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

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

                                   FORM 10-QSB

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

                For the quarterly period ended September 30, 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 Identification No.)
  incorporation or organization)


          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 15,221,538 shares outstanding of registrant's Common Stock, par value
$.001 per share, as of November 15, 2004.

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


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



                                       1

<PAGE>


                          VERIDICOM INTERNATIONAL, INC.
                                FORM 10-QSB INDEX

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited):

         a.   Consolidated Balance Sheets as of September 30, 2004 and
              December 31, 2003                                               4

         b.   Consolidated Statements of Operations and Other
              Comprehensive Income (Loss) for the three and nine
              months ended September 30, 2004 and 2003                        5

         c.   Consolidated Statements of Cash Flows for the nine
              months ended September 30, 2004 and 2003                        6

         d.   Notes to Unaudited Consolidated Financial Statements            7

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                           15

Item 3.  Controls and Procedures

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds         39

Item 3.  Defaults Upon Senior Securities                                     39

Item 4.  Submission of Matters to a Vote of Security Holders                 39

Item 5.  Other Information                                                   39

Item 6.  Exhibits                                                            39

Signatures                                                                   41
















                                       2

<PAGE>


PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements




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

                                                                            PAGE



Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003    4

Consolidated Statements of Operations and Other Comprehensive Income (Loss)
for the three months and nine months ended September 30, 2004 and 2003        5

Consolidated Statements of Cash Flows for the nine months ended
September 30, 2004 and 2003                                                   6

Notes to Unaudited Consolidated Financial Statements                          7
































                                       3

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

                                                   September 30,   December 31,
                                                        2004            2003
                                                    (Unaudited)
                            ASSETS
Current Assets
        Cash                                       $     17,342    $    126,367
        Accounts receivable                              62,730          13,497
        Accounts receivable from affiliates              48,904          77,960
        Inventory                                        62,588          89,803
        Other current assets                             26,067          10,259
                                                   ------------    ------------
                  Total current assets                  217,631         317,886

Furniture & equipment, net                              178,338          73,803
Patents                                                 200,000         200,000
Goodwill                                              4,728,546         936,520
Other assets                                              3,304           3,300
                                                   ------------    ------------
                                                   $  5,327,819    $  1,531,509
                                                   ============    ============

        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
       Accounts payable                            $  1,723,404    $    720,616
       Accrued expenses                                 869,047         673,523
       Due to related parties                           479,603         347,006
       Notes payable                                    449,549         549,549
       Notes payable - related parties                  380,000
                                                   ------------    ------------
            Total current liabilities                 3,901,603       2,290,694
                                                   ------------    ------------

Proceeds from capital stock subscriptions             3,192,619             -

Minority Interest                                        48,333          25,006
                                                   ------------    ------------
Stockholders' Equity (Deficit)
Common stock, $.001 par value, 60,000,000 authorized;
15,033,903 and 9,450,689 issued and outstanding          15,034           9,450
Additional paid in capital                            9,131,529       7,280,603
Common stock reserved                                   116,250          10,000
Accumulated other comprehensive (loss)                  (80,225)         (3,693)
Accumulated (deficit)                               (10,997,324)     (8,080,551)
                                                   ------------    ------------
            Total stockholders' equity (deficit)     (1,814,736)       (784,191)
                                                   ------------    ------------
                                                   $  5,327,819    $  1,531,509
                                                   ============    ============


         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       4

<PAGE>

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                    CONSOLIDATED STATEMENTS OF OPERATIONS AND
                        OTHER COMPREHENSIVE INCOME (LOSS)
                                    UNAUDITED
<TABLE>
<CAPTION>
                                                                              Nine            Nine
                                             Three       Three Months        Months          Months
                                          Months Ended       Ended           Ended           Ended
                                         September 30,   September 30,    September 30   September 30,
                                              2004            2003            2004            2003
                                        ------------------------------------------------------------
<S>                                     <C>             <C>             <C>             <C>
Revenues
Net revenue                             $     86,944    $     34,335    $    395,436    $    265,835
Cost of goods sold                            19,472          49,164         207,367         138,576
                                        ------------------------------------------------------------
Gross profit (loss)                           67,472         (14,829)        188,069         127,259

Expenses
General and administrative expenses          901,142         245,083       2,658,774       1,209,116
Research and development                     162,347           1,806         295,435          14,075
Technical operation expenses                   1,489             -             2,711             -
Depreciation                                  12,099             957          32,814           9,498
                                        ------------------------------------------------------------

