--------------------------------------------------------------------------------
                       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 fiscal Quarter ended March 31, 2004

                         Commission File No.: 000-050469



                              VERIDIUM CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


Delaware                                                            59-3764931
--------------------------------------------------------------------------------
(State of other jurisdiction of                                  (IRS Employer
incorporation or organization)                               Identification No.)


1 JASPER STREET, PATERSON, NEW JERSEY                                 07522
--------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)


                                 (973) 942-7700
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)





Check mark  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter  period that the registrant as required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes X No __.



The  number of  outstanding  shares of  common  stock as of March 31,  2004 was:
24,685,510.  Based on the average closing bid and ask price of the  Registrant's
common  stock,   the  aggregate  market  value  of  the  voting  stock  held  by
non-affiliates of the Registrant as of March 31, 2004 was $10,861,624.



Transitional Small Business Disclosure Format:  Yes         No  X .
                                                    -----      ---











<PAGE>

<TABLE>


                              VERIDIUM CORPORATION
                         QUARTERLY REPORT ON FORM 10QSB
                   FOR THE FISCAL QUARTER ENDED MARCH 31, 2004

                                Table of Contents
<CAPTION>


                                                                                                           Page No
<S>               <C>                                                                                         <C>
Part I            Financial Information
Item 1.           Financial Statements (unaudited)............................................................3
                  Consolidated Balance Sheets - March 31, 2004
                    and December 31, 2003.....................................................................4
                  Consolidated Statements of Operations -
                    Three Months Ended March 31, 2004 and 2003................................................5
                  Consolidated Statements of Cash Flows -
                    Three Months Ended March 31, 2004 and 2003................................................6
                  Notes to Consolidated Financial Statements..................................................7
Item 2.           Management's Discussion and Analysis or Plan of Operation..................................13
Item 3.           Controls and Procedures....................................................................18

Part II           Other Information
Item 1.           Legal Proceedings..........................................................................19
Item 2.           Changes in Securities......................................................................19
Item 3.           Defaults Upon Senior Securities............................................................19
Item 4.           Submission of Matters to a Vote of Security Holders........................................19
Item 5.           Other Information..........................................................................19
Item 6.           Exhibits and Reports on Form 8K............................................................19

Signatures                                                                                                   20

</TABLE>


<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)




<PAGE>

<TABLE>


                      VERIDIUM CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 2004 AND DECEMBER 31, 2003

<CAPTION>
                                                               3/31/04           12/31/03
                                                             (unaudited)
                                                             ----------------------------
ASSETS:
Current assets:
<S>                                                          <C>             <C>
   Cash ..................................................   $    474,742    $     89,392
   Accounts receivable, net ..............................      2,322,784       1,970,332
   Inventories ...........................................          5,369           7,634
Prepaid expenses and other current assets ................        173,937         104,303
                                                             ------------    ------------
       Total current assets ..............................      2,976,831       2,171,661

Property and equipment, net ..............................      3,687,057       3,770,379

Other Assets:
   Deposits ..............................................        123,102         123,102
   Patents and technologies, net .........................      3,135,598       3,173,336
Deferred financing costs, net ............................        851,605            --
   Permits, net ..........................................        311,166         315,609
   Goodwill ..............................................      6,275,040       6,275,040
                                                             ------------    ------------
       Total other assets ................................     10,696,511       9,887,087
                                                             ------------    ------------

TOTAL ASSETS .............................................   $ 17,360,399    $ 15,829,127
                                                             ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Short term borrowings .................................   $    576,002    $     75,000
   Accounts payable ......................................      2,055,210       2,735,106
   Accrued expenses ......................................      1,040,093       1,256,444
   Current maturities of long-term debt ..................        169,985         173,162
   Current portion of convertible debentures .............        759,000       2,712,000
   Current portion of obligations under capital lease ....        205,555         191,461
                                                             ------------    ------------
       Total current liabilities .........................      4,805,845       7,143,173

Long-term debt, net of current maturities ................        258,181         370,883
Convertible debentures, net of current portion ...........      5,481,566       2,701,065
Obligations under capital lease, net of current maturities         93,844         123,424
Other liabilities ........................................         18,485          18,485
                                                             ------------    ------------
       Total long term liabilities: ......................      5,852,076       3,213,857

       Total liabilities: ................................     10,657,921      10,357,030

Minority interest in consolidated subsidiary .............        925,000         925,000

Commitments and contingencies ............................           --              --

Stockholders' equity:
   Preferred stock, $0.001 par value:
     Series A: authorized 1,881,366 shares;
       1,881,366 shares issued and outstanding ...........          1,881           1,881
     Series B: authorized 945,992 shares;
       945,992 shares issued and outstanding .............            946             946

   Common stock, $0.001 par value, 50,000,000
     authorized; 24,685,510 and 23,379,916 shares
     issued for 2004 and 2003, respectively ..............         24,842          23,380

   Additional paid-in capital ............................     32,584,869      31,505,431
   Accumulated deficit ...................................    (26,771,706)    (26,971,713)
   Treasury stock at cost, 131,266 and
     5,000 shares of common stock, respectively ..........        (63,354)        (12,828)
                                                             ------------    ------------
       Total stockholders' equity ........................      5,777,478       4,547,097
                                                             ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...............   $ 17,360,399    $ 15,829,127
                                                             ============    ============
<FN>
 The notes to the Consolidated Financial Statements are anintegral part of these statements.
</FN>
</TABLE>


<PAGE>

<TABLE>


                      VERIDIUM CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
         FOR THE THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED) AND 2003 (UNAUDITED)
<CAPTION>
                                                                    3/31/04          3/31/03
                                                                 ----------------------------
<S>                                                              <C>             <C>
Revenues .....................................................   $  3,101,191    $  1,010,694
   Cost of revenues ..........................................      2,296,084         815,356
                                                                 ------------    ------------
     Gross profit ............................................        805,107         195,338

Operating expenses:
   Selling expenses ..........................................        247,043         117,616
   General and administrative expenses .......................        469,976         362,136
                                                                 ------------    ------------
Total operating expenses .....................................        717,019         479,752
                                                                 ------------    ------------

Operating income (loss) ......................................         88,088        (284,414)

Other income (expense):
   Forgiveness of interest and finance charges ...............        339,280            --
   Interest expense ..........................................       (226,199)        (42,846)
                                                                 ------------    ------------
     Total other income (expense), net .......................        113,081         (42,846)
                                                                 ------------    ------------

Income (loss) before provision for income taxes ..............        201,169        (327,260)
   Provision for income taxes (net of benefit or net operating
   loss carry-forwards of about $80,000) .....................         (1,162)           (200)
                                                                 ------------    ------------

Net income (loss) ............................................   $    200,007    $   (327,460)
                                                                 ============    ============

Basic earnings (loss) attributable to common shareholders ....   $       0.01    $      (0.84)
                                                                 ============    ============

Diluted earnings (loss) attributable to common shareholders ..   $       0.01    $       --
                                                                 ============    ============

