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 June 30, 2005

                                       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)

             21 Water Street                               V6B 1A1
       Vancouver, British Columbia                      (Postal Code)
(Address of principal executive offices)

                                 (604) 696-0633
              (Registrant's telephone number, including area code)

               3800-999 3rd Avenue, Seattle, Washington 98104-4023
         (Former name or former address, if changed since last report)

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

                            Yes |X|  No |_|


There were 15,903,477 shares outstanding of registrant's Common Stock, par value
$.001 per share, as of August 9, 2005.

<PAGE>
                                      -2-

--------------------------------------------------------------------------------
                          VERIDICOM INTERNATIONAL, INC.
                                FORM 10-QSB INDEX
--------------------------------------------------------------------------------
                                                                         PAGE
--------------------------------------------------------------------------------

                         PART I FINANCIAL INFORMATION 3

Item 1   Financial Statements (Unaudited):                                3

a.       Consolidated Balance Sheet as of June 30, 2005                   3

b.       Consolidated Statements of Operations and Other
         Comprehensive Income (Loss) for the three and                    4
         six months ended June 30, 2005 and 2004

c.       Consolidated Statements of Cash Flows for the six                5
         months ended June 30, 2005 and 2004

d.       Notes to Unaudited Consolidated Financial Statements             6


Item 2   Management's Discussion and Analysis of Financial Condition      17
         and Results of Operations

Item 3   Controls and Procedures                                          35

PART II  OTHER INFORMATION                                                36

Item 1   Legal Proceedings                                                36

Item 2   Unregistered Sales of Equity Securities and Use of Proceeds      36

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                                                         40

SIGNATURES                                                                40

--------------------------------------------------------------------------------
<PAGE>
                                      -3-

PART I - FINANCIAL INFORMATION

ITEM 1   FINANCIAL STATEMENTS

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

                                                                June 30, 2005
                                                                 (Unaudited)
                                                               ---------------
                                     ASSETS

Current assets
    Cash                                                       $       538,044
    Accounts Receivable                                                 34,056
    Accounts receivable, related party                                 119,182
    Inventory                                                          183,958
    Other current assets                                                24,378
                                                               ---------------
        Total current assets                                           899,618

Property & equipment, net                                              194,666
Patents                                                                200,000
Goodwill                                                             4,728,546
Deferred finance costs, net                                            729,039
Other assets                                                             3,304
                                                               ---------------
                                                               $     6,755,173
                                                               ===============
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
    Accounts payable                                           $     1,318,665
    Accrued expenses                                                   476,045
    Due to related party                                               388,984
    Notes payable,                                                     217,674
    Notes payable, current portion of
     convertible notes payable                                         283,728
    Other current liabilities                                           89,704
                                                               ---------------
      Total current liabilities                                      2,774,800

    Notes payable, related party                                       366,214
    Convertible notes payable, net of discount                         532,163
    Other liabilities                                                   91,574


Minority interest                                                       26,804
Stockholders' equity
    Common stock, $.001 par value, 60,000,000
    authorized; 15,892,107 issued and outstanding                       15,891
    Preferred stock, $.001 par value 2,000,000
    authorized; NIL issued and outstanding                                  --
    Additional paid in capital                                      18,059,235
    Accumulated other comprehensive loss                              (118,128)
    Accumulated deficit                                            (14,993,380)
                                                               ---------------
      Stockholders' equity                                           2,963,618
                                                               ---------------
                                                               $     6,755,173
                                                               ===============

         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>
                                      -4-

                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
       CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                            Three months       Three months       Six months         Six months
                                               Ended               Ended              Ended              Ended
                                           June 30, 2005      June 30, 2004      June 30, 2005      June 30, 2004
                                          ---------------    ---------------    ---------------    ---------------
<S>                                       <C>                <C>                <C>                <C>
Revenues
    Net revenue                           $       128,231    $        69,516    $       208,807    $       308,491
    Cost of goods sold                             93,328             27,856            145,513            187,894
                                          ---------------    ---------------    ---------------    ---------------
    Gross profit                                   34,903             41,660             63,294            120,597

Expenses
    General & administrative expense            1,065,197            977,077          1,807,878          1,758,854
    Research & development expense                293,062             87,481            556,894            133,088
    Depreciation expense                           17,689             13,090             34,956             20,715
    Relocation charges                                 --             31,575                                31,575
                                          ---------------    ---------------    ---------------    ---------------
Loss from operations                           (1,341,045)        (1,067,563)        (2,336,434)        (1,823,635)

Other (income) expense:
    Other (income) loss                          (108,313)            (3,180)          (103,676)              (745)
    Interest expense                              590,686             21,631          1,067,007             32,328
    Gain on forgiveness of debt                    36,372                 --           (115,303)                --
                                          ---------------    ---------------    ---------------    ---------------
Loss before minority interest                  (1,859,790)        (1,086,014)        (3,184,462)        (1,855,218)

Minority interest                                   3,235             (4,766)             8,106             (9,086)
                                          ---------------    ---------------    ---------------    ---------------
Net loss                                       (1,863,025)        (1,081,248)        (3,192,568)        (1,846,132)

Other comprehensive loss:
Foreign currency translation                      (23,294)              (534)           (25,567)              (692)
                                          ---------------    ---------------    ---------------    ---------------
    Total comprehensive loss:             $    (1,839,731)   $    (1,080,714)   $    (3,166,001)   $    (1,845,440)

Loss per share:
   Basic and fully diluted loss
   per common share                       $         (0.12)   $         (0.07)   $         (0.23)   $         (0.14)

    Weighted average common shares
    outstanding basic and fully diluted        15,642,166         14,998,766         13,909,395         13,585,918
</TABLE>

         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>
                                       -5-


                 VERIDICOM INTERNATIONAL, INC. AND SUBSIDIARIES
                     (FORMERLY KNOWN AS ALPHA VIRTUAL, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                       Six months        Six months
                                                                         Ended              Ended
                                                                     June 30, 2005      June 30, 2004
                                                                    ---------------    ---------------
<S>                                                                 <C>                <C>
Cash flows from operating activities
Net loss from operations                                            $    (3,192,568)   $    (1,846,132)

Adjustments to reconcile net loss to net cash used
  in operating activities:
    Amortization of property and equipment                                   34,956             20,715
    Amortization of deferred financing costs                                 66,320                 --
    Stock based compensation                                                394,373            143,640
    Common shares issued for services                                       140,000
    Gain on Forgiveness of Debt                                            (115,303)                --
    Accretion of interest expense on convertible debt                       222,283                 --
    Interest expense on beneficial conversion features                      696,637                 --
    Minority interest                                                         8,106             (9,086)

Change in operating assets and liabilities
    (Increase) decrease in accounts receivable                              (18,265)             5,974
    (Increase) decrease in related party receivables                        (86,388)            23,425
    (Increase) decrease in inventory                                       (111,165)             7,642
    (Increase) decrease in other assets                                       2,223            (29,995)
    (Decrease) increase in accounts payable                                (374,860)           287,248
    (Decrease) in accrued expenses                                         (309,845)          (143,513)
    (Decrease) increase in due to related parties                          (221,019)            13,958
    Increase in other current liabilities                                   143,479                 --
                                                                    ---------------    ---------------
Net cash used in operating activities                                    (2,721,036)        (1,526,124)
                                                                    ---------------    ---------------

Cash flows from investing activities
    Cash acquired through merger and acquisition                                 --            164,791
    Purchase of property and equipment                                      (22,925)           (27,313)
                                                                    ---------------    ---------------
Net cash provided by (used in) investing activities                         (22,925)           137,478
                                                                    ---------------    ---------------

