UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
                  For the quarterly period ended June 30, 2001

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

         For the transition period from _______________to_______________

                         Commission file number 0-28813

                             VERTICA SOFTWARE, INC.
                             ----------------------
             (Exact name of registrant as specified in its charter)

                  COLORADO                                   93-1192725
--------------------------------------------   ---------------------------------
(State or Other Jurisdiction of Incorporation) (IRS Employer Identification No.)


          5801 Christie Avenue, Suite 390, Emeryville, California 94608
          -------------------------------------------------------------
          (Address of Principal Executive Offices, including Zip Code)

                                 (510) 595-3333
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
-------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of issuer's classes of common
equity, as of the latest practicable date: 14,455,463 shares of common Stock
outstanding on June 30, 2001.

-------------------------------------------------------------------------------

<PAGE>

Transitional Small Business Disclosure Format  (Check One):  Yes [ ] No [ X ]

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

         Attached.

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

     Certain statements contained in the following Plan of Operation, including,
without limitation, statements containing the words "believe," "anticipate,"
"estimate," "expect" and words of similar meaning, constitute forward-looking
statements that involve risks and uncertainties. Actual results may differ
materially from those projected in the forward-looking statements. Additional
information concerning factors that may cause actual results to differ
materially from those in the forward-looking statements are in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000 and in the
Company's other filings with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company assumes no obligation to update
any forward-looking statements or comments on the reasons why actual results may
differ. Our actual results could differ materially from those anticipated in
these forward looking statements as a result of certain factors set forth in
other parts of this document.

     Vertica Software, Inc. is a development-stage company that has developed
and is developing Internet-based software products, e-commerce marketplace, and
online resources intended to serve industries that are impacted by government
regulation of hazardous materials, hazardous wastes and other environmental laws
and regulations. We have developed and are developing software products designed
to assist companies with their environmental regulatory compliance and related
activities for common industrial applications.

     On April 1, 2001, we released our Hazweb e-commerce marketplace platform.
Hazweb Marketplace offers an industry-specific marketplace for the purchase,
sale and exchange of hazardous materials-related goods and services. It includes
a customizable directory of industry products and services, and features tools
for online price management and customer notification. Marketplace includes
customer-specific quotes and order processing services that are interfaced with
the iComply Inventory and Transporter products, thereby providing an integrated
e-commerce and hazardous materials management system.

Results of operations:

     The Company realized a net loss from operations of $ 332,278 for the three
months ended June 30, 2001, compared to a realized net loss from operations of $
436,906 for the three months ended June 30, 2000. The Company has realized,
since January 1, 1996 (inception) through June 30, 2001, a cumulative net loss
from operations of $ 3,579,057. The Company had no sales from operations for the
three months ended June 30, 2001, and $ 54,125 cumulatively for the period
January 1, 1996 (Date of Inception) through June 30, 2001.

<PAGE>

Plan of operation:

     Loss on operations for the Company for the quarter ended June 30, 2001
decreased 24 % from the prior year for the same period. These losses are
attributed to the Company's development, marketing and general expenses. The
Company will, over the next 12 months, rely on additional funding through the
sale of promissory notes convertible to common stock, the sale of common stock,
and sales from company products.

Liquidity and Capital Resources:

     To date, our activities have been financed primarily through the sale
of our common stock and promissory notes convertible into our common stock. We
currently estimate that we will need approximately $ 2,000,000 in funds, and
estimated revenues of $ 1,000,000 from the sale of our released products, in
order to satisfy our estimated cash requirements over the next twelve months. We
cannot assure you however, that we will be able to reach this revenue amount.
Operating revenues are expected to be generated, but such revenues may not be
substantial or in the amounts we expect. We anticipate that we will need these
additional funds to implement our sales strategies, to complete the development
of the remainder of our product lines and to establish strategic alliances with
other companies. We intend to raise such funds primarily through the sale of our
equity or debt securities. There can be no assurance that we will be able to
obtain such additional financing due to the recent downturn in the financial
market, or whether the terms of such financing will be favorable to us. Failure
to obtain such financing or failure to generate sufficient operating revenues
from the sale of our initial products would have a material adverse effect on
our business, financial condition and results of operations.

     During the six months ended June 30, 2001, we received funds totaling $
542,700 in the form of convertible promissory notes and demand notes. These
notes bear interest at 10% and mature six months from the date of issuance.
Conversion to common stock must occur before the maturity date.

     We currently have a hiring freeze in place, and we have suspended all new
product development. Furthermore, payment of salaries of executive employees has
also been temporarily suspended. In the event future equity capital cannot be
raised in a timely manner to fund our products to completion, we would be forced
to reduce the current staff level to four and pursue additional bridge financing
to fund the Company until such time as permanent equity funding is obtained. In
the meantime, we will be focusing our efforts on the marketing and sales of the
Inventory, Communicator, Transporter and e-commerce Marketplace products and
related services.

<PAGE>

Research and Development:

     We have released the following products and modules, which are available
for licensing to potential customers:

     iComply Inventory module (released for licensing February 1, 2000)
     iComply Communicator (released for licensing February 2000)
     iComply Transporter (released for licensing July 17, 2000)
     Hazweb Marketplace (released for licensing April 1, 2001)

     During the next 12 months, provided we obtain the necessary funding, we
plan to complete development of the remainder of our Internet-based products,
and plan to release our remaining core products as follows:

     By Spring, 2002:
     iComply Processor

     By Spring, 2002:
     iComply Permitter

     By Spring, 2002:
     iComply HazOSHA

     While completing these products, we will also be developing strategic
alliances within our industry through target marketing opportunities and
advertising. Product development and web site maintenance expenses for the next
twelve months are expected to be approximately $ 600,000.

Purchase of Significant Equipment:

     Depending on the number of new employees we hire over the next twelve
months, we intend to purchase ten to twelve additional desktop computers, two
servers, and related peripheral equipment. The total cost for the acquisition of
this equipment is estimated at approximately $ 50,000. We entered into an office
lease agreement in December 1999 for new office space totaling approximately
4,350 square feet. In connection with this lease, we acquired the predecessor
tenant's workstation modules, telephone system and other related telephone and
network equipment. The total purchase price for the furniture and equipment was
$ 3,000. During the year ended December 31, 2000, the Company purchased various
computer and phone system equipment for approximately $ 50,000. Office lease
payments for the next twelve months will be approximately $ 121,000. There were
no major equipment purchases for the three months ended June 30, 2001.

<PAGE>

Significant Change in Number of Employees

     If we are successful in obtaining additional funding, we intend to hire,
during the next twelve months, two to three software engineers, and
approximately five additional sales, marketing and administrative employees.
Total projected personnel costs for the next twelve months are estimated to be
approximately $ 2,100,000, of which approximately $ 600,000 is included above
under projected research and development costs.

                           PART II - OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES.