(Loss) from operations                    (1,009,605)       (262,675)     (2,801,665)     (1,105,430)
                                        ------------------------------------------------------------

Other income (expense)
Miscellaneous income (expense)                   (21)           (567)            725            (283)
Relocation of office                             -               -           (31,575)            -
Gain on settlement of liabilities                -           488,937             -           556,058
Interest expense                             (28,603)         (4,698)        (60,931)        (28,535)
                                        ------------------------------------------------------------
Total other income (expense)                 (28,624)        483,672         (91,781)        527,240

(Loss) before minority interest           (1,038,229)       (220,997)     (2,893,446)       (578,190)

                                        ------------------------------------------------------------
Minority Interest                             32,413             -            23,327             -
                                        ------------------------------------------------------------

Net (Loss)                                (1,070,642)       (220,997)     (2,916,773)       (578,190)
                                        ------------------------------------------------------------

Other Comprehensive Income (loss)
Foreign currency translation                 (74,617)           (264)        (73,925)         (2,386)
                                        ------------------------------------------------------------
         Total Comprehensive (loss)     $ (1,145,259)   $   (221,261)   $ (2,990,698)   $   (580,576)
                                        ------------------------------------------------------------
Earnings (loss) per share:
  Basic and fully diluted (loss)        $      (0.07)   $      (0.04)   $      (0.21)   $      (0.11)
  per common share
                                        ------------------------------------------------------------
  Weighted average common shares
  outstanding basic and fully diluted     14,988,597       5,279,916      14,044,624       5,132,663
                                        ------------------------------------------------------------
</TABLE>




         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       5
<PAGE>
                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                    UNAUDITED
                                                           2004          2003
Cash flows from operating activities                  -----------   -----------
Net (loss) before minority interest                   $(2,893,446)  $  (578,190)
Adjustments to reconcile net (loss) to net cash
used in operating activities:
    Depreciation and amortization                          32,814         9,498
    Stock-based compensation                              251,370       535,941
    Common stock committed for loan fees                  106,250
    (Gain) on cancellation/forgiveness of debt                -        (556,058)
(Increase) / decrease in:
    Accounts receivable                                   (35,190)          -
    Other receivable                                          -             284
    Related party receivables                              29,056        22,231
    Inventory                                              27,215           -
    Other assets                                          (10,938)      (34,289)
    Transfer of equipment to Cavio                            -          18,336
Increase / (decrease) in :
    Accounts payable                                      520,019         7,711
    Accrued expenses                                      (15,723)       (3,064)
    Due to related parties                                103,904       (11,608)
    Other current liabilities                                 -          15,000
    Deferred compensation                                     -         (81,484)
                                                      -----------   -----------
Net cash (used in) operating activities                (1,884,669)     (655,692)
                                                      -----------   -----------
Cash flows from investing activities
    Cash acquired through merger and acquisition          164,791       159,391
    Purchase of property and equipment                    (27,877)      (13,537)
                                                      -----------   -----------

Net cash provided by investing activities                 136,914       145,854
                                                      -----------   -----------
Cash flows from financing activities
    Net proceeds from notes payable-related parties       380,000       195,000
    Payment on note payable                              (100,000)      (20,000)
    Payments on capital lease obligation                      -          (4,016)
    Collection of subscription receivable                 129,821           -
    Payment of offering costs / commissions              (350,368)      (76,812)
    Proceeds from sale of common stock and options      1,655,809       594,600
                                                      -----------   -----------
Net cash provided by financing activities               1,715,262       688,772
                                                      -----------   -----------
Effect of exchange rate changes on cash                   (76,532)       (2,386)
                                                      -----------   -----------
Net increase (decrease) in cash                          (109,025)      176,548
Cash, beginning of period                                 126,367        22,664
                                                      -----------   -----------
Cash, end of period                                   $    17,342   $   199,212
                                                      ===========   ===========
Supplemental disclosures of cash flow information
Interest paid                                         $    22,676   $    23,837
                                                      ===========   ===========
Income taxes paid                                     $       -     $       -
                                                      ===========   ===========

         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       6

<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 consolidated 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
consolidated 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 consolidated 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 and nine month periods ended September 30,
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 and nine months ended September 30, 2003 are for Esstec Inc.
reflecting the reverse acquisition of the former Alpha Virtual Inc. on May 8,
2003 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 $2,893,446 during the nine month period ended September 30, 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
strategic alliances. 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 to the current year.




