--------------------------------------------------------------------------------
                       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 June 30, 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 June 30,  2004 was:
25,693,927.  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 June 30, 2004 was $7,804,134.



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













<PAGE>



                              Veridium Corporation
                         quarterly report on Form 10qSB
                   for the fiscal quarter ended June 30, 2004

                                Table of Contents


<TABLE>
<CAPTION>
                                                                                                           Page No
Part I    Financial Information
<S>                                                                                                             <C>
Item 1.   Financial Statements (unaudited)  .....................................................................3
          Consolidated Balance Sheets - June 30, 2004 and December 31, 2003 .....................................4
          Consolidated Statements of Operations - For the Three and Six Months  Ended June 30, 2004 and 2003  ...5
          Consolidated Statements of Cash Flows -  For the Six Months Ended June 30, 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...............................................................................17

Part II   Other Information
Item 1.   Legal Proceedings ....................................................................................18
Item 2.   Changes in Securities.................................................................................18
Item 3.   Defaults Upon Senior Securities.......................................................................18
Item 4.   Submission of Matters to a Vote of Security Holders...................................................18
Item 5.   Other Information.....................................................................................18
Item 6.   Exhibits and Reports on Form 8K.......................................................................18

Signatures                                                                                                      19
</TABLE>



<PAGE>




                         Part I - Financial information

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)




<PAGE>
<TABLE>
                      VERIDIUM CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2004 AND DECEMBER 31, 2003
<CAPTION>
                                                                6/30/04           12/31/03
                                                              (unaudited)
                                                            ------------------------------
ASSETS:
Current assets:
<S>                                                          <C>             <C>
   Cash ..................................................   $    233,600    $     89,392
   Accounts receivable, net ..............................      2,574,272       1,970,332
   Inventories ...........................................          7,522           7,634
 Prepaid expenses and other current assets ...............        186,188         104,303
                                                             ------------    ------------
       Total current assets ..............................      3,001,582       2,171,661

Property and equipment, net ..............................      3,722,650       3,770,379

Other Assets:
   Deposits ..............................................        128,002         123,102
   Patents and technologies, net .........................      3,097,197       3,173,336
Deferred financingcosts, net .............................        780,638            --
   Permits, net ..........................................        306,444         315,609
   Goodwill ..............................................      6,275,040       6,275,040
                                                             ------------    ------------
       Total other assets ................................     10,587,321       9,887,087
                                                             ------------    ------------

TOTAL ASSETS .............................................   $ 17,311,553    $ 15,829,127
                                                             ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Short term borrowings .................................   $    464,092    $     75,000
   Accounts payable ......................................      2,040,046       2,735,106
   Accrued expenses ......................................      1,033,832       1,256,444
   Current maturities of long-term debt ..................        350,550         173,162
   Current portion of convertible debentures .............        744,000       2,712,000
   Current portion of obligations under capital lease ....        168,867         191,461
                                                             ------------    ------------
       Total current liabilities .........................      4,801,387       7,143,173

Long-term debt, net of current maturities ................        559,662         370,883
Convertible debentures, net of current portion ...........      5,481,565       2,701,065
Obligations under capital lease, net of current maturities         60,815         123,424
Other liabilities ........................................         18,485          18,485
                                                             ------------    ------------
       Total long term liabilities: ......................      6,120,527       3,213,857

       Total liabilities: ................................     10,921,914      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; 25,693,927 and 23,379,916 shares
    issued for 2004 and 2003, respectively ...............         25,693          23,380

   Additional paid-in capital ............................     32,584,018      31,505,431
   Accumulated deficit ...................................    (27,084,545)    (26,971,713)
   Treasury stock at cost, 131,266 and 5,000
     shares of common stock, respectively ................        (63,354)        (12,828)
                                                             ------------    ------------
       Total stockholders' equity ........................      5,464,639       4,547,097
                                                             ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...............   $ 17,311,553    $ 15,829,127
                                                             ============    ============

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


<PAGE>
<TABLE>

                      VERIDIUM CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004
                        (UNAUDITED) AND 2003 (UNAUDITED)

<CAPTION>


                                                                 For The Three Months            For The Six Months
                                                                    Ended June 30                  Ended June 30
                                                                2004              2003          2004            2003