In the three months ended June 30, 2001, the Company completed financing
pursuant to which the Company issued three short-term convertible promissory
notes in the aggregate principal amounts of $ 60,000, $ 100,000 and $ 45,000.
Interest on these notes accrue at the rate of 10% per annum. The principal
amount of the notes plus accrued interest is convertible at the option of the
holder into shares of the Company's common stock at a conversion price equal to
$ .50 per share.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Exhibits.

Exhibit No.   Exhibit Description
-----------   -------------------

3.1           Articles of Incorporation of Registrant.*

3.2           Articles of Amendment to Articles of Incorporation of Registrant.*

3.3           Bylaws of Registrant.*

10.1          Consulting Agreement dated May 22, 2001 between Registrant and
              Oxford Corporate Finance

*Filed with Amendment No. 1 to the Form 10-SB of the Registrant on February
28, 2000.

         (b)  Reports on Form 8-K.

              None.


<PAGE>




                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                             VERTICA SOFTWARE, INC.



Dated:  August 20, 2001                  By:  /s/ Hans Nehme
                                              ---------------------------------
                                              Hans Nehme, President and
                                              Chief Executive Officer (and
                                              principal financial officer)


<PAGE>

                              VERTICA SOFTWARE, INC
                              ---------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------
                                 BALANCE SHEETS
                                 --------------

<TABLE>
<CAPTION>

                                                                          June 30          June 30
                                                                            2001            2000
                         ASSETS                                         (Unaudited)     (Unaudited)
                         ------                                         -----------     -----------

<S>                                  <C>                                <C>            <C>
CURRENT ASSETS
     Cash and Cash Equivalents (Note 3)                                 $        --    $    22,587
     Employee Advances                                                        5,800             --
     Prepaid Expenses                                                           377          2,724
                                                                        -----------    -----------
         TOTAL CURRENT ASSETS                                                 6,177         25,311

EQUIPMENT, less accumulated depreciation of $ 71,608,
     and $ 38,449, respectively (Notes 3 and 5)                              31,111         61,803

DEPOSITS                                                                     10,000         10,000

                                                                        -----------    -----------
         TOTAL ASSETS                                                   $    47,288    $    97,114
                                                                        ===========    ===========

                                 LIABILITIES AND
                                 ---------------
                              STOCKHOLDERS' EQUITY
                              --------------------

CURRENT LIABILITIES
     Current Portion of Capital Lease Obligations (Note 8)              $       806    $     6,665
     Bank Overdraft                                                           6,727             --
     Notes Payable (Note 6)                                                  91,300             --
     Accounts Payable and Other Accrued Expenses                            398,354        192,500
     Payroll Taxes Payable                                                    8,683             --
                                                                        -----------    -----------
         TOTAL CURRENT LIABILITIES                                          505,870        199,165

CAPITAL LEASE OBLIGATIONS (Note 8)                                               --          1,035

CONVERTIBLE PROMISSORY NOTES (Note 9)                                     1,242,000        875,000
                                                                        -----------    -----------

         TOTAL LIABILITIES                                                1,747,870      1,075,200
                                                                        -----------    -----------

COMMITMENTS (Note 11)

 STOCKHOLDERS' EQUITY (DEFICIT) (Note 12)
     Preferred Stock, $ .001 par value, 3,000,000 shares authorized,
        -0- shares issued and outstanding                                        --             --
     Common Stock, $ .0001 par value, 30,000,000 shares authorized;
        13,575,639 shares issued and outstanding at June 30, 2001 ,
        and 12,077,941 shares issued and outstanding at
        June 30, 2000, respectively                                           1,358          1,207
     Paid in Capital                                                      1,877,117      1,030,459
     Deficit accumulated during development stage                        (3,579,057)    (2,009,752)
                                                                        -----------    -----------
         TOTAL STOCKHOLDERS' EQUITY                                      (1,700,582)      (978,086)
                                                                        -----------    -----------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $    47,288    $    97,114
                                                                        ===========    ===========

</TABLE>

    The accompanying notes are an integral part of these financial statements


                                      F-1

<PAGE>
<TABLE>
<CAPTION>


                             VERTICA SOFTWARE, INC
                             ---------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                         ( A DEVELOPMENT STAGE COMPANY)
                         ------------------------------
                            STATEMENTS OF OPERATIONS
                            ------------------------



                                                                                                               Cumulative
                                                                                                                  From
                                                                                                               January 1,
                                                                                                                 1996
                                                                                                               (Date of
                                                   Three Months Ended             Six Months Ended             Inception)
                                                         June 30                        June 30                   to
                                             ----------------------------    ---------------------------        June 30,
                                                  2001            2000           2001            2000            2001
                                              (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
                                              ----------      -----------     -----------     -----------     -----------
<S>                                          <C>             <C>             <C>             <C>             <C>
Total Revenue                                $         --    $     27,063    $         --    $     27,063    $     54,125

Operating expenses:
     Product development                          139,650         180,003         293,920         312,395       1,269,728
     General and administrative                   178,949         265,474         401,962         487,364       2,205,149
                                             ------------    ------------    ------------    ------------    ------------
         Total operating expenses                 318,599         445,477         695,882         799,759       3,474,877
                                             ------------    ------------    ------------    ------------    ------------

Loss from operations                             (318,599)       (418,414)       (695,882)       (772,696)     (3,420,752)

     Interest income                                    1            --                 1              28           2,571
     Interest expense                             (13,680)        (18,702)        (21,880)        (32,317)       (161,070)
     Other income                                      --             210             250           2,807           5,195
     Bad debt expense                                  --              --              --              --            (201)
                                             ------------    ------------    ------------    ------------    ------------

Loss before income taxes                         (332,278)       (436,906)       (717,511)       (802,178)     (3,574,257)

Provision for income taxes (Note 10)                   --              --            (800)           (800)         (4,800)
                                             ------------    ------------    ------------    ------------    ------------

Net loss                                     $   (332,278)   $   (436,906)   $   (718,311)   $   (802,978)   $ (3,579,057)
                                             ============    ============    ============    ============    ============

Net loss applicable to common stockholders   $   (332,278)   $   (436,906)   $   (718,311)   $   (802,978)   $ (3,579,057)
                                             ============    ============    ============    ============    ============

Net loss per share---basic                   $    (0.0245)   $    (0.0362)   $    (0.0532)   $    (0.0665)   $    (0.2649)
                                             ============    ============    ============    ============    ============


Weighted average shares used in per share
     calculation---basic                       13,575,639      12,077,941      13,512,948      12,077,941      13,512,948
                                             ============    ============    ============    ============    ============

</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       F-2

<PAGE>

                            VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------
                  Statement of Changes in Stockholders' Equity
                  --------------------------------------------

                From January 1, 1996 (Inception) to June 30, 2001
                -------------------------------------------------
<TABLE>
<CAPTION>


