--------------------------------------------------------------------------------
                       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, 2004

                         Commission File No.: 000-050469



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


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


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


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





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



The number of  outstanding  shares of common stock as of September 30, 2004 was:
26,717,093.  Based on the average closing bid and ask price of the  Registrant's
common  stock,   the  aggregate  market  value  of  the  voting  stock  held  by
non-affiliates of the Registrant as of September 30, 2004 was $3,740,393.



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



<PAGE>



                              VERIDIUM CORPORATION
                         QUARTERLY REPORT ON FORM 10QSB
                 FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2004
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS


                                                                                                           Page No
Part I    Financial Information
<S>       <C>                                                                                                <C>
Item 1.   Financial Statements................................................................................3
          Consolidated Balance Sheets  - September 30, 2004 (Unaudited) and December 31, 2003.................4
          Consolidated Statements of Operations (Unaudited) - Three and Nine Months  Ended
          September 30, 2004 and 2003.........................................................................5
          Consolidated Statements of Cash Flows (Unaudited) -  For the Nine Months Ended
          September 30, 2004 and 2003.........................................................................6
          Notes to Unaudited Consolidated Financial Statements................................................7
Item 2.   Management's Discussion and Analysis or Plan of Operation..........................................13
Item 3.   Controls and Procedures............................................................................17

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

Signatures                                                                                                   19
</TABLE>



<PAGE>


                        PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS




<PAGE>
<TABLE>
                      VERIDIUM CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
<CAPTION>
                                                               9/30/04           12/31/03
                                                             (unaudited)
                                                            ------------------------------
ASSETS:
Current assets:
<S>                                                          <C>             <C>
   Cash ..................................................   $     85,320    $     89,392
   Accounts receivable, net ..............................      2,672,932       1,970,332
   Inventories ...........................................          4,221           7,634
Prepaid expenses and other current assets ................        364,923         104,303
                                                             ------------    ------------
       Total current assets ..............................      3,127,396       2,171,661

Property and equipment, net ..............................      3,636,239       3,770,379

Other Assets:
   Deposits ..............................................        125,224         123,102
   Patents and technologies, net .........................      3,059,108       3,173,336
Deferred financing costs, net ............................        709,671            --
   Permits, net ..........................................        302,279         315,609
   Goodwill ..............................................      6,275,040       6,275,040
                                                             ------------    ------------
       Total other assets ................................     10,471,322       9,887,087
                                                             ------------    ------------
TOTAL ASSETS .............................................   $ 17,234,957    $ 15,829,127
                                                             ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Short term borrowings .................................   $    420,353    $     75,000
   Accounts payable ......................................      2,379,681       2,735,106
   Accrued expenses ......................................      1,192,151       1,256,444
   Current maturities of long-term debt ..................        349,635         173,162
   Current portion of convertible debentures .............        744,000       2,712,000
   Current portion of obligations under capital lease ....        138,192         191,461
                                                             ------------    ------------
       Total current liabilities .........................      5,224,012       7,143,173

Long-term debt, net of current maturities ................        492,497         370,883
Convertible debentures, net of current portion ...........      5,532,937       2,701,065
Obligations under capital lease, net of current maturities         48,859         123,424
Other liabilities ........................................         18,485          18,485
                                                             ------------    ------------
       Total long term liabilities: ......................      6,092,778       3,213,857

       Total liabilities: ................................     11,316,790      10,357,030

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

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

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

   Common stock, $0.001 par value, 50,000,000 authorized;
   26,717,093 and 23,379,916 shares issued
    for 2004 and 2003, respectively ......................         26,717          23,380

   Additional paid-in capital ............................     32,580,566      31,505,431
   Accumulated deficit ...................................    (27,553,589)    (26,971,713)
   Treasury stock at cost, 131,266 and 5,000 shares
    of common stock, respectively ........................        (63,354)        (12,828)
                                                             ------------    ------------
       Total stockholders' equity ........................      4,993,167       4,547,097
                                                             ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...............   $ 17,234,957    $ 15,829,127
                                                             ============    ============

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


<PAGE>
<TABLE>

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


<CAPTION>

                                                                   For The Three Months            For The Nine Months
                                                                    Ended September 30              Ended September 30
                                                                2004              2003          2004            2003
<S>                                                          <C>             <C>             <C>             <C>
Revenues .................................................   $  3,108,541    $  4,098,615    $  9,903,665    $  8,103,703
   Cost of revenues ......................................      2,494,090       3,265,543       7,437,209       6,339,559
                                                             ------------    ------------    ------------    ------------
     Gross profit ........................................        614,451         833,072       2,466,456       1,770,744

Operating expenses:
    Selling expenses .....................................        290,883         292,595         816,326         891,314
   General and administrative expenses ...................        576,613         472,027       1,628,314       1,546,925
   Severance expense .....................................           --              --           382,480            --
                                                             ------------    ------------    ------------    ------------
Total operating expenses .................................        867,496         764,622       2,822,120       2,438,239
                                                             ------------    ------------    ------------    ------------

