SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10 - KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934[FEE REQUIRED] For the fiscal year ended December 31, 2002

                                       OR

[    ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934[NO FEE REQUIRED] For the transition period from to

                           Commission File No. 0-17114

                      DEFAULT PROOF CREDIT CARD SYSTEM, INC
                 (Name of small business issuer in its charter)

                   Florida                                 59-2686523
                   -------                                 ----------
         (State or other jurisdiction of                (I.R.S. Employer
         incorporation or organization)                Identification No.)

             1545 Miller Road, Coral Gables, Florida          33146
            -------------------------------------------------------
            (Address of principal executive offices)      (Zip Code)

                  Registrant's telephone number: (305)666-1460
                                                 -------------

Securities Registered pursuant to Section 12(b) of the Act:

         Title of each class     Name of each exchange on which registered
         -------------------     -----------------------------------------
                  None                                None

Securities Registered pursuant to Section 12(g) of the Act:

                         Common Stock, Par Value $ 0.01
                         ------------------------------
                                (Title of Class)

     Check whether the issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
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 for the past
90 days.

Yes  x     No
    ---

     Check if there is no disclosure  of  delinquent  filers in response to item
405 of Regulation  S-B,  contained in this form 10-KSB and no disclosure will be
contained,  to the best of registrant's knowledge, in definite proxy information
statements  incorporated  by  reference  Part  III of this  Form  10-KSB  or any
amendment to this Form 10-KSB [ ].

     The issuer's revenue for its most recent fiscal year was: Nil

     The aggregate market value of the voting stock held by no-affiliates of the
registrant (based upon the NASDAQ average bid and asked prices as of February 4,
2002 of shares issued and outstanding of the registrant's common stock $0.01 par
value as of December 31, 2002 was: 1,785,134.

<PAGE>

CERTIFICATION OF FINANCIAL STATEMENTS

     The Chief  Executive  and  Financial  Officer have  reviewed the report and
that,  based on their  knowledge,  it does not contain any untrue statement of a
material fact or omit to state a material fact  necessary to make the statements
made, in light of the circumstances, not misleading. Based on his knowledge, the
financial  statements,  and other financial  information included in the report,
fairly present in all material  respects the company's  financial  condition and
results of operations of the issuer as of, and for, the periods  represented  in
the report.

     The signing  officers are  responsible  for  establishing  and  maintaining
internal  controls  and have  designed  such  internal  controls  to ensure that
material information related to the company is made known to them,  particularly
during the time in which the periodic repport is being prepared.  Moreover,  the
officers must certify that they have evaluated the effectiveness of the controls
and  procedures  within 90 days of the date of the report and have  presented in
the report their  conclusions  about their  effectiveness  based on the required
evaluation as of that date.

     The signing  officers  have  disclosed  to the company  auditors and to the
board audit committee all significant  deficiencies inthe design or operation of
internal  controls that could adversely  affect the company's  ability to record
and report  financial  data and have  identified  for the  auditors any material
weaknesses in internal controls,  as well as any fraud, whether or not material,
that involves  management or other employees who have a significant  role in the
company's internal controls.

     Finally,  the signing  officers  certify  that they have  indicated  in the
report whether or not there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of their  evaluation,  including any corrective  actions with regard to
significant deficiencies and material weaknesses.


                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.


Dated:   March 25, 2003

By:  /s/ VINCENT CUERVO                 By:  /s/ CHARLES A. MENENDEZ
     -----------------------                 ----------------------------
     Vincent Cuervo                          Charles A. Menendez
     Chief Executive Officer                 Chief Financial Officer


                                       2
<PAGE>





                                     PART I

ITEM 1: Description of Products & Business.
        -----------------------------------

     Default  Proof Credit Card System,  Inc.  (the  "Company" or "DPCCS"),  was
incorporated in August 1985 under the laws of the State of Florida.  The Company
engages in the  development  of  proprietary  methods  and  systems  for issuing
secured,  prepaid,  stored value, gift, credit and debit cards, that are a safer
lending  risk for the  issuers.  The  Company's  first  secured  type cards were
marketed under the  registered  trademark  RESOURCE.  Presently the Company owns
patents and other  intellectual  property as the U.S. Patent No.  6,105,009 "The
Automated Teller Machine  Dispenser of Prepaid Debit Cards",  "The Prepaid Debit
Card Dispensed at P-O-S  Terminals,  U.S.  Patent No.  6,405,182,  and we have a
number of patents  pending in the United  States and many other  countries  that
together provide strong protection for our products. These patents pending build
on the  issued  patents  and we  expect  them to be  granted  and  added  to our
intellectual  property portfolio in the near future. We will continue to develop
innovative  loyalty  products  and  all our  programs  for  the  consumers,  the
transaction processors, credit, debit and gift card issuers and retailers.