<S>                                                          <C>            <C>              <C>           <C>
Revenues                                                     $   3,693,933  $     3,078,094  $  6,795,124  $   4,088,788
   Cost of revenues .......................................      2,647,035       2,335,760       4,943,119       3,151,116
                                                              ------------    ------------    ------------    ------------
     Gross profit .........................................      1,046,898         742,334       1,852,005         937,672

Operating expenses:
    Selling expenses ......................................        278,400         481,103         525,443         598,719
   General and administrative expenses ....................        581,725         712,762       1,051,701       1,074,898
   Severance Expense ......................................        382,480            --           382,480            --
                                                              ------------    ------------    ------------    ------------
Total operating expenses ..................................      1,242,605       1,193,865       1,959,624       1,673,617
                                                              ------------    ------------    ------------    ------------

Operating loss ............................................       (195,707)       (451,531)       (107,619)       (735,945)

Other income (expense):
   Forgiveness of interest and finance charges ............         73,950            --           413,230            --
   Amortization of Deferred Financing Costs ...............        (70,968)        (60,604)        (70,968)        (60,604)
   Gain on Sale of Fixed Assets ...........................           --            14,000
                                                                                                      --            14,000
   Interest expense .......................................       (112,115)       (363,148)       (338,314)       (405,994)
                                                              ------------    ------------    ------------    ------------

     Total other expense, net .............................       (109,133)       (409,752)          3,948        (452,598)
                                                              ------------    ------------    ------------    ------------

Loss before provision for income taxes ....................       (304,840)       (861,283)       (103,671)     (1,188,543)
   Provision for income taxes .............................         (7,999)         (2,100)         (9,161)         (2,300)
                                                              ------------    ------------    ------------    ------------
Net loss ..................................................   $   (312,839)   $   (863,383)   $   (112,832)   $ (1,190,843)
                                                              ============    ============    ============    ============

Basic earnings (loss) attributable to common shareholders .   $      (0.01)   $      (0.08)   $      (0.00)   $      (0.11)
                                                              ============    ============    ============    ============

Diluted earnings (loss) attributable to common shareholders   $      (0.01)   $      (0.08)   $      (0.00)   $      (0.11)
                                                              ============    ============    ============    ============

Weighted average shares of common stock outstanding .......     23,364,535      11,398,528      25,187,839      10,900,997
                                                              ============    ============    ============    ============


            The notes to the Consolidated Financial Statements are an
                       integral part of these statements.

</TABLE>


<PAGE>
<TABLE>
                      VERIDIUM CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
<CAPTION>
                                                                                  2004               2003
                                                                           ----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                          <C>             <C>
Net loss                                                                     $  (112,832)     $  (1,190,843)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities
   Depreciation and amortization                                                 324,998           359,057
   Common Stock issued in exchange for services rendered                              --            82,808
   Provision for doubtful accounts                                              (26,378)            30,763
   Interest paid directly from lender                                             37,917                --
   Severance Expense                                                             382,480                --
   Changes in assets and liabilities
     Accounts receivable                                                        (95,028)         (650,579)
Other receivables                                                                     --            76,588
     Inventories                                                                     112          (13,017)
     Prepaid expenses and other current assets                                  (64,940)         (120,031)
     Accounts payable                                                           (91,246)         1,261,496
Accrued expenses                                                               (222,612)                --
                                                                            ------------     -------------
       Net cash provided by (used in) operating activities                     (132,471)         (163,758)
                                                                            ------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES

   Cash used in acquisition of subsidiary, net of cash acquired                       --         (184,688)
   Increase in patents, license fees and permit costs                                 --             5,040
   Change in deposits                                                            (4,900)            78,412
   Additions to and acquisition of property, plant and equipment                      --         (337,996)
                                                                            ------------     -------------
       Net used in investing activities                                          (4,900)         (439,232)
                                                                            -----------      -------------
CASH FLOWS FROM FINANCING ACTIVITIES

