**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 SEPTEMBER 30, 2005**
  **COMMISSION
        FILE NO.: 0-50469**
 
   **VERIDIUM
                  CORPORATION**(Exact
                  name of registrant as specified in its charter)**Delaware**
              **59-3764931**(State
                  of other jurisdiction of incorporation or organization)
              (IRS
                  Employer 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
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act)
 Yes
                
                No
                X
  The
        number of outstanding shares of common stock as of November 15, 2005 was
        47,522,410.
  Transitional
        Small Business Disclosure Format:
 Yes
                
                No
                X
 
  
  
 
 **VERIDIUM
        CORPORATION**
 **QUARTERLY
        REPORT ON FORM 10QSB**
 **FOR
        THE FISCAL QUARTER ENDED SEPTEMBER 30, 2005**
  **TABLE
        OF CONTENTS**
 
  **Page
                  No****Part
                  I**
              **Financial
                  Information**Item
                  1.
              Financial
                  Statements (unaudited for September 30, 2005 and 2004)
              3Consolidated
                  Balance Sheets - September 30, 2005 (unaudited) and December 31,
                  2004
              3Consolidated
                  Statements of Operations - for the Three and Nine Months Ended
                  September
                  30, 2005 (unaudited) and 2004 (unaudited)
              4Consolidated
                  Statements of Cash Flows - for the Nine Months Ended September
                  30, 2005
                  (unaudited) and 2004 (unaudited)
              5Notes
                  to Consolidated Financial Statements
              7Item
                  2.
              Management’s
                  Discussion and Analysis or Plan of Operation
              16Item
                  3.
              Controls
                  and Procedures
              23**Part
                  II**
              **Other
                  Information**Item
                  1.
              Legal
                  Proceedings
              24Item
                  2.
              Changes
                  in Securities
              24Item
                  3.
              Defaults
                  Upon Senior Securities
              24Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              24Item
                  5.
              Other
                  Information
              24Item
                  6.
              Exhibits
                  and Reports on Form 8K
              25**Signatures**
              26
 
 
  2
 
 **PART
        I - FINANCIAL INFORMATION**
  **ITEM
                1.**
              **FINANCIAL
                  STATEMENTS (UNAUDITED FOR SEPTEMBER 30, 2005 AND
                  2004)**
  
  **VERIDIUM
        CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEETS**
 **SEPTEMBER
        30, 2005 (UNAUDITED) AND DECEMBER 31, 2004**
 **9/30/05**
                
                **12/31/04****ASSETS:**Current
                    assets:Cash
                
                $
                59,048
                
                $
                1,096,327Accounts
                    receivable, net
                
                
                2,611,901
                
                
                2,147,525Prepaid
                    expenses and other current assets
                
                
                334,
                    515
                
                
                244,396Net
                    current assets of discontinued operations
                
                
                182,896
                
                
                352,135Total
                    current assets
                
                
                3,188,360
                
                
                3,840,383Property
                    and equipment, net
                
                
                1,309,387
                
                
                1,443,913Other
                    Assets:Net
                    noncurrent assets of discontinued operations
                
                
                --
                
                
                2,753,332Deposits
                
                
                104,499
                
                
                15,700Permits,
                    net
                
                
                191,958
                
                
                183,365Customer
                    List
                
                
                47,915
                
                
                --Goodwill
                
                
                4,492,391
                
                
                4,020,762Total
                    other assets
                
                
                4,836,763
                
                
                6,973,159TOTAL
                    ASSETS
                
                $
                9,334,510
                
                $
                12,257,455**LIABILITIES
                    AND STOCKHOLDERS’ EQUITY:**Current
                    liabilities:Short
                    term borrowings
                
                $
                56,964
                
                $
                316,320Accounts
                    payable
                
                
                2,032,994
                
                
                1,891,370Accrued
                    expenses
                
                
                668,267
                
                
                602,851Current
                    maturities of long-term debt
                
                
                606,274
                
                
                178,534Current
                    portion of convertible debentures
                
                
                2,025,742
                
                
                1,736,036Current
                    liabilities of discontinued operations
                
                
                1,209,763
                
                
                1,318,141Total
                    current liabilities
                
                
                6,600,004
                
                
                6,043,162Long-term
                    debt, net of current maturities
                
                
                280,631
                
                
                302,819Convertible
                    debentures, net of current portion
                
                
                3,820,368
                
                
                3,731,565Noncurrent
                    liabilities of discontinued operations
                
                
                82,702
                
                
                201,707Other
                    liabilities
                
                
                18,485
                
                
                18,485Total
                    long term liabilities:
                
                
                4,202.186
                
                
                4,254,576Total
                    liabilities:
                
                
                10,802,190
                
                
                10,297,738Total
                    Minority Interest in discontinued operations
                
                
                825,000
                
                
                825,000Stockholders’
                    equity:Preferred
                    stock, $0.001 par value:Series
                    A: 1,881,366 shares authorized issued and outstanding
                
                
                1,881
                
                
                1,881Series
                    B: authorized 1,801,218 shares; and 1,761,218 issued and outstanding
                    in
                    2005 and 2004
                
                
                1,761
                
                
                1,761Series
                    C: authorized 750,000 shares; 750,000 shares issued and
                    outstanding
                
                
                750
                
                
                750Common
                    stock, $0.001 par value, 50,000,000 authorized; 47,522,410 and
                    33,849,132
                    shares issued for 2005 and 2004, respectively
                
                
                47,522
                
                
                33,849Additional
                    paid-in capital
                
                
                35,284,960
                
                
                35,278,025Accumulated
                    deficit
                
                
                (37,565,800
                )
                
                (33,942,795
                )Treasury
                    stock at cost, 161,266 shares of common stock, for 2005 and
                    2004
                
                
                (63,754
                )
                
                (63,754
                )Common
                    Stock Subscription Receivable, 2,078,533 sharesin2004
                
                
                --
                
                
                (175,000
                )Total
                    stockholders’ (impairment) equity
                
                
                (2,292,680
                )
                
                1,134,717TOTAL
                    LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                $
                9,334,510
                
                $
                12,257,455
 
 The
          notes
          to the Consolidated Financial Statements are an integral part of these
          statements.
  3
  
 **VERIDIUM** **CORPORATION
          AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF OPERATIONS**
 **FOR
          THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)**
 **AND
          2004 (UNAUDITED)**
 
 **For
                    the three months ending**
                
                **For
                    the nine months ending****9/30/05**
                
                **9/30/04**
                
                **9/30/05**
                
                **9/30/04**Revenues:
                
                $
                3,390,833
                
                $
                2,658,265
                
                $
                10,220,274
                
                $
                7,993,236Cost
                    of Revenues
                
                
                1,918,965
                
                
                1,932,414
                
                
                6,914,634
                
                
                5,837,654Gross
                    profit
                
                
                1,471,868
                
                
                725,851
                
                
                3,305,640
                
                
                2,155,582Operating
                    expenses:Selling
                    expenses
                
                
                244,741
                
                
                269,571
                
                
                746,718
                
                
                751,721General
                    and Administrative
                
                
                616,014
                
                
                501,735
                
                
                1,786,610
                
                
                1,266,114Total
                    operating expenses
                
                
                860,755
                
                
                771,306
                
                
                2,533,328
                
                
                2,017,835Operating
                    (loss) income
                
                
                611,121
                
                
                (45,455
                )
                
                772,312
                
                
                137,747Other
                    income (expense):Forgiveness
                    of interest and finance charges
                
                
                
                
                
                73,950
                
                
                67,197
                
                
                413,230Amortization
                    of Deferred Financing Costs
                
                
                
                
                
                (70,968
                )
                
                
                
                
                (70,968
                )Interest
                    expense
                
                
                (181,901
                )
                
                (146,829
                )
                
                (514,051
                )
                
                (537,075
                )Total
                    other income (expense), net
                
                
                (181,901
                )
                
                (143,847
                )
                
                (446,854
                )
                
                (194,813
                )Income
                    (Loss) before provision for income taxes
                
                
                429,220
                
                
                (189,302
                )
                