Operating income (loss) ..................................       (253,045)         68,450        (360,664)       (667,495)

Other income (expense):
   Forgiveness of interest ...............................           --              --           413,230            --
   Amortization of deferred financing costs ..............        (70,966)       (106,873)       (141,934)       (167,477)
   Gain on sale of fixed assets ..........................          9,550            --             9,550          14,000
   Settlements ...........................................         (2,500)         78,402          (2,500)         78,402
    Conversion benefit ...................................           --           208,344            --              --
   Interest expense ......................................       (153,075)       (281,425)       (491,389)       (479,075)
                                                             ------------    ------------    ------------    ------------
     Total other expense, net ............................       (216,991)       (101,552)       (213,043)       (554,150)
                                                             ------------    ------------    ------------    ------------

Loss before provision for income taxes ...................       (470,036)        (33,102)       (573,707)     (1,221,645)

   Provision for income taxes ............................         (1,427)         (1,170)        (10,588)         (3,470)
                                                             ------------    ------------    ------------    ------------
Net loss .................................................   $   (471,463)   $    (34,272)   $   (584,295)   $ (1,225,115)
                                                             ============    ============    ============    ============
Basic and diluted loss attributable to common shareholders   $      (0.02)   $      (0.00)   $      (0.02)   $      (0.09)
                                                             ============    ============    ============    ============
Weighted average shares of common stock outstanding ......     26,008,733      16,844,885      26,008,733      12,966,831
                                                             ============    ============    ============    ============

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


<PAGE>
<TABLE>
                      VERIDIUM CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
        FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)
<CAPTION>
                                                                                   2004           2003
                                                                             -----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                           <C>             <C>
Net loss .................................................................   $  (584,295)   $(1,225,115)
Adjustments to reconcile net loss to net cash provided
 by (used in) operating activities
   Depreciation and amortization .........................................       382,974        308,383
   Amortization of deferred financing costs ..............................       141,934        167,477
   Common stock issued in exchange for services rendered .................          --          152,397
   Provision for doubtful accounts .......................................        (4,716)        65,570
   Interest paid directly from lender ....................................        37,917           --
   Severance expense .....................................................       382,480           --
     Increase in deferred taxes ..........................................          --           17,675
   Changes in assets and liabilities
     Accounts receivable .................................................      (215,350)      (537,870)
Other receivables ........................................................          --           69,414
     Inventories .........................................................         3,414          1,103
     Prepaid expenses and other current assets ...........................      (243,686)       (56,756)
     Accounts payable ....................................................       248,389        581,958
Accrued expenses .........................................................       (64,293)       329,787
                                                                             -----------    -----------
       Net cash provided by (used in) operating activities ...............        84,768       (125,977)
                                                                             -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
   Cash used in acquisition of subsidiary, net of cash acquired ..........          --         (259,172)
   Change in deposits ....................................................        (2,400)       (27,588)
   Additions to and acquisition of property, plant and equipment .........          --         (458,653)
                                                                             -----------    -----------
       Net used in investing activities ..................................        (2,400)      (745,413)
                                                                             -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES
   Repayments to factor, net .............................................       (11,772)          --
   Repayment of short-term borrowings ....................................      (258,461)       (70,000)
   Repayment of current maturities of long-term debt, net ................      (105,391)       (59,744)
   Proceeds from long-term debt ..........................................          --          495,000
   Repayment of officer loans, net .......................................          --         (139,312)
   Proceeds from officers' loans payable .................................          --          311,187
   Proceeds from long-term convertible debentures ........................      543,372,           --
   Proceeds from sale of common stock ....................................         5,000           --
   Proceeds from the exercise of stock options and purchase of stock, net           --          101,597
   Purchase of treasury stock ............................................       (50,526)          --
   Proceeds from obligations under capital lease .........................          --           27,630
   Repayment of obligations under capital leases .........................      (127,833)      (117,945)
   Repayment of Subordinate Loan .........................................       (45,829)          --
   Repayment of Convertible Debenture ....................................       (15,000)          --
   Proceeds from (Payment of) short term borrowings ......................          --         (325,606)
   Proceeds from short-term debt .........................................          --          760,800
   Deferred financing costs incurred .....................................       (20,000)       (85,892)
                                                                             -----------    -----------
       Net cash (used in) provided by financing activities ...............       (86,440)       897,715
                                                                             -----------    -----------
Increase (decrease) in cash ..............................................        (4,072)        26,625
Cash at beginning of period ..............................................        89,392            721
                                                                             -----------    -----------
Cash at end of period ....................................................   $    85,320    $    27,046
                                                                             ===========    ===========
Supplemental disclosure of non-cash investing and financing activities:
   Equity issued for deferred financing costs ............................   $    82,500    $      --
   Conversion of subordinate loan into equity ............................       454,171           --
   Debenture paid with Laurus proceeds ...................................       250,000           --
   Payment of subordinate loan with proceeds of Laurus financing .........       500,000           --
   Payment of term financing with proceeds of Laurus financing ...........       100,000           --
   Payment of accounts-receivable factor with proceeds of Laurus financing       470,762           --
   Prepaid expenses paid with proceeds of Laurus financing ...............        16,945           --
   Interest expense paid with Laurus financing ...........................        12,917           --
   Deferred financing costs paid with proceeds of Laurus financing .......       179,376           --
   Deferred financing costs associated with stock issuance ...............        50,000           --
   Issuance of warrants for deferred financing costs .....................       489,229           --
   Settlement of accounts payable with short term notes ..................       603,814           --
   Deferred financing costs issued in connection with subordinate loan ...        30,500           --
   Acquisition of equipment with long term debt ..........................       120,998           --

