Form 10-Q Vertical Data Inc. For: Mar 31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
OR
(Commission File Number)
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| Common Stock | OTC Link |
Securities
registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act:
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 13, 2026, there were shares of the registrant’s common stock outstanding.
TABLE OF CONTENTS
| 2 |
Cautionary Note Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements”. These forward-looking statements, including without limitation forward-looking statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” involve risks and uncertainties. Any statements contained in this Quarterly Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements as to our future operating results; plans for the marketing of our services; future economic conditions; the effect of our market and product development efforts; and expectations or plans relating to the implementation or realization of our strategic goals and future growth, including through potential future acquisitions. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, use of cash and other measures of financial performance, as well as statements relating to future dividend payments. Other forward-looking statements may be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “predicts,” “targets,” “forecasts,” “strategy,” and other words of similar meaning in connection with the discussion of future operating or financial performance. These statements are based on current expectations, estimates and projections about the industries in which we operate, and the beliefs and assumptions made by management. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance.
| 3 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERTICAL DATA INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED AS OF MARCH 31, 2026 AND AUDITED AS OF SEPTEMBER 30, 2025)
| As of March 31, | As of September 30, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accrued liabilities | $ | $ | ||||||
| Contract liability | ||||||||
| Insurance premium financing payable | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Equity: | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at March 31, 2026 and September 30, 2025, respectively. | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity (deficit) | ( | ) | ||||||
| Total liabilities and equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-1 |
VERTICAL DATA INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross margin | $ | $ | ||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share: | ||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-2 |
VERTICAL DATA INC.
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
| Common Stock | Accumulated | |||||||||||||||||||
| # of Shares | Amount | APIC | Deficit | Total | ||||||||||||||||
| September 30, 2024 | ( | ) | ||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| December 31, 2024 | ( | ) | ||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| March 31, 2025 | ( | ) | ||||||||||||||||||
| September 30, 2025 | ( | ) | ||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||
| Common stock cancellation | ( | ) | ( | ) | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| December 31, 2025 | ( | ) | ||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||
| Employee stock-based compensation | - | |||||||||||||||||||
| Non-employee stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| March 31, 2026 | ( | ) | ( | ) | ||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-3 |
VERTICAL DATA INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
| Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net (loss) income to net cash used in operating activities | ||||||||
| Employee stock-based compensation | ||||||||
| Non-employee stock-based compensation | ||||||||
| Depreciation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Other current assets | ||||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Contract liability | ||||||||
| Other current liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | $ | $ | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | $ | $ | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of common stock | ||||||||
| Payments on insurance premium financing payable | ( | ) | ||||||
| Net cash provided by financing activities | $ | $ | ||||||
| Net change in cash, cash equivalents and restricted cash | $ | $ | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Cash, cash equivalents and restricted cash reconciliation: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | |||||||
| Cash paid for taxes | ||||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Insurance premiums financed with issuance of a liability | $ | |||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-4 |
VERTICAL DATA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Vertical Data Inc. (the “Company”) was incorporated in Nevada on May 3, 2024 and has a fiscal year-end of September 30. The Company’s current service to its customers is comprised solely of the sale of artificial intelligence related hardware. The Company plans to expand its service offerings in the future to include technology consulting, design and engineering, project management, systems integration, system installation and facilities management. The Company’s corporate office is located in Las Vegas, Nevada.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS
The accompanying notes to the Company’s unaudited interim financial statements have been prepared in accordance with the requirements of ASC 270, Interim Reporting and Article 8 of Regulation S-X. To that extent, footnote disclosure which would substantially duplicate the disclosure contained in the Company’s latest audited financial statements has been omitted.
In the opinion of management, these unaudited interim consolidated financial statements include all adjustments and accruals, consisting only of normal, recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein. The results of the interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.
Basis of Presentation
The accompanying financial statements have been prepared using the accrual basis of accounting in accordance with generally accepted accounting principles (“GAAP”) promulgated in the United States of America. The financial statements include Vertical Data Inc. and its subsidiaries Vertical Data Nordic and VDCA Inc. as of March 31, 2026. Vertical Data Nordic and VDCA Inc. were recently established in Sweden and Canada, respectively, for the purpose of conducting business operations in those countries. The entities did not commence principal operations as of March 31, 2026. The Company’s fiscal year-end is September 30.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable, the results of which form the basis for the amounts recorded in the financial statements.