                                               Preferred Stock        Common Stock
                                              ----------------   ----------------------    Advance to     Paid-in
                                              Shares    Amount   Shares          Amount   Stockholder     Capital
                                              ------    ------   ------          ------   -----------     --------
<S>                                            <C>   <C>       <C>          <C>              <C>         <C>
BALANCE, DECEMBER 31, 1995                        -- $      --         --     $      --      $      --   $      --

January 1, 1996 (inception), shares issued at
     incorporation (Note 4)                       --        --  9,200,000           920             --         (70)

Net loss for the year ended December 31, 1996     --                   --            --             --          --
                                               ----- ---------  ---------     ---------      ---------   ---------
BALANCE DECEMBER 31, 1996 (Audited)               -- $      --  9,200,000     $     920      $      --   $     (70)
                                               ----- ---------  ---------     ---------      ---------   ---------


Net loss for the year ended December 31, 1997     --        --         --            --             --          --
                                               ----- ---------  ---------     ---------      ---------   ---------
BALANCE DECEMBER 31, 1997 (Audited)               -- $      --  9,200,000     $     920      $      --   $     (70)
                                               ----- ---------  ---------     ---------      ---------   ---------

December 31, 1998, Issuance of common stock
     pursuant to a reverse merger acquisition     --        --  1,300,000           130             --        (130)

December 31, 1998, sale of common stock
     pursuant to a confidential subscription
     agreement (Note 7)                           --        --     50,000             5             --      49,995

December 31, 1998, sale of common stock
     pursuant to a confidential subscription
     agreement (Note 7)                           --        --     50,000             5             --      49,995

     Advance to Stockholder (Note 5)              --        --         --            --        (25,000)         --

Net loss for the year ended December 31, 1998     --        --         --            --             --          --
                                               ----- ---------  ---------     ---------      ---------   ---------
BALANCE DECEMBER 31, 1998 (Audited)               -- $      -- 10,600,000     $   1,060      $ (25,000)  $  99,790
                                               ----- ---------  ---------     ---------      ---------   ---------
February 11, 1999, sale of common stock
     pursuant to a confidential subscription
     agreement  (Note 7)                          --        --     40,000             4             --      39,996

</TABLE>

<TABLE>
<CAPTION>


                                                     Deficit
                                                   Accumulated
                                                      During
                                                   Development
                                                      Stage            Total
                                                   -----------         -----
<S>                                              <C>           <C>

BALANCE, DECEMBER 31, 1995                        $        --      $        --

January 1, 1996 (inception), shares issued at
     incorporation (Note 4)                                --              850

Net loss for the year ended December 31, 1996         (42,285)         (42,285)
                                                  -----------      -----------
BALANCE DECEMBER 31, 1996 (Audited)               $   (42,285)     $   (41,435)
                                                  -----------      -----------

Net loss for the year ended December 31, 1997        (176,605)        (176,605)
                                                  -----------      -----------
BALANCE DECEMBER 31, 1997 (Audited)               $  (218,890)     $  (218,040)
                                                  -----------      -----------

December 31, 1998, Issuance of common stock
     pursuant to a reverse merger acquisition              --               --

December 31, 1998, sale of common stock
     pursuant to a confidential subscription
     agreement (Note 7)                                    --           50,000

December 31, 1998, sale of common stock
     pursuant to a confidential subscription
     agreement (Note 7)                                    --           50,000

     Advance to Stockholder (Note 5)                       --          (25,000)

Net loss for the year ended December 31, 1998        (235,335)        (235,335)
                                                  -----------      -----------
BALANCE DECEMBER 31, 1998 (Audited)               $  (454,225)     $  (378,375)
                                                  -----------      -----------
February 11, 1999, sale of common stock
     pursuant to a confidential subscription
     agreement  (Note 7)                                   --           40,000

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-3


<PAGE>

                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------
                  Statement of Changes in Stockholders' Equity
                  --------------------------------------------

                From January 1, 1996 (Inception) to June 30, 2001
                -------------------------------------------------
<TABLE>
<CAPTION>


                                               Preferred Stock            Common Stock
                                              ----------------   ------------------------     Advance to     Paid-in
                                              Shares    Amount   Shares           Amount     Stockholder     Capital
                                              ------    ------   ------          --------    -----------     --------
<S>                                            <C>   <C>       <C>          <C>              <C>          <C>
February 11, 1999, sale of common stock
   in Private Placement Transactions, net of
   Offering costs of $ 1,876  (Note 7)           --        --      584,500           58            --        584,442

February 11, 1999, conversion of convertible
   promissory note to common stock  (Note 7)     --        --       41,433            5            --         42,653

February 24, 1999, sale of common stock
   in Private Placement Transactions, net of
   Offering costs of $ 75  (Note 7)              --        --       62,000            6            --         61,994

February 24, 1999, conversion of convertible
   promissory notes to common stock  (Note 7)    --        --       32,885            3            --         34,693

March 2, 1999, sale of common stock
   in Private Placement Transactions, net of
   Offering costs of $ 15  (Note 7)              --        --       15,000            1            --         14,999

March 25, 1999, conversion of convertible
   promissory note to common stock  (Note 7)     --        --       80,802            8            --         55,045

March 26, 1999, conversion of convertible
   promissory notes to common stock  (Note 7)    --        --      571,321           57            --         86,852

September 23, 1999, issuance of common
   stock for services  (Note 7)                  --        --       40,000            4            --             (4)

October 29, 1999, conversion of convertible
   promissory note to common stock  (Note 7)               --       10,000            1            --          9,999

Net loss for the year ended December 31, 1999    --        --           --           --            --             --
                                              -----  --------  -----------  -----------      ---------    -----------

BALANCE, DECEMBER 31, 1999 (Audited)             --  $     --   12,077,941  $     1,207      $(25,000)   $ 1,030,459
                                              -----  --------  -----------   -----------     ---------    -----------

</TABLE>
<TABLE>

                                                   Deficit
                                                    Accumulated
                                                    During
                                                 Development
                                                     Stage          Total
                                                 -----------       -----
<S>                                              <C>           <C>
February 11, 1999, sale of common stock
   in Private Placement Transactions, net of
   Offering costs of $ 1,876  (Note 7)                   --       584,500

February 11, 1999, conversion of convertible
   promissory note to common stock  (Note 7)             --        42,658

February 24, 1999, sale of common stock
   in Private Placement Transactions, net of
   Offering costs of $ 75  (Note 7)                      --        62,000

February 24, 1999, conversion of convertible
   promissory notes to common stock  (Note 7)            --        34,696

March 2, 1999, sale of common stock
   in Private Placement Transactions, net of
   Offering costs of $ 15  (Note 7)                      --        15,000

March 25, 1999, conversion of convertible
   promissory note to common stock  (Note 7)             --        55,053

March 26, 1999, conversion of convertible
   promissory notes to common stock  (Note 7)            --        86,909