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



<PAGE>

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

1        BASIS OF PRESENTATION

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

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

2        GOING CONCERN

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  The Company  incurred a loss
of $584,295 the nine months ended  September 30, 2004 which  included  severance
expenses of  approximately  $380,000.  As of September  30, 2004 the Company had
$85,320 in cash, and current  liabilities  exceeded current assets by $2,096,616
including  $744,000 in  liabilities  that are  convertible  into  equity.  These
matters raise  substantial  doubt about the  Company's  ability to continue as a
going concern.

Management  believes  that it will begin to operate  profitably  due to improved
operational   results,   cost  cutting  practices  and  the  completion  of  the
integration  of the completed  acquisitions  in 2003.  However,  there can be no
assurances that the Company will be successful in this regard or will be able to
eliminate its working  capital  deficit or operating  losses.  The  accompanying
financial  statements do not contain any adjustments  which may be required as a
result of this uncertainty.

3        CERTAIN ACCOUNTING POLICIES

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

NEW ACCOUNTING PRONOUNCEMENTS

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

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

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


<PAGE>

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

3        CERTAIN ACCOUNTING POLICIES (continued)

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

STOCK BASED COMPENSATION

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

SFAS No. 123  established  accounting and disclosure  requirements  using a fair
value-based method of accounting for stock-based employee compensation plans. As
allowed by SFAS No.  123,  the  Company  has  elected to  continue  to apply the
intrinsic value-based method of accounting described above, and has adopted only
the disclosure requirement of SFAS No. 123 for employee issued options. No stock
option based  employee  compensation  costs are  reflected in the  Company's net
loss, as all options  granted had an exercise price equal to or greater than the
market value of the Company's  underlying common stock at the date of grant. Had
the Company  elected to recognize  compensation  cost based on fair value of the
stock and stock  options at the date of grant  under SFAS 123,  such costs would
have  been  recognized  ratably  over  the  service  period  of  the  underlying
instrument  and the  Company's net loss and net loss per common share would have
decreased to the amounts indicated in the table below (which are not intended to
be indicative of or a projection of future results):
<TABLE>
<CAPTION>
                                                             For the Three Months Ended   For the Nine Months Ended
                                                                   September 30,                September 30,
                                                            ---------------------------------------------------------
                                                                   2004             2003          2004          2003
                                                            ---------------------------------------------------------
<S>                                                          <C>            <C>            <C>            <C>
Net loss .................................................   $  (471,463)   $   (34,272)   $  (584,295)   $(1,225,115)

Less: stock based employee compensation expense determined
under the fair value method for all awards ...............          --         (590,331)          --         (940,460)
                                                             -----------    -----------    -----------    -----------

Pro forma net loss .......................................   $  (471,463)   $  (624,603)   $  (584,295)   $(2,165,575)
                                                             ===========    ===========    ===========    -----------

Basic and diluted net loss per common share, as reported .   $     (0.02)   $     (0.00)   $     (0.02)   $     (0.09)
                                                             ===========    ===========    ===========    ===========
</TABLE>


RECLASSIFICATIONS

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

SEGMENT INFORMATION

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

<PAGE>

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

3        CERTAIN ACCOUNTING POLICIES (continued)

GOODWILL AND INTANGIBLE ASSETS

The Company accounts for its goodwill and intangible assets pursuant to SFAS No.
142,  Goodwill and Other  Intangible  Assets.  Under SFAS 142,  intangibles with
definite lives continue to be amortized on a straight-line basis over the lesser
of their estimated useful lives or contractual  terms.  Goodwill and intangibles
with  indefinite  lives  are  evaluated  at least  annually  for  impairment  by
comparing the asset's  estimated  fair value with its carrying  value,  based on
cash flow  methodology.  Intangibles with definitive lives consist  primarily of
patents,  which have useful lives and are subject to  impairment  testing in the
event of certain indicators.  An impairment in the carrying value of an asset is
recognized whenever  anticipated future cash flows  (undiscounted) from an asset
are estimated to be less than its carrying  value.  The amount of the impairment
recognized  is the  difference  between the carrying  value of the asset and its
fair value.