THE COMPANY'S PATENTS AND PATENT PENDING APPLICATIONS

     On August 15, 2000 the U.S. Patent and Trademark  Office  ("USPTO")  issued
Patent No.  6,105,009  entitled  "Automated  Teller  Machine  Dispenser of Debit
Cards"  ("ATMDDC")  to  inventor  Vincent  Cuervo J.D. On June 11, 2002 the U.S.
Patent  Office also granted U.S.  Patent No.  6,405,182  "The Prepaid Debit Card
System" or the "Over-The-Counter Prepaid Debit Card" to Vincent Cuervo, J.D. its
inventor,  these two issued  patents  represent the  foundation of the Company's
growing patents portfolio stream. The Company has purchased all worldwide rights
and licenses of those patents from its inventor  Vincent  Cuervo,  J.D.,  who is
also the founder of Default  Proof Credit Card System,  Inc.  Cuervo is also the
inventor of several  other patent  pending  applications  and are, the "INTERNET
WEBSITE  PROGRAM";  on the November 29, 2001,  under patent pending  application
Publication No.20010047342, the USPTO published the full text and image database
of Vincent Cuervo's patent pending application for "Credit or Debit Cards of All
Kinds to be Issued With a Bank Savings Account Attached".  On November 21, 2002,
under patent pending application Publication  No.20020174016 the USPTO published
the full text and image database of Vincent Cuervo's patent pending  application
for "Multiple Accounts and Purposes Card Method and System".  The "Prepaid Debit
Card System" is also a patent pending through the Patent Cooperation Treaty with
offices in Geneva,  Switzerland for the worldwide protection and priority rights
of the Company's  patents.  The patent  pending  applications  relate to various
aspects of the purchase, issuance,  activation delivery and dispensing of stored
value,  gift,  payroll and prepaid  debit cards.  The U.S.  patents,  and patent
pending  applications  are  continuation  in part (C.I.P.) of the Company's U.S.
Patent No.  6,105,009 which is a C.I.P. of application no.  08/877,006  filed on
June 6,  1997  and  now  abandoned.  All of the  above  referenced  Intellectual
Property ("IP") is protected under the United States and International copyright
laws, as well as nationwide,  and statewide in Florida, where "RESOURCE" is also
a Registered Trademark of the Company.


                                       3
<PAGE>

     The  related   international   application   was  filed  under  the  Patent
Cooperation Treaty ("PCT") and with the World Intellectual Property Organization
("WIPO") in Geneva,  Switzerland.  DPCCS has decided to enroll  initially in the
countries of the United States of America, United Europe, Canada and Mexico.

     Utilizing its proprietary IP and the associated  rights,  the Company plans
to offer patent licenses of the prepaid debit cards to be marketed, offered, and
sold via the  internet at  UBUYDEBITCARDS.COM  ("UBDC"),  which is a domain name
owned by DPCCS,  as well as via numerous  innovative  non  traditional  channels
including retailers and entities,  over-the-counter  ("OTC") at stores,  through
the U.S. Postal  Services,  etc. The Company's IP is strong as well as efficient
and will  prove to be a valuable  and  essential  element  as the  strong  trend
towards a "cashless" society continues to develop.

U.S. PATENT Number 6,105,009
----------------------------

     "Automated Teller Machine Dispenser of Debit Cards", ("ATMDDC") U.S. Patent
No.  6,105,009 is a patented  system and  technology  for  controlled  purchase,
issuance and  dispensing  of prepaid debit cards.  The consumer  designs its own
prepaid debit card in accordance with his/hers needs and economic  means,  since
the  spending  amount is prepaid  into the card.  The ATMDDC  technology  may be
incorporated into newly  manufactured ATMs, as well as existing ATMs with simple
modifications,  or will operate in  stand-alone  kiosks,  or in retailers like a
copier corporation is presently using at its stores. The technology provides for
actual prepaid debit cards, not vouchers or coupons, to be dispensed.

     The DPCCS "Over-The-Counter  Prepaid Debit Card" US Patent # 6,405,182, the
"UBUYDEBITCARDS"  patent  pending,  as  well  as the  remaining  patent  pending
applications,  are essential for  maximizing  the potential of the ATMDDC and in
the overall marketing plans of the Company.

     These  card   acquisitions   will  require  minimal  amount  of  paperwork,
maintenance,  and financial  disclosure  from the purchaser,  and unlike typical
online debit cards, not the purchaser or the issuer of these prepaid debit cards
do not require a previous  or formal  banking  relationship  with the issuing or
sponsoring  bank,  the issuer can become also the depositary of the stored value
funds in the  card.  This  system,  and its new  technology,  incorporated  into
existing  ATMs,  and  installed as a feature in newly  manufactured  ATMs,  will
permit  consumers  to  purchase  and  design a prepaid  debit  card from  widely
available  ATMs  by  using  cash,  debit  and/or  credit  cards,  and  even  ACH
transaction  may be possible.  Information  and belief  indicates that automated
teller machines  dispensers of prepaid debit cards has been  manufactured and is
in use in the United States of America, the Company will look in to this.



                                       4
<PAGE>

ATM DISPENSER OF DEBIT CARDS-U.S.Patent # 6,105,009 - Potential Revenue
-----------------------------------------------------------------------

     According to CARDWEB.com, the U.S. Payment Card Information Network, "there
are  perhaps  as many as 60  million  bankless  consumers  in the USA.  Analysts
estimate that this  "un-banked"  consumer group spends about $8 billion annually
in check  cashing  and other  financial  services".  Most of those are unable to
obtain credit,  debit, or ATM cards for a variety of reasons such as bad credit,
divorce,  students,  bankruptcy,  recent  immigrant  status,  etc.  It  would be
reasonable to anticipate  that members of these  segments  should be some of the
first expected to purchase  prepaid debit cards.  The solution points out to the
prepaid debit card and/or the payroll card.

