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                  September 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 November 13, 2003, there were 22,790,336 shares of common stock issued and
outstanding.
<PAGE>

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


                                TABLE OF CONTENTS



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 ............................................28

PART II - OTHER INFORMATION

ITEM 1.   Legal Proceedings ..................................................28

ITEM 2.   Changes in Securities and Use of Proceeds ..........................29

ITEM 3.   Defaults Upon Senior Securities ....................................29

ITEM 4.   Submission of Matters to a Vote of Security Holders ................29

ITEM 5.   Other Information ..................................................29

ITEM 6.   Exhibits and Reports on Form 8-K ...................................29


                                       2
<PAGE>

                          Part I Financial Information

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

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

                                                                     September 30,
                                                                         2003         December 31,
                                                                       Unaudited         2002
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
CURRENT ASSETS
  Cash and cash equivalents                                          $     52,100    $    390,079
  Restricted cash                                                              --         500,000
  Commissions and other receivables                                        60,010          44,636
  Receivable from related parties                                         151,667              --
  Prepaid research                                                        246,683              --
  Other current assets                                                     16,743          50,097
  Assets of discontinued operations, current portion                           --       2,095,044
                                                                     ------------    ------------
                                                                          527,203       3,079,856

 Property and equipment, net                                              547,449         724,917
 Assets of discontinued operations                                             --       4,127,702
 Receivable from related parties                                           62,500              --
 Other assets                                                               3,300          48,302
                                                                     ------------    ------------
     Total assets                                                    $  1,140,452    $  7,980,777
                                                                     ============    ============

    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued liabilities                           $    411,910    $    533,652
  Accrued liabilities payable to related parties                               --       1,271,281
  Revolving credit facility                                                63,500       2,891,975
  Current portion of convertible debt, net                                478,073         967,125
  Notes payable                                                           300,000         300,000
  Notes payable - related parties                                         187,500         187,500
  Deferred revenue and prepaid subscriptions                              839,610         194,892
  Liabilities of discontinued operations                                       --       1,740,093
                                                                     ------------    ------------
                                                                        2,280,593       8,086,518
LONG-TERM LIABILITIES
  Convertible debt                                                      1,025,188              --
                                                                     ------------    ------------
     Total liabilities
                                                                        3,305,781       8,086,518

Minority interest in subsidiary                                           (92,196)          2,356

STOCKHOLDERS' EQUITY
  Preferred stock, $.0001 par value; 10,000,000 authorized
    shares; no shares outstanding                                              --              --
  Common stock; $.0001 par value, 80,000,000 authorized,
    34,557,052 issued; 22,790,336 outstanding at
    September 30, 2003 and 28,718,302 issued;
    28,300,436 outstanding at December 31, 2002                             2,321           2,872
  Additional paid-in capital                                           28,881,565      29,630,220
  Treasury stock, 417,866 common shares at cost at
    September 30, 2003 and December 31, 2002, respectively                (58,501)        (58,501)
  Accumulated deficit                                                 (30,898,518)    (29,682,688)
                                                                     ------------    ------------

     Total stockholders' deficit                                       (2,073,133)       (108,097)
                                                                     ------------    ------------

     Total liabilities and stockholders' equity                      $  1,140,452    $  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 Nine Months
                                                             Ended September 30,             Ended September 30,
                                                        ----------------------------    ----------------------------
                                                            2003            2002             2003            2002
                                                        ------------    ------------    ------------    ------------

<S>                                                     <C>             <C>             <C>             <C>
Revenues
  Data service revenues                                 $    561,738    $    270,378    $  1,394,249    $    766,505
  Consulting services                                         25,200              --         108,900    $         --
  Placement fees                                                  --          20,000              --         302,875
  Commissions                                                     --          16,855              --         646,618
  Interest and other                                               1           3,164           1,251          14,006
                                                        ------------    ------------    ------------    ------------
                                                             586,939         310,397       1,504,400       1,730,004
                                                        ------------    ------------    ------------    ------------

