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

                                   FORM 10-QSB


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the quarterly period ended          June 30, 2003
--------------------------------------------------------------------------------

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from ____________________ to _____________________

                         Commission File Number   025449
                                                  ------

                          PCS Research Technology, Inc.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


           Delaware                                      33-0856651
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

3655 Nobel Drive, Suite 540, San Diego, California                       92122
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, including area code                (858) 623-1600
--------------------------------------------------------------------------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 of 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]



As of August 13, 2003, there were 23,395,436 shares of common stock issued and
outstanding.
<PAGE>

                          PCS Research Technology, Inc.
                                   FORM 10-QSB
                                QUARTERLY REPORT
                                  June 30, 2003


                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----
PART I -  FINANCIAL INFORMATION   (UNAUDITED)

ITEM 1.   Condensed Consolidated Financial Statements:

          Consolidated Balance Sheets .....................................   3

          Consolidated Statements of Operations ...........................   4

          Consolidated Statements of Cash Flows ...........................   5

          Notes to Consolidated Financial Statements ......................   6


ITEM 2.   Management's Discussion and Analysis
            of Financial Condition and Results of Operations ..............  18

ITEM 3.   Controls and Procedures .........................................  27

PART II - OTHER INFORMATION

ITEM 1.   Legal Proceedings ...............................................  27

ITEM 2.   Changes in Securities and Use of Proceeds .......................  28

ITEM 3.   Defaults Upon Senior Securities .................................  28

ITEM 4.   Submission of Matters to a Vote of Security Holders .............  28

ITEM 5.   Other Information ...............................................  28

ITEM 6.   Exhibits and Reports on Form 8-K ................................  28


                                        2
<PAGE>

                          Part I Financial Information

Item 1.  Condensed Consolidated Financial Statements
         -------------------------------------------

<TABLE>
<CAPTION>
PCS Research Technology, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS


                                                                 June 30, 2003    December 31,
                                                                  (Unaudited)         2002
                                                                 -------------    -------------
<S>                                                              <C>              <C>
CURRENT ASSETS
  Cash and cash equivalents                                      $      97,088    $     390,079
  Restricted cash                                                           --          500,000
  Commissions and other receivables                                    125,556           44,636
  Receivable from related parties                                      125,000               --
  Prepaid research                                                     324,447               --
  Other current assets                                                  24,053           50,097
  Assets of discontinued operations, current portion                        --        2,095,044
                                                                 -------------    -------------
                                                                       696,144        3,079,856

  Property and equipment, net                                          602,755          724,917
  Assets of discontinued operations - identifiable intangibles              --        4,127,702
  Receivable from related parties - long term portion                  125,000               --
  Other assets                                                           3,300           48,302
                                                                 -------------    -------------
      Total assets                                               $   1,427,199    $   7,980,777
                                                                 =============    =============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable and accrued liabilities                       $     441,995    $     533,652
  Accrued liabilities payable to related parties                            --        1,271,281
  Revolving credit facility                                                 --        2,891,975
  Current portion of convertible debt, net                             403,914          967,125
  Notes payable                                                        300,000          300,000
  Notes payable - related parties                                      187,500          187,500
  Deferred revenue and prepaid subscriptions                           910,169          194,892
  Liabilities of discontinued operations                                    --        1,740,093
                                                                 -------------    -------------
                                                                     2,243,578        8,086,518
LONG-TERM LIABILITIES
  Convertible debt - long term portion                               1,141,995               --
                                                                 -------------    -------------
      Total liabilities                                              3,385,573        8,086,518

  Minority owner's equity (deficit) in subsidiary                      (91,847)           2,356

STOCKHOLDERS' DEFICIT
  Preferred stock, $.0001 par value; 10,000,000 authorized
    shares; no shares outstanding                                           --               --
  Common stock; $.0001 par value, 80,000,000 authorized,
    23,813,302 issued; 23,395,436 outstanding at June 30, 2003
    and 28,718,302 issued; 28,300,436 outstanding
    at December 31, 2002                                                 2,381            2,872
  Additional paid-in capital                                        28,881,355       29,630,220
  Treasury stock, 417,866 common shares at cost at
    June 30, 2003 and December 31, 2002, respectively                  (58,501)         (58,501)
  Accumulated deficit                                              (30,691,762)     (29,682,688)
                                                                 -------------    -------------

      Total stockholders' deficit                                   (1,866,527)        (108,097)
                                                                 -------------    -------------

      Total liabilities and stockholders' deficit                $   1,427,199    $   7,980,777
                                                                 =============    =============
</TABLE>


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

                                        3
<PAGE>

PCS Research Technology, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


<TABLE>
<CAPTION>
                                                                 For the Three Months             For the Six Months
                                                                    Ended June 30,                  Ended June 30,
                                                             ----------------------------    ----------------------------

                                                                 2003            2002            2003            2002
                                                             ------------    ------------    ------------    ------------

<S>                                                          <C>             <C>             <C>             <C>
Revenues
  Data service revenues                                      $    498,986    $    290,997    $    832,510    $    496,127
  Placement fees                                                       --         258,750              --         282,875
  Commissions and other income                                     41,700         572,632          83,700         629,764
  Interest and other                                                  317           5,679           1,250          10,842
                                                             ------------    ------------    ------------    ------------
                                                                  541,003       1,128,058         917,460       1,419,608
                                                             ------------    ------------    ------------    ------------

Expenses
  Compensation and benefits                                       361,788       1,209,121         774,361       1,964,785
  General and administrative                                      159,820         721,862         447,620       1,383,615
  Product research expenses                                       125,168          38,014         185,038          75,806
  Clearing and execution costs                                         --          15,113              --          22,684
  Depreciation and amortization                                    70,677          85,071         142,256         164,161
  Commissions and finder's fees                                        --         249,339              --         249,339
  Impairment loss related to intangibles and goodwill                  --         923,084              --         923,084
  Minority interest                                                38,059              --          75,796              --
                                                             ------------    ------------    ------------    ------------
                                                                  755,512       3,241,604       1,625,071       4,783,474
                                                             ------------    ------------    ------------    ------------

Operating Loss                                                   (214,509)     (2.113,546)       (707,611)     (3,363,866)

  Interest expense                                                 51,691         429,125         519,938         976,829

                                                             ------------    ------------    ------------    ------------
  Loss from continuing operations                                (266,200)     (2,542,671)     (1,227,549)     (4,340,695)

  Discontinued operations
     Income (loss) from discontinued operations                    44,358          (4,310)        236,728         (61,372)
     Loss on transfer of assets of discontinued operations             --              --         (18,253)             --
                                                             ------------    ------------    ------------    ------------
                                                                   44,358          (4,310)        218,475         (61,372)

  Net Loss                                                   $   (221,842)   $ (2,546,981)   $ (1,009,074)   $ (4,402,067)
                                                             ============    ============    ============    ============

  Earnings (loss) per share - basic and diluted
     Loss per share - continuing operations                         (0.01)          (0.11)          (0.05)          (0.19)
     Earnings (loss) per share - discontinued operations             0.00            0.00            0.01            0.00
                                                             ------------    ------------    ------------    ------------

     Total loss per share - basic and diluted                $      (0.01)   $      (0.11)   $      (0.04)   $      (0.19)
                                                             ============    ============    ============    ============

  Weighted average number of shares                            22,471,329      22,965,948      23,491,879      22,913,936
                                                             ============    ============    ============    ============
</TABLE>


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

                                        4
<PAGE>

PCS Research Technology, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


<TABLE>
<CAPTION>
                                                                           For the Six Months Ended June 30,
                                                                           ---------------------------------
                                                                               2003                 2002
                                                                           ------------         ------------
<S>                                                                        <C>                  <C>
Cash flows from operating activities
  Loss from continuing operations                                          $ (1,227,549)        $ (4,340,695)
  Adjustments to reconcile loss from continuing operations
    to net cash used in continuing operations operating activities:
      Depreciation and amortization                                             142,256              164,161
      Amortization of discounts on indebtedness                                 417,189              656,396
      Impairment loss related to intangibles and goodwill                            --              923,084
      Stock options issued for services rendered                                 16,000               21,875
      Minority interest in subsidiary                                            75,796                   --
  Net changes in assets and liabilities:
    Increase in commissions and other receivables                               (80,920)            (101,753)
    Increase in prepaid research                                               (324,447)                  --
    Decrease in other current assets                                             26,044                1,479
    Decrease in other assets                                                     45,002                   --
    Increase (decrease) in accounts payable and accrued liabilities             (91,656)              52,847
    Increase in deferred revenue                                                715,277              102,433
                                                                           ------------         ------------
  Net cash used in continuing operations operating activities                  (287,008)          (2,520,173)

