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SEC 2337  Potential persons who are to respond to the collection of information
(3-02)    contained in this form are not required to respond unless the form
          displays a currently valid OMB control number.
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002



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

                                    COLORADO
                               -------------------
                 (State or Other Jurisdiction of Incorporation)

                                    000-28813
                              --------------------
                            (Commission File Number)

                                   93-1192725
                              --------------------
                     (I.R.S. Employer Identification Number)

                        106 EAST SIXTH STREET, SUITE 900
                               AUSTIN, TEXAS 78701
               --------------------------------------------------
          (Address of Principal Executive Offices, including Zip Code)

                                 (512) 322-3900
                                 --------------



                (Issuer's Telephone Number, Including Area Code)

       Securities registered pursuant to Section 12 (b) of the Act: None.

          Securities registered pursuant to Section 12 (g) of the Act:

                         COMMON STOCK, $0.0001 PAR VALUE
                         -------------------------------

Check whether the Issuer filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Company was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [_] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [_]

State Issuer's revenues for its most recent fiscal year: December 31, 2002 -
$-0-

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: $-0-.

Issuers involved in Bankruptcy Proceedings during the past five years: Not
Applicable

State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date: December 31, 2002 - 21,850,091 shares
of Common Stock

Documents Incorporated By Reference

None

Transitional Small Business Issuer Format: [_]Yes [X] No

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                                Table of Contents

                              Created by Disclosure


                                 Filing Sections

              To jump to section, click on hypertexted page number

<TABLE>
<S>                                                                       <C>
Document..............................................................     1
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Base..................................................................     1
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Cover Page............................................................     1
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Business..............................................................     3
                                                                           -
Properties............................................................    12
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Legal Proceedings.....................................................    12
                                                                          --
Submission to a Vote..................................................    12
                                                                          --
Market for Common Equity..............................................    12
                                                                          --
Management Discussion.................................................    14
                                                                          --
Financial Stmnts/Suppl Data...........................................    16
                                                                          --
Changes in Accounting.................................................    16
                                                                          --
Directors and Executive Officers......................................    16
                                                                          --
Executive Compensation................................................    17
                                                                          --
Security Ownership....................................................    17
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Related Transactions..................................................    18
                                                                          --
Exhibits and Reports..................................................    19
                                                                          --
List of Exhibits......................................................    19
                                                                          --
Signatures............................................................    20
                                                                          --
Financial Statements..................................................    20
                                                                          --
Report of Auditors....................................................    20
                                                                          --
Balance Sheet.........................................................    21
                                                                          --
Income Statement......................................................    22
                                                                          --
Shareholders Equity...................................................    23
                                                                          --
Cashflow Statement....................................................    25
                                                                          --
Financial Footnotes...................................................    26
                                                                          --


                                    Exhibits

Exhibits..............................................................    40
                                                                          --
Consents : Experts/Counsel............................................    40
                                                                          --
</TABLE>

<PAGE>

                                     PART I

Item 1. Description of Business.

Organization and General History

     In April 1997, Perfection Development Corporation was incorporated under
the laws of Colorado. We were originally formed for the purpose of developing
and constructing real estate properties. On September 29, 1998, we acquired all
the outstanding capital stock of Vertica Software, Inc., a California
corporation ("Vertica California"). At the time of the acquisition, we were
inactive and had no significant assets. Vertica California was in the business
of developing Internet software products serving the hazardous materials and
hazardous waste industries. We have continued this business since the
acquisition. On December 31, 1998, Vertica California, which we then held as a
subsidiary, merged with and into us. We became the surviving corporation in the
merger and the separate corporate existence of Vertica California ceased.
Concurrently with the merger, we changed our name to Vertica Software, Inc. Our
stock trades on the NASD OTC Bulletin Board under the symbol "VERI". Our
headquarters are located in Austin, Texas.

     We are a development-stage company that is developing Internet software
products intended to serve industries that are impacted by government regulation
of hazardous materials and hazardous wastes and other environmental laws and
regulations. We are developing software products designed to provide information
about environmental regulations and a software management system to assist
companies with their environmental regulation compliance and related activities
for common industrial applications. We have developed and may continue to
develop software products within a software management system called " iComply".
These products reside in our website called Hazweb.com, which was previously
called Vertica.com.

     The iComply products currently include: Communicator (which is designed to
manage efficiently a facility's environmental reporting, emergency response, and
crisis communication before, during, and after an emergency incident); Inventory
(which is designed to streamline hazardous chemical and waste inventory tracking
and assists in the management of hazardous materials and wastes); Transporter
(which is designed to automate the shipping, labeling, transporting compliance
and invoicing of hazardous materials and wastes).

     Hazweb.com includes the Marketplace (which offers e-commerce business
solutions that streamline the sales process and allow hazardous materials
marketers to operate more efficiently).

     All trademarks and trade names appearing in this document are the property
of their respective holders.

CURRENT STATUS OF DEVELOPMENT

     As stated earlier, we completed the development of three products included
in the iComply system, and all three products have been used at Olympian, the
largest independent oil marketer in California. It is our current plan,
providing we obtain the necessary funding, to sell these products in the
marketplace, which includes the oil & gas, petro-chemical, transportation,
industrial and agricultural chemical industries. We currently estimate that we
will need approximately $500,000 in funds, in order to satisfy our estimated
cash requirements over the next twelve months. We cannot assure you, however,
that we will receive the necessary financing.

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     As a development-stage Company, we have cumulatively, since inception, had
revenues totaling $57,887. Our expenses to date have been incurred in connection
with the development of the software products and the Hazweb .com (formerly
called Vertica.com) web site and other marketing, sales and administrative
expenses. We have formalized our pricing models, and have designed a licensing
agreement which we intend our customers to execute.

Industry Overview

     Companies that transport, store, or handle hazardous materials are required
by federal, state and local laws to meet current regulations. These regulations
require training of personnel, proper handling and storing of hazardous
materials, filing of appropriate government forms, production of required
shipping papers and labeling and placarding of hazardous materials. These
government regulations are complex and difficult to interpret and are updated
and revised from time to time. Failure to comply with current environmental
regulations can result in significant criminal and civil penalties, including
fines, damages and injunctions. See "Government Regulations."

     The growth of the environmental regulation compliance market is driven
primarily by the maintenance and expansion of environmental regulations in the
United States, including federal, state and local regulatory schemes. We believe
that continued public pressure for environmental protection in the United States
will likely result in continued and increased environmental regulation of many
industries.

     We believe our products can serve companies in the following industries and
the following government agencies:

     Transportation, including railroad, highway, marine and air;

     Manufacturing, including petroleum refining and related industries,
chemical and allied products, rubber and miscellaneous plastics, primary metal
industries, fabricated metal products, industrial and commercial machinery,
electronic, electrical equipment and components, transportation equipment,
measuring and analyzing and controlling instruments, and other manufacturing
industries;

     Engineering and research services, including petroleum, chemical,
industrial, sanitary, biological, non-commercial biological and testing
laboratories;

     Utilities, including electric, gas and sanitary;

     Other industries, including mining, agricultural, construction, insurance,
industry wholesale trade, training agencies and industry consulting agencies;
and

     Government agencies, including the Environmental Protection Agency, the
Department of Transportation and the Occupational Health and Safety
Administration.

     We cannot assure you, however, that we will be able to successfully market
our products to participants in these potential markets.

     The Vertica Solution

     We believe that many companies hire consultants to insure environmental
compliance and that other companies spend substantial amounts to hire in-house
information technology groups to design and maintain environmental compliance
systems. We believe we offer a solution based on a combination of a Web browser
and Microsoft SQL Servers, and bring together a software management system with

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an on-line community. This solution allows our software products and Internet
web site, discussed below, to function in concert.

     We have designed our environmental software management system, iComply, to
assist our customers by reducing the time and costs required by consultants,
internal information technology and environmental management staff for
regulatory compliance with environmental regulations. Our products would not,
however, provide any check for compliance with applicable regulations of a
customer's internal systems.

     We have also designed the Internet web site, Hazweb.com (formerly called
Vertica.com) as an environmental web portal serving the hazardous materials and
hazardous waste industries. Hazweb.com contains extensive and continuously
updated information relating to current environmental regulations, and enables
clients and vendors in the hazardous materials industry to interact on-line. The
iComply products reside within Hazweb.com.

     We believe that our customers will be able to use our systems to reduce the
labor time and resources needed to comply with hazardous waste and environmental
regulations. A customer is asked by the software to respond to a list of
relevant questions, the responses are linked to forms and other documentation
used for reporting and compliance purposes. We call these lists of questions and
links "wizards." The data accumulated in the modules can be retrieved for a
variety of purposes through the software, thus enabling the user to reduce the
amount of manual calculations, hard paper information gathering and storage and
other clerical functions needed to complete required reports and notices.