Recognition of Revenue from Contracts with Customers
The Company recognizes revenue from its contracts with customers in accordance with the core principle outlined in ASC 606 Revenue from Contracts with Customers. Specifically, the Company recognizes revenue “to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services”. To that extent, the Company recognizes revenue in accordance with the ASC Topic by applying the following five steps:
| ● | Step 1-Identify the contract(s) with a customer | |
| ● | Step 2-Identify the performance obligations in the contract | |
| ● | Step 3-Determing the transaction price | |
| ● | Step 4-Allocate the transaction price to the performance obligations in the contract | |
| ● | Step 5-Recognize revenue when (or as) the Company satisfies a performance obligation |
| F-5 |
The Company’s contracts with its customers currently only contain a single performance obligation comprised solely of the sale of IT equipment. To that extent, the Company does not provide any installation or customization services at this time that might be considered a separate performance obligation. Further, as noted above, revenue is recognized at a point in time upon delivery of the equipment to the customer at the agreed upon location. The Company does not currently extend any form of payment terms to its customers and, as such, full payment for the equipment is received from the customer (via wire payment) immediately upon delivery of the equipment. The Company will recognize a contract liability to the extent it receives consideration from a customer prior to providing the equipment.
During the interim period ended March
31, 2026, the Company received an $
Restricted Cash
The
Company presents cash and cash items that are restricted as to withdrawal and usage as restricted cash on its consolidated balance sheet.
As of March 31, 2026, the Company classified $
Segments
The Company currently reports under a single operating segment, which constitutes all of the consolidated entity. Further, the Company’s CODM, which is its CEO, reviews the entity-wide operating results and performance. As such, the measure of profit or loss for the segment is net loss as presented in our consolidated statement of operations.
Recent Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures related to a public entity’s reportable segments. Required disclosures include, on an annual and interim basis, significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount for other segment items (which is the difference between segment revenue less segment expenses and less segment profit or loss) and a description of its composition, the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard also permits disclosure of more than one measure of segment profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the new standard on September 30, 2025. The adoption of the new standard did not have a material impact to our financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses at each interim and annual reporting period. The amendments are effective for annual periods beginning after December 15, 2026, and reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of the new ASU to its financial statements.
3. PREPAID EXPENSES
Prepaid expenses consisted of the following:
March 31, 2026 | September 30, 2025 | |||||||
| Prepaid commissions | $ | $ | ||||||
| Vendor deposits | ||||||||
| Prepaid insurance | ||||||||
| Other | ||||||||
| Prepaid expenses | $ | $ | ||||||
As
of March 31, 2026 and September 30, 2025, prepaid expenses totaled $
| F-6 |
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| Description | March 31, 2026 | September 30, 2025 | ||||||
| Tools, machinery, and equipment | $ | $ | ||||||
| Less – accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Total
depreciation expense was $
5. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
March 31, 2026 | September 30, 2025 | |||||||
| Wages accrual | $ | $ | ||||||
| Expenses accrual | ||||||||
| Credit card accrual | ||||||||
| Total accrued liabilities | $ | $ | ||||||
6. INSURANCE PREMIUM FINANCING PAYABLE
On January 30, 2026, the Company entered into a premium financing agreement
to fund an annual Director and Officer (D&O) insurance policy. The agreement provided for a total financed amount of $
The note is payable in 9 equal monthly installments of $
7. STOCKHOLDERS’ EQUITY
Upon
formation, the authorized capital of the Company was
Common Stock
The Company’s common shares do not include any dividend or liquidation preferences, participation rights, call prices or unusual voting rights.
Common Stock Issuances
During
the three months ended March 31, 2026, the Company sold shares of Company stock in an unregistered offering for net proceeds
of $
During
the six months ended March 31, 2026, the Company sold shares of Company stock in an unregistered offering for net proceeds of
$
Share Cancellation
During October of 2025, certain founders and other Company shareholders voluntarily surrendered an aggregate of shares of Common Stock to the Company for no consideration. The cancellation was not given retroactive effect on the balance sheet as, pursuant to SAB Topic 4.C, it was not a stock dividend, stock split or reverse split.
Stock Option Cancellations
During October of 2025, the Company cancelled stock options that were issued to five individuals. The Company recorded an immaterial amount of incremental stock-based compensation expense related to these cancellations.
| F-7 |
Stock Option Exercises
During
January of 2026, a total of stock options were exercised at a weighted average exercise price of $, resulting in proceeds
of $
During January of 2026, a total of stock options were exercised. These stock options were exercised as a cashless exercise whereby the consideration provided for exercise was forfeiture of shares, resulting in net shares issued of .