      Income (loss) on discontinued operations                                  218,475              (61,372)
      Changes in assets and liabilities of discontinued operations            2,196,014             (218,761)
                                                                           ------------         ------------

  Net cash provided by (used in) discontinued operations                      2,414,489             (280,133)
                                                                           ------------         ------------
      Net cash provided by (used in) operating activities                     2,127,481           (2,800,306)

Cash flows from investing activities
  Purchases of property and equipment                                           (20,092)            (157,454)
                                                                           ------------         ------------
  Net cash flows used in investing activities                                   (20,092)            (157,454)
                                                                           ------------         ------------

Cash flows from financing activities
  Borrowings under revolving credit facility                                         --            3,257,533
  Payments on revolving credit facility                                      (2,391,975)            (507,948)
  Distributions to minority interests                                          (170,000)                  --
  Net proceeds under notes payable                                              161,595              317,500
                                                                           ------------         ------------
  Net cash flows provided by (used in) financing activities                  (2,400,380)           3,067,085
                                                                           ------------         ------------
  Net increase (decrease) in cash and cash equivalents                         (292,991)             109,325

Cash and cash equivalents, beginning of period                                  390,079              276,701
                                                                           ------------         ------------

Cash and cash equivalents, end of period                                   $     97,088         $    386,026
                                                                           ============         ============

Supplemental disclosure of cash flow information
  Cash paid for interest                                                   $     99,878         $     74,835
                                                                           ============         ============
</TABLE>


Supplemental disclosures of non-cash information - See Note I


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

                                        5
<PAGE>

                 PCS Research Technology, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2003 and 2002
                                   (Unaudited)


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The accompanying unaudited condensed consolidated financial statements of PCS
Research Technology, Inc. and subsidiaries (the "Company"), formerly known as
DirectPlacement, Inc. ("DPI"), have been prepared pursuant to accounting
principles generally accepted in the United States of America ("US GAAP") for
interim financial statements and the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and note disclosures
normally included in annual financial statements prepared in accordance with US
GAAP have been condensed or omitted pursuant to those rules and regulations.
These consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
audited financial statements for the year ended December 31, 2002 filed on Form
10-KSB.

The consolidated financial statements include the accounts of the Company, its
wholly-owned broker-dealer subsidiaries, DP Securities, Inc. ("DPS"), PCS
Securities, Inc. ("PCS") and its majority-owned joint venture, DPBT, LLC
("DPBT"). All material inter-company accounts and transactions have been
eliminated in consolidation.

As discussed more fully in Note B - Discontinued Operations, the Company
discontinued the operations of its PCS Securities subsidiary in the first
quarter of 2003. Accordingly, all revenue and expense activity and related
balance sheet accounts of PCS Securities for the periods presented have been
reclassified and presented as discontinued operations.

In the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
condition, results of operations and cash flows for the periods presented have
been included. The Company's quarterly results presented herein are not
necessarily indicative of results for a full year.

Going Concern and Liquidity
---------------------------

The accompanying unaudited consolidated financial statements have been prepared
using the going concern basis of accounting. As more fully discussed in
Company's 2002 Form 10-KSB, the Company's December 31, 2002 audited financial
statements included a "going concern" qualification from its independent
auditors due to the Company's lack of profitability, negative working capital
and the loss of future revenue associated with the decision to close its PCS
Securities subsidiary during the first quarter of 2003.

In conjunction with the decision to close the PCS business unit, the Company and
its management recommitted to pursuing its long-term objective of becoming a
leading single source of independent research to the institutional investment
community. The Company and its management believe that the independent
institutional research market is a viable area in which the Company can compete.
However, no assurances can be provided that the Company will be successful.

Whereas management believes its anticipated cash flow from operations could be
adequate to fund operations through December 31, 2003, there can be no
assurance, however, that the Company will

                                        6
<PAGE>

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Going Concern and Liquidity (continued)
---------------------------------------

not require additional financing prior to or after such time. Furthermore, there
can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at all. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate its operational plans.

Our inability to obtain additional financing could have a material adverse
effect on the Company's business, financial condition and results of operations.

The accompanying consolidated financial statements do not include any
adjustments that might result from the resolution of these matters.

Use of Estimates
----------------

The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the periods presented. Actual results
could differ materially from those estimates.

Revenue Recognition
-------------------

Data services revenue represents revenue from providing individual custom
reports or reports on a monthly or annual subscription basis. Revenue from
custom reports is recognized when the report is provided, and revenue from
subscriptions is recognized ratably over the contractual period. Deferred
revenue on the consolidated balance sheets consists of subscription revenues
that have been received but not yet earned.

Placement fees include gains, losses and fees, net of syndicate expenses,
arising from private equity and debt offerings in which the Company participates
as an underwriter or agent. The fees are recorded when the underwriting is
completed and the income is reasonably determinable. Referral fees related to
placement transactions are expensed when the revenue is recognized.

Commissions from security transactions are recorded on a settlement date basis,
generally the third business day following the transaction date, which is not
materially different than on a trade date basis.

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

The Company calculates loss per share in accordance with Statement of Financial
Accounting Standard ("SFAS") No. 128, "Earnings Per Share," and Securities and
Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 98.
Accordingly, basic loss per share is computed using the weighted average number
of common shares and diluted loss per share are computed based on the weighted
average number of common shares and all common equivalent shares outstanding
during the period in which they are dilutive. Common equivalent shares consist
of shares issuable upon the exercise of stock options, using the treasury stock
method, or warrants; common equivalent shares are excluded from the calculation
if their effect is anti-dilutive.

Stock-Based Compensation
------------------------

The Company measures compensation expense related to the grant of stock options
and stock-based awards to employees in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, under which compensation
expense, if any, is generally based on the difference between the exercise price
of an option, or the amount paid for the award and the market price or fair

                                        7
<PAGE>

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Stock-Based Compensation (continued)
------------------------------------

value of the underlying common stock at the date of the award. Stock-based
compensation arrangements involving non-employees are accounted for under SFAS
No. 123, "Accounting for Stock-Based Compensation," under which such
arrangements are accounted for based on the fair value of the option or award.
The Company adopted the disclosure requirements of SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," an amendment of SFAS No.
123 as of January 1, 2003, which require certain disclosures about stock-based
employee compensation plans in an entity's accounting policy note.

Those disclosures include a tabular format of pro forma net income and, if
applicable, earnings per share under the fair value method if the intrinsic
value method is used in any period presented. Pro forma information in a tabular
format is also required in the notes to interim financial information if the
intrinsic value method is used in any period presented. The adoption of SFAS No.
148 did not have a material impact to these consolidated financial statements
and the disclosure requirements are included below.

As of May 15, 2001, the Board of Directors of the Company adopted the 2001 Stock
Plan ("2001 Plan"), which was approved by the Company's shareholders in November
2001. The 2001 Plan provides for accelerated vesting provisions in the event of
a change in control and other events, as defined.

During the first quarter of 2003, the Company issued 130,000 stock options, to
purchase the Company's common stock, to employees at exercise prices equal to
the market value of the Company's stock at the grant date ranging from $0.08 -
$0.10 per share. The options have a term of ten years and vest over three years.

In addition, in the first quarter of 2003, the Company issued 200,000 stock
options to purchase the Company's common stock in exchange for services
rendered. Fifty (50) percent of options vested at the date of the grant and the
remaining fifty (50) percent vest on the first anniversary of the date of grant.
The Company has accounted for these issuances in accordance with SFAS No. 123
and has recorded an expense of $16,000 representing the fair value of the
options using a Black-Scholes option-pricing model. The options are exercisable
at price of $0.08 per share and have a term of 10 years

During the second quarter of 2003, no stock options to purchase the Company's
common stock were issued. As of June 30, 2003, 2,092,499 options to purchase
shares of the Company's common stock were outstanding pursuant to the 2001 Plan.

SFAS No. 123 requires the Company to provide pro forma information regarding net
income (loss) and income (loss) per share as if compensation cost for the
Company's stock option issuances had been determined in accordance with the fair
value based method prescribed in SFAS No. 123. The Company estimates the fair
value of each stock option at the grant date by using the Black-Scholes
option-pricing model with the following assumptions used for grants in fiscal
2003: dividend yield of zero percent, risk-free interest rates ranging from
2.90% to 3.50%, expected life of five years, and expected volatility of 111%.
For grants in fiscal 2002, the following assumptions were used: dividend yield
of zero percent, risk-free interest rates ranging from 4.19% to 4.49%, expected
lives of five years, and expected volatility of 122%.