Cash flows from financing activities
    Proceeds from notes payable                                           3,400,000                 --
    Payment on notes payable                                               (356,372)          (100,000)
    Deferred finance costs                                                 (357,706)                --
    Collection of subscriptions receivable                                  420,000            129,821
    Payment of offering costs/commission                                     (5,000)          (301,228)
    Proceeds from sale of common stock and warrants                         100,650          1,575,209
                                                                    ---------------    ---------------
Net cash provided by financing activities                                 3,201,572          1,303,802
                                                                    ---------------    ---------------
Effect of exchange rate changes on cash                                      26,567                692
                                                                    ---------------    ---------------
Net increase (decrease) in cash                                             484,178            (84,152)
Cash, beginning of period                                                    53,866            126,367
                                                                    ---------------    ---------------
Cash, end of period                                                 $       538,044    $        42,215
                                                                    ===============    ===============
Supplemental disclosures of cash flow information
    Interest paid                                                            73,385             15,124
    Income taxes paid                                                            --                 --

Non cash financing activities
    Deferred financing costs from issuance of notes payable                 437,647                 --
    Common shares issued for services                                       140,000                 --
</TABLE>
         SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>
                                      -6-


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


NOTE 1 - NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS


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

The legal entity, Alpha Virtual, Inc. ("Alpha"),  retained its name until it was
changed to Veridicom  International,  Inc. in February 2004. On January 21, 2004
Veridicom  International  (Canada) Inc. ("Canada") was formed to be the Canadian
operating  company  for  the  public  company.  In May  2005,  the  name  of the
subsidiary company in Pakistan was changed to Veridicom Pakistan (Pvt.) Limited.

The Company has five subsidiaries:  Esstec, Veridicom Pakistan (Private) Limited
("Pakistan Ltd."),  Veridicom Inc., Cavio Corporation  ("Cavio"),  and Veridicom
International (Canada) Inc. ("Canada Inc.").

Esstec  is  a   professional   services   company  that  focuses  on  e-commerce
initiatives,  interactive  multimedia,  and  mobile  software  applications  for
clients  in   various   industries,   including   the   telecommunications   and
entertainment  industries.  During  2004,  Esstec  did not have any  significant
revenues or incur any significant expenses.

Pakistan  Ltd. was  incorporated  on April 19, 2000 to establish the business of
software  development for the  international  markets and to export software and
technology. Esstec owns approximately 63.4% of Pakistan Ltd.

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

Cavio  produces   technology   tools  designed  to  protect  users  from  fraud,
misrepresentation,   security   and  privacy   issues  by   allowing   users  to
biometrically  authenticate  themselves  to secure  control  access and  confirm
identity across a number of industries.

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 $3,192,568  and has a working  capital  deficit of $1,875,182 as of June
30,  2005,  which  raises  substantial  doubt about its ability to continue as a
going  concern.  The  Company  is  currently  devoting  its  efforts  to raising
additional  capital.  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.

<PAGE>
                                      -7-


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2004.

The historical results for the three and six months ended June 30, 2005 and 2004
include the Company and all its  subsidiaries.  The  historical  results for the
three and six months ended June 30, 2004  include  Cavio  Corporation  ("Cavio")
from the merger date of February 20, 2004.

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
our subsidiaries  Esstec,  Pakistan Ltd., Veridicom Inc., Cavio, and Canada Inc.
All significant  intercompany  balances and transactions have been eliminated in
consolidation. Minority interest reflects the ownership of minority shareholders
in the equity of  Pakistan  Ltd.,  a  consolidated  subsidiary  less than wholly
owned.

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.

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.

Inventory

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

Furniture and Equipment

Furniture  and  equipment are recorded at cost.  Depreciation  and  amortization
expense is provided on a straight-line basis using estimated useful lives of 3-7
years.  Depreciation  expense was  $34,956 and $20,715 for the six months  ended
June 30,  2005 and 2004,  respectively.  Maintenance  and repairs are charged to
expense as incurred and  expenditures  for major  improvements  are capitalized.
When assets are retired or  otherwise  disposed  of, the  property  accounts are
relieved of costs and accumulated depreciation and any resulting gain or loss is
credited or charged to operations.

<PAGE>
                                      -8-


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.

Concentrations of Credit Risk

Financial instruments, which potentially expose the Company to concentrations of
credit risk, consist primarily of trade accounts receivable. Aggregate potential
credit losses have so far not exceeded management's expectations.

Advertising Expenses

We expense  advertising  costs as incurred.  During the six month  periods ended
June 30, 2005 and 2004,  the Company  incurred  $45,000 and $7,731 for marketing
and advertising costs, respectively.

Long Lived assets

In accordance  with SFAS No. 144,  "Accounting for the Impairment or Disposal of
Long-Lived  Assets",  the Company  tests  long-lived  assets or asset groups for
recoverability  when  events or changes  in  circumstances  indicate  that their
carrying  amount may not be  recoverable.  Circumstances  which could  trigger a
review  include,  but are not limited to:  significant  decreases  in the market
price of the asset; significant adverse changes in the business climate or legal
factors;  accumulation of costs significantly in excess of the amount originally
expected for the acquisition or  construction of the asset;  current period cash
flow or  operating  losses  combined  with a history of losses or a forecast  of
continuing losses associated with the use of the asset; and current  expectation
that the  asset  will more  likely  than not be sold or  disposed  significantly
before the end of its estimated useful life.

Recoverability  is assessed  based on the  carrying  amount of the asset and its
fair value which is generally  determined  based on the sum of the  undiscounted
cash flows  expected  to result  from the use and the  eventual  disposal of the
asset, as well as specific appraisal in certain instances. An impairment loss is
recognized when the carrying amount is not recoverable and exceeds fair value.

Foreign Currency Transactions/Balances

The Company  translates  the  financial  statements of foreign  subsidiaries  in
accordance  with  SFAS  No.  52,  "Foreign  Currency  Translation".  Assets  and
liabilities  denominated in foreign currencies are translated into US dollars at
rates of  exchange in effect at the balance  sheet date.  Average  rates for the
year are used to translate  revenues and expenses.  Resulting  translation gains
and losses are accumulated in a separate  component of  stockholders'  equity as
accumulated other comprehensive income or loss.

Veridicom  Pakistan  Ltd.  considers  the  Pakistan  Rupee to be the  functional
currency of its operations.  Cavio and Canada Inc.  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.


<PAGE>
                                      -9-


................................... ..................... .....................
                                      For the period        For the period
                                          Ending                Ending
Exchange Rates                        June 30, 2005         June 30, 2004
................................... ..................... .....................
Rupee Average                             .01680                .01736
Rupee Period end                          .01680                .01722
Canadian Dollar Average                   .80632                .73556
Canadian Dollar Period end                .81593                .74973
................................... ..................... .....................

Patents

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

Goodwill

Goodwill represents the excess of the purchase price of acquired assets over the
fair  values  of the  identifiable  assets  acquired  and  liabilities  assumed.
Pursuant to SFAS No. 141, the Company does not amortize goodwill,  but tests for
impairment  of goodwill on an annual basis and at any other time if events occur
or  circumstances  indicate  that the  carrying  amount of  goodwill  may not be
recoverable. Circumstances that could trigger an impairment test include but are
not limited to: a significant  adverse  change in the business  climate or legal
factors;  an  adverse  action  or  assessment  by  a  regulator;   unanticipated
competition and loss of key personnel.  Goodwill is tested for impairment  using
present value  techniques  of estimated  future cash flows;  or using  valuation
techniques  based on multiples of earnings.  If the carrying  amount of goodwill
exceeds the implied fair value of that goodwill,  an impairment  loss is charged
to operations.

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 is  recognized  at the time service is
provided.

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

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

Veridicom Inc. recognizes revenues at the point of shipment of products.


<PAGE>
                                      -10-


Stock Based Compensation

Stock  options  granted to employees and  non-employees  are accounted for under
Statement of Financial  Accounting Standards No. 123 "Accounting for Stock-Based
Compensation"  (SFAS  123),  which  establishes  a fair  value  based  method of
accounting for stock-based awards, and recognizes  compensation expense based on
the fair  value of the  stock  award or fair  value of the  goods  and  services
received, whichever is more reliably measurable.

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

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.

On February 7, 2005, the Board of Directors of the Company approved the granting
of 1,025,000  shares to officers,  directors  and employees of the Company under
the 2004 Stock Option Plan.