September 23, 1999, issuance of common
   stock for services  (Note 7)                          --            --

October 29, 1999, conversion of convertible
   promissory note to common stock  (Note 7)             --        10,000

Net loss for the year ended December 31, 1999      (752,549)     (752,549)
                                                -----------   ------------

BALANCE, DECEMBER 31, 1999 (Audited)            $(1,206,774)  $  (200,108)
                                                -----------   ------------

</TABLE>

   The accompanying notes are an integral part of these financial statements


                                      F-4

<PAGE>

<TABLE>
<CAPTION>
                                                              F-5 VERTICA SOFTWARE, INC.
                                                              --------------------------
                                                   (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                                                   ---------------------------------------------
                                                            (A DEVELOPMENT STAGE COMPANY)
                                                            -----------------------------
                                                     Statement of Changes in Stockholders' Equity
                                                     --------------------------------------------

                                                    From January 1, 1996 (Inception) to June 30, 2001
                                                    -------------------------------------------------

                                                                                                                  Deficit
                                                                                                                Accumulated
                                               Preferred Stock        Common Stock         Paid-in                 During
                                               ---------------      ---------------   Advance to     Paid-in    Development
                                               Shares    Amount     Share    Amount  Stockholder     Capital       Stage     Total
                                               ------    ------     -----    ------  -----------     -------       -----    -------
<S>                                            <C>       <C>       <C>         <C>      <C>           <C>          <C>     <C>
Repayment of Stockholder's Advance              --         --         --       --       25,000            --         --      25,000

August 11, 2000, sale of common stock
  pursuant to a confidential subscription
  agreement  (Note 7)                           --         --      400,000     40                    199,960         --     200,000

August 18, 2000, sale of common stock
  pursuant to a confidential subscription
  agreement  (Note 7)                           --         --       35,000      3         --          17,497         --      17,500

August 30, 2000, sale of common stock
  pursuant to a confidential subscription
  agreement  (Note 7)                           --         --      160,000     16         --          79,984         --      80,000

September 20, 2000, sale of common stock
  pursuant to a confidential subscription
  agreement  (Note 7)                           --         --      120,000     12         --          59,988         --      60,000

September 27, 2000, conversion of convertible
  promissory notes to common stock  (Note 7)    --         --      327,000     33         --         163,467         --     163,500

October 3, 2000, sale of common stock
  pursuant to a confidential subscription
  agreement  (Note 7)                           --         --      130,000     13         --          64,987         --      65,000

Net loss for the year ended December 31, 2000
  Audited)                                      --         --         --       --         --            --   (1,653,972) (1,653,972)
                                               -----      ----  ----------  -----       ------     ---------  ---------   ---------
BALANCE, DECEMBER 31, 2000 (Audited)            --         --   13,249,941  1,324         --       1,616,342 (2,860,746) (1,243,080)
                                               -----      ----  ----------  -----       ------     ---------  ---------   ---------
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                      F-5

<PAGE>

<TABLE>
<CAPTION>
                                                              F-5 VERTICA SOFTWARE, INC.
                                                              --------------------------
                                                   (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                                                   ---------------------------------------------
                                                            (A DEVELOPMENT STAGE COMPANY)
                                                            -----------------------------
                                                     Statement of Changes in Stockholders' Equity
                                                     --------------------------------------------

                                                    From January 1, 1996 (Inception) to June 30, 2001
                                                    -------------------------------------------------

                                                                                                              Deficit
                                                                                                            Accumulated
                                               Preferred Stock        Common Stock                             During
                                               ---------------      ---------------   Advance to   Paid-in  Development
                                               Shares    Amount     Share    Amount  Stockholder   Capital     Stage      Total
                                               ------    ------     -----    ------  -----------   -------     -----      -----
<S>                                            <C>       <C>       <C>         <C>    <C>       <C>         <C>         <C>

January 12, 2001, sale of common stock
  pursuant to a confidential subscription
  agreement  (Note 7)                           --         --       50,000      5        --        24,995           --       25,000

January 12, 2001, conversion of convertible
  promissory notes to common stock  (Note 7)    --         --      101,823     11        --       162,906           --      162,917

January 22, 2001, issuance of common stock
  through the Company's Employee Equity
  Incentive Plan (Note 9)                       --         --       73,875      8        --        41,584           --       41,592

March 20, 2001, issuance of common stock for
  consulting services (Note 7)                  --         --      100,000     10        --        31,290           --       31,300

Net loss for the six months ended June 30, 2001
  (Unaudited)                                   --         --           --     --        --            --     (718,311)    (718,311)
                                               ----    ------   ----------  ------    -----    ----------  -----------    ---------

BALANCE, JUNE 30, 2001 (Unaudited)              --     $   --   13,575,639  $1,358    $  --    $1,877,117  $(3,579,057) $(1,700,582)
                                               ----    ------   ----------  ------    -----    ----------  -----------  -----------

                                       The accompanying notes are an integral part of these financial statements.

</TABLE>


                                      F-6


<PAGE>

                             VERTICA SOFTWARE, INC.
                             ----------------------
                 (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                 ---------------------------------------------
                         (A DEVELOPMENT STAGE COMPANY)
                         -----------------------------
                            STATEMENTS OF CASH FLOWS
                            ------------------------
<TABLE>
<CAPTION>


                                                                                                         Cumulative
                                                                                                            From
                                                                                                         January 1,
                                                                                                            1996
                                                                                                          (Date of
                                                                                 Six Months Ended        Inception)
                                                                                      June 30                to
                                                                          ----------------------------    June 30,
                                                                               2001           2000          2001
CASH FLOWS FROM OPERATING ACTIVITIES                                       (Unaudited)    (Unaudited)    (Unaudited
                                                                          -------------  ------------   ------------
<S>                                                                       <C>            <C>            <C>
     Net Loss                                                             $  (718,311)   $  (802,978)   $(3,579,057)

     Transactions not requiring cash:
           Depreciation                                                        14,478         15,112         71,608
     Changes in operating assets and liabilities:
     (Increase) decrease in employee advances                                  (5,800)            --         (5,800)
     (Increase) decrease in advance to stockholder                                 --         25,000
     (Increase) decrease in prepaid expenses                                      566             --           (377)
     (Increase) decrease in deposits                                               --             --        (10,000)
     Increase (decrease) in bank overdraft                                    (13,458)            --          6,727
     Increase (decrease) in accounts payable and other accrued expenses        93,502        126,136        398,354
     Increase (decrease) in payroll taxes payable                               7,121             --          8,683
                                                                          -----------    -----------    -----------
           NET CASH (USED IN) OPERATING ACTIVITIES                           (621,902)      (636,730)    (3,109,862)
                                                                          -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase/acquisition of equipment                                         (2,467)       (49,627)      (102,719)
                                                                          -----------    -----------    -----------
          NET CASH (USED IN) INVESTING ACTIVITIES                              (2,467)       (49,627)      (102,719)