Our Strategy

     We derive revenues from three diversified products and services:

     Licensing of iComply products, transaction fees for filing activities, and
e-commerce marketplace transaction fees on the Hazweb.com web site. We believe
that our pricing for the licensing and training are lower than the costs a
customer would incur in developing an in-house system due to the distribution of
our costs of development and maintenance across our entire client base. We also
believe that iComply modules will attract clients by lowering their capital and
labor costs associated with environmental compliance. Some activities, such as
plain text searches of government regulations, are offered for free, in order to
generate initial traffic to our web site. Finally, we have set our transaction
fees on Hazweb.com at the then current market rates for such fees.

     We believe that our Hazweb.com web site will be a hub for a client's
environmental compliance transaction activity, as well as the entry point for
research queries into our proposed database. We believe that eventually a steady
traffic flow through our site will result in vendors connecting with clients in
these industries.

Products and Services

     iComply. On February 1, 2000, we released two products, the iComply
Communicator and Inventory modules. On July 17, 2000, we released the iComply
Transporter, and in the first quarter of 2001, we released the Hazweb e-commerce
marketplace platform. Over the next twelve months, the Company's primary
commitment is to market and sell its existing products.

     iComply Features

     We have designed our iComply software products, comprised of separate
Internet accessible software modules as described below, to assist clients in
industries subject to environment and hazardous materials and hazardous waste
regulations in environmental compliance, reduce regulatory paper trails and

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streamline the administrative efforts associated with hazardous materials and
hazardous waste management and crisis communications, thus reducing costs to
those industries.

     iComply Products:

     Inventory

     The Inventory module, as part of each of the other iComply products
discussed below, provides assistance to customers and data to other iComply
products by managing chemical and waste information for each customer site. The
module is designed to link

material safety data sheets ("MSDS") and waste profile information directly to a
customer's facility inventory. The module provides customers with a site map
feature and the capability to track inventory down to the individual building
level. A customer will be able to use the inventory and regulated chemical lists
to facilitate chemical control, emergency compliance and environmental
reporting. Inventory can be updated manually by the customer or automatically by
iComply products as a customers products are received, manufactured, transported
or released. The Inventory module is complete and has been used by Olympian,
which is the largest independent oil marketer in California.

     Communicator

     The Communicator is designed to manage a facility's hazardous materials,
emergency compliance, crisis communications and environmental reporting
information. The product includes hazardous materials plan builders, compliance
wizards and automated document submission. Electronic forms and checklists are
designed to streamline response efforts and minimize reporting errors. The
Communicator module is also designed to facilitate internal as well as external
communications, allowing continuous control of a customer's facility public
image. This module also supports compliance with EPCRA (Emergency Planning and
Community Right to Know) and related environmental regulations. The Communicator
was released on February 1, 2000.

     Transporter

     The Transporter is designed to serve the hazardous materials and waste
transportation needs of a customer. The product includes automated Department of
Transportation registration form, bill of lading and waste manifest software
"wizards," document tracking and incident and exception report capability. The
module automatically updates chemical and waste inventories, allows access to
material information and provides labeling and placard information essential to
the shipment of hazardous materials. This product supports compliance with
Department of Transportation regulations. The Transporter was released on July
17, 2000.

     Processor

     The Processor will be designed to serve each iComply customer site's
production floor process mapping, inventory, hazardous materials and waste
stream needs. It will support compliance with TSCA (Toxic Substance Control
Act)and related regulations. The development and first release of this product
depends upon us generating revenue on our existing completed products.

     HazOSHA

     The HazOSHA product will be designed to serve each iComply customer site's
hazardous materials employee safety policies, procedures and training needs,
including on-line training. This module will support compliance with hazardous
materials related sections of 29 CFR OSHA (Code of Federal Regulations for

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Occupational Safety and

Health Administration). The development and first release of this product
depends upon us generating revenue on our existing completed products.

     Permitter

     The Permitter product will be designed to serve each iComply customer
site's permit monitoring and compliance needs, and will include air, liquid
discharge and hazardous waste permit application software "wizards." This module
will support compliance with CAA (Clean Air Act), EPA (Environmental Protection
Agency), RCRA (Resource Conservation and Recovery Act), CWA (Clean Water Act),
AQMD (Air Quality Management District) and related regulations. Programming of
permit processors for this product has suspended, and the completion and first
release of this product depends upon us generating revenue on our existing
completed products.

     Hazweb.com

     Hazweb.com (which was called Vertica.com) is our web site that has been
designed to provide updated information on environmental regulations and serve
as an e-commerce web portal in which vendors and clients in the hazardous
materials industry will be able to buy and sell products and services. The
iComply products reside within Hazweb.com. The features of this system are:

     News & Analysis: It is intended that Hazweb.com provides current industry
news for the hazardous materials community, including stories from business,
government, energy, environment and finance. Our web site features informational
articles written by experts in the hazardous materials industry and offers an
internet posting site for industry related press releases and publications.

     Marketplace: 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.

     Hazinfo: We believe that Hazweb.com serves the multifaceted information
needs of the hazardous materials and the hazardous waste communities. It
features industry-specific glossaries, a public contacts database, codified
regulations, on-line MSDS access, discussion groups, event calendars and an
industry-related resume posting and career center.

     Sales and Marketing

     We use marketing tools including focus groups, public relations, direct
mail, channel distributions, advertisement and telemarketing. Based on the
evolving markets

for each product line, we will modify the marketing program to utilize all
appropriate marketing resources. In general, the marketing for each product line
follows the following format:

1. Introductory product announcements, public relations and media coverage;

2. Promotion via trade shows, conferences and the Internet;

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3.   Direct sales using our sales personnel;

4.   Expansion of sales channels through distributors and business partnerships;

5.   Ongoing advertising through targeted media and the Internet;

6.   Product demonstration and information at Hazweb.com (web-site),
     www.Hazweb.com.

     We also promote our product lines and web site through affiliates,
individual seminars, trade shows, and in trade publications. Direct sales using
our subject-expert sales personnel is also a high priority, including direct
calls to our customers. In addition, we seek marketing and distribution
partnerships with other firms that stand to benefit from bringing our target
industries on-line. This could include such partners in the on-line
infrastructure field such as computer network equipment manufacturers, software
database providers and other business solutions providers. Additionally, we
promote Hazweb.com's ability to provide data for research and crisis
preparedness, make available information that helps companies dealing with the
hazardous materials and hazardous wastes industries' fragmented environment and
"information overload ," and to minimize the paperwork associated with hazardous
materials and hazardous waste regulatory compliance.

     We intend to develop marketing relationships with the following
organizations:

     California Trucking Association

     American Petroleum Institute

     Petroleum Marketers Association of America

     Western States Petroleum Association

     American Electronics Association

     Other associations and marketing companies

Competition

     While we are not aware of any other company that currently offers a suite
of software products similar to our proposed products, several environmental
management firms, with substantially greater financial and marketing resources
than Vertica, have existing products and services that compete with one or more
of our iComply modules, as described below. In addition, several firms have
established their own Internet web sites that may compete with our Hazweb.com
web site and e-commerce services.

     For example, VerticalSuites, a subsidiary of Levine-Fricke, offers an
environmental management system based on SAP, a database software application
system that performs logistics, finance, sales, human resources and related
business functions. Amoco Corporation offers a system based on Lotus Domino, an
integrated messaging and applications software platform. While these competing
systems will appeal to companies that already use the SAP or Domino
applications, the SAP and Domino applications are based on an in-house or
intra-company paradigm. We believe, however, that our system permits the
integration of regulatory compliance work flow among suppliers, carriers,
receivers and governmental agencies, all of which input or receive data
regarding hazardous materials activities.

     One central aspect of our iComply Transporter product is producing
hazardous materials shipping papers that are filed with the Environmental

                                       6

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Protection Agency. We have approached the California EPA to accept electronic
filing of these papers and we believe that Sterling Software has a similar
initiative in Illinois based on their electronic data interchange, or EDI,
technology. Industrial facilities rely on CAD/CAM software that includes process
models. Process models typically track raw materials through the initial
production process to shipment of the product. These models can be extended to
serve environmental process applications, and in these situations these
"in-house" models may compete with our proposed iComply Process module. Most
industrial facilities rely on a variety of consultants and training classes to
comply with OSHA regulations and such services will compete with the services to
be offered by our proposed iComply HazOSHA module. Similarly, most industrial
companies rely on environmental consulting firms to prepare and obtain permits
and such firms will, therefore, offer services in competition with the services
offered by our proposed iComply Permitter product.

     We also face competition in connection with our Internet web site. For
example, Verticalnet is an existing web portal with an environmental community
that offers environmental industry news and electronic commerce, but does not
provide the additional resources, including a glossary, access to regulations,
industry contacts or MSDS repositories, or the software applications that our
Hazweb.com web site will provide. While other Internet sites provide similar
resources for free, our site offers them in combination with industry news and
environmental management applications. Also, the Environmental Protection Agency
itself offers an assortment of on-line access to

regulations and form completion software, but the software is not integrated
with the customer's environmental information database and the applications are
maintained at the customer's site, away from access to the regulations. In
addition, there are several sites that offer extensive MSDS repositories,
however, our Hazweb.com MSDS repository is linked to our customer's chemical
inventory, which facilitates access to MSDS data used for a customer's
regulatory compliance calculations, emergency planning, hazardous materials
shipping papers, and employee hazard communication.