The stock options vest monthly over a thirty-six-month period. The fair value of
the vested  options of $178,913 was  estimated  using the  Black-Scholes  option
pricing model with an expected life of five years, a risk-free  interest rate of
2.43% and an  expected  volatility  of 209%.  The fair  value of vested  options
during the year has been expensed as stock based compensation.

On April 22, 2005,  the Board of Directors of the Company  approved the granting
of an additional 130,000 shares to employees of the Company under the 2004 Stock
Option Plan.

The Company  recognized  $394,373 as stock based  compensation  to employees and
directors of the Company for the six months ended June 30, 2005.

Income Taxes

We recognize  deferred tax assets and liabilities for the expected future income
tax consequences of events that have been recognized in the Company's  financial
statements.   Under  this  method,  deferred  tax  assets  and  liabilities  are
determined based on temporary differences between the financial carrying amounts
and the tax bases of assets and liabilities using enacted tax rates in effect in
the  periods  in which  the  temporary  differences  are  expected  to  reverse.
Valuation  allowances  are  established  when  necessary to reduce  deferred tax
assets to the amount expected to be realized.  Income tax expense represents the
tax payable for the current  period and the change during the period in deferred
tax assets and  liabilities.  The Company has a net operating loss carry forward
of approximately $4,000,000 expiring beginning in 2020.

<PAGE>
                                      -11-

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.

Software Development Costs

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

Earnings Per Common Share

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

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- An  Amendment  of APB  Opinion No.  29".  The  guidance in APB Opinion No. 29,
"Accounting  for  Nonmonetary  Transactions",  is  based on the  principle  that
exchanges of  nonmonetary  assets should be measured  based on the fair value of
the assets exchanged.  The guidance in that Opinion,  however,  included certain
exceptions to that  principle.  SFAS No. 153 amends  Opinion No. 29 to eliminate
the  exception  for  nonmonetary  exchanges  of  similar  productive  assets and
replaces it with a general exception for exchanges of nonmonetary assets that do
not have commercial  substance.  A nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as a
result  of the  exchange.  The  provisions  of SFAS No.  153 are  effective  for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005.  Early  application  is permitted  and  companies  must apply the standard
prospectively.  The adoption of this standard is not expected to have a material
effect on the Company's results of operations or financial position.

In December  2004,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  of  Financial  Accounting  Standard  (SFAS) No.  123R,  "Share  Based
Payment".  SFAS 123R is a revision of SFAS No. 123  "Accounting  for Stock-Based
Compensation",  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to Employees" and its related  implementation  guidance.  SFAS 123R  establishes
standards for the accounting for  transactions in which an entity  exchanges its

<PAGE>
                                      -12-


equity  instruments  for goods or services.  It also addresses  transactions  in
which an entity  incurs  liabilities  in exchange for goods or services that are
based  on the fair  value  of the  entity's  equity  instruments  or that may be
settled by the issuance of those equity instruments. SFAS 123R focuses primarily
on accounting for transactions in which an entity obtains  employee  services in
share-based payment transactions.  SFAS 123R requires a public entity to measure
the cost of  employee  services  received  in  exchange  for an award of  equity
instruments  based on the  grant-date  fair  value of the  award  (with  limited
exceptions).  That cost  will be  recognized  over the  period  during  which an
employee  is  required  to  provide  service  in  exchange  for the  award - the
requisite  service period (usually the vesting period).  SFAS 123R requires that
the compensation cost relating to share-based payment transactions be recognized
in financial  statements.  That cost will be measured based on the fair value of
the equity or liability  instruments issued.  Public entities that file as small
business  issuers  will be required  to apply SFAS 123R in the first  interim or
annual  reporting  period that begins after  December 15, 2005.  The adoption of
this standard is not expected to have a material effect on the Company's results
of operations or financial position.

In March 2005,  the SEC staff  issued  Staff  Accounting  Bulletin No. 107 ("SAB
107") to give  guidance on the  implementation  of SFAS 123R.  The Company  will
consider SAB 107 during implementation of SFAS 123R.

Reclassifications

Certain  reclassifications  have  been  made  to the  prior  period's  financial
statements to conform to the current period presentation. Cost of goods sold for
the six months ended June 30, 2005 includes $29,491 which has been  reclassified
from research and development  expenses incurred in the three months ended March
31, 2005.


NOTE 3 - BUSINESS ACQUISITION

On January 16, 2004,  we entered into an Agreement and Plan of Merger with Cavio
Corporation,  a privately  held  Washington  corporation  ("Cavio").  The merger
became  effective  on February 20, 2004  following a special  meeting of Cavio's
stockholders.  In accordance with the merger, on February 20, 2004,  through its
wholly owned subsidiary,  A/VII Acquisition  Corporation,  a Nevada corporation,
acquired Cavio in exchange for 5,119,140 shares of our common stock. We 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
                                                              --------

<PAGE>
                                      -13-

          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 year  ended  December  31,  2004  gives  effect to the above
transaction as if it had occurred on January 1, 2004.

<TABLE>
<CAPTION>

                      Veridicom International         Cavio Corporation
                        Inc.  Consolidated            for the period
                        for the year ended         from November 01, 2003            Proforma                  Proforma
                         December 31, 2004           to February 19, 2004          Adjustments                Consolidated
                         -----------------           -----------------           -----------------          -----------------
<S>                      <C>                         <C>                         <C>                        <C>
 Revenues                $         384,853           $              --           $              --          $         384,853
(Expenses)                      (4,196,622)                   (481,715)                         --                 (4,678,337)
 Other                              91,508                      (3,367)                         --                     88,141
                         -----------------           -----------------           -----------------          -----------------
 Net loss                $      (3,720,261)          $        (485,082)          $              --          $      (4,205,343)
                         =================           =================           =================          =================
</TABLE>


NOTE 4 - ACCOUNTS RECEIVABLE, RELATED PARTY

The Company inadvertently repaid a note that was previously converted to equity.
The $82,501 is fully recoverable.


NOTE 5 - FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

                                                                   June 30,
                                                                     2005
                                                                   --------
Tooling equipment                                                  $161,595
Furniture & fixture                                                  33,932
Office equipment                                                     31,891
Computer hardware                                                   281,769
Computer software                                                   159,922
Vehicles                                                             27,422
                                                                   --------
                                                                    696,531
Less accumulated depreciation and amortization                      501,865
                                                                   --------
                                                                   $194,666
                                                                   ========

<PAGE>
                                      -14-

NOTE 6 - NOTES PAYABLE,  RELATED PARTIES

During the six months ended June 30, 2005, the Company reached a full settlement
with a lender in respect of a short term loan of $100,000  and the  interest due
theron.  Under the settlement terms, the total interest payable was limited to a
maximum of $20,000. The Company paid, in full, the principal of $100,000 and all
the  accrued  interest  owed to the lender of $10,000.  The Company  also issued
25,000 shares of the Company's  common stock to this lender as a loan fee valued
at $106,250.  A director of the Company is an  associate of the lender's  parent
company.

In March 2005,  the Company paid $50,000 of its unsecured  loan of $416,214 from
Global  Ventures  Advisors,  a company  controlled  by a former  director of the
Company's  subsidiary in Pakistan.  The loan bears interest at 12% per annum and
due on or before June 30, 2007, with an option to convert to common stock in the
event of default in repayment by the Company.  The  outstanding  loan balance of
$366,214 is shown as notes payable from related party.

NOTE 7 - COMMON STOCK

Common Stock Issued during the Period to June 30, 2005

During the six month  period  ended June 30, 2005 the Company  issued a total of
111,000  shares of  common  stock.  A total of 61,000  shares  were  issued  for
$100,650  less  offering  costs of $5,000 and 50,000 shares with a fair value of
$140,000 were issued for payment of legal services rendered.


NOTE 8 - COMMITMENTS AND CONTINGENCIES

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.  The fair value
of the  current  year  vested  options  of  $215,460  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%.  The fair
value of  vested  options  during  the year 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 and November  2003  amounting to a total of $111,651.
The Company has accrued for this  liability in its  financial  statements  as at
June 30, 2005.

