==============================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

                  For the quarterly period ended March 31, 2004

                                       OR

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

                        Commission file number 000-12382



                          VERIDICOM INTERNATIONAL, INC.
        (Exact name of small business issuer as specified in its charter)


                    Delaware                                95-2577731
       (State or other jurisdiction of                  (I.R.S. Employer
        incorporation or organization)                 Identification No.)

              3800-999 3rd Avenue                           98104-4023
              Seattle, Washington                           (Zip Code)
    (Address of principal executive offices)

                                 (206) 224-6206
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes [ ]     No [X]


There were 14,960,853 shares outstanding of registrant's Common Stock, par value
$.001 per share, as of June 16, 2004.

Transitional Small Business Disclosure Format (check one):  Yes [ ]     No [X]


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                                       1

<PAGE>



                          VERIDICOM INTERNATIONAL, INC.
                                FORM 10-QSB INDEX


PART I - FINANCIAL INFORMATION                                             3

Item 1.  Financial Statements (Unaudited):                                 3

         a.    Consolidated Balance Sheets as of March 31, 2004 and
               December 31, 2003                                           3

         b.    Consolidated Statements of Operations for the three
               months ended March 31, 2004 and 2003                        4

         c.    Consolidated Statements of Cash Flows for the three
               months ended March 31, 2004 and 2003                        5

         d.    Notes to Consolidated Financial Statements                  6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                        11

Item 3.  Controls and Procedures                                          30



PART II - OTHER INFORMATION                                               32

Item 1.  Legal Proceedings                                                32

Item 2.  Changes in Securities and Use of Proceeds                        32

Item 3.  Defaults Upon Senior Securities                                  32

Item 4.  Submission of Matters to a Vote of Security Holders              32

Item 5.  Other Information                                                32

Item 6.  Exhibits and Reports on Form 8-K                                 32

Signatures                                                                34




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








                                       2

<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                           CONSOLIDATED BALANCE SHEETS

                                                      March 31,
                                                        2004     December 31,
                            ASSETS                   (Unaudited)    2003
Current Assets              ------
  Cash and cash equivalents                         $    462,201 $   126,367
  Accounts receivable                                     11,672      13,497
  Accounts receivable from affiliates                     32,563      77,960
  Inventory                                               83,493      89,803
  Other current assets                                    44,524      10,259
                                                    ------------ -----------
     Total current assets                                634,453     317,886

Furniture & equipment, net                               185,010      73,803
Patents                                                  200,000     200,000
Goodwill                                               4,728,546     936,520
Other assets                                               3,300       3,300
                                                    ------------ -----------
                                                    $  5,751,309 $ 1,531,509
                                                    ============ ===========

        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
        ----------------------------------------------
Current liabilities
  Accounts payable                                  $  1,211,473 $   720,616
  Accrued expenses                                       736,394     673,523
  Due to related parties                                 283,954     347,006
  Notes payable                                          449,549     549,549
                                                    ------------ -----------
     Total current liabilities                         2,681,370   2,290,694
                                                    ------------ -----------
Proceeds from capital stock subscriptions              3,192,619           -
Minority Interest                                         20,686      25,006
                                                    ------------ -----------
Stockholders' Equity (Deficit)
Common stock,$.001 par value,60,000,000 authorized;
14,960,853 and 9,450,689 issued and outstanding           14,960       9,450
Additional paid in capital                             8,682,842   7,280,603
Common stock reserved                                     10,000      10,000
Accumulated other comprehensive (loss)                    (5,733)     (3,693)
Accumulated (deficit)                                 (8,845,435) (8,080,551)
                                                    ------------ -----------
     Total stockholders' equity (deficit)               (143,366)   (784,191)
                                                    ------------ -----------
                                                    $  5,751,309 $ 1,531,509
                                                    ============ ===========

         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       3

<PAGE>


                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                    CONSOLIDATED STATEMENTS OF OPERATIONS AND
                        OTHER COMPREHENSIVE INCOME (LOSS)
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                    UNAUDITED

                                                   2004                2003
                                                   ----                ----
Revenues
    Net revenue                               $    238,975        $    203,000
    Cost of goods sold                             160,038              45,175
                                              ------------        ------------
    Gross profit                                    78,937             157,825