Under the accounting provisions of SFAS No. 123, as amended by SFAS No. 148, the
Company's pro forma net loss and loss per share for the three and six-months
ended June 30, 2003 and 2002 would have been as follows:

                                        8
<PAGE>

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Stock-Based Compensation (continued)
------------------------------------

<TABLE>
<CAPTION>
                                 For the Three Months             For the Six Months
                                    Ended June 30,                  Ended June 30,
                             ----------------------------    ----------------------------

<S>                          <C>             <C>             <C>             <C>
Net Loss
  As reported                $   (221,842)   $ (2,546,981)   $ (1,009,074)   $ (4,402,067)
  SFAS No. 123 effect            (553,880)       (524,184)       (554,000)       (533,246)
                             ------------    ------------    ------------    ------------

  Pro forma net loss         $   (775,722)   $ (3,071,165)   $ (1,563,074)   $ (4,935,313)

Loss per share, basic and
  diluted
  As reported                $      (0.01)   $      (0.11)   $      (0.04)   $      (0.19)
  Pro forma                  $      (0.03)   $      (0.13)   $      (0.07)   $      (0.22)

Basic and diluted weighted
  average common shares
  outstanding                  22,471,329      22,965,948      23,491,879      22,913,936
</TABLE>


Segment Information
-------------------

The Company complies with SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" that requires public business enterprises to
report information regarding reportable operating segments. SFAS No. 131
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise."

During 2002, the Company had two primary business units comprised of (1) the
soft dollar brokerage unit and (2) the data services unit. Both business units
were involved in the marketing and distribution of research products to
institutional investors. In addition, the soft dollar broker unit provided for
collection of amounts owed from customers through the receipt of commission
revenues related to customer's securities trading activity. As discussed in Note
B - Discontinued Operations, the Company's PCS Securities subsidiary that was
conducting business as a soft dollar broker has been closed effective April 30,
2003, and its activities have been accounted for as discontinued operations in
the consolidated financial statements presented herein. Accordingly, the Company
is no longer operating the soft dollar brokerage unit, and separate segment
information is not being presented.

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

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 supersedes APB
Opinion No. 17, "Intangible Assets". SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001 and provides that all existing and newly
acquired goodwill and intangible assets with indefinite lives will no longer be
amortized but will be tested for impairment annually and written down only when
impaired. The adoption of this pronouncement is reflected on the Company's
consolidated financial statements and notes.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to all entities and legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or normal operation of long-lived
assets, except for certain obligations of lessees.

                                        9
<PAGE>

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Recent Accounting Pronouncements (continued)
--------------------------------------------

This statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The adoption of this pronouncement is reflected
on the Company's consolidated financial statements and notes.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS No. 144
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations--Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously
defined in that Opinion). The provisions of SFAS No. 144 are effective for
financial statements issued for fiscal years beginning after December 15, 2001,
with early application encouraged and generally are to be applied prospectively.
The adoption of this pronouncement is reflected on the Company's consolidated
financial statements and notes.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 is effective for activities
initiated after December 31, 2002. Activities include restructurings (such as
relocation of a business and fundamental reorganizations of a business itself),
which may give rise to costs such as contract cancellation provisions, employee
relocation, and one-time termination costs. SFAS No. 146 prohibits liability
recognition based solely on management's intent, and requires that liabilities
be measured at estimated fair value. The Company has adopted the provisions of
SFAS No. 146 and is reflected in Note B.

The FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" - an interpretation of SFAS Nos. 5, 57 and 107 and rescission of FASB
Interpretation No. 34. This Interpretation elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
Interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. Implementation of these provisions of the
Interpretation is not expected to have a material impact on the Company's
consolidated financial statements. The disclosure requirements of the
Interpretation are effective for financial statements of interim or annual
periods ended after December 15, 2002, and have been adopted in the accompanying
consolidated financial statements with no additional disclosure required.

The FASB issued Interpretation No. 46, "Consolidation of Variable Interest
Entities" - an interpretation of Accounting Research Bulletin ("ARB") No. 51.
This Interpretation defines a variable interest entity and provides that if a
business enterprise has a controlling financial interest in a variable interest
entity, the assets, liabilities, and results of the activities of the variable
interest entity should be included in consolidated financial statements with
those of the business enterprise. Furthermore, the Board indicates that the
voting interest approach of ARB No. 51 is not effective in identifying
controlling financial interests in entities that are not controllable through
voting interest or in which the equity investors do not bear the residual
economic risk. This Interpretation applies immediately to variable interest
entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It applies in the first
fiscal year or interim period beginning after June 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003.

                                       10
<PAGE>

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Recent Accounting Pronouncements (continued)
--------------------------------------------

The Interpretation applies to public enterprises as of the beginning of the
applicable interim or annual period. Management believes the implementation of
this Interpretation will not have a material impact on the Company's
consolidated financial statements.

In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." EITF Issue
No. 00-21 provides guidance on how to account for arrangements that involve the
delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 will apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003.
Management is currently evaluating the effect that the adoption of EITF Issue
No. 00-21 but does not expect a material impact on the Company's consolidated
financial statements.

In May 2003, the FASB issued SFAS No. 150 ("SFAS 150"), "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
statement establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. In accordance with the standard,
financial instruments that embody obligations for the issuer are required to be
classified as liabilities. SFAS 150 is effective for all financial instruments
created or modified after May 31, 2003, and otherwise shall be effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS 150 is not expected to have a material impact on the Company's
consolidated financial condition or results of operations.

Reclassifications
-----------------

Certain amounts from the 2002 consolidated financial statements have been
reclassified to conform to the 2003 presentation.


NOTE B - DISCONTINUED OPERATIONS

Shut down of PCS Securities Subsidiary and Asset Transfer
---------------------------------------------------------

In January 2003, the Board of Directors of the Company decided to wind down the
activities of PCS Securities, Inc. and to close this subsidiary during the first
quarter of 2003. Based on the subsequent activities of PCS Securities, the wind
down was completed, and PCS Securities was closed effective April 30, 2003.

In connection with the decision to close the PCS Securities subsidiary, the
Company entered into an agreement with the two former owners of PCS Securities
pursuant to which the Company agreed to transfer ownership of two intangible
assets, the name "PCS" and trademarks related to such name ("Trademarks") as
well as a list of PCS customers to the former owners of PCS (or their designee)
in exchange for consideration including cash, the relief of certain liabilities
and the surrender by them of an aggregate of 10.3 million shares of the
Company's common stock for cancellation. Pursuant to the agreement, each of the
former owners of PCS Securities agreed to terminate their rights under
employment and/or consulting agreements between them and the Company.
Furthermore, the former owners of PCS Securities agreed to pay to the Company an
aggregate of $250,000 over a period of two years assuming that certain
conditions are satisfied, to repay the Company's revolving line of credit with
Bear Stearns by June 30, 2003 in the event that there is an outstanding balance
as of such date and to repay or assume all obligations to customers (i.e. credit
balances) existing as of June 30, 2003.

                                       11
<PAGE>

NOTE B - DISCONTINUED OPERATIONS - CONTINUED

Shut down of PCS Securities Subsidiary and Asset Transfer (continued)
---------------------------------------------------------------------

In connection with this agreement, the Company granted a non-exclusive two year
license to use the Company's customer relationship management software to the
former owners of PCS Securities and agreed to use a new soft dollar brokerage
firm to be formed by the former owners of PCS Securities as the Company's
preferred brokerage firm for soft dollar transactions.

Furthermore, the parties agreed that the Company would transfer the remaining
$500,000 restricted cash balance to pay down the outstanding credit facility
balance, and that all commissions generated by the PCS Securities subsidiary
subsequent to January 1, 2003 that clear through Bear Stearns, would be
automatically applied against the outstanding balance of the credit facility.

As a result of the transfer of the restricted cash balance, commissions
collected by the Company during the first and second quarters and funds paid
directly to Bear Stearns by the former owners from commissions generated by a
new soft dollar brokerage firm controlled by these individuals, all of which was
applied against the credit line balance, the outstanding credit line balance was
fully paid as of April 30, 2003. As of March 31, 2003, PCS Securities was not in
compliance with minimum net capital requirements required by the National
Association of Securities Dealers ("NASD"). In connection with the closing of
the PCS Securities subsidiary, the Company filed with the NASD to withdraw the
PCS Securities broker-dealer license, effective April 30, 2003, and, effective
April 30, 2003, all business activities related to PCS were terminated.

Results of Discontinued Operations
----------------------------------

Based on the Board of Directors' decision to shut down the PCS Securities
subsidiary in January 2003 together with the execution of the asset transfer
agreement and the full repayment of the line of credit in connection with such
agreement, the Company has accounted for the activities of the subsidiary as
discontinued operations in the current quarter and all periods presented.