On March 21, 2005 one of the  claimants  signed a letter of agreement to convert
his claim of $ 61,054 into stock based on the closing  price of our common stock
on that day of $2.40 per  share,  or a total of  25,439  shares  for his  entire
claim.  However,  this  settlement is subject to obtaining  certain  waivers and
documents from the holders of our Callable Secured Convertible Notes.

<PAGE>
                                      -15-

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.

On March 28,  2003 the  Company and one of the  company's  stockholders  filed a
lawsuit in  Superior  Court  against a former CEO of the  Company.  The  lawsuit
alleges a breach of  fiduciary  duty,  negligence,  fraud and breach of contract
claiming the CEO did not devote his efforts to the Company's product development
and market  strategies  or  maximize  the profit of the  business.  An amount of
damages  has not been  determined  and the  outcome  of this  lawsuit  cannot be
determined at this time.

NOTE 9 - GAIN ON CANCELLATION/FORGIVENESS OF DEBT

In the six month period ended June 30, 2005,  the Company  recorded  $115,303 of
gain on forgiveness of debt after reaching  settlement  agreements  with certain
vendors  to  cancel  old  accounts   payable  for  reduced  cash  payment,   and
cancellation  of  accounts  payable for which no  collection  effort was made by
vendors over the last four years.

The Company is  currently  investigating  the  possibility  of revising  certain
pre-merger accounts payable estimated at $270,000.

NOTE 10 - LONG TERM DEBT

On February  25,  2005,  the Company  completed  the first of three  rounds of a
private  placement  whereby  the  Company  will  issue  up  to an  aggregate  of
$5,100,000 worth of 10% callable secured notes convertible into shares of common
stock of the Company and warrants to purchase up to an  aggregate of  10,200,000
shares of common  stock,  of the Company to certain  accredited  investors.  The
closing  of the first  round of the  Private  Placement  resulted  in  aggregate
proceeds to the Company of $1,700,000.  During the second  quarter,  the Company
completed  the second  round of the private  placement  resulting  in  aggregate
proceeds amounting to $1,700,000.  The third closing of $1,700,000 is contingent
upon triggering events set forth in the Securities Purchase Agreement. The Notes
have a term of 36 months and bear  interest  at 10% per annum,  which is payable
monthly;  provided,  however,  that the interest  rate shall reset at 0% for any
monthly  period in which the  Company's  stock price is greater than 125% of the
"Initial Market Price," which is defined as 100% of the volume weighted  average
of the Company's common stock for the five days immediately prior to closing, as
reported on the Over-the-Counter Bulletin Board.

The  Warrants  are  exercisable  at any time for a period of five years from the
date of  issuance.  The Series A Warrants  have an  exercise  price of $3.00 per
share and the Series B Warrants have an exercise price of $5.00 per share.

As an inducement to participate in the Private  Placement,  the Company  granted
the Note Holders a security interest in all of its intellectual property.

As  consideration  for placement  agent  services  provided by Joseph  Stevens &
Company Inc.  ("JSC") in connection with the Private  Placement,  the Company is
obligated to issue JSC  warrants to purchase up to 107,087  shares of its common
stock at an exercise price of $1.27 per share and cash commissions in the amount
of  $136,000  for each round of the  private  placement.  Also,  the Company was
obligated and has issued one time  warrants to purchase up to 100,000  shares of
its common stock at an exercise price of $3.50 per share.

<PAGE>
                                      -16-

Discount on Convertible Notes

On February  25,  2005,  the Company  completed  the first of three  rounds of a
private  placement  whereby  the  Company  will  issue  up  to an  aggregate  of
$5,100,000 worth of 10% callable secured notes convertible into shares of common
stock of the Company and warrants to purchase up to an  aggregate of  10,200,000
shares of common stock, of the Company to certain accredited investors.

On April 29,  2005,  the  Company  completed  the  second  round of the  private
placement.

The notes are convertible  into the Company's common stock at a conversion price
equal to $1.27,  which is seventy  percent (70%) of the initial  market price of
$1.81 as  defined in the  agreement  using the  Weighted  Volume  Average  Price
("WVAP");  provided however, that if an event of default shall have occurred and
be continuing,  the  conversion  price shall be equal to the lesser of (i) fifty
percent (50%) of the initial market price or (ii) the variable conversion price,
defined as the  applicable  percentage  multiplied by the average of the average
daily  prices for the  common  stock for the five (5) days prior to the date the
conversion notice is sent by the holder of the notes to the Company.

The fair value of the beneficial  conversion feature for these convertible notes
and warrants issued was estimated using the  Black-Scholes  option pricing model
with an expected life of five years,  a risk-free  interest rate of 2.43% and an
expected  volatility  of 187% and 185% for the  first and  second  rounds of the
private  placement  respectively.  The fair value of the  beneficial  conversion
feature of  $2,594,526  has been  capitalized  as discount on notes and is being
amortized over the three-year term of the notes.

The monthly  amortization of $75,093 is being recorded as interest  expense over
the three-year term of the notes.

The Company also recorded a one time interest  expense related to the beneficial
conversion feature of $696,637.

The Company  incurred a total of $357,701 in legal  expenses and  commissions to
complete  the first and second  rounds of a private  placement.  These costs are
being capitalized and amortized over the three-year term of the note.

The Company also  recorded as deferred  finance  costs the fair value of 214,174
warrants  issued as  consideration  for the two completed  rounds of the private
placement.  The fair value of these warrants was estimated at $437,652 using the
Black-Scholes  option  pricing  model with an  expected  life of five  years,  a
risk-free interest rate of 2.43% and an expected volatility of 187% and 185% for
the first and second rounds of the private placement respectively.

The fair values of the  deferred  finance  costs have been  capitalized  and are
being amortized over the three-year term of the notes.


NOTE 11 - OFFICE CLOSING

On April 15, 2004 the Company permanently closed the offices of Veridicom,  Inc.
in Sunnyvale,  California and has integrated and  consolidated  its software and
hardware  product  divisions  at its  offices in  Vancouver,  British  Columbia,
Canada.  The direct costs incurred by the company  during 2004,  with respect to
the closure and relocation of the Sunnyvale operations, amounted to $31,575.

<PAGE>
                                      -17-

NOTE 12 - SUBSEQUENT EVENTS

In June 2005,  the Company  elected to convert  $14,438 of interest owed to Note
Holders of the private  placement into the Company's  common stock. As a result,
11,370 shares were issued in July 2005.


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


SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

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


OVERVIEW

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 the Company 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.

<PAGE>
                                      -18-

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

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

On January 16, 2004,  we entered into an Agreement and Plan of Merger with Cavio
Corporation,  a privately-held  Washington corporation ("Cavio").  In accordance
with the merger, on February 20, 2004, we, through our wholly-owned  subsidiary,
A/VII  Corporation,  a  Nevada  corporation,  acquired  Cavio  in  exchange  for
5,119,140  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 Laferte, VP, Technical Operations (resigned in June 2005)
    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.  The Company has five  operational  subsidiaries:  Esstec,
Veridicom Pakistan  (Private) Limited ("Pakistan Ltd."),  Veridicom Inc., Cavio,
and Veridicom International (Canada) Inc. ("Canada Inc.").

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.


<PAGE>
                                      -19-


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

The Company has a strong  management team with combined  experience in sales and
marketing,  vertical  market  knowledge,  technology  development,  and hardware
integrated circuit design. In addition, we are continuing our efforts to appoint
an  advisory  board  with  significant  expertise  in the  areas of  technology,
government, security and financial service to provide the Company with strategic
direction for products and services.

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,  the Company has 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. 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.  Since 2004,  Veridicom  International  has  prioritized the
process of  streamlining  its  manufacturing  operations.  In addition,  we have
re-aligned  our  product  line in  anticipation  of  customer  requirements  for
stronger security solutions and secure devices. As such, we have worked with our
suppliers to identify  opportunities for efficiencies,  reduced costs,  improved
quality and improved capacity.

We expect to begin manufacturing a new revision of our FPS200 fingerprint sensor
which includes a number of enhancements to the previous version.

