<PAGE>   1
================================================================================

                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 JANUARY 31, 1997

                                       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 (the "Common Stock"),
$.01 par value, outstanding at February 28, 1997 was 18,790,907 (including
2,406,583 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 January 31, 1997                               1

              Consolidated Statements of Operations -
                For the Three and Six Months Ended January 31, 1996 and 1997     3

              Consolidated Statements of Cash Flows -
                For the Six Months Ended January 31, 1996 and 1997               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                                        19

              Item 4.  Submission of Matters to a Vote of Security Holders      19

              Item 6.  Exhibits and Reports on Form 8-K                         20
</TABLE>




<PAGE>   3




                         PART I. FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

                       VERITAS DGC INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                  (In thousands of dollars, except par value)

<TABLE>
<CAPTION>
                                                                     (Unaudited)
                                                          July 31,    January 31,
                                                            1996         1997
                                                         ----------   ----------
<S>                                                      <C>          <C>       
ASSETS                                                  (AS COMBINED - SEE NOTE 2)
Current assets:
   Cash and short-term investments                       $   10,072   $   15,523
   Restricted cash investments                                  327          537
   Accounts and notes receivable (net of allowance for
       doubtful accounts:  July, $740; January, $505)        65,447      105,140
   Materials and supplies inventory                           1,659        2,126
   Prepayments and other                                      8,199        6,532
                                                         ----------   ----------

          Total current assets                               85,704      129,858

Property and equipment                                      165,104      197,682
Less accumulated depreciation                                86,094      102,668
                                                         ----------   ----------

          Property and equipment - net                       79,010       95,014

Multi-client data library                                    25,628       27,139

Investments in and advances to joint venture                  1,463        1,379

Goodwill (net of accumulated amortization:
    July, $2,214; January, $2,475)                            3,674        3,413

Other assets                                                  3,113        3,655
                                                         ----------   ----------

              Total                                      $  198,592   $  260,458
                                                         ==========   ==========
</TABLE>

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

See Notes to Consolidated Financial Statements.




                                       1
<PAGE>   4

<TABLE>
<CAPTION>
                                                                                (Unaudited)
                                                                   July 31,     January 31,
                                                                     1996          1997
                                                                  ----------    ----------
<S>                                                               <C>           <C>       
LIABILITIES AND STOCKHOLDERS' EQUITY                              (AS COMBINED - SEE NOTE 2)
Current liabilities:
  Current maturities of long-term debt                            $   13,739    $      480
  Accounts payable - trade                                            27,454        28,487
  Accrued interest                                                       313         2,189
  Other accrued liabilities                                           19,905        27,769
  Income taxes payable                                                 1,814         3,133
                                                                  ----------    ----------

          Total current liabilities                                   63,225        62,058

Non-current liabilities:
  Long-term debt - less current maturities                            27,351        75,186
  Other non-current liabilities                                        2,093         2,129
                                                                  ----------    ----------

          Total non-current liabilities                               29,444        77,315

Stockholders' equity:
  Common stock, $.01 par value; authorized:
     40,000,000 shares; issued: 11,334,352 shares and
     16,148,926 shares at July and January, respectively                 113           161

  Additional paid-in capital                                         104,469       107,635

  Retained earnings (from August 1, 1991
     with respect to Digicon Inc.)                                     2,275        13,950

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

           Total stockholders' equity                                105,923       121,085
                                                                  ----------    ----------

                  Total                                           $  198,592    $  260,458
                                                                  ==========    ==========
</TABLE>

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

See Notes to Consolidated Financial Statements.