Common Stock to be Issued for Services Provided
During
the three months ended March 31, 2026, the Company entered into agreements with various service providers to settle existing obligations through the future
issuance of shares resulting in the settlement of liabilities totaling $
During
the three months ended March 31, 2026, the Company entered into a agreements with two employees for the payment of bonuses through the
future issuance of shares resulting in the settlement of liabilities totaling $
During
the three months ended March 31, 2026, the Company entered into an agreement with a service provider for to settle an existing obligation through the future
issuance of shares resulting in the settlement of liabilities totaling $
8. SUBSEQUENT EVENTS
In accordance with ASC 855 Subsequent Events, the Company has evaluated events and transactions subsequent to March 31, 2026 through the date these financial statements were issued. Management did not identify any subsequent events that would require disclosure in these consolidated financial statements.
| F-8 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our most recent audited financial statements and related notes. Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements.
The results of operations for the interim period ended March 31, 2026, are not necessarily indicative of the results that may be expected for any other future period. The following discussion should be read in conjunction with the unaudited interim and annual financial statements and the notes thereto included in Company’s previously filed Form 10-K. Further, the Company’s Management Discussion and Analysis of Financial Condition and Results of Operations has been prepared in accordance with Item 303(c) of Regulation S-K.
Overview
Vertical Data Inc. is a systems and solutions technology provider delivering high performance compute solutions to enterprise and data center clients. We distribute computer systems and information technology (“IT”) systems including graphics processing unit (“GPU”) servers, storage solutions, system components, software, networking and communications equipment, and related complementary products and services.
We distribute technology products from original equipment manufacturers (“OEMs”) as well as suppliers of next-generation technologies and delivery models such as converged and hyper-converged infrastructure. We purchase peripherals, IT systems, systems components, software, and networking equipment from a network of suppliers, consisting of mainly two vendors, and sell them to our data center and enterprise customers. The Company also engages in the coordination and provision of data center services and hosting services for our customers.
Our Company’s business model focuses on supporting the demand for enterprise AI compute capability. We are characterized by high volumes of sales and price sensitivity by our end users. The market for IT products is generally characterized by declining unit prices and short product life cycles. We set our sales price based on the market supply and demand characteristics for each particular product or bundle of products we distribute and services we provide. In addition, we try to provide just-in-time delivery of the IT products to avoid taking significant inventory in order to ensure positive working capital cycles and to ensure our product offerings tie with current market demands.
We are highly dependent on the end-market demand for IT products and on our partners’ strategic initiatives and business models. This end market demand is influenced by many factors including the introduction of new IT products and software by OEMs, replacement cycles for existing IT products, trends toward AI computing, overall economic growth and general business activity. A difficult and challenging economic environment may also lead to consolidation or decline in the IT industries and increased price-based competition
We are an early-stage company. Our financial results reflect our investment in building a direct sales force for revenue-producing initiatives and the development of a business development team for identifying target customers and key equipment and hardware suppliers.
We are a value-added reseller of best-in-class technology and computing solutions to data centers. Our mission is to expand the availability of high-performance computing to the global landscape. We accomplish this by providing infrastructure hardware and services to data centers and enterprises looking to utilize high performance compute such as machine learning and inference.
We intend to make deliberate and substantial investments in support of our mission and long-term growth. For example, we have invested in building a team of expert and experienced consultants and business development personnel that is responsible for development and expansion of our customer base and our technology supplier base. We also plan to make significant investments in sales and marketing and incentives to grow and retain our customer base.
Our priorities are to (a) continue to invest in identifying best-in-class technologies that will enable us to expand our product offerings, (b) establishing and extending our product offerings in new jurisdictions, and (c) expand our product and service offerings that are related to and complimentary of our existing product offerings.
Our current business is highly scalable with relatively minimal incremental spend in adding consulting resources to our sales and business development personnel. We will continue to manage our fixed-cost base in conjunction with our market entry plans and focus our variable spend on marketing, customer experience and support to become the value-added reseller of choice for customers and to maintain favorable relationships with suppliers. We also expect to improve our profitability over time as our revenue and gross margin expand as customer relationships mature and expand, and our variable marketing expenses and fixed costs stabilize or grow at a slower rate.
| 4 |
Our path to profitability is based on the acceleration of positive contribution profit growth driven by increased revenue and gross margin generation from ongoing customer acquisition, strong customer retention, improved monetization from increased sales volume, as well as scale benefits from investments in our general and administrative functions. On an adjusted EBITDA basis, we expect to achieve profitability when total contribution profit exceeds the fixed costs of our business, which depends, in part, on the number of customers that have access to our product offerings and the other factors summarized in the section entitled “Cautionary Statement Regarding Forward-Looking Statements”.