   Repayments to Factor, net                                                    (11,772)                --
   Issuance of (repayment of) short-term borrowings                            (214,722)         (251,284)
   Issuance of (repayment of) current maturities of long-term debt, net         (37,311)          (59,744)
   Proceeds from (repayment of) officer  loans, net                                   --           179,211
   Proceeds from long-term convertible debentures                                492,000                --
   Proceeds from sale of common stock                                              5,000                --
   Proceeds from the exercise of stock options and purchase of stock, net             --            95,397
   Purchase of treasury stock                                                   (50,526)                --
   Repayment of obligations under capital leases                                (85,203)          (54,514)
   Repayment of Subordinate Loan                                                (45,829)                --
   Repayment of Convertible Debenture                                           (15,000)                --
   Proceeds from short term debt                                                      --           677,825
   Deferred financing costs incurred                                            (20,000)          (58,389)
                                                                            ------------     -------------
Net cash provided by financing activities                                         16,637           645,280
                                                                            ------------     -------------
Increase (decrease) in cash                                                      144,208            42,290

Cash at beginning of period                                                       89,392               721
                                                                            ------------     -------------
Cash at end of period                                                       $    233,600     $      43,011
                                                                            ============     =============

Supplemental disclosure of non-cash investing and financing activities:
   Equity issued for deferred financing costs                               $     82,500     $         --
   Conversion of subordinate loan into equity                                    454,171               --
   Debenture paid with Laurus proceeds                                           250,000               --
   Payment of subordinate loan with common stock                                      --               --
   Payment of subordinate loan with proceeds of Laurus financing                 500,000               --
   Payment of CCS Debenture with proceeds of Laurus financing                         --               --
   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               --
   Interest expense paid with Laurus financing                                    12,917               --
   Deferred financing costs paid with proceeds of Laurus financing               179,376               --
   Deferred financing costs associated with stock issuance                        50,000               --
   Issuance of warrants for deferred financing costs                             489,229               --
   Settlement of accounts payable with short term notes                          603,814               --
   Deferred financing costs issued in connection with subordinate loan            30,500               --
   Acquisition of equipment with long term debt                                  120,998               --
            The notes to the Consolidated Financial Statements are an
                       integral part of these statements.
</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.

2        GOING CONCERN

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  The Company  incurred a loss
of  approximately  $112,800  the six months  ended June 30, 2004 which  included
severance  expenses of approximately  $380,000.  As of June 30, 2004 the Company
had  approximately  $233,000 in cash, and current  liabilities  exceeded current
assts by  approximately  $1,799,000  including  $744,000 in liabilities that are
convertible  into  equity.  These  matters  raise  substantial  doubt  about the
Company's ability to continue as a going concern.

Further,  management  believes that the Company will begin to operate profitably
due to the Company's improved operational results, cost-management practices and
the nearly-complete integration of the Company's various acquisitions.  However,
there can be no assurances that the Company will be successful in this regard or
will be able to eliminate  both its working  capital  deficit and its  operating
losses.  The  accompanying  financial  statements do not contain any adjustments
which may be required as a result of this uncertainty.

3        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



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

3        CERTAIN ACCOUNTING POLICIES (CONTINUED)

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.

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>

                                                       For the Three Months Ended   For the Six Months Ended
                                                                June 30,                    June 30,
                                                       ------------------------------------------------------
                                                           2004           2003          2004          2003
                                                       ------------------------------------------------------

<S>                                                     <C>          <C>           <C>          <C>
Net loss ............................................   $ (312,839)  $  (863,283)  $ (112,832)  $(1,190,843)

Less: stock based employee compensation expense
determined under the fair value method for all awards         --        (381,608)        --        (350,129)
                                                        ----------   -----------   ----------   -----------

Pro forma net loss ..................................   $ (312,839)  $(1,244,891)  $ (112,832)  $(1,540,972)
                                                        ==========   ===========   ==========   -----------

Basic and diluted net income (loss) per
  common share, as reported .........................   $    (0.01)  $     (0.08)  $    (0.00)  $     (0.11)
                                                        ==========   ===========   ==========   ===========

Pro forma basic and diluted net income
 (loss) per common share ............................   $    (0.01)  $     (0.08)  $   (0.00)   $     (0.11)
                                                        ==========   ===========   ==========   ===========
</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.

<PAGE>

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

3        CERTAIN ACCOUNTING POLICIES (CONTINUED)

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  $22,900 for the six months ended June 30,
2004.

During the second quarter 2003, the Company borrowed  $262,500 from an immediate
family  member of the Chairman at an interest rate of 2% per year and an initial
stated  term of 5 years,  $88,754  from  officers  for general  working  capital
purposes,  and  issued  debt  in  the  amount  of  $370,000  pertaining  to  the
acquisition by the Company of Metal  Recovery  Transportation,  Corp.,  from its
former Vice Chairman; these amounts were each subsequently converted into equity
in the third and fourth  quarters of 2003 (see Note 5,  Financing  Arrangements,
below).