4        RELATED PARTY TRANSACTIONS

The Company utilizes the services of Candent Corporation  (formerly  Cyngularity
Corporation),  for  development  and  administration  of its various  management
information  systems.  Candent is  majority-owned  by the  Company's  Chairman's
spouse.  Such  services  approximated  $39,000 and  $112,500 for the nine months
ended September 30, 2004 and 2003.

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

During the second  quarter 2004, the Company  entered into severance  agreements
with  key  management   personnel  who  are  related  parties.   (See  Severance
Agreements, below)

5        FINANCING ARRANGEMENTS

The following summarizes the Company's financing arrangements as of September
30, 2004 and December 31, 2003:
<TABLE>
<CAPTION>
                                                                         09/30/04     12/31/03
                                                                      ------------------------
Short-term borrowings
<S>                                                                   <C>          <C>
   Line of credit .................................................   $   75,000   $   75,000
   Term financing .................................................      345,353         --
                                                                      ----------   ----------
     Total short-term borrowings ..................................   $  420,353   $   75,000

Current maturities of long-term debt:
   Term financing .................................................      100,000      100,000
   Severance ......................................................      166,909         --
   Vehicle loans and other current obligations ....................       82,726       73,162
                                                                      ----------   ----------
     Total current maturities of long-term debt ...................   $  349,635   $  173,162

Current portion of convertible debentures:
   AMRC debentures, 10% convertible debentures, currently due .....      144,000      159,000
   CCS debenture, 12% convertible debentures, due May and July 2004      600,000      850,000
   Senior loan, variable interest rate convertible debenture ......         --      1,203,000
   Subordinate loan, 12% convertible debentures ...................         --        500,000
                                                                      ----------   ----------
     Total current portion of convertible  debentures .............   $  744,000   $2,712,000

Long-term debt:
   Term financing .................................................      100,000      200,000
   Severance ......................................................      170,641         --
   Vehicle loans and other current obligations ....................      221,856      170,883
                                                                      ----------   ----------
     Total long-term debt, net of current maturities ..............   $  492,497   $  370,883

Convertible debt, net of current portion:
   Laurus financing, 9% convertible debenture, due March 2007 .....    1,801,372         --
   Senior loan, 10% rate convertible debenture, due March 2007 ....    1,000,000         --
   GCS debenture, 10% convertible debenture, due December 2008 ....    1,184,065    1,184,065
   Subordinate loan, 12% convertible debenture, due December 2008 .    1,547,500    1,517,000
                                                                      ----------   ----------
     Total convertible debt, net of current portion ...............   $5,532,937   $2,701,065

</TABLE>

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

5        FINANCING ARRANGEMENTS (continued)

The following chart is presented to assist the reader in analyzing the Company's
ability to fulfill its fixed debt service requirements as of September 30, 2004
and the Company's ability to meet such obligations:
<TABLE>
<CAPTION>
Year                                               Amount
<C>                                            <C>
2005                                           $1,513,988
2006                                              252,231
2007                                            2,917,349
2008                                               43,718
2009                                            2,765,825
Thereafter                                         46,311
                                               ----------

Total minimum payments due under current
  and long-term obligations                    $7,539,422
                                               ==========
</TABLE>
SHORT TERM BORROWINGS

The Company has a variable interest rate, (6.25% at September 30, 2004), line of
credit with a bank, which has an outstanding  balance of $75,000 as of September
30, 2004,  representing  the entire line.  The line matured on January 31, 2004,
and the Company is currently renegotiating the terms of this facility.

TERM FINANCING

During the first  quarter 2004,  the Company  entered into a number of unsecured
term  facilities with trade vendors for outstanding  accounts  payable  totaling
about $0.5 million with a maturity date of December 31, 2004, about $0.3 million
of which  bears  interest  at 6% per year.  The  Company  is in default of these
agreements.

The Company has certain  non-interest  bearing term financing totaling $200,000,
payable  in two equal  installments  March  2005 and 2006.  This  obligation  is
secured by a first mortgage interest in the Company's Massachusetts property.

AMRC DEBENTURES

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

CCS DEBENTURES

In May 2003,  the  Company  issued  $0.85  million  in  subordinate  convertible
debentures  to  three  institutional  investors  (the  "CCS  Debenture").  These
debentures  bear interest at 12% per year and are secured by the  chairman's and
certain related  parties'  common stock.  The principal of the debenture and all
accrued interest are convertible into common stock of the Company at the rate of
$0.60 per share.  During  2003,  the  Company  was in default on this debt under
various  provisions of the  agreement.  As a result,  the Company had accrued an
increase  in the  additional  interest  rate  to 25%  per  annum  and  penalties
aggregating  4% per  month  from the  date of the  corresponding  default  as of
December 31, 2003,  which penalties were waived in March 2004 in connection with
the  completion of the Laurus  Financing.  $0.25 million of the principal of the
CCS  Debentures  were  redeemed in  connection  with the Laurus  Financing  (see
below).  The Company  recognized a gain of  approximately  $0.19  million on the
forgiveness of penalties.  On June 30, 2004 the Company recognized an additional
gain for the forgiveness of penalties totaling $0.07 million.