                                       2
<PAGE>   5

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

<TABLE>
<CAPTION>
                                                Three Months Ended             Six Months Ended
                                                    January 31,                   January 31,
                                            --------------------------    --------------------------
                                                1996           1997           1996           1997
                                            -----------    -----------    -----------    -----------
                                                            (AS COMBINED - SEE NOTE 2)
<S>                                         <C>            <C>            <C>            <C>        
Revenues                                    $    62,719    $    90,691    $   122,543    $   167,096

Costs and expenses:
    Operating expenses                           53,297         67,982        100,103        126,302
    Depreciation and amortization                 6,695          9,828         13,047         18,520
    Selling, general and administrative           1,824          2,432          3,404          4,382
    Other (income) expense:
       Merger related costs                                                                      597
       Interest                                   1,387          1,967          2,674          3,230
       Other                                        (72)           532             44            276
                                            -----------    -----------    -----------    -----------

          Total costs and expenses               63,131         82,741        119,272        153,307
                                            -----------    -----------    -----------    -----------

Income (loss) before provision for
   (benefit from) income taxes and equity
   in earnings of 50% or less-owned
   companies and joint ventures                    (412)         7,950          3,271         13,789
                                                                                                
Provision for (benefit from) income taxes          (536)         1,681          1,128          2,919

Equity in earnings of 50% or less-
   owned companies and joint ventures            (1,145)          (238)          (816)          (805)
                                            -----------    -----------    -----------    -----------

Net income                                  $     1,269    $     6,507    $     2,959    $    11,675
                                            ===========    ===========    ===========    ===========

Per share of common stock:
      Income per share of common stock      $       .07    $       .35    $       .17    $       .63
                                            ===========    ===========    ===========    ===========
      Weighted average shares                    17,938         18,639         17,663         18,510
                                            ===========    ===========    ===========    ===========
   Cash dividends                                  None           None           None           None
                                            ===========    ===========    ===========    ===========
</TABLE>

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

See Notes to Consolidated Financial Statements.




                                       3
<PAGE>   6




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

<TABLE>
<CAPTION>
                                                                     Six Months Ended
                                                                       January 31,
                                                               ----------------------------
                                                                   1996            1997
                                                               ------------    ------------
                                                                (AS COMBINED - SEE NOTE 2)
<S>                                                            <C>             <C>         
Operating activities:
  Net income                                                   $      2,959    $     11,675
  Non-cash items included in net income:
     Depreciation and amortization                                   13,047          18,520
     Amortization of deferred gain on sale/leaseback                    (90)
     Loss on disposition of property and equipment                      360             439
     Equity in earnings of 50% or less-owned
        companies and joint ventures                                   (816)           (805)
     Write-down of multi-client data library to market                  198             767
     Change in operating assets/liabilities:
     Accounts and notes receivable                                   (4,473)        (39,693)
     Materials and supplies inventory                                (1,447)           (467)
     Prepayments and other                                              867           1,667
     Multi-client data library                                        3,387          (2,278)
     Other                                                           (2,698)          2,319
     Accounts payable - trade                                            65          (1,420)
     Accrued interest                                                    13           1,876
     Other accrued liabilities                                        2,051           7,773
     Income taxes payable                                               (71)          1,319
     Other non-current liabilities                                     (651)             36
                                                               ------------    ------------
          Total cash provided by operating activities                12,701           1,728

Financing activities:
  Borrowing of senior notes                                                          75,000
  Debt issues costs                                                                  (2,765)
  Borrowings of long-term debt                                                          781
  Payments of long-term debt                                         (4,618)        (29,289)
  Net payments under credit agreements                               (1,096)        (11,458)
  Payment of secured term loan                                                       (6,000)
  Net proceeds from sale of common stock                                 13           3,214
  Net proceeds from sale of treasury stock                            3,972
                                                               ------------    ------------
          Total cash provided (used) by financing activities         (1,729)         29,483
</TABLE>

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

See Notes to Consolidated Financial Statements.




