UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    ---------
                                   FORM 10-KSB
(Mark One)
  [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES AND EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 2003

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

                        Commission File Number 000-12382

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


                          VERIDICOM INTERNATIONAL, INC.
                         (formerly Alpha Virtual, Inc.)

                 (Name of small business issuer in its charter)

               Delaware                                    95-2577731
   (State or other jurisdiction of                     (I.R.S. Employer
    incorporation or organization)                   Identification Number)
          3800-999 3rd Avenue                              98104-4023
          Seattle, Washington                              (Zip Code)
(Address of principal executive offices)

                                 (206) 224-6206
                           (Issuer's telephone number)
                             -----------------------

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

   Securities registered under Section 12(g) of the Exchange Act:  Common Stock,
                                                                 $.001 Par Value

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

   Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

   Issuer's revenues for its most recent fiscal year: $281,997





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<PAGE>
   Aggregate market value of the voting stock held by non-affiliates computed by
reference to the closing price at which the Common Stock was sold on the
Over-the-Counter on May 10, 2004: $41,083,108. The voting stock held by
non-affiliates on that date consisted of 7,825,354 shares of Common Stock.

   Number of shares outstanding of each of the issuer's classes of common stock
at May 10, 2004:
                            Common Stock: 15,075,532

   Transitional Small Business Disclosure Format (check one)    Yes |_| No |X|

--------------------------------------------------------------------------------
                                FORM 10-KSB INDEX

PART I........................................................................3
     ITEM 1.  DESCRIPTION OF BUSINESS.........................................3
     ITEM 2.  DESCRIPTION OF PROPERTIES......................................17
     ITEM 3.  LEGAL PROCEEDINGS..............................................17
     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............17
PART II......................................................................17
     ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......17
     ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION......18
     ITEM 7.  FINANCIAL STATEMENTS...........................................37
     ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
              AND FINANCIAL DISCLOSURES......................................38
     ITEM 8A. CONTROLS AND PROCEDURES........................................38
PART III.....................................................................39
     ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS...............................39
     ITEM 10. EXECUTIVE COMPENSATION.........................................41
     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
              AND MANAGEMENT.................................................42
     ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................45
     ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...............................45
     ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.........................47
SIGNATURES...................................................................48
POWER OF ATTORNEY............................................................48

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                   NOTE CONCERNING FORWARD-LOOKING STATEMENTS
         This Report contains certain forward-looking statements, including the
plans and objectives of management for the business, operations, and economic
performance of Veridicom International, Inc. (formerly Alpha Virtual, Inc.) (the
"Company"). These forward-looking statements generally can be identified by the
context of the statement or the use of words such as the Company or its
management "believes," "anticipates," "intends," "expects," "plans" or words of
similar meaning. Similarly, statements that describe the Company's future
operating performance, financial results, plans, objectives, strategies, or
goals are forward-looking statements. Although management believes that the
assumptions underlying the forward-looking statements are reasonable, these
assumptions and the forward-looking statements are subject to various factors,
risks and uncertainties, many of which are beyond the control of the Company.
Accordingly, actual results could differ materially from those contemplated by
the forward-looking statements.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Overview

         Veridicom International, Inc., a Delaware corporation (hereinafter
sometimes referred to as the "Company," "we," and "us"), incorporated on
September 9, 1987, under the name Perceptronics, Inc. From our inception through
fiscal 2000, we were engaged in the design, development and manufacture of
computer-based simulation systems for training and decision support. These
systems included both hardware and software and are used to train personnel in
the use of various military and commercial equipment. Much of our simulator
business was in the foreign defense industry. The tightening of defense budgets
worldwide, combined with the continuing consolidation and competition in the
defense industry, negatively impacted the growth and profit opportunities for
small companies such as ours. As a result, in July 2000, we refocused our
business. In connection with the refocus, we sold the assets related to our
computer based simulation system line of business to a developer and
manufacturer of specialized defense simulation products. We then commenced
development of commercial products in the area of Internet collaboration.

         However, we lacked the funds necessary to exploit our developed
products. As a result, in October 2002, we entered into a license agreement with
our then principal stockholder, Global Alpha Corporation ("GAC") pursuant to
which GAC was granted an exclusive license to our software and systems commonly
referred to as the "IC3D Framework" (the "System"). The System encompassed
substantially all of our software including software developed to support
multi-user online collaborative interactivity in a broad variety of applications
employing a variety of virtual media over a number of networks including the
Internet and intra-nets. Under the license agreement, GAC agreed to pay us a
license fee of 10% of the revenue generated from the sale or use of the System
up to $1.0 million, 9% up to $2.0 million, 8% up to $3.0 million and,
thereafter, 7% of the revenue generated.

         In connection with the license agreement, in October 2002 we terminated
substantially all of our employees, and except for our license agreement, ceased
all of our prior operating activities. Our principal activities became directed
to reducing our liabilities and seeking possible acquisitions. Management's


                                       3
<PAGE>
objective was to acquire an operating company that has experienced management
and the potential for profitable growth in exchange for our securities.

         On April 28, 2003, we entered into an Agreement and Plan of Merger with
EssTec, Inc., a privately-held Nevada corporation ("EssTec"). In accordance with
the merger, on May 8, 2003, we, through our wholly-owned subsidiary, Alpha
Acquisition Corporation, a Nevada corporation, acquired EssTec in exchange for
4,276,162 shares of our common stock. The transaction contemplated by the
agreement was intended to be a "tax-free" reorganization pursuant to the
provisions of Section 351 and 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended.

         On May 8, 2003, in connection with the EssTec merger, we changed our
fiscal year end from March 31 to December 31.

         On November 25, 2003, we entered into an Agreement and Plan of Merger
with Veridicom, Inc., a privately-held California corporation ("Veridicom"). In
accordance with the merger, on November 25, 2003, we, through our wholly-owned
subsidiary, A/V Acquisition Corporation, a Nevada corporation, acquired
Veridicom in exchange for 3,500,000 shares of our common stock; 3,250,000 shares
were issued to the holders of Veridicom stock and 250,000 shares were issued
into escrow to cover indemnification obligations, if any, of Veridicom. The
transaction contemplated by the agreement was intended to be a "tax-free"
reorganization pursuant to the provisions of Section 351 and 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended.

Subsequent Events

         On January 16, 2004, we entered into an Agreement and Plan of Merger
with Cavio Corporation, a privately-held Washington corporation ("Cavio"). The
merger became effective on February 20, 2004 following a special meeting of
Cavio's stockholders. In accordance with the merger, on February 20, 2004, we,
through our wholly-owned subsidiary, A/VII Acquisition Corporation, a Nevada
corporation, acquired Cavio in exchange for 5,000,000 shares of our common
stock. The transaction contemplated by the agreement was intended to be a
"tax-free" reorganization pursuant to the provisions of Section 351 and
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.

         The members of our Board of Directors now consist of Paul Mann, Saif
Mansour, Bill Cheung and Gyung Min Kim. The following individuals constitute our
officers, key employees and advisors:

         Paul Mann, President and Chief Executive Officer. Mr. Mann has held a
variety of international posts throughout Europe including: Sales and Marketing
Manager, Erith PLC, England; National Sales and Marketing Director, Eurodata
Limited, UK; and Sales and Marketing Director ASB Grunland, Ludwigsburgh,
Germany. In Canada, Mr. Mann has served as President of an international
business referral service linking global trade opportunities, and has worked to
spearhead the international sales and marketing initiatives of The Business
Development Corporation. Mr. Mann's background in international trade and
international business development led to the creation of Cavio and since its
inception in 1998, he has been its Chief Executive Officer.

         Bashir Jaffer, Chief Financial Officer. Mr. Jaffer has been a member of
the Canadian Institute of Chartered Accountants since 1976. He is also a Fellow


                                       4
<PAGE>
of the Institute of Chartered Accountants of England and Wales. From 1998 to
2003, Mr. Jaffer was the owner and President of a travel management company.
From 1983 to 1998, Mr. Jaffer was a partner at a firm of chartered accountants
in located in Vancouver, British Columbia. Prior to that, Mr. Jaffer worked for
a public company and an international firm of chartered accountants located in
London, England. Mr. Jaffer also worked at KPMG (formerly Thorne Riddell) and
PricewaterhouseCoopers (formerly Coopers & Lybrand) both located in Vancouver,
British Columbia.

         Terry Laferte, SVP, Technical Operations. Mr. Laferte is a software
engineering expert with a 20-year track record in IT team leadership and project
management. From 2000 to 2004, Mr. Laferte was responsible for leading the
development of technology applications for Cavio. From 1993 to 2000, Mr. Laferte
managed all software development for the Canadian Securities Registration
Systems located in Vancouver, British Columbia. From 1986 to 1993, Mr. Laferte
was a senior consultant with SHL System house Ltd. Located in Edmonton, Alberta.

         Cameron Adams, Manager Marketing & Business Development. From 2001 to
2004, Mr. Adams guided the product and marketing strategies of Cavio. From 2000
to 2001, Mr. Adams served as VP, Marketing at Aerovistas.net, Inc., an Internet
start-up, located in Vancouver, British Columbia, serving transportation and
aviation clients. Since 1998, Mr. Adams has also served as President of his own
private consulting practice, Airport Financial Services, Ltd., where he provides
business development and planning services.

         Roger Brandt, Chief Technical Advisor. Mr. Brandt has more than 25
years experience in software engineering. Mr. Brandt joined Veridicom, Inc. in
2000 in the role of e-commerce architect and progressed to the post of Director
of Software Engineering. Prior to 2000, Mr. Brandt was president and system
architect of Bay-area consulting firms Object Works, Inc. and Signorum, Inc.
where he was chiefly responsible for architecting an e-commerce gateway for
IntelliPay for HP, a database for the Visa/TPS (Vital) credit card authorization
and capture system, retail point of sale networks and credit card authorization
and capture systems. Mr. Brandt has also worked as a software developer at
Tandem Computers. Mr. Brandt holds a Bachelor's Degree from Valparaiso
University and has completed the coursework portion of his Masters Degree in
Mathematics from California State University, Hayward.

         We officially changed our name from Alpha Virtual, Inc. to Veridicom
International, Inc. on February 23, 2004.

         Following the name change, shares of our common stock are traded under
the symbol "VRDI" on the OTC Bulletin Board (the "OTCBB").

         On April 16, 2004, Messrs. Al-Zarooni and Mirza resigned from the Board
of Directors.

Description of the Company Post-Merger

General

         Following the merger with Cavio, we realigned our business strategy to
leverage the core operations of each of our subsidiaries. We have three
operational subsidiaries: Cavio, Veridicom and EssTec.



                                       5
<PAGE>
         Since March 1, 2004, we have undertaken a comprehensive review of all
pre-merger operations. This on-going review has included all facets of
operations, including the supply chain, product development, previous sales and
marketing agreements, internal controls and reporting systems. Based on this
review, we have decided that a thorough reorganization of all of the companies
is warranted, including a re-evaluation of the supply chain, method of
manufacture, product strategy and other organizational procedures. Although
distracting in the short-term, we believe that this review is in the long-term
best interests of the Company and our stockholders. As part of the
reorganization, we closed our Sunnyvale, California offices on April 15, 2004 in
favor of a more cost effective and efficient development environment in the
Pacific Northwest.

         Our core strategy is to build a comprehensive authentication suite of
products and services, with market-specific applications that leverage the core
identity management infrastructure. We believe there is a significant need for
an auditable, scalable product solution capable of linking an individual to a
specific electronic event or transaction -- a strong authentication solution
that safeguards legitimate interests and adheres to emerging electronic commerce
legislation. Our identity management solutions employ public key infrastructure
and a "virtual token" based technology to control, audit and monitor the
identification processes for electronic events and transactions.

         We will focus on transforming the market for biometrics and growing the
market beyond traditional security applications. In particular, the strategy
will be to expand the traditional security offerings to include security and
convenience value propositions for commercial or point-of-sale transactions. By
developing customizable applications as well as authentication technology, we
are endeavoring that our brand become synonymous with secure, authenticated
transactions.

         We offer a solution that we believe not only addresses an
organization's current requirements for stronger and more scalable
authentication and authorization, but also addresses a future vision for
security, via a combination of centralized and distributed identity repositories
and administration tools. Utilizing biometric technology, we provide
organizations with an authentication solution that also provides users with
increased convenience by reducing the reliance on passwords.

         We have a strong management team with combined experience in sales and
marketing, vertical market knowledge, technology development, and hardware
integrated circuit design. In addition, we will have access to a network of
advisors and consultants with significant expertise in technology, government,
security, and financial services. These advisors will be invited to form a more
formal advisory board to provide strategic direction for products and services,
and, they may be leveraged to provide targeted business development contacts in
key target markets.

         There are several factors that management believes will provide new
opportunities or present new challenges for us. We believe that regulatory,
technological, and cultural changes will create new opportunities. International
distribution arrangements are currently in place, while new channels are being
developed.

Product and Services Overview


                                       6
<PAGE>
Authentication vs. Identification

         Webster's Dictionary defines the term "Identification" as follows:
evidence of identity; something that identifies a person or thing. With
biometric technology, identification is the process of identifying individuals
strictly from their biometric scan from a group of hundreds, thousands, or
millions of entries.

         Webster's Dictionary defines "Authentication" as follows: To establish
the authenticity of; prove genuine. Authentication of a biometric sample or an
individual is confirmed on a one-to-one basis, by comparing a pre-registered
template to a person presenting a live finger or other live biometric.

         In a commercial environment, it is more feasible, more convenient, and
users can be authenticated more quickly on a one-to-one basis via
authentication.

Unique Minutia Extraction

         Privacy is a paramount concern to us, and as discussed further, it
addresses individual privacy concerns through a variety of technology solutions
and business rules. One of the primary means of addressing privacy concerns
surrounding the use of fingerprints or other biometric samples is the creation
of a minutia. Via a complex set of proprietary algorithms and computer
processes, we extract a mathematical representation of a biometric sample (i.e.,
fingerprint) and stores this data in a secure file (minutia file). We do not
store biometric images. This alleviates concerns surrounding the storage of
personal biometric information, and further protects an individual's privacy by
making it virtually impossible for a hacker or malicious computer code to
recreate an individual's fingerprint from a minutia file.

Identity Management Infrastructure

         Our core strategy is to build a comprehensive authentication suite of
products and services, with market-specific applications that leverage the core
identity management infrastructure.

         We believe that there is a significant need for an auditable, scalable
and legally recognized product solution capable of linking an individual to a
specific electronic event or transaction -- a strong authentication solution
that safeguards legitimate interests. Our identity management solutions employ
public key infrastructure and a "virtual token" based technology to control,
audit and monitor the identification processes for electronic events.

           o   Deployment of biometric technology provides irrefutable
               authentication and validation of a user's identity eliminating
               the sole reliance on the vulnerable password/PIN infrastructure;

           o   Enterprise middleware systems can move authenticated events
               securely in real-time over the Internet through a "trusted path";

           o   Creating a non-reputable and legally recognized "card-present"
               scenario for events conducted for previously anonymous Internet
               credit card transactions;



                                       7
<PAGE>
           o   Allowing for the audit and assignment of a digital signature to
               any electronic event proving without question the time and origin
               of an event and actual event occurrence;

           o   Authenticating instead of identifying false accept and false
               reject rates approach zero and scalability is achieved; and

           o   Our portfolio allows organizations to leverage investments in
               existing IT infrastructure.

Authentication Service

         We intend to offer authentication services on a hosted basis.
Corporations, governments, or other enterprises that do not wish to invest in a
full server based biometric infrastructure may choose to have us manage this
service on their behalf. We maintain a fully redundant hosting infrastructure at
its data center that can accommodate multiple customers and their users. The
additional advantage of this solution is that we maintain our expertise in
managing identities and biometric information, relieving organizations of this
responsibility.

         It is expected that the authentication service will be available on a
subscription basis in addition to a one-time setup fee. In addition, it is
expected that this service will be made available through certified third party
systems integrators. It is expected that these integrators will typically offer
a variety of hosted services to large organizations and therefore have the
capability and resources available.

         We have an extensive portfolio of products and services that are
currently available to customers, or that are available subject to customization
and specific requirements definition. However, we realize the need to continue
an aggressive product development strategy to meet the needs of the marketplace
and advance the adoption of biometrics. Management believes that in general the
industry faces continuous pressures to reduce the cost of devices and solutions
in order to provide a greater ROI to organizations. As such, we endeavor to
deliver additional products that provide a high degree of application
flexibility to the end user. It is expected that we will build our products to
meet the needs of both current and future state-of-the-art technology and will
incorporate third party technology solutions where needed.

         For example, we believe that the rollout of 3G wireless and Bluetooth
infrastructure creates a more stable and secure communications protocol to offer
wireless functionality. We are in the process of developing a variety of
solutions to accommodate mobile users and mobile applications for biometrics.
Leveraging core expertise in the enrollment, verification and application of an
individual's biometric information, it is expected that we will work with
partners to develop applications for wireless phones, PDA's, tablet PC's, point
of sale, and other devices.

         The following table outlines our current and short-term product
portfolio:

          Product                               Description
          -------                               -----------
          FPS200                                Solid state silicon sensor,
                                                256 x 300 array

                                       8
<PAGE>
          FPS250                                Solid state silicon sensor,
                                                lower cost, less surface area
                                                than FPS200 sensor

          FPS300                                Swipe sensor, low cost, low area
                                                sensor for mobile devices

          G2                                    Next generation desktop
                                                peripheral with new plastic
                                                housing

          G2-CRFID                              62 peripheral with RFID
                                                capability

          G2-CSMART                             G2 peripheral with smart card
                                                reader

          G2-CMAG                               G2 peripheral with magnetic card
                                                reader

          Matchboard - wired                    Standalone fingerprint
                                                recognition system  with trusted
                                                sensor crypto capability, FPS250
                                                sensor, KVM

          Matchboard-wireless                   Matchboard as above with
                                                wireless connectivity

          Personal Authentication Device (PAD)  Mobile authentication device
                                                with crypto, FPS250, KVM,
                                                wireless, and self-powered
          Middleware

          Product                               Description
          -------                               -----------
          Veridicom Authentication Server       Robust Enterprise level
                                                authentication server for
                                                Windows, Linux platforms.
                                                Sun/Solaris support planned.