Revenues and expenses from PCS Securities for the three and six months ended
June 30, 2003 and 2002 are summarized below:

<TABLE>
<CAPTION>
                                                    For the Three Months             For the Six Months
                                                        Ended June 30,                 Ended June 30,
                                                 ---------------------------    ---------------------------
                                                     2003           2002            2003           2002
                                                 ------------   ------------    ------------   ------------
                                                         (Unaudited)                    (Unaudited)
<S>                                              <C>            <C>             <C>            <C>
Revenues
  Commission and other fees                      $    243,385   $  4,154,357    $  1,358,848   $  7,688,535

Expenses
  Independent research expense                        168,042      2,860,600         943,859      5,171,863
  Execution and clearing costs                         30,985        780,785         177,841      1,383,438
  Amortization of identifiable intangibles                 --        539,576              --      1,079,150
  General and administrative expense                       --         49,706             420        115,456
                                                 ------------   ------------    ------------   ------------
    Total expenses                                    199,027      4,158,667       1,122,120      7,749,907

    Income (loss) from discontinued operations   $     44,358   $     (4,310)   $    236,728   $    (61,372)
                                                 ============   ============    ============   ============
</TABLE>

                                       12
<PAGE>

NOTE B - DISCONTINUED OPERATIONS - CONTINUED

Loss on Transfer of Assets
--------------------------

In connection with the Company's agreement to transfer the PCS trademark and
customer list intangibles to the former owners of PCS Securities , in exchange
for cash, the relief of liabilities and the surrendering of 10.3 million shares
of the Company's common stock held by these individuals, the Company recorded a
loss on the transfer, in the first quarter of 2003, totaling $18,253.

The components of the loss are summarized below:

Consideration to be received:
  Cash                                                       (A)   $    250,000
  Credit line repayments                                     (B)      1,076,556
  Accrued liabilities relieved:
    Accrued compensation payable to related parties          (C)      1,271,281
    Accrued research services - net                          (D)        398,723
  Surrender and cancellation of common stock                 (E)        721,000
  Other                                                      (F)        391,889
                                                                   ------------
                                                                      4,109,449

Carrying amount of intangibles transferred                   (G)     (4,127,702)
                                                                   ------------

Net loss on transfer                                               $    (18,253)
                                                                   ============

     (A)  Represents a $250,000 receivable from the former owners of PCS over 2
          years pursuant to the asset transfer agreement (125,000 of which is
          classified as current assets), subject to certain conditions as
          defined in the agreement.
     (B)  Represents funds paid directly to Lender from the soft dollar
          brokerage firm that is controlled by the former owners.
     (C)  Accrued compensation payable as of December 31, 2002 pursuant to
          respective employment and consulting agreements with the former owners
          of PCS Securities.
     (D)  Net customer credit balances of the PCS Securities subsidiary assumed
          by former owners of PCS.
     (E)  10.3 million shares of the Company's common stock surrendered by the
          former owners of PCS Securities at fair market value. The fair market
          value of the Company's common stock at the date of the transaction was
          $0.07.
     (F)  Additional net assets realized in connection with transaction.
     (G)  Carrying amount of PCS trademark and customer list intangibles at date
          of transaction.

                                       13
<PAGE>
NOTE B - DISCONTINUED OPERATIONS - CONTINUED

Net Assets and Liabilities of Discontinued Operations
-----------------------------------------------------

At June 30, 2003 and December 31, 2002, the net assets and liabilities of the
discontinued operations were as follows:

<TABLE>
<CAPTION>
                                                          (Unaudited)     December 31,
                                                         June 30, 2003        2002
                                                         -------------    -------------
<S>                                                      <C>              <C>
Assets of discontinued operations-current portion
  Cash                                                   $          --    $      58,480
  Commissions and other receivables                                 --          305,362
  Deferred research/service costs                                   --        1,731,202
                                                         -------------    -------------
      Total current assets                               $          --    $   2,095,044
                                                         -------------    -------------

Assets of discontinued operations-noncurrent portion
   Identifiable intangibles (A)                          $          --    $   4,127,702
                                                         -------------    -------------

Liabilities of discontinued operations-current portion
   Accounts payable                                      $          --    $      (6,647)
   Accrued research services                                                 (1,733,446)
                                                         -------------    -------------
                                                         $          --    $  (1,740,093)
                                                         -------------    -------------
</TABLE>

(A)  Identifiable intangibles of PCS Securities consist of the following:

                                              (Unaudited)     December 31,
                                             June 30, 2003        2002
                                             -------------    -------------

     Trademark                               $          --    $     841,736
     Customer lists                                     --        3,763,809
                                             -------------    -------------
                                                        --        4,605,545
       Less accumulated amortization                    --         (477,843)
                                             -------------    -------------
                                             $          --    $   4,127,702
                                             =============    =============

     Identifiable intangibles shown above at December 31, 2002 represent the
     balance of intangible assets acquired as part of the merger with PCS
     Securities in the fourth quarter of 2001, net of impairment write downs
     recorded in 2002. In connection with the asset transfer transaction with
     the former owners of PCS Securities, the intangible assets were written off
     during the first quarter of 2003.

NOTE C - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

                                              (Unaudited)     December 31,
                                             June 30, 2003        2002
                                             -------------    -------------

Computer equipment and software              $   1,283,592    $   1,263,498
Furniture and fixtures                              37,797           37,797
Office equipment                                    81,590           81,590
                                             -------------    -------------
                                                 1,402,979        1,382,885
Less accumulated depreciation                     (800,224)        (657,968)
                                             -------------    -------------
                                             $     602,755    $     724,917
                                             =============    =============

                                       14
<PAGE>

NOTE D - CREDIT LINE

On June 12, 2003 the Company entered into a promissory note agreement with Bank
of America, pursuant to which a $100,000 revolving credit line was made
available to the Company through June 10, 2006. During this period, the Company
is obligated to pay interest only, based on the outstanding principal balance,
on a monthly basis. The interest rate on the note is variable and is calculated
based on the published Wall Street Journal prime rate listing plus 4.5%. The
initial interest rate on the note is 8.75% per year, and is subject to change as
described above.

Following this initial period, the outstanding principal balance, together with
interest based on the applicable interest rate, shall be repaid monthly, on a
fully amortized basis, over the remaining term of the note that runs through
June 12, 2010.

As of June 30, 2003 there were no borrowings outstanding under the credit line.

The credit line is guaranteed by the United States Small Business
Administration, as well as by Brian Overstreet, the Company's President and CEO.


NOTE E - REVOLVING CREDIT FACILITY

The Company obtained a $3,000,000 revolving credit facility from Bear Stearns, a
U.S. brokerage firm (the "Lender") in connection with the merger with PCS
Securities in December 2001. At December 31, 2002, borrowings outstanding under
this revolving credit facility totaled $2,891,975. At that date, the credit
facility was secured by $500,000 in restricted cash of the Company and personal
guarantees by the Company's President and Chief Executive Officer and the two
formers owners of PCS Securities.

In connection with the Company's decision to close its PCS Securities subsidiary
during 2003 and the agreement reached with the former owners of PCS Securities
pursuant to which the Company agreed not to draw any additional funds from the
credit facility subsequent to January 1, 2003, the parties agreed that the
Company would transfer the remaining $500,000 restricted cash deposit balance to
pay down the outstanding credit facility balance, and that all commissions
generated by PCS Securities subsequent to January 1, 2003 that clear through the
Lender will be applied against the outstanding balance of the credit facility.

During the first quarter of 2003, after applying the $500,000 restricted cash
deposit, commissions generated by the Company during the quarter, and funds paid
by the former owners of PCS Securities (including commissions generated by their
new soft brokerage firm), the line of credit balance was fully paid off on April
30, 2003. As of April 30, 2003 the credit facility was cancelled.

                                       15
<PAGE>

NOTE F - CONVERTIBLE DEBT

On December 17, 2001, the Company issued convertible debentures in the aggregate
principal amount of $1,600,000. These debentures had a maturity date of December
17, 2003, and bore interest at a rate of 10% per annum, which was due and
payable on the last day of each calendar quarter until they were paid in full or
converted into shares of the Company's common stock.

At issuance, proceeds from the debentures were allocated to the warrants based
on the fair value of the warrants using a Black Scholes valuation model totaling
$259,182. In addition, a discount of $541,536 was applied to account for the
beneficial conversion feature at the closing date of December 17, 2001.

In November 2002, the Company made a partial prepayment of principal in the
amount of $215,686.

At December 31, 2002, debentures with an aggregate principal balance of
$1,384,314, were carried net of unamortized discounts of $417,189 related to the
intrinsic value of the beneficial conversion feature, which is inclusive of the
effect of conversion price resets, and the warrants.