     The Company's  potential  revenues should be expected from the royalties or
fees, generated from licenses for among other activities, the manufacture,  use,
importation,  sale and/or  offer for sale of patented  ATMs,  and from  licenses
issued to financial  entities that own their ATMs and would like to benefit from
adding the many  features  available in this  patent.  An upfront fee, a fee per
card purchased, and transaction fees can be expected.

     "Celent Communications predicts ACH and closed-end  networks-based payments
will  capture 7% market  share of US  e-commerce  by 2005.  Alternative  payment
solutions will thrive thanks to "niche  markets,"  which will account for 25% of
e-commerce by 2005".

THE COMPANY'S PATENT NUMBER 6,405,182 - POTENCIAL REVENUE
---------------------------------------------------------

     "System for Dispensing  Prepaid Debit Cards at POS Terminals"  U.S.  patent
No. 6,405,182 is continuation in part of U.S. Patent No. 6,105,009.

     These  Prepaid  Debit  Cards  would be  purchased,  loaded,  and offered at
participating and licensed retailer locations, such as supermarkets, pharmacies,
convenience  stores,  and any other  entity,  or from  merchant and retail store
locations.  Virtually anyone,  anywhere in the world could be a purchaser of one
or multiple cards.

     Our June 11, 2002 allowed  patent for this method and system of  operation,
involves  a  Prepaid  Debit  Card  Program  for a card  that  may  be  purchased
Over-The-Counter at any participating, licensed locations worldwide.

     Even during its patent  pending  period,  the Company's  Prepaid Debit Card
Program as is its Title,  has been copied and sold,  offered and marketed  under
different names like "Gift Card",  "Payroll Card", "Stored Value Card", "Prepaid
Card" and several  others,  by entities  not  affiliated  or licensed by Default
Proof Credit Card System. The program, is now protected under U.S. Patent Number
6,405,182,  that offers the same  features as well as  improvements  to the ones
available in this rapidly  growing  market,  including:  reach to the  unbanked,
money  transfers  card to card,  person  to  card,  teenager  programs,  payroll
programs, access for college students, and many others. It will not require, nor
does it have to be linked to a bank  checking  account.  Our DPCCS Prepaid Debit
Card may be reloaded and it can be replaced if lost.

     This PIN  prepaid  debit  card may be easily  and  conveniently  purchased,
loaded  or  prepaid  at the  counters  of  participating  merchant  or  retailer
locations  by the merchant or a clerk  utilizing  their  existing  Point-of-Sale
("POS")  terminals.  This  dynamic  card will  offer a wide  variety of uses and
global  applications,  as well as, several unique  advantages  that will benefit
issuers, users, and merchants.  The acceptance and growth of the Debit Cards has
been well  established  with the higher volume  merchants that are accepting PIN
transactions instead of signatures from processors:

                                       5
<PAGE>

         Debit PIN based POS Network Leaders increases in 2002:

                1.Star  (Approximately             30%growth)
                2.Interlink      (Over 80%growth)
                3.NYCE  (Approx                    25%Growth)
                4.Pulse (Approx                    80%Growth)
                5.Jeanie         (Approx                 45%Growth)


     According  to the report from ATM & Debit News dated 01-16- 2003 PIN Volume
Beats Anemic Retail Sales During The Recent Holidays.

     "The  all-important  holiday  retail-sales  season  may  have  been a major
disappointment  for  retailers as the shaky  economy made  consumers  edgy about
spending.  But shoppers who opened their wallets last month used their PIN-based
debit cards in increasing numbers even as overall retail sales growth slumped.

     Among the four largest PIN-based point-of-sale debit networks,  cardholders
last month  initiated  452.6  million  purchases,  up 26.7%  from 357.2  million
transactions  they initiated in December  2001. The four networks  generate more
than 80% of the nation's overall PIN-based purchase volume.

     By  comparison,  overall retail sales last month grew by only about 1% over
December 2001, according to an analysis of government and industry sales data by
the Chicago-based Shopper Trak consultancy.

     The nation's  largest  debit  network,  Concord EFS Inc.'s  Star,  says its
member issuers'  cardholders  last month initiated 286.5 million  purchases,  up
25.8% from 227.7 million in December 2001. Visa U.S.A.'s Interlink, the nation's
second-largest PIN-based POS debit network, says its cardholders last month 75.6
million purchases, up 33.3% from 56.7 million in December 2001".

     Interested consumers receiving, shopping and/or prepaying the DPCCS prepaid
debit  cards will have the  opportunity  to select and design its many  features
that would be unique to their card, including the desired line of credit amount.
Among many other uses,  these  amounts may be used with a  "multiple,  twin,  or
multiple cards" feature as an inexpensive and convenient  means for secure money
transfers.

     The  Company  expects  that  income  derived  from  licenses  and per  card
transactions  fee of its U.S. Patent No.  6,405,182 that will allow the offering
and selling of cards at their  locations by merchants and retailers will consist
of an upfront amount per licensee and a small fee per card transaction.

PENDING PATENT APPLICATIONS
---------------------------

The "INTERNET PREPAID DEBIT CARD WEBSITE PROGRAM" - Patent Pending.
-------------------------------------------------------------------

     "Internet     Website     Program":     patent     pending     application,
continuation-in-part of U.S. Patent No. 6,105,009.