          VAS Hosted Service                    Hosted authentication service
                                                from our data center

          VAS                                   Appliance Less robust
                                                authentication server for
                                                smaller organizations, available
                                                for 1000 or 5000 users

          SDK                                   SDK's available for all products
                                                for customer customization and
                                                OEMs.

          Applications




                                       9
<PAGE>
          Product                               Description
          -------                               -----------
          Digital                               Signature Biometric signature
                                                attached to transactions or
                                                events. This provides
                                                significantly more secure
                                                signing capabilities than
                                                current PIN-based certificates.

          VPAS                                  Veridicom Personal
                                                Authentication System. This
                                                application is a bundled
                                                solution that allows PC or
                                                network logon, and secure logon
                                                to web site or web applications.
                                                It is expected that this will be
                                                a shrinkwrapped product to
                                                deployed at retail locations.
Intellectual Property

         With a pedigree born out of Lucent Technologies and Bell Labs, we have
several international patents for our technology, as well as several pending
patent applications.

U.S. Patents Issued

U.S. Patent No.                           Title
---------------                           -----
5,991,408        Identification and Security Using Biometric Measurements

6,016,355        Capacitive Fingerprint Acquisition Sensor

6,049,620        Capacitive Fingerprint Sensor With Adjustable Gain

6,330,345        Automatic Adjustment Processing For Sensor Devices

6,331,452        Method of Fabricating Integrated Circuit Package with Opening
                 Allowing Access to Die

6,546,122        Method For Combining Fingerprint Templates Representing Various
                 Sensed Areas of a Fingerprint to Derive One Fingerprint
                 Template Representing The Fingerprint

6,538,456        Capacitive Fingerprint Sensor with Adjustable Gain

6,535,622        Method for Imaging Fingerprints and Concealing Latent
                 Fingerprints

6,538,456        Capacitive Fingerprint Sensor with Adjustable Gain


Patent Applications





                                       10
<PAGE>
    U.S. Patent
    App. Serial                        Title
    -----------                        -----
    10/089,987   Spoof Detection for Biometric Sensing Systems

    10/288,554   Method & System for Capturing Fingerprints from Multiple Swipe

Market Overview

Industry Overview

         We believe that in the wake of the tragic events of September 11 and
the heightened security risks posed by the prospect of random acts of terrorism,
biometrics and the field of identity management are at the forefront of
technological development. However, with such an immediate and pressing need, we
believe that the authentication and security environment is, surprisingly, in a
state of disarray.

         We believe that the tendency to-date has been for vendors to develop
proprietary software and hardware that focuses on one segment of the identity
verification and management equation. Because of their proprietary nature, many
biometric technology products are inconsistent, impractical or incompatible with
not only the existing `real world' needs and systems, but also other biometric
products.

         Fingerprint recognition technology continues to dominate the market for
biometric authentication, and will continue to do for the foreseeable future due
to its combination of accuracy, ease of use, and cost effectiveness.

         We believe that there are several increasingly important trends
positively affecting the need for biometric technology:

           o   the need to protect increasing amounts of sensitive and private
               information. Increased digitization of travel, medical, financial
               and security information requires stronger, less fallible modes
               of user authentication;

           o   the increased amount of information has resulted in increased
               access requirements for corporate and personal uses. Physical and
               logical access requirements demands a more streamlined approach
               to identity management;

           o   increased travel security requirements demand leading edge
               identification technology to improve security while streamlining
               the travel process; and

           o   information access requirements have increased the proliferation
               of passwords. Unfortunately, as password requirements increase,
               the costs of managing passwords becomes prohibitive.

         Given the trends described above, we believe that there are inevitably
going to be organizations that believe they can offer a variety of services or
products that incorporate biometrics and may compete with our technology.

Competitive Overview


                                       11
<PAGE>
         As the opportunities for strong authentication solutions increases, so
will the competition. With significant brand recognition, patent portfolio, and
technology solutions, we believe that we are well protected against increased
competition. Furthermore, we believe that increased competition indirectly
validates the business model and market potential for our solutions. The
following companies have been identified as potential competitors due to their
biometric focus and product mix.

         Identix - Provides fingerprint and facial recognition technology after
having merged with Visionics. Their main target markets appears to be the public
sector, including law enforcement and government applications. They provide live
scan booking equipment for government agencies that captures fingerprint images
for background checks, criminal booking for law enforcement, etc.

         Bioscrypt - Provides mainly physical access solutions via end user
products, software for their equipment, as well as OEM modules for third party
integrators. They do not currently provide desktop peripherals, enterprise
applications or other software.

         Fingerprint Cards AB - Based out of Sweden, Fingerprint Cards only
manufactures OEM hardware and sensors. They conduct business through their
partners of manufacturers and other OEM's, not through direct sales or direct
customer relationships. They have a variety of sensors, including a swipe sensor
and sensor embedded on USB memory module.

         SAGEM - Large European provider of fingerprint recognition systems.
They have a significant presence in live booking systems for government agencies
and law enforcement around the world.

         STMicrosystems - Purchased several licenses and patents from Veridicom
regarding desktop peripherals. They also have a swipe sensor they are targeting
at the mobile device manufacturers.

         Atrua - Several former Veridicom employees formed this company in Dec
2000/early 2001. They are focusing on authentication for mobile devices and
mobile transactions using their swipe sensor. They have also developed their own
algorithms and software for managing authentications in a transaction
environment.

         Authentec - Manufacturer of solid state fingerprint sensors. They focus
on hardware only, providing peripherals and sensor chips to OEM's. They do not
provide software, middleware or other applications for end users.

         S-Travel. This is an initiative sponsored by the European Union and
Switzerland for a registered passenger program using biometrics. SITA is the
project manager and major participant in this project. In addition, Biowise, a
small biometrics company in Belgium provides the biometrics kiosks for iris
recognition and fingerprint sensors. It is in the pilot stages through Spring,
2004 involving Milan airport and Alitalia airlines. This project uses iris
recognition from Panasonic and fingerprint sensors from SAGER.

         In addition to the above-mentioned entities, it is conceivable that we
could face future indirect competition and market encroachment from companies
such as VeriSign International and RSA, which currently offer alternative
security and digital identity solutions not based on biometrics.


                                       12
<PAGE>
         However, these organizations could also present interesting partnering
opportunities via bundled service offerings.

Market Influences

         There are several factors that will provide new opportunities or
present new challenges for us. We believe that the primary market influences
relate to regulatory, technological and cultural changes.

Regulatory Changes

         Regulatory issues will continue to change the landscape for our
technology. We believe that many of these legislative changes will present
significant opportunities, such as:

           o   HIPA - Health Insurance Portability and Accountability Act
               governs the privacy of health information, and securing access to
               that information. We believe that biometrics is well suited to
               this task.

           o   US-VISIT - The US Government is mandating that all visitors to
               the US be fingerprinted and have a digital photo taken. By the
               end of 2004, all passports will be required to have a biometric
               template (fingerprint) and digital photo.

           o   Department of Defense - The US and other defense agencies are
               increasing security requirements at facilities and increasing
               security surrounding information assets. We believe that
               biometrics is well suited to meeting this challenge.

           o   National ID cards - Canada, UK, US, Italy, Australia, Bosnia, and
               other nations are evaluating national ID card programs. Many of
               these nations are also considering adding biometrics, and
               fingerprints in particular, as components of that ID card
               program.

           o   Electronic Voting - Many municipal, regional, and national
               governments are contemplating and/or implementing electronic
               voting systems to avoid the voting debacle that plagued the 2000
               US presidential election. As such, there is a strong need to
               authenticate voters for onsite and remote electronic voting.

Technological Changes

         The biometrics industry is rapidly changing and we aim to remain at the
leading edge of technology. In addition, we will focus on inventing, developing,
and commercializing those technologies that we believe offer additional value to
our customers. We believe that the future will mandate incorporation of multiple
biometric technologies (fingerprint, facial, iris, voice, etc.) under a single
solution. We will actively sell to source and/or acquire best of breed
technologies as dictated by customer and/or corporate requirements.

Cultural Changes




                                       13
<PAGE>
         Biometrics is still a new technology to the majority of consumers and
employees around the world. However, we believe that recent mandates by the U.S.
government requiring biometrics in passports and other security initiatives are
facilitating public acceptance and rollout of biometrics. In addition, as
information security becomes increasingly important to an organization's risk
management policies, we believe that biometrics is getting increased attention
for implementation at workplaces. As workplace enrolment increases, we believe
that personal use of biometrics will increase accordingly. In addition, our
suite of applications is targeted to drive more rapid adoption rate of
biometric-based solutions.

Market Segments

Financial Services

         The financial services industry has been slow to adopt biometrics as a
core service offering. We believe that this is due to a number of factors,
including, cost, customer demand, risk vs. ROI of implementation, and
availability of applications. We aim to change this scenario by offering
financial services firm a variety of solutions aimed at increasing security;
increasing convenience and offering a variety of authentication applications
suitable for a broad organizational rollout.

         We will initially target those financial institutions that have the
scale and market influence to push biometrics to their markets, as well as those
institutions that are known for differentiating their service offering by
providing leading edge technology and services. The strategy will be to
concurrently encourage use of biometrics by other industries, encouraging the
financial institutions to take notice.

Travel & Transportation

         The travel industry continues to feel the effects of September 11 and
the resulting lag in air travel and commensurate slowdown in the economy.
Business travel is down significantly and there is continuing downward pressure
on travel fares. In light of the ongoing slump, airlines and other travel
providers are looking for new ways to generate revenue and increase both safety
and the convenience aspects of travel for their passengers.

         We will propose our solution as a business opportunity, not just a
security solution. It is expected that travelers will be charged users and/or
transaction fees by the travel provider in exchange for additional benefits
gained by using the system.

         Target customers within this market segment include travel agents,
travel reservations, airlines, airports, hotels, and other travel service
providers.

         We, through our subsidiary Cavio, currently have an agreement with
Uniglobe, which is part of an international travel service provider, to pilot
its technology for the purposes of confirming individual client itineraries and
to approve the processing of travel service purchases with client customized
payment instructions. Following the successful rollout, it is expected that this
model will be expanded to include other industry travel partners such as
airlines, hotels, etc.


                                       14
<PAGE>
Public Sector

         We believe that there are many opportunities in the public sector,
including eGovernment, health care, and education. We believe that the
authentication product suite has far reaching implications for members of this
unique but broad-based environment.

         Specifically, we believe that our products are ideally suited to mimic
traditional dynamic environments, for example, in the fields of electronic
education, and industry accreditization. The authentication suite overcomes
previously unaddressed variables including geographic diversity, can handle
multiple users interacting in real-time and can control varying levels of
clearance and access to allow for the appropriate flow of information.

         While we recognize that government opportunities offer potential for
future sales, we also recognize that they generally yield a longer sales cycle
to close. To that end, we are focusing on establishing strategic relationships
and partnerships with a variety of public sector organizations and allied
complementary markets to further our efforts within this market. To date, we are
successfully established key relationships with senior level individuals in
national and regional government agencies in a top down approach in order to
solidify and speed product acceptance and to build a multi-agency,
cross-jurisdictional foothold.

Retail

         We intend to actively pursue partnerships with leading retail
organizations for product distribution purposes. It is expected that selected
retailers will have the ability to sell components of the Authentication Service
bundle and accordingly to share in revenues generated from the product/service
sale. It is expected that additional transaction related fees will generally not
be shared with partners as support and ongoing customer relationships will be
managed by us.

         The strategy in pursuing the retail market is twofold: First, we
believe that customers will be attracted to the VPAS product as a means of
improving security and convenience for PC and web logons. As their comfort with
the technology increases, we believe that these users will gravitate towards
using other services within the Veridicom Authentication Service (digital
signatures, authenticated payment, etc). Second, as more scanners get deployed
into the market, we believe that other organizations could be inclined to adopt
the Veridicom International solution to keep up with the demands of their
customers.

Distribution

         We will approach our markets via a combination of direct sales and
partnerships with international systems integrators and resellers. Some
distributors are already in place as they were inherited from our previous
structure, and, as such, we are currently in the process of evaluating the
performance and suitability of those partners as we move forward.

Direct Sales




                                       15
<PAGE>
         We have a number of direct sales representatives in various regions
around the world. These representatives will be responsible for both direct
sales to strategic customers as well as supporting the network of channel
partners and OEM relationships in various geographic regions.

Development and Distribution Partners

         Partnerships inherited from Veridicom will be re-evaluated based on
performance, strategic value, future potential and/or additional value-add.
Software Development Kits will be available to enable integration partners,
development partners, and OEM's to develop specific applications or other
devices around our product family.

OEM Integration
         An impediment to the aggressive growth of fingerprint sensors has been
the need to acquire a separate fingerprint peripheral. Although we will continue
to design and produce leading edge peripherals, we will also endeavor to
integrate our sensors and authentication software with OEM's and computer
manufacturers. We previously integrated fingerprint sensor chips with Acer, NEC,
and IBM notebooks. In addition, we believe that further opportunities exist by
integrating sensor chips with mobile devices such as PDA's and mobile phones.

Promotion

         A variety of strategies will be employed to promote our product and
service portfolio. These initiatives include:

           o   Bundling of our services;

           o   Bundling with third party applications and software;

           o   Joint partnerships with leading industry organizations;

           o   Trade shows;

           o   Leverage personal contacts and utilize network of key industry
               advisors; and

           o   Leverage network of investment brokers and their clients.
               Transition investor support to market support.

Employees and Labor Relations

         At December 31, 2003 we had 23 full-time employees. At May 10, 2004, we
had 43 full-time employees, as well as seven contract employees on monthly
retainers and/or commissions.

         We believe our labor relations are good. However, five former employees
of  Veridicom,  Inc.  (which we  acquired in  November  2003) have filed  claims
against us with the Labor  Commissioner  in the State of California.  The former
employees allege that we owe unpaid wages, salaries and vacation pay for various
periods  between July 2000 to November 2003 amounting to a total of $112,113.70.
The validity of the claim is being reviewed by our legal advisors.

Legislative Actions and Potential New Accounting Pronouncements


                                       16
<PAGE>
         In order to comply with the newly adopted Sarbanes-Oxley Act of 2002
and proposed accounting changes by the Securities and Exchange Commission, we
may be required to increase our internal controls, hire additional personnel and
additional outside legal, accounting and advisory services, all of which could
cause our general and administrative costs to increase. Proposed changes in the
accounting rules, including legislative and other proposals to account for
employee stock options as compensation expense among others, could increase the
expenses that we report under Generally Accepted Accounting Practices and could
adversely affect operating results.

ITEM 2.  DESCRIPTION OF PROPERTIES

         Corporate Headquarters. Our executive offices are located at 3800-999
3rd Avenue, Seattle, Washington. We have an agreement for use of office space at
this location under an annual rental agreement. Under the terms of the
agreement, we have the option to increase or decrease office space utilization
on a monthly basis.

         We also maintain an office in Canada located at 21 Water Street, 5th
Floor, Vancouver, British Columbia. We lease approximately 8,200 square feet of
office space located at this location under a three-year lease, which expires in
February 2007.

         We also maintain short-term tenancies for office space located in
Washington, DC., London (UK) and Lahore (Pakistan).

         All of our facilities are in good repair.

         We believe that our existing facilities will be adequate to meet our
needs for the foreseeable future. Should we need additional space, management
believes it will be able to secure additional space at commercially reasonable
rates.

ITEM 3.   LEGAL PROCEEDINGS

         Five former employees of Veridicom, Inc. (which we acquired in November
2003) have filed claims against us with the Labor Commissioner in the State of
California. The former employees allege that we owe unpaid wages, salaries and
vacation pay for various periods between July 2000 to November 2003 amounting to
a total of $112,113.70. The validity of the claim is being reviewed by our legal
advisors.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters submitted to a vote of our security holders
during the fourth quarter ended December 31, 2003.


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market for Common Stock; Related Information




                                       17
<PAGE>
         Our common stock is traded on the OTCBB under the symbol "VRDI". Prior
to February 23, 2004, our common stock traded under the symbol "AVRT". The
following table sets forth, for the fiscal quarter indicated, the high and low
sales price per share sales prices for the common stock, as reported by OTCBB:

                                                    High 1     Low 1
         2002                                       -------    -------
          Jan. 1 - March 31                         $ 12.60    $  4.20
          April 1 - June 30                         $  7.70    $  2.80
          July 1 - Sept. 30                         $  4.20    $  0.10
          Oct. 1 - Dec. 31                          $  3.50    $  0.10
         2003
          Jan. 1 - March 31                         $  3.50    $  1.06
          April 1 - June 30                         $  6.00    $  2.94
          July 1 - Sept. 30                         $  7.00    $  1.20
          Oct. 1 - Dec. 31                          $  6.00    $  3.45

          1 - The high and low per share prices reflect our stock splits that
              occurred on November 14, 2002 (1:5 stock split) and April 23, 2003
              (1:7 stock split).

         On May 10, 2004, there were 1,013 holders of record of our common
stock. For information concerning historical dividends and our dividend policy,
see "Item 6--Management's Discussion and Analysis or Plan of
Operation--Dividends and Distributions."

         In connection with the EssTec and Veridicom merger transactions
described in Item 1 above, we issued a total of 7,776,162 shares of our common
stock.

         Refer to Item 11 for information regarding our equity compensation
plans.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Management's Discussion and Analysis of Financial Condition and Results of
Operations

         The following discussion should be read in conjunction with our
Financial Statements, including the related notes thereto, and other financial
information included herein. The information in this Report includes
forward-looking statements. In addition, past operating results are not
necessarily indicative of the results to be expected for future periods.

Overview

         Veridicom International, Inc., a Delaware corporation (hereinafter
sometimes referred to as the "Company," "we," and "us"), incorporated on
September 9, 1987, under the name Perceptronics, Inc. From our inception through
fiscal 2000, we were engaged in the design, development and manufacture of
computer-based simulation systems for training and decision support. These
systems included both hardware and software and are used to train personnel in
the use of various military and commercial equipment. Much of our simulator
business was in the foreign defense industry. The tightening of defense budgets
worldwide, combined with the continuing consolidation and competition in the


                                       18
<PAGE>
defense industry, negatively impacted the growth and profit opportunities for
small companies such as ours. As a result, in July 2000, we refocused our
business. In connection with the refocus, we sold the assets related to our
computer based simulation system line of business to a developer and
manufacturer of specialized defense simulation products. We then commenced
development of commercial products in the area of Internet collaboration.

