and trade credit.

In October 1996, the Company effected a public offering of $75.0 million of 9
3/4% senior notes due 2003 (the "Senior Notes") which generated approximately
$72.2 million of net proceeds. The indenture relating to the Senior Notes (the
"Indenture") contains certain covenants, including covenants which limit the
Company's ability to, among other things, incur additional debt, pay dividends
and complete mergers, acquisitions and sales of assets. Upon a change of
control of the Company (as defined in the Indenture), holders of the Senior
Notes have the right to require the Company to purchase all or a portion of
such holder's Senior Note at a price equal to 101% of the aggregate principal
amount.

The Company maintains a $15.0 million revolving credit facility, as amended (the
"Credit Facility"), with a commercial bank which will mature in July 1998.
Advances under the Credit Facility are secured by substantially all of the
Company's receivables, bear interest, at the Company's election, at LIBOR plus
two percent or prime rate and are limited by a borrowing formula which, based on
current levels of receivables, results in a borrowing base well in excess of the
maximum commitment. Covenants in the Credit Facility limit, among other things,
the Company's right, without consent of the lender, to take certain actions,
including creating indebtedness and paying dividends and limit the Company's
capital expenditures in any fiscal year. In addition, the Credit Facility
requires minimum cash flow coverage and the maintenance of minimum tangible net
worth, limits the ratio of funded debt to total capitalization, and requires the
Company to maintain a minimum current ratio.

The Company requires significant amounts of working capital to support its
operations and to fund capital spending and research and development programs.
The Company's foreign operations require greater amounts of working capital
than similar domestic activities, as the average collection period for foreign
receivables is generally longer than for comparable domestic accounts.
Approximately 59% of revenues for the quarter ended October 31, 1996 are
attributable to the Company's export sales and foreign operations. In addition,
the Company has increased its participation in multi-client data surveys and
has significantly expanded its library of multi-client data. Because of the
lead time between survey execution and sale, multi-client data surveys
generally require greater amounts of working capital than contract work.
Depending on timing of future sales of the data and the collection of the
proceeds from such sales, the Company's liquidity will continue to be affected;
however, the Company believes that these non-exclusive surveys have good
long-term sales, earnings and cash flow potential.



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Approximately $49.8 million of the net proceeds from the Senior Notes has been
used to retire outstanding indebtedness of the Company (including borrowings
under the Credit Facility). The remaining net proceeds are being used to fund a
portion of the Company's $67.4 million capital expenditure budget for fiscal
1997. It is anticipated that the balance of the 1997 capital expenditure budget
will be financed from internally generated funds, and, if necessary, from the
Credit Facility or other borrowings permitted by the Indenture and Credit
Facility. Of the $67.4 million capital expenditure budget, approximately $7.7
million represents capital spending necessary to maintain the Company's
operating equipment and the remainder is for discretionary capital spending,
including approximately $26.2 million for the replacement of older operating
equipment with a view to substantially enhancing operating efficiency. The
remaining $33.5 million will be used for expansion of its equipment complement
to meet increased demand for seismic services.

The Company will require substantial cash flow to continue operations on a
satisfactory basis, complete its capital expenditure and research and
development programs, and meet its principal and interest obligations with
respect to the Senior Notes. The Company anticipates that cash and short-term
investments, cash flow generated from operations and borrowings permitted under
the Indenture and Credit Facility will provide sufficient liquidity to fund
these requirements until the Senior Notes become due in 2003. However, the
Company's ability to meet its debt service and other obligations depends on its
future performance, which, in turn, is subject to general economic conditions,
business and other factors beyond the Company's control. If the Company is
unable to generate sufficient cash flow from operations or otherwise to comply
with the terms of the Credit Facility or the Indenture, it may be required to
refinance all or a portion of its existing debt or obtain additional financing.
There can be no assurances that the Company would be able to obtain such
refinancing or financing, or that any refinancing or financing would result in
a level of net proceeds required.