                                       4
<PAGE>   7




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

<TABLE>
<CAPTION>
                                                                          Six Months Ended
                                                                             January 31,
                                                                       ------------------------
                                                                          1996          1997
                                                                       ----------    ----------
                                                                       (AS COMBINED - SEE NOTE 2)
<S>                                                                    <C>           <C>        
Investing activities:
  (Increase) decrease in restricted cash investments                   $      338    $     (210)
  (Increase) decrease in investment in and advances to joint venture         (260)          889
  Purchase of property and equipment                                       (9,329)      (27,406)
  Sale of property and equipment                                              422           699
  Other                                                                       (76)
                                                                       ----------    ----------

      Total cash used by investing activities                              (8,905)      (26,028)

Currency (gain) loss on foreign cash                                          (55)          268
                                                                       ----------    ----------

Change in cash and cash equivalents                                         2,012         5,451

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

Ending cash and cash equivalents balance                               $    8,703    $   15,523
                                                                       ==========    ==========
</TABLE>



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

See Notes to Consolidated Financial Statements.




                                       5
<PAGE>   8




                       VERITAS DGC INC. AND SUBSIDIARIES
        SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   UNAUDITED

                           (In thousands of dollars)

<TABLE>
<CAPTION>
                                                               Six Months Ended
                                                                 January 31,
                                                           -----------------------
                                                               1996         1997
                                                           ----------   ----------
                                                          (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                           $    2,788   $    5,542
  Accounts payable - trade                                      2,040        2,453

Supplemental disclosures of cash flow information:

Cash paid for:
   Interest -
     Revolving credit agreements                                1,036          205
     Secured term loans                                           242          274
     Equipment purchase obligations                               977          748
     Other                                                        443          150
   Income taxes                                                 2,509        1,333
</TABLE>



                                       6
<PAGE>   9




                       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 ("the Company") at January 31, 1997, and the
         results of its operations and its cash flows for the three and six
         months ended January 31, 1996 and 1997. 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. ("VES") Exchangeable
         Shares (See Note 2).

         Earnings per share are computed based on the weighted average number
         of shares of common stock. Shares issuable upon the conversion of
         stock options and warrants, which are common stock equivalents, were
         disregarded since the treasury stock method of calculation resulted in
         dilution of less than 3%.

         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





         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




         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




         Presented below is the effect of the pooling of interests 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
         reflect 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 on borrowings which are deferred and 
         amortized over the period of the debt affecting net income by
         approximately $17,000 and $107,000 for the three and six months
         ended January 31, 1996, respectively, and (ii) reverse the effect of a
         prior period adjustment reducing net income by approximately $90,000
         for the six months ended January 31, 1996. Reclassification of
         $10,844,000 and $17,829,000 for the three and six months ended January
         31, 1996, respectively, have been made to net amounts billed to
         customers for reimbursable costs against VES' revenues.

<TABLE>
<CAPTION>
                                                    Three Months     Six Months
                                                        Ended          Ended
                                                     January 31,     January 31,
                                                         1996           1996
                                                     -----------    -----------
                                                      (IN THOUSANDS OF DOLLARS, 
                                                      EXCEPT PER SHARE AMOUNTS)
<S>                                                  <C>            <C>        
Revenues:
   Digicon                                           $    38,755    $    76,429
   VES                                                    34,808         63,943
   Reclassifications                                     (10,844)       (17,829)
                                                     -----------    -----------
      Total                                          $    62,719    $   122,543
                                                     ===========    ===========

Net income:
   Digicon                                           $     1,077    $     1,829
   VES                                                       209          1,147
   Adjustments                                               (17)           (17)

                                                     -----------    -----------
      Total                                          $     1,269    $     2,959
                                                     ===========    ===========

Net income per share:
   As previously reported                            $       .10    $       .17
                                                     ===========    ===========

   As restated                                       $       .07    $       .17
                                                     ===========    ===========
</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 six months ended January
         31, 1997, the Company incurred and expensed $3,666,000 and $597,000,
         respectively, of costs associated with the merger. These costs consist
         primarily of professional fees. Costs for the six months ended January
         31, 1997 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
<PAGE>   13
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         Six Months Ended
                                      January 31,              January 31,
                                ----------------------    ---------------------
                                  1996         1997         1996         1997
                                ---------    ---------    ---------    ---------
                                            (IN THOUSANDS OF DOLLARS)
<S>                             <C>          <C>          <C>          <C>      
Revenues                        $   1,313    $     940    $   1,817    $   4,236