Expenses
  Compensation and benefits                                  293,901       1,125,551       1,068,262       3,090,336
  General and administrative                                 168,795         656,816         616,414       2,039,625
  Product research expenses                                  164,560          42,888         349,599         118,694
  Clearing and execution costs                                    --           1,513              --          24,197
  Depreciation and amortization                               67,246          72,909         209,502         237,070
  Commissions and finder's fees                                   --          14,679              --         264,018
  Impairment loss related to intangibles and goodwill             --              --              --         923,084
  Minority interest expense                                   34,113              --         109,909              --
                                                        ------------    ------------    ------------    ------------
                                                             728,615       1,914,356       2,353,686       6,697,024
                                                        ------------    ------------    ------------    ------------

Operating loss                                              (141,676)     (1,603,959)       (849,286)     (4,967,020)
  Interest expense                                            65,081         582,207         585,019       1,559,036
                                                        ------------    ------------    ------------    ------------
  Loss from continuing operations                           (206,757)     (2,186,166)     (1,434,305)     (6,526,056)

Discontinued operations
  Income from discontinued operations
    (including loss on transfer
    of assets of discontinued
    operations in the amount of
    $18,253 for the nine months ended
    September 30, 2003)                                           --         237,890         218,475         176,518
                                                        ------------    ------------    ------------    ------------

Net loss                                                $   (206,757)   $ (1,948,276)   $ (1,215,830)   $ (6,349,538)
                                                        ============    ============    ============    ============

Earnings (loss) per share - basic and diluted
  Loss per share - continuing operations                       (0.01)          (0.09)          (0.06)          (0.28)
  Earnings per share - discontinued operations                    --            0.01            0.01            0.01
                                                        ------------    ------------    ------------    ------------

    Total loss per share - basic and diluted            $      (0.01)   $      (0.08)   $      (0.05)   $      (0.27)
                                                        ============    ============    ============    ============

Weighted average number of shares                         23,152,438      25,842,194      23,377,489      23,900,748
                                                        ============    ============    ============    ============
</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 Nine Months Ended
                                                                            September 30,
                                                                      --------------------------
                                                                         2003            2002
                                                                      -----------    -----------
<S>                                                                   <C>            <C>
Cash flows from operating activities
  Loss from continuing operations                                     $(1,434,305)   $ 6,526,056)
  Adjustments to reconcile net loss from continuing
    operations to net cash provided by (used in)
    continuing operations operating activities:
      Depreciation and amortization                                       209,502        237,070
      Amortization of discounts on indebtedness                           417,189      1,023,461
      Impairment loss related to intangibles and goodwill                      --        923,084
      Stock options issued for services rendered                           16,000         21,875
   Net changes in assets and liabilities
    Increase in commissions and other receivables                         (15,374)       (71,845)
    Increase in prepaid research                                         (246,683)            --
    (Increase) decrease in other current assets                            33,354        (31,036)
    Decrease in other assets                                               45,002          1,501
    Increase (decrease) in accounts payable and accrued liabilities      (121,742)       480,276
    Increase in deferred revenue                                          644,718        310,394
    Minority interest in subsidiary                                       109,909             --
                                                                      -----------    -----------
   Net cash used in continuing operations operating activities           (342,430)    (3,631,276)

     Income from discontinued operations                                  218,475        176,518
     Changes in assets and liabilities of discontinued operations       2,231,847        652,080
                                                                      -----------    -----------

   Net cash provided by discontinued operations                         2,450,322        828,598
                                                                      -----------    -----------

   Net cash provided by (used in) operating activities                  2,107,892     (2,802,678)

Cash flows from investing activities
  Additions to property and equipment                                     (32,032)      (209,395)
  Decrease in restricted cash                                                  --      1,000,000
  Decrease in purchase price consideration due to related parties              --       (565,926)
                                                                      -----------    -----------