                                       7

<PAGE>

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


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 Model to estimate the fair market value.

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 the entirety during 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 product.

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 shareholders in the equity
of Pakistan, a consolidated subsidiary less than wholly owned.

Mergers
-------
On April 28, 2003, the Company and Esstec Inc., a privately held Nevada
corporation, entered into an Agreement and Plan of Merger.  In accordance with


                                       8

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


the Merger, on May 8, 2003 the Company, through its wholly owned subsidiary,
Alpha Acquisition Corporation ("AAC"), a Nevada Corporation, acquired Esstec in
exchange for 4,276,162 shares of the Alpha's common stock. For accounting
purposes Esstec acquired Alpha in a reverse merger under the purchase method of
accounting. The financial statements in the filings of Alpha became those of
Esstec. The legal entity (Alpha) retained its name until it was changed to
Veridicom International, Inc. in February 2004.

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

On January 16, 2004, the Company entered into an Agreement and Plan of Merger
with Cavio Corporation, a privately held Washington corporation ("Cavio"). The
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 the Company's
common stock. The Company recorded goodwill of $3,792,019 for this acquisition.


          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 nine month period ended September 30, 2004 gives effect to the above
transaction as if it had occurred on January 1, 2004.

                                       9

<PAGE>

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


                   Veridicom          Cavio
              International, Inc.   Corporation
             Consolidated for the  for the Period
               Nine Month Period   from November 01,
               Ending September    2003 to February   Proforma       Proforma
                    30,2004           19, 2004      Adjustments    Consolidated
                  ------------     -----------      -----------    ------------

     Revenues     $    395,436     $       -        $        -     $    395,436
     (Expenses)     (3,243,755)       (481,715)              -       (3,725,470)

     Other             (68,454)         (3,367)              -          (71,821)

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

     Net loss     $ (2,916,773)    $  (485,082)     $        -     $ (3,401,855)
                  ============     ===========      ===========    ============


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.


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 their 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
           --------------        ----------------------    ---------------------
                                  September 30, 2004        September 30, 2003
                                  ------------------        ------------------
           Rupee Average                0.01729                   0.01730
          Rupee Period end              0.01689                   0.01730
      Canadian Dollar Average           1.32803                      -
        Canadian Period end             1.26390                      -





                                       10

<PAGE>

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


NOTE 4 - FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

                                                      September 30, December 31,
                                                            2004         2003

     Tooling equipment                                    $161,595     $159,595
     Furniture and equipment                                43,377       27,065
     Office equipment                                       11,918          -
     Computers                                             248,898       91,390
     Software                                              135,747       28,000
     Vehicles                                               19,848       20,540
                                                          --------     --------

                                                           621,383      326,590
        Less accumulated depreciation and amortization     443,045      252,787
                                                          --------     --------

                                                          $178,338     $ 73,803
                                                          ========     ========

NOTE 5 - NOTES PAYABLE - RELATED PARTIES

During the three months ended September 30, 2004 the Company was advanced
$280,000 under a loan agreement allowing for up to $400,000 to be advanced. The
loan bears interest at 12% per annum with principal interest due on June 30,
2007. The outstanding principal and accrued interest may be converted into the
Company's common stock, in the event of non-payment on the due date. The
principal of the lender is a director of a subsidiary of the Company.

In August 2004 the Company borrowed $100,000 under a short-term agreement. The
principal amount and interest of $10,000 was due on September 30, 2004. The note
has not been repaid and a default rate of interest of 15% is being applied to
the outstanding principal balance. The Company's President and another related
party have personally guaranteed the loan. The Company has pledged 100,000
shares of the Company's common stock, which will be returned upon repayment. If
the principal and interest is not repaid by December 30, 2004, the shares will
be issued to the lender. Additional terms of the loan, which are pending the
formal approval of the Company's Board of Directors, include the issuance of
25,000 shares of the Company at $4.25 per share (the closing price on August 30,
2004) as a loan fee and the granting of warrants to purchase 100,000 shares of
the Company's common stock at $3.50 per share. The value of the 25,000 shares of
$106,250 has been recorded as common stock committed. A director of the Company
is an associate of the lender's parent company.






                                       11

<PAGE>

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


NOTE 6 - 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. These shares are being held in trust until the eligible
investors are confirmed.


NOTE 7 - COMMON STOCK

During the period ending September 30, 2004 the Company sold 458,947 shares of
common stock for $1,642,001 less offering costs of $350,368.