In February 2003, the Company and the debenture holders restructured certain
terms and provisions of the convertible debentures. In connection with the debt
restructuring, the Company was relieved of $137,844 in liquidated damages
previously accrued. The restructuring of the convertible debt has been accounted
for as a troubled debt restructuring and, accordingly, no gain was recognized.
At June 30, 2003, the restructured convertible debt principal totaled $1,545,909
of which $403,914 is classified as the current portion.

Following is a summary of primary terms of the restructured agreements:

$1,250,000 Original Principal Amount Note
-----------------------------------------

The original debenture was amended pursuant to which the principal balance was
changed to $1,425,000. The amended principal balance includes the original
principal amount plus accrued and unpaid liquidated damages and interest of
$150,000 and $25,000, respectively. The remaining balance of accrued interest at
February 28, 2003, totaling $26,736, was paid by the Company and $125,000 of
accrued liquidated damages were waived by the debenture holder.

The debenture matures on December 28, 2005 and bears interest at an annual rate
of 14%. The debenture requires fixed monthly payments of principal and interest
beginning on March 28, 2003 of $25,000 for the first five (5) months, $50,000
thereafter through November 28, 2005 and a final payment due December 28, 2005
in the amount of $271,100. The outstanding principal balance can be converted
into shares of the Company's common stock at the option of the holder based on a
fixed conversion price of $0.20, and the warrant exercise price is fixed at
$0.086 for the term of the warrants to purchase 160,000 shares of the Company's
common stock that were included in the original debenture. In addition, the
debenture holder agreed to waive all registration requirements with respect to
the convertible debenture, warrants and shares underlying the warrants.

$350,000 Original Principal Amount Note
---------------------------------------

The original debenture was amended pursuant to which the principal balance was
changed to $155,000. The amended principal balance includes the original
principal amount, less the partial principal payment in November 2002, of
$215,686 plus accrued and unpaid liquidated damages and interest of $16,656 and
$4,030, respectively. The debenture holder waived accrued liquidated damages in
the amount of $12,844. The debenture matures on February 28, 2005 and bears
interest at an annual rate of 14%. Payment of interest is required quarterly,
beginning March 30, 2003 and the principal balance is payable upon the maturity
date. The outstanding principal balance can be converted in shares of the
Company's common stock at the option of the holder based on a fixed

                                       16
<PAGE>

NOTE F - CONVERTIBLE DEBT

$350,000 Original Principal Amount Note (continued)
---------------------------------------------------

conversion price of $0.20, and the warrant exercise price is fixed at $0.086 for
the term of the warrants to purchase 35,000 shares of the Company's common stock
that were included in the original debenture. In addition, the debenture holder
agreed to waive all registration requirements with respect to the convertible
debenture, warrants and shares underlying the warrants.

NOTE G - PROMISSORY NOTE

On November 22, 2001, the Company borrowed $300,000 from an unrelated party. In
connection with such loan, the Company issued a note to the lender, which note
is unsecured, bears in interest at 15% per annum and was originally due in July
2002. In addition, the Company issued 150,000 detachable warrants to the lender
exercisable for 150,000 shares of the Company's common stock at an exercise
price of $2.30 per share. The warrants are exercisable at the option of the
holder and expire in November 2006. In May 2003, the Company received an
extension the maturity date of the note to July 16, 2003, and in July 2003, the
maturity date was extended to January 1, 2004.

NOTE H - LOSS PER SHARE

Stock options, warrants, performance warrants and shares issuable upon
conversion of debt totaling 2,092,499, 663,905, 5,025,000 and 7,729,545,
respectively, at June 30, 2003 have not been included in the calculation of loss
per share since their inclusion would be anti-dilutive.

NOTE  I  - SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION

In January 2002, the Company issued 94,731 shares of common stock at market
value to an officer of the Company as payment of bonus earned in 2001 totaling
$169,000.

In February 2003, 10,300,000 shares of the Company's common stock were cancelled
in connection with an agreement between the Company and the two former owners of
PCS Securities. See Note B.

In April 2003, an aggregate of 5,688,750 shares of common stock were issued in
connection with the exercise of 5,765,626 performance warrants.

NOTE J - RELATED PARTY TRANSACTIONS

Loans and Advances
------------------

In January 2002, the Company borrowed $42,500 from a company controlled by an
officer/stockholder. In connection therewith, the Company issued an unsecured
promissory note to the lender, which was due and payable on January 31, 2003 and
bears interest at 12 % per annum. In January 2003, the Company received an
extension of the due date to July 1, 2003, and in July 2003, the due date of the
note was extended to January 1, 2004. In May 2001 and October 2001, the Company
borrowed an aggregate of $145,000 from the same company. These notes are
unsecured, bear interest at 12% and mature on May 14, 2003 and October 31, 2003,
respectively. In May 2003, the Company received an extension the maturity date
of the note originally scheduled to mature on May 14, 2003, to January 1, 2004.
At June 30, 2003, the aggregate outstanding balance of these notes was $187,500.
During the six months ended June 30, 2003 the Company recorded interest expense
in connection with these notes totaling $11,250, and as of June 30, 2003 total
interest payable in connection with these loans was $15,010.

                                       17
<PAGE>

NOTE J - RELATED PARTY TRANSACTIONS

Consulting Services
-------------------

During the six months ended June 30, 2003, the Company recorded $91,681 in
consulting expense to a corporation controlled by a party related to an
officer/stockholder of the Company.

NOTE K - LITIGATION

In August 2002, the Company commenced an action in the Superior Court of the
State of California, County entitled, DirectPlacement, Inc. v. Barry Witz, et.
al., Case No. GIC 793647, in which the Company claimed that one or more of the
defendants (i) breached their fiduciary duties, (ii) were unjustly enriched,
(iii) wrongfully converted the Company's property, and (iv) committed legal
malpractice.

Between October 2002 and March 31, 2003, defendant Witz and two other
co-defendants entered into Settlement and Mutual Release Agreements with the
Company. Under the terms of these agreements, the defendants agreed to return an
aggregate of 293,750 shares of common stock and 1,725,000 performance warrants
to the Company. In addition, the agreement with Witz provided that the Company
would grant Witz a warrant to purchase a number of shares of the Company's
common stock equal to 25% of the total number of shares of common stock conveyed
to the Company for cancellation as a result of default judgments being entered
and enforced against the other defendants in connection with this action, up to
a maximum of 250,000 shares. The exercise price of such warrants will equal the
average closing market price for the Company's common stock during the ten days
prior to the date of the warrant issue.

In July 2003, default judgments were obtained against four additional defendants
in the case that will result in the cancellation of 755,000 shares of common
stock and 3,971,250 performance warrants.


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.
         -----------------------------------------------------------------------

         The following discussion should be read in conjunction with the
financial statements and notes thereto of the Company. Such financial statements
and information have been prepared to reflect the Company's financial position
as of June 30, 2003 and December 31, 2002.

         Historical results and trends should not be taken as indicative of
future operations, especially in light of the Company's recent restructuring.
Management's statements contained in this report that are not historical facts
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Actual results may differ materially from those
included in the forward-looking statements. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of complying with
those safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Company, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," "prospects" or similar
expressions.

         The Company's ability to predict results or the actual effect of future
plans or strategies is inherently uncertain. Information concerning the Company
and its business, including the risks faced by us described herein and in our
most recent annual report on Form 10-KSB could materially affect the Company's
financial results. The Company disclaims any obligation to update or announce
revisions to any forward-looking statements to reflect actual events or
developments.
                                       18
<PAGE>

GENERAL OVERVIEW

         PCS Research Technology, Inc., formerly DirectPlacement, Inc. ("DPI"),
based in San Diego, California and incorporated in Delaware in 1999, is a
financial technology company. We operate our business activities through the
parent entity, PCS Research Technology, Inc. (the "PCS Research", "we", or the
"Company") and through our wholly owned subsidiaries, DP Securities, Inc.
("DPS"), a broker-dealer incorporated in the State of California.

         Through April 30, 2003 we also operated through our wholly owned
subsidiary PCS Securities, Inc. ("PCS Securities" or "PCS"), a broker-dealer
incorporated in the State of Washington. As discussed in Note B of the Notes to
Consolidated Financial Statements, PCS Securities was closed in 2003, and
accordingly, all activities related to PCS Securities have been accounted for as
discontinued operations in all periods presented.

         We use advanced proprietary technology platforms to distribute
financial research, data, and analytics to the institutional investment
community. Our business strategy is to leverage our technology expertise to
become a leading single-source provider, developer, and marketer of independent
research for the institutional investment community.

         In the fourth quarter of 2001, the Company began offering trading
services for institutional investors through DPS, as a result of its acquisition
of certain assets of PCH Securities, Inc ("PCH"). Also in the fourth quarter of
2001, the Company began offering soft-dollar brokerage services as a result of
its merger with PCS Securities, Inc.