We distribute our products and technology solutions through direct sales channels managed by our team of consultants in addition to our own direct-to-customer platforms and web pages.
The Company was incorporated in Nevada on May 3, 2024, and our corporate office is currently located in Las Vegas, Nevada. During the three months ended March 31, 2026, the Company purchased an 85% ownership interest in VDA Nordica. VDA Nordica was established to assist in the development of data centers in Sweden and had not commenced principal operations as of the most recent balance sheet date.
Liquidity and Capital Resources
The Company has funded its operations primarily through ongoing sales of equipment and GPU compute capacity to its customers and through private equity offerings to investors. During the six months ended March 31, 2026, these sales resulted in gross proceeds of approximately $0.2 million. As of March 31, 2026, the Company has not borrowed money to fund its business through either notes payable or lines of credit. The Company plans to continue to fund its operations through private equity offerings as well as cash generated from its ongoing business operations.
The Company purchases equipment from certain suppliers to sell to its customers. However, as of March 31, 2026, the Company has not entered into any long-term commitments or contractual obligations with those suppliers to purchase equipment. Further, while the Company entered into a lease agreement during October of 2024, the agreement is on a month-to-month basis and we do not expect the agreement to have a material impact on our financial statements or results of operations.
Cash Flows
For the Three and Six Months Ended March 31, 2026
The following table summarizes the Company’s cash flows for the six months ended March 31, 2026:
| Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net loss | $ | (1,982,636 | ) | $ | (2,242,454 | ) | ||
| Net cash provided by (used in) operating activities | 4,063,709 | (551,847 | ) | |||||
| Net cash used in investing activities | - | (459 | ) | |||||
| Net cash provided by financing activities | 262,000 | 1,398,400 | ||||||
| Net change in cash, cash equivalents and restricted cash | $ | 4,325,709 | $ | 846,094 | ||||
| Cash, cash equivalents and restricted cash, beginning of period | 372,718 | 427,722 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 4,698,427 | $ | 1,273,816 | ||||
Operating Activities
Net provided by operating activities for the six months ended March 31, 2026 was approximately $4.1 million. The amount was primarily comprised of a net loss of approximately $2.0 million, offset by stock-based compensation expense of approximately $1.2 million and a net change in assets and liabilities of approximately $4.9 million.
| 5 |
Net cash used in operating activities for the six months ended March 31, 2025 was approximately $0.6 million. The amount was primarily comprised of a net loss of $2.2 million, offset by stock-based compensation expense of approximately $1.4 million and the net change in assets and liabilities of approximately $0.2 million.
Investing Activities
There were no investing activities during the six months ended March 31, 2026.
During the six months ended March 31, 2025, we purchased equipment totaling $459.
Financing Activities
Net cash provided by financing activities for the six months ended March 31, 2026, consisted of sales of common shares resulting in net proceeds of approximately $0.2 million and cash received for stock option exercises of approximately $0.1 million, partially offset by $25,000 of payments on insurance premium financing payable.
Net cash provided from financing activities for the six months ended March 31, 2025 consisted solely of the continued private equity offering resulting in net proceeds of approximately $1.4 million.
Results of Operations
We are an early-stage company, and our historical results may not be indicative of our future results. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or future results of operations.
Our financial results for the three and six months ended March 31, 2026 and 2025 are summarized as follows:
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | 568,000 | $ | - | $ | 625,000 | $ | 3,666,000 | ||||||||
| Cost of goods sold | 434,000 | - | 482,900 | 3,598,000 | ||||||||||||
| Gross margin | $ | 134,000 | $ | - | 142,100 | 68,000 | ||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 1,464,001 | 1,404,996 | 2,124,736 | 2,310,454 | ||||||||||||
| Total operating expenses | 1,464,001 | 1,404,996 | 2,124,736 | 2,310,454 | ||||||||||||
| Loss from operations | (1,330,001 | ) | (1,404,996 | ) | (1,982,636 | ) | (2,242,454 | ) | ||||||||
| Net loss | $ | (1,330,001 | ) | $ | (1,404,996 | ) | $ | (1,982,636 | ) | $ | (2,242,454 | ) | ||||
Comparison of the three and six months ended March 31, 2026 and 2025
Revenue
Total revenue was $568,000 and $0 for the three months ended March 31, 2026 and 2025, respectively. Revenue increased by $568,000, or 100%, due to an increase in the number of products sold during the current period as compared to the prior comparable period. Revenue increased compared to the prior-year period primarily due to the timing of orders. We have continued to expand our sales pipeline, which we believe supports increased customer adoption and conversion of opportunities, and we expect revenue to improve as delayed transactions progress and deliveries occur. However, revenue may vary from period to period based on the timing of customer orders, deliveries, and customer acceptance, among other factors.