                                       6
<PAGE>

     The patent pending application "Internet Website Program" for the purchase,
issuance,  activation  and  delivery  of  prepaid  debit  cards  was  filed as a
continuation-in-part of U.S. Patent No. 6,105,009. This application illustrates,
in detail,  fourteen  (14) claims.  Features are related to prepaid  debit cards
that are to be purchased by means of an e-commerce transaction on the Internet.

     By  accessing  the  Company's  website,  www.ubuydebitcards.com,   Internet
applicants  will soon be able to obtain a self designed,  prepaid debit card for
any dollar amount and/or in any  currency.  Among its many and varied uses,  the
card may be used with "twin" card(s) to effect funds  transfers,  online-of-line
merchandise or services  purchases,  as well as other attractive  incentives and
selections

     Prepaid debit cards, soon may be designed and obtained over the Internet by
accessing  the  "Internet  Prepaid  Debit Card Website  Program"  that should be
available in the near future.  The  Intellectual  Property  associated with this
method simplifies the purchase, issuance, dispensing and activation of the debit
cards, gift cards, payroll cards, money transfer cards, and all prepaid cards.

     This may be  performed  on the  Internet at the  Company's  web site domain
named, http://ubuydebitcards.com as soon as the "The Internet Prepaid Debit Card
Program" patent pending application  receives a Notification of Patent Allowance
from the Patent and Trademarks  Office.  In the near future,  this prepaid debit
card,  purchased over the Internet,  may be using the ATM (ATMDDC,  U.S.  Patent
No.6,105,009)  technology for prepaid debit cards  dispensing  and  transferring
funds at a location  convenient  to the  purchaser  or user (if  different).  At
present,  plans provide the card  purchased  through the Internet  Prepaid Debit
Card Program, patent pending, will be picked up at any branch of a participating
bank or  retail  store,  or to be  sent  by  mail.  In a  safe,  efficient,  and
economical way,  ubuydebitcards.com  should provide a fast and convenient way of
obtaining a prepaid debit card. There is no assurance that a patent,  related to
this patent pending application,  will be issued. Nevertheless,  the probability
of issuance is increased by the fact that it is also a  continuation-in-part  of
the Company's U.S. Patent No. 6,105,009.

     According  to the news media  hundreds  of retail  stores,  merchants,  and
financial institutions are offering Gift Cards.

     The  entire  method  and  process  is  described  and  referred  to in  the
"Products"  section  as  "Resource":  The  "Prepaid  Debit  Cards" may be viewed
visiting http://members.aol.com/dpccsystem/

     None of DPCCS'  prepaid  debit  cards  programs  require  previous  banking
affiliation or maintenance of a checking account.

     A  licensed  retailer  or  financial  institution  may  offer and issue the
prepaid  debit cards.  The issuers also  becomes the  depository  of the prepaid
funds  that  represent  the  stored  value in the  cards.  The  issuers  and the
processors will also be responsible  for tracking,  payments and charges made by
the consumer for merchandise and services purchased with the card.

     International   Patent   Application,   Patent  Cooperation  Treaty  (PCT):
application was filed by the Company to obtain the International  Priority Claim
for the  prepaid  debit card  pending  applications.  The PCT filing  covers the
entire group of 110 treaty countries plus the U.S.  "PREPAID DEBIT CARD SYSTEM":
the  International  Application has been published by WIPO under the auspices of
the PCT.


                                       7
<PAGE>


     Another patent application,  filed June 2001, "CREDIT OR DEBIT CARDS OF ALL
KINDS ISSUED WITH A BANK SAVINGS ACCOUNT ATTACHED".  On November 29, 2001 the US
Patent & Trademark Office (PTO) published this application  under Patent Pending
Application Publication  No.0010047342.  All patent pending applications,  filed
after March 30, 2001, are required by the PTO to be published on the Internet.

     As its title suggests,  the card will be issued with an associated  savings
account at the issuing  bank.  Discounts,  rebates,  rewards or cash  offered by
retailers or service  providers may be earned by customers when the card is used
to pay for their purchases.  Once earned the discount,  rebate,  rewards or cash
will then be  electronically  transferred,  crediting  the bank savings  account
associated with the card.

     Presently, retailers and service providers offer discounts, rebates rewards
or cash only to their own  cardholders.  In the United  States,  in excess of 45
million individuals do not have a bank relationship;  and an even greater number
does not have credit or debit cards, or a retailer card such as those offered by
Sears, Home Depot,  Wal-Mart,  and many others.  Major marketing efforts will be
directed  toward  those  retailers  and  service  providers,  offering  them the
opportunity  to extend the same  discounts  and benefits to the holders of these
"DEBIT OR CREDIT CARDS WITH A BANK SAVINGS ACCOUNT  ATTACHED" card. By so doing,
merchants will benefit with a vast source of new customers  being  encouraged by
offers to receive  these  discounts,  rebates,  rewards or cash when using their
card at those participating merchants.

     With the amounts credited to the attached savings account,  the cardholders
will have  several  options:  they may use the  deposited  funds to increase the
stored value of their prepaid debit card, they may apply the funds to reduce the
outstanding  balance on a credit card, or for cash. In order to keep the savings
account open, a small balance must be maintained.

