8-K/A 1 form8k_a.txt FORM 8K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) December 21, 2001 ----------------- DIRECTPLACEMENT, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 0-25449 87-0401453 -------------------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) Formation) 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 -------------- (Former name or former address, if changes since last report) 1 Item 5. Other Events As previously disclosed, on December 21, 2001 (the "Effective Date"), the Company acquired all of the outstanding stock of PCS Securities, Inc., a Washington corporation, in exchange for 10,500,000 shares of the Company's common stock. Based upon the closing market price of $2.15 per share on the Effective Date, the aggregate purchase price paid by the Company was $22,575,000. Item 7. Financial Statements and Exhibits This filing amends the Company's current report on Form 8-K dated December 21, 2001 regarding the Company's acquisition of PCS Securities, Inc. and includes required financial information as follows: (a) Financial Statements of PCS Securities, Inc. (b) Pro Forma Financial Information. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly authorized and caused the undersigned to sign this Report on the Registrant's behalf. DIRECTPLACEMENT, INC. By: /s/ BRIAN M. OVERSTREET ---------------------------------------- Name: Brian M. Overstreet Title: President and Chief Executive Officer Dated: January 31, 2002 2 PCS SECURITIES, INC. FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 TABLE OF CONTENTS ----------------- Report of Independent Certified Public Accountants.............................4 FINANCIAL STATEMENTS: Balance Sheets.................................................................5 Statements of Operations and Retained Earnings.................................6 Statements of Cash Flows.......................................................7 Notes to Financial Statements..................................................8 3 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- Board of Directors PCS Securities, Inc. We have audited the accompanying balance sheets of PCS Securities, Inc. (a Washington corporation) as of December 31, 2000 and 1999, and the related statements of operations and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PCS Securities, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. \s\ Greenway & Company, P.S. Greenway & Company, P.S. Certified Public Accountants January 25, 2002 4 PCS Securities, Inc. BALANCE SHEETS December 31, 2000 1999 ---------- ---------- ASSETS Cash and cash equivalents $ 21,350 $ 503,532 Commissions receivable 687,391 433,578 Deferred research/services cost 2,379,257 1,742,218 Prepaid clearing charges 200,988 349,372 ---------- ---------- Total assets $3,288,986 $3,028,700 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accrued research services $1,116,599 $1,940,938 STOCKHOLDERS' EQUITY Common stock; no par value; 1,000 shares authorized; 100 shares issued and outstanding 122,000 122,000 Retained earnings 2,050,387 965,762 ---------- ---------- Total stockholders' equity 2,172,387 1,087,762 ---------- ---------- Total liabilities and stockholders' equity $3,288,986 $3,028,700 ========== ========== See accompanying notes to financial statements. 5 PCS Securities, Inc. STATEMENTS OF OPERATIONS AND RETAINED EARNINGS Year ended December 31, 2000 1999 ------------ ------------ Commissions and other income $ 15,219,031 $ 13,598,284 ------------ ------------ Expenses Independent research expenses 10,153,502 8,945,577 Clearing and execution costs 2,357,854 2,039,502 General and administrative expenses 416,702 527,461 ------------ ------------ Total operating expenses 12,928,058 11,512,540 ------------ ------------ NET INCOME 2,290,973 2,085,744 ------------ ------------ Retained earnings at January 1 965,762 1,660,378 Less distributions to stockholders (1,206,348) (2,780,360) ------------ ------------ Retained earnings at December 31 $ 2,050,387 $ 965,762 ============ ============ See accompanying notes to financial statements. 6