CASH FLOWS FROM FINANCING ACTIVITIES
     Net borrowings/assumption on line of credit                                   --         26,300         26,300
     Net payments on line of credit                                                --        (26,300)       (26,300)
     Proceeds/assumption of unsecured notes                                    26,700             --        112,700
     Net payments on unsecured notes                                             (700)            --        (21,400)
     Proceeds, assumption on convertible debt                                 516,000        675,000      1,695,061
     Reduction of convertible promissory notes                               (150,000)            --       (453,061)
     Conversion of convertible promissory notes into common
        stock (includes $ 12,917 of accrued interest)                         162,917             --        705,733
     Proceeds from stock subscriptions                                             --             --        447,500
     Redemption of stock subscriptions                                        (25,000)            --       (597,500)
     Issuance of common stock                                                  97,892             --      1,322,742
     Assumption of capital lease obligation                                        --             --         26,361
     Net payments on capital lease obligation                                  (3,440)        (2,546)       (25,555)
                                                                          -----------    -----------    -----------
                        NET CASH PROVIDED BY FINANCING ACTIVITIES             624,369        672,454      3,212,581
                                                                          -----------    -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                          --        (13,903)            --

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                     --         36,490             --
                                                                          -----------    -----------    -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $        --    $    22,587    $        --
                                                                          ===========    ===========    ===========

Supplemental Disclosure of Cash Flow Information:

     Cash paid during the period for:
          Interest                                                        $        87    $        --    $    18,911
          Taxes                                                           $       800    $       800    $     4,000

NONCASH INVESTING AND FINANCING TRANSACTIONS:
     Common stock issued for consulting services                          $    31,300    $        --    $    71,300

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-7

<PAGE>




                                TABLE OF CONTENTS
                                -----------------


FINANCIAL STATEMENTS

     Balance Sheets..........................................................F-1

     Statements of Operations................................................F-2

     Statement of Changes in Stockholders' Equity............................F-3

     Statements of Cash Flows................................................F-7


NOTES TO FINANCIAL STATEMENTS................................................F-8



<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------

                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------


NOTE 1 - LOSSES DURING THE DEVELOPMENT STAGE
--------------------------------------------


Development Stage Company
-------------------------

The Company is in the development stage in accordance with Statement of
Financial Accounting Standard (SFAS) No. 7. All of the costs incurred to date
have been related to the development of its products, development of its
proposed Internet website, and the raising of capital to finance such
activities.

The Company, as discussed in Notes 2, 3, and 4 below, have incurred operating
losses since inception, totaling $3,579,057 through June 30, 2001.

Management plans to raise additional capital, primarily through the issuance of
common stock and convertible promissory debt until successful operations are
obtained, and the Company is no longer in the development stage.

In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon the Company's ability to meet its
financing requirements, and the success of its future operations. Management
believes that actions presently being taken to underwrite the Company's
development stage through completion will provide the necessary financial
requirements, which in turn will provide the opportunity for the Company to
continue as a going concern.


NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS
--------------------------------------------


Background
----------


Vertica Software, Inc., (the "Company"), formerly "Perfection Development
Corporation", was incorporated in Colorado on April 18, 1997. As further
discussed in Notes 3 and 4, on September 29, 1998, Perfection Development
Corporation entered into an agreement pursuant to which it would acquire all of
the outstanding capital stock of Vertica Software, Inc., a California
corporation ("Vertica California"). On December 31, 1998, Vertica California
merged with and into the Company. The Company was the surviving corporation in
the merger and the separate corporate existence of Vertica California ceased.
Concurrently with the merger, the Company changed its name from Perfection
Development Corporation to Vertica Software, Inc. The Company is developing
Internet/Intranet software products and services and an Internet web site for
the hazardous material and environmental industries.

Products
--------

The Company's current product development includes an environmental management
computer software system called ICOMPLY and an Internet web site called
HAZWEB.COM. ICOMPLY is planned to be a set of computer software modules designed
to automate environmental regulation compliance and related activities for
common industrial applications. The related activities will include chemical
inventory listings and tracking, transportation manifests, emergency response,
permit applications, waste streams, and occupational training. HAZWEB.com is an
on-line web site that intended to serve the hazardous materials community and
environmental concerns of industry. The Company intends to allow ICOMPLY to link
to HAZWEB.COM for additional content information, on-line regulations compliance
and on-demand training and services.

                                      F-8

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)


NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS - Continued
--------------------------------------------------------

Liquidity
---------

The Company has recurring operating losses since inception that have continued
subsequent to June 30, 2001. The losses are primarily due to product development
costs, and administrative infrastructure costs related to the financing and
development of the Company's business.

In January 2001 the Company received an additional $ 26,700 in bridge financing.
In February 2001, the Company received an additional $ 200,000 in bridge
financing.
In March 2001, the Company received an additional $ 111,000 in bridge
financing.
In April 2001, the Company received an additional $ 60,000 in bridge
financing.
In May 2001, the Company received an additional $ 100,000 in bridge
financing.
In June 2001, the Company received an additional $ 45,000 in bridge
financing.

The Company understands that the proceeds from this and similar transactions
will not provide adequate funding to sustain the Company's operations. Permanent
equity funding must be raised. There is no assurance that the funding will be
raised, or that it will be sufficient to sustain operations until the Company
begins generating positive cash flows.

The Company's plan to continue the development of its core products and commence
sales operations through the year ending December 31, 2001 is solely dependent
on additional funding through the sale of equitable securities or convertible
promissory notes.


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

Basis of Presentation
---------------------

As further discussed in Note 4, the acquisition of Vertica California was
accounted for as a "reverse merger acquisition" whereby, for accounting
purposes, Perfection Development Corporation acquired the Company under the
purchase method of accounting and, due to the lack of significant prior
operations of Perfection Development Corporation, was substantially recorded as
a "recapitalization". Accordingly, the historical financial statements have been
restated after giving effect to the December 31, 1998 acquisition of the
Company. The financial statements have been prepared to give retroactive effect
to January 1, 1996 of the reverse merger acquisition completed on December 31,
1998 and represent the operations of Vertica California. Consistent with reverse
acquisition accounting: ( i ) all of Vertica California's assets, liabilities
and accumulated deficit are reflected at their combined historical cost ( as the
accounting acquirer ) and ( ii ) the preexisting outstanding shares of the
Company ( the accounting acquiree ) are reflected at their net asset value as if
issued on December 31, 1998.

                                      F-9

<PAGE>


                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
---------------------------------------------------------------

Management Estimates
--------------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, retained earnings, income
and expenses, and related disclosures for the reporting period. Actual results
could differ from those estimates and such differences could be material.