         However, we lacked the funds necessary to exploit our developed
products. As a result, in October 2002, we entered into a license agreement with
our then principal stockholder, Global Alpha Corporation ("GAC") pursuant to
which GAC was granted an exclusive license to our software and systems commonly
referred to as the "IC3D Framework" (the "System"). The System encompassed
substantially all of our software including software developed to support
multi-user online collaborative interactivity in a broad variety of applications
employing a variety of virtual media over a number of networks including the
Internet and intra-nets. Under the license agreement, GAC agreed to pay us a
license fee of 10% of the revenue generated from the sale or use of the System
up to $1.0 million, 9% up to $2.0 million, 8% up to $3.0 million and,
thereafter, 7% of the revenue generated.

         In connection with the license agreement, in October 2002 we terminated
substantially all of our employees, and except for our license agreement, ceased
all of our prior operating activities. Our principal activities became directed
to reducing our liabilities and seeking possible acquisitions. Management's
objective was to acquire an operating company that has experienced management
and the potential for profitable growth in exchange for our securities.

         On April 28, 2003, we entered into an Agreement and Plan of Merger with
EssTec, Inc., a privately-held Nevada corporation ("EssTec") . In accordance
with the merger, on May 8, 2003, we, through our wholly-owned subsidiary, Alpha
Acquisition Corporation, a Nevada corporation, acquired EssTec in exchange for
4,276,162 shares of our common stock. The transaction contemplated by the
agreement was intended to be a "tax-free" reorganization pursuant to the
provisions of Section 351 and 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended.

         On May 8, 2003, in connection with the EssTec merger, we changed our
fiscal year end from March 31 to December 31.

         On November 25, 2003, we entered into an Agreement and Plan of Merger
with Veridicom, Inc., a privately-held California corporation ("Veridicom"). In
accordance with the merger, on November 25, 2003, we, through our wholly-owned
subsidiary, A/V Acquisition Corporation, a Nevada corporation, acquired
Veridicom in exchange for 3,500,000 shares of our common stock; 3,250,000 shares
were issued to the holders of Veridicom stock and 250,000 shares were issued
into escrow to cover indemnification obligations, if any, of Veridicom. The
transaction contemplated by the agreement was intended to be a "tax-free"
reorganization pursuant to the provisions of Section 351 and 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended.

         Since March 1, 2004, we have undertaken a comprehensive review of all
pre-merger operations. This on-going review has included all facets of
operations, including the supply chain, product development, previous sales and
marketing agreements, internal controls and reporting systems. Based on this
review, we have decided that a thorough reorganization of all of the companies


                                       19
<PAGE>
is warranted, including a re-evaluation of the supply chain, method of
manufacture, product strategy and other organizational procedures. Although
distracting in the short-term, we believe that this review is in the long-term
best interests of the Company and our stockholders. As part of the
reorganization, we closed our Sunnyvale, California offices on April 15, 2004 in
favor of a more cost effective and efficient development environment in the
Pacific Northwest.

Critical Accounting Policies Used in Financial Statements

         We prepare our financial statements in accordance with accounting
principles generally accepted in the United States. The preparation of these
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Management's estimates and judgments are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

Veridicom  International,  Inc., (the Company,  formerly known as Alpha Virtual,
Inc. ("Alpha") is a Delaware  Corporation  formerly  headquartered in California
that was formed on  September  9, 1987.  The name of the  Company was changed to
Veridicom  International,  Inc. in February 2004. The Company  consolidated  its
corporate  offices in Seattle,  Washington,  and Vancouver,  British Columbia in
April 2004.

Going Concern
-------------
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.  The Company has incurred a net
loss of $2,882,690 and has a working capital deficit and a stockholder  deficit,
which raises substantial doubt about its ability to continue as a going concern.
The Company is currently  devoting its efforts to raising additional capital and
investigating potential merger candidates.  The Company's ability to continue as
a going concern is dependent upon its ability to develop  additional  sources of
capital,  and  ultimately,   achieve  profitable  operations.  The  accompanying
financial  statements do not include any adjustments  that might result from the
outcome of these uncertainties.

Change in Year End
------------------
On May 8, 2003, in connection  with the Esstec merger,  Alpha changed its fiscal
year end from March 31 to December 31.

Consolidation
-------------
The consolidated  financial  statements  include the accounts of the Company and
its wholly owned  subsidiaries  Esstec,  Inc.,  Essential Tec Pakistan (Private)
Limited,  and  Veridicom,   Inc.  All  significant   intercompany  balances  and
transactions have been eliminated in consolidation.


                                       20
<PAGE>
Minority Interest
-----------------
Minority interest reflects the ownership of minority  shareholders in the equity
of Pakistan, a consolidated subsidiary less than wholly owned.

Reclassifications
-----------------
For comparative  purposes,  prior year's consolidated  financial statements have
been reclassified to conform to report classifications of the current year.

Goodwill
--------
Goodwill was recorded at its purchase price and is not being amortized. Pursuant
to SFAS 142 ("Goodwill and Other  Intangible  Assets") and SFAS 144 ("Accounting
for the Impairment or Disposal of Long-Lived Assets"), the Company has evaluated
its goodwill for impairment  and determined  that the fair value of its goodwill
is $936,520 and has recognized a $1,809,648 impairment charge.

Valuation of the Company's Common Stock
---------------------------------------
Unless otherwise  disclosed,  all stock based  transactions  entered into by the
Company  have been valued at the market value of the  Company's  common stock on
the date the transaction was entered into or have been valued using the Modified
Black-Scholes European Model to estimate the fair market value.

Concentrations of Credit Risk
-----------------------------
Financial instruments, which potentially expose the Company to concentrations of
credit  risk,  consist  primarily  of trade  accounts  receivable.  The  Company
maintains  reserves  for  potential  credit  losses  and  such  losses,  in  the
aggregate, have not exceeded management's expectations.

Advertising Expenses
--------------------
The  Company  expenses  advertising  costs as  incurred.  During the years ended
December  31, 2003 and 2002,  the Company did not have  significant  advertising
costs.

Fair Value of Financial Instruments
-----------------------------------
The carrying  amounts of cash,  accounts  receivable,  notes payables,  accounts
payable,  and  accrued  expenses  approximate  fair  value  because of the short
maturity of these items.

Recently Issued Accounting Pronouncements
-----------------------------------------
In July 2001 the Financial  Accounting  Standards Board ("FASB") issued SFAS No.
142 Goodwill and Other Intangible  Assets (SFAS 142).  Under SFAS 142,  goodwill
and  intangible  assets with  indefinite  lives are no longer  amortized but are
reviewed  annually  (or more  frequently  if  impairment  indicators  arise) for
impairment.  Separable  intangible assets that are not deemed to have indefinite
lives will continue to be amortized over their useful lives (but with no maximum
life).  With respect to goodwill and intangible assets acquired prior to July 1,
2001, the Company was required to adopt SFAS 142 effective  January 1, 2002. The
Company has  determined  that the fair value of its goodwill is $936,520 and has
recognized a $1,809,648 impairment charge.

                                       21

<PAGE>
In July 2001 the FASB  issued  SFAS No.  143,  Accounting  for Asset  Retirement
Obligations, which addresses accounting and reporting for obligations associated
with the  retirement  of tangible  long-lived  assets and the  associated  asset
retirement  costs. SFAS No. 143 will be effective for the Company for the fiscal
year beginning  January 1, 2003 and early  adoption is encouraged.  SFAS No. 143
requires that the fair value of a liability for an asset's retirement obligation
be  recorded in the period in which it is incurred  and the  corresponding  cost
capitalized by increasing the carrying amount of the related  long-lived  asset.
The Company has adopted  SFAS No. 143 and its  adoption  did not have a material
impact on its financial statements.

In August 2001 the FASB issued SFAS No. 144,  Accounting  for the  Impairment or
Disposal of  Long-Lived  Assets.  SFAS No. 144 is  effective  for the Company on
January 1, 2002 and addresses  accounting  and  reporting for the  impairment or
disposal of long-lived assets.  SFAS No. 144 supersedes SFAS No. 121, accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of and APB Opinion No. 30,  reporting  the Results of  Operations-Reporting  the
Effects  of  Disposal  of a Segment of a  Business.  SFAS No.  144  retains  the
fundamental provisions of SFAS No. 121 and expands the reporting of discontinued
operations to include all  components of an entity with  operations  that can be
distinguished  from the rest of the entity and that will be eliminated  from the
ongoing  operations  of the entity in a disposal  transaction.  The  Company has
adopted  SFAS No. 144 and its  adoption  did not have a  material  impact on its
financial statements.

In April 2002 the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4,
44, and 64,  Amendment  of SFAS  Statement  No. 13,  and  Technical  Corrections
("SFAS145").  This statement  rescinds the  requirement in SFAS No. 4, Reporting
Gains and Losses from  Extinguishment of Debt, that material gains and losses on
the extinguishment of debt be treated as extraordinary items. The statement also
amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency between
the accounting for  sale-leaseback  transactions  and the accounting for certain
lease   modifications   that  have   economic   effects   that  are  similar  to
sale-leaseback   transactions.   Finally   the   standard   makes  a  number  of
consequential and other technical corrections to other standards. The provisions
of the statement  relating to the  rescission of SFAS 4 are effective for fiscal
years beginning after May 15, 2002.  Provisions of the statement relating to the
amendment of SFAS 13 are effective for transactions occurring after May 15, 2002
and the other provisions of the statement are effective for financial statements
issued  on or after May 15,  2002.  The  Company  has  adopted  SFAS 145 and its
adoption did not have a material effect on its financial statements.

In July 2002 the FASB  issued  SFAS No.  146,  Accounting  for Exit or  Disposal
Activities  ("SFAS  146").  SFAS 146  applies to costs  associated  with an exit
activity  (including  restructuring)  or with a disposal of  long-lived  assets.
Those activities can include eliminating or reducing product lines,  terminating
employees and contracts, and relocating plant facilities or personnel.  SFAS 146
will  require a Company  to  disclose  information  about its exit and  disposal
activities,  the related  costs,  and changes in those costs in the notes to the
interim and annual financial statements that include the period in which an exit
activity  is  initiated  and in any  subsequent  period  until the  activity  is
completed.  SFAS 146  supersedes  Emerging  Issues  Task Force  Issue No.  94-3,
Liability  Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity  (including Certain Costs Incurred in a Restructuring),  and
requires liabilities associated with exit and disposal activities to be expensed


                                       22
<PAGE>
as  incurred  and  can  be  measured  at  fair  value.  SFAS  146  is  effective
prospectively for exit or disposal activities initiated after December 31, 2002,
with  earlier  adoption  encouraged.  The Company  has adopted  SFAS 146 and its
adoption did not have a material effect on its financial statements.

In  December  2002 the FASB  issued SFAS No.  148,  Accounting  for  Stock-Based
Compensation-Transition  and  Disclosure-an  amendment  of SFAS  No.  123.  This
Statement amends SFAS No. 123 to provide alternative methods of transition for a
voluntary  change to the fair value based method of accounting  for  stock-based
employee  compensation  from the  intrinsic  value  based  method of  accounting
prescribed  by APB No. 25. In addition,  this  Statement  amends the  disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim  financial  statements  about the method of accounting  for  stock-based
employee  compensation  and the effect of the method used on  reported  results.
Under  the  provisions  of SFAS No.  148,  companies  that  choose  to adopt the
accounting  provisions  of SFAS No. 123 will be  permitted  to select from three
transition  methods:   Prospective  method,   Modified  Prospective  method  and
Retroactive  Restatement method. The transition and annual disclosure provisions
of SFAS No. 148 are  effective  for the fiscal years  ending after  December 15,
2002.  The  Company  has adopted  SFAS No. 148 and its  adoption  did not have a
material effect on the financial statements.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest Entities,  an interpretation of ARB 51 ("FIN 46"). The primary
objectives of FIN 46 are to provide guidance on the  identification  of entities
for which  control is achieved  through  means other than through  voting rights
(Variable  Interest Entities or "VIEs") and to determine when and which business
enterprise should consolidate the VIE. This new model for consolidation  applies
to an  entity  which  either  (1) the  equity  investors  (if any) do not have a
controlling  financial  interest  or  (2)  the  equity  investment  at  risk  is
insufficient to finance that entity's  activities  without receiving  additional
subordinated  financial support from other parties. The disclosure  requirements
of FIN 46 became  effective  for financial  statements  issued after January 31,
2003.  The  adoption  of this  interpretation  did not  have  an  impact  on the
Company's financial statements.

In April 2003, FASB issued SFAS No. 149, "Accounting for Derivative  Instruments
and Hedging  Activities,"  ("SFAS 149") which is effective for contracts entered
into or modified  after June 30, 2003 and for hedging  relationships  designated
after June 30, 2003. This statement  amends and clarifies  financial  accounting
and reporting for derivative  instruments including certain instruments embedded
in other contracts and for hedging  activities  under SFAS No. 133,  "Accounting
for Derivative Instruments and Hedging Activities." The Company has adopted SFAS
149 and its adoption did not have a material effect on its financial statements.

In May 2003,  FASB  issued  SFAS No.  150,  "Accounting  for  Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity," ("SFAS 150")
which is effective for financial  instruments entered into or modified after May
31, 2003,  and  otherwise is  effective  at the  beginning of the first  interim
period beginning after June 15, 2003. SFAS 150 establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics of both liabilities and equity. The Company has adopted SFAS 150
and its adoption did not have a material effect on its financial statements.




                                       23
<PAGE>
Inventory
---------
Inventory consists primarily of various sensors, combos and parallel port units.
Inventory is valued at lower of cost (first-in, first-out) or market.

Furniture and Equipment
-----------------------
Furniture  and  equipment are recorded at cost.  Depreciation  and  amortization
expense is provided on a straight-line basis using estimated useful lives of 3-7
years. Depreciation expense was $18,105 and $39,846 for the years ended December
31, 2003 and 2002, respectively.  Maintenance and repairs are charged to expense
as incurred and expenditures for major improvements are capitalized. When assets
are retired or  otherwise  disposed  of, the  property  accounts are relieved of
costs and accumulated depreciation and any resulting gain or loss is credited or
charged to operations.

Patents
-------
At the  acquisition of Veridicom,  the Company  evaluated the unused patents and
determined the costs to secure the patents outweighed their intended use and was
unable to find a party  interested in purchasing  the patents.  The patents were
originally  recorded at cost and were being amortized on a  straight-line  basis
over 15 years. The Company has valued the patents at $200,000.

Cash and Cash Equivalents
-------------------------
For  purposes of  reporting  cash flows,  the Company  considers  all funds with
original maturities of three months or less to be cash equivalents.

Income Taxes
------------
The Company  recognizes  deferred  tax assets and  liabilities  for the expected
future  income  tax  consequences  of events  that have been  recognized  in the
Company's  financial  statements.  Under this  method,  deferred  tax assets and
liabilities are determined based on temporary  differences between the financial
carrying  amounts and the tax bases of assets and liabilities  using enacted tax
rates in effect in the periods in which the temporary  differences  are expected
to reverse.  Valuation  allowances  are  established  when  necessary  to reduce
deferred tax assets to the amount  expected to be  realized.  Income tax expense
represents  the tax  payable for the  current  period and the change  during the
period in deferred tax assets and  liabilities.  The Company has a net operating
loss carry forward of approximately $3,000,000 expiring beginning in 2020.

Revenue Recognition
-------------------
Sales of services are recorded  when  performed in  accordance  with  contracts.
Revenues from software sales are recorded in accordance  with SOP 97-2 'Software

Revenue Recognition
-------------------
Revenue  Recognition',  which  requires  that revenue  recognized  from software
arrangements be allocated to the various  elements of the  arrangement  based on
the relative  fair market  values of the  elements,  such as software  products,
upgrades,   enhancements,   post  contract  customer  support,  installation  or
training.  Revenue from product services are recognized at the time services are
provided.

                                       24
<PAGE>
For fixed fee  contracts,  Esstec  recognizes  revenue  based on the  percentage
completed,  calculated as either the number of direct labor hours in the project
to date divided by the  estimated  total  direct labor hours,  or based upon the
completion of specific task benchmarks. It is Esstec's policy to record contract
losses in their  entirety in the period in which such  losses can be  estimated.
Any revenues  associated with  pre-payments  or pre-billings  are deferred until
revenue is earned. For non-fixed fee jobs, revenue is recognized as services are
performed and adjusted to realization value, if necessary.

Pakistan    recognizes    revenue   at   the    point/time   the   software   is
delivered/exported.

Veridicom recognizes revenues at the point of shipment of products.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

Comprehensive Loss
------------------
The Company utilizes  Statement of Financial  Accounting  Standards ("SFAS") No.
130. "Reporting  Comprehensive Income." This statement establishes standards for
reporting  comprehensive  loss  and its  components  in a  financial  statement.
Comprehensive loss as defined includes all changes in equity (net assets) during
a  period  from  non-owner  sources.   Examples  of  items  to  be  included  in
comprehensive  loss, which are excluded from net loss,  include foreign currency
translation  adjustments and unrealized  gains and losses on  available-for-sale
securities.   Comprehensive  loss  presented  in  these  consolidated  financial
statements resulted from translations of foreign currency financial statements.

Foreign Currency Translation
----------------------------

Pakistan  considers  the  Pakistan  Rupee to be the  functional  currency of its
operations.   The  reporting  currency  of  the  Company  is  the  U.S.  dollar;
accordingly,  all  amounts  included  in  the  financial  statements  have  been
translated into U.S. dollars.

    Exchange Rates      For the year Ending 2003     For the Year Ending 2002
    --------------      ------------------------     ------------------------
       Average                  .017331                       .01648
      Period end                .017479

Software Development Costs
--------------------------
The software  development  costs were expensed as research and development costs
as incurred until the software reached  technological  feasibility in accordance
with Statement of Financial  Accounting  Standards No. 86,  "Accounting  for the
Costs of Computer  Software to be Sold,  Leased or  Otherwise  Marketed"  ("SFAS
86").