                325,458
                
                
                (57,066
                )Provision
                    for income taxes, net
                
                
                (598
                )
                
                (1,427
                )
                
                (14,445
                )
                
                (10,160
                )Income(loss)
                    from Continuing Operations
                
                $
                428,622
                
                $
                (190,729
                )
                $
                311,013
                
                $
                (67,226
                )Discontinued
                    Operations
                
                
                (3,714,240
                )
                
                (285,530
                )
                
                (3,934,018
                )
                
                (517,069
                )Net
                    Loss
                
                
                (3,285,618
                )
                
                (476,259
                )
                
                (3,623,005
                )
                
                (584,295
                )Earnings
                    (loss) per share attributable to common shareholders - continuing
                    operations
                
                $
                0.01
                
                $
                (0.02
                )
                $
                0.01
                
                $
                (0.02
                )Loss
                    per share attributable to common shareholders - discontinued
                    operations
                
                $
                (0.08
                )
                $
                (0.02
                )
                $
                (0.10
                )
                $
                (0.02
                )Loss
                    per share attributable to commonshareholders - net loss per
                    share
                
                $
                (0.07
                )
                $
                (0.02
                )
                $
                (0.09
                )
                $
                (0.02
                )Weighted
                    average shares of common stock outstanding basic and
                    Dilutive
                
                
                47,094,043
                
                
                26,008,733
                
                
                41,429,503
                
                
                26,008,733
 
 The
          notes
          to the Consolidated Financial Statements are an integral part of these
          statements.
 
 
 4
 
 
 **VERIDIUM
          CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS**
 **FOR
          THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)**
 **AND
          SEPTEMBER 30, 2004 (UNAUDITED)**
 
 **9/30/05**
                
                **9/30/04**CASH
                    FLOWS FROM OPERATING ACTIVITIESNet
                    loss
                
                $
                (3,623,005
                )
                $
                (584,295
                )Adjustments
                    to reconcile net loss to net cash (used in) provided by operating
                    activitiesDepreciation
                    and amortization
                
                
                76,477
                
                
                94,314Amortization
                    of deferred financing costs
                
                
                --
                
                
                141,934Equity
                    issued in exchange for services rendered
                
                
                143,904
                
                
                --Provision
                    for doubtful accounts
                
                
                (3,324
                )
                
                (4,716
                )Interest
                    paid directly from lender
                
                
                88,803
                
                
                37,917Gain
                    on Sale of Fixed Assets
                
                
                (3,042
                )
                
                --Gain
                    on forgiveness of debt
                
                
                (67,197
                )
                
                --Change
                    in discontinued operations
                
                
                3,507,725
                
                
                451,149Changes
                    in assets and liabilities,Accounts
                    receivable
                
                
                (263,998
                )
                
                (215,350
                )Inventories
                
                
                --
                
                
                3,414Prepaid
                    expenses and other current assets
                
                
                (90,119
                )
                
                (243,686
                )Accounts
                    payable
                
                
                (53,359
                )
                
                248,389Accrued
                    expenses
                
                
                (159,801
                )
                
                (64,293
                )Net
                    cash (used in) provided by operating activities
                
                
                (446,936
                )
                
                (135,223
                )CASH
                    FLOWS FROM INVESTING ACTIVITIESChange
                    in deposit
                
                
                (88,799
                )
                
                (2,400
                )Additional
                    Permit
                
                
                (16,500
                )
                
                --Proceeds
                    from Sale of Fixed Assets
                
                
                3,042
                
                
                --Additions
                    to and acquisition of property, plant and equipment
                
                
                (135,440
                )
                
                --Net
                    cash used in investing activities
                
                
                (237,697
                )
                
                (2,400
                )CASH
                    FLOWS FROM FINANCING ACTIVITIESRepayment
                    to factor, Net
                
                
                --
                
                
                (11,772
                )Repayment
                    of short-term borrowings
                
                
                (192,159
                )
                
                (258,461
                )Repayment
                    of current maturities of long-term debt, net
                
                
                (125,394
                )
                
                (105,391
                )Proceeds
                    of Term Financing
                
                
                137,775
                
                
                --Proceeds
                    from long-term convertible debentures
                
                
                --
                
                
                543,372Proceeds
                    from collection of stock subscription receivable
                
                
                175,000
                
                
                --Proceeds
                    from sale of common stock
                
                
                75,000
                
                
                5,000Purchase
                    of treasury stock
                
                
                (340,624
                )
                
                (50,526
                )Repayment
                    of Laurus Financing
                
                
                (82,244
                )
                
                --Repayment
                    of Subordinate Loan
                
                
                --
                
                
                (45,829
                )Repayment
                    of Convertible Debenture
                
                
                --
                
                
                (15,000
                )Deferred
                    Financing Cost Incurred
                
                
                --
                
                
                (20,000
                )Net
                    cash (used in) provided by financing activities
                
                
                (352,646
                )
                
                133,551(Decrease)
                    Increase in cash
                
                
                (1,037,279
                )
                
                (4,072
                )Cash
                    at beginning of period
                
                
                1,096,327
                
                
                89,392Cash
                    at end of period
                
                $
                59,048
                
                $
                85,320
 
 The
          notes
          to the Consolidated Financial Statements are an integral part of these
          statements.
   5
 
 **VERIDIUM
          CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS**
 **FOR
          THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)**
 **AND
          SEPTEMBER 30, 2004 (UNAUDITED)**
 
 **9/30/05**
                
                **9/30/04**Supplemental
                    disclosure of cash flow informationCash
                    paid during the period for interest
                
                $
                168,907
                
                $
                338,314Supplemental
                    disclosure of non-cash investing and financing activities:Equity
                    issued for deferred financing costs
                
                $
                --
                
                $
                82,500Equity
                    issued to settle accounts payable
                
                
                265,118
                
                
                --Payment
                    of Subordinate Loan with common stock
                
                
                --
                
                
                454,171Payment
                    of Subordinate Loan with proceeds of Laurus Financing
                
                
                --
                
                
                500,000Payment
                    of CCS Debenture with proceeds of Laurus Financing
                
                
                --
                
                
                250,000Payment
                    of Term Financing with proceeds of Laurus Financing
                
                
                --
                
                
                100,000Payment
                    of Accounts-Receivable Factor with proceeds of Laurus
                    Financing
                
                
                --
                
                
                470,762Prepaid
                    expenses paid with proceeds of Laurus Financing
                
                
                --
                
                
                16,945Interest
                    expense paid with proceeds of Laurus Financing
                
                
                --
                
                
                12,917Deferred
                    financing costs paid with proceeds of Laurus Financing
                
                
                --
                
                
                179,876Deferred
                    financing costs associated with Stock Issuances
                
                
                --
                
                
                50,000Issuance
                    of warrants for deferred financing costs
                
                
                --
                
                
                489,229Deferred
                    financing costs issued in connection with subordinate loan
                
                
                --
                
                
                30,500Acquisition
                    of equipment with long term debt
                
                
                --
                
                
                120,998Settlement
                    of accounts payable with short term notes
                
                
                --
                
                
                603,914Issuance
                    of Common Stock
                
                
                --
                
                
                --Incurrence
                    of Term financing
                
                
                178,000
                
                
                --Incurrence
                    of convertible debentures (Laurus Master Fund)
                
                
                408,750
                
                
                --
 
 The
          notes
          to the Consolidated Financial Statements are an integral part of these
          statements.
 