We have several patents and pending patent  applications for its technology,  an
important  factor in  today's  competitive  landscape.  We  expect to  receive a
decision to grant for our previously  announced  European  Patent for the use of
biometric  technology in conjunction  with  encryption and the use of public and
private keys. We believe that this is a significant  patent for the company,  as
it covers a range of devices utilizing encryption technology and biometrics. The
VKI-V is an example of this patent and technology used in a device.

We do not  announce  all sales  orders  received  either due to  confidentiality
provisions or because sales are conducted  indirectly  through a growing base of
channel partners. We currently have outstanding sales orders of approximately $8
million

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").

Recent Events

On April 25,  2005 we  announced  the launch of VKI-V,  an  identity  device for
personal authentication and secure transactions for enterprise and consumers.


<PAGE>
                                      -20-


On May 2, 2005, we announced the selection of an Atmel Corporation processor for
inclusion in our portable biometric identity product line.

On May 9, 2005,  we announced the receipt of an initial sales order from Fook Vo
Holdings Ltd. of Macau.

On June 2, 2005 we announced the presenting of the Company's  roadmap for strong
authentication,  data  security  and  identity  management  to a select group of
government and business leaders at the Beijing International Convention Center.

On June 27, 2005 we announced a strategic  marketing and  development  agreement
with Levington  Manufacturing  Corporation , a major provider of home automation
equipment.

On July 25, 2005 we issued a performance update to our shareholders

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, 2004.

The historical results for the three and six months ended June 30, 2005 and 2004
include the Company and all its  subsidiaries.  The  historical  results for the
three and six months ended June 30, 2004  include  Cavio  Corporation  ("Cavio")
from the merger date of February 20, 2004.

Critical Accounting Policies

The Company's  critical  accounting  policies are particularly  important to the
portrayal  of  financial  position  and  results of  operations  and require the
application  of  significant   judgments  by  management.   As  a  result,   the
consolidated   financial  statements  are  subject  to  an  inherent  degree  of
uncertainty.  In  applying  those  policies,  management  uses its  judgment  to
determine the appropriate assumptions to be used in the determination of certain
estimates.  These  estimates are based on the Company's  historical  experience,
terms  of  existing  contracts,   observance  of  trends  in  the  industry  and
information  available  from outside  sources,  as  appropriate.  The  Company's
critical accounting policies are described below:

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.

<PAGE>
                                      -21-


Long Lived assets

In accordance  with SFAS No. 144,  "Accounting for the Impairment or Disposal of
Long-Lived  Assets",  the Company  tests  long-lived  assets or asset groups for
recoverability  when  events or changes  in  circumstances  indicate  that their
carrying  amount may not be  recoverable.  Circumstances  which could  trigger a
review  include,  but are not limited to:  significant  decreases  in the market
price of the asset; significant adverse changes in the business climate or legal
factors;  accumulation of costs significantly in excess of the amount originally
expected for the acquisition or  construction of the asset;  current period cash
flow or  operating  losses  combined  with a history of losses or a forecast  of
continuing losses associated with the use of the asset; and current  expectation
that the  asset  will more  likely  than not be sold or  disposed  significantly
before the end of its estimated useful life.

Recoverability  is assessed  based on the  carrying  amount of the asset and its
fair value which is generally  determined  based on the sum of the  undiscounted
cash flows  expected  to result  from the use and the  eventual  disposal of the
asset, as well as specific appraisal in certain instances. An impairment loss is
recognized when the carrying amount is not recoverable and exceeds fair value.

Goodwill

Goodwill represents the excess of the purchase price of acquired assets over the
fair  values  of the  identifiable  assets  acquired  and  liabilities  assumed.
Pursuant to SFAS No. 141, the Company does not amortize goodwill,  but tests for
impairment  of goodwill on an annual basis and at any other time if events occur
or  circumstances  indicate  that the  carrying  amount of  goodwill  may not be
recoverable. Circumstances that could trigger an impairment test include but are
not limited to: a significant  adverse  change in the business  climate or legal
factors;  an  adverse  action  or  assessment  by  a  regulator;   unanticipated
competition and loss of key personnel.  Goodwill is tested for impairment  using
present value  techniques  of estimated  future cash flows;  or using  valuation
techniques  based on multiples of earnings.  If the carrying  amount of goodwill
exceeds the implied fair value of that goodwill,  an impairment  loss is charged
to operations.

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 is  recognized  at the time service is
provided.

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

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

<PAGE>
                                      -22-


Veridicom Inc. recognizes revenues at the point of shipment of products.

Stock Based Compensation

Stock  options  granted to employees and  non-employees  are accounted for under
Statement of Financial  Accounting Standards No. 123 "Accounting for Stock-Based
Compensation"  (SFAS  123),  which  establishes  a fair  value  based  method of
accounting for stock-based awards, and recognizes  compensation expense based on
the fair  value of the  stock  award or fair  value of the  goods  and  services
received, whichever is more reliably measurable.

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


Software Development Costs

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

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- An  Amendment  of APB  Opinion No.  29".  The  guidance in APB Opinion No. 29,
"Accounting  for  Nonmonetary  Transactions",  is  based on the  principle  that
exchanges of  nonmonetary  assets should be measured  based on the fair value of
the assets exchanged.  The guidance in that Opinion,  however,  included certain
exceptions to that  principle.  SFAS No. 153 amends  Opinion No. 29 to eliminate
the  exception  for  nonmonetary  exchanges  of  similar  productive  assets and
replaces it with a general exception for exchanges of nonmonetary assets that do
not have commercial  substance.  A nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as a
result  of the  exchange.  The  provisions  of SFAS No.  153 are  effective  for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005.  Early  application  is permitted  and  companies  must apply the standard
prospectively.  The adoption of this standard is not expected to have a material
effect on the Company's results of operations or financial position.

In December  2004,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  of  Financial  Accounting  Standard  (SFAS) No.  123R,  "Share  Based
Payment".  SFAS 123R is a revision of SFAS No. 123  "Accounting  for Stock-Based
Compensation",  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to Employees" and its related  implementation  guidance.  SFAS 123R  establishes
standards for the accounting for  transactions in which an entity  exchanges its
equity  instruments  for goods or services.  It also addresses  transactions  in
which an entity  incurs  liabilities  in exchange for goods or services that are
based  on the fair  value  of the  entity's  equity  instruments  or that may be
settled by the issuance of those equity instruments. SFAS 123R focuses primarily
on accounting for transactions in which an entity obtains  employee  services in
share-based payment transactions.  SFAS 123R requires a public entity to measure
the cost of  employee  services  received  in  exchange  for an award of  equity
instruments  based on the  grant-date  fair  value of the  award  (with  limited
exceptions).  That cost  will be  recognized  over the  period  during  which an
employee  is  required  to  provide  service  in  exchange  for the  award - the
requisite  service period (usually the vesting period).  SFAS 123R requires that
the compensation cost relating to share-based payment transactions be recognized
in financial  statements.  That cost will be measured based on the fair value of
the equity or liability  instruments issued.  Public entities that file as small
business  issuers  will be required  to apply SFAS 123R in the first  interim or
annual  reporting  period that begins after  December 15, 2005.  The adoption of
this standard is not expected to have a material effect on the Company's results
of operations or financial position.


<PAGE>
                                      -23-

In March 2005,  the SEC staff  issued  Staff  Accounting  Bulletin No. 107 ("SAB
107") to give  guidance on the  implementation  of SFAS 123R.  The Company  will
consider SAB 107 during implementation of SFAS 123R.

Reclassifications

Certain  reclassifications  have  been  made  to the  prior  period's  financial
statements to conform to the current period presentation. Cost of goods sold for
the six months ended June 30, 2005 includes $29,491 which has been  reclassified
from research and development  expenses incurred in the three months ended March
31, 2005

Results of Operations - Six and Three Months Ended June 30, 2005 and 2004

Net Revenue

Net revenue for the six months  ended June 30,  2005 of  $208,807  decreased  by
$99,684  compared to net revenue of  $308,491  for the same period in 2004.  The
decrease is due to a specific order of finger print sensor chips for $170,000 in
the six months  ended June 30,  2004.  All other  revenues  for the  comparative
periods  are in respect of sales of  capacitive  fingerprint  sensors,  computer
peripherals and software  related to the use of our  fingerprint  authentication
technology.