5        FINANCING ARRANGEMENTS
<TABLE>

The following is a summary of the Company's  financing  arrangements  as of June
30, 2004 and December 31, 2003:
<CAPTION>

                                                                                6/30/04          12/31/03
                                                                          ----------------------------------
Short-term borrowings
<S>                                                                       <C>                 <C>
   Line of credit                                                         $      75,000       $     75,000
   Term financing                                                               389,092                 --
                                                                          -------------       ------------
     Total short-term borrowings                                          $     464,092       $     75,000

Current maturities of long-term debt:
   Term financing                                                               100,000            100,000
   Severance                                                                    166,909                 --
   Vehicle loans and other current obligations                                   83,641             73,162
                                                                          -------------       ------------
     Total current maturities of long-term debt                           $     350,550       $    173,162

Current portion of convertible debentures:
   AMRC debentures, 10% convertible debentures, currently due                   144,000            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                     $     744,000       $  2,712,000

Long-term debt:
   Term financing                                                               100,000            200,000
   Severance                                                                    215,571                 --
   Vehicle loans and other current obligations                                  244,091            170,883
                                                                          -------------       ------------
     Total long-term debt, net of current maturities                      $     559,662       $    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                1,184,065          1,184,065
   Subordinate loan, 12% convertible debenture, due December 2008             1,547,500          1,517,000
                                                                          -------------       ------------
     Total current maturities of long-term debt                           $   5,481,565       $  2,701,065

</TABLE>


<PAGE>


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

5        FINANCING ARRANGEMENTS (CONTINUED)

The following chart is presented to assist the reader in analyzing the Company's
ability to fulfill its fixed debt service  requirements  as of June 30, 2004 and
the Company's ability to meet such obligations:
<TABLE>
<CAPTION>

Year                                                                           Amount

<C>                                                                       <C>
2005                                                                      $   1,558,642
2006                                                                            276,683
2007                                                                            137,022
2008                                                                          2,804,593
2009                                                                          2,773,598
Thereafter                                                                       49,331
                                                                          -------------

Total minimum payments due under current and long-term obligations        $   7,599,869
                                                                          =============
</TABLE>

SHORT TERM BORROWINGS

The Company has a variable  interest  rate,  (6.25% at June 30,  2004),  line of
credit with a bank,  which has an outstanding  balance of $75,000 as of June 30,
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  is in default of these
agreements.

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.  On June 30,2004 the Company  recognized an additional
gain for the forgiveness of penalties totaling $0.07 million.

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



<PAGE>

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

5        FINANCING ARRANGEMENTS (CONTINUED)

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.

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.

SEVERANCE AGREEMENTS

The  Company  is party  to  certain  severance  agreements  with key  management
personnel.  These  agreements  require  payment of annual  base  salary  through
December 2005 and certain Company  benefits.  The cost of these agreements total
$382,480 of which $198,991 is recognized as a current liability with the balance
to be paid over a number of years.

6        CHANGES IN STOCKHOLDERS' EQUITY

ANTI-DILUTION AND PRICE PROTECTION AGREEMENTS

During 2003, in  consideration  for certain equity  transactions,  lenders and a
vendor received price protection benefits and/or anti-dilution  coverage as part
of their equity  instruments.  As a result of these agreements,  the Company was
required to issue approximately  1,020,417 shares during second quarter 2004 for
no  consideration.  Certain of these agreements  extend into the future. At June
30, 2004, one investor has an  anti-dilution  agreement in place to maintain his
current ownership percentage of common stock.

In addition,  two investors in connection with a prior  acquisition have a price
protection  agreement which becomes effective only in the event of the Company's
liquidation.
<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. The agreement renews annually.

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  $191,975 in potential  expenses.
The  Company  is also  involved  with  several  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.