     On  November  21,  2002 the U.S.  Patent and  Trademarks  office  published
another of DEFAULT PROOF CREDIT CARD SYSTEM,  Inc. patent pending  applications:
"Multiple Accounts and Purposes Card Method and System".  It relates to a single
card with a choice to be used in one or as a combination  of operative  accounts
available,  as a prepaid debit card, a bank card, ATM, "Smart",  Stored Value, a
Gift,  a check  card,  a cash,  a Debit or a  Credit  Card.  A single  versatile
rechargeable  card to be sold,  purchased,  replaceable  if lost,  activated and
issued carrying any, some or all of the above features.

     The described Company's patents and patent pending  applications  represent
the methods and ways of  solicitation,  purchase,  delivery,  activation  and/or
dispensing of prepaid  debit cards.  The DPPCS IP provides for its prepaid debit
card to be made available through various significant  channels,  including;  at
retailers  and  merchants'  over-the-counter,  via  the  Internet,  and/or  from
modified ATMs(U.S. Patent 6,105,009).
Visit http://www.members.aol.com/dpccsystem/.


     DPCCS is poised and has the potential to capture a significant share of the
rapidly  growing  prepaid debit card payments  market.  The Company was recently
granted an  important  patent,  the U.S.  Patent No.  6,405,182,  and expects to
receive in the near  future  the Notice of  Allowance  for three  other  patents
pending  applications from the U.S. Patent and Trademarks Office.  Besides those
U.S. pending patent application, its International Patent Pending "PREPAID DEBIT
CARD  SYSTEM"  filed  through the Patent  Cooperation  Treaty (PCT) and with the
World Intellectual  Property  Organization (WIPO) based in Geneva,  Switzerland.
DPCCS recently received a POSITIVE result issued by the International  Examining
Authority. A decision has been made by DPCCS, and communicated to the PCT, as to
which of the PCT  countries  the Company  wants to continue this process and the
selections  were: All countries  members of the Europe United (25 now),  Canada,
Mexico and the U. S. A.

                                       8
<PAGE>

INDUSTRY and MEDIA OVERVIEW
---------------------------

     The Company considers industry trends and statistics to be highly favorable
to DPCCS.  Bank Technology News reports that from the period March 2000 to March
2001 PIN based card transactions  increased by 34% from 259 million transactions
to 348  million  transactions.  Further,  the  opinions  of: The  Nilson  Report
considers the Gift card systems are the fastest growing  consumer payment system
in the U.S. over the last three  years...  Retailers  have much to gain from the
migration from paper  certificates to plastic  cards...gift  cards will dominate
the prepaid  payment  system for years to come; the Retail Card Forum wrote that
American  Express  estimates  retail gift card  outstanding  balances  alone are
currently  $1 billion,  and project  they will grow to $15 billion in the next 2
years.  Shoppers  using prepaid gift cards and  certificates  are less concerned
about  paying full price in retail  stores  than  shoppers  using  other  media,
according  to research by Daniel R. Horne,  assistant  professor of marketing at
Providence College,  RI. Horne's survey of gift card and certificate users found
that 40% of shoppers using a retailer's gift card or certificate purchased items
at full price,  compared to 16% of shoppers using other payment methods, the Los
Angeles  Times  wrote  about that  Macy's,  Gap,  Bloomingdale's  and others are
promoting  prepaid  gift cards  that take the place of paper gift  certificates,
hoping to boost sales...The cards have an important advantage for retailers over
paper gift certificates.  Consumers using gift certificates receive their change
in cash, which can be spent elsewhere.  The electronic gift cards keep the money
from leaving the store.

     Dan Horne,  retailing professor at Providence College in Rhode Island, said
sales of gift cards and certificates have been growing 11% to 15% annually since
1993,  thanks in part to gift cards.  Americans  will spend billions on them, he
said. The cards appeal to time-pinched consumers in search of a convenient gift,
corporations purchase batches of the cards to give to customers, Horne said.

     Also, Dennis Lynch President and C.E.O of Montvale,  N.J.-based NYCE Corp.,
owner of the NYCE,  addressing the Thomson  Media's  ATM&Debit Forum in October,
said  "PIN-based  point-of-sale  debit  eventually  will surpass  signature-base
transactions  in the next three years.  And he believes  that  signature and PIN
debit interchange per transaction will come together".  Through the same Thomson
Media's  ATM&Debit News Mike Caruana,  national sales director at NYCE, Corp. on
12/12/2002, he said. "The overall U.S.A.  Quick-Serve-Restaurants (QSR) industry
is estimated at $110  billion in sales per year,  with an average  ticket of $5,
that equates to 22 billion  transactions  per year". "As of last year, the whole
U.S. PIN-based POS debit industry  processed just under 5 billion  transactions,
which illustrates the size of the opportunity QSR represents".

                                       9
<PAGE>

     Nilson Report note that debit card transactions  increased 54% in 2000, and
usage continues to grow rapidly as the debit card evolves beyond being more than
just an  electronic  extension  of a  checking  account.  Not only do most major
merchants  offer a prepaid debit card,  but they are also cross selling cards of
other merchants.  Bankruptcies  hit an all time high in 2001,  increasing by 19%
from 2000.

     Bankruptcies   account   for  up  to  50  percent  of  credit  card  issuer
charge-offs.  2002 also was  witness to the demise of several  high  profile sub
prime credit card issuers, such as, NextCard, Providian, and many others.