  6
 
 **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
          Veridium Corp. (“Veridium” or “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, 2004.
  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. 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. Results of interim periods are not necessarily indicative
          of the
          results that may be expected for the entire year. See “ *Management’s
          Discussion and Analysis of Financial Condition and Results of
          Operations* ”
          in this
          report.
  The
          accompanying consolidated financial statements have been prepared assuming
          that
          the Company will continue as a going concern. The Company incurred a loss
          of
          $3,623,005 for the nine months ended September 30, 2005. As of September
          30,
          2005 the Company had $59,048 in cash, and current liabilities exceeded
          current
          assets by $3,411,644 including $2,025,742 in liabilities that may be convertible
          into equity. These matters raise substantial doubt about the Company's
          ability
          to continue as a going concern.
  Management
          believes that it will begin to operate profitably due to improved operational
          results and cost cutting practices, including the closure of the Paterson,
          New
          Jersey recycling facility, which was straddled with continued operating
          losses.
          The Company is working diligently to eliminate its working capital deficits
          and
          net losses. However, at this time, it can not be determined if the company
          will
          be successful in this regard. The accompanying financial statements do
          not
          contain any adjustments which may be required as a result of this
          uncertainty.
  **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
          November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
          of
          ARB No. 43, Chapter 4," which clarifies the accounting for abnormal amounts
          of
          idle facility expense, freight, handling costs, and wasted material (spoilage)
          and also requires that the allocation of fixed production overhead be based
          on
          the normal capacity of the production facilities. SFAS No. 151 is effective
          for
          inventory costs incurred during fiscal years beginning after June 15, 2005.
          The
          adoption of this standard is not anticipated to have a material impact
          on the
          Company’s results of operations or financial position.
  In
          December 2004, the FASB issued FASB statement No. 153 ("SFAS 153"). SFAS
          153
          addresses accounting for non-monetary transactions. The adoption of this
          standard is not anticipated to have a material impact on the Company’s results
          of operations or financial position.
  In
          December 2004, FASB issued revised SFAS No. 123R "Share Based Payment."
          This
          statement is a revision to SFAS 123 and supersedes Accounting Principles
          Board
          (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and amends
          FASB Statement No. 95, "Statement of Cash Flows". This statement requires
          a
          public entity to expense the cost of employee services received in exchange
          for
          an award of equity instruments. This statement also provides guidance on
          valuing
          and expensing these awards, as well as disclosure requirements of these
          equity
          arrangements. This statement is effective as of the beginning of the first
          interim or annual reporting period that begins after December 15, 2005.
          The
          revised SFAS No. 123 may have a material effect on the Company's results
          of
          operations but not on the Company's financial position.
  7
  
 **VERIDIUM
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
  **2.**
                **CERTAIN
                    ACCOUNTING POLICIES (****continued****)**
  The
          Company has adopted SFAS No. 143, "Accounting for Asset Retirement Obligations,"
          which addresses financial accounting and reporting for obligations with
          the
          retirement of tangible long-lived assets and the associated asset retirement
          costs. The standard applies to legal obligations associated with the retirement
          of long-lived assets that result from the acquisition, construction, development
          and (or) normal use of the asset.
 
 Statement
          No. 143 requires that the fair value of a liability for an asset retirement
          obligation be recognized in the period in which it is incurred if a reasonable
          estimate of fair value can be made. The fair value of the liability is
          added to
          the carrying amount of the associated asset and this additional carrying
          amount
          is depreciated over the life of the asset. The liability is accreted at
          the end
          of each period through charges to operating expenses. If the obligation
          is
          settled for other than the carrying amount of the liability, the Company
          will
          recognize a gain or loss on settlement .
 
 STOCK
          BASED COMPENSATION
  The
          Company accounts for employee stock-based compensation in accordance with
          Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
          Issued
          to Employees", using an intrinsic value approach to measure compensation
          expense, if any. Under this method, compensation expense is recorded on
          the
          grant date only if the current market price of the underlying stock exceeds
          its
          exercise price. Options and warrants issued to non-employees are accounted
          for
          in accordance with SFAS 123 and EITF Issue No. 96-18, "Accounting for Equity
          Instruments That Are Issued to Other Than Employees for Acquiring, or in
          Conjunction with Selling, Goods and Services" using a fair value approach.
  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, Veridium 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 Veridium's net
          loss,
          as all options granted had an exercise price equal to or greater than the
          market
          value of Veridium's underlying common stock at the date of grant. Had Veridium
          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
          Veridium'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):
 
 **For
                    the Three Months Ending**
                
                **For
                    the Nine Months Ending****9/30/05**
                
                **9/30/04**
                
                **9/30/05**
                
                **9/30/04**Net
                    loss
                
                $
                (3,285,618
                )
                $
                (476,259
                )
                $
                (3,623,005
                )
                $
                (585,078
                )Less:
                    stock based employee compensation expense determined under the
                    fair value
                    method for all awards
                
                
                --
                
                
                --
                
                
                --
                
                
                --Pro
                    forma net loss
                
                
                (3,285,618
                )
                
                (476,259
                )
                
                (3,623,005
                )
                
                (585,078
                )Basic
                    and diluted net loss per common share, as reported
                
                
                (0.07
                )
                
                (0.02
                )
                
                (0.09
                )
                
                (0.02
                )Pro
                    forma basic and diluted net loss per common share
                
                
                (0.07
                )
                
                (0.02
                )
                
                (0.09
                )
                
                (0.02
                )
 
 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. 
          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. The value of
          the
          patents were determined to be impaired during September 2004 and the entire
          balance of $1.7 million was written off in the current period. Since they
          were
          deemed to be contingent on the operation of the Paterson, New Jersey facility
          the decision to close down this facility has rendered the accompanying
          patents
          useless.
 
  8
  
 **VERIDIUM
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **3.**
                **SEGMENT
                    INFORMATION**
  The
          Company operates in a single segment as a full service provider of environmental
          services within the United States of America.
 
 **4.**
                **RELATED
                    PARTY TRANSACTIONS**
  The
          Company had utilized the services of Candent Corporation (formerly Cyngularity
          Corporation), for development and administration of various management
          information systems. Candent is majority-owned by the Company’s Chairman’s
          spouse. Such services approximated $44,100 and $30,400 for the nine-month
          period
          ended September 30, 2005 and 2004. The Company also issued 2,016,578 shares
          in
          the first and second quarter to Candent in full settlement of invoices
          relating
          to the development and operations of the Company’s computer systems and under a
          price protection agreement. The Company no longer utilizes the services
          of
          Candent Corporation
  The
          Company issued 1,000,000 shares of common stock to James Green (chief executive
          officer) during the first quarter of 2005 under a price protection agreement
          relating to a prior acquisition (see note 6).
  The
          Company issued 718,702 shares of common stock to Greenshift Corporation
          (related
          party controlled by Kevin Kreisler the Company’s Chairman) for $25,000 in cash
          and the assumption of certain accounts payable in the amount of $46,806
          in the
          first quarter and issued 1,352,402 shares of common stock for $50,000 and
          the
          assumption of certain accounts payable of $36,831 in the second quarter.
          (see
          note 6).
  The
          Company issued 1,979,849 shares of common stock to Viridis Capital (related
          party controlled by Kevin Kreisler the Company’s Chairman) during the second
          quarter of 2005 pursuant to the completion of an anti-dilution agreement
          which
          was cancelled in August 2004.
  The
          Company issued 1,139,248 shares of common stock to Serenity Capital (related
          party controlled by Lawrence Kreisler, the Company’s former Chairman) during the
          second quarter of 2005 under an anti-dilution agreement. These shares should
          have been issued before the anti-dilution agreement was cancelled in August
          of
          2004.
  The
          Company issued an interest bearing (8%) convertible term note payable due
          in one
          year in the amount of $280,196 to GreenShift Corporation (a related party
          controlled by Kevin Kreisler, the Company Chairman) for payments to satisfy
          debt
          of the Company.
  **5.**
                **FINANCING
                    ARRANGEMENTS**
  The
          following is a summary of the Company’s financing arrangements as of September
          30, 2005 and December 31, 2004:
  **9/30/05**
                
                **12/31/04**Short-term
                    borrowings
                
                $
                56,964
                
                $
                316,320Current
                    maturities of long-term debt:Term
                    financing
                
                
                228,000
                
                
                100,000Liabilities
                    of discontinued operations
                
                
                1,209,763
                
                
                1,318,141Severance
                
                
                --
                
                
                108,746Vehicle
                    loans and other current obligations
                
                
                378,274
                
                
                78,535Total
                    current maturities of long-term debt
                
                $
                1,816,037
                
                $
                1,605,422Current
                    portion of convertible debentures:Laurus
                    Master Fund, 9% convertible debentures, currently due
                