See accompanying notes to financial statements. 7 PCS Securities, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2000 and 1999 NOTE A - SUMMARY OF SIGNIFICANT POLICIES Company Business ---------------- PCS securities, Inc. (the "Company") was formed in March 1989 in the state of Washington and is a broker/dealer registered with the Securities and Exchange Commission, and is a member of the National Association of Securities Dealers, Inc. The Company is an introducing broker and, therefore, clears securities transactions on a fully-disclosed basis with an independent clearing organization. The Company provides independent research and directed brokerage arrangements for investment advisors, money managers and plan sponsors (Money Managers) within the safe harbor of Section 28(e) of the Securities and Exchange Act of 1934, as amended. Revenue Recognition ------------------- Independent research and directed brokerage arrangements are accounted for on an accrual basis in accordance with accounting principles generally accepted in the United States of America. Commissions from direct brokerage arrangements are recorded as revenue when earned. Deferred research/services cost and accrued research services relating to these arrangements are accounted for on a customer-by-customer basis and are separately identified in the balance sheets. Securities transactions are recorded on a settlement date basis, generally the third business day following the transactions date, which is not materially different than the trade date. Cash Equivalents ---------------- All highly liquid debt instruments purchased with an original maturity of three months or less when purchased are considered to be cash equivalents. Income Taxes ------------ The shareholders of the Company have elected to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code. Consequently, taxable income or loss of the Company is included in the individual returns of the stockholders and the accompanying financial statements do not reflect a provision for federal income taxes. 8 PCS Securities, Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE A - SUMMARY OF SIGNIFICANT POLICIES Use of Estimate --------------- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses reported for the periods presented. Actual results can vary from amounts presently estimated. NOTE B - CUSTOMER PROTECTION - RESERVES AND CUSTODY OF SECURITIES The Company does not hold funds or securities for Customers; accordingly it is exempt from the provisions of Rule 15c3-3 under the Securities and Exchange Act of 1934, pursuant to Paragraph (k)(2)(ii) of such rule. Rule 15c3-3 provides for the maintenance by broker dealers of basic reserves with respect to customers' cash and securities and enumerates standards relating to the physical possession of customer securities. The Company carries no customer regulated commodities futures accounts; therefore, the computation of segregated funds pursuant to Section 4d(2) of the Commodity Exchange Act is not applicable. NOTE C - NET CAPITAL REQUIREMENT The Company is subject to Securities and Exchange Commission's Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital (as defined), and requires that the ratio of aggregate indebtedness (as defined) to net capital may not exceed 15 to 1. The Uniform Net Capital Rule also provides that equity capital may not be withdrawn or cash dividends paid if the resulting ratio of aggregate indebtedness to net capital would exceed 10 to 1. At December 31, 2000 and 1999, the Company had defined net capital of $708,741 and $937,110, which was $703,741 and $932,110 in excess of its required minimum net capital of $5,000. NOTE D - CONTINGENCIES The Company conducts a majority of its business under agreements for securities clearance services with one securities company. If this agreement were terminated, the Company would have to negotiate an alternative securities clearing agreement. NOTE E - SUBSEQUENT EVENT - SALE OF BUSINESS On December 21, 2001, the Company's stockholders sold all of their stock in the Company to DirectPlacement, Inc. As of result of that sale, the Company's "S" corporation status terminated as of that date. 9 DIRECTPLACEMENT, INC. CONDENSED PRO FORMA FINANCIAL INFORMATION DirectPlacement, Inc. (the "Company") was incorporated in 1999. As of May 15, 2001, the Company, PPI Capital Group, Inc., a Utah corporation ("PPI"), and DP Merger Corp., a Delaware corporation ("MergerSub"), entered into an Agreement and Plan of Merger, pursuant to which on June 11, 2001, MergerSub was merged with and into the Company and the Company became a wholly owned subsidiary of PPI. On November 21, 2001, a majority of the shareholders of PPI approved, among other things, the change of PPI's state of incorporation from the State of Utah to the State of Delaware. As a result, PPI merged with and into the Company, its wholly owned Delaware subsidiary. As of September 30, 2001, the Company's business activities consisted of producing and marketing proprietary data-oriented institutional research products related to the PIPE market (Private Investment in Public Equities). On October 26, 2001, pursuant to an asset purchase agreement, DPI acquired certain assets of PCH Securities, Inc. ("PCH") owned, used or held, including among other things, the equipment and customer list of PCH. As payment for the assets, DPI issued 417,866 shares of DPI stock with an aggregate fair market value of $1,000,000 (the "PCH Asset Acquisition"). Prior to the closing date, PCH was a financial services firm specializing in agency execution trading for a select group of institutional investors. On December 21, 2001, in accordance with an Agreement and Plan of Merger with PCS Securities, Inc. (PCS), a subsidiary of the Company merged with and into PCS (the "PCS Merger"). To effect the merger, the Company issued 10,500,000 shares of its common stock with an aggregate fair market value of $22,575,000 in exchange for all of the outstanding stock of PCS. Prior to the closing date, PCS was a registered broker dealer that developed and provided research and direct brokerage arrangements to over 500 financial institutions. After the consummation of the transactions referred to above, the Company's business activities will consist of producing and marketing proprietary data-oriented institutional research products related to the PIPE market, agency execution trading for a select group of institutional investors, and providing research and direct brokerage arrangements to financial institutions. The condensed pro forma consolidated balance sheet at September 30, 2001 reflects the historical balance sheet of the Company as filed in its quarterly report on Form 10-Q as if each of the following transactions occurred and were completed on September 30, 2001: (i) the PCH Asset Acquisition and (ii) the PCS Merger and related transactions in connection therewith. The condensed pro forma consolidated statements of operations for the year ended December 31, 2000 and the nine months ended September 30, 2001 reflect the historical operations of the Company as filed with the Securities and Exchange Commission adjusted for the effects of the PCH Asset Acquisition and the PCS Merger as of the beginning of the periods presented. The pro forma financial information should be read in conjunction with the Company's annual and quarterly reports filed by the Company with the Securities and Exchange Commission and is presented for informational purposes. The pro forma financial information is not necessarily indicative of the financial position or results of operations of the Company that would have occurred had the PCH Asset Acquisition and the PCS Merger been completed on the dates indicated nor does it purport to be indicative of future results. 10