  Net cash (used in) provided by investing activities                     (32,032)       224,679

Cash flows from financing activities
  Borrowings under revolving credit facility                                   --      2,749,585
  Payments on revolving credit facility                                (2,328,475)            --
  Distributions to minority interests                                    (204,461)            --
  Net proceeds (payments) under notes payable                             118,947         17,500
  Proceeds from exercise  of common stock warrants                            150             --
                                                                      -----------    -----------
 Net cash (used in) provided by financing activities                   (2,413,839)     2,767,085
                                                                      -----------    -----------
 Net (decrease) increase in cash and cash equivalents                    (337,979)       189,086

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

Cash and cash equivalents, end of period                              $    52,100    $   465,787
                                                                      ===========    ===========

Supplemental disclosure of cash flow information
 Cash paid for interest                                               $   132,320    $   165,546
                                                                      ===========    ===========
 Cash paid for taxes                                                  $     2,400    $     3,200
                                                                      ===========    ===========
</TABLE>


Supplemental disclosure 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
                           September 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
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As more fully
discussed in the 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.

To address the going concern issue, management has re-focused its efforts and
the Company's resources toward the single objective of providing high-quality,
independent research to the institutional investment community. In conjunction
with these efforts, the Company has aggressively reduced staff and operational
expenses, and is actively pursuing additional equity and/or debt financing to
supplement cash flow from operations.

The Company and its management believe that the independent institutional
research market is a viable area in which the Company can compete, and
ultimately achieve profitability. However, the Company's ability to continue as
a going concern is dependent upon its ability to generate sufficient cash flow
to meet its obligations on a timely basis, and/or to succeed in its efforts to

                                        6
<PAGE>

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED


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

raise additional capital. Whereas management believes its anticipated cash flow
from operations could be adequate to fund operations through December 31, 2003,
there can be no assurances that the Company will not require additional
financing prior to or after such time, or that any additional financing will be
available to the Company on acceptable terms, or at all.

For the nine months ended September 30, 2003, the Company incurred a net loss
from continuing operations of $1,434,305, and as of September 30, 2003, the
Company's current liabilities exceeded its current assets by $1,753,390.
Although this represents an improvement relative to respective year to date
losses in the prior year and negative working capital balances at December 31,
2002, these factors among others indicate that the Company may be unable to
continue as a going concern for a reasonable period of time.

The accompanying consolidated financial statements do not include any
adjustments that might result in the event that the Company is unable to
continue operating as a going concern.


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 agent. The fees are recorded when the offering 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.

Consulting services revenue represents fees from consulting services performed
by DPBT, LLC, and computer programming services performed by PCS Research.
Consulting fees related to services performed by DPBT are based on
customer-determined points awarded at the end of each quarter, and are
recognized in the period in which the determination is made and communicated to
DPBT. Consulting fees related to computer programming services are recognized
during the period that such services are provided.


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.

                                        7
<PAGE>

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED


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
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 200,000 stock options to
purchase the Company's common stock in exchange for services rendered. Fifty
percent (50%) of the options vested at the date of the grant and the remaining
fifty percent (50%) 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 quarter ended September 30, 2003, the Company issued options to
employees to purchase 45,000 shares of its common stock, at exercise prices
ranging from $0.08 - $0.14, and options to purchase 112,968 shares were
forfeited and cancelled. All options granted during the period have a term of
ten years, vest over three years and were issued at an exercise prices equal to
the market value of the underlying stock at the date of grant. As of September
30, 2003, 2,024,531 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
2.87% to 3.18%, expected life of five years, and expected volatility of 129%.
For grants in fiscal 2002, the following assumptions were used: dividend yield
of zero percent, risk-free interest rates ranging from 2.94% 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 nine-months
ended September 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 Nine Months
                                  Ended September 30,             Ended September 30,
                             ----------------------------    ----------------------------
                                 2003            2002            2003            2002
                             ------------    ------------    ------------    ------------