Expenses
    General and administrative expenses            781,778             177,099
    Research and development                        45,607                   -
    Depreciation                                     7,625               3,694
                                              ------------        ------------
    (Loss) from operations                        (756,073)            (22,968)

Other income/(expense)
    Other expense                                   (2,434)                  -
    Gain on settlement of liabilities                    -              50,638
    Interest expense                               (10,697)             (3,850)
                                              ------------        ------------
       Total other income (expense)                (13,131)             46,788

Income (Loss) before minority interest            (769,204)             23,820

Minority Interest                                    4,320                   -
                                              ------------        ------------
Net Income (Loss)                                 (764,884)             23,820
                                              ------------        ------------
Comprehensive (loss)                          $   (764,884)       $     23,820
                                              ============        ============
Earnings (loss) per share:
    Basic and fully diluted income (loss)
     per common share                         $      (0.07)       $       0.01
                                              ============        ============
    Weighted average common shares
     outstanding basic and fully diluted        11,819,186           4,259,496
                                              ============        ============










         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       4

<PAGE>
                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                    UNAUDITED
                                                         2004         2003
                                                    ------------- -------------
Cash flows from operating activities
Net income (loss) before minority interest          $   (769,204) $     23,820
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
    Depreciation and amortization                          7,625         3,694
    Stock-based compensation                              35,910
(Increase) / decrease in :
    Accounts receivable                                   15,868       (64,701)
    Other current assets                                       -        (1,385)
    Related party receivables                             45,397        10,537
    Inventory                                              6,310             -
    Prepaid expenses and other assets                    (29,391)       (9,570)
Increase / (decrease) in :
    Accounts payable                                       8,087        41,255
    Accrued expenses                                    (148,376)      (17,651)
    Due to related parties                               (91,745)        6,807
    Deferred compensation                                      -         9,528
                                                    ------------  ------------
Net cash provided by (used in) operating activities     (919,519)        2,334
                                                    ------------  ------------
Cash flows from investing activities
    Cash acquired through merger and acquisition         164,791
    Purchase of property and equipment                    (9,359)       (2,681)
                                                    ------------  ------------
Net cash provided by (used in) investing activities      155,432        (2,681)
                                                    ------------  ------------
Cash flows from financing activities
    Net proceeds from note payable                             -             -
    Payments on notes payable                           (100,000)            -
    Payments on capital lease obligation                       -        (1,323)
    Collection of subscription receivable                129,821             -
    Payment of offering costs                           (166,668)      110,808
    Proceeds from sale of common stock
               and options                             1,238,808             -
                                                    ------------  ------------
Net cash provided by (used in) financing activities    1,101,961        (1,323)
                                                    ------------  ------------
Effect of exchange rate changes on cash                   (2,040)       (2,656)
                                                    ------------  ------------
Net increase (decrease) in cash                          335,834        (4,326)
Cash, beginning of period                                126,367        22,664
                                                    ------------  ------------
Cash, end of period                                 $    462,201  $     18,338
                                                    ============  ============
Supplemental disclosures of cash flow information              -             -
Interest paid                                       $     13,906  $      3,850
                                                    ============  ============
Income taxes paid                                   $          -  $          -
                                                    ============  ============
         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                       5

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

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance
with accounting  principles  generally  accepted in the United States of America
for interim  financial  information and with the instructions to Form 10-QSB and
Item  310  of  Regulation  S-B.  Accordingly,  they  do not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for  complete  financial  statements.   The  accompanying   unaudited  financial
statements  reflect all  adjustments  that,  in the opinion of  management,  are
considered necessary for a fair presentation of the financial position,  results
of  operations,  and cash  flows  for the  periods  presented.  The  results  of
operations  for such  periods  are not  necessarily  indicative  of the  results
expected  for the full fiscal year or for any future  period.  The  accompanying
financial  statements  should be read in conjunction with the audited  financial
statements included in Form 10-KSB for the fiscal year ended December 31, 2003.

The  historical  results for the three month period ended March 31, 2004 include
the Company and all its  subsidiaries and Cavio  Corporation  ("Cavio") from the
merger date of February 20, 2004.  The  historical  results for the three months
ended March 31, 2003 are for EssTec, Inc. reflecting the reverse  acquisition of
the former Alpha Virtual, Inc. under the purchase  method of accounting,  as the
shareholders of EssTec, Inc. obtained control of the consolidated  entity at the
time of that merger.