See accompanying notes to condensed consolidated pro forma financial statements. 11

See accompanying notes to condensed consolidated pro forma financial statements. 12

See accompanying notes to condensed consolidated pro forma financial statements. 13 DirectPlacement, Inc. Notes to Condensed Pro Forma Consolidated Financial Statements (A) Reflects the acquisition of certain assets of PCH in exchange for the issuance of 417,866 shares of the Company's common stock (par value $418) at an aggregate value of $1,000,000. The fair market value of the Company's shares based on the quoted market price on the closing date of the PCH Asset Acquisition was $2.393 per share. Included in the assets acquired are identified intangibles at their fair values consisting of the customer list of PCH and an employment agreement. The excess of the purchase price has been allocated to goodwill. (B) Reflects the acquisition of all of the outstanding stock of PCS in exchange for 10,500,000 shares of the Company's common stock (par value $10,500) at an aggregate fair market value of $22,575,000. The fair market value of the Company's shares based on the quoted market price on the date of the merger was $2.15 per share. Current assets and current liabilities of PCS have been included at historical cost which approximate fair value. Identified intangible assets are presented at estimated fair value and consist of a guaranteed contractual arrangement with a research provider, PCS's customer list and its brand name. The excess of the consideration paid over the identified assets and liabilities has been allocated to goodwill. (C) Actual revenues and expenses associated with the assets of PCH for the year ended December 31, 2000 and the nine months ended September 30, 2001. (D) Amortization of identified intangible assets acquired from PCH calculated on a straight line basis over the estimated useful lives ranging from 3 to 10 years. (E) Issuance of 417,866 shares of the Company's common stock as payment for the PCH Asset Acquisition. (F) Actual revenues and expenses of PCS for the year ended December 31, 2000 and the nine months ended September 30, 2001. (G) Amortization of identified intangible assets acquired from PCS calculated on a straight line basis over the estimated useful lives ranging from 5 to 10 years. (H) Issuance of 10,500,000 shares of the Company's common stock in connection with the PCS merger. (I) Excludes $450,000 of non-recurring trading expenditures of PCH during the year ended December 31, 2000. (J) Accrued liabilities include estimated costs and expenses directly related to PCS merger and consist of legal, accounting, bonus compensation and other related costs. (K) Excludes effects of termination of "S" corporation status and historical distributions to PCS owners. 14

PPI CAPITAL GROUP INC 8-K/A