                                       25
<PAGE>
Earnings Per Common Share
-------------------------
The  Company  computes  earnings  (loss) per  common  share in  accordance  with
Statement of Financial  Accounting  Standards No. 128,  Earnings Per Share (SFAS
No. 128).  This statement  simplifies  the standards for computing  earnings per
share (EPS)  previously  found in  Accounting  Principles  Board Opinion No. 15,
Earnings  Per  Share,  and  makes  them more  comparable  to  international  EPS
standards.  SFAS  No.  128  replaces  the  presentation  of  primary  EPS with a
presentation of basic EPS. In addition, the Statement requires dual presentation
of basic and diluted EPS on the face of the income  statement  for all  entities
with complex capital  structures and requires a reconciliation  of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.

Results of Operations--Years Ended December 31, 2003 and 2002

         The following table sets forth certain statement of operations data for
the years ended December 31, 2003 and 2002:
                                                   For the years ended
                                                       December 31,
                                                 2003                  2002
                                           ------------          ------------
Revenues
 Net revenue                               $    281,997          $    394,011
 Cost of goods sold                             116,007               167,209
                                           ------------          ------------
 Gross profit                                   165,990               226,802

Expenses
 General and administrative expenses          1,727,517             1,530,856
 Research and development                             -               122,188
 Impairment of goodwill                       1,809,648                     -
 Depreciation                                    18,105                39,846
                                           ------------          ------------
 Loss from operations                        (3,389,280)           (1,466,088)
                                           ------------          ------------
Other income (expense)
 Other income                                     6,692                    62
 Loss of equipment                                    -               (34,348)
 Loss on sale of equipment                            -               (11,238)
 Gain on cancellation/forgiveness of debt       556,104                     -
 Interest expense                               (60,835)             (278,905)
                                           ------------          ------------
   Total other income (expense)                 501,961              (324,429)
                                           ------------          ------------
(Loss) before minority interest              (2,887,319)           (1,790,517)

Minority Interest                                 4,629                     -
                                          -------------          ------------
Net (Loss)                                   (2,882,690)           (1,790,517)

Other comprehensive loss
   Foreign currency translation adjustment         (741)                 (717)
                                          -------------          ------------
Comprehensive loss                        $  (2,883,431)         $ (1,791,234)
                                          =============          ============

                                       26
<PAGE>
Earnings (loss) per share:
   Basic and fully diluted (loss)
   per common share                       $       (0.51)         $      (0.49)
                                          =============          ============
   Weighted average common shares
   outstanding basic and fully diluted        5,662,025             3,661,847
                                          =============          ============

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

General

         Our business activities during the year ended December 31, 2003 were
largely focused on mergers with, and acquisitions of, companies with similar,
complementary or related technology and compatible management. Following the
merger with Esstec Inc., and the acquisition of Veridicom Inc., we were engaged


primarily in aligning the operations of the subsidiaries and curtailing and
consolidating operations as necessary, with a view to reducing costs and
liabilities, and seeking additional capital.

Net Sales

         Net sales for fiscal 2003 of $281,997 deceased by $112,014 compared to
fiscal 2002 because of reduced revenues from consulting services.

Cost of Sales

         Cost of sales represent the cost of providing consulting services.
These amounted to $116,007 in fiscal 2003 and decreased by $51,202 compared to
fiscal 2002, because of the related decrease in net sales.

Gross Profit

         The gross profit margin in fiscal 2003 was 58.9% of net sales compared
to 57.6% of net sales in fiscal 2002, a slight improvement of 1.3%





















                                       27

<PAGE>
General and Administrative Expenses

         General and administrative expenses, which include non-cash
compensation expense, amounted to $1,727,517 in fiscal 2003 compared to
$1,530,856 in fiscal 2002. However, the decrease in non-cash and deferred
compensation expense of $ 581,000 in 2003 ($477,000 in 2003 compared to
$1,028,000 in 2002) was off-set by increases in other cash expenditures in 2003
comprising mainly of $230,000 for legal fees, $265,000 for consulting fees, and
$95,000 in travel costs.

Interest

         Interest expense in fiscal 2003 amounting to $60,835 was mostly for
accrued interest on notes payable, compared to interest expense of $278,905 in
fiscal 2002. The higher interest expense in fiscal 2002 arose because during
2002, the company issued 28,500 and 25,000 shares of its common stock to a
creditor for the extension of the due dates of the note payable and recorded
interest expense totaling $267,500 ($142,500 and $125,000 respectively).

Gain on Cancellation/ Forgiveness of Debt

         During fiscal 2003, the Company realized gains on forgiveness of debts
amounting to $556,104. These relate to the sale of 13CD/OneView product to
Global Alpha Corporation (which was previously licensed to GAC) in exchange for
the cancellation of $435,000 note and accrued interest of $45,312 owed by the
Company. In addition, the Company recognized a gain on the settlement of certain
accounts payable amounting to $75,792.

Liquidity and Capital Resources

         We currently have sufficient funds on hand to fund our operations for
the next quarter. We will need to raise financing in the future to fund our
operations. If successful in raising additional financing, we may not be able to
do so on terms that are not excessively dilutive to our existing stockholders or
less costly than existing sources of financing. Failure to secure additional
financing in a timely manner and on favorable terms if and when needed in the
future could have a material adverse effect on our financial performance,
balance sheet and stock price and require us to implement cost reduction
initiatives and curtail operations.

Off-Balance Sheet Arrangements

None.

Dividends and Distributions

         We have not paid any cash dividends to date. We intend to retain our
future earnings, if any, and we do not anticipate paying cash dividends on
either class of our stock in the foreseeable future.


Risk Factors

Risk Related to our Financial Results



                                       28

<PAGE>
Our stock price is volatile and could decline in the future.

         The price of our common stock has been volatile in the past and will
likely continue to fluctuate in the future. The stock market in general and the
market for shares of technology in particular has experienced extreme stock
price fluctuations. In some cases, these fluctuations have been unrelated to the
operating performance of the affected companies. Many companies in the
technology and related industries, including us, have experienced dramatic
volatility in the market prices of their common stock.

We have an accumulated deficit, are not currently profitable and expect to incur
significant expenses in the future as we implement our new business model, which
may reduce our profitability.

         We have incurred a cumulative net loss since inception and are
currently experiencing negative cash flow. We expect to continue to experience
negative cash flow and operating losses for the foreseeable future as we
continue to make significant expenditures for acquisitions, sales and marketing,
international expansion, infrastructure development and general and
administrative functions, in light of our new business model. As a result, we
will need to generate significant revenues to achieve profitability. If our
revenues grow more slowly than we anticipate, or if our operating expenses
exceed expectations, we may experience reduced profitability.

Our auditors have indicated uncertainty concerning our ability to continue
operations as a going concern.

         Our auditors have indicated uncertainty concerning our ability to
continue as a going concern as of the most recent audited financial statements.
We cannot assure you that our ability to obtain additional customers or
financing sources will be impaired as a result of this qualification.
Additionally, we cannot assure you that our proposed projects and services, if
fully developed, can be successfully marketed or that we will ever achieve
significant revenues or profitable margins and therefore remain a going concern.

We will be required to raise additional capital to fund our operations.

         To fund our operations, we will need to raise additional capital
through public or private equity offerings of securities or debt financings. If
we cannot raise needed funds on acceptable terms, we will not be able to develop
or enhance our products, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements. To the extent we raise
additional capital by issuing equity securities, our stockholders may experience
substantial dilution. Also, any new equity securities may have greater rights,
preferences or privileges than our existing common stock. A material shortage of
capital will require us to take drastic steps such as reducing our level of
operations, disposing of selected assets or seeking an acquisition partner. If
cash is insufficient, we will not be able to continue operations.

We will be required to amend our previous periodic reports filed with the
Securities and Exchange Commission.

         We have failed to timely respond to comments generated by the
Securities and Exchange Commission on several of our previously filed periodic
reports. In addition, our previous auditors resigned largely as a result of


                                       29

<PAGE>
periodic reports being filed prior to their review. Although we are currently
working with our new auditors to address these concerns, we will be required to
amend certain previously filed periodic reports and there can be no assurance
that we will not be required to restate previously filed financial statements,
or be subject to regulatory action by the Securities and Exchange Commission.
Any of these actions would have a material adverse effect on us and the price of
our common stock.

Risks Related To Our Business

We face intense competition from other biometric security solution providers as
well as identification and security systems providers.

         A significant number of established and startup companies have
developed or are developing hardware for fingerprint biometric security
applications that currently compete or will compete directly with those products
designed, developed and sold by us. Other companies have developed or are
developing and marketing biometric security applications for the recognition of
fingerprints that currently compete or will compete with those products
designed, developed and sold by us. Some of these companies have developed or
are developing and marketing semiconductor or optically based direct contact
fingerprint image capture devices. Other companies have developed or are
developing and marketing other methods of biometric identification such as
retinal blood vessel or iris pattern, facial structure, or voice recognition.

         If one or more of these technologies or approaches were widely adopted,
it would significantly reduce the potential market for our products. Our
products also compete with non-biometric technologies such as certificate
authorities and traditional keys, cards, surveillance systems and passwords.
Many competitors offering products that are competitive with our products and
services have significantly more cash and resources that then us. The biometric
security market is a rapidly evolving and intensely competitive market, and we
believe that additional competitors may enter the market and become significant
long-term competitors.

         We expect competition to increase and intensify in the near term in the
biometrics markets. Companies competing with us may introduce products that are
competitively priced, have increased performance or functionality or incorporate
technological advances not yet developed or implemented by us.

Some present and potential competitors have financial, marketing, research, and
manufacturing resources substantially greater than we have.

         In order to compete effectively in this environment, we must
continually develop and market new and enhanced products at competitive prices
and must have the resources available to invest in significant research and
development activities. The failure to do so could have a material adverse
effect on its business operations, financial results and stock price.

We will need to raise additional equity or debt financing in the future.

         We will need to raise financing in the future to fund our operations.
If successful in raising additional financing, we may not be able to do so on
terms that are not excessively dilutive to our existing stockholders or less



                                       30

<PAGE>
costly than existing sources of financing. Failure to secure additional
financing in a timely manner and on favorable terms if and when needed in the
future could have a material adverse effect on our financial performance,
balance sheet and stock price and require us to implement cost reduction
initiatives and curtail operations.

Our business will not grow unless the market for our security solutions expands
both domestically and internationally.

         A large portion of our revenues are derived from the sale of security
products and services. We cannot accurately predict the future growth rate, if
any, or the ultimate size of the biometric technology market. The expansion of
the market for our products and services depends on a number of factors,
including:

           o   the cost, performance and reliability of its products and
               services and the products and services of our competitors;

           o   customers' perception of the benefit of biometric security
               solutions;

           o   public perceptions of the intrusiveness of these solutions and
               the manner in which firms are using the biometric information
               collected;

           o   public perceptions regarding the confidentiality of private
               information;

           o   customers' satisfaction with our products and services; and

           o   marketing efforts and publicity regarding these products and
               services.

         Certain groups have publicly objected to the use of biometric products
for some applications on civil liberties grounds and legislation has been
proposed to regulate the use of biometric security products. From time to time,
fingerprint recognition and other biometrics technologies have been the focus of
organizations and individuals seeking to curtail or eliminate the use of these
technologies on the grounds that these technologies may be used to diminish
personal privacy rights. In the event that such initiatives result in
restrictive legislation, the market for fingerprint recognition products may be
adversely affected. Even if biometric markets develop as we hope, our products
and services may not gain wide market acceptance. Even if biometric security
solutions gain wide market acceptance, our products and services may not
adequately address the market requirements.

The biometrics industry is characterized by rapid technological change and
evolving industry standards, which could render our existing products obsolete.

         Our future success will depend upon our ability to develop and
introduce a variety of new products and services and enhancements to these new
products and services in order to address the changing and sophisticated needs
of the marketplace. Frequently, technical development programs in the biometrics
industry require assessments to be made of the future directions of technology
and technology market generally, which are inherently difficult to predict.


                                       31

<PAGE>
Delays in introducing new products, services and enhancements, the failure to
choose correctly among technical alternatives or the failure to offer innovative
products and services at competitive prices may cause customers to forego
purchases of our products and services and purchase those of our competitors.

         The development of new or enhanced products and services is a complex
and uncertain process that requires the accurate anticipation of technological
and market trends. We may experience development, marketing and other
technological difficulties that may delay or limit our ability to respond to
technological changes, evolving industry standards, competitive developments or
customer requirements. You should also be aware that:

         Our technology may become obsolete upon the introduction of alternative
         technologies;

           o   We may incur substantial costs if we need to modify our products
               and services to respond to these alternative technologies;

           o   We may not have sufficient resources to develop or acquire new
               technologies or to introduce new products or services capable of
               competing with future technologies;

           o   We may be unable to acquire the rights to use the intellectual
               property necessary to implement new technology; and

           o   When introducing new or enhanced products or services, we may be
               unable to effectively manage the transition from older products
               and services.

         Continued participation by us in the market for biometric products that
are linked to forensic quality databases under the jurisdiction of governmental
agencies may require the investment of resources in upgrading our products and
technology in order for us to compete and to meet regulatory and statutory
standards. We may not have adequate resources available to us or may not
adequately keep pace with appropriate requirements in order to effectively
compete in the marketplace.

Defects in our products and services could diminish demand for our products and
services, which may harm our business.

         Because our products and services are complex, they may contain errors
or defects that are not found until after they are used by our customers. Errors
or defects that subsequently arise could seriously harm our reputation and its
ability to generate sales to new or existing customers.

         Our products and services are used in systems with other vendors'
products. These products and services can be adequately tested only when they
are successfully integrated with these systems. Errors may be found in new
products or releases after shipment and our products and services may not
operate as expected. Errors or defects in our products and services could result
in:
           o   loss of revenues and increased service and warranty costs;

           o   delay in market acceptance;



                                       32

<PAGE>
           o   loss of salaries; and

           o   injury to our reputation.

We may be subject to loss in market share and market acceptance as a result of
manufacturing errors, delays or shortages.

         Performance failure in our products or certain of our services may
cause loss of market share, delay in or loss of market acceptance, additional
warranty expense or product recall, or other contractual liabilities. The
complexity of certain of the fingerprint recognition systems make the
manufacturing and assembly process of such products, especially in volume,
complex. This may in turn lead to delays or shortages in the availability of
certain products, or, in some cases, the unavailability of certain products. The
negative effects of any delay or failure could be exacerbated if the delay or
failure occurs in products or services that provide personal security, secure
sensitive computer data, authorize significant financial transactions or perform
other functions where a security breach could have significant consequences.

         If a product or service launch is delayed or is the subject of an
availability shortage because of problems with our ability to manufacture or
assemble the product or service successfully on a timely basis, or if a product
or service otherwise fails to meet performance criteria, we may lose revenue
opportunities entirely and/or experience delays in revenue recognition
associated with a product or service in addition to incurring higher operating
expenses during the period required to correct the defects. We may be subject to
repair, replacement, reimbursement and liability claims for products that fail
to work or to meet applicable performance criteria.

         There is a risk that for unforeseen reasons we may be required to
repair or replace a substantial number of products in use or to reimburse
customers for products that fail to work or meet strict performance criteria. We
attempt to limit remedies for product or service failure to the repair or
replacement of malfunctioning or noncompliant products or services, and also
attempts to exclude or minimize exposure to product and related liabilities by
including in its standard agreements warranty disclaimers and disclaimers for
consequential and related damages as well as limitations on its aggregate
liability. From time to time, in certain complex sale or licensing transactions,
each entity may negotiate liability provisions that vary from such standard
forms.

Our existing and proposed international business exposes us to additional risks
that may result in future additional costs or limit the market for product
sales.

         Products and services provided to our international customers account
for a significant part of our revenues. In addition, key component of our
business plan is to expand our reach in our foreign markets. Conducting business
outside of the United States subjects us to additional risks, including:

           o   changes in regulatory requirements;

           o   reduced protection of intellectual property rights;

           o   evolving privacy laws;


                                       33
<PAGE>
           o   tariffs and other trade barriers;

           o   difficulties in staffing and managing foreign operations;

           o   problems in collecting accounts receivable; and

           o   difficulties in authenticating customer information.

         We will face risks inherent to new ventures in each new market that we
enter, including a lack of acceptance of our business model. We may also incur
substantial costs related to entering into new markets, which may not be
recoverable we are unsuccessful in these markets. Failure to recover these costs
and expenses may materially adversely impact our cash flow and ability to meet
our regular operating expenses, which may, in turn harm our ability to serve our
customers and our competitive position to obtain new customers.

         In addition, a portion of our technology base is in Pakistan. We could
be adversely affected by any major hostilities involving Pakistan, which result
in the interruption or curtailment of trade between Pakistan and its trading
partners. For example, if the United States or any of its trading partners
reinstitutes the recently lifted trade sanctions, it may adversely impact our
ability to continue our Pakistani operations.

If we fail to attract and retain employees, our growth could be limited and our
costs could increase, which may adversely affect our results of operations and
financial position.

         Our future success depends in large part upon our ability to attract,
train and retain highly skilled executive-level management and creative and
technical personnel. The competition in the technology industry for such
personnel is intense, and we cannot be sure that we will be successful in
attracting, training and retaining such personnel. Some of our employees and
executive officers have joined our company recently, and all employees are
subject to "at will" employment. High turnover resulting in additional training
expense would decrease its profitability.  We cannot guarantee that we will be
able to replace any of our management personnel in the event their services
become unavailable.

Our failure to maintain the proprietary nature of our technology, intellectual
property and manufacturing processes could have a material adverse effect on our
business, operating results and financial condition and on our ability to
compete effectively.

         We principally rely upon patent, trademark, copyright, trade secret and
contract law to establish and protect our proprietary rights. There is a risk
that claims allowed on any patents or trademarks that we hold may not be broad
enough to protect our technology. In addition, our patents or trademarks may be
challenged, invalidated or circumvented and management cannot be certain that
the rights granted thereunder will provide us with competitive advantages.
Moreover, any current or future issued or licensed patents, or trademarks, or
currently existing or future developed trade secrets or know-how may not afford
sufficient protection against competitors with similar technologies or
processes, and the possibility exists that certain of our already issued patents
or trademarks may infringe upon third party patents or trademarks or be designed
around by others.


