FORM 10 QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUATERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 14(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission File Number 0-17114_________________________________________
DEFAULT PROOF CREDIT CARD SYSTEM, INC._____________________
(Exact name of small business issuer as specified in its charter)
__________Florida______________ ________59-2686523_______________
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation) Number)
4520 Sunset Drive, Miami, Florida____________ 33143____________________
(Address of principal executive offices) (Zip Code)
___________________________(305) 856-4711______________________________
Registrant's telephone number, including area code
_______________________________________________________________________
(Former name, former address and fiscal year, if changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements of the past 90 days.
Yes X No _
The number of shares outstanding of the registrant common stock is 12,393,510
(as of June 30, 1998).
Transitional Small Business Disclosure Format
Yes X No _
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX
Page
PART 1 - FINANCIAL STATEMENTS
ITEM 1.
Balance Sheets
As of June 30, 1998 (unaudited) and
December 31, 1997.................................................... 4
Statements of Operations (unaudited)
Cumulative from August 14, 1985
(inception) to June, 1998 and for the three and six months ended
June 30, 1998 and 1997................................................ 5
Statements of Stockholders' Equity (Deficiency in Assets)(unaudited)
For the periods from January 1, 1998 to
June 30, 1998......................................................... 6
Statements of Cash Flows (unaudited) cumulative from August 14, 1985
(inception) to June 30, 1998 and for the three and six months ended
June 30, 1998 and 1997................................................ 8
ITEM 2.
Management's Discussion and Analysis or Plan of Operations.............. 10
PART II - Other Information
Other Information....................................................... 11
Signatures.............................................................. 12
Accountant's Report
We have compiled the accompanying balance sheet of Default Proof
Credit Card System, Inc. as of June 30, 1998, and the related
statements of income, retained earnings, and cash flows for the years
then ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We
have not audited or reviewed the accompanying financial statements
and accordingly, do not express an opinion or any other form of
assurance on them.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles. If the omitted
disclosures were included in the financial statements, they might
influence the user's conclusions about the company's financial
position, results of operations, and cash flows. Accordingly, these
financial statements are not designed for those who are not informed
about such matters.
Eduardo Garcia & Associates
August 12, 199
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
June 30, 1998
December 31, 1997
(Unaudited)
(Audited)
ASSETS
Capitalized Patent Cost
$3,945
$3,945
Total Assets
3,945
3,945
LIABILITIES AND DEFICIENCY IN ASSETS
Current Liabilities
Accrued Expenses
25,611
26,711
Due to Directors
42,917
39,390
Total Current Liabilities
68,528
66,101
Deficiency in Assets
Common Stock, $.001 par value;
25,000,000 authorized shares;
12,393,510 and 11,643,510
shares issued and outstanding
at June 30, 1998 and
December 31, 1997, respectively
12,394
11,644
Additional Paid-In Capital
3,992,710
3,903,460
Deficit accumulated during
the development stage
(4,069,687)
(3,977,260)
Total Deficiency in Assets
(64,583)
(62,156)
Total Liabilities and
Deficiency in Assets
$3,945
$3,945
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
CUMULATIVE
SIX MONTHS
THREE MONTHS
AUGUST 14, 1985
ENDED JUNE 30,
ENDED JUNE 30,
(INCEPTION) TO
1998
1997
1998
1997
JUNE 30, 1998
OPERATING EXPENSES
Depreciation &
$0
$100
$0
$50
$98,707
Amortization
Expired Public Offering
Cost
0
0
0
0
179,211
General & Administrative
92,427
4,307
23,533
2,950
3,037,402
Marketing
0
0
0
0
393,358
Officer Salary
0
0
0
0
986,556
Total Expenses
92,427
4,407
23,533
3,000
4,695,234
OTHER INCOME (EXPENSE)
Cancellation of Debt
0
0
0
0
423,000
Litigation Settlements
0
0
0
0
(90,000)
Interest & Other Income
0
0
0
0
422,720
Loss on Marketable
0
Securities
0
0
0
0
(96,529)
Loss on Sale of Equipment
0
0
0
0
(34,144)
Total other income
(expense)
0