Weighted average shares of common stock outstanding ..........     23,383,921       6,493,333
                                                                 ============    ============

Weighted average shares of common stock outstanding
   plus potentially dilutive common shares ...................     29,121,679            --
                                                                 ============    ============


<FN>
The notes to the Consolidated Financial Statements are an integral part of these statements.
</FN>
</TABLE>








<PAGE>
<TABLE>
                      VERIDIUM CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
   FOR THE THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED) AND 2003 (UNAUDITED)

<CAPTION>
                                                                              3/31/04       3/31/03
                                                                            -------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                          <C>          <C>
Net income (loss) ........................................................   $ 200,007    $(327,460)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
   Non-cash operating expenses provided by officers ......................        --         90,306
   Depreciation and amortization .........................................     125,543       30,801
   Equity issued in exchange for services rendered .......................        --         93,526
   Provision for doubtful accounts .......................................     (22,883)      12,115
   Interest paid directly from lender ....................................      37,917         --
   Changes in assets and liabilities, net of acquisitions
     Accounts receivable .................................................     152,965      (60,978)
Other receivables ........................................................        --         69,102
     Prepaid expenses and other current assets ...........................     (50,463)     (89,737)
     Accounts payable ....................................................     (76,082)      35,161
Accrued expenses .........................................................    (236,351)        --
                                                                             ---------    ---------

       Net cash provided by (used in) operating activities ...............     130,653     (147,164)
                                                                             ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES

   Acquisition of  businesses, net of cash acquired ......................        --         (2,153)
   Change in deposits ....................................................        --         99,325
   Additions to and acquisition of property, plant and equipment .........        --       (224,379)
                                                                             ---------    ---------

       Net used in investing activities ..................................        --       (127,207)
                                                                             ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES

   Reduction in factoring of accounts  receivable ........................     (11,772)        --
   Issuance of (repayment of) short-term borrowings ......................    (102,812)        --
   Issuance of (repayment of) current maturities of long-term debt, net ..     (45,828)        --
   Proceeds from (repayment of) officer  loans, net ......................        --        342,623
   Proceeds from long-term convertible debentures ........................     492,000        2,157
   Increase in note payable bank .........................................        --             78
   Proceeds from sale of common stock ....................................       5,000         --
   Proceeds from the exercise of stock options and purchase of stock, net         --         64,000
   Purchase of treasury stock ............................................     (50,526)        --
   Repayment of obligations under capital leases .........................     (31,365)     (29,966)
   Deferred financing costs incurred .....................................        --        (46,585)
                                                                             ---------    ---------

       Net cash provided by financing activities .........................     254,697      332,307
                                                                             ---------    ---------

Increase (decrease) in cash ..............................................     385,350       57,936

Cash at beginning of period ..............................................      89,392          721
                                                                             ---------    ---------

Cash at end of period ....................................................   $ 474,742    $  58,657
                                                                             =========    =========

Supplemental disclosure of non-cash investing and financing activities:
   Equity issued for deferred financing costs ............................   $  82,500    $    --
   Payment of Subordinate Loan with common stock .........................     504,171         --
   Payment of Subordinate Loan with proceeds of Laurus Financing .........     500,000         --
   Payment of CCS Debenture with proceeds of Laurus Financing ............     250,000         --
   Payment of Term Financing with proceeds of Laurus Financing ...........     100,000         --
   Payment of Accounts-Receivable Factor with proceeds of Laurus Financing     470,762         --
   Prepaid expenses paid with proceeds of Laurus Financing ...............      16,945         --
   Deferred financing costs paid with proceeds of Laurus Financing .......     279,876         --
   Issuance of warrants for deferred financing costs .....................     489,229         --
   Settlement of accounts payable with short term notes ..................     603,814         --


<FN>
The notes to the Consolidated Financial Statements are an integral part of these statements.
</FN>
</TABLE>







<PAGE>
                      VERIDIUM CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1        BASIS OF PRESENTATION

The consolidated interim financial statements included herein have been prepared
by the Company,  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission  with  regard to  Regulation  S-B and,  in the  opinion  of
management, include all adjustments which, except as described elsewhere herein,
are of a normal  recurring  nature,  necessary  for a fair  presentation  of the
financial  position,  results  of  operations,  and cash  flows for the  periods
presented.  The results for interim  periods are not  necessarily  indicative of
results for the entire year. The financial statements presented herein should be
read in  connection  with the  financial  statements  included in the  Company's
Annual Report on Form 10-KSB for the year ended December 31, 2003.

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United  States of  America  requires  the  Company's
management  to make certain  estimates  and  assumptions.  These  estimates  and
assumptions affect the reported amounts of assets and liabilities and disclosure
of  the  contingent  assets  and  liabilities  at  the  date  of  the  financial
statements.  These  estimates  and  assumptions  will also  affect the  reported
amounts of certain  revenues and expenses  during the reporting  period.  Actual
results  could  differ  materially  based on any  changes in the  estimates  and
assumptions that the Company uses in the preparation of its financial statements
that are reviewed no less than annually.  Actual results could differ materially
from these  estimates and  assumptions  due to changes in  environmental-related
regulations or future operational plans, and the inherent imprecision associated
with estimating such future matters.  See "Management's  Discussion and Analysis
of Financial Condition and Results of Operations" in this report.

2        CERTAIN ACCOUNTING POLICIES

References  to the  "FASB",  "SFAS"  and "SAB"  herein  refer to the  "Financial
Accounting Standards Board," "Statements of Financial Accounting Standards," and
the "SEC Staff Accounting Bulletin," respectively.

New Accounting Pronouncements

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal Activities".  SFAS 146 requires recording costs associated
with exit or disposal  activities at their fair values when a liability has been
incurred.  Under  previous  guidance,  certain  exit  costs  were  accrued  upon
management's  commitment  to an exit plan,  which is generally  before an actual
liability has been incurred. Adoption of SFAS 146 is required with the beginning
of fiscal year 2003.  The adoption of this  statement did not have a significant
impact on the Company's results of operations.

In November 2002, the FASB issued FASB Interpretation,  FIN No. 45, "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness  of Others".  FIN No. 45 addresses the disclosures to
be made by a guarantor in its interim and annual financial  statements about its
obligations  under  certain  guarantees  that is has  issued.  Under FIN No. 45,
recognition and initial  measurement  provisions are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002,  irrespective of
the  guarantor's  fiscal  year end.  The  adoption  of FIN No. 45 did not have a
significant impact on the Company's  consolidated  financial position or results
of operations.