<S>                          <C>             <C>             <C>             <C>
Net Loss
  As reported                $   (206,757)   $ (1,948,276)   $ (1,215,830)   $ (6,349,538)
  SFAS No. 123 effect            (553,904)       (525,204)       (554,137)       (542,713)
                             ------------    ------------    ------------    ------------

 Pro forma net loss          $   (760,661)   $ (2,473,480)   $ (1,769,967)   $ (6,892,251)

 Loss per share,
 basic and diluted
   As reported               $      (0.01)   $      (0.08)   $      (0.05)   $      (0.27)
   Pro forma                 $      (0.03)   $      (0.10)   $      (0.08)   $      (0.29)

Basic and diluted weighted
average common shares
outstanding                    23,152,438      25,842,194      23,377,489      23,900,748
</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 nine months ended
September 30, 2003 and 2002 are summarized below:

<TABLE>
<CAPTION>
                                             For the Three Months           For the Nine Months
                                              Ended September 30,            Ended September 30,
                                          ---------------------------   ----------------------------
                                            2003             2002           2003            2002
                                          --------       ------------   ------------    ------------
                                                 (Unaudited)                    (Unaudited)
<S>                                       <C>            <C>            <C>             <C>
Revenues
  Commission and other fees               $       --     $  4,140,291   $  1,358,848    $ 11,828,825

Expenses
  Independent research expense                    --        2,664,750        943,859       7,836,613
  Execution and clearing costs                    --          591,447        177,841       1,974,885
  Amortization of identifiable
    intangibles                                   --          539,575           --         1,618,725
  General and administrative expense              --          106,629            420         222,084
                                          ----------     ------------   ------------    ------------
    Total expenses                                --        3,902,401      1,122,120      11,652,307

                                          $       --     $    237,890   $    236,728    $    176,518
                                          ----------     ------------   ------------    ------------
    Loss on transfer of assets of
     discontinued operations                      --             --          (18,253)           --
                                          ----------     ------------   ------------    ------------

    Income from discontinued operations   $       --     $    237,890   $    218,475    $    176,518
                                          ==========     ============   ============    ============
</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 ($35,833 of which has been
     received and $151,667 of which is classified as current assets as of
     September 30, 2003), subject to certain conditions as defined in the
     agreement. In October 2003, the Company received an additional payment of
     $26,667 against the outstanding receivable balance due.

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

<TABLE>
<CAPTION>
                                                       (Unaudited)
                                                       September 30,    December 31,
                                                            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)
                                                   September         December
                                                   30, 2003          31, 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)
                                                  September          December
                                                  30, 2003           31, 2002
                                                 -----------        -----------

Computer equipment and software                  $ 1,301,702        $ 1,263,498
Furniture and fixtures                                37,797             37,797
Office equipment                                      76,248             81,590
                                                 -----------        -----------
                                                   1,415,747          1,382,885
Less accumulated depreciation                       (868,298)          (657,968)
                                                 -----------        -----------
                                                 $   547,449        $   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%. As of
September 30, 2003 the interest rate on the note was 8.75%.

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 September 30, 2003 the outstanding principal balance under the credit line
was $63,500.

The credit line is guaranteed by the United States Small Business
Administration, as well as by 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.

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 was paid in full as of April 30, 2003, and the credit
facility and related promissory note were 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 September 30, 2003, the restructured convertible debt principal totaled
$1,503,261 of which $478,073 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.

In October 2003, the debenture holder agreed to defer scheduled principal
payments originally due on October 28, 2003, November 28, 2003 and December 28,
2003, and to add the deferred principal payments to the amount due with the
final payment on December 28, 2005.


$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.