0
0
0
625,047
NET GAIN (LOSS)
($92,427)
($4,407)
($23,533)
($3,000)
($4,070,187)
NET GAIN (LOSS) PER
COMMON SHARE
(0.008)
(0.000)
(0.002)
(0.000)
(0.501)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
12,224,066
11,277,188
12,344,621
11,297,410
8,126,070
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
(UNAUDITED)
Deficit
Accumulated
Common
Stock
Additional
During the
# of
shares
par
Paid-In
Development
issued
value
Capital
Stage
Total
BALANCE - DECEMBER 31, 1997
11,643,510
$11,644
$3,903,460
($3,977,260
)
($62,156)
January 22, 1998, to a
Financial Public Relations
Company for Professional
Services Rendered (X)
600,000
600
65,400
0
66,000
Net Loss
0
0
0
(68,894)
(68,894)
BALANCE - MARCH 31, 1998
12,243,510
$12,244
$3,968,860
($4,046,154
)
($65,050)
April 13, 1998
for Professional Services
Rendered (X)
100,000
100
14,900
0
15,000
June 4,1998
for Professional Services
Rendered (X)
50,000
50
8,950
0
9,000
Net Loss
0
0
0
(23,533)
(23,533)
BALANCE - JUNE 30, 1998
12,393,510
$12,394
$3,992,710
($4,069,687
)
($64,583)
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDER'S EQUITY
(DEFICIENCY IN ASSETS)
(UNAUDITED)
JUNE 30, 1998
(X) Non-cash consideration received consisted of services related to
communications relating to investor relations. The shares of stock
issued for non-cash services were recorded at the fair market value of
the shares at the date of service.
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(UNAUDITED)
Cumulative
SIX MONTHS
August 14, 1985
ENDED JUNE 30,
(Inception) to
1998
1997
June 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)
($92,427)
($4,407)
($4,070,187)
Adjustments to Reconcile
Net (Loss) to Net Cash
Used in Operating Activities:
Depreciation & Amortization
0
100
97,751
Loss on Marketable Securities
0
0
130,741
Expired Public Offering Costs
0
0
110,000
Cancellation of Stockholder
0
Note Receivable
0
0
55,490
Stock Issued in lieu of Cash
0
for Professional Services
90,000
0
223,960
Stock Issued in lieu of Cash
0
for Waived Salaries
0
0
294,000
Loss on Sale of Equipment
0
0
34,144
Increase in Other Assets
0
0
(25,480)
Increase (Decrease) in Accrued Expenses
(1,100)
800
25,734
Total adjustments
88,900
900
946,340
Net Cash Used By
Operating Activities
(3,527)
(3,507)
(3,123,847)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of
Marketable Securities
0
0
(130,741)
Purchases of
Property & Equipment
0
0
(136,980)
Patent License Expenditures
0
0
(201,864)
Proceeds from
0
Sale of Equipment
0
0
22,994
Net Cash Used By
Investing Activities
0
0
(446,591)
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(UNAUDITED)
Cumulative
SIX MONTHS
August 14, 1985
ENDED JUNE 30,
(Inception) to
1998
1997
June 30, 1998
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Stock
-Private Offerings
0
0
108,547
Proceeds from Issuance of Stock
-Public Offerings
0
0
3,150,163
Proceeds from Issuance of Stock
0
-Exercise of Warrants
0
0
240,358
Proceeds from
0
Capital Contributions
0
78,076
Advances (to) from shareholder
3,527
3,507
(6,706)
Net Cash Provided By
Financing Activities
3,527
3,507
3,570,438
NET CHANGE IN CASH AND CASH EQUIVALENTS
0
0
0
CASH-BEGINNING
0
0
0
CASH-ENDING
$0
$0
$0
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Default Proof Credit Card System, Inc. (the Company) was incorporated on
August 14, 1985 under the laws of the State of Florida. For the period from
August 14, 1985 (inception) to December 31, 1985, the Company was promoting
and marketing the Resource System ( a Registered Servicemark). In 1997, the
Company filed for a new patent. The patent pending, as well as the original
Resource System, has generated interest and the Company is now engaged in
discussions with several financial institutions for licensing or joint venture
of this product.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company suffered losses prior to
commencement of operations and has a working capital deficiency. Management
intends to actively market the Resource System and a new (patent pending) Line
of Credit system. The Company is now engaged in discussions with several
financial institutions for its development. In the absence of achieving
profitable operations, or obtaining debt or equity financing, the Company may
not have sufficient funds to continue operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(Registrant)
DATE: August 12, 1998 By: _______Vincent Cuervo__________
Vincent Cuervo, President and
Chief Executive Officer
DATE: August 12, 1998 By: _______Pedro Llaguno___________
Pedro Llaguno, Secretary