SENIOR LOAN

On December 19, 2003, the Company closed on the first  installment of the Senior
Loan with GCS Investments,  LLC ("GCS"). The Senior Loan is structured as a term
loan with a principal  of $1.5 million  that  matures and renews  annually,  and
bears  interest at 10% per year.  Payments are of interest  only and are payable
monthly.  The Senior Loan is secured by a priority position on substantially all
of the Company's  assets.  Conditions  precedent of this financing  included the
conversion  of the majority of the  Company's  pre-consolidation  debt and other
liabilities  into various forms of equity,  including all obligations due to the
Company's  officers and its related  parties for loans  extended to the Company,
deferred salaries, price-protection agreements in relation to previous loans and
deferred salaries and any



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

5        FINANCING ARRANGEMENTS (continued)

SENIOR LOAN (continued)

other and all  liabilities  due to the Company's  officers and related  parties.
Additionally   required   were  a  cash-based   management   contribution,   the
unconditional personal guarantee of the Company's chairman and the conversion by
GCS' affiliate of $1.184 million in debt into the GCS Debenture (see below). The
Senior Loan is convertible into common stock of the Company at 100% of market at
the time of any such conversion.  GCS additionally  received detachable warrants
to purchase  500,000  shares of common stock that are  exercisable  at $0.40 per
share and expire on December 19, 2008. The Company  received $1.2 million of the
funds under the Senior  Loan in 2003 and the balance of $0.3  million in January
2004. GCS additionally  received  detachable warrants to purchase 500,000 shares
of common stock that are  exercisable  at $0.40 per share and expire on December
19, 2008.  The Senior Loan was decreased to a principal  balance of $1.0 million
in March 2004 in connection with the Laurus  Financing (see below).  GCS entered
into a  subordination  agreement  with the Laurus Funds in  connection  with the
completion of the Laurus Financing.

GCS DEBENTURE

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

SUBORDINATE LOAN

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

LAURUS FINANCING

On March 31, 2004,  the Company  closed on a revolving  fixed price  convertible
facility in the amount of $1.75 million with the Laurus Master Fund (the "Laurus
Financing").  Structured like a standard  receivables-based line of credit, this
facility carries interest at prime plus 5%, subject to a floor of 9%, and a term
of three years.  At September  30,  2004,  prime rate was 4.8%.  The Company may
convert debt into equity at a fixed  conversion price equal to 110% of the fixed
conversion  price of $0.43 per  share.  The  Company  issued  Laurus  seven-year
detachable warrants to purchase shares of the Company's common stock as follows:
450,000  at 115% of the fixed  conversion  price,  400,000  at 125% of the fixed
conversion price and 250,000 at 135% of the fixed conversion price. The proceeds
of the  Laurus  Financing  were  used  to (a)  repurchase  outstanding  accounts
receivable subject to a factoring agreement (about $0.5 million),  (b) repayment
of the  Senior  loan in the  amount  of $0.5  million,  and (c) pay down the CCS
Debenture by $0.25 million.

SEVERANCE AGREEMENTS

The  Company  is party  to  certain  severance  agreements  with key  management
personnel.  These  agreements  require  payment of annual  base  salary  through
December 2005 and certain Company  benefits.  The cost of these agreements total
$382,480 of which $166,909 is recognized as a current liability with the balance
to be paid over a number of years.

6        CHANGES IN STOCKHOLDERS' EQUITY

ANTI-DILUTION AND PRICE PROTECTION AGREEMENTS

During 2003, in  consideration  for certain equity  transactions,  lenders and a
vendor received price protection benefits and/or anti-dilution  coverage as part
of their equity  instruments.  As a result of these agreements,  the Company was
required to issue approximately  1,179,583 shares during second quarter 2004 and
439,000  during  the  third  quarter  for no  consideration.  Certain  of  these
agreements  extend into the future and it is anticipated that additional  shares
will be  required  to be issued in the future for no  compensation  under  these
agreements.  At September 30, 2004, one investor has an anti-dilution  agreement
in place to maintain his current ownership percentage of common stock.
<PAGE>
                      VERIDIUM CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ANTI-DILUTION AND PRICE PROTECTION AGREEMENTS (continued)

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

In  December  2003,  certain  notes  totaling  $925,000  ("the NWR  Debt")  were
converted  into 92,500 shares of a non-voting  class of preferred  equity in the
Company's American Metals Recovery, Corp. ("AMRC"),  subsidiary (the "Subsidiary
Preferred Equity"). Subsidiary Preferred Equity holders will receive a quarterly
dividend ranging from 3% to 5% of AMRC's annualized  revenue,  limited to 30% of
AMRC's operating income. The shares may not be liquidated or transferred. Shares
of Subsidiary Preferred Equity may be redeemed by the Company with shares of the
Company's common stock based upon the then-current market conditions at the time
of any  such  redemption.  There  is no  expiration  date  associated  with  the
Company's redemption option.