During the period ending September 30, 2004 the Company issued 8,561 shares of
common stock for $13,808 for the exercise of stock options.

Stock Option Plan
-----------------
In April 2004 the Company adopted the 2004 Stock Option, Deferred Stock, and
Restricted Stock Plan (the Plan) effective June 25, 2004, which provides for the
granting of options to officers, directors, consultants, employees, and
advisors. 2,000,000 shares of common stock are reserved under the Plan for the
granting of options. The Plan is in effect until June 25, 2014. The options are
exercisable to purchase stock for a period of up to ten years from the date of
grant.

The option price per share of Incentive Stock Options shall be determined by the
Board of Directions, in its sole discretion, at the time of the grant, but shall
not be less than 100% of the Fair Market Value of the stock on such date, and
shall not, in any event, be less than the par value of the stock. Incentive
stock options granted to significant stockholders shall have an option price of
not less than 110% of the fair market value of the stock on the date of the
grant. Non-Qualified Stock Options granted pursuant to this Plan may have an
option price less than 100%, but in no event less than 85% of the fair market
value of the stock on the date of grant.

As the date of this filing, no options have been granted pursuant to the Plan.


NOTE 8 - COMMITMENTS AND CONTINGENCIES

Leases
------
In February 2004 the Company entered into a three year operating lease for

                                       12

<PAGE>

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


office space. The Company is required to pay basic rent and estimated operating
expenses.

Rent expense was $99,331 for the nine months period ended September 30, 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, 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 month period. As at September
30, 2004, 29.17% of the options were vested. The fair value of the vested
options of $251,371 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 nine month period ended September 30,
2004, $251,370 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 September 20, 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.

Agreements
----------
The Company entered into a Non-Excusive Agreement with KirwanGier for assisting
in equity placements on August 5, 2004 for a term of six months. The agreement
was terminated on October 6, 2004. Under the terms of the agreement, the Company
was to issue warrants to purchase 100,000 shares of the Company's common stock
at $3.50 per share. The Company does not expect to issue these warrants due to
non-performance on the part of KirwanGier, pending approval of the same by the
Company's Board of Directors.

The Company has entered into an agreement with Carpe DM on August 23, 2004 for
investor relations services for a term of one year. The terms of the agreement
are pending approval of the Board of Directors of the Company and include
monthly fees of $2,500 to $5,000 and the issuance of warrants to purchase


                                       13

<PAGE>

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


150,000 shares of the Company's common stock at $3.50 per share. Additional
warrants for a further 150,000 shares may be issued at similar terms dependent
upon attainment of specific performance targets.


NOTE 9 - 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, Canada. The direct costs incurred by the company
to-date, with respect to the closure and relocation of the Sunnyvale operations,
amount to $31,575.


NOTE 10 - GAIN ON CANCELLATION/FORGIVENESS OF DEBT

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

In addition, the Company recognized a gain on the settlement of certain accounts
payable of $75,746.


NOTE 11 - SUBSEQUENT EVENTS

Subsequent to September 30, 2004 the Company sold 243,635 shares for $702,900
and paid offering costs of $210,870.

On October 25, 2004 the Company entered into an Agreement with Optimiser Pty
Ltd., of Australia, to form a Joint Venture focused on secure digital
entertainment content management. Mutual Non Disclosure Agreements have been
executed pending the completion of further definitive agreements.


                                       14

<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 within the
meaning of the Private Securities Litigation Reform Act of 1995, 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.

         The risks and uncertainties are detailed from time to time in reports
filed by us with the Securities and Exchange Commission, including Forms 8-K,
10-QSB, and 10-KSB, and include, among others, the following: our ability to
obtain additional capital to fund operations; our ability to respond to price
fluctuations and volatility in the stock market in general and the market for
technology stocks in particular; our ability improve profitability and to
generate additional sources of revenue; compliance with recent legislation,
including the Sarbanes-Oxley Act of 2002; our ability to respond to competitive
pressures; international, national and local general economic, political and
market conditions; our ability to respond to changes in technological
developments in the biometrics industry; our ability to successfully market new
products in the marketplace; our ability to protect our reputation by delivering
quality products; our ability to manage inventory levels and to protect against
manufacturing errors, delays or shortages; our ability to protect and secure our
intellectual property; our ability to retain and attract key personnel; our
ability to increase brand awareness; proper management of sales and
implementation cycles; development of marketing distribution channels; and other
factors referenced or incorporated by reference in this report and other
reports.
         The risks included here are not exhaustive. Other sections of this
report may include additional factors, which could adversely impact our business
and financial performance. Moreover, we operate in a very competitive and
rapidly changing environment. New risk factors emerge from time to time and we
cannot predict all such risk factors, nor can we assess the impact of all such
risk factors on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained
in any forward looking statements. Given these risks and uncertainties,
investors should not place undue reliance on forward-looking statements as a
prediction of actual results. Investors should also be aware that while we do,
from time to time, communicate with securities analysts, we do not disclose any
material non-public information or other confidential commercial information to
them. Accordingly, individuals should not assume that we agree with any