In  December  2003,  the FASB  revised  FIN No. 46,  "Consolidation  of Variable
Interest  Entities".  FIN 46 clarifies  Accounting  Research Bulletin No. 51 for
certain entities for which equity investors do not have the characteristics of a
controlling  financial interest or do not have sufficient equity at risk for the
entity to finance  its  activities  without  additional  subordinated  financial
support from other parties.  The Company would currently be required to meet the
disclosure  requirements  of  this  pronouncement.   However,  the  Company  has
determined  that it does not have a significant  interest in such entities based
on its analysis and assessment.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristics  of both Liability and Equity".  SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial instruments with characteristics of both liability and equity. It also
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some  circumstances).  Many of those  instruments
were  previously  classified as equity.  SFAS No. 150 is effective for financial
instruments  entered  into or modified  after May 15,  2003,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003,  except  for  mandatory  redeemable  financial  instruments  of  nonpublic
entities.  It is to be implemented by reporting a cumulative  effect of a change
in an accounting principle of financial  instruments created before the issuance
date of the Statement and still  existing at the beginning of the interim period
of adoption.  Restatement is not permitted. The adoption of SFAS No. 150 did not
have any significant impact on the Company's  consolidated financial position or
results of operations.


<PAGE>
                      VERIDIUM CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3        CERTAIN ACCOUNTING POLICIES (continued)

STOCK BASED COMPENSATION

In  December  2002 the FASB issued SFAS No.  148,  "Accounting  for  Stock-Based
Compensation-Transition  and  Disclosure."  SFAS No.  148 amends  SFAS No.  123,
"Accounting for  Stock-Based  Compensation."  SFAS No. 148 provides  alternative
methods of transition  for a voluntary  change to the fair value based method of
accounting for  stock-based  employee  compensation.  In addition,  SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require more prominent and
more  frequent  disclosure  in financial  statements  about the effects of stock
based compensation.  The other provisions of SFAS No. 148 are not expected to be
applicable to the Company as the Company has not expressed  intent to change its
accounting for stock-based compensation.

SFAS No. 123  established  accounting and disclosure  requirements  using a fair
value-based method of accounting for stock-based employee compensation plans. As
allowed by SFAS No.  123,  the  Company  has  elected to  continue  to apply the
intrinsic value-based method of accounting described above, and has adopted only
the disclosure requirement of SFAS No. 123 for employee issued options. No stock
option based  employee  compensation  costs are  reflected in the  Company's net
loss, as all options  granted had an exercise price equal to or greater than the
market value of the Company's  underlying common stock at the date of grant. Had
the Company  elected to recognize  compensation  cost based on fair value of the
stock and stock  options at the date of grant  under SFAS 123,  such costs would
have  been  recognized  ratably  over  the  service  period  of  the  underlying
instrument  and the  Company's net loss and net loss per common share would have
decreased to the amounts indicated in the table below (which are not intended to
be indicative of or a projection of future results):
<TABLE>
<CAPTION>
                                                                       3/31/04    3/31/03
                                                                    -----------------------
<S>                                                                 <C>          <C>
Net income (loss) ...............................................   $  205,007   $(327,460)

Less: stock based employee compensation expense determined
under the fair value method for all awards ......................         --       (17,130)
                                                                    ----------   ---------

Pro forma net income (loss) .....................................   $  205,007   $(344,590)
                                                                    ==========   =========

Basic and diluted net income (loss) per common share, as reported   $     0.01   $    --
                                                                    ==========   =========

Pro forma basic and diluted net income (loss) per common share ..   $     0.01   $    --
                                                                    ==========   =========
</TABLE>

RECLASSIFICATIONS

Certain amounts reported in the 2003 consolidated financial statements have been
reclassified to conform to the 2004 presentation.

SEGMENT INFORMATION

The Company operates in a single segment as a full service provider of
environmental services within the United States of America.

GOODWILL AND INTANGIBLE ASSETS

The Company accounts for its goodwill and intangible assets pursuant to SFAS No.
142,  Goodwill and Other  Intangible  Assets.  Under SFAS 142,  intangibles with
definite lives continue to be amortized on a straight-line basis over the lesser
of their estimated useful lives or contractual  terms.  Goodwill and intangibles
with  indefinite  lives  are  evaluated  at least  annually  for  impairment  by
comparing the asset's  estimated  fair value with its carrying  value,  based on
cash flow methodology.

Intangibles  with  definitive  lives  consist  primarily of patents,  which have
useful  lives and are  subject  to  impairment  testing  in the event or certain
indicators.  An  impairment  in the  carrying  value of an  asset is  recognized
whenever  anticipated  future  cash  flows  (undiscounted)  from  an  asset  are
estimated  to be less than its  carrying  value.  The  amount of the  impairment
recognized  is the  difference  between the carrying  value of the asset and its
fair value.

4        RELATED PARTY TRANSACTIONS

The Company utilizes the services of Candent Corporation  (formerly  Cyngularity
Corporation),  for  development  and  administration  of its various  management
information  systems.  Candent is  majority-owned  by the  Company's  Chairman's
spouse.  Such services  approximated  $12,000 for the fiscal quarter ended March
31, 2004.

<PAGE>



                      VERIDIUM CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4        RELATED PARTY TRANSACTIONS (continued)

During the first quarter 2003, the Company  borrowed  $267,500 from an immediate
family  member of the Chairman at an interest rate of 2% per year and an initial
stated  term of 5 years,  $42,000  from  officers  for general  working  capital
purposes,  and $50,000 from its former CFO (see Note 5, Financing  Arrangements,
below).

5        FINANCING ARRANGEMENTS

The following is a summary of the Company's  financing  arrangements as of March
31, 2004 and December 31, 2003:
<TABLE>
<CAPTION>

                                                                               3/31/04           12/31/03
                                                                          -----------------------------------
Short-term borrowings
<S>                                                                       <C>                 <C>
   Line of credit                                                         $      75,000       $     75,000
   Term financing                                                               501,002                 --
                                                                          -------------       ------------
     Total short-term borrowings                                          $     576,002       $     75,000

Current maturities of long-term debt:
   Term financing                                                               100,000            100,000
   Vehicle loans and other current obligations                                   69,985             73,162
                                                                          -------------       ------------
     Total current maturities of long-term debt                           $     169,985       $    173,162

Current portion of convertible debentures:
   AMRC debentures, 10% convertible debentures, currently due                   159,000            159,000
   CCS debenture, 12% convertible debentures, due May and July 2004             600,000            850,000
   Senior loan, variable interest rate convertible debenture                         --          1,203,000
   Subordinate loan, 12% convertible debentures                                      --            500,000
                                                                          -------------       ------------
     Total current portion of convertible  debentures                     $     759,000       $  2,712,000

Long-term debt:
   Term financing                                                               100,000            200,000
   Vehicle loans and other current obligations                                  158,181            170,883
                                                                          -------------       ------------
     Total long-term debt, net of current maturities                      $     258,181       $    370,883

Convertible debt, net of current portion:
   Laurus financing, 9% convertible debenture, due March 2007                 1,750,000                 --
   Senior loan, 10% rate convertible debenture, due March 2007                1,000,000                 --
   GCS debenture, 10% convertible debenture, due December 2008                1,184,066          1,184,065
   Subordinate loan, 12% convertible debenture, due December 2008             1,547,500          1,517,000
                                                                          -------------       ------------
     Total current maturities of long-term debt                           $   5,481,566       $  2,701,065
</TABLE>


The following chart is presented to assist the reader in analyzing the Company's
ability to fulfill its fixed debt service  requirements as of March 31, 2004 and
the Company's ability to meet such obligations:
<TABLE>
<CAPTION>
Year                                                                              Amount

<C>                                                                       <C>
2004                                                                      $   1,504,987
2005                                                                            158,781
2006                                                                             77,385
2007                                                                          2,771,556
2008                                                                          2,732,025
                                                                          -------------

Total minimum payments due under current and long-term obligations        $   7,244,734
                                                                          =============
</TABLE>







<PAGE>




                      VERIDIUM CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5        FINANCING ARRANGEMENTS

SHORT TERM BORROWINGS

The Company has a variable interest rate, (6% at March 31, 2004), line of credit
with a bank,  which has an outstanding  balance of $75,000 as of March 31, 2004,
representing  the entire line.  The line  matured on January 31,  2004,  and the
Company is currently renegotiating the terms of this facility.