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RESULTS OF OPERATIONS

Three Months Ended October 31, 1996 compared with Three Months Ended
October 31, 1995

Revenues. Land data acquisition revenues increased $8.7 million or 27%. During
the quarter, the Company increased its transition zone activities which
generate higher revenues and margins than highland operations. The Company
added an Input/Output System Two - RSR crew to its transition zone operations
and moved an Input/Output System Two - MRX crew from its transition zone to its
highlands operation in Peru. One of the three highland crews operating in
Argentina was mobilized to Ecuador to begin operations in November. All land
recording equipment is now fully upgraded, although some further
standardization of cables and geophones will continue throughout the year.

Marine data acquisition revenues increased $7.4 million or 83% primarily due to
increased utilization of the Company's vessels. In the prior year's quarter,
one of the Company's vessels was in transit from the North Sea to the Gulf of
Mexico and two vessels experienced downtime while a third vessel was being
rigged for multi-boat configuration. During the current quarter, there were
better weather conditions in the Gulf of Mexico, an area which in the prior
quarter had experienced one of the worst hurricane seasons in many years.
Production increased during the current period due to surveys which had fewer
shooting obstructions and program designs which improved equipment utilization.
Marine revenues also improved due to the addition of a vessel to complete
projects in the North Sea as well as an increase in funding on multi-client
data surveys.

Seismic data processing revenues increased $1.8 million or 15% due to increased
capacity and increased volumes of marine data acquired in the North Sea to be
processed. During the quarter the Company has upgraded four major marine
centers, installed an NEC supercomputer in house and added new processing
centers in Oklahoma City and Quito, Ecuador.

Sales from the licensing of multi-client data surveys decreased $1.4 million or
25% mainly because of a shift in oil and gas companies' budgets from
multi-client data library licensing to multi-client data survey acquisition
contracts. The Company expects sales to increase during the next quarter which
is typically the end of the budget period for many oil and gas companies.

Operating Expenses. Costs of services increased $11.5 million or 25% but as a
percent of revenues decreased from 78% to 76%. The improvement in operating
margins is mainly attributable to marine data acquisition as a result of
increased utilization and data processing as a result of increased capacity as
discussed above. These improvements were offset by a decline in land margins
caused by lower contract prices, delays in the startup of the new crew in South
America and adverse weather conditions in the U.S. highlands.

Depreciation and Amortization. Depreciation and amortization expense increased
37% from $6.4 million to $8.7 million due to increased equipment purchases.

Merger Related Costs. Merger related costs are a result of the Combination
discussed in Note 2 of Notes to the Consolidated Financial Statements.



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Selling, General and Administrative. Selling, general and administrative
expenses increased 23% from $1.6 million to $2.0 million, resulting primarily
from additional costs incurred in implementing new administrative and
accounting data processing systems.

Interest. Interest expense was comparable with the prior year. Increased
average debt levels were offset by improved interest rates.

Other. Other (income) expense increased from an expense of $116,000 to income
of $256,000 resulting primarily from increased net foreign currency exchange
gains.

Income Taxes. Provision for income taxes decreased from $1.7 million to $1.2
million reflecting improved tax rates as a result of restructuring the
operations of certain of the Company's subsidiaries and taxable losses in
Canada.

Equity in (Earnings) Losses. Equity in (earnings) losses is attributable to the
Company's Indonesian joint venture which performed profitable marine
acquisition services in the current year.




                                      17
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                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is not a party to, nor is its property the subject of, any material
pending legal proceedings, as defined by relevant rules and regulations of the
Securities and Exchange Commission.

Item 2.  Changes in Securities

On October 18, 1996, the Company issued senior notes in the amount of $75.0
million which bear interest at 9 3/4% and mature in 2003. The senior notes were
issued under an indenture which limits the payment of dividends.

Item 4. Submission of Matters to a Vote of Security Holders

On August 20, 1996, a Special Meeting of Stockholders of Veritas DGC Inc.
(formerly Digicon Inc. ("Digicon")) was held;

1.   To consider and vote upon a proposal to approve the Combination Agreement
     dated as of May 10, 1996, between Digicon and Veritas Energy Services
     Inc., an Alberta, Canada corporation ("Veritas"), and the transactions
     contemplated thereby.