                                       15

<PAGE>

statement or report issued by any analyst, regardless of the content of the
report. Thus, to the extent that reports issued by securities analysts contain
any projections, forecasts or opinions, such reports are not our responsibility.

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
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

                                       16

<PAGE>

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, VP, Strategic Development and Sales
         Hamid Baradaran, VP, Hardware Development and Manufacturing

         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
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


                                       17

<PAGE>

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.

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").

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

         In June 2004, Messrs. McCallum and Coles were appointed to the Board of
Directors.

         On October 25, 2004 we signed an agreement with Optimiser Pty Ltd to
form a venture focused on secure digital entertainment content management.
Utilizing our biometric technology and Optimiser's digital content management
platform, the new joint venture will market a service to allow users to download
and pay for content at a wide variety of remote locations based on users'
individually-defined preferences. The device will allow only the purchaser of
the content to access and open the entertainment files.


                                       18

<PAGE>

         On October 12, 2004 we announced a new product called VKI. VKI will be
available in variety of configurations, but will be primarily designed as
multi-factor authentication device incorporating fingerprint authentication,
secure USB storage, file encryption, and optional Radio Frequency Identification
("RFID") integration. It is intended that VKI will be marketed to both consumer
and enterprise markets.

         During September 2004 and October 2004, we exhibited our products at
two industry trade show: the Biometrics Consortium in Washington, DC and
Biometrics 2004 in London, UK. These shows were the first trade shows that we
exhibited our products at post-merger and we believe that they were generally
well received. We will continue to evaluate additional exhibition opportunities
as they become available.

         On September 28, 2004, we announced that we had retained the services
of Carpe DM, Inc. for investor relations services. We intend to maintain good
communication channels with our investor base.

         On August 25, 2004, we announced the development of Cavio 3.0 Identity
Server. The Cavio 3.0 Identity Server is a robust authentication solution of
enterprises or for offering hosted authentication services over the Internet.

         On August 23, 2004, we announced an agreement to provide the Potomac
Institution for Policy Studies with our biometric authentication technology. We
believe that this agreement will generate additional interest in our technology
in the government and NGO markets due to the nature of work performed by the
Institute.

         During the third quarter, we also announced significant sales orders
with customers in Turkey and Korea, and announced additional patent
opportunities for our technology in Europe.

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

                                       19

<PAGE>

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 and nine month period ended
September 30, 2004 include the Company, its subsidiaries and Cavio from the
merger date of February 20, 2004. The historical results for the nine months
ended September 30, 2003 are for EssTec reflecting the reverse acquisition of
the former Alpha Virtual, Inc. on May 8, 2003 under the purchase method of
accounting, as the stockholders 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 $2,893,446 during the nine month period ended September
30, 2004 and have a working capital deficit and a 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 strategic alliances. 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 $4,728,546 and has 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


                                       20

<PAGE>
our Common Stock on the date the transaction was entered into or have been
valued using the Modified Black-Scholes 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.

         In May 2003, FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,"
("SFAS 150") which is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. SFAS 150 establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. 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 three to seven 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



                                       21

<PAGE>
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
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. Cavio and Canada consider the
Canadian Dollar to be the functional currency of their 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


                                       22

<PAGE>
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed" ("SFAS 86").