Cost of Goods Sold

Cost of goods sold is mainly for product components purchased from suppliers and
the cost of  finished  products  from  existing  inventory.  These  amounted  to
$145,513  for the six months  ended June 30, 2005  compared to $187,894  for the
same period in 2004.

Gross Profit

The gross  profit for the six months ended June 30, 2005 of $63,294 was 30.3% of
net sales  compared to gross profit of $120,597 which was 39.1% of net sales for
the same period in 2004.  The variance in the gross profit  margin is due to the
change in product sales mix during the comparable periods.

General and Administrative Expenses

General  and  administrative   expenses,  which  include  non-cash  compensation
expenses of,  $394,373  amounted to  $1,807,878  for the six months ending June,
2005  compared to  $1,758,854  for the same period in 2004.  The net increase of
$49,024 is mainly in respect of:

      o     Commissions  and fees which  decreased  to $23,000 in the six months
            ended June 30,  2005  compared  to  $127,000  for the same period in
            2004.  This  decrease is because the Company  paid  commissions  for
            equity investments in 2004.

      o     A decrease in  consulting  expenses from $405,000 for the six months
            ended June 30,  2004 to $257,000  for the six months  ended June 30,
            2005.  After the merger of  Sunnyvale,  the Company  hired full time
            employees   for   services   which  were   previously   provided  by
            consultants. This reduced consulting expenses.


<PAGE>
                                      -24-


      o     A decrease in travel expenses from $143,000 for the six months ended
            June 30, 2004 to $86,000 for the six months ended June 30, 2005.  It
            is expected that travel expenses for 2005 fiscal will be higher than
            those  of  2004  as  a  result  of  increased  marketing  and  sales
            activities.

      o     Stock based  compensation,  which  increased  to $394,373 in the six
            months ended June 30, 2005  compared to $143,640 for the same period
            in 2004 as a result  of new  stock  based  compensation  vested  for
            employees  and  directors  of the  Company  in  accordance  with the
            options granted in February 2005, under the 2004 Stock Option Plan.

      o     Marketing and advertising expenses increased from $7,800 for the six
            months  ended June 30, 2004 to $45,000 for the six months ended June
            30,  2005.  This is due to costs  incurred for  attendance  of trade
            shows in 2005.

      o     Office administration  expenses also increased by $49,000 in the six
            months ended June 30, 2005 compared to the same period in 2005. This
            is due to normal increase in operational activities.

      o     Other   expenses   such  as  licenses  and   permits,   parking  and
            miscellaneous  expenses increased by $25,000 in the six months ended
            June 30, 2005 compared to the same period in 2004.

Research and Development

Research and development expenditure for the six months ending June 30, 2005 was
$556,894,  compared to $133,088 for the same period in 2004.  Such  expenditures
are related to salaries  paid to research  and  development  staff and  on-going
product, hardware and software enhancements.

Interest Expense

Interest expense for the six months ending June 30, 2005 amounting to $1,067,007
was for  amortization  of notes discount and accrued  interest on notes payable,
compared  to  interest  expense  of  $32,328  for the same  period in 2004.  The
significant  increase in interest  expense in the six months ended June 30, 2005
is  mainly  due  to  interest  expense  of  beneficial  conversion  feature  and
amortization of deferred  finance charges  resulting from the convertible  notes
issued in 2005.

Liquidity and Capital Resources

On  February  25,  2005,  we  completed  the first of three  rounds of a private
placement  whereby we will issue up to an aggregate of  $5,100,000  worth of 10%
callable secured notes  convertible into shares of common stock, and warrants to
purchase up to an aggregate of 10,200,000  shares of our common stock to certain
accredited  investors.  The first of three equal  installments of $1,700,000 was
received in March, 2005.

Subsequently  in April,  2005,  the Company  completed  the second  round of the
private placement  resulting in aggregate proceeds amounting to $1,700,000.  The
third closing of $1,700,000 is contingent  upon  triggering  events set forth in
the Securities Purchase Agreement.

We intend to complete the third round of our private placement financing to fund
our current and future  operations.  If we are not successful in completing this
financing or if we need to seek additional or alternative sources of finance, 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.


<PAGE>
                                      -25-

We  anticipate  that if we are able to  complete  the third round of our private
placement  financing  and if we are able to generate  funds from  operations  by
fulfillment of orders and product deliveries in the third and fourth quarters of
this year, we expect to have sufficient funds to meet our operating requirements
for the remainder of this year.

In addition,  if the holders of the private  placement  financing notes exercise
their option to convert  these into common  stock of our  company,  we would not
then be required to repay the  principal and interest on these notes which would
therefore  enhance our cash flow by approximately  $600,000 per quarter and also
increase our net equity by approximately $3.5 million.  However, the noteholders
are not under any obligation to convert the notes into our common stock.


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

Risks 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  stocks 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 prior auditors have indicated  substantial  doubt  concerning our ability to
continue operations as a going concern.


<PAGE>
                                      -26-


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

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

We just completed the second of three rounds of a private  placement to raise an
aggregate of $5,100,000. The first of three equal installments of $1,700,000 was
received in February,  2005,  the second was received in May, 2005 and the third
closing of  $1,700,000  is contingent  upon  triggering  events set forth in the
Securities  Purchase  Agreement.  If we cannot complete the third installment of
this placement and 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.

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.

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.


<PAGE>
                                      -27-


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 its
business operations, financial results and stock price.

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

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

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

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

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

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

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

      o     public   perceptions   regarding  the   confidentiality  of  private
            information;

      o     customers' satisfaction with our products and services; and

      o     marketing  efforts  and  publicity   regarding  these  products  and
            services.

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


<PAGE>
                                      -28-

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

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

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

      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:


<PAGE>
                                      -29-


      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 makes the  manufacturing  and assembly
process of such products,  especially in volume,  complex. This may in turn lead
to delays or  shortages in the  availability  of certain  products,  or, in some
cases, the unavailability of certain products. The negative effects of any delay
or failure could be  exacerbated  if the delay or failure  occurs in products or
services  that  provide  personal  security,  secure  sensitive  computer  data,
authorize significant financial  transactions or perform other functions where a
security breach could have significant consequences.

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

There is a risk that for  unforeseen  reasons  we may be  required  to repair or
replace a  substantial  number of products in use or to reimburse  customers for
products that fail to work or meet strict  performance  criteria.  We attempt to
limit  remedies for product or service  failure to the repair or  replacement of
malfunctioning  or  noncompliant  products  or  services,  and also  attempts to
exclude or minimize exposure to product and related  liabilities by including in
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.


<PAGE>
                                      -30-

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 if we are  unsuccessful  in these markets.  Failure to recover these
costs and expenses may materially  adversely impact our cash flow and ability to
meet our  regular  operating  expenses,  which may,  in turn harm our ability to
serve our customers and our competitive position to obtain new customers.

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

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

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

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

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

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

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

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.

<PAGE>
                                      -31-


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  products  and  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.


<PAGE>
                                      -32-


Risks relating to our current financing arrangement

There are a large number of shares  underlying our callable secured  convertible
notes,  and warrants that may be available for future sale and the sale of these
shares may depress the market price of our common stock.

As of August 9,  2005,  we had  15,903,477  shares of common  stock  issued  and
outstanding and callable secured  convertible notes outstanding or an obligation
to issue  callable  secured  convertible  notes  that may be  converted  into an
estimated  8,050,513  shares of  common  stock at  current  market  prices,  and
outstanding  warrants or an obligation to issue warrants to purchase  10,200,000
shares  of common  stock.  In  addition,  the  number of shares of common  stock
issuable upon conversion of the outstanding  callable secured  convertible notes
may increase if there is an event of default.  All of the shares,  including all
of the shares  issuable  upon  conversion  of the notes and upon exercise of our
warrants,  may be sold  without  restriction.  The  sale  of  these  shares  may
adversely affect the market price of our common stock.