         In the third quarter of 2002, the Company closed the institutional
trading desk operations of DPS. In April 2003, the Company closed PCS
Securities. Based on this restructuring, the Company's business strategy and
activities are now focused primarily on developing, marketing and distributing
independent research products and services.

Critical Accounting Policies

         Our discussion and analysis of our financial condition and results of
operations is based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent liabilities.

         On an on-going basis, we evaluate our estimates, including those
related to credit risk on receivables, recoverability of long lived assets,
identified intangibles, goodwill and the valuation of deferred income taxes. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

Revenue Recognition
-------------------

         Data services revenue represents revenue from providing individual
custom reports or reports on a monthly or annual subscription basis. Revenue
from custom reports is recognized when the report is provided, and revenue from
subscriptions is recognized ratably over the contractual period. Deferred
revenue on the consolidated balance sheets consists of subscription revenues
that have been received but not yet earned.

         Placement fees include gains, losses and fees, net of syndicate
expenses, arising from private equity and debt offerings in which the Company
participates as an underwriter or agent. The fees are recorded when the
underwriting is completed and the income is reasonably determinable. Referral
fees related to placement transactions are expensed when the revenue is
recognized.
                                       19
<PAGE>

         Commissions from security transactions are recorded on a settlement
date basis, generally the third business day following the transaction date,
which is not materially different than on a trade date basis.

Identifiable Intangible Assets and Goodwill
-------------------------------------------

         Identifiable intangible assets and goodwill have been recorded and
accounted for in accordance with Statement of Financial Accounting Standards
("SFAS") No. 141, Business Combinations and SFAS No. 142, Goodwill and Other
Intangible Assets.

         In accordance with SFAS No. 142, we amortize identifiable intangible
assets over their estimated useful lives. At each balance sheet date, or earlier
if required, we evaluate the carrying amount of each intangible asset for
impairment. In accordance with SFAS No. 142, we do not amortize goodwill, but
instead perform an annual evaluation for impairment.

         As of December 31, 2002, the unamortized amount of certain identifiable
intangible assets, and the entire amount of goodwill previously capitalized in
connection with the PCH asset acquisition and the PCS merger in 2001, in the
aggregate amount of $17,996,957, were evaluated for impairment and written off.

         As of March 31, 2003 the remaining identifiable intangible asset
balance of $4,127,702, previously capitalized in connection with PCS Securities
merger, was written off. See Note B - Discontinued Operations.

RESULTS OF OPERATIONS

         Based on the closing of our PCS Securities subsidiary, the consolidated
statement of operations presented for the three and six months ended June 30,
2003 and 2002 has been segregated to reflect continuing and discontinued
operations. As a result, all revenue and expense activity related to PCS
Securities' operations have been excluded from the results of continuing
operations presented herein.

Six months ended June 30, 2003 compared to the six months ended June 30, 2002.

Loss From Continuing Operations
-------------------------------

Revenues
--------

Total revenues for the six months ended June 30, 2003 decreased by 35% to
$917,460 compared to $1,419,608 for the same period in 2002. The decrease in
total revenue is due primarily to decreases in placement fees and commissions
and other income in 2003. For the 2003 period, there were no placement fees
earned by the Company due to its change of strategic focus to the development,
marketing and distribution of independent research products and services, and
the de-emphasis on its investment banking activities, resulting in a decreases
of 100% from $282,875 in 2002. Commissions and other income decreased by 87% to
$83,700 compared to $629,764 for the same period in 2002. Of the total amount
earned in the 2003 period, $75,000 relates to fees earned by DPBT, LLC for
consulting services in 2003, for which there was no comparable activity in the
2002 period. Commissions earned in the 2002 period resulted from activities of
the Company's institutional trading desk that was closed in the third quarter of
2002.

         Partially offsetting these decreases in the first six months of 2003
was an increase in data services revenue, which increased by 68% to $832,510,
compared to $496,127 for the 2002 period. The increase in data services revenues
in 2003 was due primarily to an increased number of research products being
marketed and to increased sales and marketing efforts.

                                       20
<PAGE>

Operating Expenses
------------------

         Total operating expenses for the six months ended June 30, 2003
decreased by 66% to $1,625,071 compared to $4,783,474 for the same period in
2002. The decrease in 2003 operating expenses is due primarily to the following
changes:

Compensation and Benefits
-------------------------

         Compensation and benefits decreased by 61% in 2003 to $774,361 compared
to $1,964,785 in 2003. This decrease is due primarily to the discontinuation of
compensation (salaries, bonuses, etc.) totaling $908,334 to the former owners of
PCS Securities. Such compensation was terminated in connection with the closing
and the agreement reached between the Company and the former owners related to
the sale of certain PCS assets. Also contributing to the decrease in
compensation and benefits was a reduction in staff personnel resulting in a net
cost savings during the six months ended June 30, 2003 of $325,157. Partially
offsetting these decreases was an increase in commission expense of $60,082
during 2003.

Product Research Expenses
-------------------------

         Product research expenses represent costs associated with generating
data services revenues. During the six months ended June 30, 2003 such costs
increased by 144% to $185,038 in 2003 compared to $75,806 in 2002 as a result of
higher data services revenues in 2003.

Clearing and Execution Costs
----------------------------

         Clearing and execution costs incurred in the first six months of 2002
were $22,684 and represent fees charged by clearing brokers in connection with
DPS institutional trading activities. There were no similar expenses incurred in
2003 due to the closing of the trading desk during the third quarter of 2002.

Depreciation and Amortization
-----------------------------

         Depreciation and amortization expense decreased by 13% to $142,256 in
2003 from $164,161 in 2002. This decrease resulted primarily from the write off
of identifiable intangibles assets in the third quarter of 2002 related to the
PCH acquisition as discussed below in "Impairment Losses Related to Intangibles
and Goodwill". Amortization expense of $34,971 related to these assets was
included in the 2002 period amount. Partially offsetting this decrease, were
increases in depreciation during the 2003 period associated with the Company's
capitalized computer equipment and software.

Impairment Losses Related to Intangibles and Goodwill
-----------------------------------------------------

         During the six months ended June 30, 2002, the Company recorded
non-cash expenses totaling $923,084 related to the amortization of identifiable
intangible assets and goodwill originally established as a result of the PCH
acquisition in the fourth quarter of 2001. These assets were written off
effective June 30, 2002 in connection with the Company's decision, in August
2002, to close its in-house trading desk operations. There were no similar
charges in the 2003 period.

Commissions and Finders' Fees
-----------------------------

         During the six months ended June 30, 2002, the Company recorded
expenses related to commissions and finders' fees totaling $249,339. These costs
represent third-party referral fees paid by the Company in connection with
completed debt or equity placements during the 2002 period. There were no
similar charges in the 2003 period.

                                       21
<PAGE>

General and Administrative
--------------------------

         General and administrative expenses decreased by 68% to $447,620 in the
first six months of 2003 compared to $1,383,615 in 2002. This decrease is due to
discontinuing a consulting agreement with a former owner of PCS Securities
resulting in savings of $575,000.

         Also contributing to the decrease in general and administrative
expenses in 2003 were decreases in legal fees of $120,015, accounting fees of
$116,767, rent expenses related to office space, furniture and equipment of
$44,847, travel and entertainment of $39,358 and public relations expenses of
$31,039.

Minority Interest
-----------------

         Minority interest was $75,796 during the first six months of 2003, and
represents the income attributable to minority member's interest in DPBT, LLC, a
joint venture formed in September 2002 between the Company and Btech Investor,
Inc. Through the joint venture, DPBT, LLC developed and introduced
BiotechTracker, a proprietary web-based research service, which is currently
marketed by the Company, focused on research, analysis and valuation of the drug
development pipelines of biotechnology and pharmaceutical companies.

Interest Expense
----------------

         Interest expense for the six months ended June 30, 2003 totaled
$519,938, and includes $417,189 of non-cash interest charges related to the
amortization of discounts recorded in connection with the Company's convertible
debt (issued together with warrants) entered into during the fourth quarter of
2001. Also included in the 2003 amount are net interest charges totaling
$102,749. Total interest expense in 2003 decreased by 47% compared to $976,829
in 2002. This decrease was primarily due to a net decrease in 2003 of $239,207
from debt discount amortization, and to the inclusion in the 2002 total of
$144,000 related to liquidated damages accrued in connection with registration
requirement provisions contained in the convertible debt agreement. Also
contributing to the decrease in 2003 were a decrease of $43,369 in interest from
the Bear Stearns credit facility resulting primarily from lower average balances
outstanding during the 2003 period and from a credit of $24,598 related to
previously accrued liquidated damages.