Cash and Cash Equivalents
-------------------------

Cash is defined as cash in demand deposit accounts as well as cash on hand. Cash
equivalents are short term, highly liquid investments that are readily
convertible to known amounts of cash and investments so near their maturity that
the risk of changes in value due to changes in interest rates is negligible.
These are generally investments with maturity dates within three months of their
acquisition date. Not included as cash equivalents are funds restricted as to
their use, regardless of liquidity or the maturity dates of investments.

Concentrations of Credit Risk
-----------------------------

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of uninsured cash balances. The Company places
its cash deposits with high-credit quality financial institutions. At times,
balances in the Company's cash accounts may exceed the Federal Deposit Insurance
Company (FDIC) limit of $100,000.

Prepaid Expenses
----------------

Prepaid expenses are charged to the statement of operations in the period for
which the benefit is incurred.

Equipment
---------

As further discussed in Note 5 development costs subsequent to the establishment
of technological feasibility. The Company has determined that technological
feasibility for its products is generally achieved upon completion of a working
model. Since software development costs have not been significant, and the
working model(s) are not yet completed, all such costs have been charged to
expense for the six months ended June 30, 2001, and 2000.

Income Taxes
------------

Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.

                                      F-10

<PAGE>


                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)



NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
---------------------------------------------------------------

Net Loss Per Share
------------------

The Company reports its net loss per share using a dual presentation of basic
and diluted loss per share. Basic loss per share excludes the impact of common
stock equivalents, and is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding for the period. Diluted
loss per share includes the dilutive effect from the potential exercise or
conversion of convertible debt. For the six months ended June 30, 2001, and 2000
the impact of convertible debt was not considered as their effect on Net Loss
Per Share would be anti-dilutive.

Fair Value of Financial Instruments
-----------------------------------

Cash, advances, prepaid expenses, notes payable, accounts payable and accrued
expenses are reflected in the accompanying financial statements at fair value
due to the short-term nature of those instruments. The carrying amount of long
term debt obligations approximate fair value at the balance sheet date.

Recent Accounting Pronouncements
--------------------------------

Statement of Financial Accounting Standards (SFAS) 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS 137,
Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133, and SFAS 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, is effective for the
Company as of July 1, 2000. SFAS 133 requires that an entity recognize all
derivatives as either assets or liabilities measured at fair value. The
accounting for changes in the fair value of a derivative depends on the use of
the derivative. Management believes adoption of these new accounting standards
will not have a material impact on the financial position of the Company.

The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
(SAB) 101, Revenue Recognition in Financial Statements, in December 1999. The
SAB summarizes certain of the SEC staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. In June
2000, the SEC issued SAB 101B, which delays the implementation date of SAB
101until no later than the fourth fiscal quarter of fiscal years beginning after
December 15, 1999. The Company does not believe that adoption of this SAB will
have a material impact on its financial statements.

In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation (FIN) 44, Accounting for Certain Transactions involving Stock
Compensation, which clarifies the application of APB 25 for certain issues. The
interpretation is effective July 1, 2000, except for the provisions that relate
to modifications that directly or indirectly reduce the exercise price of an
award and the definition of an employee, which are effective after December 15,
1998. The Company does not believe that adoption of FIN 44 will have a material
impact on its financial statements.

                                      F-11

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)


NOTE 4 - ACQUISITION
--------------------

The Company's current business is a continuation of the business formerly
conducted by Vertica Software, Inc., a California corporation ("Vertica
California"). On December 31, 1998, the Company acquired 100% of the outstanding
capital stock of Vertica California in a "reverse merger acquisition." The
purchase price was solely comprised of the issuance of 9,200,000 shares of the
Company's common stock, par value $ .0001, to the shareholders of Vertica
California in exchange for all 4,930,000 shares of Vertica California's common
stock, no par value. The Company was the surviving corporation in the merger and
the separate corporate existence of Vertica California ceased. Concurrently with
the merger, the Company changed its name from Perfection Development Corporation
to Vertica Software, Inc. The merger constituted a tax-free reorganization. The
acquisition of Vertica California was accounted for using the purchase method of
accounting, and due to the lack of significant prior Company operations, was
substantially recorded as a "recapitalization."


NOTE 5 - EQUIPMENT
------------------

Equipment consisted of the following:

At June 30:                                           2001             2000
                                                      ----             ----

Computer and peripheral equipment                $     102,719    $     100,252

Less accumulated depreciation                           71,608           38,449
                                                 -------------    -------------
                                                 $      31,111    $      61,803
                                                 =============    =============


Total depreciation expense for the six months ended June 30, 2001, and 2000
respectively was $14,478 and $15,112.


NOTE 6 - NOTES PAYABLE
----------------------

Notes payable consisted of the following:

At June 30:                                           2001             2000
                                                      ----             ----

Note payable to corporation, unsecured, bearing
compound interest at 12 1/2%, and payable upon
demand                                           $      49,800    $           0


                                      F-12

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)


NOTE 6 - NOTES PAYABLE - (Continued)
------------------------------------

Note payable to individual, unsecured, bearing
compound interest at 12 1/2%, and payable upon
demand                                                   15,500                0

Note payable to individual, unsecured, bearing
compound interest at 12 1/2%, and payable upon
demand                                                   12,000                0

Note payable to individual, unsecured, bearing
compound interest at 12 1/2%, and payable upon
demand                                                   14,000                0
                                                  -------------    -------------


                                                  $      91,300    $           0
                                                  =============    =============



NOTE 7 - SALE AND ISSUANCE OF COMMON STOCK
------------------------------------------

Sale and Issuance of Common Stock
---------------------------------

On December 31, 1998, in connection with the reverse merger acquisition, the
Company issued 1,300,000 shares of its $ .0001 par value common stock in a
recapitalization of the Company. The 1,300,000 shares consisted of the
following:

     260,000 shares of its $ .0001 par value common stock at $ .25 per share
     pursuant to Rule 504 of Regulation D of the Securities Act of 1933, as
     amended (the "Act"). The Company received net proceeds of $ 60,500 after
     deducting offering costs of $ 4,500.

     1,040,000 shares of $ .0001 par value common stock were issued to officers
     for services. These shares are "restricted securities" and may be sold only
     in compliance with Rule 144 of the Act.

During the year ended December 31, 1998, the Company issued 100,000 shares of
its $ .0001 par value common stock at $ 1.00 per share pursuant to Rule 504 of
Regulation D of the Act for net proceeds of $ 100,000.

During the year ended December 31, 1998, the Company issued 9,200,000 shares of
its $ .0001 par value common stock at $ .0001 per share to its principal
stockholders. The 9,200,000 shares are reflected as issued as of the
recapitalization date of the Company.

During the year ended December 31, 1999, the Company issued 40,000 shares of its
$ .0001 par value common stock at $ 1.00 per share pursuant to Rule 504 of
Regulation D of the Act for net proceeds of $ 40,000.