The Company's  development efforts in 2003 were focused on the completion of its
various  acquisitions  and merger,  the  integration  of the  various  companies
acquired,  financing  these  activities,  recapitalizing  our  pre-consolidation
balance  sheet,  and sales  growth.  These efforts  continued  through the first
quarter 2004 and resulted in the  improved  operational  results for the current
period.  Management  will continue to make efforts to improve and streamline our
operations  as  part  of  its  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 Six Months Ended    For The Year Ended
                                               June 30, 2004              12/31/03
                                           ----------------------------------------------

<S>                                                  <C>                 <C>
Revenue ...................................          100.0%              100.0%
Cost of revenue ...........................           72.7                82.6
                                                     -----               -----
   Gross profit ...........................           27.3                17.4

Operating Expenses
Selling expenses ..........................            7.7                 9.3
General and administrative expenses .......           15.5                24.7
Loss on impairment of long-lived assets ...            --                 65.5
Severance Expense .........................            5.6                 --
                                                     -----               -----
   Total operating expenses ...............           28.8                99.5
                                                     -----               -----

Loss from operations ......................           (1.5)              (82.1)

Other income (expense)
Amortization of deferred financing costs ..            --                 (4.7)
Gain on sale of fixed assets ..............           (1.0)                0.1
Forgiveness of interest and finance charges            6.0                 2.8
Interest expense ..........................           (5.0)              (10.9)
Write-off of idle equipment ...............            --                (14.5)
                                                     -----               -----
   Total other income (expense), net ......            --                (27.2)
                                                     -----               -----

Loss before provision for income taxes ....           (1.5)             (109.3)
   Provision for income taxes .............           (0.1)                --
                                                     -----               -----
Net loss ..................................           (1.6)             (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 loss of  approximately  $0.1  million  during the six months  ended June 30,
2004, current liabilities exceeded current assets by approximately $1.8 million,
including about $0.7 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.

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 AND SIX MONTHS ENDED JUNE 30, 2004 VERSUS THE THREE AND SIX MONTHS ENDED
JUNE 30, 2003

Revenues

Total  revenues  were $3.7  million for the three  months  ended June 30,  2004,
corresponding to an increase of $.6 million, or 20%, over the three months ended
June 30, 2003 revenues of $3.1 million. Total revenues were $6.8 million for the
six months ended June 30, 2004, corresponding to an increase of $2.7 million, or
66%,  over the six months  ended June 30,  2003  revenues of $4.1  million.  The
revenue  gains  realized  during the period were due the  accounting of six full
months of  revenues  from the New England  operations  versus two months for the
prior period.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2004 were $2.7 million,  or
72% of  revenue,  as compared  to $2.3  million,  or 76% of revenue for the same
period in 2003.  Cost of  revenues  for the six months  ended June 30, 2004 were
$4.9 million,  or 73% of revenue, as compared to $3.2 million, or 77% 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 second
quarter 2003.

Operating Expenses

Selling  expenses  for the three months ended June 30, 2004 were $0.3 million or
7.6% of revenue as  compared  to $0.4  million or 15.6% of revenue  for the same
period in 2003.  Selling  expenses  for the six months  ended June 30, 2004 were
$0.5  million or 7.7% of revenue as compared to $0.6 million or 14.6% of revenue
for the same period in 2003. These decreases were due to a sales staff reduction
in the second half of 2003.

General and  administrative  expenses  for the three  months ended June 30, 2004
were $0.6 million or 15.7% of revenue,  as compared to $0.7 million or 23.2% for
the same period  2003.  General and  administrative  expenses for the six months
ended  June 30,  2004 were $1.1  million or 15.5% of  revenue,  as  compared  to
$1.1million or 26.2% or revenue for the same period in 2003. These decreases, as
a percent of sales, were due to increased  revenues for the period  attributable
to the Company's various acquisitions.
<PAGE>

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

THREE AND SIX MONTHS ENDED JUNE 30, 2004 VERSUS THE THREE AND SIX MONTHS ENDED
JUNE 30, 2003 (CONTINUED)

Severance  expense  for the three and six months  ended  June 30,  2004 was $0.3
million  or 10.4% and 5.6% of revenue  respectively.  This  increase  was due to
certain severance agreements with key management personnel.

Depreciation and Amortization

Depreciation and amortization  expenses for the three months ended June 30, 2004
were $0.2 million, or 5.4% of revenue, as compared to $0.33 million, or 10.6% of
revenue for the same period in 2003.  Depreciation and amortization expenses for
the six months  ended June 30, 2004 were $.33  million,  or 4.9% of revenue,  as
compared to $.36  million,  or 8.8% of revenue for the same period in 2003.  The
net decrease in these  expenses was due to the  revaluation of certain assets as
of December 2003.