                                       34

<PAGE>
         In addition, there is a risk that others may independently develop
proprietary technologies and processes, which are the same as, substantially
equivalent or superior to those possessed by us or become available in the
market at a lower price.

There is a risk that we have infringed or in the future will infringe patents or
trademarks owned by owners, that we will need to acquire licenses under patents
or trademarks belonging to others for technology potentially useful or necessary
to us and that licenses will not be available on acceptable terms, if at all.

         We may have to litigate to enforce our patents or trademarks or to
determine the scope and validity of other parties' proprietary rights.
Litigation could be very costly and divert management's attention. An adverse
outcome in any litigation may have a severe negative effect on our financial
results and stock price. To determine the priority of inventions, we may have to
participate in interference proceedings declared by the United States Patent and
Trademark Office or oppositions in foreign patent and trademark offices, which
could result in substantial cost to us and limitations on the scope or validity
our patents or trademarks.

         We also rely on trade secrets and proprietary know-how, which we seek
to protect by confidentiality agreements with our employees, consultants,
service providers and third parties. There is a risk that these agreements may
be breached, and that the remedies available to us may not be adequate. In
addition, our trade secrets and proprietary know-how may otherwise become known
to or be independently discovered by others.

Failure to increase our brand awareness could limit our ability to compete
effectively.

         If the marketplace does not associate us with high-quality products and
services, we may be unable to keep our existing customers, attract new customers
or successfully introduce new products and services. Competitive and other
pressures may require us to increase our marketing expenses to promote our brand
name, and the benefits associated with brand creation may not outweigh the risks
and costs associated with establishing our brand name. Our failure to develop a
strong brand name or the incurrence of excessive costs associated with
establishing our brand name may harm our business.

We have a lengthy sales and implementation cycle, which increases the cost of
completing sales and renders completion of sales less predictable.

         If we are unable to license our services to new customers on a timely
basis or if our existing and proposed customers and their end-users suffer
delays in the implementation and adoption of its services, our revenue may be
limited and business and prospects may be harmed. Our customers must evaluate
our technology and integrate our products and services into the products and
services they provide. In addition, our customers may need to adopt a
comprehensive sales, marketing and training program in order to effectively
implement some of its products. For these and other reasons, the cycle
associated with establishing licenses and implementing our products can be
lengthy.

Our success depends on our ability to grow and develop our direct and indirect
distribution channels and the inability to do so could adversely affect future
operating results.

                                       35

<PAGE>
         Our failure to grow and develop our direct sales channel or to increase
the number of our indirect distribution channels could have a material adverse
effect on its business, operating results and financial condition. We must
continue to develop relationships with existing channel partners or they may
choose to devote greater resources to supporting the products of competitors.

We may be adversely impacted by the events of and actions in response to
September 11, 2001. A recurrence of terrorist attacks may have a material
adverse impact on our business plan, operations and financial condition.

         We may be adversely affected by the events of September 11, 2001, and
the war in Iraq. At this time, the long term effects of these events, or other
similar or related events that may occur in the future, on the biometircs
industry or on worldwide economic conditions. We cannot assure you that our
business plan, will not be adversely impacted by future terrorist attacks or
actions taken in response to those attacks.

Risks Related to our Capital Structure

There is no assurance of an established public trading market.

         Although our common stock trades on the Over-the-Counter Bulleting
Board (the "OTCBB"), a regular trading market for the securities may not be
sustained in the future. The NASD has enacted recent changes that limit
quotations on the OTCBB to securities of issuers that are current in their
reports filed with the Securities and Exchange Commission. The effect on the
OTCBB of these rule changes and other proposed changes cannot be determined at
this time. The OTCBB is an inter-dealer, Over-The-Counter market that provides
significantly less liquidity than the NASD's automated quotation system (the
"NASDAQ Stock Market"). Quotes for stocks included on the OTCBB are not listed
in the financial sections of newspapers as are those for The Nasdaq Stock
Market. Therefore, prices for securities traded solely on the OTCBB may be
difficult to obtain and holders of common stock may be unable to resell their
securities at or near their original offering price or at any price. Market
prices for our Common Stock will be influenced by a number of factors,
including:

           o   the issuance of new equity securities;

           o   changes in interest rates;

           o   competitive developments, including announcements by competitors
               of new products or services or significant contracts,
               acquisitions, strategic partnerships, joint ventures or capital
               commitments;

           o   variations in quarterly operating results;

           o   change in financial estimates by securities analysts;

           o   the depth and liquidity of the market for our common stock;

           o   investor perceptions of our company and the technologies
               industries generally; and

           o   general economic and other national conditions.

                                       36

<PAGE>
Our common stock could be considered a "penny stock."

         Our common stock could be considered to be a "penny stock" if it meets
one or more of the definitions in Rules 15g-2 through 15g-6 promulgated under
Section 15(g) of the Securities Exchange Act of 1934, as amended. These include
but are not limited to the following: (i) the stock trades at a price less than
$5.00 per share; (ii) it is NOT traded on a "recognized" national exchange;
(iii) it is NOT quoted on The Nasdaq Stock Market, or even if so, has a price
less than $5.00 per share; or (iv) is issued by a company with net tangible
assets less than $2.0 million, if in business more than a continuous three
years, or with average revenues of less than $6.0 million for the past three
years. The principal result or effect of being designated a "penny stock" is
that securities broker-dealers cannot recommend the stock but must trade in it
on an unsolicited basis.

Broker-dealer requirements may affect trading and liquidity.

         Section 15(g) of the Securities Exchange Act of 1934, as amended, and
Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in
penny stocks to provide potential investors with a document disclosing the risks
of penny stocks and to obtain a manually signed and dated written receipt of the
document before effecting any transaction in a penny stock for the investor's
account.

         Potential investors in our common stock are urged to obtain and read
such disclosure carefully before purchasing any shares that are deemed to be
"penny stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks to
approve the account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning his or her
financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from the
investor, confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives. Compliance with
these requirements may make it more difficult for holders of our common stock to
resell their shares to third parties or to otherwise dispose of them in the
market or otherwise.


ITEM 7.  FINANCIAL STATEMENTS

         The information required by this Item 7 is incorporated by reference to
our audited financial statements and Independent Auditors' Report beginning at
page F-1 of this Form 10-KSB.








                                       37
<PAGE>
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

         (a) On December 12, 2003, Beckman Kirkland & Whitney ("Beckman")
informed us that it was resigning as our independent accountant due to recent
filings of quarterly reports for the periods ended 6/30/03 and 9/30/03 made by
us with the Securities and Exchange Commission without prior review by Beckman.

         We conducted a series of discussions with Beckman urging Beckman to
reconsider its resignation. After several discussions, Beckman did not indicate
a consent to withdraw its resignation. For this reason, on February 11, 2004, we
retained AJ. Robbins, PC as our new independent accountants.

         The reports of Beckman on our financial statements for the past two
fiscal years contained a qualification that there was substantial doubt about
our ability to continue as a going concern. Other than the foregoing, the
reports contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principle.

         In connection with its audits for each of the two most recent fiscal
years through February 11, 2004, the date we filed a Form 8-K to report the
change, there were no disagreements with Beckman on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Beckman,
would have caused Beckman to make reference thereto in their report on the
financial statements for such years.

         Beckman has furnished us with a letter addressed to the Securities and
Exchange Commission stating that it agreed with the statements made in the Form
8-K and is filed as an exhibit thereto.

         (b) On February 11, 2004, our Board of Directors retained AJ. Robbins,
PC as our new independent accountants.


ITEM 8A.  CONTROLS AND PROCEDURES

         As of December 31, 2003, an evaluation was carried out under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934). Based on their
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that as of December 31, 2003, our disclosure controls and procedures
needed improvement and were not adequately effective. As disclosed in Item 8
above, quarterly reports for the periods ended 6/30/03 and 9/30/03 were filed by
us with the Securities and Exchange Commission without prior review by our
independent accountant.

         Upon completion of our merger with Cavio in February 2004, we retained
a new management team, including a new Chief Executive Officer and Chief
Financial Officer. Our Chief Executive Officer and Chief Financial Officer are
taking an active role in identifying the deficiencies and implementing
corrective measures, which includes the establishment of new internal policies
related to financial reporting. We believe that the new internal policies will


                                       38

<PAGE>
address the conditions identified by our new Chief Executive Officer and Chief
Financial Officer as material weaknesses in our disclosure controls and
procedures. We will continue to monitor the effectiveness of these new internal
policies.

         Our Chief Executive Officer and Chief Financial Officer believe that
there are no material inaccuracies, or omissions of material facts necessary to
make the statements not misleading in light of the circumstances under which
they were made, in this Form 10-KSB.


                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS

Information Concerning Our Directors and Executive Officers

         The following table sets forth, as of May 10, 2004, the names of, and
certain information concerning, our directors and executive officers:

                               Year First
Name and Title                 Appointed   Principal Occupation
Other than Director       Age  Director    During the Past Five Years
------------------------  ---  ----------  ------------------------------
Paul Mann, President
       and CEO            45    2004       Mr. Mann was the founder of Cavio
                                           Corporation and served as its CEO
                                           since its inception in 1998.

Saif Mansour              29    2002       Mr. Mansour served as our president
                                           until March 2003 and also served as
                                           our VP, Strategic Planning. Mr.
                                           Mansour previously worked in the
                                           venture capital industry.

Bill Cheung               32    2002       Mr. Cheung has been a partner of
                                           Manhattan Capital Partners,Inc., an
                                           investment advisory company, since
                                           2002. Prior to that, Mr. Cheung spent
                                           ten years in the industrial
                                           manufacturing industry as a partner
                                           of National Plastics (China)and Sino
                                           Energy (Hong Kong).

Gyung Min Kim             45    2003       Mr. Kim has been CEO of Real ID
                                           Technology LTD in Korea since its
                                           establishment in 1998. Real ID
                                           provides biometric authentication
                                           products in Korea. Prior to that, he
                                           was CEO of Sam-Jin Co, a production
                                           center for Nike in Korea, as well as
                                           CEO of Picoco Co, a sports marketing
                                           company and Official World Cup
                                           licensee.


                                       39

<PAGE>
Bashir Jaffer, CFO        58     N/A       From 1998 to 2003, Mr. Jaffer was the
                                           owner and president of his own travel
                                           management company. From 1983-1998,
                                           Mr. Jaffer was a partner at a firm of
                                           chartered accountants.

Terry Laferte, SVP
   Technical Operations   44     N/A       From 2000-2004, Mr. Laferte was
                                           responsible for leading the
                                           development of technology
                                           applications for Cavio Corporation.
                                           From 1993-2000, Mr. Laferte managed
                                           all software development for the
                                           Canadian Securities Registration
                                           Systems.

         None of our directors were selected pursuant to any arrangement or
understanding other than with our directors and executive officers acting within
their capacities as such. There are no family relationships between any of our
directors.

The Board of Directors and Committees

         Our Board does not maintain a separate audit, nominating or
compensation committee. Functions customarily performed by such committees are
performed by our Board as a whole. We are not required to maintain such
committees under the applicable rules of the Over-the-Counter Bulletin Board.
None of our independent directors qualify as an "audit committee financial
expert."

Code of Ethics

         We adopted a Code of Business Ethics that applies to our principal
executive officer, principal financial officer, principal accounting officer or
controller or persons performing similar functions, a copy of which is filed as
an exhibit to this Form 10-KSB.

Section 16(a) Beneficial Ownership Compliance

         Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and certain executive officers and persons who own more than ten
percent (10%) of a registered class of our equity securities (collectively, the
"Reporting Persons"), to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. The Reporting Persons are required by
Securities and Exchange Commission regulation to furnish us with copies of all
Section 16(a) forms they file.

         To our knowledge, based solely on our review of the copies of such
forms received by us, or written representations from the Reporting Persons, all
of our insiders complied with all filing requirements during 2003.







                                       40

<PAGE>
ITEM 10.  EXECUTIVE COMPENSATION

Summary Compensation Table

         The following table sets forth information concerning the compensation
during each of the last three fiscal years by our former principal executive
officer (the "Named Executive Officer").  No executive officer received
compensation in excess of $100,000 for the most recent fiscal year.

<TABLE>
<S>                   <C>  <C>    <C>   <C>          <C>        <C>        <C>     <C>
                                                                Long Term Compensation
                                                                -------------------------------
Annual Compensation                                             Awards             Payouts
--------------------------------------------------------------- ------------------ ------------
(a)                   (b)  (c)    (d)   (e)          (f)        (g)        (h)     (i)
--------------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
                                        Other        Restricted Securities
                                        Annual       Stock      Underlying LTIP    All Other
Name and                   Salary Bonus Compensation Award(s)   Options/   Payouts Compensation
Principal Position    Year ($)    ($)   ($)          ($)        SARs (#)   ($)     ($)
--------------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
Charles Lesser,       2003 69,631    -- 14,369 (2)          --  60,000(3)      --          --
 Former President (1) 2002     --    --     --              --      --         --          --
                      2001     --    --     --              --      --         --          --
</TABLE>
                   (1)     Retained in April 2003.

                   (2)     Represents premiums paid on an insurance policy.

                   (3)     Options were originally granted on April 1, 2003 with
                           a vesting period of 2,500 shares per month over a
                           period of 24 months. Mr. Lesser resigned in February
                           2004 and all options were cancelled 3 months after
                           the termination date.

Option/SAR Information

         The following table sets forth option granted by us to the Named
Executive Officer in the most recent fiscal year.

                      Option/SAR Grants in Last Fiscal Year
                                Individual Grants

                        No. of      Percent of    Exercise     Expiration
                      Securities       Total      or Base         Date
                      Underlying   Options/SARs    Price
                     Options/SARs   Granted to     ($/Sh)
                       Granted     Employees in
                         (#)       Fiscal Year

Charles Lesser,      60,000        54.5% (1)      $1.33        Expired (2)
Former President

                (1) 110,000 options were granted in fiscal 2003.




                                       41

<PAGE>
                (2) Options were originally granted on April 1, 2003 with a
                    vesting period of 2,500 shares per month over a period of 24
                    months. Mr. Lesser resigned in February 2004 and all options
                    were cancelled 3 months after the termination date.

         The following table sets forth information regarding options held by
the Named Executive Officer.

                  Option/SAR Exercises and Year End Value Table
        Aggregated Option/SAR Exercises in Last Fiscal Year and Year End
                                Option/SAR Value

                   Shares    Value    No. of Securities       Value of
                  Acquired  Realized     Underlying          Unexercised
                     on       ($)       Unexercised          In-the-Money
                  Exercise             Options/SARs          Options/SARS
                    (#)               at Fiscal Year     at Fiscal Year End ($)
                                         End (#)             Exercisable/
                                       Exercisable/          Unexercisable
                                       Unexercisable

Charles Lesser,      0         0         60,000 (1)         280,200 (1), (2)
Former President

                (1) Options were originally granted on April 1, 2003 with a
                    vesting period of 2,500 shares per month over a period of 24
                    months. Mr. Lesser resigned in February 2004 and all options
                    were cancelled 3 months after the termination date.

                (2) Based on a closing price of $6.00 per share on December 31,
                    2003, as reported by the Over-the-Counter Bulletin Board,
                    and an exercise price of $1.33 per share.

Employment Contracts

         We entered into an employment agreement with our current President and
Chief Executive Officer, Paul Mann. The term of the agreement is one year and
was effective as of the closing of the Cavio merger. Under the terms of he
agreement, Mr. Mann receives a base salary of $175,000 and is eligible for an
additional bonus based on our revenue performance. Mr. Mann is also entitled to
a ten year stock option for 150,000 shares of our common stock at an exercise
price of $3.50 per share.

         We have not entered into employment agreements with our other executive
officers.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Equity Compensation Plan Information

         The following table summarizes our equity compensation plan information
as of December 31, 2003. Information is included for both equity compensation
plans approved by our stockholders and equity compensation plans not approved by
our stockholders.


                                       42

<PAGE>
         We currently maintain the 1999 Stock Option Plan, which provides for
the issuance of common stock to officers and other employees, directors and
consultants. The following table sets forth information regarding outstanding
options and shares reserved for future issuance under the foregoing plans as of
December 31, 2003.

         We do not plan to issue any additional options under our existing plan.
We plan to adopt a new 2004 Stock Option Plan at our next annual meeting of
stockholders.

                                 Number of     Weighted-      Number of Shares
                                Shares to Be    Average      Remaining Available
                                Issued upon    Exercise      for Future Issuance
                                Exercise of    Price of         Under Equity
                                Outstanding   Outstanding    Compensation Plans
                                  Options,     Options,      (Excluding Shares
                                  Warrants     Warrants         Reflected in
                                 and Rights   and Rights         Column (a))
       Plan Category(1)            (a)          (b)                (c)
------------------------------- -----------   -----------     ------------------
                                  770,714       $1.96                0
Equity compensation plans
  approved by stockholders.....
Equity compensation plans
  not approved by stockholders.        --          --               --

     Total.....................   770,714       $1.96                0


Shareholdings Of Certain Beneficial Owners, Directors And Executive Officers

         We know of no person who owns, beneficially or of record, either
individually or together with associates, five percent (5%) or more of the
outstanding shares of our common stock, except as set forth in the table below.
The following table sets forth, as of May 10, 2004, the number and percentage of
shares of common stock beneficially owned, directly or indirectly, by each of
our directors, the Named Executive Officer, principal stockholders and by our
current directors as a group. The shares "beneficially owned" are determined
under applicable Securities and Exchange Commission rules, and do not
necessarily indicate ownership for any other purpose. In general, beneficial
ownership includes shares over which the director, principal stockholder or
executive officer has sole or shared voting or investment power and shares which
such person has the right to acquire within 60 days of May 10, 2004. Each person
in the table, except as noted has sole voting and investment powers over the
shares beneficially owned.

         Unless indicated otherwise, the address for each person named is c/o
Veridicom International, Inc., 3800-999 3rd Avenue, Seattle, Washington
98104-4023.