                                       16
<PAGE>

NOTE F - CONVERTIBLE DEBT - CONTINUED


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

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 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 2,024,531, 663,905, 675,000 and 7,516,305,
respectively, at September 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 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 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 matured on May 14, 2003 and October 31,
2003, respectively. During 2003, the maturity dates for all three notes were
extended to January 1, 2004. At September 30, 2003, the aggregate outstanding
balance of these notes was $187,500. During the nine months ended September 30,
2003 the Company recorded interest expense in connection with these notes
totaling $16,875, and as of September 30, 2003 total interest payable in
connection with these loans was $20,635.

                                       17
<PAGE>

NOTE J - RELATED PARTY TRANSACTIONS - CONTINUED

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

During the nine months ended September 30, 2003, the Company recorded $137,525
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 September 30, 2003, defendant Witz and seven 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 1,953,750 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 addition, default judgments were obtained against four additional defendants
in the case in July 2003 that resulted in the cancellation of 755,000 shares of
common stock and 3,971,250 performance warrants during the third quarter of
2003.


NOTE L - SUBSEQUENT EVENTS

The Company and the minority member in their joint venture, DPBT, LLC, entered
into an agreement, effective October 30, 2003, pursuant to which the joint
venture was terminated. In accordance with the terms of the agreement, the
product developed through the joint venture, BiotechTracker, may be marketed by
the Company through December 31, 2003, and all subscriptions in effect as of
that date will be continued through the earlier of the end of the subscription
term, or July 31, 2004.


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 September 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.

                                       18
<PAGE>

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.


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. ("PCS Research", "we", or the
"Company") and through our wholly owned subsidiary, 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.

                                       19
<PAGE>

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 will be recognized in future periods.

         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 offering
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.

         Consulting services revenue represents fees from consulting services
performed by DPBT, LLC, and computer programming services performed by PCS
Research. Consulting fees related to services performed by DPBT are based on
customer-determined points awarded at the end of each quarter, and are
recognized in the period in which the determination is made and communicated to
DPBT. Consulting fees related to computer programming services are recognized
during the period that such services are provided.


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 nine months ended September
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.

                                       20
<PAGE>

Nine months ended September 30, 2003 compared to the nine months ended September
30, 2002.

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

Revenues
--------

         Total revenues for the nine months ended September 30, 2003 decreased
by 13% to $1,504,400 compared to $1,730,004 for the same period in 2002. The
decrease in total revenue is primarily due to a decrease in commission revenue
of $646,618 and a decrease in placement fee revenue of $302,875 during 2003. For
the 2003 period, there were no commissions or 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.

         Partially offsetting these decreases in the first nine months of 2003
was an increase in data services revenue, which increased by 82% to $1,394,249,
compared to $766,505 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. In addition, revenues earned for consulting services in 2003
increased by $108,900 as a result of $99,000 in consulting fees generated by
DPBT, LLC, and $9,900 for computer programming services generated by PCS
Research for which there was no comparable activity in the 2002 period.


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

         Total operating expenses for the nine months ended September 30, 2003
decreased by 65% to $2,353,686 compared to $6,697,024 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 65% in 2003 to $1,068,262
compared to $3,090,336 in 2002. This decrease is due primarily to the
discontinuation of compensation (salaries, bonuses, etc.) totaling $1,529,166 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 were reductions in staff personnel
resulting in a net cost savings during the nine months ended September 30, 2003
of $504,566, and a decrease in employer payroll taxes of $52,512 resulting from
the reduced compensation in 2003. Partially offsetting these decreases was an
increase in commission expense of $65,606 during 2003.


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

         Product research expenses represent costs associated with generating
data services revenues. During the nine months ended September 30, 2003 such
costs increased by 195% to $349,599 in 2003 compared to $118,694 in 2002 as a
result of higher data services revenues in 2003.


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

         Clearing and execution costs incurred in the first nine months of 2002
were $24,197 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.

                                       21
<PAGE>

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

         Depreciation and amortization expense decreased by 12% to $209,502 in
2003 from $237,070 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 nine months ended September 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 nine months ended September 30, 2002, the Company recorded
expenses related to commissions and finders' fees totaling $264,018. 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.


