FORM 10 QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934
For the Quarterly Period Ended JUNE 30, 1999
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
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DEFAULT PROOF CREDIT CARD SYSTEM, INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2686523
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(State or other jurisdiction (I.R.S. Employer Identification
of incorporation) Number)
1545 MILLER ROAD, CORAL GABLES, FLORIDA 33146-2309
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(Address of principal executive offices) (Zip Code)
(305) 666-1460
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Registrant's telephone number, including area code
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(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 1,224,351 (as
of June 30, 1999).
Transitional Small Business Disclosure Format
Yes X No _
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DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX
PAGE
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PART 1 - FINANCIAL STATEMENTS
ITEM 1.
Balance Sheets (unaudited) As of June 30, 1999 4
Statements of Operations (unaudited)
For the Six months ended June 30, 1999 5
Statements of Stockholders' Equity
(Deficiency in Assets)(unaudited)
For the Six months ended June 30, 1999 6
Statements of Cash Flows (unaudited)
For the Six months ended June 30, 1999 7
ITEM 2.
Management's Discussion and Analysis or Plan of Operations 9
PART II - OTHER INFORMATION
Other Information 10
Signatures 10
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ACCOUNTANTS' REPORT
We have compiled the accompanying balance sheet of Default Proof Credit Card
System, Inc. as of June 30, 1999, 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
September 3, 1999
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DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
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June 30, 1999
(Unaudited)
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ASSETS
------
Capitalized Patent Cost $ 3,945
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TOTAL ASSETS 3,945
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LIABILITIES AND DEFICIENCY IN ASSETS
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CURRENT LIABILITIES
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Accrued Expenses 26,816
Due to Directors 66,595
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TOTAL CURRENT LIABILITIES 93,411
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DEFICIENCY IN ASSETS
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Common Stock, $0.01 par value;
2,500,000 authorized shares;
1,224,351 shares issued and
Outstanding at June 30, 1999 12,244
Additional Paid-In Capital 3,973,710
Deficit accumulated during
the development stage (4,075,420)
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TOTAL DEFICIENCY IN ASSETS (89,466)
TOTAL LIABILITIES AND
DEFICIENCY IN ASSETS $ 3,945
============
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DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
Statement of Operations
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SIX MONTHS
ENDED
June 30, 1999
(UNAUDITED)
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OPERATING EXPENSES
Depreciation & Amortization $ -
Expired Public Offering Cost -
General & Administrative 29,713
Marketing -
Officer Salary -
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Total Expenses 29,713
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OTHER INCOME (EXPENSE)
Cancellation of Debt -
Litigation Settlements -
Interest & Other Income -
Loss on Marketable Securities -
Loss on Sale of Equipment -
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Total other income (expense) -
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NET GAIN (LOSS) $ (29,713)
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NET GAIN (LOSS) PER
COMMON SHARE (0.024)
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,224,351
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<PAGE>
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY
(DEFICIENCY IN ASSETS)
(UNAUDITED)
JUNE 30, 1999
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<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
------------------------- Additional During the
# of shares par Paid-In Development
issued value Capital Stage Total
------ ----- ------- ----- -----
<S> <C> <C> <C> <C> <C>
BALANCE -
DECEMBER 31, 1998 12,043,510 $12,044 $3,959,560 $(4,045,707) $(74,103)
February 5, 1999
Stock Split 10:1
New Balance 1,204,351 12,044 3,959,560 (4,045,707) (74,103)
========= ====== ========= ========== =======
February 5, 1999
for Professional
Services Rendered (X) 10,000 100 7,400 - 7,500
February 18, 1999
for Professional
Services Rendered (X) 5,000 50 3,700 - 3,750
Net Loss - - - (19,780) (19,780)
---------- -------- ---------- ----------- --------
BALANCE -
MARCH 31, 1999 1,219,351 $12,194 $3,970,660 $(4,065,487) $(82,633)
========== ======== ========== ============ =========
April 15, 1999
for Professional
Services Rendered (X) 5,000 50 3,050 3,100
Net Loss (9,933)
---------- -------- ---------- ----------- ---------
BALANCE -
JUNE 30, 1999 1,224,351 $12,244 $3,973,710 $(4,075,420) $(79,533)
========== ======== ========== =========== =========
</TABLE>
(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.
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<PAGE>
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
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Six
Months Ended
June 30, 1999
(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $ (29,713)
Adjustments to Reconcile
Net (Loss) to Net Cash
Used in Operating Activities:
Depreciation & Amortization -
Loss on Marketable Securities -
Expired Public Offering Costs -
Cancellation of Stockholder Note Receivable -
Stock Issued in lieu of Cash
for Professional Services 14,350
Stock Issued in lieu of Cash
for Waived Salaries -
Loss on Sale of Equipment -
Increase in Other Assets -
Increase (Decrease) in Accrued Expenses 500
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Total adjustments 14,850
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NET CASH USED BY OPERATING ACTIVITIES (14,863)
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<PAGE>
DEFAULT PROOF CREDIT CARD SYSTEM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
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Six
Months Ended
June 30, 1999
(Unaudited)
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CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Purchases of Marketable Securities -
Purchases of Property & Equipment -
Patent License Expenditures -
Proceeds from Sale of Equipment -
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NET CASH USED BY FINANCING ACTIVITIES -
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CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from Issuance of Stock -
Private Offerings
Proceeds from Issuance of Stock -
Public Offerings
Proceeds from Issuance of Stock -
Exercise of Warrants
Proceeds from -
Capital Contributions
Advances (to) from shareholder 14,863
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NET CASH PROVIDED BY FINANCING ACTIVITIES 14,863
NET CHANGE IN CASH AND CASH EQUIVALENTS -
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CASH-BEGINNING -
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CASH-ENDING -
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<PAGE>
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
signed letters of understanding to acquired, if issued, all the worldwide rights
of the two patents pending filed by the inventor, Dr. Vincent Cuervo for two new
patents, in 1998 the Company signed another letter of understanding for a third
patent pending, ubuydebitcards.com. The patents 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 business processes. There is no assurance that the patents pending will
received grants for the related patents.
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 (patents pending) The
Automated Teller Machine Debit/Credit Cards Dispensers. 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.
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<PAGE>
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: September 3, 1999 By: /S/ Vincent Cuervo
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Vincent Cuervo, Chairman and
Chief Executive Officer
DATE: September 3, 1999 BY: /s/ Pedro P. Llaguno
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Pedro Llaguno, Secretary
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