Patent and Intellectual Property Rights

     We have filed a patent application on the integrated environmental
management system, with the on-line community. We have also filed a trade name
application for our "Hazweb" name.

Employees

     As of December 31, 2002, we had no full-time compensated employees and no
part-time compensated employees.

Government Regulations

     We offer software products and services through our Internet web site that
assists customers to comply with a variety of federal and state environmental
statutes and administrative regulations. Consequently, our business will be
affected to a substantial degree by the existing and future government
regulatory environment. While not anticipated, our business would be adversely
affected to the extent regulatory requirements are reduced or eliminated,
thereby reducing the demand for our products and services.

     We provide a searchable text database of published federal regulations and
electronic links to the federal regulations and each of the state's
environmental regulatory database, therefore, our customers have access to
environmental statutes and regulations regarding environmental reporting and
compliance requirements. We do not believe that products and services we offer
are subject to governmental agency approval, however, we do have to comply with
regulations regarding the submission of reports and data electronically to

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governmental agencies.

RISK FACTORS

     OUR BUSINESS AND RESULTS OF OPERATIONS COULD BE SERIOUSLY HARMED BY ANY OF
THE FOLLOWING RISKS. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO
ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT:

     We are a development-stage company that, as of December 31, 2002, had
cumulative revenues since inception of $57,887;

     We were formed in 1996 and have been a development stage company that has
had very little in revenues to date. Our revenue model is evolving and we have
one customer to date. Additional potential customers have only been evaluating
our products;

     We will encounter risks and difficulties frequently encountered by
development-stage companies in new and rapidly evolving markets. Many of these
risks are described in more detail in this section. We may not successfully
address any of these risks. If we do not successfully address these risks, our
business would be seriously harmed;

     WE HAVE NEW MANAGEMENT

     The Company is under new management as of October 22, 2001. Although the
new management has significant business experience, our ability to effectively
execute our business strategy depends in large part on our new management's
ability to become acclimated to the Company's infrastructure and particular
business issues. If the new management is unable to do so, our business and
results of operations may be materially and adversely affected.

     WE ARE IN THE PROCESS OF DEVELOPING A SALES AND MARKETING FORCE, BUT IF WE
ARE UNABLE TO EFFECTIVELY DEVELOP ADEQUATE SALES AND MARKETING CAPABILITIES, WE
MAY BE UNSUCCESSFUL IN ADEQUATELY COMMERCIALIZING OUR PRODUCTS AND SERVICES.

     Fully developing a sales and marketing force is expensive and
time-consuming and could delay additional sales of our products and services. If
we are unable to establish our sales and marketing capability, we may fail to
realize our full sales potential.

     WE ANTICIPATE WE WILL INCUR CONTINUED LOSSES FOR THE FORESEEABLE FUTURE.

     We expect to incur significant losses for the foreseeable future. As of
December 31, 2002, we generated cumulative revenues of $57,887 and have not been
profitable. While we intend to market our products and services, sales may not
occur. We may never be profitable or, if we become profitable, we may be unable
to sustain profitability.

     The anticipated losses may result from our plan to increase our operating
expenses in order to:

     Maintain our Hazweb.com web site and iComply products and developing
     additional iComply products;

     Increase our sales and marketing operations;

     Broaden our customer support and software capabilities; and

     Pursue strategic marketing and distribution alliances.

     Continued losses may result in our inability to further develop and market
our products, which is important to our plan to generate and grow our revenues.

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     WE MAY HAVE DIFFICULTY OBTAINING FUTURE FUNDING SOURCES, IF NEEDED, AND WE
MIGHT HAVE TO ACCEPT TERMS THAT WOULD ADVERSELY AFFECT SHAREHOLDERS.

     We will need to raise funds from additional financing. We have no
commitments for any financing and any financing commitments may result in
dilution to our existing stockholders. We may have difficulty obtaining
additional funding, and we may have to accept terms that would adversely affect
our stockholders. For example, the terms of any future financings may impose
restrictions on our right to declare dividends or on the manner in which we
conduct our business. Also, lending institutions or private investors may impose
restrictions on a future decision by us to make capital expenditures,
acquisitions or significant asset sales. We may not be able to locate additional
funding sources at all.

     If we cannot raise funds on acceptable terms, when needed, we may not be
able to enhance our services to customers, launch new products, grow our
business or respond to competitive pressures or unanticipated requirements,
which could seriously harm our business.

     WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY WITH OTHER PROVIDERS OF HAZARDOUS
MATERIALS AND ENVIRONMENTAL MANAGEMENT PRODUCTS.

     We believe that the strongest potential competition does not come from
traditional service groups but rather from the evolution of the Internet and the
types of hazardous materials, hazardous wastes and environmental management
service providers that evolution will create. As applications for hazardous
materials and environmental management providers begin to proliferate and
mature, we will compete with other technology companies and traditional service
providers such as environmental consulting firms that seek to integrate on-line
hazardous materials, hazardous waste and environmental management technologies
with their traditional service mix.

     Competition for Internet products and services is intense. We expect that
competition will continue to intensify. Barriers to entry are minimal, and
competitors can launch new web sites at a relatively low cost. We expect that
additional companies will establish competing environmental management systems.

     Hazardous materials and environmental management applications are in the
early stages of development. As these applications evolve, however, we expect
that other entrepreneurs and large, well known leaders of the hazardous
materials and environmental compliance industries will create other niche
environmental services that may compete with our services. These large industry
leaders would have better name recognition in the markets that we target.

     Several environmental consulting firms have existing products and services
that compete with one or more of our iComply products. In addition, several
environmental consulting firms have established their own Internet web sites
that may compete with our Hazweb.com (formerly called Vertica.com) web site.
These firms have substantially greater financial and marketing resources than we
have.

     OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.

     The market price of Vertica Software common stock is likely to be highly
volatile as the stock market in general, and the market for Internet-related and
technology companies in particular, has been highly volatile. Our shareholders
may not be able to resell their shares of Vertica Software common stock
following periods of volatility because of the market's adverse reaction to this
volatility. The trading prices of many technology and Internet-related
companies' stocks have reached historical lows within the past 12 months and
have reflected relative valuations substantially below historical levels. We
cannot assure you that our stock will trade at the same levels of other Internet

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stocks or that Internet stocks in general will sustain their current market
prices.

Factors that could cause this volatility may include, among other things:

     actual or anticipated variations in quarterly operating results;

     announcements of technological innovations;

     new products or services;

     changes in financial estimates by securities analysts;

     conditions or trends in the hazardous materials and environmental
     management industries, including regulatory changes;

     conditions or trends in the Internet industry;

     changes in the market valuations of other Internet companies;

     announcements by us or our competitors of significant acquisitions,
     strategic partnerships or joint ventures, changes in capital commitments;

     additions or departures of key personnel; and

     sales of Vertica Software common stock.

     Many of these factors are beyond our control. These factors may materially
adversely affect the market price of our common stock, regardless of our
operating performance.

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Item 2. Description of Property.

     We own no real property. Our executive and administrative offices are
located at 106 E. Sixth Street, Suite 900, Austin, Texas. The telephone number
is (512) 322-3900. The Company currently occupies office space provided by W.F.
Mason & Associates, Inc., a company owned and operated by the President and CEO
of the Company. There are no office lease obligations or rental costs to the
Company at this time.

     From January 1, 2001 through January 31, 2002, the Company's executive and
administrative offices were located at 5801 Christie Avenue, Suite 390,
Emeryville, California. The Company leased approximately 4,344 square feet of
office space under a 60-month lease, which commenced on December 1,1999. The
monthly rent for the office space was $10,694.57. The lease was terminated by
the lessor on January 31, 2002.

Item 3. Legal Proceedings.

We are not a party to any material legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth
quarter of 2002.

                                       11

--------------------------------------------------------------------------------
                               Disclosure Page 12

<PAGE>

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

     Our common stock is traded on the over-the-counter market and is quoted on
the NASD OTC Bulletin Board under the symbol "VERI". The following table sets
forth the closing high and low bid prices of our common stock in each quarter
from the inception of trading through December 31, 2002. These prices are
believed to be representative inter-dealer quotations, without retail markup,
markdown or commissions, and may not represent prices at which actual
transactions occurred.

                                                         Bid
                                                         ---
                          2000                    High          Low
                          ----                    ----          ---

                      1st Quarter                $3.125       $1.03125

                      2nd Quarter                $3.50        $0.843

                      3rd Quarter                $1.625       $0.625

                      4th Quarter                $1.19        $0.32

                          2001
                          ----

                      1st Quarter                $0.60        $0.343

                      2nd Quarter                $1.02        $0.72

                      3rd Quarter                $0.72        $0.15

                      4th Quarter                $0.20        $0.07

                          2002
                          ----

                      1st Quarter                $0.23        $0.10

                      2nd Quarter                $0.23        $0.05

                      3rd Quarter                $0.12        $0.05

                      4th Quarter                $0.09        $0.06

     The number of holders of record of our $0.0001 par value Common stock as of
December 31, 2002 was approximately 600. We have never declared or paid any
dividends on our common stock and we do not anticipate paying any cash dividends
in the foreseeable future.