         Earnings Per Common Share. The Company computes earnings per common
share in accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share (SFAS No. 128). 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. Basic loss per share is computed by dividing loss
available to common shareholders by the weighted average number of common shares
outstanding. The computation of diluted loss per share is similar to the basic
loss per share computation except the denominator is increased to include the
number of additional shares that would have been outstanding if the dilutive
potential common shares had been issued. In addition, the numerator is adjusted
for any changes in income or loss that would result from the assumed conversions
of those potential shares. However, such presentation is not required if the
effect is antidilutive.








































                                       23

<PAGE>

Results of Operations - Three and Nine Months Ended September 30, 2004 and 2003

<TABLE>
<CAPTION>
                                                                              Nine            Nine
                                             Three       Three Months        Months          Months
                                          Months Ended       Ended           Ended           Ended
                                         September 30,   September 30,    September 30   September 30,
                                              2004            2003            2004            2003
                                        ------------------------------------------------------------
<S>                                     <C>             <C>             <C>             <C>
Revenues
Net revenue                             $     86,944    $     34,335    $    395,436    $    265,835
Cost of goods sold                            19,472          49,164         207,367         138,576
                                        ------------------------------------------------------------
Gross profit (loss)                           67,472         (14,829)        188,069         127,259

Expenses
General and administrative expenses          901,142         245,083       2,658,774       1,209,116
Research and development                     162,347           1,806         295,435          14,075
Technical operation expenses                   1,489             -             2,711             -
Depreciation                                  12,099             957          32,814           9,498
                                        ------------------------------------------------------------

(Loss) from operations                    (1,009,605)       (262,675)     (2,801,665)     (1,105,430)
                                        ------------------------------------------------------------

Other income (expense)
Miscellaneous income (expense)                   (21)           (567)            725            (283)
Relocation of office                             -               -           (31,575)            -
Gain on settlement of liabilities                -           488,937             -           556,058
Interest expense                             (28,603)         (4,698)        (60,931)        (28,535)
                                        ------------------------------------------------------------
Total other income (expense)                 (28,624)        483,672         (91,781)        527,240

(Loss) before minority interest           (1,038,229)       (220,997)     (2,893,446)       (578,190)

                                        ------------------------------------------------------------
Minority Interest                             32,413             -            23,327             -
                                        ------------------------------------------------------------

Net (Loss)                                (1,070,642)       (220,997)     (2,916,773)       (578,190)
                                        ------------------------------------------------------------

Other Comprehensive Income (loss)
Foreign currency translation                 (74,617)           (264)        (73,925)         (2,386)
                                        ------------------------------------------------------------
         Total Comprehensive (loss)     $ (1,145,259)   $   (221,261)   $ (2,990,698)   $   (580,576)
                                        ------------------------------------------------------------
Earnings (loss) per share:
  Basic and fully diluted (loss)        $      (0.07)   $      (0.04)   $      (0.21)   $      (0.11)
  per common share
                                        ------------------------------------------------------------
  Weighted average common shares
  outstanding basic and fully diluted     14,988,597       5,279,916      14,044,624       5,132,663
                                        ------------------------------------------------------------
</TABLE>









                                       24

<PAGE>


General

         During the year ended December 31, 2003 and the three months ended
March 31, 2004, our activities were focused largely on mergers with and
acquisitions of, companies with complementary, similar or related technology and
compatible management.

         Following the completion of the transaction with EssTec and Veridicom
in 2003 and with Cavio in February 2004, 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 part of the process of streamlining and consolidation of operations,
we closed and relocated our Sunnyvale, California facility in April 2004. The
direct costs incurred for this amounted to $31,575.

         Since May 2004, we have focused our resources on product development,
including hardware and software enhancements, as well as on marketing efforts.

Net Revenue

         Net revenue for the nine months ended September 30, 2004 amounted to
$395,436, compared to $265,835 for the same period in 2003. Net revenue for the
three months ended September 30, 2004 amounted to $86,944, compared to $34,335
for the same period in 2003.

         Net revenue in fiscal 2004 is mainly in respect of sales of capacitive
fingerprint sensors, computer peripherals and software related to the use of our
fingerprint authentication technology, whereas net revenue in fiscal 2003 was
mainly in respect of software development and consulting services provide by
EssTec. Such revenue in 2004 was not significant.

Cost of Goods Sold

         Cost of goods sold for the three months ended September 30, 2004
amounted to $19,472 and $207,367 for the nine months ended September 30, 2004.
Cost of goods sold during 2004 was mainly for product components purchased from
suppliers and the cost of finished products from existing inventory.

         Cost of goods sold for the three months ended September 30, 2003
amounted to $49,164 and $138,576 for the nine months ended September 30, 2003.
Cost of goods sold during 2003 were direct costs incurred by EssTec for the
software development and consulting services rendered.

Gross Profit

         Gross profit for the three months ended September 30, 2004 was $67,472
and $188,069 for the nine months ended September 30, 2004, compared to a gross
loss of $14,829 for the three months ended September 30, 2003 and net profit of
$127,259 for the nine months ended September 30, 2003. The variances in the
gross profit and loss is due to the change in revenue sources and product mix
during the comparable periods.