Loss From Continuing Operations
-------------------------------

         As a result of the revenue and expense items mentioned above, the
Company's net loss from continuing operations decreased 72% to $1,227,549 in the
six months ended June 30, 2003 from $4,340,695 in the same period a year ago.

Income (Loss) from Discontinued Operations
------------------------------------------

         Operating income (loss) from discontinued operations represents the net
revenue and expense activity from PCS Securities and includes the following:

                                                     Six Months Ended June 30,
                                                        2003           2002
                                                    ------------   ------------
Revenues
  Commission and other fees                         $  1,358,848   $  7,688,535

Expenses
  Independent research expense                           943,859      5,171,863
  Execution and clearing costs                           177,841      1,383,438
  Amortization of identifiable intangibles                    --      1,079,150
  General and administrative expense                         420        115,456
                                                    ------------   ------------
    Total expenses                                     1,122,120      7,749,907
                                                    ------------   ------------

    Income (loss) from discontinued operations      $    236,728   $    (61,372)
                                                    ============   ============

                                       22
<PAGE>

Commission and Other Fees
-------------------------

         Commission and other fees decreased by 82% to $1,358,848 in 2003
compared to $7,688,535 in 2002 as a result of the Company's decision to wind
down its subsidiary's activities, and ultimately close it. Based on this
decision, PCS Securities did not write any new business in 2003, and as such,
revenues recognized for the six months ended June 30, 2003 were limited to the
recognition of deferred revenue associated with research subscriptions sold in
2002.

Independent Research Expense
----------------------------

         Independent research expense decreased by 82% to $943,859 in 2003 from
$5,171,863 in 2002. This was also due to the Company's decision to wind down the
activities, and to close PCS Securities, and the resulting lower commission and
other fee revenues.

Execution and Clearing Costs
----------------------------

         Execution and clearing costs decreased by 87% to $177,841 compared to
$1,383,438 in 2002. This decrease is primarily due to reduced commission levels
resulting from the wind down of the PCS Securities business.

Amortization of Identifiable Intangibles
----------------------------------------

         During the first six months of 2002, $1,079,150 was charged as
amortization expense in connection with identifiable intangible assets recorded
as part of the merger with PCS Securities completed in the fourth quarter of
2001. During 2003, no similar expenses were recorded since these assets were
held for sale subject to the asset transfer agreement, and no longer amortized.

General and Administrative
--------------------------

         General and administrative expenses decreased by 99% to $420 from
$115,036 in 2002 as a result of the closing of PCS Securities.

Net Loss
--------

         As a result of the revenue and expense items mentioned above, the
Company's net loss decreased 77% to $1,009,074 in the six months ended June 30,
2003 from $4,402,067 in the same period a year ago.


LIQUIDITY AND CAPITAL RESOURCES

Liquidity
---------

         The accompanying consolidated financial statements have been prepared
using the going concern basis of accounting. As more fully discussed in
Company's 2002 Form 10-KSB, the Company's December 31, 2002 audited financial
statements included a "going concern" qualification from its independent
auditors due to the Company's lack of profitability, negative working capital
and the loss of future revenue associated with the decision to close its PCS
Securities subsidiary during the first half of 2003.

         In conjunction with the decision to close the PCS Securities business
unit, the Company and its management recommitted to pursuing its long-term
objective of becoming a leading single source of independent research to the
institutional community. The Company and its management believe that the
independent institutional research market is a viable area in which the Company
can compete. However, no assurances can be provided that the Company will be
successful.

                                       23
<PAGE>
         At June 30, 2003, the Company had $97,088 of cash and cash equivalents
to meet its immediate short-term liquidity requirements. Whereas management
believes its anticipated cash flow from operations could be adequate to fund
operations for the next fiscal year, there can be no assurance, however, that
the Company will not require additional financing prior to or after such time.
Furthermore, there can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. If adequate funds are
not available, the Company may be required to delay, scale back or eliminate its
operational plans. Our inability to obtain additional financing could have a
material adverse effect on the Company's business, financial condition and
results of operations.


Operating Activities
--------------------

         Cash provided by operating activities increased to $2,127,481 during
the six months ended June 30, 2003 compared to cash used in operating activities
of $2,800,306 during the six months ended June 30, 2002.

         This increase is primarily attributable to changes in asset and
liabilities from discontinued operations of $2,196,014, a decrease in the net
loss from continuing operations in 2003 of $2,233,165, an increase in deferred
revenue of $612,844 in 2003 and an increase in income from discontinued
operations of $279,847. Partially offsetting these were an increase in prepaid
research costs of $324,447 and an increase in accounts payable and accrued
liabilities of $144,503 in 2003.

Investing Activities
--------------------

         Cash used by investing activities decreased to $20,092 during the six
months ended June 30, 2003 compared $157,454 during the six month ended June 30,
2002. This decrease resulted primarily from fewer purchases of property and
equipment during 2003.

Financing Activities
--------------------

         Cash used in financing activities increased to $2,400,380 during the
six months ended June 30, 2003 compared to cash provided by financing activities
of $3,067,085 during the six months ended June 30, 2002. The increase in cash
used during the 2003 period is primarily due to activity during the respective
periods on the Company's credit facility with Bear Stearns. As discussed in Note
B to the Financial Statements, the credit facility was paid in full and
terminated as of April 30, 2003 in connection with the closing of PCS
Securities. This resulted in a use of cash in the 2003 period of $2,891,975,
whereas during the 2002 period, the credit line balance was increased by
$2,999,585. Partially offsetting this was a transfer of the $500,000 restricted
cash balance that had been held by Bear Stearns as cash collateral.


Financing
---------

Credit Facility-Bank of America
-------------------------------

         On June 12, 2003 the Company entered into a promissory note agreement
with Bank of America, pursuant to which a $100,000 revolving credit line was
made available to the Company through June 10, 2006. During this period, the
Company is obligated to pay interest only, based on the outstanding principal
balance, on a monthly basis. The interest rate on the note is variable and is
calculated based on the published Wall Street Journal prime rate listing plus
4.5%. The initial interest rate on the note is 8.75% per year, and is subject to
change as described above.

         Following this initial period, the outstanding principal balance,
together with interest based on the applicable interest rate, shall be repaid
monthly, on a fully amortized basis, over the remaining term of the note, which
runs through June 12, 2010.

                                       24
<PAGE>

         As of June 30, 2003 there were no borrowings outstanding under the
credit line.

         The credit line is guaranteed by the United States Small Business
Administration, as well as by Brian Overstreet, the Company's President and CEO.

Credit Facility-Bear Stearns
----------------------------

         In December 2001, the Company obtained a $3,000,000 working capital
credit facility from Bear Stearns in connection with the merger with PCS
Securities. The credit facility was originally secured by $1.5 million in
restricted cash of the Company and personal guarantees by the Company's
President and Chief Executive Officer and the two formers owners of PCS
Securities. In July 2002, the Lender released $1.0 of the cash collateral in
connection with discussions between the parties to restructure the credit
facility. The primary focus on these discussions was to increase the maximum
amount available under the credit facility, and to release all, or a portion of
the security deposit and guarantees contained in the original agreements. These
discussions were terminated December 2002, when it became clear that acceptable
terms could not be reached. As of December 31, 2002 the outstanding balance owed
on the credit facility was $2,891,975.

         In connection with the Company's decision to close PCS Securities
during 2003 and the agreement reached with the former owners of PCS Securities
pursuant to which the Company agreed not to draw any additional funds from the
Bear Stearns credit facility. Furthermore, the parties agreed that the Company
would transfer the remaining $500,000 security deposit balance to pay down the
outstanding credit facility balance, and that all commissions generated by PCS
Securities subsequent to January 1, 2003 that clear through Bear Stearns will be
applied against the outstanding balance of the credit facility. As a result of
the security deposit balance transfer in February 2003, and commissions applied
subsequent to January 1, 2003, the outstanding balance of the credit facility at
March 31, 2003 was $386,194. As of April 30, 2003 the credit facility balance
was paid in full, and the credit facility and related promissory note were
cancelled.

Convertible Debt
----------------

         On December 17, 2001, the Company issued convertible debentures in the
aggregate principal amount of $1,600,000. These debentures had a maturity date
of December 17, 2003, and bore interest at a rate of 10% per annum, which was
due and payable on the last day of each calendar quarter until they were paid in
full or converted into shares of the Company's common stock.

         At issuance, proceeds from the debentures were allocated to the
warrants based on the fair value of the warrants using a Black Scholes valuation
model totaling $259,182. In addition, a discount of $541,536 was applied to
account for the beneficial conversion feature at the closing date of December
17, 2001.

         In November 2002, the Company made a partial prepayment of principal in
the amount of $215,686.