                
                2,025,742
                
                
                1,736,036Long-term
                    debt:Term
                    financing
                
                
                --
                
                
                100,000Liabilities
                    of discontinued operation
                
                
                82,702
                
                
                201,707Severance
                    - related party
                
                
                --
                
                
                171,530Vehicle
                    loans and other current obligations
                
                
                280,631
                
                
                202,819Total
                    long-term debt, net of current maturities
                
                $
                363,333
                
                $
                676,056Convertible
                    debt, net of current portion:Senior
                    loan, 10% rate convertible debenture, due March 2007
                
                
                1,000,000
                
                
                1,000,000GCS
                    debenture, 10% convertible debenture, due December 2008
                
                
                1,272,868
                
                
                1,184,065Subordinate
                    loan, 12% convertible debenture, due December 2008
                
                
                1,547,500
                
                
                1,547,500Total
                    Convertible debt, net of current portion
                
                $
                3,820,368
                
                $
                3,731,565
  The
          following chart is presented to assist the reader in analyzing the Company’s
          ability to fulfill its fixed debt service requirements as of September
          30, 2005
          and the Company’s ability to meet such obligations:
 9
  
 **VERIDIUM
            CORPORATION AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
  **5.**
                  **FINANCING
                      ARRANGEMENTS (**CONTINUED****)****
 Year
                  
                  **Amount**2005
                  
                  $
                  3,898,7432006
                  
                  
                  149,0852007
                  
                  
                  1,090,0102008
                  
                  
                  2,859,0552009
                  
                  
                  85,551Total
                      minimum payments due under current and long-term
                      obligations
                  
                  $
                  8,082,444
  SHORT
          TERM BORROWINGS
  During
          the first quarter 2004, the Company entered into a number of unsecured
          term
          facilities with trade vendors for outstanding accounts payable with a maturity
          date of December 31, 2004, outstanding balances amounted to approximately
          $57,000 and $316,000 at September 30, 2005 and December 31, 2004. The unpaid
          balances at September 30, 2005 are in default.
  TERM
          FINANCING
  The
          Company has certain term financing totaling $100,000 and $200,000, at September
          30, 2005 and December 31, 2004. The balance at September 30, 2005 is payable
          in
          March 2006. This obligation is secured by a first mortgage interest in
          the
          Company’s Massachusetts property.
  The
          Company has certain financing arrangement totaling $128,000 in connection
          with
          the North Country Acquisition. This entire $128,000 balance at September
          30,
          2005 is payable in November 2005.
  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 collateralized by the stock of the Jones and
          Enviro-Safe subsidiaries, and has a UCC filing on the equipment. 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. 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. 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. Any unpaid principal
          balance
          and accrued interest will be due December 19, 2008.
  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. The Subordinate Loan is collateralized by the stock of the Jones
          and
          Enviro-Safe subsidiaries, and has a UCC filing on the equipment.
 
 
  10
  
 **VERIDIUM
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
  **5.**
                **FINANCING
                    ARRANGEMENTS (****CONTINUED****)**
  LAURUS
          FINANCING
  On
          March
          31, 2004, Veridium 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 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.
          This debt can be converted into equity at a fixed conversion price equal
          to
          $0.43 per share. The proceeds of the Laurus Financing were used to complete
          Veridium's recapitalization process and to stimulate increased cash flows
          from
          operations. Specifically, these proceeds were used to (a) repurchase receivables
          sold under a factoring agreement ($0.5 million), (b) payment on the Subordinate
          Loan for $0.5 million, and (c) pay down the CCS Debenture by $0.25 million.
          Simultaneously with the closing of this financing, Veridium additionally
          paid
          $0.5 million of the Subordinate Loan in the form restricted common stock
          (1.25
          million shares) and assigned GCS the balance of the Subordinate Loan, $1.517
          million, in return for a reduction of the Senior Loan of $0.5 million.
          Veridium
          is currently in default of this agreement due to its failure to register
          certain
          stock and debentures.
  **6.**
                **CHANGES
                    IN STOCKHOLDERS’ EQUITY**
  During
          the first nine months of 2005, various common stock issuances for services,
          price protection and debt repayments were as follows: 4,135,194 shares
          issued to
          settle accounts payable amounting to $293,448; 10,437,429 shares issued
          under
          various price protection and anti-dilution agreements (the par value of
          these
          issuances were recorded as a reduction to additional paid in capital);
          258,900
          shares were issued to directors for participation in board meetings for
          $50,000;
          60,000 shares were issued for services of $6,000; 250,000 shares were issued
          for
          cash proceeds of $25,000; The company also purchased 3,832,166 shares of
          common
          stock for a cash payment of $340,611 and the Company immediately retired
          the
          shares.
  In
          September 2003, Veridium's shareholders authorized the issuance of up to
          50,000,000 shares of common stock and 5,000,000 shares of preferred stock.
          As of
          September 30, 2005, the Company did not have sufficient shares of common
          stock
          authorized to accommodate conversion of all outstanding shares of preferred
          stock
  At
          September 30, 2005, the Company has certain price protection and antidilution
          agreements in effect with certain stockholders including certain members
          of the
          board of directors.
  **7.**
                **COMMITMENTS
                    AND CONTINGENCIES**
  EMPLOYMENT
          AGREEMENTS
  Veridium
          is party to certain employment agreements with its Chairman, Chief Executive
          Officer and Chief Compliance Officer. The
          agreements call for an annual base salary of $145,000, $165,000 and $145,000
          respectively, and reimbursement of business expenses, use of a Company
          automobile, periodic bonuses, four weeks vacation and participation in
          any
          employee benefits provided to all employees of Veridium.
  The
          employment agreements also include non-solicitation, covenants not to compete,
          confidentiality requirements, ethics standards, and termination provisions,
          including severance of one year’s salary upon termination by Veridium for any
          reason other than fraud or willful misconduct.
  LEGAL
          PROCEEDINGS
  Veridium
          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 KPMI and VEC, 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 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. Veridium 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 Veridium is seeking to have
          cancelled. Veridium is currently pursuing the reversal of this acquisition
          and
          seeking the return of the common stock issued.
 
 
  11
  
 **VERIDIUM
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
  **7.**
                **COMMITMENTS
                    AND CONTINGENCIES
                    (CONTINUED)**
  Veridium
          was party to a matter entitled Stern & Co. v. Veridium Corporation. The
          action was filed in the United State District Court for the Southern District
          of
          New York on February 2, 2005. The Complaint sought compensatory damages
          of
          approximately $150,000, interest, attorney's fees and costs for breach
          of
          contract. The matter was settled in the third quarter for $30,000.
  Veridium
          is party to a matter entitled Daley v. Veridium Corporation which has been
          filled against the Company by a contractor’s employee who was injured at the
          Paterson Facility while working on an emissions test in 2002.  The
          case is
          in the discovery phase.  The Company is represented and defended
          by its
          insurance carrier.  There is a risk that a judgment may exceed the
          insurance limit, in which case the Company would not be able to pay and
          be
          forced to curtail or cease operations . The
          amount of the loss can not be reasonably estimated at this time.
  The
          Company has received a federal grand jury subpoena from the Middle District
          of
          Pennsylvania requiring the production of original records in regards to
          an
          incident that occurred in February of 2004, where a tanker truck of liquid
          wastes, shipped from the Company's New Jersey recycling facility by a private
          carrier to a destination in Pennsylvania, overheated on the highway, causing
          no
          injuries, but requiring emergency response services, including redirecting
          traffic. The Company is cooperating fully in the investigation . The
          amount of any loss can not be reasonably estimated at this time.
  The
          Company is subject to a number of complaints from the New Jersey Department
          of
          Environmental Protection (“NJDEP”) related to past operations at Paterson from
          1999 to 2004.  The Company has reserved $250,000 to cover the assessed
          penalties.  The NJDEP has indicated a strong desire to settle these
          actions
          in a global settlement and Veridium is NJDEP expect a final settlement
          at the
          reserve amount in the fourth quarter of 2005.
  Veridium
          is party to a lawsuit brought by Interchange Capital Corporation to recover
          unpaid financing on certain capital equipment at our Paterson, New Jersey
          recycling facility. Interchange claims approximately $100,000 is owed.
          The
          company is responding to the claims. The amount of any loss can not be
          reasonably estimated at this time.
  Veridium
          is also involved in various collection matters for which vendors are seeking
          payment for services rendered and goods provided. These collection matters
          total
          $150,000.
  OTHER
          CONTINGENCIES
  Veridium
          is subject to various regulatory requirements, including the procurement
          of
          requisite licenses and permits at its facilities. These licenses and permits
          without which Veridium's operations would be adversely affected are subject
          to
          periodic renewal. Veridium 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.
  Per
          FASB
          143, Veridium has established a remediation accrual for potential costs
          to be
          incurred upon the future closure of its leased hazardous waste recycling
          and
          storage facility located at One Jasper Street in Paterson, NJ. The corporation
          recognized the fair value of the liability for its assets retirement obligation.
          As of September 30, 2005, the fair value of the obligation was estimated
          to be
          $115,000. These estimated costs were recorded as an increase in the gross
          book
          value of property, plant and equipment with a corresponding increase in
          the
          asset retirement obligation. Accretion expense, resulting from the increase
          in
          the present value of the liability due to the passage in time, is recorded
          in
          the amount of $7,000 for the nine months ended September 30, 2005.
  The
          change in asset retirement obligation for 2005 is as follows:
  Opening
                    Balance 1/1/2005
                