If there is an event of default,  the continuously  adjustable  conversion price
feature of our callable secured convertible notes become applicable, which could
have a depressive effect on the price of our common stock.

Upon an event of default the callable secured  convertible notes are convertible
into shares of our common  stock at a 50%  discount to the trading  price of the
common stock prior to the conversion.  The significant  downward pressure on the
price of the common stock as the selling stockholder converts and sells material
amounts of common  stock  could have an adverse  effect on our stock  price.  In
addition,  not only the sale of shares  issued  upon  conversion  or exercise of
notes, warrants and options, but also the mere perception that these sales could
occur, may adversely affect the market price of the common stock.

The issuance of shares upon conversion of the callable secured convertible notes
and  exercise  of  outstanding  warrants  may cause  immediate  and  substantial
dilution to our existing stockholders.

The issuance of shares upon conversion of the callable secured convertible notes
and exercise of warrants may result in substantial  dilution to the interests of
other  stockholders  since the selling  stockholders may ultimately  convert and
sell the full amount issuable on conversion.  Although the selling  stockholders
may not convert their callable secured  convertible  notes and/or exercise their
warrants if such  conversion or exercise would cause them to own more than 4.99%
of our outstanding  common stock,  this restriction does not prevent the selling
stockholders  from converting  and/or exercising some of their holdings and then
converting  the rest of their  holdings.  In this way, the selling  stockholders
could sell more than this limit while never holding more than this limit.  There
is no upper limit on the number of shares that may be issued which will have the
effect of further diluting the proportionate equity interest and voting power of
holders of our common stock, including investors in this offering.

If we are  required  for any reason to repay our  outstanding  callable  secured
convertible  notes,  we would be required to deplete  our  working  capital,  if
available,  or raise additional funds. Our failure to repay the callable secured
convertible  notes, if required,  could result in legal action against us, which
could require the sale of substantial assets.


<PAGE>
                                      -33-


On February 25, 2005, we entered into a Security  Purchase  Agreement  involving
the sale of an  aggregate of  $5,100,000  principal  amount of callable  secured
convertible  notes and stock purchase  warrants to buy 10,200,000  shares of our
common stock. The callable secured  convertible notes are due and payable,  with
10% interest,  three years from the date of issuance,  unless  sooner  converted
into shares of our common stock.  Although we currently have $3,400,000 callable
secured  convertible  notes  outstanding,  the investor is obligated to purchase
additional  callable  secured  convertible  notes  in the  aggregate  amount  of
$1,700,000.  In addition,  any event of default such as our failure to repay the
principal or interest when due, our failure to issue shares of common stock upon
conversion by the holder, our failure to timely file a registration statement or
have such registration  statement  declared  effective,  breach of any covenant,
representation  or  warranty in the  Securities  Purchase  Agreement  or related
convertible  note,  the  assignment  or  appointment  of a receiver to control a
substantial  part of our property or business,  the filing of a money  judgment,
writ or similar process against us in excess of $100,000,  the commencement of a
bankruptcy, insolvency,  reorganization or liquidation proceeding against us and
the  delisting  of our common  stock could  require the early  repayment  of the
callable secured convertible notes,  including a default interest rate of 15% on
the  outstanding  principal  balance  of the notes if the  default  is not cured
within the  specified  grace period.  We anticipate  that the full amount of the
callable secured  convertible  notes will be converted into shares of our common
stock, in accordance with the terms of the callable secured  convertible  notes.
If we are required to repay the callable secured  convertible notes, we would be
required to use our limited  working capital and raise  additional  funds. If we
were unable to repay the notes when  required,  the note holders could  commence
legal  action  against us and  foreclose  on all of our  assets to  recover  the
amounts due. Any such action would require us to curtail or cease operations.

Risks related to our common stock

There is no assurance  of an  established  public  trading  market,  which would
adversely  affect  the  ability  of  investors  in our  company  to  sell  their
securities in the public markets.

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

      o     the issuance of new equity securities;

      o     changes in interest rates;

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

      o     variations in quarterly operating results;

      o     change in financial estimates by securities analysts;

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

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

      o     general economic and other national conditions.


<PAGE>
                                      -34-


The limited prior public market and trading  market may cause  volatility in the
market price of our common stock.

Our common stock is currently  traded on a limited  basis on the OTCBB under the
symbol  "VRDI." The  quotation  of our common stock on the OTCBB does not assure
that a meaningful, consistent and liquid trading market currently exists, and in
recent years such market has experienced  extreme price and volume  fluctuations
that have particularly affected the market prices of many smaller companies like
us. Our common stock is thus subject to volatility.  In the absence of an active
trading market:

      o     investors may have difficulty buying and selling or obtaining market
            quotations;

      o     market visibility for our common stock may be limited; and

      o     a lack of  visibility  for our  common  stock may have a  depressive
            effect on the market for our common stock.

Our common stock could be considered a "penny stock."

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

Broker-dealer requirements may affect trading and liquidity.

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

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

Shares  eligible  for future sale may  adversely  affect the market price of our
common stock, as the future sale of a substantial amount of our restricted stock
in the public marketplace could reduce the price of our common stock.


<PAGE>
                                      -35-


From time to time,  certain of our  stockholders  may be eligible to sell all or
some of their shares of common stock by means of ordinary brokerage transactions
in the open market  pursuant to Rule 144,  promulgated  under the Securities Act
("Rule 144"), subject to certain limitations.  In general, pursuant to Rule 144,
a stockholder (or stockholders  whose shares are aggregated) who has satisfied a
one-year  holding  period  may,  under  certain  circumstances,  sell within any
three-month  period a number of securities  which does not exceed the greater of
1% of the then outstanding  shares of common stock or the average weekly trading
volume of the class during the four calendar weeks prior to such sale.  Rule 144
also permits, under certain circumstances,  the sale of securities,  without any
limitations,  by a  non-affiliate  of our company that has  satisfied a two-year
holding period. In addition, we completed the first of three rounds of a private
placement  in February  2005,  whereby we granted the  investors  in the private
placement certain registration rights with respect to the shares of common stock
underlying  their  securities.  Any substantial sale of common stock pursuant to
Rule 144 or pursuant to any resale  prospectus may have an adverse effect on the
market price of our securities.

Certain provisions of our Certificate of Incorporation and Delaware law may make
it more difficult for a third party to effect a change-in-control.

Our Certificate of  Incorporation  authorizes the Board of Directors to issue up
to 2,000,000 shares of preferred stock. The preferred stock may be issued in one
or more series,  the terms of which may be determined at the time of issuance by
the Board of Directors without further action by the  stockholders.  These terms
may include voting rights  including the right to vote as a series on particular
matters,  preferences  as  to  dividends  and  liquidation,  conversion  rights,
redemption  rights and sinking fund  provisions.  The issuance of any  preferred
stock could  diminish the rights of holders of our common  stock,  and therefore
could  reduce the value of such  common  stock.  In  addition,  specific  rights
granted to future  holders of  preferred  stock  could be used to  restrict  our
ability to merge  with,  or sell  assets to, a third  party.  The ability of the
Board of Directors to issue preferred stock could make it more difficult, delay,
discourage,   prevent   or  make  it  more   costly  to   acquire  or  effect  a
change-in-control.

In  addition,  we are  also  subject  to  Section  203 of the  Delaware  General
Corporation  Law that,  subject  to  certain  exceptions,  prohibits  a Delaware
corporation  from  engaging  in any  business  combination  with any  interested
stockholder  for a period of three years following the date that the stockholder
became an interested stockholder. The preceding provisions of our Certificate of
Incorporation,  as well as Section 203 of the Delaware General  Corporation Law,
could  discourage   potential   acquisition   proposals,   delay  or  prevent  a
change-in-control  and prevent  changes in our  management,  even if such things
would be in the best interests of our stockholders.