Operating expenses                     69          679          789        3,044
Depreciation and amortization         106          102          213          390
Other                                 (12)          (4)          (6)          (3)
                                ---------    ---------    ---------    ---------
          Total                       163          777          996        3,431

Income before benefit from
   income taxes                     1,150          163          821          805
Benefit from income taxes                          (75)
                                ---------    ---------    ---------    ---------

Net income                      $   1,150    $     238    $     821    $     805
                                =========    =========    =========    =========
</TABLE>


4.       LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                              July 31,    January 31,
                                                                1996         1997
                                                             ----------   ----------
                                                            (AS COMBINED - SEE NOTE 2)
                                                             (IN THOUSANDS OF DOLLARS)
<S>                                                          <C>          <C>       
Senior notes due October 2003, at 9 3/4%                                  $   75,000
Revolving credit agreement due July 1998, at
   LIBOR plus 2% or prime                                    $   11,458
Secured term loan due July 1999, at prime plus 3/4%               6,000
Secured term loan due July 1999, at prime plus 1/2%               1,240
Secured term loan due July 1999, at prime plus 1/2%               2,832
Equipment purchase obligations maturing through July 1999,
   at a weighted average rate of 8.6% at January 31, 1997        19,319          666
Mortgage note payable due October 2005, at 10%                      241
                                                             ----------   ----------
            Total                                                41,090       75,666
Less current maturities                                          13,739          480
                                                             ----------   ----------
            Due after one year                               $   27,351   $   75,186
                                                             ==========   ==========
</TABLE>




                                      11
<PAGE>   14




         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 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 principal 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 1/2% 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 was payable in monthly installments of Canadian
         $4,800 including interest at 10% and was secured by a building. The
         mortgage note was paid with proceeds from the senior notes.




                                      12
<PAGE>   15




5.       OTHER (INCOME) EXPENSE

         Other (income) expense consists of the following:

<TABLE>
<CAPTION>
                                     Three Months Ended    Six Months Ended
                                         January 31,          January 31,
                                     ------------------    ------------------
                                      1996       1997       1996       1997
                                     -------    -------    -------    -------
                                           (AS COMBINED - SEE NOTE 2)
                                            (IN THOUSANDS OF DOLLARS)
<S>                                  <C>        <C>        <C>        <C>    
Net foreign currency exchange loss   $     9    $   619    $    29    $   224
Net loss on disposition of
   property and equipment                 57        215        360        439
Interest income                         (122)      (283)      (295)      (378)
Other                                    (16)       (19)       (50)        (9)
                                     -------    -------    -------    -------

          Total                      $   (72)   $   532    $    44    $   276
                                     =======    =======    =======    =======
</TABLE>


6.       RELATED PARTY TRANSACTION

         On November 30, 1996, the Company entered into agreements to purchase
         property and equipment in the amount of approximately $1.5 million
         from companies which were partially owned by certain nonexecutive
         employees of the Company.




                                      13
<PAGE>   16

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. Interest is payable semi-annually beginning April 1997.

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 57% of revenues for the six months ended January 31, 1997 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.

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 $70.0 million capital expenditure budget for fiscal
1997. It is anticipated that the balance of the 1997 capital



                                      14
<PAGE>   17

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 $70.0 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 of substantially enhancing operating
efficiency. The remaining $36.1 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.



                                      15
<PAGE>   18




RESULTS OF OPERATIONS

Three Months Ended January 31, 1997 compared with Three Months Ended January
31, 1996.