                $
                108,000Accretion
                    Expense
                
                
                7,000Ending
                    Balance 9/30/05
                
                $
                115,000
 
 Under
          Veridium'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 environmental impairments is $25,000. Environmental
          liability
          insurance is carried with policy limits of $3,000,000 per occurrence and
          $6,000,000 aggregate.
 
  12









**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**




**7.**
            **COMMITMENTS
                AND CONTINGENCIES
                (CONTINUED)**





Viridis
      Capital, LLC, an affiliate of Kevin Kreisler, assumed a $75,000 debt payable
      to
      Lakeland Bank and assigned this debt to GreenShift, another affiliate of Kevin
      Kreisler. Lakeland Bank has not released Veridium of this debt
      obligation.




The
      Company has certain capital lease arrangements totaling $48,304 as part of
      the
      discontinued operations. These capital leases are currently in
      default.





The
      Company has failed to comply with certain registration requirements for stock
      issued to certain debt holders.




**8.**
            **ACQUISITIONS**




Veridium
      follows SFAS No. 141, “Business Combinations.” Under this standard, business
      acquisitions are accounted for under the purchase method and goodwill represents
      the excess of the purchase price of a business acquisition over the fair market
      value of the net assets acquired at the date of acquisition. The statement
      also
      requires the recognition of acquired intangible assets apart from goodwill
      if it
      arises from contractual and other legal rights. If an intangible does not arise
      from contractual or other legal rights, it shall be recognized as an asset
      apart
      from goodwill only if it is capable of being separated or divided from the
      acquired entity and sold, transferred, licensed, rented, or
      exchanged.




North
      Country Environmental was a full service environmental contracting company
      serving industrial, commercial, institutional, and government accounts. In
      connection with the completion of the acquisition of 100% of the voting equity
      of North Country Environmental in May 2005, Veridium recorded approximately
      $472,000 in goodwill and $50,000 for an amortizable customer list relating
      to
      the engineering and training portion of the business. Such amortizable
      intangible assets have an expected useful life of ten years. This acquisition
      provided Veridium with the additional volume in the Field Service area to
      maximize potential of existing structure, as well as to add Engineering and
      Training to the service offerings. Operations of this acquisition from the
      date
      of acquisition through September 30, 2005 have been included in the Company’s
      consolidated statement of operations. The following table summarizes the fair
      value of assets acquired and liabilities assumed for the acquisition detailed
      above.




Purchase
                Price:Cash
                paid to sellersCash
                paid directly to lending facility on Line of Credit
            
            $
            358,750Cash
                paid directly to seller
            
            $
            50,000Total
                Cash payments to seller
            
            $
            408,750Fair
                value of debt issued to sellers, per agreement
            
            $
            128,000Fair
                value of equity issued on date of acquisition (982,759 shares of
                common)
            
            $
            75,000Total
                Purchase Price
            
            $
            611,750Fair
                value of net assets acquiredCurrent
                Assets
            
            $
            233,853Property
                and Equipment
            
            $
            175,280Goodwill
            
            $
            471,629Customer
                List
            
            $
            50,000Total
                assets acquired
            
            $
            930,762Liabilities
                Assumed:Current
                Liabilities
            
            $
            242,880Long
                Term Debt
            
            $
            76,132Total
                liabilities assumed
            
            $
            319,012


13
  
 **VERIDIUM
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


The
      following (unaudited) pro-forma consolidated results of operations have been
      prepared as if the acquisition of North Country Environmental had occurred
      at
      the beginning of the periods presented:





September
                30, 2005
            
            September
                30, 2004Sales
            
            $
            11,297,740
            
            $
            9,343,236Income
                (loss) from continuing operations
            
            $
            (637,464
            )
            $
            (494,295
            )Net
                loss per share - basic and diluted
            
            
            ($
                0.07
            )
            
            ($
                0.02
            )




**9.**
            **SUBSEQUENT
                EVENTS**




DISCONTINUED
      OPERATIONS - AMERICAN METALS RECOVERY CORPORATION




On
      October 24, 2005, the Veridium Board of Directors adopted a plan to close the
      Paterson, New Jersey recycling facility operated by American Metals Recovery
      Corporation (“AMRC”). The decision to terminate operations at the Paterson
      facility was made due to overall economic factors, in particular the decreasing
      volume of inorganic, metal-bearing wastes suitable for recycling. AMRC has
      ceased accepting waste and will remove all hazardous waste from the facility.
      AMRC will dispose of all of the equipment and clean the facility as required
      by
      regulation and surrender the premises by December 31, 2005. All costs associated
      with the closure will be incurred by December 31, 2005.




The
      results of the recycling business are recorded as discontinued operations,
      of
      which the components are as follows:




9
                Months Ended
            
            9
                Months Ended9/30/2005
            
            9/30/2004Net
                Revenues
            
            
            1,252,814
            
            
            2,858,576Cost
                of Revenues
            
            
            1,899,936
            
            
            2,547,865Gross
                Margin
            
            
            (647,122
            )
            
            310,711Selling,
                General and Administrative
            
            
            314,768
            
            
            803,223Impairment
                of assets
            
            
            2,958,876Operating
                Loss
            
            
            (3,920,766
            )
            
            (492,512
            )Other
                Income/Expenses
            
            
            (13,252
            )
            
            (24,557
            )Loss
                from Discontinued Operations
            
            
            (3,934,018
            )
            
            (517,069
            )





(a)
            The
                results presented above for 2005 and 2004 include the operating activity
                for the recycling operation for the entire nine
                months.





The
      assets and liabilities of the recycling business were reported as assets and
      liabilities of discontinued operations at September 30, 2005. The net fixed
      assets and the net intangible assets totaling $2,958,876, below were written
      down to zero based upon the assets and intangibles were site specific to our
      Paterson, New Jersey facility. Also, as of September 30, 2005, a portion of
      the
      discontinued operations assets are being used as collateral against certain
      outstanding Veridium debt instruments.




14
  
 **VERIDIUM
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**9.**
              **SUBSEQUENT
                  EVENTS (**CONTINUED****)****


Current
                assets of discontinued operations:Accounts
                Receivables
            
            
            156,956Inventory
            
            
            3,383Other
                current assets
            
            
            22,557Total
                current assets of discontinued operations
            
            
            182,896Net
                noncurrent assets of discontinued operations:Net
                fixed assets
            
            
            1,187,333Net
                intangible assets
            
            
            1,771,543Less:
                recognition of impairment
            
            
            (2,958,876
            )Total
                noncurrent assets of discontinued operations
            
            
            --Total
                Assets of discontinued operations
            
            
            182,896Current
                liabilities of discontinued operations:Accounts
                Payable
            
            
            530,775Accrued
                and other current liabilities
            
            
            678,988Total
                current liabilities of discontinued operations
            
            
            1,209,763Net
                noncurrent liabilities of discontinued operations:Other
                long term liabilities
            
            
            82,702Total
                noncurrent liabilities of discontinued operations
            
            
            1,292,465Total
                minority interest in discontinued operations
            
            
            825,000Total
                net assets of discontinued operations:
            
            
            1,024,307





INCREASE
      IN AUTHORIZED STOCK





On
      November 7, 2005 Veridium filed a Certificate of Amendment of its Certificate
      of
      Incorporation. The amendment increased the number of authorized shares of common
      stock from 50,000,000 to 250,000,000.