During the year ended December 31, 1999, the Company issued 661,500 shares of
its $ .0001 par value common stock at $ 1.00 per share pursuant to Rule 504 of
Regulation D of the Act for net proceeds of $ 661,500.

                                      F-13

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)



NOTE 7 - SALE AND ISSUANCE OF COMMON STOCK - (Continued)
---------------------------------------------------------

During the year ended December 31, 1999, the Company converted convertible
promissory notes totaling $ 229,316 (including accrued interest of $ 66,255) for
736,441 shares of its $ .0001 par value common stock at an average price of $
 .31 per share.

During the year ended December 31, 1999, the Company issued 40,000 shares of its
$ .0001 par value common stock at $ 1.00 per share for outside consulting
services.

During the year ended December 31, 2000, the Company converted convertible
promissory notes totaling $ 163,500 (including accrued interest of $ 13,500) for
327,000 shares of its $ .0001 par value common stock at an average price of $
 .50 per share.

During the year ended December 31, 2000, the Company issued 715,000 shares of
its $ .0001 common stock at an average price of $ .50 per share.

During the year ended December 31, 2001, the Company issued 130,000 shares of
its $ .0001 common stock at an average price of $ .50 per share.

During the six months ended June 30, 2001, the Company issued 325,698 shares of
its $ .0001 common stock at an average price of $ .80 per share.

NOTE 8 - CAPITAL LEASE OBLIGATIONS
----------------------------------

<TABLE>
<CAPTION>

Capital lease obligations consisted of the following:

At June 30:                                                              2001              2000
                                                                         ----              ----
<S>                                                                  <C>              <C>

Capital lease obligation, secured by equipment,
with an effective interest rate of 14.9% and
approximate monthly payments of $ 360                                $         479    $       4,327

Capital lease obligation, secured by equipment,
with an effective interest rate of 14.9% and
approximate monthly payments of $ 250                                          325            3,373
                                                                     -------------    -------------

                                                                               806            7,700

Less current portion                                                           806            6,665
                                                                     -------------    -------------

                                                                     $           0    $       1,035
                                                                     =============    =============

</TABLE>

                                      F-14

<PAGE>




                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)


NOTE 9 - CONVERTIBLE PROMISSORY NOTES
-------------------------------------

<TABLE>
<CAPTION>

Convertible promissory notes consisted of the following:

At June 30:                                                                         2001      2000
                                                                                    ----      ----
<S>                                                                                <C>       <C>
Convertible promissory note, unsecured with interest at 10%. The agreement
stipulates the conversion rate of $ 1.60 per share of common stock. The
principal note balance along with all accrued interest is payable
upon demand                                                                             0    50,000

Convertible promissory note, unsecured with interest at 10%. The agreement
stipulates the conversion rate of $ 1.60 per share of common stock. The
principal note balance along with all accrued interest is payable
upon demand                                                                             0    50,000

Convertible promissory note, unsecured with interest at 10%. The agreement
stipulates the conversion rate of $ 1.60 per share of common stock. The
principal note balance along with all accrued interest is payable
upon demand                                                                             0    50,000

Convertible promissory note, unsecured with interest at 12%. The principal plus
accrued interest converts to common stock at a conversion price equal to 55% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all accrued
interest is payable on demand 50,000 50,000

</TABLE>

                                      F-15


<PAGE>


                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)

<TABLE>
<CAPTION>

NOTE 9 - CONVERTIBLE PROMISSORY NOTES - (Continued)
---------------------------------------------------

<S>                                                                               <C>       <C>
Convertible promissory note, unsecured with interest at 12%. The principal plus
accrued interest converts to common stock at a conversion price equal to 55% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all
accrued interest is payable on demand                                             100,000   100,000

Convertible promissory note, unsecured with interest at 12%. The principal plus
accrued interest converts to common stock at a conversion price equal to 55% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all
accrued interest is payable on demand                                              50,000    50,000

Convertible promissory note, unsecured with interest at 12%. The principal plus
accrued interest converts to common stock at a conversion price equal to 55% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all
accrued interest is payable on demand                                             100,000   100,000

Convertible promissory note, unsecured with interest at 12%. The principal plus
accrued interest converts to common stock at a conversion price equal to 55% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all
accrued interest is payable on demand                                              50,000    50,000

</TABLE>

                                      F-16

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)

<TABLE>
<CAPTION>

NOTE 9 - CONVERTIBLE PROMISSORY NOTES - (Continued)
---------------------------------------------------

<S>                                                                                <C>       <C>
Convertible promissory note, unsecured with interest at 12%. A separate
agreement stipulates the conversion rate of $ 1.50 per share of common stock
The principal note balance along with all accrued interest
is payable on demand                                                                    0    50,000

Convertible promissory note, unsecured with interest at 12%. A separate
agreement stipulates the conversion rate of $ 1.50 per share of common stock
The principal note balance along with all accrued interest
is payable on demand                                                                    0    50,000


Convertible promissory note, unsecured with interest at 12%. The principal plus
accrued interest converts to common stock at a conversion price equal to 55% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all
accrued interest is payable on demand                                              50,000    50,000

Convertible promissory note, unsecured with interest at 12%. The principal plus
accrued interest converts to common stock at a conversion price equal to 55% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all
accrued interest is payable on demand                                             100,000   100,000

Convertible promissory note, unsecured with interest at 12%. The principal plus
accrued interest converts to common stock at a conversion price equal to 55% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all
accrued interest is payable on demand                                             100,000   100,000

</TABLE>

                                      F-17

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)

<TABLE>
<CAPTION>

NOTE 9 - CONVERTIBLE PROMISSORY NOTES - (Continued)
---------------------------------------------------

<S>                                                                               <C>             <C>
Convertible promissory note, unsecured with interest at 12%. The debt and
accrued interest converts at a rate of $ 50 cents per share of common stock.
The principal note balance along with all accrued interest matured
on December  30, 2000                                                                   0    25,000

Convertible promissory note, unsecured with interest at 10%. The principal plus
accrued interest converts to common stock at a conversion price equal to 75% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all accrued
interest matures on March 16, 2001                                                 61,000         0

Convertible promissory note, unsecured with interest at 10%. The principal plus
accrued interest converts to common stock at a conversion price equal to 75% of
the closing sale price of the common stock as reported on the OTCBB on the date
of the election to convert. The principal note balance along with all accrued
interest matures on April 2, 2001                                                  65,000         0

Convertible promissory note, unsecured with interest at 10%. The principal plus
accrued interest converts to common stock at a conversion price of $ .50 a
share. The principal note balance along with all accrued interest matures on
September 26, 2001                                                                111,000         0

Convertible promissory note, unsecured with interest at 10%. The principal plus
accrued interest converts to common stock at a conversion price of $ .50 a
share. The principal note balance along with all accrued interest matures on
August 28, 2001                                                                   200,000         0

</TABLE>

                                      F-18

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)