         At December 31, 2002, debentures with an aggregate principal balance of
$1,384,314, were carried net of unamortized discounts of $417,189 related to the
intrinsic value of the beneficial conversion feature, which is inclusive of the
effect of conversion price resets, and the warrants.

         In February 2003, the Company and the debenture holders restructured
certain terms and provisions of the convertible debentures. In connection with
the debt restructuring, the Company was relieved of $137,844 in liquidated
damages previously accrued. The restructuring of the convertible debt has been
accounted for as a troubled debt restructuring and, accordingly, no gain or loss
was recognized. At June 30, 2003, the restructured convertible debt principal
totaled $1,545,909 of which $403,914 is classified as the current portion.

                                       25
<PAGE>

         Following is a summary of primary terms of the restructured agreements:

$1,250,000 Original Principal Amount Note
-----------------------------------------

         The original debenture was amended pursuant to which the principal
balance was changed to $1,425,000. The amended principal balance includes the
original principal amount plus accrued and unpaid liquidated damages and
interest of $150,000 and $25,000, respectively. The remaining balance of accrued
interest at February 28, 2003, totaling $26,736, was paid by the Company and
$125,000 of accrued liquidated damages were waived by the debenture holder. The
debenture matures on December 28, 2005 and bears interest at an annual rate of
14%. The debenture requires fixed monthly payments of principal and interest
beginning on March 28, 2003 of $25,000 for the first five (5) months, $50,000
thereafter through November 28, 2005 and a final payment due December 28, 2005
in the amount of $271,100.

         The outstanding principal balance can be converted into shares of the
Company's common stock at the option of the holder based on a fixed conversion
price of $0.20, and the warrant exercise price is fixed at $0.086 for the term
of the warrants to purchase 160,000 shares of the Company's common stock that
were included in the original debenture. In addition, the debenture holder
agreed to waive all registration requirements with respect to the convertible
debenture, warrants and shares underlying the warrants. The Company made a
scheduled payment of $25,000 in March 2003, resulting in the application of
$8,375 against the principal balance of the note. As of June 30, 2003 the
outstanding principal balance was $1,390,909, of which $403,914 was a current
liability and $986,995 was a long-term liability.

$350,000 Original Principal Amount Note
---------------------------------------

         The original debenture was amended pursuant to which the principal
balance was changed to $155,000. The amended principal balance includes the
original principal amount, less the partial principal payment in November 2002,
of $215,686 plus accrued and unpaid liquidated damages and interest of $16,656
and $4,030, respectively. The debenture holder waived accrued liquidated damages
in the amount of $12,844 were waived by the debenture holder. The debenture
matures on February 28, 2005 and bears interest at an annual rate of 14%.
Payment of interest is required quarterly, beginning March 30, 2003 and the
principal balance is payable upon the maturity date. The outstanding principal
balance can be converted in shares of the Company's common stock at the option
of the holder based on a fixed conversion price of $0.20, and the warrant
exercise price is fixed at $0.086 for the term of the warrants to purchase
35,000 shares of the Company's common stock that were included in the original
debenture.

         In addition, the debenture holder agreed to waive all registration
requirements with respect to the convertible debenture, warrants and shares
underlying the warrants. As of June 30, 2003 the outstanding principal balance
was $155,000, all of which was reflected as a long-term liability.

Promissory Notes
----------------

         On November 22, 2001, the Company borrowed $300,000 from an unrelated
party. In connection with such loan, the Company issued a note to the lender,
which note is unsecured, bears in interest at 15% per annum and was originally
due in July 2002. In addition, the Company issued 150,000 detachable warrants to
the lender exercisable for 150,000 shares of the Company's common stock at an
exercise price of $2.30 per share. The warrants are exercisable at the option of
the holder and expire in November 2006. In November 2002, the Company paid
interest accrued through October 31, 2002, totaling $42,875 and received and
extension of the maturity date of the note to May 15, 2003. In May 2003, the
Company received an extension the maturity date of the note to July 16, 2003,
and in July 2003, the maturity date was extended to January 1, 2004. During the
six months ended June 30, 2003 the Company recorded interest expense in
connection with this note totaling $22,500, and as of June 30, 2003 total
interest payable in connection with these loans was $30,125.

                                       26
<PAGE>

         On May 14, 2001, October 31 2001 and January 13, 2002, the Company
borrowed an aggregate of $187,500 from an entity controlled by an
officer/stockholder of the Company. In connection with such loans, the Company
issued notes to lender which are unsecured, bear interest at 12% and mature on
May 14, 2003, October 31, 2003 and July 1, 2003 respectively. In May 2003, the
Company received an extension of the maturity date of the note originally
scheduled to mature on May 14, 2003, to January 1, 2004, and in July 2003 the
Company received an extension the maturity date of the note scheduled to mature
on July 1, 2003, to January 1, 2004. During the six months ended June 30, 2003
the Company recorded interest expense in connection with these notes totaling
$11,250, and as of June 30, 2003 total interest payable in connection with these
loans was $15,010.

Net Capital Deficiency
----------------------

         As of March 31, 2003 the Company's PCS Securities subsidiary failed to
meet the minimum net capital requirement of $5,000 required by the NASD. As
discussed in Note B, in April 2003, the Company filed with the NASD to withdraw
the PCS Securities subsidiary broker-dealer license, and effective April 30,
2003, the PCS subsidiary was closed.

New Accounting Pronouncements
-----------------------------

         See accompanying notes to the condensed consolidated financial
statements for a description.


Item 3.  Controls and Procedures
         -----------------------

         We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer and Principal Accounting Officer, as appropriate, to
allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

         As required by SEC Rule 13a-15(b), we carried out an evaluation, under
the supervision and with the participation of our management, including our
Chief Executive Officer and Principal Accounting Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures as of the
end of the quarter covered by this report. Based on the foregoing, our Chief
Executive Officer and Principal Accounting Officer concluded that our disclosure
controls and procedures were effective at the reasonable assurance level.

         There has been no change in our internal controls over financial
reporting during our most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal controls over financial
reporting. However, it should be noted that in May 2003, as a consequence of the
winding down of the business of PCS Securities during the first half of 2003,
the Chief Financial Officer's position was downgraded to a part time position,
and the title was changed to Director of Finance and Accounting. Concurrent with
this restructuring, our President and Chief Executive Officer assumed the duties
as the Company's Principal Accounting Officer.

                            Part II Other Information

Item 1.  Legal Proceedings.
         ------------------

         Except as set forth below, there are no material legal proceedings
pending or, to the Company's knowledge, threatened against the Company:

                                       27
<PAGE>

         On or about August 5, 2002, the Company commenced an action in the
Superior Court of the State of California, County entitled, DirectPlacement,
Inc. v. Barry Witz, et. al., Case No. GIC 793647, in which the Company claimed
that one or more of the defendants (i) breached their fiduciary duties, (ii)
were unjustly enriched, (iii) wrongfully converted the Company's property, and
(iv) committed legal malpractice.

         Between October 2002 and March 31, 2003, defendant Witz and two other
co-defendants entered into Settlement and Mutual Release Agreements with the
Company. Under the terms of these agreements, the defendants agreed to return an
aggregate of 293,750 shares of common stock and 1,725,000 performance warrants
to the Company. In addition, the agreement with Witz provided that the Company
would grant Witz a warrant to purchase a number of shares of the Company's
common stock equal to 25% of the total number of shares of common stock conveyed
to the Company for cancellation as a result of default judgments being entered
and enforced against the other defendants in connection with this action, up to
a maximum of 250,000 shares. The exercise price of such warrants will equal the
average closing market price for the Company's common stock during the ten days
prior to the date of the warrant issue.

         In July 2003, default judgments were obtained against four additional
defendants in the case that will result in the cancellation of 755,000 shares of
common stock and 3,971,250 performance warrants.


Item 2.  Changes in Securities and Use of Proceeds
         -----------------------------------------

         None

Item 3.  Default Upon Senior Securities
         ------------------------------

         None

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

         None

Item 5.  Other Information.
         ------------------

         None

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

     (a) Exhibits
         --------


              31.  Certifications of the Company's Chief Executive Officer and
                   Principal Accounting Officer pursuant to Section 302 of the
                   Sarbanes-Oxley Act of 2002.

              32.  Certifications of the Company's Chief Executive Officer and
                   Principal Accounting Officer pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002.

     (b) Reports on Form 8-K
         -------------------

              None


                                       28
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-QSB to be signed on its behalf
by the undersigned thereunto duly authorized.



                                       PCS RESEARCH TECHNOLOGY, INC.


                                       By: /s/ BRIAN M. OVERSTREET
                                           ------------------------------------
                                           Name:  Brian M. Overstreet
                                           Title: President and Chief Executive
                                                  Officer

Date: August 14, 2003


                                       29