Revenues. Land and transition zone seismic data acquisition revenues in the
second quarter increased $17.6 million or 68% over the same period last year.
Crews operating in the second quarter increased to 17 from 14 and the total
number of channels increased to 21,000 from 17,500 compared with the same
period of the prior year. Strong seasonal market demand for crews in Canada
coupled with larger channel requirements for the U.S. highlands and transition
markets accounted for the higher capacity. The Canadian market is showing
stronger demand for off season work, and other land markets are experiencing
longer term contracts and increased activity. The higher activity levels are
resulting in improved contract prices and weather protection clauses to ensure
crew availability.

Marine acquisition revenues were $1.7 million or 16% higher than the same
quarter of the prior year, primarily due to increased vessel utilization. The
marine vessels Polar Search and Polar Princess which were operating in the
North Sea have been mobilized to the Gulf of Mexico. The Polar Princess
completed a survey in the Falklands en route to the Gulf of Mexico and is
presently in the shipyard being upgraded to 7200 meter Syntron RDA streamer
capability. The Polar Search completed its upgrade to the 7200 meter Syntron
RDA streamers early in the second quarter. The upgrade to more channels coupled
with high production for all vessels worldwide and improving prices in the
contract market are yielding higher margins.

Revenues from the Company's seismic data processing operations increased $3.9
million or 28% over the same period last year due to the installation of new HP
KittyHawk Systems in the major marine data processing centers and the new NEC
Supercomputer in Houston as a result of rising demand. Additionally, land data
processing centers set up in the prior quarter in Oklahoma City and Quito,
Ecuador were in full production. A center in Abu Dhabi was set up late in the
second quarter, and full-time production is expected to be achieved late in the
third quarter. In the coming fiscal third quarter, the long-term contract
operation of a dedicated center will be completed. The personnel from that
center will be re-deployed to the Houston and Crawley, England centers to
process the higher production requirements of those centers.

Multi-client data sales rose by $4.7 million or 41% over the same period last
year. The higher data sales reflect increased activity levels in the North Sea
and Gulf of Mexico markets. Due to increasing customer interest in deep-water
and sub-salt areas of the Gulf of Mexico, demand for larger inventory levels in
these areas is increasing. Surveys in the Shetland-Faroes area, Gulf of Mexico
deep-water basin and smaller selected Far East areas are planned over the
coming months. The Company initiated its first land data library project in the
U.S. and will be expanding projects in this area.

Operating Expenses. Costs of services increased $14.7 million or 28% over the
same period last year but as a percent of revenues decreased from 85% to 75%.
The improvement in operating margins is attributable to all service groups as a
result of increased demand, higher prices, better equipment utilization and
increased capacity as discussed above. 




                                      16
<PAGE>   19

Depreciation and Amortization. Depreciation and amortization expense increased
47% from $6.7 million to $9.8 million due to the significant 1997 capital
expenditure program as previously discussed.

Selling, General and Administrative. Selling, general and administrative
expenses increased 33% from $1.8 million to $2.4 million, resulting primarily
from costs incurred in a more aggressive marketing strategy and in implementing
new administrative and accounting data processing systems.

Interest. Interest expense increased $580,000 due to increased debt levels to
finance the Company's 1997 capital expenditure program.

Other. Other (income) expense decreased from income of $72,000 to an expense of
$532,000 resulting primarily from net foreign currency exchange losses.

Income Taxes. Provision for income taxes increased from a $536,000 benefit to a
$1.7 million provision as a result of the increased profitability of the
Company. The effective tax rate was reduced in the current year by
restructuring the operations of certain of the Company's subsidiaries.

Equity in Earnings. Equity in earnings is attributable to the Company's
Indonesian joint venture which performed profitable marine acquisition services
in the prior year.

Six Months Ended January 31, 1997 compared with Six Months Ended January 31,
1996.

Revenues. Land and transition zone seismic data acquisition revenues for the
year increased $26.3 million or 46% over the same period last year due to
strong market demand in Canada and improving prices. During the current year
the Company also added an Input/Output System Two-RSR crew to its transition
zone operations and increased the number of land crews and channels in
operation.