<TABLE>
<CAPTION>

NOTE 9 - CONVERTIBLE PROMISSORY NOTES - (Continued)
---------------------------------------------------

<S>                                                                               <C>            <C>
Convertible promissory note, unsecured with interest at 10%. The principal plus
accrued interest converts to common stock at a conversion price of $ .50 a
share. The principal note balance along with all accrued interest matures on
October 16, 2001                                                                        60,000           0

Convertible promissory note, unsecured with interest at 10%. The principal plus
accrued interest converts to common stock at a conversion price of $ .50 a
share. The principal note balance along with all accrued interest matures on
November 1, 2001                                                                        40,000           0

Convertible promissory note, unsecured with interest at 10%. The principal plus
accrued interest converts to common stock at a conversion price of $ .50 a
share. The principal note balance along with all accrued interest matures on
November 14, 2001                                                                       60,000           0

Convertible promissory note, unsecured with interest at 10%. The principal plus
accrued interest converts to common stock at a conversion price of $ .50 a
share. The principal note balance along with all accrued interest matures on
December 6, 2001                                                                        45,000           0
                                                                                  ------------   ---------

                                                                                  $  1,242,000   $ 875,000
                                                                                  ============   =========
</TABLE>


                                      F-19

<PAGE>


                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)


NOTE 10 - INCOME TAXES
----------------------

A reconciliation of the U.S. statutory federal income tax rate to the effective
tax rate is as follows:

At December 31:                                       2001              2000
                                                      ----              ----

     U.S. federal statutory graduated rate          34.00%            39.00%
     State income tax rates net of federal
     benefits:
        Colorado                                     3.16%             4.00%
        California                                   6.10%             7.00%
     Net operating loss for which no tax
        benefit is currently available             (43.26%)          (50.00%)
                                                ---------------  ---------------

                                                      0%                0%
                                                ===============  ===============


The Company conducts its operations in California, which has an annual minimum
tax of $800.


At December 31, 2000, 1999, 1998, 1997 and 1996, deferred taxes consisted of a
net tax asset due to operating loss carry forwards of $ 1,653,972, $752,549,
$235,335, $176,605, and $42,285, respectively, which was fully allowed for, in
the valuation allowance of $ 1,653,972, $752,549, $235,335, $176,605, and
$42,285, respectively. The valuation allowance offsets the net deferred tax
asset for which there is no assurance of recovery. The change in valuation
allowance for the years ended June 30, 2001, 1999, 1998, 1997, and 1996 were
$503,164, $228,937, $28,679, $57,963, and $10,201, respectively. Net operating
loss carry forwards will expire in 2011, 2012, 2013, 2014, 2015.


NOTE 11 - COMMITMENTS
---------------------

The Company has operating leases on its office space and some of its equipment.
Future minimum lease payments under such noncancelable operating leases are
summarized as follows:

                                  Office
                                   Space                     Equipment
                            -----------------           -----------------
Year ending
December 31,
------------
2001                        $          60,553           $             806
2002                                  124,739                           0
2003                                  128,481                           0
2004                                  121,011                           0
                            -----------------           -----------------

                            $         434,784           $             806
                            =================           =================

Total rent expense for the six months ended June 30, 2001, and 2000 was
$72,668, and $39,359, respectively.

                                      F-20

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)

NOTE 11 - COMMITMENTS - (Continued)
-----------------------------------

The Company entered into an agreement with an outside consultant to provide
management services. As part of the agreement, the Company will pay $ 10,000 per
month. The consultant has the option of converting the fees into shares of
common stock at the following exercise prices:

                                                      Exercise Price
                           Share Options               Per Share
                           -------------              --------------
                                 58,695                   $ 1.150
                                  4,444                   $ 2.250
                                  4,000                   $ 2.500
                                  8,000                   $ 1.250
                                  9,416                   $ 1.062
                                  9,433                   $ 1.060
                                 10,330                   $ .9680
                                 10,672                   $ .9370
                                 11,848                   $ .8440
                                 50,000                   $ .4900

In the event the consultant provides additional financing of $ 109,645, the
consultant will receive an additional 200,000 unrestricted common share options
at an exercise price equal to 85% of the closing sale price of the Company's
common share price as reported on the OTCBB on June 1,2001. In additional to
these provisions, the consultant will receive a 7% fee for financing and a 7%
fee against the gross revenue generated from the results of the consultants
efforts.

On March 15, 2001, the Company entered into a 90-day agreement with an outside
consultant to provide advisory and consultative services to shareholders, the
general public, and the brokerage community. Compensation for these services is
100,000 shares of common stock. No stock had been issued as of June 30, 2001.

On March 1, 2001, the Company entered into a 90-day agreement with an outside
consultant to provide general services to the Company. Compensation for these
services is 250,000 shares of common stock. 100,000 shares of common stock had
been issued as of June 30, 2001.


NOTE 12 - STOCKHOLDER EQUITY (DEFICIT)
--------------------------------------

     (a)  2000 Equity Incentive Plan

On December 15, 2000, the Board of Directors authorized the 2000 Employee Stock
Purchase Plan (the Employee Plan). Under the Employee Plan, the Company may
issue up to an aggregate of 3,000,000 shares of common stock to employees at 85%
of the lower of the fair market value of the common stock on the date of grant,
except for 10% shareholders who may exercise options at no less than 110% of the
fair market value of the shares on the date of grant. During the six months
ended June 30, 2001 73,875 shares were issued pursuant to the Employee Plan.
Compensation expense related to the issuance of these shares for the six months
ended June 30, 2001 was $ 41,592.

                                      F-21

<PAGE>



                             VERTICA SOFTWARE, INC.
                             ----------------------
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                  ---------------------------------------------
                          (A DEVELOPMENT STAGE COMPANY)
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                JANUARY 1, 1996 (Inception) THROUGH JUNE 30, 2001
                -------------------------------------------------
                                   (Unaudited)



NOTE 12 - STOCKHOLDER EQUITY (DEFICIT) - (Continued)
----------------------------------------------------

     (b)  STOCK OPTION PLANS

In connection with certain convertible promissory notes, the Company granted, to
the third parties, warrants to purchase 112,500 shares of common stock at a
range of approximately $ 1.00 to $ 1.50 per share. The warrants vest upon
conversion of the promissory notes. None of the notes were converted as of their
maturity date. The fair market value of the Company's common stock at June 30,
2001 was less than the warrants' prices.


NOTE 13 - EMPLOYEE BENEFIT PLAN
-------------------------------

The Company established an employee benefit plan (the Benefit Plan) under
Section 401(k) of the Internal Revenue Code. The Benefit Plan is available to
all full-time U.S. employees. The Benefit Plan allows for employees to make
contributions up to a specified percentage of their compensation. Under the
Benefit Plan, the Company makes no discretionary contributions to the plan.

                                      F-22


<PAGE>