TERM FINANCING

During the first  quarter 2004,  the Company  entered into a number of unsecured
term  facilities with trade vendors for outstanding  accounts  payable  totaling
about $0.5 million with a maturity date of December 31, 2004, about $0.3 million
of which  bears  interest at 6% per year.  The Company has certain  non-interest
bearing term  financing  totaling  $200,000,  payable in two equal  installments
March 2005 and 2006. This obligation is secured by a first mortgage  interest in
the Company's Massachusetts property.

AMRC DEBENTURES

These  instruments,  executed in December 2002 through  December  2003,  are 10%
convertible  debentures  that  are due on the  first  anniversary  of each  such
debenture.  The debentures are generally  convertible at $1.00 per common share,
with default provisions entitling the holder to penalty shares for the amount in
default at $0.20 per share.  One of these  debentures due in January 2004 in the
initial  amount of  $50,000  is to the  Company's  former  CFO.  The  Company is
currently in default of this debenture.

CCS DEBENTURES

In May 2003,  the  Company  issued  $0.85  million  in  subordinate  convertible
debentures  to  three  institutional  investors  (the  "CCS  Debenture").  These
debentures  bear interest at 12% per year and are secured by the  chairman's and
certain related  parties'  common stock.  The principal of the debenture and all
accrued interest are convertible into common stock of the Company at the rate of
$0.60 per share.  During  2003,  the  Company  was in default on this debt under
various  provisions of the  agreement.  As a result,  the Company had accrued an
increase  in the  additional  interest  rate  to 25%  per  annum  and  penalties
aggregating  4% per  month  from the  date of the  corresponding  default  as of
December 31, 2003,  which penalties were waived in March 2004 in connection with
the  completion of the Laurus  Financing.  $0.25 million of the principal of the
CCS  Debentures  were  redeemed in  connection  with the Laurus  Financing  (see
below).  The Company  recognized a gain of  approximately  $0.19  million on the
forgiveness of penalties.

SENIOR LOAN

On December 19, 2003, the Company closed on the first  installment of the Senior
Loan with GCS Investments,  LLC ("GCS"). The Senior Loan is structured as a term
loan with a principal  of $1.5 million  that  matures and renews  annually,  and
bears  interest at 10% per year.  Payments are of interest  only and are payable
monthly.  The Senior Loan is secured by a priority position on substantially all
of the Company's  assets.  Conditions  precedent of this financing  included the
conversion  of the majority of the  Company's  pre-consolidation  debt and other
liabilities  into various forms of equity,  including all obligations due to the
Company's  officers and its related  parties for loans  extended to the Company,
deferred salaries, price-protection agreements in relation to previous loans and
deferred  salaries  and any  other  and  all  liabilities  due to the  Company's
officers and related parties. Additionally required were a cash-based management
contribution, the unconditional personal guarantee of the Company's chairman and
the  conversion  by GCS'  affiliate  of  $1.184  million  in debt  into  the GCS
Debenture (see below).  The Senior Loan is convertible  into common stock of the
Company at 100% of market at the time of any such  conversion.  GCS additionally
received detachable warrants to purchase 500,000 shares of common stock that are
exercisable  at $0.40 per share and expire on  December  19,  2008.  The Company
received $1.2 million of the funds under the Senior Loan in 2003 and the balance
of $0.3 million in January 2004. GCS additionally  received  detachable warrants
to purchase  500,000  shares of common stock that are  exercisable  at $0.40 per
share and expire on  December  19,  2008.  The Senior  Loan was  decreased  to a
principal  balance of $1.0 million in March 2004 in  connection  with the Laurus
Financing  (see below).  GCS entered  into a  subordination  agreement  with the
Laurus Funds in connection with the completion of the Laurus Financing.







<PAGE>




                      VERIDIUM CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5        FINANCING ARRANGEMENTS (continued)

GCS DEBENTURE

In December 2003, and in connection  with the  requirements  of the Senior Loan,
GCS'  affiliates  converted  $1.184 million in debt into  convertible  preferred
securities of the Company (the "GCS  Debenture").  This instrument is to be paid
at a rate equal to 2% of the  Company's  gross  annual  revenue  on a  quarterly
basis, provided that such payments,  together with the interest payments paid to
GCS on the Senior Loan, do not exceed 30% of the Company's EBITDA for such year.
These  payments  shall continue to be made until the sum of all such payments is
equal to $1.184  million,  at which  time  this  instrument  will  automatically
convert into 30,000 shares of Subsidiary Preferred.

SUBORDINATE LOAN

The Company  entered into an agreement to purchase their  obligations  due under
the notes issued in connection with the purchase of the  Environmental  Services
Division of R.M. Jones & Co., Inc.  ("Jones") with a principal balance of $2.017
million in exchange  for 1.25 million  shares of common stock and $0.5  million.
The Company's  rights under the agreement  were assigned to GCS in March 2004 in
connection  with the Company's  completion of the Laurus  financing (see below).
GCS received $0.5 million from the Laurus funding as a repayment of their Senior
Loan and acquired about $1.5 million of this loan under the above agreement.

LAURUS FINANCING

On March 31, 2004,  the Company  closed on a revolving  fixed price  convertible
facility in the amount of $1.75 million with the Laurus Master Fund (the "Laurus
Financing").  Structured like a standard  receivables-based line of credit, this
facility carries interest at prime plus 5%, subject to a floor of 9%, and a term
of three years.  At March 31,  2004,  prime rate was 4%. The Company may convert
debt  into  equity  at a fixed  conversion  price  equal  to  110% of the  fixed
conversion  price of $0.43 per  share.  The  Company  issued  Laurus  seven-year
detachable warrants to purchase shares of the Company's common stock as follows:
450,000  at 115% of the fixed  conversion  price,  400,000  at 125% of the fixed
conversion price and 250,000 at 135% of the fixed conversion price. The proceeds
of the  Laurus  Financing  were  used  to (a)  repurchase  outstanding  accounts
receivable subject to a factoring agreement (about $0.5 million),  (b) repayment
of the  Senior  loan in the  amount  of $0.5  million,  and (c) pay down the CCS
Debenture by $0.25 million.