                                       25

<PAGE>

General and Administrative Expenses

         General and administrative expenses for the nine months ended September
30, 2004 was $2,658,774, compared to $1,209,116 for the same period in 2003.
General and administrative expenses for the three months ended September 30,
2004 was $901,142, compared to $245,083 for the same period in 2003.

         The increase in general and administrative expenses in fiscal 2004
amounted to $665,059 for the three months ended September 30, 2004 and
$1,449,659 for the nine months ended September 30, 2004.

         The increases referenced above for the three and nine months ended
September 30, 2004, respectively, are mainly attributed to the following
expenses in fiscal 2004: technical and other consultants fees amounting to
$102,000 and $472,000, respectively, salaries and benefits amounting to $112,000
and $201,000, respectively, professional fees amounting to $69,000 and $261,000,
respectively, travel expenses amounting to $52,000 and $130,000, respectively,
rent amounting to $20,000 and $78,000, respectively, and commissions and other
fees amounting to $101,000 and $97,000, respectively.

         Stock based compensation for the nine months ended September 30, 2004
was $251,370, compared to $535,941 for the same period in 2003, amounting to a
decrease of $284,571.

Interest Expense

         Interest expense for the nine months ended September 30, 2004 was
$60,931, compared to $28,535 for the same period in 2003. Interest expense for
the three months ended September 30, 2004 was $28,603, compared to $4,698 for
the same period in 2003. Interest expense in 2004 was mainly in respect of
certain interest bearing notes payable.

Research and Development

         Research and development expenditure for the nine months ended
September 30, 2004 was $295,435, compared to $14,075 in the same period in 2003.
Research and development expenditure for the three months ended September 30,
2004 was $162,347, compared to $1,806 in the same period in 2003. The increase
in this expense in fiscal 2004 is mainly for salaries of new personnel hired for
product development, including hardware and software enhancements.

Liquidity and Capital Resources

         We currently do not have sufficient funds on hand to fund our
operations for the next quarter. We intend to raise financing to fund our
current and future 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.




                                       26

<PAGE>

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
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.






                                       27

<PAGE>

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.
Any of these actions would have a material adverse effect on us and the price of
our Common Stock.

If we fail to maintain effective internal controls over financial reporting, the
price of our Common Stock may be adversely affected.

         Our internal controls over financial reporting may have weaknesses and
conditions that need to be addressed, the disclosure of which may have an
adverse impact on the price of our Common Stock. We are required to establish
and maintain appropriate internal controls over financial reporting. Failure to
establish those controls, or any failure of those controls once established,
could adversely impact our public disclosures regarding our business, financial
condition or operating results. In addition, management's assessment of our
internal controls over financial reporting may identify weaknesses and
conditions that need to be addressed in our internal controls over financial
reporting or other matters that may raise concerns for investors. Any actual or
perceived weaknesses and conditions that need to be addressed in our internal
controls over financial reporting, disclosure of management's assessment of our
internal controls over financial reporting or disclosure of our public
accounting firm's attestation to or report on management's assessment of our
internal controls over financial reporting may have an adverse impact on 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.



                                       28

<PAGE>

         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;

      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;



                                       29

<PAGE>

      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;

      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


                                       30

<PAGE>

      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
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


                                       31

<PAGE>

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
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



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<PAGE>

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 us 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.

         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.


                                       33

<PAGE>

         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.

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.



                                       34

<PAGE>

Our business is subject to reporting requirements that are currently evolving
and, once established, could substantially increase our operating expenses and
divert management's attention from the operation of our business.

         Because our Common Stock is publicly traded, we are subject to a
variety of rules and regulations of federal, state and financial market exchange
entities charged with the protection of investors and the oversight of companies
whose securities are publicly traded. These entities, including the Securities
and Exchange Commission, the Public Company Accounting Oversight Board and the
OTC Bulletin Board, have recently issued new requirements and regulations and
are currently developing additional regulations and requirements in response to
recent laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. As
certain rules are not yet finalized, we do not know the level of resources we
will have to commit in order to be in compliance. Our compliance with current
and proposed rules is likely to require the commitment of significant financial
and managerial resources. As a result, our management's attention might be
diverted from other business concerns, which could negatively affect our
business.

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 technology industry
          generally; and


                                       35

<PAGE>

      o   general economic and other national conditions.