NOTE 2 - OPERATIONS

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 $764,884  during the three month  period  ended March 31, 2004 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.

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

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.

                                       6

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


NOTE 2 - OPERATIONS (continued)

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



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

Merger
------
On January 16, 2004,  the Company  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,
through its wholly owned  subsidiary,  A/VII Acquisition  Corporation,  a Nevada
corporation,  acquired  Cavio in  exchange  for  5,119,140  shares of our common
stock. The Company recorded goodwill of $3,792,019 for this acquisition.


                                       7

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

NOTE 2 - OPERATIONS (continued)

Cash                                    $   164,791
Receivables                                  14,043
Stock subscription receivable               129,821
Prepaid expenses                              4,874
Fixed assets, net                           109,473
                                        -----------
                                            423,002
                                        -----------

Less liabilities assumed

Accounts Payable and accrued expenses      (694,009)
Loans payable                               (28,693)
                                        -----------
                                           (722,702)
                                        -----------
Net Liabilities                         $  (299,700)
                                        ===========

Net liabilities assumed                 $   299,700
Stock issued for acquisition                299,700
Common stock issued into escrow           3,192,619
                                        -----------
Goodwill                                $ 3,792,019
                                        ===========

The following unaudited proforma condensed consolidating statement of operations
for the three  month  period  ended  March 31,  2004  gives  effect to the above
transaction as if it had occurred on January 1, 2004.

                    Veridicom           Cavio
                International, Inc. Corporation for
                 Consolidated for   the Period from
                 the Three Month    November 01,2003
                 Period Ending      to February 19,   Proforma     Proforma
                 March 31,2004          2004         Adjustments Consolidated
                ------------------- ---------------- ----------- ------------
Revenues        $      238,975      $        -       $        -  $    238,975
(Expenses)
                      (995,048)       (481,715)               -    (1,476,763)
Other
income/(expense)        (8,811)        (31,367)               -       (40,178)
                --------------      ----------       ----------  ------------
Net loss        $     (764,884)     $ (485,082)      $        -  $ (1,277,966)
                ==============      ==========       ==========  ============

Name Change
-----------
The legal entity (Alpha Virtual, Inc.) retained its name until it was changed to
Veridicom International, Inc. in February 2004.

New Entity
----------
On January 21, 2004 Veridicom  International (Canada) Inc. ("Canada") was formed
to be the Canadian operating company for the public company.

                                       8

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


NOTE 3 - FOREIGN CURRENCY TRANSLATION

Pakistan  considers  the  Pakistan  Rupee to be the  functional  currency of its
operations.  Cavio and Canada  consider the Canadian Dollar 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 period ending      For the period ending
      --------------       ---------------------      ---------------------
                              March 31, 2004             March 31, 2003
                              --------------             --------------
      Rupee Average               0.01745                   0.01725
    Rupee Period end              0.01745                   0.01722
 Canadian Dollar Average          1.3113                          -
  Canadian Period end             1.3178                          -

NOTE 4 - FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

                                           March 31, 2004   December 31, 2003

Tooling equipment                            $   159,595       $   159,595
Furniture and equipment                           55,043            27,065
Computers                                        245,284            91,390
Software                                         124,330            28,000
Vehicles                                          20,506            20,540
                                             -----------       -----------
                                                 604,758           326,590
   Less accumulated depreciation
        and amortization                         419,748           252,787
                                             -----------       -----------
                                             $   185,010       $    73,803
                                             ===========       ===========



NOTE 5 - PROCEEDS FROM CAPITAL STOCK SUBSCRIPTIONS

Proceeds from capital stock  subscriptions  are in respect of Cavio  Corporation
and represents  amounts advanced to Cavio that are intended to be converted into
capital stock.  There is uncertainty with respect to whether some or all of this
amount will  ultimately be converted  into stock and therefore the total balance
is recorded as a liability in the company's financial  statements.  If the total
amount is converted Cavio may be required to issue up to approximately 3,254,000
common  shares to complete  the  transaction.  To  complete  the merger with the
Company,  Cavio issued  1,754,000  shares which were then  exchanged for 486,654
shares of the  Company in accordance with the terms of the merger.  These shares
are being held in trust until the eligible investors are confirmed.


                                       9

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

NOTE 6 - COMMON STOCK

During  the  period  ending  March  31,  2004 the Company sold 370.514 shares of
common stock for $1,225,000 less offering costs of $166,668.