     As further  evidence of this strong trend away from credit  towards  debit,
the largest POS debit  networks  including  Concord  EFS,  VISA,  CIRRUS,  STAR,
Interlink,  Pulse and  others,  all  continued  reporting  substantial  gains in
transaction  volumes  in 2002.  During  the past year  major  retailers,  led by
Wal-Mart,  have been  emphasizing  PIN based  debit  card  transactions  because
charges  from the  processing  network to the merchant are lower when a consumer
utilizes a PIN.  Quoting  portions of the article by Ed McKinley,  "Prepaid Gift
Cards:  Wild Growth Spurt Far from Finished":  "Legions of retailers are finding
prepaid gift cards too hot not to handle.  As of early  March,  80% of Americans
had heard of gift cards,  up from 15% a year ago. As recently as 1998, the cards
were virtually unknown.

     Use is burgeoning, too. By now, 45% of the population has used prepaid gift
cards,  compared  to 11% last year,  according  to a  telephone  survey of 1,000
people in all nine U.S. Census Bureau Market  Regions.  And from Card Marketing,
"Consumers who buy gift cards aren't cheapskates. Purchasers spent an average of
$200 last year,  up by $61 from the  previous 12 months.  In many cases,  people
bought more than one card".

     Valutec Card  Solution  described the four ways to Profit with Stored Value
as follows:

Gift Cards
----------

     A cash-generating  product that doubles as a miniature  "billboard" in your
customer's wallet.  Card balances decline as the card is used encouraging repeat
visits and limiting cash refunds.

Loyalty & Membership Programs
-----------------------------

     Acquire   customers  and  retain  them,   that's  the  goal.  Now  you  can
automatically  keep  track of point  balances  and  transaction  activity  for a
multitude of rewards and incentive programs.

Merchandise Credits
-------------------

     Cards can be  loaded  with the exact  value of a product  return  for store
credit. Declining balance keeps cash in store by limiting refunds.

Advertising & Promotion
-----------------------

     The marketing  applications of  stored-value  cards are as wide open as the
imagination--from electronic coupons to co-branded cards paid for by one or more
merchant  suppliers.  Valutec Card Solutions answers the big question mark, "Why
Plastic vs Paper?":

     o Increases  prepaid gift sales o Builds brand  awarenesso  Keeps full cash
     value in storeo  Customers  spend moreo Tracks Loyalty Program pointso Easy
     to carry and uso Powerful promotional toolo Complete transaction reporting.

                                       10
<PAGE>

     Adding  these Market  Facts:  45% of the  population  has used prepaid gift
cards, compared to 11% last year. Purchasers spent an average of $200 last year,
up by $61 from the prior 12 months.Most  gift card recipients make more than one
trip to the store to use up the  value of their  card.  61% spend  more than the
value of the card.  Gift cards continue to increase store traffic.  About 55% of
recipients  needed more than one trip to the store to use up the value stored on
a gift card.

     Most gift card  buyers  based their  purchase  decision  on  planning,  not
impulse.  A total of 75% said the purchases  were planned.  Men were more likely
than women to buy gift cards on impulse.  While 16% of men attribute  their gift
card purchases to impulse,  just 2% of women do. Gift cards increase incremental
sales.  Among survey respondents 61% indicated that they spent more at the store
than the  value of the card.  "It's  pretty  amazing,"  quoting  David  Fehrman,
general manager of the Standard Register Imaging Services Group, who had this to
say about gift card trends:  the survey helped  uncover.  "You expect growth but
this.  It looks  like it might be a good idea to have  stock in a  company  that
makes plastic cards," he joked. .

     The  Standard  Register  people  agreed  that gift  cards  offer  retailers
advantages over paper gift certificates. With paper certificates,  cashiers hand
the recipient the change.  With stored-value  cards, the unspent funds remain on
the card, ready for the next shopping trip.

     Another  significant  growth  market  being  targeted  by DPCCS is teenager
spending.  The Company  believes  that its PIN  protected  prepaid debit card is
particularly  well suited for this  application.  Among its many  features,  the
Company's  proprietary  technology  consists  of some highly  suitable  parental
control functions.

     Teenager  spending online,  which totaled $500 million in 2000, is expected
to grow to $10 billion by 2005  (source:  Datamonitor).  In addition,  there are
several other  markets of  significant  proportions  offering  similarly  strong
growth   potential  for  which  the  Company's   proprietary   technologies  are
particularly well suited: money transfers, payroll, gift, travel, business card,
and others.  Debit Cards are now the second most popular form of payment (second
to cash), and since 1993, the number of consumers  initiating a transaction with
a debit card has tripled.

     The Company is also positioned to benefit from the above average growth and
multiple  applications being experienced in the Automated Teller Machine ("ATM")
industry.  More and more,  ATMs are becoming  web-enabled  and are utilized as a
means of  distribution  for a variety  of  products,  such as  telephone  cards,
coupons, and theater tickets. Ultimately, the Company's licensees may be capable
of  offering  or  selling  prepaid  debit  cards over the  Internet  that may be
instantaneously  dispensed, at some remote location, by an ATM. According to the
news media, in 2001 well over 12 billion  transactions  were carried out at ATMs
and 60 percent of consumers  report using ATMs (source:  Bank Technology  News).
The  Company's  patent  pending  application  "The  Internet  Prepaid Debit Card
Program"  (ubuydebitcards.com) will be a worthy complement for its prepaid debit
card program.