Recent Sales of Unregistered Securities

     The following summarizes the equity securities sold by the Company in 2002
that were not registered under the Securities Act of 1933, as amended (the
"Securities Act").

During the quarter ended March 31, 2002, the Company sold 973,334 shares for
consulting services.

During the quarter ended June 30, 2002, the Company sold 1,895,835 shares for
legal and consulting services.

During the six months ended December 31, 2002, the Company sold 3,050,000 shares
for consulting and marketing services.

During the three months ended December 31, 2002, the Company sold 390,600 shares
to former employees in lieu of compensation owed to them.

                                       12

--------------------------------------------------------------------------------
                               Disclosure Page 13

<PAGE>

Item 6. Management's Discussion and Analysis or Plan of Operation.

     Some of the statements contained in this Form 10-KSB are forward-looking
statements, including but not limited to those specifically identified as such,
that involve risks and uncertainties. The statements contained in this Form
10-KSB that are not purely historical are forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including, without
limitation, statements regarding our expectations, beliefs, intentions or
strategies regarding the future. All forward-looking statements included in this
Form 10-KSB are based on information available to us on the date hereof, and we
assume no obligation to update any such forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors,
which may cause our actual results to differ materially from those implied by
the forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," or "continue"
or the negative of these terms or other comparable terminology. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Important factors that may cause actual results to differ from
expectations include those discussed in "Risk Factors" under Item 1 above.
Additional information concerning factors that may cause actual results to
differ materially from those in the forward-looking statements are in the
Company's Registration Statement on form 10-SB, with amendments, for the year
ended December 31, 2000 and in the Company's other filings with the Securities
and Exchange Commission.

     Vertica Software, Inc. is a development-stage company that 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 are developing software products designed to assist companies

                                       13

--------------------------------------------------------------------------------
                               Disclosure Page 14

<PAGE>

with their environmental regulation compliance and related activities for common
industrial applications.

     On November 1, 2000, we released our Hazweb e-commerce marketplace platform
for beta-testing. 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 $503,531 for the year
ended December 31, 2002, compared to a realized net loss from operations of
$1,398,639 for the year ended December 31, 2001. The Company has realized, since
January 1, 1996 (inception) to December 31, 2002, a cumulative net loss from
operations of $4,762,916. The Company had $0 in sales from operations for the
year ended December 31, 2002, and cumulatively $57,887 for the period January 1,
1996 (Date of Inception) through December 31, 2002.

Plan of operation:

     Loss on operations for the Company for the years ended December 31,2002 and
2001(decreased)increased (64%) and (15)%, respectively, from the prior years for
the same periods. 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.

     The Company has reduced its monthly operating expenses by eliminating
salaries and overhead related to the development stage of its products. The
Company also moved its Application Service Provider hardware and software
platform to a lower cost, higher performance computer co-location facility.

     The resulting efforts has allowed the Company to focus more on marketing
the products and developing strategic alliances with similar companies, and
companies desiring to add Vertica's products to their business line.

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 $500,000 in funds, in order
to satisfy our estimated cash requirements over the next twelve months. We
cannot assure you however, that we will be able to raise the necessary capital
to fund the next twelve months of operations.

     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, 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.

                                       14

--------------------------------------------------------------------------------
                               Disclosure Page 15

<PAGE>

     During the year ended December 31, 2002, we received funds totaling $81,185
in the form of funding from the issuance of common stock.

     We are currently recasting the Company's personnel structure in order to
enter the marketing phase of operations. The Company has engaged one key
employee, on a consulting basis, familiar with its products to implement
marketing plan. The Company plans to outsource all other technical support
required.

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 2000)
          iComply Communicator (released for licensing February 2000)

          iComply Transporter (released for licensing July 2000)
          Hazweb E-Commerce Marketplace

The development of iComply Processor has been suspended until future
profitability from the existing products is obtained.

     While marketing these products, we will also be developing strategic
alliances within our industry through target marketing opportunities and
advertising. Web site maintenance expenses for the next twelve months are
expected to be approximately $38,000.

Purchase of Significant Equipment:

     The Company does not expect to expend any funds for the purchase of
equipment over the next twelve months.

Significant Change in Number of Employees

     If we are successful in obtaining additional funding, we intend to hire,
during the next twelve months, one additional employee and outsource our
marketing expenses which we have budgeted at $85,000.

                                       15

--------------------------------------------------------------------------------
                               Disclosure Page 16

<PAGE>

Item 7. Financial Statements.

The consolidated financial statements of the Company are filed under this Item,
beginning on Page F-1 of this Report


Item 8.  Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

None.

                                       16

--------------------------------------------------------------------------------
                               Disclosure Page 17

<PAGE>

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.

The following table sets forth certain information with respect to the executive
officers and directors as of December 31, 2002:

NAME                        AGE     POSITIONS AND OFFICES HELD

William F. Mason            54      President, Chief Executive Officer,
                                    Chief Financial Officer and Sole Director

William F. Mason has served as our President,  Chief  Executive  Officer,  Chief
Financial Officer,  and a director since October 2001. In 1998, Mr. Mason formed
W.F. Mason & Associates, Inc., a consulting firm with an emphasis on industrial,
chemical,  agricultural and transportation  companies, and continues to serve as
its President and Chief  Executive  Officer.  Prior to 1998, Mr. Mason served as
the President and Chief  Executive  Officer for Bolidean  Intertrade Inc. (later
called  Intertrade  Holdings  Inc.),  an  industrial,   chemical,  agricultural,
manufacturing, marketing and trading company.

                                       17

--------------------------------------------------------------------------------
                               Disclosure Page 18

<PAGE>

Item 10. Executive Compensation.

The following table sets forth the compensation paid by Vertica Software to its
officers and directors for services rendered to the company during the fiscal
years ending December 31, 1999, December 31, 2000, December 31, 2001, and
December 31, 2002:

<TABLE>
<CAPTION>
                                           SUMMARY COMPENSATION TABLE

                                                                    Long Term Compensation
                                                                    ----------------------
                             Annual Compensation                       Awards            Payouts
                    ----------------------------------- -------------------------------  --------
     (a)       (b)     (c)      (d)         (e)              (f)             (g)            (h)            (i)
------------ -----  -------- -------  ----------------  ------------   ----------------  --------     ------------
  Name and                                               Restricted       Securities       LTIP         All Other
  Principal          Salary   Bonus     Other Annual        Stock         Underlying      Payouts     Compensation
  Position    Year     ($)     ($)    Compensation ($)   Award(s) ($)  Options/SARs (#)     ($)          ($)
------------ -----  -------- -------  ----------------  ------------   ----------------  --------     ------------
<S>          <C>    <C>      <C>      <C>               <C>            <C>               <C>          <C>
William F.

Mason CEO *   2001     -0-      -0-         -0-              -0-            -0-            -0-            -0-
              2002     -0-      -0-         -0-              -0-        2,478,772          -0-            -0-
------------ -----  -------- -------  ----------------  ------------   ----------------  --------     ------------
Hans          2001    62,928    -0-         -0-              -0-          166,000          -0-            -0-
Nehme,        2000   105,053    -0-         -0-              -0-          164,000          -0-            -0-
CEO **        1999   112,800    -0-         -0-              -0-          164,000          -0-            -0-
</TABLE>


<TABLE>
<CAPTION>
                                          Option Grants in Last Fiscal Year

                                                  Individual Grants
--------------------------------------------------------------------------------------------------------------------
     (a)                     (b)                             (c)                        (d)                 (e)
------------       -----------------------     -------------------------------    ----------------   ---------------
                    Number of Securities
                   Underlying Options/SARs     % of Total Options/SARs Granted    Exercise or Base
     Name                Granted (#)             to Employees in Fiscal Year        Price ($/Sh)     Expiration Date
------------       -----------------------     -------------------------------    ----------------   ---------------
<S>               <C>                         <C>                                <C>                 <C>
William F.               2,478,772                          100%                     $0.16/share       10/01/2006
Mason, CEO*
Hans Nehme,                164,000                           50%                     $0.28/share        9/29/2004
CEO **
</TABLE>

* On October 19, 2001,  William F. Mason was elected to the Board of  Directors.
On October 22, 2001, Mr. Mason was appointed to the positions of Chief Executive
Officer, President and Chief Financial Officer.

** On October 22, 2001, Hans Nehme resigned as Chief Executive Officer,
President, Chief Financial Officer and Director.

DIRECTOR COMPENSATION

     Our directors do not receive any cash compensation for their services as
directors. It is anticipated that each non-employee director will be eligible to
participate in our stock option plan.

                                       18

--------------------------------------------------------------------------------
                               Disclosure Page 19

<PAGE>

Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters.

The following table sets forth information with respect to beneficial ownership
of our common stock by:

         .        each person who beneficially owns more than 5% of each class
                  of stock;

         .        each of our executive officers;

         .        each of our directors;

         .        and all executive officers and directors as a group.