During the period ending March 31, 2004 the  Company  issued  20,511  shares  of
common stock for $13,808 for the exercise of stock options.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Leases
------
In  February 2004,  the Company  entered into a three year  operating  lease for
office space. The Company is required to pay basic rent and estimated  operating
expenses.

Rent expense was $21,682 for the three month period ended March 31, 2004.

Employment Agreement
--------------------
The Company  entered into an employment  agreement  with its President and Chief
Executive  Officer  effective  February 20, 2004 for one year  providing  for an
annual salary of $175,000,  ten-year stock option to purchase  150,000 shares of
the  Company's  common stock at $3.50 per share,  and an annual bonus of $20,000
for every $1.5  million  in gross  consolidated  revenue of the Company for said
year.  The agreement is automatically renewable.

The stock options vest monthly over a twenty-four months period. As at March 31,
2004,  4% of the options  were vested.  The fair value of the vested  options of
$35,910 was  estimated  using the  Black-Scholes  option  pricing  model with an
expected life of five years, a risk-free  interest rate of 2.79% and an expected
volatility of 293%. During the three month period ended March 31, 2004,  $35,910
has been expensed as stock based compensation.

Litigation
----------
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 March 31, 2004.

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.

NOTE 8 - OFFICE CLOSING

On April 15, 2004 the Company permanently closed the offices of Veridicom,  Inc.
in  Sunnyvale,  California  and is currently in the process of  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.

NOTE 9 - SUBSEQUENT EVENTS

Subsequent to March 31, 2004 the Company  issued 47,000 shares for cash totaling
$238,000.
                                      10

<PAGE>


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

Special Note Regarding 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. (the "Company" "we" and "us").
These forward-looking statements generally can be identified by the context of
the statements 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.

Overview

         We were incorporated in Delaware 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


                                       11

<PAGE>

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.

         On January 16, 2004, we entered into an Agreement and Plan of Merger
with Cavio Corporation, a privately-held Washington corporation ("Cavio"). In
accordance with the merger, on February 20, 2004, we, through our wholly-owned
subsidiary, A/VII Corporation, a Nevada corporation, acquired Cavio in exchange
for 5,119,410 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.

Description of the Company Post-Merger

         Following the merger with Cavio, we appointed the following officers,
key employees and advisors:

         Paul Mann, President, Chief Executive Officer and Director
         Bashir Jaffer, Chief Financial Officer
         Terry Lafterte, SVP, Technical Operations
         Cameron Adams, Manager, Marketing and Business Development
         Roger Brandt, Chief Technical Advisor

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

         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


                                       12

<PAGE>

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.

         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.






                                       13

<PAGE>

Recent Events

         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.

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.

         The following is a summary of our critical accounting policies:

         Basis of Presentation . The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with the
instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
unaudited financial statements reflect all adjustments that, in the opinion of
management, are considered necessary for a fair presentation of the financial
position, results of operations, and cash flows for the periods presented. The
results of operations for such periods are not necessarily indicative of the
results expected for the full fiscal year or for any future period. The
accompanying financial statements should be read in conjunction with the audited
financial statements included in Form 10-KSB for the fiscal year ended December
31, 2003.

         The historical results for the three-month period ended March 31, 2004
include the Company, its subsidiaries and Cavio from the merger date of February
20, 2004. The historical results for the three months ended March 31, 2003 are
for EssTec reflecting the reverse acquisition of the former Alpha Virtual Inc.
under the purchase method of accounting, as the shareholders of EssTec obtained
control of the consolidated entity at the time of that merger.

         Going-Concern. Our financial statements have been presented on the
basis that we are a going-concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. We have
incurred a net loss of $764,884 and have a working capital deficit and a


                                       14

<PAGE>

stockholder deficit, which raises substantial doubt about our ability to
continue as a going concern. We are currently devoting our efforts to raising
additional capital and investigating potential merger candidates. Our ability to
continue as a going-concern is dependent upon our ability to develop additional
sources of capital, and ultimately, achieve profitable operations. The
accompanying financial statements in this quarterly report 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, we changed our fiscal year end from March 31 to December 31.

         Consolidation. The consolidated financial statements include our
wholly-owned subsidiaries. All significant inter-company balances and
transactions have been eliminated in consolidation.