6        CHANGES IN STOCKHOLDERS' EQUITY

In  connection  with the closing of the Laurus  Financing,  the  Company  issued
options to purchase  1,725,000  shares of common stock and  1,250,000  shares of
restricted  common stock.  The Company  issued an additional  191,860  shares of
common  stock  for  financing  costs  rendered  in  connection  with the  Laurus
financing.



<PAGE>




                      VERIDIUM CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7        COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENTS

The Company is party to certain  employment  agreements with its Chief Executive
Officer and President and Chief Operational Officer. Each agreement calls for an
annual base salary of $150,000,  reimbursement  of business  expenses,  use of a
Company automobile, periodic bonuses, and participation in any employee benefits
provided to all employees of the Company.

LEGAL PROCEEDINGS

The Company is party to the matter entitled Somerset Hills Consultants, Inc., et
al, v. KBF. The action was filed in the Supreme  Court of the State of New York,
February 13, 2002. The Verified Complaint seeks specific  performance of certain
agreements  between the plaintiffs  and the Company,  plus  attorney's  fees and
costs.  The  plaintiffs  were awarded  partial  judgment  during 2003 as to some
issues which resulted in adjustment to the Company's  litigation  accrual during
the period.  The Company has issued  300,128  shares of its common stock into an
escrow account pending final judgment in this matter.  The matter is ongoing and
counsel is  therefore  unable to  evaluate  the  probability  of an  unfavorable
outcome or range of potential loss at this time.

The Company is party to the matter  entitled  Kerns  Manufacturing  Corp. v. KBF
Pollution  Management,  Inc.  The action was filed in the  Supreme  Court of the
State of New York, August 14, 2003. The Verified  Complaint seeks performance of
certain agreements between the plaintiffs and the Company,  plus attorney's fees
and costs. The matter is ongoing and counsel is therefore unable to evaluate the
probability of an  unfavorable  outcome or range of potential loss at this time.
This matter relates to the Company's recent acquisition of Vulcan Waste Systems,
Inc.  from Kerns  Manufacturing  Corp.  and the breach by Kerns of the terms and
conditions of the relevant acquisition agreement. The Company incurred a loss in
December 31, 2003 on its write-off of $1,890,000 of idle equipment  connected to
this  transaction.  1,350,000  shares of restricted  common stock related to the
Vulcan  acquisition  remain  outstanding  which shares the Company is seeking to
have  cancelled.  The  Company  is  currently  pursuing  the  reversal  of  this
acquisition and seeking the return of the common stock issued.

The Company  assumed and is party to various  other  administrative  enforcement
proceedings  for which the Company has accrued  $237,500 in potential  expenses.
The Company is also involved with several minor collection  matters in which the
Company  and  vendors  are  seeking  payment  for  services  rendered  and goods
provided.

OTHER CONTINGENCIES

The  Company  is  subject  to various  regulatory  requirements,  including  the
procurement of requisite licenses and permits at its facilities.  These licenses
and permits without which the Company's  operations would be adversely  affected
are subject to periodic renewal. The Company anticipates that, once a license or
permit is issued  with  respect to a  facility,  the  license or permit  will be
renewed at the end of its term if the  facility's  operations  are in compliance
with the applicable regulatory requirements.

Under the Company's  insurance  programs,  coverage is obtained for catastrophic
exposures, as well as those risks required to be insured by law or contract. The
deductible per occurrence for the workers'  compensation,  general liability and
vehicle liability, as well as for environmental impairments, is $25,000.



<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS and Plan of Operation

FORWARD LOOKING STATEMENTS

In  addition  to   historical   information,   this   Annual   Report   contains
forward-looking statements, which are generally identifiable by use of the words
"believes,"  "expects,"  "intends,"   "anticipates,"  "plans  to,"  "estimates,"
"projects," or similar expressions. These forward-looking statements are subject
to certain  risks and  uncertainties  that could cause actual  results to differ
materially from those  reflected in these  forward-looking  statements.  Factors
that might  cause such a  difference  include,  but are not  limited  to,  those
discussed  in the section  entitled  "Management's  Discussion  and  Analysis of
Financial  Condition and Results of  Operations--Factors  That May Affect Future
Results."   Readers  are  cautioned  not  to  place  undue   reliance  on  these
forward-looking  statements,  which reflect management's opinions only as of the
date  hereof.  We  undertake  no  obligation  to revise or publicly  release the
results of any  revision to these  forward-looking  statements.  Readers  should
carefully review the risk factors described in other documents the Company files
from time to time with the  Securities  and  Exchange  Commission  (the  "SEC"),
including  the  Quarterly  Reports on Form 10QSB to be filed by us in the fiscal
year 2004.

OVERVIEW

Veridium  is  an  environmental   services   provider  that  uses  patented  and
proprietary  green  technologies to minimize and eliminate the need for disposal
and reduce the burden on natural  resources by recycling  and mining  industrial
hazardous wastes.  Our business model is to develop the domestic hazardous waste
management  market  organically  and  acquisitively,  leveraging the operational
efficiencies made possible by our green technologies to recycle,  reuse and mine
all recoverable  resources from industrial hazardous wastes in a safe, compliant
and profitable manner.

Veridium was formed in 2003 upon the completion and consolidation of a series of
acquisitions  with  Veridium  Environmental  Corporation  ("VEC")  and  into the
Company  through a merger with KBF  Pollution  Management,  Inc.  ("KPMI").  The
Company's  development  efforts in 2003 were focused on the  completion of these
corporate  transactions,  the  integration  of the various  companies  acquired,
financing these activities,  recapitalizing our pre-consolidation balance sheet,
and sales growth.

These efforts continued into the first quarter 2004 and resulted in the improved
operational  results for the period.  Management  will  continue make efforts to
improve and  streamline  our  operations as part of our  integration  process in
2004. There can be no assurances,  however,  that the Company will be successful
in this regard or will be able to eliminate  its working  capital  deficit.  The
accompanying  financial  statements do not contain any adjustments  which may be
required as a result of this uncertainty.