     The address of each stockholder listed in the table is c/o Vertica
Software, Inc. 106 E. Sixth Street, Suite 900, Austin, Texas 78701. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect to
shares. To our knowledge, except under applicable community property laws, the
persons named in the table have sole voting and sole investment control with
respect to all shares beneficially owned. The applicable percentage of ownership
for each stockholder is based on 15,040,323 shares of common stock outstanding
on December 31, 2001.

     William F. Mason received an option to purchase 200,000 shares of the
Company's common stock at $0.60 cents per share. Through the Company's Employee
Stock Purchase Plan, total option shares vested to Hans Nehme is 338,784; Erick
Ahrens 87,808, and Nalini Frush 100,000. No stock appreciation rights were
granted to any of the officers or directors of the Company. Hans Nehme, Erick F.
Ahrens, John C. Leutwyler, and Nalini Rajender Frush are no longer officers of
Company.

<TABLE>
<CAPTION>
TITLE OF CLASS         NAME OF BENEFICIAL                           AMOUNT AND NATURE
                       OWNER (2)                                    OF PERCENT OF
                                                                    BENEFICIAL OWNERSHIP
                                                                    CLASS
<S>                    <C>                              <C>                             <C>
Common Stock           Hans Nehme                        9,714,517(1)                     44.5%
Common Stock           William F. Mason                    410,000                         1.9%
Common Stock           Erick F. Ahrens                      58,000                         0.3%
Common Stock           John C. Leutwyler                    60,000                         0.3%
Common Stock           Susan N. Hastings                 9,714,517(1)                     44.5%
Common Stock           Nalini Rajender Frush                24,500                         0.1%

Common Stock           All officers and directors       10,267,017(1)                     47.1%
                       as a group (6)
</TABLE>

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

     (1) Includes 9,243,200 shares owned of record by Mr. Nehme and 471,317
shares owned of record by Ms. Hastings. Mr. Nehme and Ms. Hastings are husband
and wife.

                                       19

--------------------------------------------------------------------------------
                               Disclosure Page 20

<PAGE>

Item 12. Certain Relationships and Related Transactions.

     The Company issued six unsecured convertible promissory notes to William F.
Mason, who is an officer and director of the Company, during 2001 as described
under Item 5 above.

     In addition, the Company issued to Mr. Mason an unsecured convertible
promissory note with an interest rate of 10% and in the amount of $61,000 on
October 16, 2000; and an unsecured convertible promissory note with an interest
rate of 10% and in the amount of $65,000 on November 2, 2000. For each of these
notes, Mr. Mason was the note holder and the lender of the funds to the Company.
As of April 12, 2002, none of the unsecured convertible promissory notes issued
to Mr. Mason during 2000 and 2001 had been converted into common stock. Mr.
Mason was elected to the Company's Board of Directors on October 19, 2001 and
later appointed its interim President, Chief Executive Officer and Chief
Financial Officer on October 22, 2001.

                                       20

--------------------------------------------------------------------------------
                               Disclosure Page 21

<PAGE>

Item 13. Exhibits and Reports on Form 8-K.

(a)      Exhibits

         The following Exhibits are filed as part of this report:

Exhibit No.     Description

    10.1        Amendment to Consulting Agreement dated September 23, 2002
                between the Company and Del Mar Capital

    10.2        Consulting Agreement dated August 15, 2002 between the Company
                and The Momentum Solutions Group, LLC.

    10.3        Consulting Agreement dated June 25, 2002 between the Company and
                The Charles Group, LLC.

    10.4        Consulting Agreement dated October 1, 2002 between the Company
                and The Charles Group, LLC.

    10.5        Consulting Agreement dated November 25, 2002 between the Company
                and The Momentum Solutions Group, LLC.

    10.6        Consulting Agreement dated December 3, 2002 between the Company
                and DeSylvia Professional Solutions.

    10.7        Consulting Agreement dated November 12,2002 between the Company
                and Thomas E. Lindholm.

    23.1        Consent of Randolph Scott & Company, Certified Public
                Accountants, Inc.

    99.1        Certification pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(b)      Reports on Form 8-K

         On October 17, 2002 the Company filed a Current Report on Form 8-K
         announcing the Board of Directors authorization of the 2003 Equity
         Incentive Plan.

                                       21

--------------------------------------------------------------------------------
                               Disclosure Page 22

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Exchange Act,
Vertica Software, Inc. has duly caused this annual report on Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                                 VERTICA SOFTWARE, INC.

Dated:  April 15, 2003                           By: /s/ William F. Mason
                                                 ------------------------
                                                 William F. Mason, President,
                                                 Chief Executive Officer and
                                                 Chief Financial Officer

In accordance with requirements of the Exchange Act, this Annual Report has been
signed by the following person in the capacities and on the date indicated.

SIGNATURE                                        TITLE
--------------                                   --------------

/s/ William F. Mason                             Sole Director, President,
--------------------------------                 Chief Executive Officer and
                                                 Chief Financial Officer

DATE: April 15, 2003

                                       22

--------------------------------------------------------------------------------
                               Disclosure Page 23

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                            <C>
INDEPENDENT AUDITORS' REPORT ..............................................................................    F-1


FINANCIAL STATEMENTS ......................................................................................

     Balance Sheets .......................................................................................    F-2

     Statements of Operations .............................................................................    F-3

     Statement of Changes in Stockholders' Equity .........................................................    F-4

     Statements of Cash Flows .............................................................................    F-9


NOTES TO FINANCIAL STATEMENTS .............................................................................   F-10
</TABLE>

<PAGE>

Board of Directors
Vertica Software, Inc.
Emeryville, California

                          INDEPENDENT AUDITORS' REPORT

We have audited the accompanying balance sheets of Vertica Software, Inc., a
Colorado corporation (the "Company"), formerly Perfection Development
Corporation, (a development stage company) as of December 31, 2002, and 2001,
and the related statements of operations, stockholders' equity, and cash flows
for the period January 1, 1996 (inception) through December 31, 2002. On
December 31, 1998, the Company acquired all of the outstanding capital stock of
Vertica Software, Inc., a California corporation ("Vertica California") in a
reverse acquisition merger. The merger has been accounted for as a capital
acquisition as further described in the notes to the financial statements. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 2002, and 2001, and the results of its operations and its cash
flows for the period January 1, 1996 (inception) through December 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Notes 1 and 2 to the financial
statements, the Company has incurred significant development stage losses and
has a limited supply of cash resources, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Randolph Scott & Company
Certified Public Accountants, Inc.
San Anselmo, California
April 15, 2003

                                      F-1

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                         December 31,     December 31,
                                                                                             2002             2001
                                              ASSETS                                       (Audited)       (Audited)
                                              ------                                     ------------     -----------
<S>                                                                                      <C>               <C>
CURRENT ASSETS
 Cash and Cash Equivalents (Note 3)                                                      $     8,028      $         -
 Prepaid Expenses                                                                             38,530                -
                                                                                         -----------      -----------

     TOTAL CURRENT ASSETS                                                                     46,558                -

EQUIPMENT, less accumulated depreciation of $89,926,
 and $ 81,665, respectively (Notes 3 and 5)                                                   12,793           21,054

DEPOSITS                                                                                           -                -
                                                                                         -----------      -----------
       TOTAL ASSETS                                                                      $    59,351      $    21,054
                                                                                         ===========      ===========

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

CURRENT LIABILITIES
 Accounts Payable and Other Accrued Expenses                                             $   662,340      $   628,054
 Wages Payable                                                                               343,967          343,967
 Payroll Taxes Payable                                                                        26,757           26,757
 Notes Payable (Note 6)                                                                       91,300           91,300
                                                                                         -----------      -----------

     TOTAL CURRENT LIABILITIES                                                             1,124,364        1,090,078

CONVERTIBLE PROMISSORY NOTES (Note 9)                                                        742,000          742,000
                                                                                         -----------      -----------
       TOTAL LIABILITIES                                                                   1,866,364        1,832,078
                                                                                         -----------      -----------

COMMITMENT (Note 13)

STOCKHOLDERS' EQUITY (DEFICIT)
  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;
     21,850,091 shares issued and outstanding at December 31, 2002,
     and 15,040,323 shares issued and outstanding at December 31,
     2001 respectively                                                                         2,185            1,504
  Paid in Capital                                                                          2,953,718        2,446,857
  Deficit accumulated during development stage                                            (4,762,916)      (4,259,385)
                                                                                         -----------      -----------
        TOTAL STOCKHOLDERS' EQUITY                                                        (1,807,013)      (1,811,024)
                                                                                         -----------      -----------

           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $    59,351      $    21,054
                                                                                         ===========      ===========
</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)
                             STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                       Cumulative
                                                                                                          From
                                                                                                       January 1,
                                                                                                          1996
                                                                                                       (Date of
                                                              For the               For the            Inception)
                                                            Year Ended            Year Ended              to
                                                            December 31,          December 31,         December 31,
                                                               2002                  2001                 2002
                                                            (Audited)             (Audited)            (Audited)
                                                           -------------        --------------       -------------
<S>                                                        <C>                  <C>                  <C>
Total Revenue                                              $           -        $        3,762       $      57,887