Marine acquisition revenues were $9.2 million or 46% higher than the same
period of the prior year primarily due to increased utilization of the
Company's vessels and the addition of a vessel. In the prior year, vessels
experienced downtime related to vessel upgrades and mobilization and bad
weather. Lower production also resulted from shooting obstructions and program
designs.

The Company's seismic data processing operations increased $5.7 million or 21%
over the same period last year due to increased capacity and increased volumes
of marine data available for processing. The Company has substantially upgraded
its marine data processing centers and added a new NEC supercomputer in 
Houston. The Company also added new centers in Quito, Ecuador and Oklahoma City.

Multi-client data sales rose by $3.3 million or 19% over the same period last
year due to increasing customer interest in the North Sea and Gulf of Mexico
multi-client data surveys. In general, demand has increased for multi-client
data surveys.





                                      17
<PAGE>   20




Operating Expenses. Costs of services increased $26.2 million or 26%, but as a
percent of revenues decreased from 82% to 76%. The improvement in operating
margins is attributable to all service groups as a result of increased demand,
higher prices, better equipment utilization and increased capacity as discussed
above.

Depreciation and Amortization. Depreciation and amortization expense increased
42% from $13.0 million to $18.5 million due to the significant 1997 capital
expenditure program.

Selling, General and Administrative. Selling, general and administrative
expenses increased 29% from $3.4 million to $4.4 million, resulting primarily
from costs incurred in a more aggressive marketing strategy and in implementing
new administrative and accounting data processing systems.

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

Interest. Interest expense increased $556,000 due to increased debt levels to
finance the Company's 1997 capital expenditure program.

Other. Other expense increased $232,000 primarily due to net foreign currency
exchange losses.

Income Taxes. Provision for income taxes increased from $1.1 million to $2.9
million as a result of increased profitability of the Company. The effective
tax rate was reduced in the current year by restructuring the operations of
certain of the Company's subsidiaries.




                                      18
<PAGE>   21




                           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 4. Submission of Matters to a Vote of Security Holders

The Company's annual meeting of stockholders was held on December 16, 1996.
Common stockholders of record on November 1, 1996 were entitled to vote. Each
of the eight directors nominated for the board of directors was elected by the
stockholders as follows:

<TABLE>
<CAPTION>
                                            FOR                     WITHHELD
                                         ----------               ------------
<S>                                      <C>                      <C>
George F. Baker                          14,197,948                     100
Clayton P. Cormier                       14,197,946                       0
Ralph M. Eeson                           14,197,946                     700
Lawrence C. Fichtner                     14,197,946                       0
Steve J. Gilbert                         12,044,174               2,340,290
Stephen J. Ludlow                        14,197,746                     200
Brian F. MacNeill                        14,197,746                     450
David B. Robson                          14,197,746                     200
Douglas B. Thompson                      14,197,746                     200
Jack C. Threet                           14,197,746                   1,050
</TABLE>




                                      19
<PAGE>   22




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 Geophysical 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)



                                      20
<PAGE>   23




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 and six months ended January 31, 1996 and 1997.

*27)  Financial Data Schedule

*Filed herewith

b)   Reports on Form 8-K

     1)   A Form 8-K dated November 27, 1996, as amended by Form 8-K/A-1 dated
          December 4, 1996, reported a change in the Company's principal
          accountants.





                                      21
<PAGE>   24




                                   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:    March 17, 1997             By:  /s/ David B. Robson
     -----------------------           ----------------------------------------
                                             David B. Robson
                                          (Chairman of the Board
                                        and Chief Executive Officer)




Date:    March 17, 1997             By:  /s/ Richard W. McNairy
     -----------------------           ----------------------------------------
                                             Richard W. McNairy
                                       (Chief Accounting and Financial Officer)






                                      22
<PAGE>   25
                              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.)

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 Geophysical 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)

<PAGE>   26

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 and six months ended January 31, 1996 and 1997.

*27)     Financial Data Schedule
</TABLE>

*Filed herewith