The  margin  analysis  shown  below  demonstrates  our  progress  to date in our
integration and consolidation efforts. The table and below discussions should be
read in conjunction with Item 1, Financial Statements, of this report.
<TABLE>
<CAPTION>
                                                                Percentage of Total Revenues For the Period Ended,
                                                         ----------------------------------------------------------
                                                                                 3/31/04                  12/31/03
                                                         ----------------------------------------------------------

<S>                                                                                <C>                      <C>
Revenue                                                                            100.0%                   100.0%
Cost of revenue                                                                      74.0                     82.6
                                                                              -----------               ----------
   Gross profit                                                                      26.0                     17.4

Selling expenses                                                                      8.0                      9.3
General and administrative expenses                                                  15.2                     24.7
Loss on impairment of long-lived assets                                                --                     65.5
                                                                              -----------               ----------
   Total operating expenses                                                          23.2                     99.5
                                                                              -----------               ----------

Income (loss)  from operations                                                        2.8                   (82.1)

Amortization of deferred financing costs                                               --                    (4.7)
Gain on sale of fixed assets                                                           --                      0.1
Forgiveness of accrued interest                                                        --                      2.8
Forgiveness of interest and finance charges                                          10.9                       --
Interest expense                                                                    (7.3)                   (10.9)
Write-off of idle equipment                                                            --                   (14.5)
                                                                              -----------               ----------
   Total other income (expense)                                                       3.6                   (27.2)
                                                                              -----------               ----------

Income (loss)  before provision for income taxes                                      6.4                  (109.3)
   Provision for income taxes                                                          --                       --
                                                                              -----------               ----------
Net income (loss)                                                                     6.4                  (109.3)
                                                                              ===========               ==========
</TABLE>

<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  While the Company realized a
net income of  approximately  $0.2  million  during the quarter  ended March 31,
2004, current liabilities exceeded current assets by approximately $1.8 million,
including about $0.8 million in liabilities  that are  convertible  into equity.
This  working  capital  deficit  raises  substantial  doubt about the  Company's
ability to continue as a going concern.

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")

We define "EBITDA" as net income or loss, less interest, taxes, depreciation and
amortization.  We  consider  EBITDA  to be a  measurement  of  performance  that
provides useful information to both management and investors.  EBITDA should not
be considered an alternative to net income or loss or other  measurements  under
accounting  principles  generally accepted in the United States of America as an
indicator of operating performance or as a measure of liquidity. EBITDA does not
reflect working capital changes, cash expenditures for interest,  taxes, capital
improvements or principal payments on indebtedness. While EBITDA is a good means
to evaluate the  probability of cash flow, it does not measure actual cash flow.
Our  operating  cash flow is a better  measure of how much cash a company we are
generating because it adds non-cash charges (depreciation and amortization) back
to net income and includes  the changes in working  capital that also provide or
use cash.  Additionally,  our measurement of EBITDA might be  inconsistent  with
similar measures presented by other companies. The following is a reconciliation
of net income (loss) to EBITDA for the following three months ended March 31:

<TABLE>
<CAPTION>
                                                      3/31/04        3/31/03
                                                        ------------------------
<S>                                                      <C>         <C>
Net income (loss) ....................................   $ 200,007   $(327,460)
Depreciation and amortization ........................     125,543      30,801
Interest expense, net ................................     226,199      42,846
Provision for income taxes ...........................       1,162         200
Equity in exchange for non-recurring services rendered        --        93,526
                                                         ---------   ---------

EBITDA $ .............................................     552,911   $(160,087)
</TABLE>


The following reconciles EBITDA to net cash provided from operating activities
for the following quarters ended March 31:

<TABLE>
<CAPTION>
                                                             3/31/04         3/31/03
                                                             -----------------------

Adjustments to reconcile EBITDA to net cash provided by (used in) operating
activities:
<S>                                                        <C>            <C>
   Interest expense ....................................   $  (188,282)   $   (42,846)
   Provision for income taxes ..........................        (1,162)          --
   Provision for doubtful accounts .....................       (22,883)        12,115

Changes in assets and liabilities:
   Accounts receivable .................................       152,965        (60,978)
   Other receivables ...................................          --           69,102
   Prepaid expenses and  other  current  assets ........       (50,463)       (89,737)
   Accounts payable ....................................       (76,082)        35,161
 Accrued expenses ......................................      (236,351)          --
                                                           -----------    -----------

     Net cash provided by (used in) operating activities   $   135,653    $  (147,164)
                                                           ===========    ===========

Selected Financial Data:
Working capital, net of convertible debentures .........    (1,070,015)    (2,361,426)

Selected Margin Data (%):
Gross profit ...........................................          26.0           19.3
EBITDA .................................................           7.0          (49.8)
Net income (loss) ......................................           6.4         (109.4)

Selected Growth Data (%):
Revenue ................................................         206.8            6.8
Gross Profit ...........................................         312.2           71.1
EBITDA .................................................         249.6           46.7
Net income (loss) ......................................         161.8           38.7
</TABLE>

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our  consolidated  financial  statements  requires us to make
estimates that affect the reported amounts of assets, liabilities,  revenues and
expenses.  The  following  are the areas that we believe  require  the  greatest
amount of estimates in the preparation of our financial  statements:  allowances
for doubtful  accounts and legal matters.  Prior to the filing of this Quarterly
Report on Form 10QSB,  the Company's  Audit  Committee  reviewed  these critical
accounting policies and estimates and discussed them with our management.

We establish an allowance  for doubtful  accounts to cover  accounts  receivable
that  may  not be  collectible.  In  establishing  the  allowance  for  doubtful
accounts,  we analyze the collectibility of accounts that are large or past due.
In addition,  we consider  historical bad debts and current  economic  trends in
evaluating the allowance for doubtful accounts.  Accounts receivable written off
in  subsequent  periods can differ  materially  from the  allowance for doubtful
accounts provided.

As described more fully in Item 1, Note 7, Commitments and Contingencies, above,
we are subject to legal  proceedings  which we have assumed in our consolidation
process.  Accruals are established for legal matters when, in our opinion, it is
probable  that  a  liabilities  exists  and  the  liability  can  be  reasonably
estimated.  Estimates  of the  costs  associated  with  dispute  settlement  are
adjusted as facts emerge.  Actual expenses incurred in future periods can differ
materially from accruals established.

We attempt to make good faith  realistic  estimates in providing  allowances for
assets and recording liabilities.  Our experience has been that overestimates in
one area can occur but are often offset by underestimates in other areas.  While
it is probable in the future that unexpected  events could materially affect the
results of operations of a future  period,  we believe that our risk  management
protocols  would prevent the  occurrence of such an event from having a material
impact on our financial condition.

Three Months ended March 31, 2004 versus the Three Months ended March 31, 2003

Revenues

Total  revenues  were $3.1  million for the three  months  ended March 31, 2004,
corresponding  to an increase of $2.1  million,  or 206%,  over the three months
ended March 31, 2003 revenues of $1.0 million.  The revenues realized during the
period were due to the expanded  operating  activities of the various  companies
consolidated during the first quarter 2003.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2004 were $2.3 million, or
74% of  revenue,  as compared  to $0.8  million,  or 81% of revenue for the same
period in 2003.  The change in cost of revenues  as  compared  to the  Company's
pre-consolidation  operations  is primarily  attributable  to the  operation and
accretive  impact of the  acquisitions  completed during the first quarter 2003.
Our cost of  revenues  had  increased  during  2003 to 83% of  revenue  and have
trended  downward  through  the third  and  fourth  quarters  2003 and the first
quarter 2004 to the current 74% of revenue.