     Votes cast for the above matter were 8,434,738; votes against the above
     matter were 14,424. There were 7,510 abstentions.

2.   To consider and vote upon a recapitalization plan pursuant to which 
     Digicon's Restated Certificate of Incorporation would be amended and
     restated (a) to authorize a class of 40,000,000 ordinary shares, $.01 par
     value ("Ordinary Shares"), (b) to reclassify the currently outstanding
     common stock as a series of Ordinary Shares having the same rights and
     privileges, (c) to designate a series of Ordinary Shares as Special Voting
     Stock consisting of one share, (d) to change Digicon's name to "Veritas DGC
     Inc." and (e) to add provisions regarding Digicon's obligation to comply
     with the terms of the exchangeable shares of Veritas.

     Votes cast for the above matter were 8,359,820; votes against the above
     matter were 9,034. There were 87,818 abstentions.



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Item 6.  Exhibits and Reports on Form 8-K

a)   Exhibits filed with this report:

     3-A)   Restated Certificate of Incorporation of Veritas DGC Inc. dated
            August 30, 1996. (Exhibit 3.1 to Veritas DGC Inc.'s Current Report 
            on Form 8-K dated September 16, 1996 is incorporated herein by
            reference.)

     3-B)   Certificate of Ownership and Merger of New Digicon Inc. and Digicon
            Inc. (Exhibit 3-B to Digicon Inc.'s Registration Statement No.
            33-43873 dated November 12, 1991 is incorporated herein by
            reference.)

     3-C)   By-laws of New Digicon Inc. dated June 24, 1991 (Exhibit 3-I to
            Digicon Inc.'s Form 10-K for the year ended July 31, 1991, is
            incorporated herein by reference.)

     4-A)   Specimen certificate for Senior Notes. (Included as part of Section
            2.2 of Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No.
            333-12481 dated September 20, 1996 is incorporated herein by
            reference.)

     4-B)   Form of Trust Indenture relating to the 9 3/4% Senior Notes due 2003
            of Veritas DGC Inc. between Veritas DGC Inc. and Fleet National 
            Bank, as trustee. (Exhibit 4-B to Veritas DGC Inc.'s Registration 
            Statement No. 333-12481 dated September 20, 1996 is incorporated 
            herein by reference.)

     4-C)   Specimen Veritas DGC Inc. common stock certificate. (Exhibit 4-C to
            Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1996, is
            incorporated herein by reference.)

     10-A   Salary Continuation Agreement executed by Nicholas A. C. Bright,
            Kevin P. Callaghan, Richard W. McNairy and Allan C. Pogach. 
            (Incorporated herein by reference to Exhibit 10-E of Digicon Inc.'s
            Annual Report on Form 10-K for the year ended July 31, 1994)

     10-B   Salary Continuation Agreement executed by Stephen J. Ludlow
            (Incorporated herein by reference to Exhibit 10-B of Veritas 
            DGC Inc.'s Amendment No. 1 to Registration Statement 
            No. 333-12481, dated October 2, 1996)

     10-C   Asset Purchase Agreement dated August 31, 1994, between Syntron,
            Inc. and Digicon Gephysical Corp., Euroseis, Inc., Digicon/GFS Inc. 
            and Digicon Inc. (Incorporated herein by reference to Exhibit 10-M
            of Digicon Inc.'s Annual Report on Form 10-K for the year ended
            July 31, 1994)

     10-D   1992 Non-Employee Director Stock Option Plan. (Incorporated herein
            by reference to Exhibit 10-T of Digicon Inc.'s Amendment No. 3 to 
            Registration Statement No. 33-54384, dated December 17, 1992) 

     10-E   Amended and Restated 1992 Employee Nonqualified Stock Option Plan.
            (Incorporated herein by reference to Exhibit 10-E of Veritas 
            DGC Inc.'s Amendment No. 1 to Registration Statement 
            No. 333-12481, dated October 2, 1996)

