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 March 31, 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
12,243,510 (as of March 31, 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 March 31, 1998 (unaudited) and
December 31,
1997........................................
..... 3
Statements of Operations (unaudited)
Cumulative from August 14, 1985
(inception) to March 31, 1998 and for the three months ended
March 31, 1998 and
1997........................................
4
Statements of Stockholders' Equity (Deficiency in Assets)(unaudited)
For the periods from August 14, 1985 (inception) to
March 31,
1998........................................
......... 5
Statements of Cash Flows (unaudited) cumulative from August 14, 1985
(inception) to March 31, 1998 and for the three months ended
March 31, 1998 and
1997........................................
7
ITEM 2.
Management's Discussion and Analysis or Plan of Operations....... 9
PART II - Other Information
Other
Information......................................
.......... 10
Signatures......................................
................. 11
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
March 31, 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
27,963
26,711
Due to Directors
41,032
39,390
Total Current Liabilities
68,995
66,101
Deficiency in Assets
Common Stock, $.001 par value; 25,000,000
authorized shares; 12,243,510 and
11,643,410 shares issued and outstanding
at March 31, 1998 and December 31, 1997,
respectively
12,244
11,644
Additional Paid-In Capital
3,968,860
3,903,460
Deficit accumulated during the
development stage
(4,046,154)
(3,977,260)
Total Deficiency in Assets
(65,050)
(62,156)
Total Liabilities and Deficiency in Assets
$3,945
$3,945
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
CUMULATIVE
THREE MONTHS
THREE MONTHS
August 14, 1985
ENDED
ENDED
(INCEPTION) TO
March 31, 1998
March 31, 1997
March 31, 1998
(UNAUDITED)
(UNAUDITED)
(UNAUDITED)
OPERATING EXPENSES
Depreciation & Amortization
$0
$50
$98,707
Expired Public Offering Cost
0
0
179,211
General & Administrative
68,894
2,257
3,013,369
Marketing
0
0
393,358
Officer Salary
0
0
986,556
Total Expenses
68,894
2,307
4,671,201
OTHER INCOME (EXPENSE)
Cancellation of Debt
0
0
423,000
Litigation Settlements
0
0
(90,000)
Interest & Other Income
0
0
422,720
Loss on Marketable Securities
0
0
(96,529)
Loss on Sale of Equipment
0
0
(34,144)
Total other income (expense)
0
0
625,047
NET GAIN (LOSS)
($68,894)
($2,307)
($4,046,154)
NET GAIN (LOSS) PER COMMON SHARE
(0.006)
0.062
(0.482)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
12,096,743
11,297,410
8,397,610
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS 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 (A, 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)
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDER'S EQUITY
(DEFICIENCY IN ASSETS)
(UNAUDITED)
MARCH 31, 1998
(A) The shares are subject to restrictions on transfers imposed by
Rule 144 of the Securities Act of 1993, as amended.
(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)
STATEMENTS OF CASH FLOWS
Cumulative
Three
Three
August 14,
1985
Months
Ended
Months Ended
(Inception) to
March 31,
1998
March 31,
1997
March 31, 1998
(Unaudited)
(Unaudited)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)
($68,894)
($2,307)
($4,052,154)
Adjustments to Reconcile
Net (Loss) to Net Cash
Used in Operating Activities:
Depreciation & Amortization
0
50
97,751
Loss on Marketable Securities
0
0
130,741
Expired Public Offering Costs
0
0
110,000
Cancellation of Stockholder
Note Receivable
0
0
55,490
Stock Issued in lieu of Cash
for Professional Services
66,000
0
205,960
Stock Issued in lieu of Cash
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
1,252
400
27,586
Total adjustments
67,252
450
930,192
Net Cash Used By
Operating Activities
(1,642)
(1,857)
(3,121,962)
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
(209)
(201,864)
Proceeds from
Sale of Equipment
0
0
22,994
Net Cash Used By
Financing Activities
0
(209)
(446,591)
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Cumulative
Three
Three
August 14,
1985
Months
Ended
Months Ended
(Inception)
to
March 31,
1998
March 31,
1997
March 31, 1998
(Unaudited)
(Unaudited)
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Stock
-Private Offerings
0
209
108,547
Proceeds from Issuance of Stock
-Public Offerings
0
0
3,150,163
Proceeds from Issuance of Stock
-Exercise of Warrants
0
0
240,358
Proceeds from
Capital Contributions
0
78,076
Advances (to) from shareholder
1,642
1,857
(8,591)
Net Cash Provided By
Financing Activities
1,642
2,066
3,568,553
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: May 12, 1998 By: _______________________________
Vicente Cuervo, President and
Chief Executive Officer
DATE: May 12, 1998 By: _______________________________
Pedro Llaguno, Secretary