                                       43

<PAGE>
                                                          Amount and
                                                          Nature of      Percent
                                                          Beneficial       of
Beneficial Owner                                          Ownership       Class
------------------------------------------------------- ---------------- -------
Current Directors(1):
Paul Mann, Director, President, Chief Executive Officer 2,957,017(2)      19.6%
Gyung Min Kim, Director                                 1,338,404(3)       8.9%
4F SeRa B/D 50-1 Nonhyeon-dong
Gangnam-gu, Seoul
Republic of Korea 135-010
Bill Cheung, Director and Secretary                       435,714(4)       2.8%
Saif Mansour, Director                                    100,314(5)          *
(All Current Directors as a group, 4 in all)            4,831,449(6)      31.0%

Former President:
Charles Lesser, Former President                           45,000(7)          *

5% Stockholders:
Ik Ju Kwun                                              1,498,682(3,)(8)  10.5%
102-805 Seocho-Samsung-Raemian
APT
Seocho-gu, Seocho-dong, Seoul
Republic of Korea 137-070
Gerald Calame                                           1,172,257(9)       8.2%
Mill Mall, P.O. Box 964
Road Town Tortolla,
British Virgin Islands
--------------------
*  Less than 1%
(1)      Holdings of current executive officers appointed after fiscal 2003 are
         not reported on this table pursuant to applicable federal law. For
         further information regarding our executive officers, refer to Form 3
         filings made with the Securities and Exchange Commission. Such filings
         may be accessed free of charge at www.sec.gov.
                                           -----------
(2)      Includes options to purchase 43,750 shares of common stock within 60
         days of May 10, 2004.

(3)      Pursuant to the terms of an Agreement and Plan of Merger dated as of
         November 25, 2003, an additional 250,000 shares of common stock are
         currently being held in escrow by Comerica Bank, as escrow agent. Upon
         release of the shares from escrow, Veridicom, Inc. stockholders will be
         entitled to a pro-rata distribution.
(4)      Includes (i) options to purchase 285,714 shares exercisable at $0.70
         per share, owned by Manhattan Capital Partners, LLC of which Mr. Cheung
         is a partner and (ii) options to purchase 150,000 shares exercisable at
         $3.50 per share from October 15, 2001 through October 14, 2011.

(5)      Includes options to purchase 50,000 shares exercisable within 60 days
         of May 10, 2004.

(6)      Includes options to purchase 529,464 shares exercisable within 60 days
         of May 10, 2004.



                                       44

<PAGE>
(7)      Includes options to purchase 25,000 shares.  Mr. Lesser notified us in
         2004 that he plans to exercise this and issuance of the shares is
         pending.

(8)      Includes 979,376 shares held in the name of Biocom Co., Ltd.  Mr. Kwun
         is the president of Biocom Co., Ltd.

(9)      All shares are held indirectly by Mr. Calame through Ucino Finance Ltd.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         We have entered into indemnification agreements with certain of our
directors and executive officers pursuant to which we have agreed to indemnify
any officer or director against all costs associated with the defense of any
action brought against him or her in his/her capacity as an officer or director.

         Paul Mann was a stockholder of Cavio prior to the merger transaction
referenced in Item 1. He acquired approximately 20.4% of our outstanding common
stock as of February 20, 2004.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

   Exhibit
   Number
------------
     2.1     Agreement and Plan of Merger dated April 23, 2003 by and among the
             Registrant (formerly Alpha Virtual, Inc.), Alpha Acquisition
             Corporation and EssTec, Inc. (incorporated by reference to Exhibit
             10.25 to the Registrant's current report on Form 8-K filed with the
             SEC on May 5, 2003).

     2.2     Agreement and Plan of Merger dated November 25, 2003 by and among
             the Registrant (formerly Alpha Virtual, Inc.), A/V Acquisition
             Corporation and Veridicom, Inc. (incorporated by reference to
             Exhibit No. 2.1 to the Registrant's current report on Form 8-K
             filed with the SEC on December 10, 2003).

     2.3     Agreement and Plan of Merger dated January 16, 2004 between the
             Registrant (formerly Alpha Virtual, Inc.), A/VII Acquisition
             Corporation and Veridicom, Inc. and Cavio Corporation (incorporated
             by reference to Exhibit 2.1 to the Registrant's current report on
             Form 8-K filed with the SEC on February 23, 2004).

     3.1     Amended and Restated Certificate of Incorporation (incorporated by
             reference to Exhibit 3.1 to the Registrant's Definitive Information
             Statement on Schedule 14C filed with the SEC on February 3, 2004).

     3.2     Amended and Restated By-Laws (incorporated by reference to Exhibit
             3.2 to the Registrant's Information Statement on Schedule 14C filed
             with the SEC on February 3, 2004).

     10.1    1999 Stock Option Plan  (incorporated  by reference to Exhibit 10.1
             to the Registrant's  quarterly report on Form 10-QSB for the period
             ended September 30, 1999)

                                       45

<PAGE>

     10.2    Employment agreement dated August 15, 2003 between the Registrant
             and Paul Mann.

     10.3    Commercial Lease dated February 20, 2004 by and between Gastown
             Investment 21 Ltd. and the Registrant (formerly Alpha Virtual,
             Inc.)

     10.4    Rental Agreement dated April 30, 2004 by and between Insignia
             Corporate Establishments and the Registrant.

     14.1    Code of Ethics.

     16.1    Letter dated February 24, 2004 from Beckman Kirkland & Whitney to
             the Securities and Exchange Commission (incorporated by reference
             to Exhibit 16.1 to the Registrant's current report, as amended, on
             Form 8-K/A filed with the SEC on February 24, 2004).

     21.1    List of Subsidiaries.

     23.1    Consent of Kabani & Company, Inc. regarding Esstec, Inc.

     24.1    Power of Attorney (included on the signature page).

     31.1    Certification of Chief Executive Officer pursuant to Item
             601(b)(31) of Regulation S-B, as adopted pursuant to Section 302 of
             the Sarbanes-Oxley Act of 2002.

     31.2    Certification of Chief Financial Officer pursuant to Item
             601(b)(31) of Regulation S-B, as adopted pursuant to Section 302 of
             the Sarbanes-Oxley Act of 2002.

     32.1    Certifications of Chief Executive Officer and Chief Financial
             Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
             Section 906 of the Sarbanes-Oxley Act of 2002.

(b)      Reports on Form 8-K.

       During the fourth quarter of the year ended December 31, 2003, we filed
the following reports on Form 8-K:

     (i) On October 21, 2003, we filed an Amendment to a Current Report on Form
8-K/A with the Securities and Exchange Commission related to our merger with and
acquisition of EssTec, Inc. through a wholly-owned subsidiary, Alpha Acquisition
Corporation. The original Current Report was filed on May 22, 2003. Our
Amendment to the Current Report contained Financial Statements of Businesses
Acquired and Pro Forma Financial Information pursuant to Item 7, which were
impracticable to file with the original Current Report.

     (ii)On December 10, 2003, we filed a Current Report on Form 8-K with the
Securities and Exchange Commission regarding the execution of an Agreement and
Plan of Merger between Veridicom, Inc. and us pursuant to which we acquired
Veridicom, Inc. through a wholly-owned subsidiary, A/V Acquisition Corporation.
The Current Report included Item 1 (Change in Control of Registrant) and Item 2



                                       46

<PAGE>
(Acquisition or Disposition of Assets).  Item 7's Financial Statements of
Businesses Acquired and Pro Forma Financial Information were impracticable to
file in the Current Report and were subsequently filed in an Amendment to the
Current Report on a Form 8-K/A. The Current Report had attached as exhibits a
copy of the Agreement and Plan of Merger (Exhibit 2.1) and a copy of our press
release (Exhibit 99.1).

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

         Beckman Kirkland & Whitney ("Beckman") resigned as our independent
certified public accountant on February 11, 2004. Beckman audited Veridicom's
financial statements for the fiscal years ended December 31, 2002 and 2001.
Following Beckman's resignation, the Board selected AJ Robbins, PC to serve as
our certified public accountant.

         Beckman's report on Veridicom's financial statements for the fiscal
years ended December 31, 2002 and 2001 did not contain any adverse opinion or
disclaimer of opinion and were not qualified as audit scope or accounting
principles. The reports for the fiscal years ended December 31, 2002 and 2001
were qualified reports in that adverse financial conditions identified by the
accountants raised substantial doubt about our ability to continue as a
going-concern. During the recent fiscal year ended December 31, 2003, there were
no disagreements with and Beckman on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to the satisfaction of Beckman, would have caused it to make
reference to the subject matter of the disagreement in connection with its
reports.

         Aggregate fees billed by our independent certified public accountants
for the years ended 2003 and 2002 are as follows:

                                                           2003         2002
                                                        ---------     ---------
Audit fees...........................................   $ 90,000      $ 32,500
Audit related fees...................................   $ --          $ --
Tax fees.............................................   $ --          $ --
All other fees.......................................   $ --          $ --


         The Board has considered the provision of non-audit services provided
by our independent certified public accounts to be compatible with maintaining
their independence. The Board will continue to approve all audit and permissible
non-audit services provided by our independent certified public accountants.
These services may include audit services and related services, tax services,
and other services.












                                       47

<PAGE>
                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                          VERIDICOM INTERNATIONAL, INC.

                          By:         /s/ Paul Mann
                             ------------------------------------------
                             Name:    Paul Mann
                             Title:   President
                                      (Principal Executive Officer)

                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose
signature appears below hereby constitutes and appoints Paul Mann and Bashir
Jaffer, each of them acting individually, as his or her attorney-in-fact, each
with the full power of substitution, for him or her in any and all capacities,
to sign any and all amendments to this Annual Report on Form 10-KSB, and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming our signatures as they may be signed by
our said attorney-in-fact and any and all amendments to this Annual Report on
Form 10-KSB.

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

          Signature                 Title                              Date


      /s/ Paul Mann         President, Chief Executive Officer,
------------------------    Director (Principal Executive Officer)  May 18, 2004
Paul Mann

      /s/ Bashir Jaffer     Chief Financial Officer (Principal
------------------------    Financial Officer)                      May 18, 2004
Bashir Jaffer

      /s/ Saif Mansour
------------------------
Saif Mansour                Director                                May 18, 2004

      /s/ Bill Cheung
------------------------
Bill Cheung                 Director, Secretary                     May 18, 2004





                                       48

<PAGE>
                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                          INDEX TO FINANCIAL STATEMENTS


                                                                          PAGE



Independent Auditors' Report                                               F-2

Independent Auditors' Report                                               F-3

Consolidated Balance Sheet                                                 F-4

Consolidated Statements of Operations and Other Comprehensive
 Income (Loss)                                                             F-5

Consolidated Statements of Changes in Stockholders' Equity (Deficit)       F-6

Consolidated Statements of Cash Flows                                      F-8

Notes to Consolidated Financial Statements                                 F-10



































                                      F-1
<PAGE>
                                AJ. ROBBINS, P.C.
                              216 SIXTEENTH STREET
                                    SUITE 600
                             DENVER, COLORADO 80202


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Veridicom International, Inc.
(f/k/a Alpha Virtual, Inc.)
Beverly Hills, California


We have  audited  the  accompanying  consolidated  balance  sheet  of  Veridicom
International,  Inc. (formerly known as Alpha Virtual,  Inc.) as of December 31,
2003,  and  the  related   consolidated   statements  of  operations  and  other
comprehensive income (loss), changes in stockholders' equity (deficit), and cash
flows for the year then ended. These consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  Veridicom
International,  Inc. (formerly known as Alpha Virtual,  Inc.) as of December 31,
2003,  and the  results of its  operations  and its cash flows for the year then
ended in conformity with generally accepted accounting  principles in the United
States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net  capital  deficiency  that  raises  substantial  doubt  about  the
entity's ability to continue as a going concern. Management's plans in regard to
these  matters are also  described in Note 1. The  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.

                                                   AJ. Robbins, P.C.
                                                   Certified Public Accountants

Denver, Colorado
April 7, 2004





                                      F-2
<PAGE>
                          INDEPENDENT AUDITORS' REPORT



Board of Directors
Esstec, Inc. and subsidiary

We have audited the accompanying  consolidated balance sheet of Esstec, Inc. and
subsidiary as of December 31, 2002, and the related  consolidated  statements of
operations, stockholders' deficit and cash flows for the year ended December 31,
2002.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial  statements  based  on our  audit.  We did  not  audit  the  financial
statements of Essential Tec of Pakistan, whose statements reflect combined total
assets of  approximately  $94,240 as of December 31, 2002 and combined total net
revenues of $24,528 for the year then ended;  Those  statements  were audited by
other auditors whose reports have been furnished to us, and our opinion, insofar
as it relates to the amounts included for Essential Tec of Pakistan for the year
ended  December 31, 2002,  is based solely on the report of the other  auditors.
The 2001 consolidated  financial statements were audited by other auditors whose
report dated May 10, 2002, on those statements included an explanatory paragraph
describing  conditions that raised substantial doubt about the Company's ability
to continue as a going concern.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial  statement  presentation.  We believe that our audit provide a
reasonable basis for our opinion.

In our  opinion,  based on our  audit  and the  report  of other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the  consolidated  financial  position of Esstec,  Inc. and
subsidiary  as of  December  31,  2002,  and  the  results  of its  consolidated
operations and its cash flows for the year ended December 31, 2002 in conformity
with accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As shown in the  financial
statements,  the Company has incurred net losses from  operations,  has negative
cash flows from operations, and has a net working capital deficit. These factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note 11. The  financial  statements  do not include any  adjustments  that might
result from the outcome of these uncertainties.



KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS

Fountain Valley, California
August 22, 2003

                                      F-3
<PAGE>
                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2003

                                     ASSETS
Current Assets                       ------
  Cash and cash equivalents                               $    126,367
  Accounts receivable                                           13,497
  Accounts receivable from affiliates                           77,960
  Inventory                                                     89,803
  Other current assets                                          10,259
                                                          ------------
     Total current assets                                      317,886

Furniture & equipment, net                                      73,803
Patents                                                        200,000
Goodwill                                                       936,520
Other assets                                                     3,300
                                                          ------------
     Total assets                                         $  1,531,509
                                                          ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------
Current liabilities
  Accounts payable                                        $    720,616
  Accrued expenses                                             673,523
  Due to related parties                                       347,006
  Notes payable                                                549,549
                                                          ------------
     Total current liabilities                               2,290,694
                                                          ------------
Minority Interest                                               25,006
                                                          ------------
Stockholders' Equity (Deficit)
Common stock, $.001 par value, 60,000,000 authorized;
9,450,689 issued and outstanding                                 9,450
Additional paid in capital                                   7,280,603
Common stock reserved                                           10,000
Accumulated other comprehensive loss                            (3,693)
Accumulated (deficit)                                       (8,080,551)
                                                          ------------
     Total stockholders' equity (deficit)                     (784,191)
                                                          ------------
                                                          $  1,531,509
                                                          ============








         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       F-4
<PAGE>
                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
   CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
                 ----------------------------------------------

                                                 2003               2002
                                                 ----               ----
Revenues
 Net revenue                               $    281,997          $    394,011
 Cost of goods sold                             116,007               167,209
                                           ------------          ------------
 Gross profit                                   165,990               226,802

Expenses
 General and administrative expenses          1,727,517             1,530,856
 Research and development                             -               122,188
 Impairment of goodwill                       1,809,648                     -
 Depreciation                                    18,105                39,846
                                           ------------          ------------
 Loss from operations                        (3,389,280)           (1,466,088)
                                           ------------          ------------
Other income (expense)
 Other income                                     6,692                    62
 Loss of equipment                                    -               (34,348)
 Loss on sale of equipment                            -               (11,238)
 Gain on cancellation/forgiveness of debt       556,104                     -
 Interest expense                               (60,835)             (278,905)
                                          -------------          ------------
   Total other income (expense)                 501,961              (324,429)
                                          -------------          ------------
(Loss) before minority interest              (2,887,319)           (1,790,517)

Minority Interest                                 4,629                     -
                                          -------------          ------------
Net (Loss)                                   (2,882,690)           (1,790,517)

Other comprehensive loss
   Foreign currency translation adjustment         (741)                 (717)
                                          -------------          ------------
Comprehensive loss                        $  (2,883,431)         $ (1,791,234)
                                          =============          ============
Earnings (loss) per share:
   Basic and fully diluted (loss)
   per common share                       $       (0.51)         $      (0.49)
                                          =============          ============
   Weighted average common shares
   outstanding basic and fully diluted        5,662,025             3,661,847
                                          =============          ============






         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       F-5
<PAGE>
                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
                 ----------------------------------------------

<TABLE>
                                                      Common      Deferred    Additional  Accumulated    Accumulated      Total
                      Common Stock $.001 par value     Stock    Compensation    Paid In   Other Compre-   (Deficit)   Stockholders'
                        Shares          Amount       Committed                  Capital   hensive Loss              Equity (Deficit)
                     ---------       ---------       --------   ---------    ----------     --------    -----------   -----------
<S>                  <C>             <C>             <C>        <C>          <C>            <C>         <C>           <C>
Balances,
December 31, 2001    3,242,117       $   3,242       $ 76,000   $(137,759)   $3,025,877     $ (2,235)   $(3,406,692)  $  (441,567)

Issuance of common
stock for cash          17,000              17              -           -        84,983            -              -        85,000

Issuance of
committed stock        129,524             130        (80,000)          -        79,870            -              -             -

Issuance of stock
options and
warrants to
employees as
compensation                 -               -              -    (766,250)    1,350,000            -              -       583,750

Issuance of
warrants for
services rendered            -               -              -           -        76,477            -              -        76,477

Amortization of
employee stock
options                      -               -              -     287,614       150,000            -              -       437,614

Adjustment of
deferred
compensation                 -               -              -     139,254      (139,254)           -              -             -

Exercise of
warrants in lieu
of payment of
accounts payable       274,102             274              -           -        81,957            -              -        82,231

Exercise of
warrants in lieu
of compensation         25,000              25              -           -         7,474            -              -         7,499

Exercise of
warrants for cash      518,253             518         15,000           -       144,959            -              -       160,477