         Minority Interest. Minority interest reflects the ownership of minority
stockholders 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"), we
have evaluated our goodwill for impairment and determined that the fair value of
our goodwill is $4,998,187 and have recognized a $1,809,648 as an impairment
charge in the year ended December 31, 2003.

         Valuation of Our Common Stock. Unless otherwise disclosed, all stock
based transactions entered into by us have been valued at the market value of
our 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 us to concentrations of credit risk, consist primarily of trade accounts
receivable. We maintain reserves for potential credit losses and such losses, in
the aggregate, have not exceeded management's expectations.

         Advertising Expenses.  We expense advertising costs as incurred.

         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


                                       15

<PAGE>

goodwill and intangible assets acquired prior to July 1, 2001, we were required
to adopt SFAS 142 effective January 1, 2002. We have determined that the fair
value of our goodwill is $4,988,187 and have recognized a $1,809,648 as an
impairment charge in the year ended December 31, 2003.

         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 us 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.
We have adopted SFAS No. 143 and its adoption did not have a material impact on
our 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. We have adopted SFAS No. 144 and its adoption did not have a
material impact on our 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 ("SFAS 145"). 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. We have adopted SFAS 145 and its adoption did
not have a material effect on our 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


                                       16

<PAGE>

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. We have adopted SFAS 146 and its adoption did
not have a material effect on our 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. We have adopted SFAS No. 148 and its adoption did not have a material
effect on our 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 our
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." We have adopted SFAS 149 and its adoption did not have a
material effect on our financial statements.

         In May 2003, FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,"


                                       17

<PAGE>

("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. We have adopted
SFAS 150 and its adoption did not have a material effect on our financial
statements.

         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. 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. Following the acquisition of Veridicom, we 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. We valued the patents at $200,000.

         Cash and Cash Equivalents. For purposes of reporting cash flows, we
consider all funds with original maturities of three months or less to be cash
equivalents.

         Income Taxes. We recognize deferred tax assets and liabilities for the
expected future income tax consequences of events that have been recognized in
our 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. We have 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', 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


                                       18

<PAGE>

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.

         In Pakistan, revenues are recognized 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. We utilize 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. We report in U.S. dollar and,
accordingly, all amounts included in the financial statements have been
translated into U.S. dollars.

         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. We compute 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.




                                       19

<PAGE>
Results of Operations - Three Months Ended March 31, 2004 and 2003

                                                   2004                2003
                                                   ----                ----
Revenues
    Net revenue                               $    238,975        $    203,000
    Cost of goods sold                             160,038              45,175
                                              ------------        ------------
    Gross profit                                    78,937             157,825

Expenses
    General and administrative expenses            781,778             177,099
    Research and development                        45,607                   -
    Depreciation                                     7,625               3,694
                                              ------------        ------------
    (Loss) from operations                        (756,073)            (22,968)

Other income/(expense)
    Other expense                                   (2,434)                  -
    Gain on settlement of liabilities                    -              50,638
    Interest expense                               (10,697)             (3,850)
                                              ------------        ------------
       Total other income (expense)                (13,131)             46,788

Income (Loss) before minority interest            (769,204)             23,820

Minority Interest                                    4,320                   -
                                              ------------        ------------
Net Income (Loss)                                 (764,884)             23,820
                                              ------------        ------------
Comprehensive (loss)                          $   (764,884)       $     23,820
                                              ============        ============
Earnings (loss) per share:
    Basic and fully diluted income (loss)
     per common share                         $      (0.07)       $       0.01
                                              ============        ============
    Weighted average common shares
     outstanding basic and fully diluted        11,819,186           4,259,496
                                              ============        ============

General. During the year ended December 31, 2003, our activities were focused
largely on mergers with, and acquisitions of, companies with complementary,
similar or related technology and compatible management.

Following the transactions with EssTec, Veridicom and Cavio described in
"Overview" above, we have been engaged primarily in aligning the operations of
the subsidiaries with the objective of streamlining and consolidating operations
as necessary, reducing costs and seeking additional capital. As a part of this
process, we closed our Sunnyvale, California facility in April 2004.