Operating expenses:
     Product development                                               -               411,018           1,386,826
     General and administrative                                  439,183               877,850           3,120,220
                                                           -------------        --------------       -------------
               Total operating expenses                          439,183             1,288,868           4,507,046
                                                           -------------        --------------       -------------

Loss from operations                                            (439,183)           (1,285,106)         (4,449,159)

     Interest income                                                   -                     1               2,571
     Interest expense                                            (64,348)             (112,984)           (316,522)
     Other income                                                      -                   250               5,195
     Bad debt expense                                                  -                     -                (201)
                                                           -------------        --------------       -------------

Loss before income taxes                                        (503,531)           (1,397,839)         (4,758,116)

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

Net loss                                                   $    (503,531)       $   (1,398,639)      $  (4,762,916)
                                                           =============        ==============       =============

Net loss applicable to common stockholders                 $    (503,531)       $   (1,398,639)      $  (4,762,916)
                                                           =============        ==============       =============

Net loss per share ---basic                                $     (0.0280)       $      (0.0985)      $     (0.2649)
                                                           =============        ==============       =============


Weighted average shares used in per share
     calculation---basic                                      17,982,600            14,202,956          17,982,600
                                                           =============        ==============       =============
</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 December 31, 2002

<TABLE>
<CAPTION>
                                                                                                              Deficit
                                                                                                            Accumulated
                                          Preferred Stock        Common Stock                                 During
                                          ----------------   --------------------  Advance to     Paid-in   Development
                                          Shares    Amount     Shares     Amount   Stockholder    Capital      Stage       Total
                                          ------    ------   ----------  --------  -----------   ---------  -----------  ----------
<S>                                       <C>       <C>      <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)           -         850

Net loss for the year ended December 31,       -         -            -         -            -           -      (42,285)    (42,285)
    1996
                                          ------    ------   ----------  --------  -----------   ---------  -----------  ----------
BALANCE DECEMBER 31, 1996 (Audited)            -    $    -    9,200,000  $    920  $         -   $     (70) $   (42,285) $  (41,435)
                                          ------    ------   ----------  --------  -----------   ---------  -----------  ----------

Net loss for the year ended December 31,       -         -            -         -            -           -     (176,605)   (176,605)
    1997
                                          ------    ------   ----------  --------  -----------   ---------  -----------  ----------
BALANCE DECEMBER 31, 1997 (Audited)            -    $    -    9,200,000  $    920  $         -   $     (70) $  (218,890) $  218,040)
                                          ------    ------   ----------  --------  -----------   ---------  -----------  ----------

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            -      50,000

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

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

Net loss for the year ended December 31,
    1998                                       -         -            -         -            -           -     (235,335)   (235,335)

                                          ------    ------   ----------  --------  -----------   ---------  -----------  ----------
BALANCE DECEMBER 31, 1998 (Audited)            -    $    -   10,600,000  $  1,060  $   (25,000)  $  99,790  $  (454,225) $ (378,375)
                                          ------    ------   ----------  --------  -----------   ---------  -----------  ----------

February 11, 1999, sale of common stock
    pursuant to a confidential
    subscription agreement (Note 7)            -         -       40,000         4            -      39,996            -      40,000
</TABLE>

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

                                       F-4

<PAGE>

                             VERTICA SOFTWARE, INC.
                  (FORMERLY PERFECTION DEVELOPMENT CORPORATION)
                          (A DEVELOPMENT STAGE COMPANY)
                  Statement of Changes in Stockholders' Equity
              From January 1, 1996 (Inception) to December 31, 2002


<TABLE>
<CAPTION>
                                                                                                              Deficit
                                                                                                            Accumulated
                                                                                                              During
                                                Preferred Stock     Common Stock    Advance to    Paid-in   Development
                                                ---------------   -----------------
                                                Shares   Amount    Shares    Amount Stockholder   Capital      Stage        Total
                                                ------   ------   -------    ------ -----------  ---------- ------------  ---------
<S>                                             <C>      <C>       <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            -    584,500

February 11, 1999, conversion of convertible
    promissory note to common stock (Note 7)         -        -       41,433      5           -      42,653            -     42,658

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

February 24, 1999, conversion of convertible
    promissory notes to common stock (Note 7)        -        -       32,885      3           -      34,693            -     34,696

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

March 25, 1999, conversion of convertible
    promissory note to common stock (Note 7)         -        -       80,802      8           -      55,045            -     55,053

March 26, 1999, conversion of convertible
    promissory notes to common stock (Note 7)        -        -      571,321     57           -      86,852            -     86,909

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            -     10,000

Net loss for the year ended December 31, 1999        -        -            -      -           -           -     (752,549)  (752,549)
                                                ------   ------   ---------- ------ -----------  ---------- ------------  ---------
BALANCE, DECEMBER 31, 1999 (Audited)                 -   $    -   12,077,941 $1,207     (25,000) $1,030,459 $ (1,206,774) $(200,108)
                                                ------   ------   ---------- ------ -----------  ---------- ------------  ---------
</TABLE>

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

                                       F-5

<PAGE>

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

              From January 1, 1996 (Inception) to December 31, 2002

<TABLE>
<CAPTION>
                                                                                                                Deficit
                                                                                                              Accumulated
                                                 Preferred Stock    Common Stock                                During
                                                 ---------------  ------------------  Advance to     Paid-in  Development
                                                 Shares   Amount    Shares    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-6

<PAGE>

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

              From January 1, 1996 (Inception) to December 31, 2002

<TABLE>
<CAPTION>
                                                                                                            Deficit
                                                                                                          Accumulated
                                            Preferred Stock       Common Stock                              During
                                            ---------------  -------------------  Advance to    Paid-in   Development
                                            Shares   Amount    Shares     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 in lieu of compensation
  (Note 7)                                      -        -       60,000        6           -      33,774             -       33,780

January 22, 2001, issuance of common
  stock through the Company's Employee
  Equity Incentive Plan (Notes 7 and 14)        -        -        1,875        1           -       1,055             -        1,056

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

July 31, 2001, conversion of convertible
  promissory notes to common stock
  (Note 7)                                      -        -    1,146,684      114           -     573,228             -      573,342

July 1, 2001, issuance of common stock
  for consulting services (Note 7)              -        -      330,000       33           -       3,267             -        3,300

Net loss for the year ended December 31,
  2001 (Audited)                                -        -            -        -           -           -    (1,398,639)  (1,398,639)
                                            -----    -----   ----------  -------  ----------  ----------  ------------   ----------

BALANCE, DECEMBER 31, 2001 (Audited)            -        -   15,040,323  $ 1,504  $        -  $2,446,857  $ (4,259,385) $(1,811,024)
                                            -----    -----   ----------  -------  ----------  ----------  ------------   ----------

February 25, 2002, issuance of common
  stock for consulting services (Note 7)        -        -      390,000       39           -      31,161             -       31,200

March 22, 2002, issuance of common
  stock for consulting services (Note 7)        -        -      583,334       58           -     174,942             -      175,000

April 18, 2002, issuance of common stock
  for consulting services (Note 7)              -        -    1,687,500      169           -      59,737             -       59,906

April 19, 2002, issuance of common stock
  for legal services (Note 7)                   -        -      208,335       21           -      24,979             -       25,000
</TABLE>

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

                                       F-7

<PAGE>

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

              From January 1, 1996 (Inception) to December 31, 2002

<TABLE>
<CAPTION>
                                                          Preferred Stock          Common Stock
                                                       --------------------   ----------------------    Advance to      Paid-in
                                                        Shares      Amount      Shares      Amount      Stockholder     Capital
                                                       ---------   --------   ----------  ----------    -----------   -----------
<S>                                                    <C>         <C>        <C>         <C>           <C>           <C>
 July 24, 2002, issuance of common stock for
     consulting services (Note 7)                              -          -      500,000          50              -        24,950

 October 24, 2002, issuance of common stock for
     consulting services (Note 7)                              -          -    1,500,000         150              -        89,850

 October 29, 2002, issuance of common stock for
     consulting services (Note 7)                              -          -    1,500,000         150              -        74,850

 November 6, 2002, issuance of common stock for
     former employees in lieu of compensation (Note 7)         -          -      390,600          39              -        23,397

 November 6, 2002, issuance of common stock for
     consulting services (Note 7)                              -          -       50,000           5              -         2,995

 Net loss for the year ended December 31, 2002
     (Audited)                                                 -          -            -           -              -             -
                                                       ---------   --------   ----------  ----------    -----------   -----------

 BALANCE, DECEMBER 31, 2002 (Audited)                          -   $      -   21,850,092  $    2,185    $         -   $ 2,953,718
                                                       =========   ========   ==========  ==========    ===========   ===========

<CAPTION>
                                                              Deficit
                                                            Accumulated
                                                               During
                                                            Development
                                                               Stage             Total
                                                           -------------     ------------
<S>                                                        <C>               <C>
 July 24, 2002, issuance of common stock for
     consulting services (Note 7)                                      -           25,000