7        COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENTS

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

LEGAL PROCEEDINGS

The Company is party to the matter entitled Somerset Hills Consultants, Inc., et
al, v. KBF. The action was filed in the Supreme  Court of the State of New York,
February 13, 2002. The Verified Complaint seeks specific  performance of certain
agreements  between the plaintiffs  and the Company,  plus  attorney's  fees and
costs.  The  plaintiffs  were awarded  partial  judgment  during 2003 as to some
issues which resulted in adjustment to the Company's  litigation  accrual during
the period.  The Company has issued  300,128  shares of its common stock into an
escrow account  pending final  judgment in this matter.  This matter was settled
during the third  quarter  2004 for 400,000 new shares of the  Company's  common
stock  being  issued  and about  120,000  of the  shares  held in  escrow  being
cancelled.

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

The Company  assumed and is party to various  other  administrative  enforcement
proceedings  for which the Company has accrued  $239,000 in potential  expenses.
The  Company  is also  involved  with  several  collection  matters in which the
Company  and  vendors  are  seeking  payment  for  services  rendered  and goods
provided.

The  Company  is also  subject  to a number of legal  actions  with  respect  to
non-payment of payables. This total in the aggregate is approximately $150,000.

OTHER CONTINGENCIES

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

Under the Company's  insurance  programs,  coverage is obtained for catastrophic
exposures, as well as those risks required to be insured by law or contract. The
deductible per occurrence for the workers'  compensation,  general liability and
vehicle liability, as well as for environmental impairments, is $25,000.
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

FORWARD LOOKING STATEMENTS

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

OVERVIEW

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

The Company's  development efforts in 2003 were focused on the completion of its
various  acquisitions  and merger,  the  integration  of the  various  companies
acquired,  financing  these  activities,  recapitalizing  our  pre-consolidation
balance sheet, and sales growth. These efforts continued through the first three
quarters of 2004 and resulted in the improved operational results. The Company's
New Jersey recycling  facility,  however,  did not meet its performance  targets
during  the  current  period due to the loss of a major  client  and  difficulty
processing new waste streams from a new client. Management will continue to make
efforts to improve and  streamline  the  Company's  operations  and believes the
operational  problems at the New Jersey facility will not recur. There can be no
assurances,  however, that the Company will be successful in this regard or that
it will be able to  eliminate  its working  capital  deficit.  The  accompanying
financial  statements do not contain any adjustments  which may be required as a
result of this uncertainty.  The table and below  discussions  should be read in
conjunction with Item 1, Financial Statements, of this report.
<TABLE>
<CAPTION>
                                                                Percentage of Total Revenues
                                                       ----------------------------------------------------
                                                        For the Nine Months Ended        For The Year Ended
                                                               September 30, 2004         December 31, 2003
                                                       ----------------------------------------------------
<S>                                                                        <C>                      <C>
Revenue                                                                     100.0%                   100.0%
Cost of revenue                                                              75.1                     82.6
                                                                      -----------               ----------
   Gross profit                                                              24.9                     17.4

Operating Expenses
Selling expenses                                                              8.2                      9.3
General and administrative expenses                                          16.4                     24.7
Loss on impairment of long-lived assets                                        --                     65.5
Severance Expense                                                             3.9                       --
                                                                      -----------               ----------
   Total operating expenses                                                  28.5                     99.5
                                                                      -----------               ----------
Operating loss                                                               (3.6)                   (82.1)

Other income (expense)
Forgiveness of interest                                                       4.2                      2.8
Amortization of deferred financing costs                                     (1.4)                    (4.7)
Gain on sale of fixed assets                                                  0.1                      0.1
Settlements                                                                    --                       --
Interest expense                                                             (5.0)                   (10.9)
Write-off of idle equipment                                                    --                    (14.5)
                                                                      -----------               ----------
   Total other income (expense), net                                         (2.1)                   (27.2)
                                                                      -----------               ----------
Loss before provision for income taxes                                       (5.8)                  (109.3)
   Provision for income taxes                                                (0.1)                      --
                                                                      -----------               ----------
Net loss                                                                     (5.9)                  (109.3)
                                                                      ===========               ==========
</TABLE>
<PAGE>


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

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  While the Company realized a
net loss of  approximately  $0.6 million during the nine months ended  September
30, 2004,  current  liabilities  exceeded current assets by  approximately  $2.1
million,  including about $0.7 million in liabilities  that are convertible into
equity.  This  working  capital  deficit  raises  substantial  doubt  about  the
Company's ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

As described more fully in Item 1, Note 7, Commitments and Contingencies, above,
we are subject to legal  proceedings  which we have assumed in our consolidation
process.  Accruals are established for legal matters when, in our opinion, it is
probable that a liability 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.