     10-F   Support Agreement dated August 30, 1996, between Digicon Inc. and
            Veritas Energy Services Inc. (Incorporated herein by reference to 
            Exhibit 10.1 of Veritas DGC Inc.'s Current Report on Form 8-K, 
            dated August 30, 1996)

     10-G   Credit Agreement dated July 18, 1996, among Digicon Inc. and
            Digicon Geophysical Corp., Digicon/GFS Inc., Digicon Geophysical
            Limited and Digicon Exploration, Ltd., as Borrowers, each of the
            banks named therein, and Wells Fargo Bank (Texas), National
            Association, as issuing bank, as a bank and as agent for the 
            banks (the "Credit Agreement") (Incorporated herein by reference 
            to Exhibit 10-G of Veritas DGC Inc.'s Amendment No. 1 to 
            Registration Statement No. 333-12481, dated October 2, 1996)

     10-H   Letter dated September 27, 1996, from Wells Fargo Bank (Texas), 
            National Association, agreeing to amend the Credit Agreement 
            (Incorporated herein by reference to Exhibit 10-H of Veritas 
            DGC Inc.'s Amendment No. 1 to Registration Statement 
            No. 333-12481, dated October 2, 1996)
            
     *      11) Computation of income per common and common equivalent share 
            for the three months ended October 31, 1995 and 1996.

*     27)   Financial Data Schedule

---------------
* Filed herewith

b)   Reports on Form 8-K

     1)   A Form 8-K dated August 30, 1996 reported the Combination of Digicon 
          Inc. and Veritas Energy Services Inc.



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                                   SIGNATURES


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



                       
                                                    VERITAS DGC INC.
                                     -------------------------------------------
                                                      (Registrant)
                                        
                                        
                                        
                                        
Date: December 13, 1996              By:         /s/ David B. Robson
      -----------------              -------------------------------------------
                                                     David B. Robson
                                                 (Chairman of the Board
                                              and Chief Executive Officer)
                                        
                                        
                                        
Date: December 13, 1996              By:      /s/ Richard W. McNairy
      -----------------              -------------------------------------------
                                                   Richard W. McNairy
                                        (Chief Accounting and Financial Officer)
                       
      


<PAGE>   23
                              INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                   DESCRIPTION
-------                  -----------
<S>       <C>
  3-A)    Restated Certificate of Incorporation of Veritas DGC Inc. dated
          August 30, 1996. (Exhibit 3.1 to Veritas DGC Inc.'s Current Report on
          Form 8-K dated September 16, 1996 is incorporated herein by
          reference.)
         
  3-B)    Certificate of Ownership and Merger of New Digicon Inc. and Digicon
          Inc. (Exhibit 3-B to Digicon Inc.'s Registration Statement No.
          33-43873 dated November 12, 1991 is incorporated herein by
          reference.)
         
  3-C)    By-laws of New Digicon Inc. dated June 24, 1991 (Exhibit 3-I to
          Digicon Inc.'s Form 10-K for the year ended July 31, 1991, is
          incorporated herein by reference.)
         
  4-A)    Specimen certificate for Senior Notes. (Included as part of Section
          2.2 of Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No.
          333-12481 dated September 20, 1996 is incorporated herein by
          reference.)
         
  4-B)    Form of Trust Indenture relating to the 9 3/4% Senior Notes due 2003
          of Veritas DGC Inc. between Veritas DGC Inc. and Fleet National Bank,
          as trustee. (Exhibit 4-B to Veritas DGC Inc.'s Registration Statement
          No. 333-12481 dated September 20, 1996 is incorporated herein by
          reference.)
         
  4-C)    Specimen Veritas DGC Inc. common stock certificate. (Exhibit 4-C to
          Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1996, is
          incorporated herein by reference.)
         
*  11)    Computation of income per common and common equivalent share for the
          three months ended October 31, 1995 and 1996.
         
*  27)    Financial Data Schedule
</TABLE>

---------------
* Filed herewith