 October 24, 2002, issuance of common stock for
     consulting services (Note 7)                                      -           90,000

 October 29, 2002, issuance of common stock for
     consulting services (Note 7)                                      -           75,000

 November 6, 2002, issuance of common stock for
     former employees in lieu of compensation (Note 7)                 -           23,436

 November 6, 2002, issuance of common stock for
     consulting services (Note 7)                                      -            3,000

 Net loss for the year ended December 31, 2002
     (Audited)                                                  (503,531)        (503,531)
                                                           -------------     ------------

 BALANCE, DECEMBER 31, 2002 (Audited)                      $  (4,762,916)    $ (1,807,013)
                                                           =============     ============
</TABLE>

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

                                      F-8

<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
                                                                                For the        For the      Inception)
                                                                              Year Ended     Year Ended         to
                                                                              December 31,   December 31,   December 31,
                                                                                 2002           2001           2002
                                                                               (Audited)      (Audited)      (Audited)
                                                                              -----------    -----------    -----------
<S>                                                                           <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net Loss                                                                 $  (503,531)   $(1,398,639)   $(4,762,916)

     Transactions not requiring cash:
         Depreciation                                                               8,261         24,535         89,926
     Changes in operating assets and liabilities:
         (Increase) decrease in employee advances                                       -              -              -
         (Increase) decrease in advance to stockholder                                  -              -              -
         (Increase) decrease in prepaid expenses                                  (38,530)           943        (38,530)
         (Increase) decrease in deposits                                                -         10,000              -
         Increase (decrease) in bank overdraft                                          -        (20,185)             -
         Increase (decrease) in wages payable                                           -        323,553        323,553
         Increase (decrease) in accounts payable and other accrued expenses        34,286        343,616        682,754
         Increase (decrease) in payroll taxes payable                                   -         25,195         26,757
                                                                              -----------    -----------    -----------
             NET CASH (USED IN) OPERATING ACTIVITIES                             (499,514)      (690,982)    (3,678,456)
                                                                              -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase/acquisition of equipment                                                  -         (2,467)      (102,719)
                                                                              -----------    -----------    -----------
             NET CASH (USED IN) INVESTING ACTIVITIES                                    -         (2,467)      (102,719)

CASH FLOWS FROM FINANCING ACTIVITIES
     Net borrowings/assumption on line of credit                                        -              -         26,300
     Net payments on line of credit                                                     -              -        (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      1,695,061
     Reduction of convertible promissory notes                                          -       (650,000)      (953,061)
     Conversion of convertible promissory notes into common
        stock (includes $ 86,259 of accrued interest)                                   -        736,259      1,279,075
     Proceeds from stock subscriptions                                                  -              -        447,500
     Redemption of stock subscriptions                                                  -        (25,000)      (597,500)
     Issuance of common stock                                                     507,542         94,436      1,826,828
     Assumption of capital lease obligation                                             -              -         26,361
     Net payments on capital lease obligation                                           -         (4,246)       (26,361)
                                                                              -----------    -----------    -----------
             NET CASH PROVIDED BY FINANCING ACTIVITIES                            507,542        693,449      3,789,203
                                                                              -----------    -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                           8,028              -          8,028

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                          -              -              -
                                                                              -----------    -----------    -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                      $     8,028    $         -    $     8,028
                                                                              ===========    ===========    ===========

Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------

     Cash paid during the period for:
         Interest                                                             $         -    $         -    $    18,824
         Taxes                                                                $         -    $       800    $     4,000

NONCASH INVESTING AND FINANCING TRANSACTIONS:
     Common stock issued for consulting services                              $   459,941    $    34,600    $   534,541
     Common stock in lieu of compensation                                     $    23,436    $    33,780    $    57,216

</TABLE>

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

                                      F-9

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

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, has incurred operating
losses since inception, totaling $4,762,916 through December 31, 2002.

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-10

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS - Continued

Liquidity

The Company has recurring operating losses since inception that have continued
subsequent to December 31, 2002. The losses are primarily due to product
development costs, and administrative infrastructure costs related to the
financing and development of the Company's business.

The Company has received $ 81,185 in financing for the year ended December 31,
2002.

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 marketing of its core products and commence
sales operations through the year ending December 31, 2003 is solely dependent
on additional funding through the sale of equitable securities or convertible
promissory notes and assistance through the issuance of stock in lieu of
compensation.

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.

Management Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.

                                      F-11

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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, equipment is carried at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
related assets, which is five years. Capitalized equipment leases are
depreciated over the lesser of their estimated useful life or lease term.

Product Development

Product development expenditures are charged to operations as incurred.
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed", requires
the capitalization of certain software 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 Period January 1, 1996 (inception) through December 31, 2002.

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-12

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

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 years ended December 31, 2002, and 2001
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

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 146 ("SFAS 146"), "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a
liability for costs associated with an exit or disposal activity be recognized
and measured initially at fair value only when the liability is incurred, rather
than at the date of commitment to an exit or disposal plan. SFAS 146 is
effective for exit or disposal activities that are initiated after December 31,
2002. The Company does not expect that the adoption of SFAS 146 will have a
material impact on the Company's financial position or results of operations,
although SFAS 146 may impact the timing of recognition of costs associated with
future restructuring, exit or disposal activities.

In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation - Transition and
Disclosure - An Amendment of FASB Statement No. 123." SFAS 148 amends Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. SFAS 148 amends the disclosure requirements of SFAS 123
to require prominent disclosures both in annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The Company has included the
disclosures required by SFAS 148 in Note 1 - "The Company and Summary of
Significant Accounting Policies" and Note 14 - "Stockholders' Equity."

In November 2002, the FASB issued Interpretation No. 45 ("FIN 45") "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." FIN 45 elaborates on the existing
disclosure requirements for most guarantees, including loan guarantees. It also
clarifies that at the time a company issues a guarantee, the company must
recognize an initial liability for the fair value, or market value, of the
obligations it assumes under that guarantee. However, the provisions related to
recognizing a liability at inception of the guarantee for the fair value of the
guarantor's obligations does not apply to product warranties or to guarantees
accounted for as derivatives. The initial recognition and initial measurement
provisions apply on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of interim or annual

                                      F-13

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Recent Accounting Pronouncements - Continued

periods ending after December 15, 2002. The Company does not expect the adoption
of this interpretation will have a material impact on operations or financial
position.

Stock Based Compensation

The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method. If the fair value based
method had been applied in measuring stock compensation expense, the pro forma
effect on net income (loss) per share would have been as follows:

<TABLE>
<CAPTION>
                                                Years Ended December 31,
                                  ------------------------------------------------------
                                          2002              2001              2000
                                    ----------------  ----------------  ----------------
 <S>                                <C>               <C>               <C>
 Net income (loss)
    As reported                     $       (503,531) $     (1,398,639) $     (1,653,972)
    Stock compensation
    expense, net of tax                     (408,997)          (85,638)         (119,426)

                                    ----------------  ----------------  ----------------
    Pro forma                       $       (912,528) $     (1,484,277) $     (1,773,398)
                                    ================  ================  ================

 Net income (loss) per share:
    As reported - basic             $        (0.0280) $        (0.0985) $        (0.1328)
    Pro forma - basic               $        (0.0510) $        (1.0580) $        (0.1424)
</TABLE>

Diluted net loss per share for the years ended December 31, 2002, 2001, 2000
have not been included since their effect is anti-dilutive.

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."

                                      F-14

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 5 - EQUIPMENT

Equipment consisted of the following:

At December 31:                                 2002          2001
                                            ------------  ------------

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

Less accumulated depreciation                     89,926        81,665
                                            ------------  ------------
                                            $     12,793  $     21,054
                                            ============  ============

Total depreciation expense for the year ended December 31, 2002, and 2001
respectively was $ 8,261 and $24,535.

NOTE 6 - NOTES PAYABLE

Notes payable consisted of the following:

<TABLE>
<CAPTION>
At December 31:                                                2002            2001
                                                               ----            ----
<S>                                                       <C>             <C>
Note payable to corporation, unsecured, bearing
compound interest at 12 1/2%, and payable upon
demand                                                    $      49,800   $      49,800

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

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

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

                                                          $      91,300   $      91,300
                                                          =============   =============
</TABLE>

                                      F-15

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

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.

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, 2000, the Company issued 130,000 shares of
its $ .0001 common stock at an average price of $ .50 per share.

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

                                      F-16

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 7 - SALE AND ISSUANCE OF COMMON STOCK - Continued

During the year ended December 31, 2001, the Company issued 60,000 shares of its
$ .0001 par value common stock at an average price of $ .56 per share in lieu of
compensation.

During the year ended December 31, 2001, the Company issued 1,875 shares of its
$ .0001 par value common stock at an average price of $ .56 per share through
the Company's Employee Equity Incentive Plan.

During the year ended December 31, 2001, the Company converted convertible
promissory notes totaling $ 736,259 (including accrued interest of $ 67,600) for
1,248,507 shares of its $ .0001 par value common stock at an average price of $
..59 per share.

During the year ended December 31, 2001, the Company issued 430,000 shares of
its $ .0001 par value common stock at an average price per of $ .08 per share
for consulting services.