The Company  currently has  equipment  with a cost of  approximately  $1,273,528
which has not yet been placed in service as of September 30, 2004. Management is
currently  evaluating  the  future  usage  of  this  asset  within  its  current
operational  infrastructure  and will  consider  impairment  testing  during the
fourth quarter of 2004.

THREE MONTHS ENDED SEPTEMBER 30, 2004 VERSUS THE THREE MONTHS ENDED SEPTEMBER
30, 2003

Revenues

Total revenues were $3.1 million for the three months ended  September 30, 2004,
corresponding to a decrease of $1.0 million, or 24%, over the three months ended
September  30, 2003  revenues of $4.1  million.  The decrease in revenue for the
third quarter 2004 as compared to the same period in 2003 is  predominantly  due
to the  Company's  focus on  traditionally  higher margin  business,  as well as
efforts to  streamline  operations  at its New Jersey  recycling  facility.  The
Company's recycling facility was consequently temporarily scaled back during the
period.  This facility has since  demonstrated  improved  results and Management
expects the performance of this facility to continue to improve.

Cost of Revenues

Cost of  revenues  for the  three  months  ended  September  30,  2004 were $2.5
million,  or 80% of revenue,  as compared to $3.3 million, or 80% of revenue for
the same  period in 2003.  The change in cost of  revenues  as  compared  to the
Company's   pre-consolidation   operations  is  primarily  attributable  to  the
operation and accretive impact of the  acquisitions  completed during the second
quarter 2003.

Operating Expenses

Selling expenses for the three months ended September 30, 2004 were $0.3 million
or 9.4% of revenue as compared  to $0.3  million or 7.1% of revenue for the same
period  in  2003.  These  increases,  as a  percent  of  sales,  were due to the
decreased sales demonstrated during the period.



<PAGE>



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

THREE MONTHS ENDED SEPTEMBER 30, 2004 VERSUS THE THREE MONTHS ENDED SEPTEMBER,
2003 (continued)

General and  administrative  expenses for the three months ended  September  30,
2004 were $0.6 million or 18.5% of revenue, as compared to $0.5 million or 11.5%
for the same period 2003. This increase,  as a percent of sales,  was due to the
decreased revenues for the three month period discussed above.

Depreciation and Amortization

Depreciation and amortization  expenses for the three months ended September 30,
2004 were $0.13  million,  or 4.4% of revenue,  as compared to $0.2 million,  or
4.3% of revenue for the same period in 2003.  The net decrease in these expenses
was due to the revaluation of certain assets as of December 2003.

Interest Expense

Interest  expenses  for the three  months  ended  September  30, 2004 were $0.15
million,  or 4.9% of revenue,  as compared to $0.28 million,  or 6.9% of revenue
for  the  same  period  in  2003.  The  decrease  as a  percent  of  revenue  is
attributable to the Company's various financings  completed during December 2003
and March  31,2004 (see Item 1, Note 5,  Financing  Arrangements,  above) versus
prior  financing  arrangements  with Prestige  Capital  Corporation  and various
non-reoccurring charges associated with acquisitions completed in May of 2003.

Net Loss

The net loss for the three months ended  September 30, 2004,  was $0.47 million,
or 15.1% of revenue, as compared to a loss of $0.03 million, or 0.01% of revenue
from the same period in 2003.

NINE MONTHS ENDED SEPTEMBER 30, 2004 VERSUS THE NINE MONTHS ENDED SEPTEMBER,
2003

Revenues

Total  revenues were $9.9 million for the nine months ended  September 30, 2004,
corresponding to an increase of $1.8 million, or 22%, over the nine months ended
September 30, 2003 revenues of $8.1 million.  The revenue gains realized  during
the nine month period were due to the accounting of nine full months of revenues
from the New England operations versus five months for the prior period.

Cost of Revenues

Cost of revenues for the nine months ended September 30, 2004 were $7.4 million,
or 75% of revenue,  as compared to $6.3 million,  or 78% of revenue for the same
period in 2003.  The change in cost of revenues  as  compared  to the  Company's
pre-consolidation  operations  is primarily  attributable  to the  operation and
accretive impact of the acquisitions completed during the second quarter 2003.

Operating Expenses

Selling  expenses for the nine months ended September 30, 2004 were $0.8 million
or 8.2% of revenue as compared to $0.9  million or 11.0% of revenue for the same
period in 2003.  These  decreases  were due to a sales  staff  reduction  in the
second half of 2003.

General and administrative expenses for the nine months ended September 30, 2004
were $1.6  million or 20.3% of revenue,  as compared to $1.5 million or 19.1% of
revenue for the same period in 2003. This decreases as a percentage of sales was
due to  increased  revenues  for  the  nine  month  period  attributable  to the
Company's various acquisitions.