                                       11
<PAGE>

     The retailers,  entities and financial  institutions,  licensed by DPCCS to
issue, offer and sell the patented O-T-C Prepaid Debit Cards and other Company's
patents,  will not need to open or  maintain a checking  account  related to the
card purchaser. The card purchaser is not required to have had any bank account.
Upon its purchase, the prepaid debit card, in essence, may serve as a substitute
"bank account" for the  cardholder.  The card, be a Gift Card,  Payroll Card, or
any other  prepaid  kind of card,  will be used as a credit  style  charge card.
Cardholders  will use it much like a credit card,  anywhere,  for anything,  for
purchasing or returning merchandise, services or even for cash advances at ATMs.

     Industry  statistics  strongly  support  DPCCS'  belief that  stored  value
prepaid debit cards are the most exciting, rapidly growing segment of the entire
"charge card" industry. The Company's patented prepaid debit card products offer
vastly  improved  functionality.  As compared to the Company's  products,  other
available prepaid card are necessarily  related to a checking account,  or other
bank  related   credit   instrument,   that  may  have   limited   functionality
electronically,  geographically and economically. There are other cards that are
promotional, which in many cases, will be potential patent violators.

     Plans  include  that  prepaid  debit cards would be  purchased at automated
dispensers,  such as, ATMs,  kiosks, or over the Internet,  as now they are been
purchased  or obtained  over the counter,  where the Point of Sale  terminals of
participating  merchants  are located.  Regardless  of where or how this prepaid
debit card is purchased,  it will carry with it all the capabilities  needed and
expected by consumers.  Each card offers benefits,  such as, incentives,  global
use, as well as many other  useful new  features.  The future link to the ATMDDC
alone is important as compared to the debit cards now being offered.

PAYROLL CARDS ALSO A PREPAID DEBIT CARD
---------------------------------------

     A  Payroll  Card  is  a  convenient  and   cost-effective   alternative  to
traditional paper pay checks.  Each employee is issued a payroll card, which may
be an ATM card, a Cash Card,  etc. Each pay day payroll is transferred  directly
to each employee's card.  Employees can then shop with the card wherever prepaid
cards, debit cards, credit cards, ATM, Bank, or Cash Cards are accepted.

     The  payroll  card  is  well  suited  for  large  organizations,  marketing
organizations with a widespread  workforce,  employees who may not have checking
accounts,  temporary employees,  or employees who are seldom in the office. More
than 25 million  wage  earners  in the U.S.  do not have  financial  institution
accounts, yet check-cashing businesses process about 180 million checks totaling
$55 billion annually.

     With a payroll card program from Star Systems(R)  (STAR sm), a Concord EFS,
Inc. wholly owned subsidiary, and other financial institutions can enhance their
commercial  business  relationships by offering a cost-effective  and convenient
alternative  to cutting  payroll  checks.  The Payroll Card allows  employers to
deliver payroll deposits or commission payments to employees who may not have an
existing  banking  relationship or who prefer to receive their pay outside of an
existing financial institution account.


                                       12
<PAGE>

PAYROLL CARD AMONG THE COMPANY'S PREPAID DEBIT CARD FEATURES
------------------------------------------------------------


     The  Payroll  Card,  in  essence a prepaid  debit  card,  is geared  toward
employers with more transient  employees and for issuers that prefer PIN-secured
debit programs (STAR, Cirrus,  Plus). The cards may be set up as signature debit
cards  (MasterCard or Visa),  but issuers can opt for a STAR-only  branded card,
which gives cardholders  access to more than 1 million ATMs and retail locations
in the U.S. that accept STAR ATM/debit cards.

     The Company's  Intellectual Property under its U.S. Patent Number 6,405,182
features Payroll accounts that can be loaded/reloaded via EFT or by the standard
direct deposit  process,  in addition to  participating  in all other activities
been offered  today.  Using this card,  employers can offer their  personnel the
benefits of a signature  debit card that does not require  them to qualify for a
financial service account. The Payroll Card brings to the employers  significant
cuts in their payroll  administrative  expenses,  and eliminates  replacement of
stolen or lost checks thus  reducing  check  fraud.  Their  employees  will also
receive valuable benefits as:

     Immediate funds availability. Elimination of cash cashing fees, and waiting
in long lines to cash their checks. Security PIN protection. Purchasing power at
participating retailers, where no one would be denied approval.

     According to the American Payroll Association:

          As much as 30% of the U.S.  population  does not have a bank  account.
          More than four million  paychecks are lost or stolen each year and the
          cost to replace those paychecks is estimated at $48 million annually.

          Companies  can  save  up  to  $1.25  per  payment   using   electronic
          disbursement instead of checks, as per www.directdeposit.org

          The chance of having a problem  with a check is 20 times  greater than
          with Direct Deposit, as per www.directdeposit.org

          Studies show that  employees  may spend the  equivalent  of three work
          days each year just going to the bank, as per www.directdeposit.org

EXECUTIVE COMMENTS
------------------

Patents, Trademarks and Licensing Rights
----------------------------------------

     On August 15, 2000, a new U.S. patent (No. 6,105,009) related to the Stored
Value  Prepaid  Debit Card  Program  was  issued to the  Company.  This  patent,
entitled  "Automated  Teller  Machine  Dispenser  of Debit  Cards"  has not been
commercialized  because of the Company's expectations regarding two of its other
patent pending applications. On the other hand, the Company could not anticipate
delays,  including  those  related to the 9/11  tragedy,  that would prolong the
processing of the two applications; one was filed in December 1998 and the other
in March 2000.