15








**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
      Corporation is a Delaware Corporation and through its subsidiaries ("we", "our",
      "us", "Veridium" or the "Company"), are an
      environmental management company providing a variety of services to a broad
      client base in both the private and public sectors with a specialization in
      the
      transportation, disposal and remediation of hazardous wastes. We
      conduct business throughout the northeastern region of the United States and
      o ur
      services include:




·
            *Environmental
                Services*-
                we provide transportation, distribution, recycling and disposal services
                specific to the materials and processes of our clients, for a wide
                range
                of industrial wastes.


·
            *Field
                Services*-
                we provide remedial, industrial cleaning and other related services
                for
                our clients at their sites and
                facilities.




Our
      business for the first nine months of 2005 is broken down into 80 percent
      distribution and 20 percent field services. By offering both distribution and
      field service services, we enable our customers to engage Veridium to manage
      their wastes in the most cost effective and environmentally friendly manner
      possible.




The
      Company was formed in 1984 as KBF Pollution Management, Inc. ("KPMI") and was
      merged with its wholly owned subsidiary, Veridium Corporation in 2003 after
      completing the acquisition of the former Environmental Services Division of
      R.M.
      Jones & Co., Inc. ("ESD"), Enviro-Safe, Corp. ("ESC"), and Metal Recovery
      Transportation, Corp., ("MRTC"). These acquisitions were completed to form
      a
      full service environmental company, operating throughout the New England,
      Northeast and Mid-Atlantic States.




We
      presently operate four service centers: our Part B permitted TSDF in Lowell,
      Massachusetts, our field service operation and administrative offices in
      Sandwich, Massachusetts and Milford, Massachusetts; and our technical services
      center in Plainville, Connecticut.




Veridium
      operates through its subsidiary, Veridium Environmental Corporation ("VEC").
      VEC, in turn, is the sole owner of (1) ESD, the sole owner of Jones
      Environmental Services (North East), Inc., our Massachusetts-based RCRA Part
      B
      TSD facility, and (2) ESC, our field service company. All commercial activities
      are conducted through these subsidiaries.











16


**ITEM 2.**
              **MANAGEMENT'S
                  DISCUSSION AND****ANALYSIS
                  AND PLAN OF OPERATION**
  The
        table
        and below discussions should be read in conjunction with Item 1, *Financial
        Statements,* of
        this
        report.





**Percentage
                of Total Revenues For the Period Ended****9/30/05**
            
            **9/30/04**Revenue
            
            
            100.0
            %
            
            100.0
            %Cost
                of revenue
            
            
            67.7
            
            
            73.0Gross
                profit
            
            
            32.3
            
            
            27.0Selling
                expenses
            
            
            7.3
            
            
            9.4General
                and administrative expenses
            
            
            17.5
            
            
            15.8Total
                operating expenses
            
            
            24.8
            
            
            25.2Income
                (loss) from operations
            
            
            7.5
            
            
            1.8Forgiveness
                of interest and finance charges
            
            
            --
            
            
            5.2Gain
                on Sale of Fixed Assets
            
            
            --
            
            
            (0.8
            )Interest
                expense
            
            
            (5.0
            )
            
            (6.7
            )Total
                other income (expense)
            
            
            (5.0
            )
            
            (2.3
            )Income
                (loss) before provision for income taxes
            
            
            2.5
            
            
            (0.5
            )Provision
                for income taxes
            
            
            (0.0
            )
            
            (0.0
            )Net
                income (loss) from continuing operations
            
            
            2.5
            
            
            (0.5
            )Discontinued
                operations
            
            
            (38.5
            )
            
            (6.5
            )Net
                (loss) Income
            
            
            (36.0
            )
            
            (7.0
            )





BUSINESS
      RISK FACTORS




There
      are
      many important factors that have affected, and in the future could affect,
      Veridium’s business, including but not limited to the factors discussed below,
      which should be reviewed carefully together with other information contained
      in
      this report. Some of the factors are beyond our control and future trends are
      difficult to predict.




**Veridium
      is currently in default on some of its debt.**




Veridium
      is currently in default of its Laurus Financing agreement due to its failure
      to
      register certain securities. The entire Laurus financing is now due upon demand.
      As of September 30, 2005 this amount totaled $2,025,742 and has not been
      demanded. If this amount is demanded, Veridium would have to find alternative
      financing or liquidate assets to satisfy the demand.







17




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


**The
      conversion of our convertible debentures, the exercise of our outstanding
      warrants and options and the Company’s various anti-dilution and
      price-protection agreements could cause the market price of our common stock
      to
      fall, and may have dilutive and other effects on our existing
      stockholders.**




The
      conversion of our outstanding convertible debentures, and the exercise of our
      outstanding warrants and options could result in the issuance of up to 7,070,348
      shares of common stock, assuming all outstanding warrants and options are
      currently exercisable, and taken with the Company’s various anti-dilution and
      price-protection agreements, are subject to adjustment pursuant to certain
      anti-dilution and price-protection provisions.




Such
      issuances would reduce the percentage of ownership of our existing common
      stockholders and could, among other things, depress the price of our common
      stock.  This result could detrimentally affect our ability to raise
      additional equity capital.  In addition, the sale of these additional
      shares of common stock may cause the market price of our stock to
      decrease.




**Our
      external auditors have issued a going concern opinion at December 31,
      2004.**




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. The Company incurred a net loss
      of
      $ 3,623,005 for the nine months ended September 30, 2005. As of September 30,
      2005 the Company had $59,048 in cash, and current liabilities exceeded current
      assets by $ 3,411,644 including $2,025,742 in liabilities that are convertible
      into equity. These matters raise substantial doubt about the Company's ability
      to continue as a going concern.




**The
      company received a Federal Grand Jury subpoena regarding an incident occurring
      in February of 2004.**




The
      Company has received a federal grand jury subpoena from the Middle District
      of
      Pennsylvania requiring the production of original records in regards to an
      incident that occurred in February of 2004, where a tanker truck of liquid
      wastes, shipped from the Company's New Jersey recycling facility by a private
      carrier to a destination in Pennsylvania, overheated on the highway, causing
      no
      injuries, but requiring emergency response services, including redirecting
      traffic. If this investigation leads to successful legal action against the
      company, substantial penalties may be imposed and business may be lost,
      jeopardizing continuing operations at the New Jersey Recycling
      Facility.




**The
      Company’s New Jersey operation is subject to a number of complaints by the New
      Jersey Department of Environmental Protection.**




The
      Company is subject to a number of complaints from the New Jersey Department
      of
      Environmental Protection (“NJDEP”) related to past operations at Paterson from
      1999 to 2004.  The Company has reserved $250,000 to cover the assessed
      penalties.  The NJDEP has indicated a strong desire to settle these
      actions
      in a global settlement and Veridium has worked with the NJDEP to settle at
      this
      amount. This agreement is almost completed.




**The
      company’s New Jersey recycling operation was subject to continuous operating
      losses and therefore closure.**




Diligent
      and extensive measures had been taken to reduce costs and increase revenue
      at
      the Company’s New Jersey Recycling Facility. These efforts did not result in
      this facility operating as a profitable center in the marketplace Because of
      this, the company’s operation has stopped accepting wastes and a plant shutdown
      has begun. Potential closure cost could be higher than expected and therefore
      higher than anticipated losses for the company.