Depreciation and Amortization

Depreciation and  amortization  expenses for the nine months ended September 30,
2004 were $0.52 million,  or 5.3% of revenue,  as compared to $0.48 million,  or
5.8% of revenue for the same period in 2003.  The net increase in these expenses
was due to the  revaluation  of certain  assets as of December 2003 as offset by
increased  amortization charges associated with the Company's increased deferred
financing costs.

Interest Expense

Interest  expenses  for the nine  months  ended  September  30,  2004 were $0.49
million,  or 5.0% of revenue,  as compared to $0.49 million,  or 5.0% of revenue
for  the  same  period  in  2003.  The  decrease  as a  percent  of  revenue  is
attributable to the Company's various financings  completed during December 2003
and March 2004 (see Item 1, Note 5, Financing Arrangements,  above) versus prior
financing   arrangements   with  Prestige   Capital   Corporation   and  various
non-reoccurring charges associated with acquisitions completed in May of 2003.
<PAGE>

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

NINE MONTHS ENDED SEPTEMBER 30, 2004 VERSUS THE NINE MONTHS ENDED SEPTEMBER,
2003 (continued)

Net Loss

The net loss for the nine months ended September 30, 2004, was $0.58 million, or
5.9% of revenue, as compared to a loss of $1.2 million, or 15.1% of revenue from
the same period in 2003.

LIQUIDITY AND CAPITAL RESOURCES

Cash

Our primary  sources of liquidity are cash provided by operating,  investing and
financing  activities,  and  availability  under our  various  revolving  credit
facilities.  For the nine months ended  September 30, 2004, net cash used in our
operating  activities  was $0.66  million as compared to $0.13 million as of the
nine months ended September 30, 2003.

Liquidity

The Company's  capital  requirements  consist of general  working capital needs,
scheduled  principal  and  interest  payments on debt,  obligations  and capital
leases and planned capital expenditures. The Company's capital resources consist
primarily of cash generated  from  operations and proceeds from issuance of debt
and common  stock.  The Company's  capital  resources are impacted by changes in
accounts  receivable as a result of revenue  fluctuations,  economic trends, and
collection  activities.  At  September  30,  2004 the  Company had cash of about
$85,000.  This cash represents an increase of $58,000 from the nine months ended
September 30, 2003.

Cash Flows for the Nine Months Ended September 30, 2004

Our  operating  activities  during the first  three  quarters of 2004 used $0.66
million in cash. Accounts receivable at September 30, 2004, net of allowance for
doubtful accounts,  totaled $2.67 million as compared to the September 30, 2003,
balance of $3.0 million.  Accounts payable and accrued expenses at September 30,
2004 totaled $3.57  million as compared to the  September  30, 2003,  balance of
$4.8 million.  The decrease in accounts  receivable is primarily due to a normal
variance of $0.2 - $0.25  million in weekly cash flow.  The decrease in accounts
payable and accrued  liabilities is due to the Company's  efforts to restructure
it's balance sheet through various financing activities.

The  Company  had a negative  working  capital  position  of $1.4  million as of
September  30,  2004.  This  does  not  include  $0.74  million  of  short  term
convertible  debenture  debt. This is an increase in the deficit of $0.3 million
from June 30, 2004.

STOCKHOLDER MATTERS

Stockholders'  equity was  $4,993,166  of  September  30,  2004,  or $0.18 share
outstanding,  as compared to $4,547,097 at December 31, 2003, or $0.19 per share
outstanding.  Additionally,  on June 29, 2004,  the Company filed a registration
statement on Form SB-2 in connection with the Laurus  Financing,  see above. The
Company's  annual  meeting  was  held on June 30,  2004,  during  which  one new
director was voted to the Company's board of directors.



<PAGE>

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

NEW ACCOUNTING PRONOUNCEMENTS

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

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

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

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

ITEM 3.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

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



<PAGE>

      Part II - Other Information

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 2. CHANGES IN SECURITIES

None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.

ITEM 5. OTHER INFORMATION
None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following are exhibits filed as part of the Company's Form 10-QSB for the
period ended September 30, 2004:

Exhibit Number             Description

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

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

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

Reports on Form 8K

No reports on Form 8-K were filed during the period.



<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the date indicated.
VERIDIUM CORPORATION
By:             /S/      KEVIN E. KREISLER
                --------------------------
                         KEVIN E. KREISLER
                         Chairman and Chief Executive Officer
Date:                    November 15, 2004

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

                /S/      JIM GREEN
                ------------------
By:                      JIM GREEN
                         President, Chief Operational Officer
                         and Acting Chief Financial Officer
Date:                    November 15, 2004

                /S/      RICHARD KRABLIN
                ------------------------
By:                      RICHARD KRABLIN
                         Secretary and Chief Compliance Officer
Date:                    November 15, 2004

                         JAMES HANRAHAN
                         Director
Date:                    November 15, 2004

                         STEPHEN LEWEN
                         Director
Date:                    November 15, 2004

                /S/      KEVIN E. KREISLER
                --------------------------
By:                      KEVIN E. KREISLER
                         Attorney-In-Fact
Date:                    November 15, 2004