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Evaluation  of  Disclosure  Controls and  Procedures.  As of June 30, 2005,  the
Company's  management  carried out an evaluation,  under the  supervision of the
Company's  Chief  Executive  Officer  and the Chief  Financial  Officer,  of the
effectiveness  of the design and operation of the Company's system of disclosure
controls  and  procedures  pursuant to the  Securities  and  Exchange Act , Rule
13a-15(d) and 15d-15(d) under the Exchange Act. Based upon that evaluation,  the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure  controls  and  procedures  were  effective,  as of the date of their
evaluation,  for the purposes of recording,  processing,  summarizing and timely
reporting material  information required to be disclosed in reports filed by the
Company under the Securities Exchange Act of 1934.



<PAGE>
                                      -36-


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) of Rule
13a-15 or 15d-15 under the Exchange Act that  occurred  during the quarter ended
June  30,  2005  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, our internal control over financial reporting.


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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 and November  2003  amounting to a total of $111,651.
The Company has accrued for this  liability in its  financial  statements  as at
June 30, 2005.

On March 21, 2005 one of the  claimants  signed a letter of agreement to convert
his claim of $ 61,054 into stock based on the closing  price of our common stock
on that day of $2.40 per  share,  or a total of  25,439  shares  for his  entire
claim.  However,  this  settlement is subject to obtaining  certain  waivers and
documents from the holders of our Callable Secured Convertible Notes.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During  the  period  ended  June  30,  2005,  we  issued  the  following  equity
securities:

<TABLE>
<CAPTION>
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
             Name                    Title of Securities         Date of Sale      Amount of Securities      Consideration
                                                                                           Sold
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
<S>                              <C>                          <C>                 <C>
AJW Offshore,                    Callable Secured             February, 2005      Principal of $450,000   $450,000 cash
Ltd.                             Convertible Notes and                            and 900,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
AJW Qualified Partners, LLC      Callable Secured             February, 2005      Principal of $390,000   $390,000 cash
                                 Convertible Notes and                            and 780,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
AJW Partners, LLC                Callable Secured             February, 2005      Principal of $140,000   $140,000 cash
                                 Convertible Notes and                            and 280,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
New Millennium Capital           Callable Secured             February, 2005      Principal of $20,000    $20,000 cash
Partners II, LLC                 Convertible Notes and                            and 40,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
</TABLE>

<PAGE>
                                      -37-

<TABLE>
<CAPTION>

-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
<S>                              <C>                          <C>                 <C>
Alpha Capital                    Callable Secured             February, 2005      Principal of $200,000   $200,000 cash
                                 Convertible Notes and                            and 400,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Enable Growth Partners,          Callable Secured             February, 2005      Principal of $100,000   $100,000 cash
L.P.                             Convertible Notes and                            and 200,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Whalehaven Capital Fund Limited  Callable Secured             February, 2005      Principal of $200,000   $200,000 cash
                                 Convertible Notes and                            and 400,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Meadowbrook Opportunity Fund     Callable Secured             February, 2005      Principal of $120,000   $120,000 cash
LLC                              Convertible Notes and                            and 240,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
TCMP3 Partners                   Callable Secured             February, 2005      Principal of $80,000    $80,000 cash
                                 Convertible Notes and                            and 160,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Philip Benanti                   Common Stock Purchase        February, 2005      38,829 shares           For services
                                 Warrants                                                                 provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
GunnAllen Financial              Common Stock Purchase        February, 2005      16,567                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Joseph Stevens & Co., Inc.       Common Stock Purchase        February, 2005      77,657                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Michele Markowitz                Common Stock Purchase        February, 2005      10,400                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Fabio Migliaccio                 Common Stock Purchase        February, 2005      4,005                   For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Patricia Sorbara                 Common Stock Purchase        February, 2005      10,400                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Anthony St. Clair                Common Stock Purchase        February, 2005      38,829                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Anthony Varbero                  Common Stock Purchase        February, 2005      10,400                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Sichenzia Ross Friedman          Common Stock                 April, 2005         50,000 shares           For legal services
Ference LLP                                                                                               provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
</TABLE>

<PAGE>
                                      -38-

<TABLE>
<CAPTION>
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
<S>                              <C>                          <C>                 <C>
AJW Offshore,                    Callable Secured             April, 2005         Principal of $450,000   $450,000 cash
Ltd.                             Convertible Notes and                            and 900,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
AJW Qualified Partners, LLC      Callable Secured             April, 2005         Principal of $390,000   $390,000 cash
                                 Convertible Notes and                            and 780,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
AJW Partners, LLC                Callable Secured             April, 2005         Principal of $140,000   $140,000 cash
                                 Convertible Notes and                            and 280,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
New Millennium Capital           Callable Secured             April, 2005         Principal of $20,000    $20,000 cash
Partners II, LLC                 Convertible Notes and                            and 40,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Alpha Capital                    Callable Secured             April, 2005         Principal of $200,000   $200,000 cash
                                 Convertible Notes and                            and 400,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Enable Growth Partners,          Callable Secured             April, 2005         Principal of $100,000   $100,000 cash
L.P.                             Convertible Notes and                            and 200,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Whalehaven Capital Fund Limited  Callable Secured             April, 2005         Principal of $200,000   $200,000 cash
                                 Convertible Notes and                            and 400,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Meadowbrook Opportunity Fund     Callable Secured             April, 2005         Principal of $120,000   $120,000 cash
LLC                              Convertible Notes and                            and 240,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
TCMP3 Partners                   Callable Secured             April, 2005         Principal of $80,000    $80,000 cash
                                 Convertible Notes and                            and 160,000 shares
                                 Common Stock Purchase
                                 Warrants
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Philip Benanti                   Common Stock Purchase        April, 2005         38,829 shares           For services
                                 Warrants                                                                 provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
GunnAllen Financial              Common Stock Purchase        April, 2005         16,567                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Joseph Stevens & Co., Inc.       Common Stock Purchase        April, 2005         77,657                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Michele Markowitz                Common Stock Purchase        April, 2005         10,400                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Fabio Migliaccio                 Common Stock Purchase        April, 2005         4,005                   For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Patricia Sorbara                 Common Stock Purchase        April, 2005         10,400                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Anthony St. Clair                Common Stock Purchase        April, 2005         38,829                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
Anthony Varbero                  Common Stock Purchase        April, 2005         10,400                  For services
                                 Warrants                                         shares                  provided to the
                                                                                                          Registrant
-------------------------------- ---------------------------- ------------------- ----------------------- ---------------------
</TABLE>

<PAGE>
                                      -39-


All of the above offerings and sales were deemed to be exempt under Section 4(2)
of  the  Securities  Act  of  1933,  as  amended.   No  advertising  or  general
solicitation  was employed in offering the  securities.  The offerings and sales
were made to a limited number of persons, all of whom were accredited investors,
business  associates  of our company or executive  officers of our company,  and
transfer was restricted by our company in accordance  with the  requirements  of
the   Securities   Act  of  1933.   In  addition  to   representations   by  the
above-referenced  persons,  we have made independent  determinations that all of
the  above-referenced  persons were accredited or sophisticated  investors,  and
that they were  capable of analyzing  the merits and risks of their  investment,
and  that  they   understood  the  speculative   nature  of  their   investment.
Furthermore,  all of the  above-referenced  persons were provided with access to
our Securities and Exchange Commission filings.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

On June 17, 2005,  the Company held its annual  meeting of  shareholders  in Las
Vegas, Nevada. The Company's shareholders voted on the following two items:

      o     The Company's  shareholders  elected Paul Mann,  Saif Mansour,  Bill
            Cheung,  Jeremy  Coles and  Shannon  McCallum as  directors  to hold
            office until their successors are elected and qualified.

      o     The  Company's  shareholders  did not ratify the Board of Directors'
            selection  of AJ  Robbins,  PC  as  Veridicom's  independent  public
            accountants.

ITEM 5. OTHER INFORMATION

None


<PAGE>
                                      -40-


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.

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

32.2  Certification  of 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.

<PAGE>
                                      -41-


                                   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

         VERIDICOM INTERNATIONAL, INC.

         Date: August 12, 2005

                               /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)