Issuance of
common stock as
interest expense        53,500              53              -           -       267,447            -              -       267,500

Collection of
loan receivable
in lieu of
issuance of
committed stock              -               -         (1,000)          -             -            -              -        (1,000)

Foreign currency
translation
adjustment                   -               -              -           -             -         (717)             -          (717)

Net loss                     -               -              -           -             -            -     (1,791,169)   (1,791,169)
                     ---------       ---------       --------   ---------    ----------     --------    -----------   -----------
Balances,
December 31, 2002    4,259,496           4,259         10,000    (477,141)    5,129,790       (2,952)    (5,197,861)     (533,905)
</TABLE>







         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       F-6

<PAGE>


                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002




<TABLE>
                                                      Common      Deferred    Additional  Accumulated    Accumulated      Total
                      Common Stock $.001 par value     Stock    Compensation    Paid In   Other Compre-   (Deficit)   Stockholders'
                        Shares          Amount       Committed                  Capital   hensive Loss              Equity (Deficit)
                     --------------  -------------   ---------  ------------ ------------ ------------- ----------- ----------------
<S>                  <C>             <C>             <C>        <C>          <C>            <C>         <C>           <C>
Reverse merger with
Alpha Virtual, Inc.  1,515,897           1,516             -            -     1,003,308            -              -     1,004,824

Amortization of
deferred
compensation                 -               -             -      477,141             -            -              -       477,141

Sales of common
stock net of
offering costs of
$106,603               155,296             155             -            -       619,445            -              -       619,600

Stock issued for
services                20,000              20             -            -        58,780            -              -        58,800

Stock issued in
acquisition of
Veridicom, Inc.      3,500,000           3,500             -            -       414,760            -              -       418,260

Stock options
granted for services         -               -             -            -        54,520            -              -        54,520

Foreign currency
translation
adjustment                   -               -             -            -             -         (741)             -          (741)

Net (loss)                   -               -             -            -             -            -     (2,882,690)   (2,882,690)
                     ---------       ---------       --------   ---------    ----------     --------    -----------   -----------
Balances, December
31, 2003             9,450,689       $   9,450       $ 10,000   $       -    $7,280,603     $ (3,693)   $(8,080,551)  $  (784,191)
                     =========       =========       ========   =========    ==========     ========    ===========   ===========
</TABLE>




















         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       F-7

<PAGE>
                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                       CONSOLIDATED STATEMENTS CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                          2003           2002
Cash flows from operating activities                 -----------    -----------
Net loss before minority interest                    $(2,887,319)   $(1,790,517)

Adjustments to reconcile net loss to net cash
used in operating activities:
    Depreciation and amortization                         18,105         39,846
    Bad debt expense                                      38,216         68,215
    Loss on equipment disposal                              --           45,586
    Impairment of goodwill                             1,809,648           --
    (Gain) on cancellation/forgiveness of debt          (556,104)          --
    Stock-based compensation                             531,661      1,021,364
    Common stock issued for services rendered             58,800         76,477
    Common stock issued as interest expense                 --          267,500
    Transfer of equipment to Cavio                        18,336           --
(Increase) / decrease in: Accounts receivable             (7,901)        19,462
    Related party receivables                            (50,404)        46,528
    Prepaid expenses and other assets                     88,480         16,196
Increase / (decrease) in :
    Accounts payable                                    (145,628)      (161,661)
    Accrued expenses                                      37,065         32,977
    Due to related parties                               157,059         29,616
    Deferred compensation                               (140,618)        28,503
                                                     -----------    -----------
Net cash used in operating activities                 (1,030,604)      (259,908)
                                                     -----------    -----------
Cash flows from investing activities
    Proceeds from equipment sales                           --           12,867
    Cash acquired through merger and acquisition         184,001           --
    Purchase of property and equipment                   (19,314)          --
                                                     -----------    -----------
Net cash provided by (used in) investing activities      164,687         12,867
                                                     -----------    -----------
Cash flows from financing activities
    Net proceeds from note payable                       346,549         20,000
    Payments on notes payable                            (20,000)
    Payments on capital lease obligation                  (5,423)        (4,439)
    Proceeds from the exercise warrants                     --          160,477
    Sale of minority interest                             29,635
    Proceeds from sale of common stock and warrants      619,600         85,000
                                                     -----------    -----------
Net cash provided by financing activities                970,361        261,038
                                                     -----------    -----------
Effect of exchange rate changes on cash                     (741)          (717)
                                                     -----------    -----------
Net increase (decrease) in cash                          103,703         13,280
Cash, beginning of period                                 22,664          9,384
                                                     -----------    -----------
Cash, end of period                                  $   126,367    $    22,664
                                                     ===========    ===========

         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                       F-8

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                       CONSOLIDATED STATEMENTS CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
                                  (Continued)

                                                          2003           2002
                                                     -----------    -----------

Supplemental disclosures of cash flow information
Interest paid                                        $      --      $       822
                                                     ===========    ===========
Income taxes paid                                    $      --      $       800
                                                     ===========    ===========








































         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       F-9
<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Background
----------
Veridicom  International,  Inc., (the Company,  formerly known as Alpha Virtual,
Inc. ("Alpha") is a Delaware  Corporation  formerly  headquartered in California
that was formed on  September  9, 1987.  The name of the  Company was changed to
Veridicom  International,  Inc. in February 2004. The Company  consolidated  its
corporate  offices in Seattle,  Washington,  and Vancouver,  British Columbia in
April 2004.

Going Concern
-------------
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.  The Company has incurred a net
loss of $2,882,690 and has a working capital deficit and a stockholder  deficit,
which raises substantial doubt about its ability to continue as a going concern.
The Company is currently  devoting its efforts to raising additional capital and
investigating potential merger candidates.  The Company's ability to continue as
a going concern is dependent upon its ability to develop  additional  sources of
capital,  and  ultimately,   achieve  profitable  operations.  The  accompanying
financial  statements do not include any adjustments  that might result from the
outcome of these uncertainties.

Mergers
-------
On April  28,  2003 the  Company  and  Esstec  Inc.,  a  privately  held  Nevada
corporation,  entered into an Agreement and Plan of Merger.  In accordance  with
the Merger,  on May 8, 2003, the Company,  through its wholly owned  subsidiary,
Alpha Acquisition Corporation ("AAC"), a Nevada Corporation,  acquired Esstec in
exchange  for  4,276,162  shares of the Alpha's  common  stock.  For  accounting
purposes  Esstec acquired Alpha in a reverse merger under the purchase method of
accounting.  The  financial  statements  in the filings of Alpha became those of
Esstec.  The legal  entity  (Alpha)  retained  its name until it was  changed to
Veridicom International, Inc. in February 2004.  Thus,  the financial statements
are still those of "Esstec, Inc."

On November 25, 2003,  the Company  entered into an Agreement and Plan of Merger
with  Veridicom,  Inc.  (Veridicom),  a California  corporation,  through AAC, a
Nevada  corporation,  whereby the Company  acquired  Veridicom  in exchange  for
3,500,000  shares of Veridicom's  common stock.  3,250,000 shares were issued to
the holders of Veridicom's  stock, and 250,000 shares were issued into escrow to
cover Veridicom's indemnification  obligations, if any. Veridicom's stockholders
owned approximately 35% of the Company's common stock outstanding as of November
25, 2003.

On January 16, 2004,  the Company  entered into an Agreement  and Plan of Merger
with Cavio Corporation,  a privately held Washington corporation ("Cavio").  The


                                      F-10

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Mergers (Continued)
-------------------
merger  became  effective  on February 20, 2004  following a special  meeting of
Cavio's  stockholders.  In  accordance  with the merger,  on February  20, 2004,
through its wholly owned  subsidiary,  A/VII Acquisition  Corporation,  a Nevada
corporation,  acquired  Cavio in  exchange  for  5,000,000  shares of our common
stock.

The following unaudited proforma condensed consolidating statement of operations
for the  year  ended  December  31,  2003  gives  effect  to  each of the  above
transactions as if they had occurred on January 1, 2003.

<TABLE>
                   Veridicom        Alpha      Veridicom,       Cavio
                 International,    Virtual,     Inc. For     Corporation
                      Inc.           Inc.      the Eleven      for the
                Consolidated for   For the       Months          Year
                 the Year Ended   One Month      Ended          Ended
                  December 31,   Ended April    November       October       Proforma         Proforma
                      2003         30, 2003     30, 2003       31, 2003     Adjustments     Consolidated
                ---------------  -----------   -----------   -----------    ------------    ------------
<S>               <C>            <C>           <C>           <C>             <C>           <C>
Revenues          $   165,990    $       -     $   359,511   $         -     $        -     $    525,501

(Expenses)         (3,555,270)     (26,351)     (1,598,797)     (666,287)             -       (5,846,705)

Other
income/(expense)      506,590            -           9,458      (121,937)             -          394,111
                -------------    ----------    -----------   -----------     -----------    -------------

Net  loss         $(2,882,690)   $ (26,351)    $(1,229,828)  $  (788,224)    $        -    $ (4,927,093)
                =============    ==========    ===========   ===========     ===========   =============
</TABLE>

Change in Year End
------------------
On May 8, 2003, in connection  with the Esstec merger,  Alpha changed its fiscal
year end from March 31 to December 31.

Operations
----------
Esstec,  Inc.  ("Esstec")  is a  professional  services  company that focuses on
e-commerce initiatives, interactive multimedia, and mobile software applications
for  clients  in  various  industries,   including  the  telecommunications  and
entertainment industries.

Essential Tec Pakistan (Private) Limited  ("Pakistan") was incorporated on April
19, 2000 to establish the business of software development for the international
markets and to export software and technology.  Esstec owns approximately  63.4%
of Pakistan.



                                      F-11

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Operations (Continued)
----------------------
Veridicom designs, manufactures and delivers hardware and software products that
enable  strong  authentication   solutions  based  on  fingerprint   biometrics.
Veridicom  markets  a  complete   fingerprint   biometrics   platform  on  which
applications can be built.

Consolidation
-------------
The consolidated  financial  statements  include the accounts of the Company and
its subsidiaries  Esstec,  Inc.,  Essential Tec Pakistan (Private) Limited,  and
Veridicom,   Inc.   All  significant intercompany balances and transactions have
been eliminated in consolidation.

Minority Interest
-----------------
Minority interest reflects the ownership of minority  shareholders in the equity
of Pakistan, a consolidated subsidiary less than wholly owned.

Reclassifications
-----------------
For comparative  purposes,  prior year's consolidated  financial statements have
been reclassified to conform to report classifications of the current year.

Goodwill
--------
Goodwill was recorded at its purchase price and is not being amortized. Pursuant
to SFAS 142 ("Goodwill and Other  Intangible  Assets") and SFAS 144 ("Accounting
for the Impairment or Disposal of Long-Lived Assets"), the Company has evaluated
its goodwill for impairment  and determined  that the fair value of its goodwill
is $936,520 and has recognized a $1,809,648 impairment charge.

Valuation of the Company's Common Stock
---------------------------------------
Unless otherwise  disclosed,  all stock based  transactions  entered into by the
Company  have been valued at the market value of the  Company's  common stock on
the date the transaction was entered into or have been valued using the Modified
Black-Scholes European Model to estimate the fair market value.

Concentrations of Credit Risk
-----------------------------
Financial instruments, which potentially expose the Company to concentrations of
credit  risk,  consist  primarily  of trade  accounts  receivable.  The  Company
maintains  reserves  for  potential  credit  losses  and  such  losses,  in  the
aggregate, have not exceeded management's expectations.




                                      F-12

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising Expenses
--------------------
The  Company  expenses  advertising  costs as  incurred.  During the years ended
December  31, 2003 and 2002,  the Company did not have  significant  advertising
costs.

Fair Value of Financial Instruments
-----------------------------------
The carrying  amounts of cash,  accounts  receivable,  notes payables,  accounts
payable,  and  accrued  expenses  approximate  fair  value  because of the short
maturity of these items.

Recently Issued Accounting Pronouncements
-----------------------------------------
In July 2001 the Financial  Accounting  Standards Board ("FASB") issued SFAS No.
142 Goodwill and Other Intangible  Assets (SFAS 142).  Under SFAS 142,  goodwill
and  intangible  assets with  indefinite  lives are no longer  amortized but are
reviewed  annually  (or more  frequently  if  impairment  indicators  arise) for
impairment.  Separable  intangible assets that are not deemed to have indefinite
lives will continue to be amortized over their useful lives (but with no maximum
life).  With respect to goodwill and intangible assets acquired prior to July 1,
2001, the Company was required to adopt SFAS 142 effective  January 1, 2002. The
Company has  determined  that the fair value of its goodwill is $936,520 and has
recognized a $1,809,648 impairment charge.

In July 2001 the FASB  issued  SFAS No.  143,  Accounting  for Asset  Retirement
Obligations, which addresses accounting and reporting for obligations associated
with the  retirement  of tangible  long-lived  assets and the  associated  asset
retirement  costs. SFAS No. 143 will be effective for the Company for the fiscal
year beginning  January 1, 2003 and early  adoption is encouraged.  SFAS No. 143
requires that the fair value of a liability for an asset's retirement obligation
be  recorded in the period in which it is incurred  and the  corresponding  cost
capitalized by increasing the carrying amount of the related  long-lived  asset.
The Company has adopted  SFAS No. 143 and its  adoption  did not have a material
impact on its financial statements.

In August 2001 the FASB issued SFAS No. 144,  Accounting  for the  Impairment or
Disposal of  Long-Lived  Assets.  SFAS No. 144 is  effective  for the Company on
January 1, 2002 and addresses  accounting  and  reporting for the  impairment or
disposal of long-lived assets.  SFAS No. 144 supersedes SFAS No. 121, accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of and APB Opinion No. 30,  reporting  the Results of  Operations-Reporting  the
Effects  of  Disposal  of a Segment of a  Business.  SFAS No.  144  retains  the
fundamental provisions of SFAS No. 121 and expands the reporting of discontinued
operations to include all  components of an entity with  operations  that can be
distinguished  from the rest of the entity and that will be eliminated  from the



                                      F-13

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements (Continued)
-----------------------------------------------------
ongoing  operations  of the entity in a disposal  transaction.  The  Company has
adopted  SFAS No. 144 and its  adoption  did not have a  material  impact on its
financial statements.

In April 2002 the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4,
44, and 64,  Amendment  of SFAS  Statement  No. 13,  and  Technical  Corrections
("SFAS145").  This statement  rescinds the  requirement in SFAS No. 4, Reporting
Gains and Losses from  Extinguishment of Debt, that material gains and losses on
the extinguishment of debt be treated as extraordinary items. The statement also
amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency between
the accounting for  sale-leaseback  transactions  and the accounting for certain
lease   modifications   that  have   economic   effects   that  are  similar  to
sale-leaseback   transactions.   Finally   the   standard   makes  a  number  of
consequential and other technical corrections to other standards. The provisions
of the statement  relating to the  rescission of SFAS 4 are effective for fiscal
years beginning after May 15, 2002.  Provisions of the statement relating to the
amendment of SFAS 13 are effective for transactions occurring after May 15, 2002
and the other provisions of the statement are effective for financial statements
issued  on or after May 15,  2002.  The  Company  has  adopted  SFAS 145 and its
adoption did not have a material effect on its financial statements.

In July 2002 the FASB  issued  SFAS No.  146,  Accounting  for Exit or  Disposal
Activities  ("SFAS  146").  SFAS 146  applies to costs  associated  with an exit
activity  (including  restructuring)  or with a disposal of  long-lived  assets.
Those activities can include eliminating or reducing product lines,  terminating
employees and contracts, and relocating plant facilities or personnel.  SFAS 146
will  require a Company  to  disclose  information  about its exit and  disposal
activities,  the related  costs,  and changes in those costs in the notes to the
interim and annual financial statements that include the period in which an exit
activity  is  initiated  and in any  subsequent  period  until the  activity  is
completed.  SFAS 146  supersedes  Emerging  Issues  Task Force  Issue No.  94-3,
Liability  Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity  (including Certain Costs Incurred in a Restructuring),  and
requires liabilities associated with exit and disposal activities to be expensed
as  incurred  and  can  be  measured  at  fair  value.  SFAS  146  is  effective
prospectively for exit or disposal activities initiated after December 31, 2002,
with  earlier  adoption  encouraged.  The Company  has adopted  SFAS 146 and its
adoption did not have a material effect on its financial statements.

In  December  2002 the FASB  issued SFAS No.  148,  Accounting  for  Stock-Based
Compensation-Transition  and  Disclosure-an  amendment  of SFAS  No.  123.  This
Statement amends SFAS No. 123 to provide alternative methods of transition for a
voluntary  change to the fair value based method of accounting  for  stock-based
employee  compensation  from the  intrinsic  value  based  method of  accounting
prescribed  by APB No. 25. In addition,  this  Statement  amends the  disclosure


                                      F-14

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements (Continued)
-----------------------------------------------------
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim  financial  statements  about the method of accounting  for  stock-based
employee  compensation  and the effect of the method used on  reported  results.
Under  the  provisions  of SFAS No.  148,  companies  that  choose  to adopt the
accounting  provisions  of SFAS No. 123 will be  permitted  to select from three
transition  methods:   Prospective  method,   Modified  Prospective  method  and
Retroactive  Restatement method. The transition and annual disclosure provisions
of SFAS No. 148 are  effective  for the fiscal years  ending after  December 15,
2002.  The  Company  has adopted  SFAS No. 148 and its  adoption  did not have a
material effect on the financial statements.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest Entities,  an interpretation of ARB 51 ("FIN 46"). The primary
objectives of FIN 46 are to provide guidance on the  identification  of entities
for which  control is achieved  through  means other than through  voting rights
(Variable  Interest Entities or "VIEs") and to determine when and which business
enterprise should consolidate the VIE. This new model for consolidation  applies
to an  entity  which  either  (1) the  equity  investors  (if any) do not have a
controlling  financial  interest  or  (2)  the  equity  investment  at  risk  is
insufficient to finance that entity's  activities  without receiving  additional
subordinated  financial support from other parties. The disclosure  requirements
of FIN 46 became  effective  for financial  statements  issued after January 31,
2003.  The  adoption  of this  interpretation  did not  have  an  impact  on the
Company's financial statements.