During the three months ended March 31, 2002, the Company issued 973,334 shares
of its $ .0001 par value common stock at an average price per of $ .21 per share
for consulting services.

During the three months ended June 30, 2002, the Company issued 1,895,835 shares
of its $ .0001 par value common stock at an average price per of $ .045 per
share for consulting and legal services.

During the six months ended December 31, 2002, the Company issued 3,050,000
shares of its $ .0001 par value common stock at an average price of $ .055 per
share for consulting and marketing services.

During the three months ended December 31, 2002, the Company issued 390,600
shares of its $ .0001 par value common stock at an average price of $ .055 per
share to former employees in lieu of compensation.

NOTE 9 - CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consisted
of the following:

<TABLE>
<CAPTION>
At December 31:                                    2002           2001
                                                   ----           ----
<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         $      50,000  $      50,000
</TABLE>

                                      F-17

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 9 - CONVERTIBLE PROMISSORY NOTES - (Continued)

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 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 is due and payable on
demand                                               61,000         61,000

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 is due and payable on
demand                                               65,000         65,000

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 is due and
payable on demand                                   111,000        111,000

                                      F-18

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 9 - CONVERTIBLE PROMISSORY NOTES - (Continued)

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 is due and
payable on demand                                   200,000        200,000

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 is due and
payable on demand                                    60,000         60,000

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 is due and
payable on demand                                    40,000         40,000

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 is due and
payable on demand                                    60,000         60,000

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 is due and
payable on demand                                    45,000         45,000
                                              -------------  -------------

                                              $     742,000  $     742,000
                                              =============  =============

                                      F-19

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 10 - INCOME TAXES

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

<TABLE>
<CAPTION>
For the year ended December 31:                                  2002              2001
                                                                 ----              ----
     <S>                                                   <C>              <C>
     U.S. federal statutory graduated rate                      30.10%            30.40%
     State income tax rates net of federal
     benefits:
         Colorado                                                3.07%             3.16%
         California                                              0.00%             6.10%
       Net operating loss for which no tax
         benefit is currently available                        (33.17%)          (39.66%)
                                                           ---------------  ---------------

                                                                    0%                0%
                                                           ===============  ===============
</TABLE>

     During the year ended December 31, 2002 the Company moved its operations to
Texas. In 2001, the Company conducted its operations in California, which has an
annual minimum tax of $800.

At December 31, 2002, 2001, 2000, 1999, 1998, 1997, and 1996, deferred taxes
consisted of a net tax asset due to operating loss carry forwards of $ 503,531,
$1,398,639, $1,653,972, $752,549, $235,335, $176,605, and $42,285, respectively,
which was fully allowed for, in the valuation allowance of $ 503,591,
$1,398,639, $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
December 31, 2002, 2001, 2000, 1999, 1998, 1997, and 1996 were $ 153,073,
$425,186, $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, 2016,
and 2017.

NOTE 11 - 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-20

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 12 - RELATED PARTY TRANSACTION

In consideration of funds received, the Company has issued eight separate
convertible promissory notes payable to a director of the Corporation. Interest
expense incurred amounted to $63,449 and $51,116 for the years ended December
31, 2002 and 2001 respectively.

The Company stills owes funds in the form of common stock on a Consulting
Agreement that expired December 31, 2001 between Vertica Software, Inc. and
William F. Mason at a balance of 851,903 shares. On January 1, 2002 William F.
Mason took the positions of Chairman of the Board/Chief Executive
Officer/President of Vertica Software, Inc. His Compensation was accrued at
$10,000 per month and is being paid in the form of Common Stock for 1,626,849
shares at waited value of .055 per share.

NOTE 13 - COMMITMENT

The Company entered into an agreement in December 2002 with a company that
provides product assessment and website support. The total contract price is $
4,800. No work had been performed as of 12/31/02.

NOTE 14 - STOCKHOLDER EQUITY

  (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. Under the Employee Plan,
offerings were made in December of 2000. In January of 2001, the Company issued
1,875 shares of the authorized 3,000,000 shares at an average price of $.56 per
share. The Company converted approximately $1,056 in accrued employee
contributions into Stockholders Equity as a result.

<TABLE>
<CAPTION>
 Stock Options Outstanding Under Incentive Plan:                             Price per Share
                                                                 ----------------------------------------
                                                                                             Weighted
                                                 Shares                  Range                Average
                                           ------------------    ---------------------    ---------------
 <S>                                       <C>                   <C>                      <C>
 Balance, December 31, 2001                     2,228,305           $ 0.25 - $ 0.28            $ 0.26
    Granted                                             0           $ 0.00 - $ 0.00            $ 0.00
    Exercised                                           0           $ 0.00 - $ 0.00            $ 0.00
    Cancelled                                           0           $ 0.00 - $ 0.00            $ 0.00
                                              -----------        ---------------------    ---------------

 Balance, December 31, 2001                     2,228,305           $ 0.25 - $ 0.28            $ 0.26
                                              ===========        =====================    ===============
</TABLE>

                                      F-21

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 14 - STOCKHOLDER EQUITY - (Continued)

2002 EQUITY INCENTIVE PLAN

On October 1, 2002, the Board of Directors authorized the Employee Stock
Purchase Plan (the Employee Plan). Under the Employee Plan, the Company may
issue up to an aggregate of 7,000,000 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. Under the Employee Plan,
offerings were made in October 2002.

<TABLE>
<CAPTION>
 Stock Options Outstanding Under Incentive Plan:                             Price per Share
                                                                 ----------------------------------------
                                                                                              Weighted
                                                 Shares                   Range                Average
                                           ------------------    ---------------------    ---------------
 <S>                                       <C>                   <C>                      <C>
 Balance, October 1, 2002                       7,000,000           $ 0.035 - $ 0.170          $ 0.10
    Granted                                     2,478,772           $ 0.035 - $ 0.045          $ 0.04
    Exercised                                           0           $ 0.000 - $ 0.000          $ 0.00
    Cancelled                                           0           $ 0.000 - $ 0.000          $ 0.00
                                              -----------        ---------------------    ---------------

 Balance, December 31, 2002                     4,521,228           $ 0.035 - $  0.17          $ 0.07
                                              ===========        =====================    ===============
</TABLE>

  (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 December
31, 2002 was less than the warrants' prices.

                                      F-22

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

              JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 2002

NOTE 14 - STOCKHOLDER EQUITY - (Continued)

STOCK BASED EMPLOYEE COMPENSATION

The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method. If the fair value based
method had been applied in measuring stock compensation expense, the pro forma
effect on net income (loss) per share would have been as follows:

<TABLE>
<CAPTION>
                                                Years Ended December 31,
                                  ------------------------------------------------------
                                          2002              2001              2000
                                    ----------------  ----------------  ----------------
 <S>                                <C>               <C>               <C>
 Net income (loss)
    As reported                     $       (503,531) $     (1,398,639) $     (1,653,972)
    Stock compensation
    expense, net of tax                     (408,997)          (85,638)         (119,426)

                                    ----------------  ----------------  ----------------
    Pro forma                       $       (912,528) $     (1,484,277) $     (1,773,398)
                                    ================  ================  ================

 Net income (loss) per share:
    As reported - basic             $        (0.0280) $        (0.0985) $        (0.1328)
    Pro forma - basic               $        (0.0510) $        (1.0580) $        (0.1424)
</TABLE>

Diluted net loss per share for the years ended December 31, 2002, 2001, 2000
have not been included since their effect is anti-dilutive.

The weighted average fair value of options where the exercise price was greater
than the market price on grant date was $0.165, $0.25, and $0.00 for grants in
the years ended December 31, 2002, 2001 and 2000, respectively. The weighted
average exercise price of options where the exercise price was greater than the
market price on grant date was $0.165, $0.00, and $0.3113 for grants in the
years ended December 31, 2002, 2001, and 2000 respectively.

Because additional stock options are expected to be granted each year, the pro
forma disclosures are not representative of pro forma effects on reported
financial results for future years. The fair value of the option grants is
determined by the actual option price as set forth in the Equity Incentive Plan.

                                      F-23

<PAGE>

                        Certification of CEO Pursuant to
                 Securities Exchange Act Rules 13a-14 and 15d-14
                             as Adopted Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

I, William F. Mason, the Chief Executive Officer and Chief Financial Officer
of Vertica Software Inc., certify that:

     1.   I have reviewed this annual report on Form 10-K of Vertica Software,
          Inc.;

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

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

     4.   The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and have:

          (a)  designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

--------------------------------------------------------------------------------
                               Disclosure Page 24

<PAGE>

          (b)  evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          (c)  presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

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

          (a)  all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          (b)  any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officer and I have indicated in this
          annual report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent evaluation,
          including any corrective actions with regard to significant
          deficiencies and material weaknesses.

Dated: April 15, 2003               By: /s/ WILLIAM F. MASON
                                        -----------------------------------
                                        William F. Mason
                                        Chief Executive Officer and
                                        Chief Financial Officer

--------------------------------------------------------------------------------
                               Disclosure Page 25