Interest Expense

Interest  expenses for the three months ended June 30, 2004 were $0.12  million,
or 3.0% of revenue,  as compared to $0.36  million,  or 11.8% of revenue for the
same period in 2003.  Interest  expenses  for the six months ended June 30, 2004
were $0.3 million,  or 4.9% of revenue, as compared to $0.41 million, or 9.9% of
revenue  for the same  period in 2003.  The  decrease as a percent of revenue is
attributable to the Company's various financings  completed during December 2003
and March 31, 2004 (see Item 1, Note 5,  Financing  Arrangements,  above) versus
prior  financing  arrangements  with Prestige  Capital  Corporation  and various
non-reoccurring charges associated with acquisitions completed in May of 2003.

Net Loss

The net loss for the three  months ended June 30, 2004,  was $0.31  million,  or
8.5% of revenue,  as compared  to a loss of $0.86  million,  or 28.0% of revenue
from the same  period in 2003.  The net loss for the six  months  ended June 30,
2004,  was $0.11  million,  or 1.7% of  revenue,  as  compared to a loss of $1.2
million,  or  29.0%  of  revenue  from the same  period  in 2003.  This  loss is
attributable  to a one  time  charge  of  $0.38  million  related  to  severance
agreements for key management personnel.

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 six  months  ended  June 30,  2004,  net  cash  used in our
operating  activities  was $0.13  million as compared to $0.16 million as of the
six months ended June 30, 2003.

Liquidity

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 June 30,  2004 the  Company  had cash of about $0.23
million.  This cash  represents an increase of $0.18 million from the six months
ended June 30, 2003.

Cash Flows for the Six Months Ended June 30, 2004

Our  operating  activities  during  the first two  quarters  of 2004 used  $0.13
million in cash.  Accounts  receivable  at June 30, 2004,  net of allowance  for
doubtful  accounts,  totaled  $2.6  million as  compared  to the June 30,  2003,
balance of $1.9 million.  Accounts payable and accrued expenses at June 30, 2004
totaled $3.1 million as compared to the June 30, 2003,  balance of $3.9 million.
The increase in accounts  receivable  is primarily  due to  acquisition  related
activities.  The decrease in accounts payable and accrued  liabilities is due to
the  Company's  efforts  to  restructure  it's  balance  sheet  through  various
financing activities.



<PAGE>


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

THREE AND SIX MONTHS ENDED JUNE 30, 2004 VERSUS THE THREE AND SIX MONTHS ENDED
JUNE 30, 2003 (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES  (continued)

The Company had a negative  working capital  position of $1.6 million as of June
30,  2004.  This  does not  include  $0.74  million  of short  term  convertible
debenture  debt.  This is a decrease in the deficit of $0.2  million  from March
31,2004.

STOCKHOLDER MATTERS

Stockholders'   equity  was   $5,464,639  of  June  30,  2004,  or  $0.21  share
outstanding,  as compared to $4,547,097 at December 31, 2003, or $0.19 per share
outstanding.  Additionally,  on June 29, 2004,  the Company filed a registration
statement on Form SB-2 in connection with the Laurus  Financing,  see above. The
Company's  annual  meeting  was  held on June 30,  2004,  during  which  one new
director was voted to the Company's board of directors.

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 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.



<PAGE>



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.

     2)   On June 29, 2004, the Company filed a Report on Form 8K, which related
          to the Company's execution of a distribution agreement.



<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

              /S/     KEVIN E. KREISLER
              --------------------------
By:                   KEVIN E. KREISLER
                      Chairman and Chief Executive Officer

Date:                 August 13, 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:                  August 13, 2004

                /S/    RICHARD KRABLIN
                ------------------------
By:                    RICHARD KRABLIN
                       Secretary and Chief Compliance Officer

Date:                    August 13, 2004

                       JAMES HANRAHAN
                       Director

Date:                  August 13, 2004

                       STEPHEN LEWEN
                       Director

Date:                  August 13, 2004

                /S/    KEVIN E. KREISLER
                --------------------------
By:                    KEVIN E. KREISLER
                       Attorney-In-Fact

Date:                  August 13, 2004