In April 2003, FASB issued SFAS No. 149, "Accounting for Derivative  Instruments
and Hedging  Activities,"  ("SFAS 149") which is effective for contracts entered
into or modified  after June 30, 2003 and for hedging  relationships  designated
after June 30, 2003. This statement  amends and clarifies  financial  accounting
and reporting for derivative  instruments including certain instruments embedded
in other contracts and for hedging  activities  under SFAS No. 133,  "Accounting
for Derivative Instruments and Hedging Activities." The Company has adopted SFAS
149 and its adoption did not have a material effect on its financial statements.

In May 2003,  FASB  issued  SFAS No.  150,  "Accounting  for  Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity," ("SFAS 150")
which is effective for financial  instruments entered into or modified after May
31, 2003,  and  otherwise is  effective  at the  beginning of the first  interim
period beginning after June 15, 2003. SFAS 150 establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics of both liabilities and equity. The Company has adopted SFAS 150
and its adoption did not have a material effect on its financial statements.





                                      F-15
<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory
---------
Inventory consists primarily of various sensors, combos and parallel port units.
Inventory is valued at lower of cost (first-in, first-out) or market.

Furniture and Equipment
-----------------------
Furniture  and  equipment are recorded at cost.  Depreciation  and  amortization
expense is provided on a straight-line basis using estimated useful lives of 3-7
years. Depreciation expense was $18,105 and $39,846 for the years ended December
31, 2003 and 2002, respectively.  Maintenance and repairs are charged to expense
as incurred and expenditures for major improvements are capitalized. When assets
are retired or  otherwise  disposed  of, the  property  accounts are relieved of
costs and accumulated depreciation and any resulting gain or loss is credited or
charged to operations.

Patents
-------
At the  acquisition of Veridicom,  the Company  evaluated the unused patents and
determined the costs to secure the patents outweighed their intended use and was
unable to find a party  interested in purchasing  the patents.  The patents were
originally  recorded at cost and were being amortized on a  straight-line  basis
over 15 years. The Company has valued the patents at $200,000.

Cash and Cash Equivalents
-------------------------
For  purposes of  reporting  cash flows,  the Company  considers  all funds with
original maturities of three months or less to be cash equivalents.

Income Taxes
------------
The Company  recognizes  deferred  tax assets and  liabilities  for the expected
future  income  tax  consequences  of events  that have been  recognized  in the
Company's  financial  statements.  Under this  method,  deferred  tax assets and
liabilities are determined based on temporary  differences between the financial
carrying  amounts and the tax bases of assets and liabilities  using enacted tax
rates in effect in the periods in which the temporary  differences  are expected
to reverse.  Valuation  allowances  are  established  when  necessary  to reduce
deferred tax assets to the amount  expected to be  realized.  Income tax expense
represents  the tax  payable for the  current  period and the change  during the
period in deferred tax assets and  liabilities.  The Company has a net operating
loss carry forward of approximately $3,000,000 expiring beginning in 2020.

Revenue Recognition
-------------------
Sales of services are recorded  when  performed in  accordance  with  contracts.
Revenues from software sales are recorded in accordance  with SOP 97-2 `Software


                                      F-16

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition
-------------------
Revenue  Recognition',  which  requires  that revenue  recognized  from software
arrangements be allocated to the various  elements of the  arrangement  based on
the relative  fair market  values of the  elements,  such as software  products,
upgrades,   enhancements,   post  contract  customer  support,  installation  or
training.  Revenue from product services are recognized at the time services are
provided.

For fixed fee  contracts,  Esstec  recognizes  revenue  based on the  percentage
completed,  calculated as either the number of direct labor hours in the project
to date divided by the  estimated  total  direct labor hours,  or based upon the
completion of specific task benchmarks. It is Esstec's policy to record contract
losses in their  entirety in the period in which such  losses can be  estimated.
Any revenues  associated with  pre-payments  or pre-billings  are deferred until
revenue is earned. For non-fixed fee jobs, revenue is recognized as services are
performed and adjusted to realization value, if necessary.

Pakistan    recognizes    revenue   at   the    point/time   the   software   is
delivered/exported.

Veridicom recognizes revenues at the point of shipment of products.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

Comprehensive Loss
------------------
The Company utilizes  Statement of Financial  Accounting  Standards ("SFAS") No.
130. "Reporting  Comprehensive Income." This statement establishes standards for
reporting  comprehensive  loss  and its  components  in a  financial  statement.
Comprehensive loss as defined includes all changes in equity (net assets) during
a  period  from  non-owner  sources.   Examples  of  items  to  be  included  in
comprehensive  loss, which are excluded from net loss,  include foreign currency
translation  adjustments and unrealized  gains and losses on  available-for-sale
securities.   Comprehensive  loss  presented  in  these  consolidated  financial
statements resulted from translations of foreign currency financial statements






                                      F-17

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign Currency Translation
----------------------------

Pakistan  considers  the  Pakistan  Rupee to be the  functional  currency of its
operations.   The  reporting  currency  of  the  Company  is  the  U.S.  dollar;
accordingly,  all  amounts  included  in  the  financial  statements  have  been
translated into U.S. dollars.

    Exchange Rates      For the year Ending 2003     For the Year Ending 2002
    --------------      ------------------------     ------------------------
       Average                  .017331                       .01648
      Period end                .017479

Software Development Costs
--------------------------
The software  development  costs were expensed as research and development costs
as incurred until the software reached  technological  feasibility in accordance
with Statement of Financial  Accounting  Standards No. 86,  "Accounting  for the
Costs of Computer  Software to be Sold,  Leased or  Otherwise  Marketed"  ("SFAS
86").

Earnings Per Common Share
-------------------------
The  Company  computes  earnings  (loss) per  common  share in  accordance  with
Statement of Financial  Accounting  Standards No. 128,  Earnings Per Share (SFAS
No. 128).  This statement  simplifies  the standards for computing  earnings per
share (EPS)  previously  found in  Accounting  Principles  Board Opinion No. 15,
Earnings  Per  Share,  and  makes  them more  comparable  to  international  EPS
standards.  SFAS  No.  128  replaces  the  presentation  of  primary  EPS with a
presentation of basic EPS. In addition, the Statement requires dual presentation
of basic and diluted EPS on the face of the income  statement  for all  entities
with complex capital  structures and requires a reconciliation  of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.


NOTE 2 - ACCOUNTS RECEIVABLE

In December 1999 Alpha sold its PGTS training  simulator to an unrelated entity.
As part of the agreement,  Alpha is entitled to royalty  payments on future PGTS
Training System sales by Eidetics for a four-year  period from the date of sale.
As of  December  31,  2003  Alpha was owed  approximately  $105,117  in past due
royalties.  A full allowance was recorded against this  receivable.  The Company
continues to pursue collection of these royalties.

The  Company  has  additional  accounts  receivable  arising  from a  consulting
contract, which was fully collected subsequent to December 31, 2003.


                                      F-18

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:
                                                                          2003
                                                                       --------
Tooling equipment                                                      $159,595
Furniture and equipment                                                  27,065
Computers                                                                91,390
Software                                                                 28,000
Vehicles                                                                 20,540
                                                                       --------
                                                                        326,590
         Less accumulated depreciation and amortization                 252,787
                                                                       --------

                                                                       $ 73,803

NOTE 4 - DCAA AUDIT

The  Company's  books and records were subject to audit by the Defense  Contract
Audit Agency (DCAA) for defense  contracts  formerly  serviced by Alpha.  A DCAA
audit  remains  open for a contract  that was  completed  in 1994.  The  Company
believes the costs charged to this contract were proper and should not result in
adjustments  in excess of the  $100,000  reserved for  possible  contract  price
adjustments.  The amount  reserved is believed to be adequate and is included in
accrued expenses.

NOTE 5 - NOTES PAYABLE

The Company has notes payable  totaling  $549,549 bearing interest at rates from
10%-12%per  annum,  maturing  between  January and August 2004.  $165,000 of the
notes are  convertible  at the  Company's  option into  shares of the  Company's
common stock.  Certain note holders received  warrants to purchase 33,000 shares
of the  Company's  common stock at $1.75 per share.  The  warrants  were granted
prior to the reverse merger and were  previously  valued and expensed due to the
short-term nature of the loans by Alpha.

NOTE 6 - STOCK-BASED COMPENSATION

The Company accounts for stock based  compensation  under Statement of Financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation" (SFAS
123). The standard  requires the Company to present the "fair value" method with
respect to stock-based compensation of consultants and other non-employees.

The  Company  did not  change  its method of  accounting  with  respect to stock
options;  the Company continues to account for these under the "intrinsic value"
method.  The Company recognized $58,800 as stock based compensation to employees
for the year ended  December 31, 2003 for 20,000  shares issued to the Company's
former president.


                                      F-19

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7 - RELATED PARTY TRANSACTIONS

On July 15,  2003  Alpha  entered  into a  consulting  agreement  for  marketing
strategy  and  support  services  for a term of three  months and at the rate of
$7,000  per  month  plus  the  reimbursement  of out of  pocket  expenses.  This
agreement continues and expands Government and commercial  marketing  activities
previously  undertaken for the OneView Technology,  and extends these activities
to include technology newly available from Esstec and Veridicom.

On July 15, 2003 Alpha entered into an advisory agreement with the principals of
the  consulting  company in the above  agreement to join the Company's  Advisory
Board to assist the Company's  Board of Directors in structuring and advising as
to  strategic  alliances  and  growth.  The  agreement  is for one  year and the
principals  were each granted  options to acquire 10,000 shares of the Company's
common stock at $3.50 per share; options vest monthly over one year. The options
were valued at $54,520, the fair value using the Black-Scholes  European Pricing
Model. The average risk rate used was 3.3%, volatility was estimated at 100% and
the expected life was one year.

The  Company  has  entered  into  agreements  with  Manhattan  Capital  Partners
("Manhattan")  and its  affiliates  to provide  consulting  and stock  placement
services.  The Company paid Manhattan a total of $205,673  during the year ended
December  31,  2003.  At December  31, 2003  Manhattan  had advanced the Company
$110,005 in a non-interest  bearing  short-term  loan, which was repaid in 2004.
The Company has amounts outstanding for prior services rendered by affiliates of
Manhattan  totaling an  additional  $236,801  and is  negotiating  to reduce the
amounts  owed  under this  agreement.  Manhattan  is  related  due to one of the
principals being the former Chief Executive of Esstec.


NOTE 8 - COMMON STOCK

The Company has authorized 60,000,000 shares of $.001 par value common stock and
2,000,000 shares of $.001 par value preferred stock

Common Stock Issued during the Year Ended December 31, 2002
-----------------------------------------------------------
In January 2002, the Company issued 12,857 shares of common stock from committed
stock for services rendered totaling $45,000.

In February  2002,  the Company  issued  17,000  shares of common stock for cash
totaling $85,000.

In March  2002,  the  Company  issued  25,000  shares of common  stock  from the
non-cash  exercise  of warrants by an officer of the Company in lieu of deferred
compensation  totaling  $7,499.  During the year ended  December 31,  2002,  the
Company  issued  28,500 and 25,000  shares of common stock to a creditor for the
extension  of the due dates of the note payable and  recorded  interest  expense
totaling $142,500 and $125,000, respectively. During the year ended December 31,


                                      F-20

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - COMMON STOCK (Continued)

2002,  the Company  issued  518,253  shares of common  stock for the exercise of
warrants  with cash  totaling  $145,477 and recorded  committed  stock  totaling
$15,000.   During  the  year  ended   December  31,  2002,  the  Company  issued
129,524shares  of common stock from committed stock totaling  $80,000 During the
year ended  December 31, 2002, the Company issued 100,000 shares of common stock
from  committed  stock to an officer  upon the  exercise of warrants to purchase
100,000 shares of common stock at $0.30 per share. In lieu of a cash payment for
the exercise, the Company converted $30,000 of accrued consulting fees.

During the year ended  December 31, 2002,  the Company  issued  16,667 shares of
common stock from committed stock upon the exercise of warrants.

Stock Option Plan
-----------------
The  Company  maintains  the 1999 Stock  Option  Plan,  which  provides  for the
granting of options to officers, directors, employees and consultants. 3,000,000
shares of common stock are reserved  under the plan for the granting of options.
As of  December  31,  2003 the Company  has  770,714  options  outstanding  with
exercise prices ranging from $.70 to $3.50, expiring beginning in 2008.


NOTE 9 - COMMITMENTS AND CONTINGENCIES

On July 7, 2003 Alpha entered into a consulting  agreement with TSC to assist in
negotiating,  arranging or developing  funding to Alpha clients and projects for
an initial  term of 6 months  for a  non-refundable  fee of  $50,000  payable as
follows:  $25,000 upon  securing  $1,000,000 of funding and $5,000 per month for
the remaining  $25,000  until paid in full and  reimbursement  of expenses.  The
agreement is extended for 3 years after termination if funding is secured with a
prospect  handled by TSC. Alpha will grant to TSC 120,000 warrants upon securing
the $1,000,000 in funding,  to be distributed at 20,000  warrants per month from
the date of closing,  at an exercise  price equal to the stock price on the date
of exercise,  expiring in 5 years. If funding exceeds $2,000,000, a bonus of 50%
of the above free structure of cash and warrants will be paid to TSC.

On October 31, 2002 the Company's Chief  Technology  Officer was discharged.  On
November  15, 2002 the two  parties  entered  into a  Settlement  of  Employment
Agreement  whereby Alpha agreed to pay and accrued $30,000 in severance pay with
monies  received  for  royalties  (See  Note 2).  Alpha  will pay 50% of  monies
received up to $30,000.

Litigation
----------
On March 28,  2003 the  Company and one of the  company's  stockholders  filed a
lawsuit in  Superior  Court  against a former CEO of the  Company.  The  lawsuit
alleges a breach of  fiduciary  duty,  negligence,  fraud and breach of contract
claiming the CEO did not devote his efforts to the Company's product development


                                      F-21

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)

Litigation (Continued)
----------------------
and market  strategies  or  maximize  the profit of the  business.  An amount of
damages  has not been  determined  and the  outcome  of this  lawsuit  cannot be
determined at this time.

Five former  employees of Veridicom,  Inc. have filed claims against the Company
with the Labor  Commissioner  in the State of California.  The former  employees
allege that the Company owes unpaid wages, salaries and vacation pay for various
periods  between  July 2000 to November  2003  amounting to a total of $112,114.
Management  and legal  advisors are  reviewing  the  validity of the claim.  The
Company has accrued compensation payable at December 31, 2003.

In addition, the Company is a party to a number of other lawsuits arising in the
normal course of business. In the opinion of management, the resolution of these
matters will not have a material  adverse  effect on the  Company's  operations,
cash flows or financial position.

Leases
------
The Company rented office space under various short-term  month-month  operating
leases and is currently  not  obligated  under any  operating  leases for office
space.

Rent  expense was $26,841  and $-0- for the years  ended  December  31, 2003 and
2002, respectively.

NOTE 10 - EARNINGS PER SHARE

                                            For the Year Ended December 31, 2003
                                            ------------------------------------
                                                                           Per
                                              Income          Shares      Share
                                            (Numerator)   (Denominator)  Amount
                                            -----------   -----------   --------
Basic EPS
  (Loss) available to common stockholders   $(2,882,690)    5,662,025   $  (.51)

Effect of Dilutive Securities                      --            --         --
                                            -----------   -----------   --------

Diluted EPS
  (Loss) available to common stockholders   $(2,882,690)    5,662,025   $  (.51)
                                            ===========   ===========   ========





                                      F-22

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10 - EARNINGS PER SHARE (Continued)

                                            For the Year Ended December 31, 2002
                                            ------------------------------------
                                                                           Per
                                              Income          Shares      Share
                                            (Numerator)   (Denominator)  Amount
                                            -----------   -----------   --------
Basic EPS
  (Loss) available to common stockholders   $(1,790,517)    3,661,847   $ ( .49)

Effect of Dilutive Securities                      --            --        ---
                                            -----------   -----------   --------

Diluted EPS
  (Loss) available to common stockholders   $(1,790,517)    3,661,847   $  (.49)
                                            ===========   ===========   =======


NOTE 11-GAIN ON CANCELLATION/FORGIVENESS OF DEBT

Effective October 31 2002, the Company entered into a License Agreement with its
principal shareholder,  Global Alpha Corporation ("GAC") wherein GAC was granted
an exclusive license to the Company's  software and systems commonly referred to
as the "IC3D Framework" (the "System). The System encompasses  substantially all
of the Company's  software  including  software  developed to support multi-user
online collaborative  interactivity in a broad variety of applications employing
a variety of virtual media over a number of networks  including the Internet and
intra-nets.  Under the  Agreement,  GAC will pay to the Company a license fee of
ten  percent of the revenue  generated  from the sale or use of the System up to
$1,000,000,  nine percent up to $2,000,000,  eight percent up to $3,000,000 and,
thereafter,  seven percent of the revenue generated.  A minimum,  annual license
fee of $25,000 for the year ending  December 31, 2002 and December 31, 2003 must
be paid to maintain the exclusive license.  At March 31, 2003 the annual license
fee of $25,000 for 2002 had not been paid and the Company has waived the license
fee based on discussions  with GAC setting off the license fee against the short
term debt of $435,000  owed by the  Company to GAC.  The Company has sold to GAC
the  IC3D/OneView  product in exchange for cancellation of the $435,000 note and
accrued interest of $45,312 owed by Alpha.

In addition, the Company recognized a gain on the settlement of certain accounts
payable of $75,792.









                                      F-23

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - SUBSEQUENT EVENTS

The Company sold 370,514 shares of common stock for $1,225,000 through March 31,
2004.

Office Closure (Unaudited)
--------------------------
Subsequent to December 31, 2003, the Company  permanently  closed the offices of
Veridicom in Sunnyvale,  California,  on April 15, 2004, and is currently in the
process on  integrating  and  consolidating  its software  and hardware  product
divisions  at its  offices in  Vancouver,  British  Columbia.  The direct  costs
incurred by the company  to-date,  with respect to the closure and relocation of
the Sunnyvale operations, amount to approximately $40,000.






































                                      F-24