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

         General and administrative expenses decreased by 70% to $616,414 in the
first nine months of 2003 compared to $2,039,625 in 2002. This decrease is
primarily due to the discontinuation of a consulting agreement with a former
owner of PCS Securities resulting in savings of $862,500.

         Also contributing to the decrease in general and administrative
expenses in 2003 were decreases in legal fees of $186,173, accounting fees of
$155,692, rent expenses related to office space, furniture and equipment of
$46,891, travel and entertainment expenses of $46,898, public/investor relations
expenses of $54,082 and consulting expenses of $25,928.


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

         Minority interest was $109,909 during the first nine 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
----------------

         Total interest expense for the nine months ended September 30, 2003
decreased by 62% to $585,019 compared to $1,559,036 in 2002. The 2003 interest
expense 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, and $167,830 of net interest charges related to notes payable, outstanding
credit line balances and finance charges. Included in the 2002 amount were
non-cash interest charges $1,023,461 related to the amortization of discounts
recorded in connection with the Company's convertible debt entered into during
the fourth quarter of 2001, $240,000 related to liquidated damages accrued in
connection with the Company's failure to comply with registration requirement
provisions contained in the

                                       22
<PAGE>

convertible debt agreements and net interest charges of $295,574 related to
notes payable, outstanding credit line balances and finance charges. The
decrease in 2003 interest expense is primarily due to decreases of $606,273 from
debt discount amortization and $240,000 from liquidated damages. Also
contributing to the decrease in 2003 were a decrease of $102,729 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 78% to $1,434,305 in the
nine months ended September 30, 2003 from $6,526,056 in the same period a year
ago.


Income from Discontinued Operations
-----------------------------------

         Income from discontinued operations represents the net revenue and
expense activity from PCS Securities and includes the following:

                                                     Nine Months Ended June 30,
                                                    ----------------------------
                                                        2003            2002
                                                    -----------      -----------

Revenues
  Commission and other fees                         $ 1,358,848      $11,828,825

Expenses
  Independent research expense                          943,859        7,836,613
  Execution and clearing costs                          177,841        1,974,885
  Amortization of identifiable intangibles                 --          1,618,725
  General and administrative expense                        420          222,084
                                                    -----------      -----------
    Total expenses                                    1,122,120       11,652,307
                                                    -----------      -----------

                                                        236,728          176,518

    Loss on transfer of assets of
      discontinued operations                           (18,253)            --
                                                    -----------      -----------

    Income from discontinued operations             $   218,475      $   176,518
                                                    ===========      ===========


Commission and Other Fees - Discontinued Operations
---------------------------------------------------

         Commission and other fees decreased by 89% to $1,358,848 in 2003
compared to $11,828,825 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 nine months ended September 30, 2003 were limited to
the recognition of deferred revenue associated with research subscriptions sold
in 2002.


Independent Research Expense - Discontinued Operations
------------------------------------------------------

         Independent research expense decreased by 88% to $943,859 in 2003
compared to $7,836,612 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, and related independent research expense.


Execution and Clearing Costs - Discontinued Operations
------------------------------------------------------

         Execution and clearing costs decreased by 91% to $177,841 in 2003
compared to $1,974,885 in 2002. This decrease is primarily due to reduced
commission levels resulting from the wind down and closing of the PCS Securities
business.

                                       23
<PAGE>

Amortization of Identifiable Intangibles - Discontinued Operations
------------------------------------------------------------------

         During the first nine months of 2002, $1,618,725 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 - Discontinued Operations
----------------------------------------------------

         General and administrative expenses decreased by 100% to $420 from
$222,085 in 2002 as a result of the closing of PCS Securities.


Net Income - Discontinued Operations
------------------------------------

         As a result of the revenue and expense items mentioned above, the
Company's net income from discontinued operations increased 24% to $218,475 in
the nine months ended September 30, 2003 from $176,518 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.