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. We believe that a number of factors,
both within and outside our control, could cause the price of our Common Stock
to fluctuate, perhaps substantially. Factors such as the following could have a
significant adverse impact on the market price of the our Common Stock:

      o   our ability to obtain additional financing and, if available, the
          terms and conditions of the financing;

      o   our financial position and results of operations;

      o   developments with our collaborators, if any;

      o   developments concerning our intellectual property rights or our those
          of our competitors (including litigation);

      o   status of litigation, if any;

      o   period-to-period fluctuations in our operating results;

      o   changes in estimates of the our performance by any securities
          analysts;

      o   new regulatory requirements and changes in the existing regulatory
          environment; and

      o   market conditions for technology stocks in general.

Penny stock regulations may impose certain restrictions on the marketability of
our securities.

         Our Common Stock is considered to be a "penny stock". The Securities
and Exchange Commission (the "Commission") has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) of less that $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. As a result, our Common
Stock is subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the Commission relating to the penny stock
market. The broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the




                                       36

<PAGE>

securities ad, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our securities and may affect the
ability of investors to sell our securities in the secondary market and the
price at which such purchasers can sell any such securities.

         Stockholders should be aware that, according to the Securities and
Exchange Commission, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns include:

      o   control of the market for the security by one or a few broker-dealers
          that are often related to the promoter or issuer;

      o   manipulation of prices though prearranged matching of purchases and
          sales and false and misleading press releases;

      o   "boiler room" practices involving high pressure sales tactics and
          unrealistic price projections by inexperienced sales persons;

      o   excessive and undisclosed bid-ask differentials and markups by selling
          broker-dealers; and

      o   the wholesale dumping of the same securities by promoters and
          broker-dealers after prices have been manipulated to a desired level,
          along with the inevitable collapse of those with consequent investor
          losses.


Broker-dealer requirements may affect trading and liquidity.

         Section 15(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), 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


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<PAGE>

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 September 30, 2004, our management, with the participation of our
Chief Executive Officer, or "CEO," and Chief Financial Officer, or "CFO,"
performed an evaluation of the effectiveness and the operation of our disclosure
controls and procedures as defined in Rules 13a - 15(e) or 15d-15(e) under the
Securities Exchange Act of 1934, as amended, or the "Exchange Act." Based on
their evaluation, our CEO and CFO 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.

         Our CEO and CFO 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 CEO and CFO as material weaknesses in our disclosure controls and
procedures. We will continue to monitor the effectiveness of these new internal
policies.

         Our CEO and CFO 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 Controls

         There have been no changes in our internal control over financial
reporting identified in connection with the evaluation required by paragraph (d)
Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter
ended September 30, 2004 that has materially affected, or is reasonably likely
to affect, our internal control over financial reporting.



















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<PAGE>


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         From time to time we are involved in proceedings arising in the
ordinary course of business. We do not expect that any of these matters,
individually or in the aggregate, will have a material adverse effect on our
business, financial condition, cash flows or results of operations.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

         During the period ended September 30, 2004, we issued an aggregate of
458,947 shares of our common stock in a private offering. The shares were
offered and sold in reliance upon exemptions from registration pursuant to
Section 4(2) under the Securities Act of 1933, as amended, and Rule 506
promulgated thereunder. Each of the investors qualified as an accredited
investor (as defined by Rule 501 under the Securities Act of 1933, as amended).
We raised $1,642,001 in the private placement, less offering costs of $350,368.
Net proceeds were used for general corporate purposes.

         During the period ended September 30, 2004, we issued 8,561 shares of
our common stock pursuant to stock option exercises. The shares were offered and
sold in reliance upon exemptions from registration pursuant to Section 4(2)
under the Securities Act of 1933, as amended, and Rule 506 promulgated
thereunder. Each of the optionees qualified as an accredited investor (as
defined by Rule 501 under the Securities Act of 1933, as amended). We raised
$13,808 from the exercise of the stock options and net proceeds were used for
general corporate purposes.

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


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


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



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<PAGE>

              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.*

         *  This exhibit shall not be deemed "filed" for purposes of section 18
            of the Securities Exchange Act of 1934 or otherwise subject to the
            liabilities of that section, no shall it be deemed incorporated by
            reference in any filing under the Securities Act of 1933 or the
            Securities Exchange Act of 1934, whether before or after the date
            hereof and irrespective of any general incorporation language in any
            filings.












































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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:  November 22, 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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