Net Revenue. Net revenue for the three months ended March 31, 2004 was $238,975,
which was mainly attributed to sales of capacitive fingerprint sensors, computer
peripherals, and software related to the use of our fingerprint authentication
technology. Net revenue for the three months ended March 31, 2003 was $203,000,

which was mainly attributed to software development and consulting services
provided by EssTec. Such revenue in the 2004 period was not significant.

                                       20

<PAGE>
Cost of Goods Sold. Cost of goods sold for the three months ended March 31, 2004
was $160,038, which was mainly attributed to product components purchased from
suppliers and the cost of finished products from existing inventory. Cost of
goods sold for the three months ended March 31, 2003 was $45,175.

Gross Profit.  Gross profit for the three months ended March 31, 2004 was
$78,937 compared to $136,400 for the three months ended March 31, 2003.  The
variance is the result of a change in revenue source and mix during the two
comparable periods.

General and Administrative Expenses. General and administrative expenses for the
three months ended March 31, 2004 were $781,778, compared to $177,099 for the
three months ended March 31, 2003. The increase of $604,679 is mainly attributed
to the following: increased salary and wage expense of approximately $150,000,
professional fees of approximately $80,000, travel expenses of approximately
$40,000 and technical and other consultant fees of approximately $250,000.

Interest Expense. Interest expense for the three months ended March 31, 2004 was
$10,697 for certain interest bearing notes payable, compared to $3,850 for the
three months ended March 31, 2003.

Research and Development. Research and development expenditures for the three
months ended March 31, 2004 were $45,607. Such expenditures were related to
on-going product, hardware and software enhancements. We had zero research and
development expenditures for the three months ended March 31, 2003.

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

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


                                       21
<PAGE>
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
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.



                                       22

<PAGE>

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 than 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 our business operations, financial results and stock price.

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 our products and services;


                                       23

<PAGE>

         o  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 the technology market generally, which are inherently difficult to predict.

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:

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



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<PAGE>

         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;

         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


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<PAGE>

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 our standard agreements warranty disclaimers and disclaimers for
consequential and related damages as well as limitations on our 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;

         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


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<PAGE>

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.

         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.


                                       27

<PAGE>

         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.

         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.




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<PAGE>

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 biometrics
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 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
OTC Bulletin Board 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.

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


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<PAGE>

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 transaction 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 3.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

         As of March 31, 2004, 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 our disclosure controls and procedures needed improvement and
were not adequately effective to ensure timely reporting with the Securities and
Exchange Commission.

         Upon completion of our merger with Cavio in February 2004, we retained
a new management team, including a new Chief Executive Officer and Chief


                                       30

<PAGE>

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
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 in which they
were made, in this Form 10-QSB.

Changes In Internal Control

         There were no significant changes to our internal control over
financial reporting that occurred during our most recent fiscal quarter that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.




































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<PAGE>


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities and Use of Proceeds

         On January 16, 2004, we entered into an Agreement and Plan of Merger
with Cavio Corporation, a privately-held Washington corporation ("Cavio"). In
accordance with the merger, on February 20, 2004, we, through our wholly-owned
subsidiary, A/VII Corporation, a Nevada corporation, acquired Cavio in exchange
for 5,119,410 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.

Item 3.  Defaults Upon Senior Securities

         None.

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

         None.

Item 5.  Other Information

         None.

Item 6.  Exhibits and Reports on Form 8-K

         (a)   The following exhibits are included herewith:


               2.1   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).


               2.2   Amendment No. 1 to 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.


               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.




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               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)   Current Reports on Form 8-K:

         Current Report filed February 27, 2004 reporting Item 8.

         Current Report filed February 25, 2004 reporting Item 5.

         Current Report filed February 24, 2004 reporting Items 4 and 7
         (Amendment to Current Report filed February 12, 2004).

         Current Report filed February 23, 2004 reporting Items 2 and 7.

         Current Report filed February 12, 2004 reporting Items 4 and 7.


































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<PAGE>


SIGNATURES

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

Date:  June 18, 2004                    VERIDICOM INTERNATIONAL, INC.


                                        /s/ Paul Mann
                                        -------------------------------------
                                        Paul Mann
                                        President and Chief Executive Officer
                                        (Duly Authorized Officer and Principal
                                        Executive Officer)


                                        /s/ Bashir Jaffer
                                        -------------------------------------
                                        Bashir Jaffer
                                        Chief Financial Officer
                                        (Duly Authorized Officer and Principal
                                        Financial and Accounting Officer)
































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