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Total revenue was $625,000 and $3,666,000 for the six months ended March 31, 2026 and 2025, respectively. Revenue decreased by $3,041,000, or 83%, due to a reduction in the number of products sold during the current period as compared to the prior comparable period. Revenue decreased compared to the prior-year period primarily due to the timing of orders. Certain transactions expected to close during the quarter were delayed as customer decision-making and procurement cycles extended and supplier and inventory lead times lengthened, resulting in deliveries shifting into subsequent periods. We believe the revenue decrease is not indicative of underlying demand trends. We have continued to expand our sales pipeline, which we believe supports increased customer adoption and conversion of opportunities, and we expect revenue to improve as delayed transactions progress and deliveries occur. However, revenue may vary from period to period based on the timing of customer orders, deliveries, and customer acceptance, among other factors.
Cost of Sales
Total cost of sales was $434,000 and $0 for the three months ended March 31, 2026 and 2025, respectively. Cost of sales increased by $434,000 due to the increase in revenue.
Total cost of sales was $482,900 and $3,598,000 for the six months ended March 31, 2026 and 2025, respectively. Cost of sales decreased by $3,115,100, or 87%, due to the reduction in revenue.
Operating Expenses
Total operating expense was approximately $1.5 million and $1.4 million for the three months ended March 31, 2026 and 2025, respectively. Operating expense increased by approximately $59,000, or 4%, primarily due to increases in professional services expense of approximately $194,000, server space and energy of approximately $187,000, contract labor costs of approximately $166,000, salaries of approximately $90,000, commissions and fees of approximately of $59,000, software expense of approximately $41,000 and other expenses of approximately $68,000, partially offset by decreases in stock-based compensation of approximately $740,000 and travel and entertainment of approximately $6,000.
Total operating expense was approximately $2.1 million and $2.3 million for the six months ended March 31, 2026 and 2025, respectively. Operating expense decreased by approximately $186,000, or 8%, primarily due to decreases in stock-based compensation of approximately $938,000 and commissions & fees of approximately $10,000, partially offset by increases in contract labor of approximately $199,000, server space and energy storage of approximately $187,000, professional services expense of approximately $169,000, salaries expense of approximately $75,000, software expense of approximately $65,000, travel and entertainment of approximately $7,000 and other expenses of $60,000.
Critical Accounting Estimates
There have been no material changes in the Company’s Critical Accounting Estimates as compared to our most recent fiscal year ended September 30, 2025.
Recent Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures related to a public entity’s reportable segments. Required disclosures include, on an annual and interim basis, significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount for other segment items (which is the difference between segment revenue less segment expenses and less segment profit or loss) and a description of its composition, the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard also permits disclosure of more than one measure of segment profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the new standard on September 30, 2025. The adoption of the new standard did not have a material impact to our financial statements.
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In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses at each interim and annual reporting period. The amendments are effective for annual periods beginning after December 15, 2026, and reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of the new ASU to its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item, as disclosed in our most recent Form 10-K filed with the Securities and Exchange Commission on December 29, 2025.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on this evaluation of our disclosure controls and procedures as of March 31, 2026, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company currently is not a party to any legal proceedings and, to the Company’s knowledge; no such proceedings are threatened or contemplated.
ITEM 1A. RISK FACTORS
Investment in our securities involves risk. An investor or potential investor should consider the risks included under the caption “Risk Factors” in our Form S-1/A that was declared effective on July 09, 2025 when making investment decisions regarding our securities. The risk factors disclosed in our Form S-1/A have not materially changed since the date of such filing.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2026, the Company entered into the following unregistered sales of equity securities:
| ● | Sold 280,000 shares of common stock for gross proceeds of $40,000 to certain accredited investors. The sale did not include any underwriting discounts or commissions and | |
| ● | Issued 2,009,379 shares of common stock upon the exercise of certain stock options |
All of the securities described above were issued in reliance on the exemption from registration provided by Rule 506(b) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are filed as part of this Form 10-Q:
| Exhibit Number | Description | |
| 31.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS** | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH** | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB** | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104** | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
VERTICAL DATA INC.
| Signature | Title | Date | ||
| /s/ Deven Soni | May 15, 2026 | |||
| Deven Soni | (President and Chief Executive Officer) | |||
| /s/ Christopher Creatura | May 15, 2026 | |||
| Christopher Creatura | (Chief Financial Officer) |
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ATTACHMENTS / EXHIBITS