18




**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 $3.6 million during the first nine months ending September
      30, 2005, current liabilities exceeded current assets by approximately $ 3.4
      million, including about $2.0 million in liabilities that are convertible into
      equity. This working capital deficit raises 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
      NINE MONTHS ENDED SEPTEMBER 30, 2005 VERSUS THE THREE AND NINE MONTHS ENDED
      SEPTEMBER 30, 2004




**Revenues**




Total
      revenues were $ 3.4 million for the three months ended September 30, 2005,
      corresponding to an increase of $ 0.8 million, or 28%, over the three months
      ended September 30, 2004 revenues of $ 2.7 million. Total revenues for the
      nine
      months ended September 30, 2005 were $ 10.2 million corresponding to an increase
      of $2.2 million, or 28% over the nine months ended September 30, 2004 revenues
      of $8.0 million. The increased revenues realized during the period were largely
      due to one large budgeted project and the North Country Environmental
      acquisition.




**Cost
      of Revenues**




Cost
      of
      revenues for the three months ended September 30, 2005 were $ 1.9 million,
      or 56
      % of revenue, as compared to $ 1.9 million, or 73 % of revenue for the same
      period in 2004. Cost of revenues for the nine months ended September 30, 2005
      were $6.9 million, or 67 % of revenue compared to $ 5.8 million, or 73 % of
      revenue.




**Selling,
      General and Administrative Expenses**




Selling,
      general and administrative expenses for the three months ended September 30,
      2005 were $ 0.8 million, or 25 % of revenue, as compared to $ 0.8 million,
      or 29
      % of revenue for the same period in 2004. Selling, general and administrative
      expenses for the nine months ended September 30, 2005 were $ 2.5 million, or
      25
      % of revenue compared to $ 2.0 million, or 25% of revenue.




Operating
      results for the three months ended September 30, 2005, increased about $ 650,000
      from an operating loss of about $ 45,000 from the period ending September 30,
      2004. Operating results for the nine months ended September 30, 2005 is an
      operating income of $ 772,000 as compared to an operating income of $ 138,000.




19


**ITEM 2.**
              **MANAGEMENT'S
                  DISCUSSION AND****ANALYSIS
                  AND PLAN OF OPERATION**
  THREE
        AND
        NINE MONTHS ENDED SEPTEMBER 30 2005 VERSUS THE THREE AND NINE MONTHS ENDED
        SEPTEMBER 30, 2004




**Depreciation
      and Amortization**




Depreciation
      and amortization expenses for the three months ended September 30, 2005 were
      $
      0.1 million, as compared to $ 0.1 million for the same period in 2004.
      Depreciation and amortization expense for the nine months ended September 30,
      2005 was $ 0.1 million or 0.9 % of revenues, as compared to $ 0.4 million or
      4.8
      % of revenues.




**Interest
      Expense**




Interest
      expenses for the three months ended September
      30, 2005 were $ 0.2 million, or 5.3% of revenue, as compared to $0.1 million,
      or
      5.5 % of revenue for the same period in 2004. Interest expense for the nine
      months ended September 30, 2005 were $ 0.5 million or 4.4 % of revenue as
      compared to $ 0.5 million or 6.7 % of revenue.




**Income
      (loss) from Continuing Operations**




Income
        from continuing operations for the three months ended September 30, 2005,
        was $
        0.4 million, or 12.7 % of revenue, as compared to a loss from continuing
        operations of $ 0.2 million, or 7.2 % of revenue from the same period in
        2004.
        The income from continuing operations for the nine months ended September
        30,
        2005 was $ 0.3 million, or 3.2 %, as compared to a loss from continuing
        operations of $ 0.1 for the same period in 2004. On May 10, 2005, Veridium
        acquired the assets and certain liabilities of North Country Environmental
        Services and subsequently, combined this unit with EnviroSafe, our Field
        Services unit headquartered in Sandwich, MA. We have seen positive profitability
        with this acquisition.


**Loss
      from Discontinued Operations**




The
        loss
        from discontinued operations for the three months ended September 30, 2005,
        was
        $ 3.7 million, as compared to a loss from discontinued operations of $ 0.3
        million from the same period in 2004. The loss from discontinued operations
        for
        the nine months ended September 30, 2005 was $ 3.9 million, as compared to
        a
        loss from discontinued operations of $ 0.5 million for the same period in
        2004.


**Net
      Income**




Net
      loss
      for the three months ended September 30, 2005, was $ 3.3 million, as compared
      to
      a net loss of $ 0.5 million from the same period in 2004. The net loss for
      the
      nine months ended September 30, 2005 was $ 3.6 million, as compared to a net
      loss of $ 0.6 for the same period in 2004.






LIQUIDITY
      AND CAPITAL RESOURCES




**Cash** ****




Our
      primary source of liquidity is cash provided by operating, investing and
      financing activities, and availability under our various credit facilities.
      For
      the nine months ended September 30, 2005, net cash used by our operations,
      investing and financing activities was approximately $ 1,037,000 as compared
      to
      the net cash used by operations, investing and financing activities of about
      $
      4,000 for the same period of 2004.




**Liquidity**




Our
      operating activities during the first nine months of 2005 used approximately
      $
      808,000 in cash, as compared to cash provided by operations of approximately
      $
      85,000 during the same period in 2004. We used cash provided from operating
      activities to fund operations and strengthen our balance sheet. 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 September 30, 2005 the Company had cash of
      approximately $59,000. This cash represents a decrease of $1,037,000
      from **** the
      year
      ended December 31, 2004.




20





**ITEM 2.**
              **MANAGEMENT'S
                  DISCUSSION AND****ANALYSIS
                  AND PLAN OF OPERATION**
  **Nine
      Months Ended September 30, 2005**




Our
      operating activities during the first nine months of 2005 used approximately
      $
      0.2 million in cash. Accounts receivable at September 30, 2005, net of allowance
      for doubtful accounts, totaled $2.6 million as compared to the December 31,
      2004, balance of $ 2.1million. Accounts payable at September 30, 2005 totaled
      $2.0 million as compared to the December 31, 2004, balance of $ 1.9 million.
      Accrued expenses at September 30, 2005 totaled $ 0.7 million as compared to
      the
      December 31, 2004 balance of $ 0.6 million. These increases and decreases are
      a
      result of normal operational activity.




LIQUIDITY
      AND CAPITAL RESOURCES (CONTINUED)




For
      the
      nine months ended September 30, 2005, Veridium used $ 0.2 million from investing
      activities, and we used net cash from financing of $ 0.5 million. We used these
      funds to further provide working capital for operations. Our financing
      arrangements are discussed in more detail in Item 1, Note 5, *Financing
      Arrangements* ,
      above.




The
      Company had a negative working capital position of $ 3.2 million at September
      30, 2005, of which convertible debentures accounted for approximately $2.0
      million.




STOCKHOLDER
      MATTERS




Stockholders’
      impairment was $ 2.2 million at September 30, 2005, or ($ 0.05) per share
      outstanding, as compared to $1.1 million of stockholders equity at December
      31,
      2004, or $0.04 per share outstanding.




In
      September 2003, Veridium's shareholders authorized the issuance of up to
      50,000,000 shares of common stock and 5,000,000 shares of preferred stock.
      As of
      September 30, 2005, the Company did not have sufficient shares of common stock
      authorized to accommodate conversion of all outstanding shares of preferred
      stock




GreenShift
      Corporation ("GreenShift"), an affiliate of Kevin Kreisler, the Company
      Chairman, has an anti-dilution agreement in place to maintain its ownership
      percentage (relative to the acquisition by GreenShift of 750,000 shares of
      the
      Company's Series C Preferred Stock for $1.5 million in December 2004) at about
      25% of the outstanding capital stock of the Company; the terms of the December
      2004 GreenShift investment also provide for price protection in the amount
      of
      $1.5 million. Mr. Kreisler additionally has price protection rights relative
      to
      his purchase and conversion into restricted preferred stock of approximately
      $1.0 million of the Company's debt in December 2004. As of September 30, 2005,
      no additional shares were due under these agreements.