Selling, General and Administrative Expenses

Selling,  general and  administrative  expenses the three months ended March 31,
2004 were $0.7 million,  or 23% of revenue,  as compared to $0.5 million, or 48%
of revenue for the same period in 2003.  Operating  income for the three  months
ended March 31, 2004,  increased  about $0.1  million from an operating  loss of
about $0.3  million.  As with our cost of revenues,  the change in our operating
expenses,  as  compared  to  the  Company's  pre-consolidation   operations,  is
primarily attributable to the operation and accretive impact of the acquisitions
completed during 2003.

Depreciation and Amortization

Depreciation and amortization expenses for the three months ended March 31, 2004
were $0.13 million, or 4.1% of revenue, as compared to $0.03 million, or 3.1% of
revenue for the same period in 2003.  The net increase in these expenses was due
to the acquisition of new depreciable assets during 2003.



<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

THREE MONTHS ENDED MARCH 31, 2004 VERSUS THE THREE MONTHS ENDED MARCH 31, 2003

Interest Expense

Interest  expenses for the three months ended March 31, 2004 were $0.23 million,
or 7.3% of revenue,  as compared  to $0.04  million,  or 4.2% of revenue for the
same period in 2003.  The  increase is  attributable  to the  Company's  various
financings  completed  during  2003,  including  certain  non-recurring  charges
incurred in connection with the Company's completion of the Laurus Fiancing. Our
refinancing and recapitalization efforts during 2003 were successful in reducing
these costs and we expect further reductions,  on a cash and non-cash basis, and
as a percentage of overall  revenue,  due to our recent  completion of financing
with the Laurus Funds.

EBITDA Contribution

Earnings before interest, taxes,  depreciation,  amortization ("EBITDA") for the
three months ended March 31, 2004 were about $0.55  million,  or 18% of revenue,
as compared to a loss before  interest,  taxes,  depreciation,  amortization  of
$0.16  million,  or 16% of revenue from the same period in 2003. The increase is
attributable to the increased margins  described above,  which were attributable
to the accretive impact of the various companies  consolidated  during the year.
While a useful metric of performance because it eliminates the impact of certain
financing  and  accounting  activities,  EBITDA  should  not  be  considered  an
alternative  to net income or as an indicator of operating  performance  or as a
measure of liquidity.  EBITDA does not include  working  capital  changes,  cash
expenditures for interest,  taxes, capital improvements or principal payments on
indebtedness.  While EBITDA is a good means to evaluate the  probability of cash
flow, it does not measure  actual cash flow. Our operating cash flow is a better
measure of how much cash a company we are  generating  because it adds  non-cash
charges  (depreciation  and  amortization)  back to net income and  includes the
changes in working  capital that also provide or consume cash. A  reconciliation
of EBITDA to net cash provided by our operating  activities is provided above in
this Item 2, Management's Discussion and Analysis and Plan of Operation.

Net Income or Loss

Net income for the three months ended March 31, 2004, was $0.2 million,  or 6.4%
of revenue, as compared to a loss of $0.33 million, or 32.4% of revenue from the
same period in 2003.  The net income  realized  during the period was due to the
margin  improvement  discussed  above  and  was  offset  by  the  impact  of the
seasonally low first quarter  sales.  We expect that net income will increase in
future periods as we move out of the less  productive  first quarter,  and as we
continue to streamline our  operations to fully realize the accretive  impact of
our consolidation process.

LIQUIDITY AND CAPITAL RESOURCES

Cash

Our primary  sources of liquidity are cash provided by operating,  investing and
financing  activities,  and  availability  under our  various  revolving  credit
facilities.  For the three months ended March 31, 2004, net cash provided by our
operating  activities  was $0.13  million as  compared to the net use of cash of
about $0.15 million as of the quarter ended March 31, 2003.

Liquidity

Our operating activities during the first quarter 2004 provided $0.14 million in
cash, as compared to the use of $0.15 million during the same period in 2003. We
used cash provided from operating activities to fund operations, our integration
and  recapitalization  efforts.  We intend to use cash provided from  operating,
investing and financing  activities  to fund  operations  and continue to reduce
debt outstanding.  For the foreseeable future, we anticipate that cash generated
by operating activities will be sufficient to fund operations.

The Company's  capital  requirements  consist of general  working capital needs,
scheduled  principal  and  interest  payments on debt,  obligations  and capital
leases and planned capital expenditures. The Company's capital resources consist
primarily of cash generated  from  operations and proceeds from issuance of debt
and common  stock.  The Company's  capital  resources are impacted by changes in
accounts  receivable as a result of revenue  fluctuations,  economic trends, and
collection  activities.  At March 31,  2004 the  Company had cash of about $0.47
million.  This cash represents an increase of $0.42 from the quarter ended March
31, 2003.


<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

LIQUIDITY AND CAPITAL RESOURCES  (continued)

Cash Flows for the Three Months Ended March 31, 2004

Our operating activities during the first quarter 2004 provided $0.14 million in
cash.  Accounts  receivable  at March 31, 2004,  net of  allowance  for doubtful
accounts,  totaled $2.3  million as compared to the March 31,  2003,  balance of
$0.3  million.  Accounts  payable  at March 31,  2004  totaled  $2.1  million as
compared to the March 31, 2003,  balance of $1.8  million.  Accrued  expenses at
March 31, 2004 totaled $1.0 million as compared to the March 31, 2003 balance of
$1.4  million.  These  increases  and  decreases  are  primarily due to the 2003
acquisition  activity and secondarily to increased sales and decreased  expenses
of the companies acquired.

For the  three  months  ended  March  31,  2004,  we  used no cash in  investing
activities,  and we obtained net cash from financing of $0.25  million.  We used
these  funds to complete  our  recapitalization  process and to provide  working
capital for operations.  Our financing  arrangements are discussed further below
in this Item 2 and in more  detail in Item 1,  Note 5,  Financing  Arrangements,
below.

The Company had a negative working capital position of $1.8 million at March 31,
2004, of which accounts payable and accrued expenses accounted for approximately
$3.1 million.

STOCKHOLDER MATTERS

Stockholders'  equity  was $5.8  million at March 31,  2004,  or $0.23 per share
outstanding,  as compared to $4.5  million at December  31,  2003,  or $0.19 per
share outstanding.  Stockholders'  equity increased during the period due to the
refinancing activities completed in connection with the Laurus Financing.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal Activities".  SFAS 146 requires recording costs associated
with exit or disposal  activities at their fair values when a liability has been
incurred.  Under  previous  guidance,  certain  exit  costs  were  accrued  upon
management's  commitment  to an exit plan,  which is generally  before an actual
liability has been incurred. Adoption of SFAS 146 is required with the beginning
of fiscal year 2003.  The adoption of this  statement did not have a significant
impact on the Company's results of operations.

In November 2002, the FASB issued FASB Interpretation,  FIN No. 45, "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness  of Others".  FIN No. 45 addresses the disclosures to
be made by a guarantor in its interim and annual financial  statements about its
obligations  under  certain  guarantees  that is has  issued.  Under FIN No. 45,
recognition and initial  measurement  provisions are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002,  irrespective of
the  guarantor's  fiscal  year end.  The  adoption  of FIN No. 45 did not have a
significant impact on the Company's  consolidated  financial position or results
of operations.