         At September 30, 2003, the Company's current liabilities exceeded its
current assets by $1,753,390, and it had $52,100 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 remainder of its 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 by $4,910,570 to
$2,107,892 during the nine months ended September 30, 2003 compared to cash used
in operating activities of $2,802,678 during the nine months ended September 30,
2002. This increase was comprised of $3,288,846 from continuing operations and
$1,621,724 from discontinued operations.

         The increase in cash provided from continuing operations in 2003 is
primarily attributable to a decrease in the net loss from continuing operations
during the year.

                                       24
<PAGE>

After adjusting for non cash expenses such as depreciation, amortization and
impairment losses, the net loss from continuing operations decreased by
$3,528,952 during the 2003 period. Partially offsetting this was a decrease in
cash provided by operating activities as a result of changes in asset and
liability accounts during 2003 of $240,106.

         The increase in cash provided from discontinued operations in 2003
included $1,579,767 resulting from changes in asset and liability accounts of
the discontinued operations and $41,957 resulting from an increase in net income
from discontinued operations during the 2003 period.


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

         Cash used in investing activities increased to $32,032 during the nine
months ended September 30, 2003 compared to cash provided by investing
activities of $224,679 during the nine months ended September 30, 2002. The 2003
cash used relates to additions of property and equipment of $32,032 during the
period, which decreased by $177,363, when compared to additions of property and
equipment of $209,395 during 2002. In addition, the net cash provided by
investing activities in 2002 includes $565,926 paid to related parties as the
final purchase price consideration in connection with the PCS merger and
$1,000,000 of cash generated through the release of previously restricted cash
collateral.


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

         Cash used in financing activities increased to $2,413,839 during the
nine months ended September 30, 2003 compared to cash provided by financing
activities of $2,767,085 during the nine months ended September 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. Cash used in the 2003 period to pay off the Bear Stearns credit
facility totaled $2,891,975. Partially offsetting this was a transfer of the
$500,000 restricted cash balance that had been held by Bear Stearns as cash
collateral. Conversely, during the 2002 period, the credit line balance was
increased by $2,749,585. Also contributing to the change in cash from financing
activities during 2003 were an increase in distributions to minority owners of
DPBT, LLC of $204,461, borrowings under the Bank of America credit facility of
$63,500 and net increases in notes payable of $118,947.


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%. As of September 30, 2003 the interest rate on the note was 8.75%.

         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 September 30, 2003 the outstanding principal balance under the
credit line was $63,500.

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

                                       25
<PAGE>

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 $1,000,000 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 September 30, 2003, the restructured convertible debt
principal totaled $1,503,261 of which $478,073 is classified as the current
portion.

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

                                       26
<PAGE>

$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. As of September 30, 2003
the outstanding principal balance was $1,348,261, of which $478,073 was a
current liability and $870,188 was a long-term liability.

         In October 2003, the debenture holder agreed to defer scheduled
principal payments originally due on October 28, 2003, November 28, 2003 and
December 28, 2003, and to add the deferred principal payments to the amount due
with the final payment on December 28, 2005.


$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 September 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
nine months ended September 30, 2003 the Company recorded interest expense in
connection with this note totaling $33,750, and as of September 30, 2003 total
interest payable in connection with these loans was $41,375.

                                       27
<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 matured on
May 14, 2003, October 31, 2003 and July 1, 2003 respectively. During 2003, the
maturity dates for all three notes were extended to January 1, 2004. During the
nine months ended September 30, 2003 the Company recorded interest expense in
connection with these notes totaling $16,875, and as of September 30, 2003 total
interest payable in connection with these loans was $20,635.


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:

                                       28
<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 September 30, 2003, defendant Witz and seven
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 1,953,750 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 resulted in the cancellation of 755,000 shares of
common stock and 3,971,250 performance warrants during the third quarter of
2003.


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

               Current report on Form 8-k filed with the Commission on September
               12, 2003 with respect to Items 4 and 7.

                                       29
<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: November 14, 2003


                                       30