ANTI-DILUTION
      AND PRICE PROTECTION AGREEMENTS




James
      Green has an anti-dilution agreement in place to maintain his ownership
      percentage at 10% of the outstanding capital stock of the Company until December
      31, 2005. Mr. Green additionally has price protection rights relative to the
      Company's May 2003 acquisition from Mr. Green of EnviroSafe Corp., in the
      approximate amount of $283,000. During 2004 and 2003, Mr. Green received 180,000
      shares of the Company's Series B Preferred Stock and 3.6 million shares of
      the
      Company's common stock, respectively, pursuant to these agreements. As of
      September 30, 2005, no additional shares were due under these agreements. In
      connection with the issuance of these shares, the Company has adjusted the
      par
      value and paid in capital.




Richard
      Krablin has an anti-dilution agreement in place to maintain his ownership
      percentage at 3% of the outstanding capital stock of the Company. During 2004
      and 2003, Mr. Krablin received 47,383 shares of the Company's Series B Preferred
      Stock and 245,000 of the Company's common stock, respectively, pursuant to
      this
      agreement. As of September 30, 2005, no additional shares were due under this
      agreement. In connection with the issuance of these shares, the Company has
      adjusted the par value and paid in capital.




In
      addition to the agreements detailed above, four shareholders had price
      protection agreements totaling about $150,000 as of September 30, 2005,
      corresponding to an expected additional 1,650,000 shares of common stock. This
      amount depends on a variety of factors including market price for the Company's
      common stock and whether any cash payments are made.




NEW
      ACCOUNTING PRONOUNCEMENTS




In
      November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
      of
      ARB No. 43, Chapter 4," which clarifies the accounting for abnormal amounts
      of
      idle facility expense, freight, handling costs, and wasted material (spoilage)
      and also requires that the allocation of fixed production overhead be based
      on
      the normal capacity of the production facilities. SFAS No. 151 is effective
      for
      inventory costs incurred during fiscal years beginning after June 15, 2005.
      The
      adoption of this standard is not anticipated to have a material impact on the
      Company’s results of operations or financial position






21


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


NEW
      ACCOUNTING PRONOUNCEMENTS (continued)




In
      December 2004, the FASB issued FASB statement No. 153 ("SFAS 153"). SFAS 153
      addresses accounting for non-monetary transactions. This statement is not
      anticipated to have a material effect on the Company's results of operations.





In
      May
      2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No.
      154,
      Accounting Changes and Error Corrections, a replacement of APB Opinion No.
      20
      and FASB Statement No. 3. SFAS 154 requires retrospective application to prior
      periods financial statements for changes in accounting principle, unless it
      is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change. SFAS 154 also requires that retrospective application
      of a
      change in accounting principle be limited to the direct effects of the change.
      Indirect effects of a change in accounting principle, such as a change in
      non-discretionary profit-sharing payments resulting from an accounting change,
      should be recognized in the period of the accounting change. SFAS 154 also
      requires that a change in depreciation, amortization, or depletion method for
      long-lived, non-financial assets be accounted for as a change in accounting
      estimate effected by a change in accounting principle. SFAS 154 is effective
      for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005. Early adoption is permitted for accounting changes
      and
      corrections of errors made in fiscal years beginning after the date this
      Statement is issued. The Company does not expect the adoption of this SFAS
      to
      have a material impact on its consolidated financial position, results of
      operations or cash flows.




In
      December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
      No.
      123R "Share Based Payment." This statement is a revision to SFAS 123 and
      supersedes Accounting Principles Board (APB) Opinion No. 25, "Accounting for
      Stock Issued to Employees," and amends FASB Statement No. 95, "Statement of
      Cash
      Flows". This statement requires a public entity to expense the cost of employee
      services received in exchange for an award of equity instruments. This statement
      also provides guidance on valuing and expensing these awards, as well as
      disclosure requirements of these equity arrangements. This statement is
      effective as of the beginning of the first interim or annual reporting period
      that begins after December 15, 2005. The revised SFAS No. 123 may have a
      material effect on the Company's results of operations but not on the Company's
      financial position.




OFF
      BALANCE SHEET ARANGEMENTS




Viridis
      Capital, LLC, an affiliate of Kevin Kreisler, assumed a $75,000 debt payable
      to
      Lakeland Bank and assigned this debt to GreenShift, another affiliate of Kevin
      Kreisler. Lakeland Bank has not released Veridium of this debt obligation.





22








**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.




There
      was
      no change in internal controls over financial reporting (as defined in Rule
      13a-15(f) promulgated under the Securities Exchange Act of 1934) identified
      in
      connection with the evaluation described in the preceding paragraph that
      occurred during the Company’s third fiscal quarter that has materially affected
      or is reasonably likely to materially affect the Company’s internal control over
      financial reporting.






























23








**PART
      II - OTHER INFORMATION**




**ITEM
              1.**
            **LEGAL
                PROCEEDINGS**




Veridium
      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 KPMI and VEC, 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 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. Veridium 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 Veridium is seeking to have
      cancelled. Veridium is currently pursuing the reversal of this acquisition
      and
      seeking the return of the common stock issued.




Veridium
      was party to a matter entitled Stern & Co. v. Veridium Corporation. The
      action was filed in the United State District Court for the Southern District
      of
      New York on February 2, 2005. The Complaint sought compensatory damages of
      approximately $150,000, interest, attorney's fees and costs for breach of
      contract. The matter was settled in the third quarter for $30,000.




Veridium
      is party to a matter entitled Daley v. Veridium Corporation which has been
      filled against the Company by a contractor’s employee who was injured at the
      Paterson Facility while working on an emissions test in 2002.  The case
      is
      in the discovery phase.  The Company is represented and defended by
      its
      insurance carrier.  There is a risk that a judgment may exceed the
      insurance limit, in which case the Company would not be able to pay and be
      forced to curtail or cease operations . The
      amount of the loss can not be reasonably estimated at this time.




The
      Company has received a federal grand jury subpoena from the Middle District
      of
      Pennsylvania requiring the production of original records in regards to an
      incident that occurred in February of 2004, where a tanker truck of liquid
      wastes, shipped from the Company's New Jersey recycling facility by a private
      carrier to a destination in Pennsylvania, overheated on the highway, causing
      no
      injuries, but requiring emergency response services, including redirecting
      traffic. The Company is cooperating fully in the investigation .
      The
      amount of any loss can not be reasonably estimated at this time.




The
      Company is subject to a number of complaints from the New Jersey Department
      of
      Environmental Protection (“NJDEP”) related to past operations at Paterson from
      1999 to 2004.  The Company has reserved $250,000 to cover the assessed
      penalties.  The NJDEP has indicated a strong desire to settle these
      actions
      in a global settlement and Veridium is NJDEP expect a final settlement at the
      reserve amount in the fourth quarter of 2005.




Veridium
      is party to a lawsuit brought by Interchange Capital Corporation to recover
      unpaid financing on certain capital equipment at our Paterson, New Jersey
      recycling facility. Interchange claims approximately $100,000 is owed. The
      company is responding to the claims. The amount of any loss can not be
      reasonably estimated at this time .





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




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.












24






**ITEM
                6.**
              **EXHIBITS**





The
      following are exhibits filed as part of the Company’s Form 10-QSB for the period
      ended March 31, 2005:




Exhibit
                Number
            Description3-a(1)
            Certificate
                of Amendment of Certificate of Incorporation filed on November 9,
                200531.1
            Certification
                of Chief Executive Officer pursuant to Exchange Act Rules 13a-15(e)
                and
                15d-15(e).31.2
            Certification
                of Chief Financial Officer pursuant to Exchange Act Rules 13a-15(e)
                and
                15d-15(e).32.1
            Certification
                Chief Executive Officer and Chief Financial Officer pursuant to 18
                U.S.C.
                Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                Act
                of 2002.





























25







**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. KREISLERKEVIN
                E. KREISLERPresident
                and
                Chief Executive OfficerDate:
            November
                18,
                2005By:
            /S/     
                MICHAEL J. DESROSIERSMICHAEL
                J. DESROSIERSChief
                Financial OfficerDate:
            November
                18,
                2005





































26