In  December  2003,  the FASB  revised  FIN No. 46,  "Consolidation  of Variable
Interest  Entities." FIN 46 clarifies  Accounting  Research  Bulletin No. 51 for
certain entities for which equity investors do not have the characteristics of a
controlling  financial interest or do not have sufficient equity at risk for the
entity to finance  its  activities  without  additional  subordinated  financial
support from other parties.  The Company would currently be required to meet the
disclosure  requirements  of  this  pronouncement.   However,  the  Company  has
determined  that it does not have a significant  interest in such entities based
on its analysis and assessment.


<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

NEW ACCOUNTING PRONOUNCEMENTS (continued)

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristics  of both Liability and Equity".  SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial instruments with characteristics of both liability and equity. It also
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some  circumstances).  Many of those  instruments
were  previously  classified as equity.  SFAS No. 150 is effective for financial
instruments  entered  into or modified  after May 15,  2003,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003,  except  for  mandatory  redeemable  financial  instruments  of  nonpublic
entities.  It is to be implemented by reporting a cumulative  effect of a change
in an accounting principal of financial  instruments created before the issuance
date of the Statement and still  existing at the beginning of the interim period
of adoption.  Restatement is not permitted. The adoption of SFAS No. 150 did not
have any significant impact on the Company's  consolidated financial position or
results of operations.

ITEM 3.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our principal  executive officer and principal  financial and accounting officer
have  participated  in and supervised the evaluation of our disclosure  controls
and  procedures  (as  defined in Rules  13(a)-15(e)  and  15(d)-15(e)  under the
Securities  Exchange  Act of 1934,  as amended  (the  "Exchange  Act")) that are
designed  to ensure  that  information  required  to be  disclosed  by us in the
reports that we file is recorded, processed,  summarized and reported within the
time periods  specified in the  Securities and Exchange  Commission's  rules and
forms. Disclosure controls and procedures include, without limitation,  controls
and procedures designed to ensure that the information  required to be disclosed
by us in the reports  that we file or submit  under the Act is  accumulated  and
communicated to our  management,  including our principal  executive  officer or
officers and principal  financial officer,  to allow timely decisions  regarding
required  disclosure.  The Company's chief executive officer and chief financial
officer  determined  that,  as of the end of the period  covered by this report,
these  controls and  procedures are adequate and effective in alerting them in a
timely  manner to material  information  relating to the Company  required to be
included in the Company's periodic SEC filings.





<PAGE>




                           Part II - Other Information

ITEM 1.  LEGAL PROCEEDINGS

Note 7 to the financial statements contained in this Form 10QSB is incorporated
herein by reference.

ITEM 2.  CHANGES IN SECURITIES

None.

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.           OTHER INFORMATION

None.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

The following are exhibits filed as part of the Company's Form 10-QSB for the
period ended March 31, 2004:

Exhibit Number             Description

31.1 Certification  of Chairman  and Chief  Executive  Officer  pursuant to Rule
     13a-14(a)/15d-   14(a),   as  adopted   pursuant  to  Section  302  of  the
     Sarbanes-Oxley Act of 2002.

31.2 Certification  of  President,  Chief  Operating  Officer  and Acting  Chief
     Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant
     to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chairman and Chief Executive Officer and President,  Chief
     Operating  Officer and Acting Chief Financial Officer pursuant to 18 U.S.C.
     Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of 2002.

REPORTS ON FORM 8K

The following is a list of reports filed on Form 8-K during the period:

     1)   On April 7, 2004, the Company filed a Report on Form 8K, which related
          to the Company's completion of the Laurus Financing on March 31, 2004.



<PAGE>




                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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 on the date indicated.
VERIDIUM CORPORATION

By:            /S/      KEVIN E. KREISLER
               --------------------------
                        KEVIN E. KREISLER
                        Chairman and Chief Executive Officer
Date:                   May 14, 2004

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

                /S/      JIM GREEN
                ------------------
By:                      JIM GREEN
                         President, Chief Operational Officer and
                           Acting Chief Financial Officer
Date:                    May 14, 2004

                /S/      RICHARD KRABLIN
                ------------------------
By:                      RICHARD KRABLIN
                         Secretary and Chief Compliance Officer
Date:                    May 14, 2004

                         JAMES HANRAHAN
                         Director
Date:                    May 14, 2004

                         STEPHEN LEWEN
                         Director
Date:                    May 14, 2004

                /S/      KEVIN E. KREISLER
                --------------------------
By:                      KEVIN E. KREISLER
                         Attorney-In-Fact
Date:                    May 14, 2004


<PAGE>




Exhibit 31.1

                         Certification of ANNUAL Report

I, Kevin Kreisler, certify that:

1.   I  have  reviewed  this  Quarterly   Report  on  Form  10-QSB  of  Veridium
     Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer(s) and I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a.   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b.   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and,

     c.   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting.

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

a.   All  significant  deficiencies  and  material  weaknesses  in the design or
     operation of internal control over financial reporting which are reasonably
     likely to adversely  affect the  registrant's  ability to record,  process,
     summarize and report financial information; and,

b.   Any fraud,  whether or not  material,  that  involves  management  or other
     employees who have a significant role in the registrant's  internal control
     over financial reporting.



               /S/      KEVIN E. KREISLER
               --------------------------
By:                     KEVIN E. KREISLER
                        Chairman and Chief Executive Officer
Date:                   May 14, 2004



<PAGE>





Exhibit 31.2

                         Certification of ANNUAL Report

I, Jim Green, certify that:

1.   I  have  reviewed  this  Quarterly   Report  on  Form  10-QSB  of  Veridium
     Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer(s) and I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a.   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b.   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and,

     c.   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting.

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a.   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and,

     b.   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


                /S/      JIM GREEN
                ------------------
By:                      JIM GREEN
                         President, Chief Operational Officer
                           and Acting Chief Financial Officer
Date:                    May 14, 2004



<PAGE>




Exhibit 32.1

                        CERTIFICATION OF PERIODIC REPORT

Pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley  Act of  2002,  each  of the  undersigned  officers  of  Veridium
Corporation (the "Company"), certifies that:

1.   The  Quarterly  Report on Form 10-QSB of the  Company for the three  months
     ended March 31, 2004 (the "Report") fully complies with the requirements of
     Section  13(a) or 15(d) of the  Securities  Exchange Act of 1934 (15 U.S.C.
     78m or 78o(d)); and

2.   The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.




Veridium Corporation


               /S/      KEVIN E. KREISLER
               --------------------------
By:                     KEVIN E. KREISLER
                        Chairman and Chief Executive Officer
Date:                   May 14, 2004


               /S/      JIM GREEN
               ------------------
By:                     JIM GREEN
                        President, Chief Operational Officer
                          and Acting Chief Financial Officer
Date:                   May 14, 2004


This  certification  is made solely for the purpose of 18 U.S.C.  Section  1350,
subject  to the  knowledge  standard  contained  therein,  and not for any other
purpose.