                                       13
<PAGE>

     During  2001 and  early  in 2002  the  Company  filed  two new U.S.  patent
applications and one  international  application  through the Patent  Protection
Treaty  (PCT).  The  PCT  application  determines  the  priority  rights  of the
Company's intellectual property. Again, all of these applications are related to
the Stored Value Prepaid Debit Card Program.

     The  "Internet  Prepaid  Debit Card  Program"  is  completely  internet  or
e-commerce oriented.  At the Company's website it is referenced and displayed as
"ubuydebitcards.com".  U.S. Patent Office Action  regarding this  application is
expected soon.  Frequently and interchangeably,  the product or card is referred
to as: the Prepaid Card,  Stored Value Card, the Gift Card, the Check Card, Cash
Card, etc. Regardless of the nomenclature, all should fall under the umbrella of
the patent.

     On June 11, 2002, an important new U.S.  Patent (No.  6,405,182) was issued
to the Company.  This new patent the "System for Dispensing  Prepaid Debit Cards
at Point-Of-Sale  Terminals" is critically  important to the future  development
and operational  plans of the Company.  The patent protection of our technology,
methods,  systems and products is essential, and success of products that are in
planning  or  development  phase may depend,  in part,  on our ability to obtain
patent protection.

     Bearing the above in mind, on July 1, 2002 the Company  retained one of the
nation's most successful patent enforcement law firms, Niro,  Scavone,  Haller &
Niro. Mr. Raymond P. Niro is the senior partner of the law firm and the attorney
who will lead  Default  Proof's  legal  team.  Mr.  Niro has won 20  consecutive
multi-million  dollar verdicts resulting in awards in excess of $400 million for
his  clients.  According  to the New York Times,  patent  enforcement  is a $150
billion  per  year  business.  The  28-attorney,  Chicago,  IL  based  law  firm
specializes  in  intellectual  property  law and has a broad  client  base  that
includes  Fortune  500  companies.  It is a very  favorable  agreement  for  the
Company.

     Based  upon the core  belief  as to the  monumental  importance  of  patent
protection for  proprietary  technologies,  the Company's  intention to continue
filing additional patent  applications.  Although  management  strongly believes
that  this is the most  appropriate  course to follow  for new  products  and/or
technological  developments,  there  can be no  guarantee  that  any  additional
patents  will be issued  or, if issued  that it will be of  commercial  value or
benefit.

     Further,  it is premature or impossible to anticipate the breadth or degree
of  protection  that any such  patents  may  provide.  Further,  there can be no
guarantee that any product developed by the Company will not infringe on patents
held by third  parties,  or in any such  cases  that  licenses  from such  third
parties will be available on commercially acceptable terms, if at all.

     The Company is fully committed to entering into License  Arrangements  with
all interested and qualified parties including those who have previously ignored
the "Patent  Pending"  disclosures  that have been printed as warnings on all of
our marketing  material,  on the website  pages,  on Non  Disclosure Non Compete
Agreements  that were  executed  with the Company,  on brochures  that have been
marked as confidential  while making  presentations and discussing our products,
even with those who have  marketed  copies of our  programs  as their  own,  and
specially with those  interested in starting off with one or more of the Default
Proof programs available.


                                       14
<PAGE>

     To this point,  Default Proof has been a development-stage  company and has
not  generated  revenues or profits.  But having now  successfully  secured U.S.
Patent No.  6,405,182 which  compliments  U.S. Patent No.  6,105,009 of which is
Continuation-In-Part,  and the following patent pending  applications,  and with
this  active  development  of the  Company's  intellectual  property  portfolio,
Default  Proof  is  ready  and  well  positioned  for  commercialization  of its
intellectual properties and it's technologies.

     Also,  if  successful  in obtaining  patents  grants on its patent  pending
applications,  a  great  deal  of  strength  will  be  added  to  the  Company's
intellectual  property  portfolio.  It is believed  that the early weeks of 2003
will present an excellent  opportunity for the Company to reward its patient and
faithful  shareholders.  It is in the Company's best interest for  shareholders,
investors  and the general  public to have an  awareness  and  understanding  of
DPCCS' products.

     Again,  although  there can be no guarantee,  the Company is hoping that it
may be able to produce its first positive financial results very soon.

                                    PART II

ITEM 2. DESCRIPTION OF PROPERTY
        -----------------------

     The Company's  executive  offices  consisting of  approximately  750 square
feet, are located at 1545 Miller Road,  Coral Gables,  FL 33146, the landlord is
Vincent Cuervo,  J.D.,  haven't charged or received payment for the space leased
by the Company since March 1995.  Furniture,  general office equipment,  several
computers,  printers,  fax, scan, etc.  Telephone  number:  (305) 666-1460;  Fax
Number:(305)     665-3462.     E-Mail:     dpccsystem@aol.com     -     Website:
htt://members.aol.com/dpccsystem/   and   www.ubuydebitcards.com  and  owns  the
following   domain   names    ubuydebitcards.com/    resourcedebitcards.com/   &
O-T-C-prepaid debit card.

     The Company has executed  contracts  and  agreements  with Vincent  Cuervo,
J.D., the inventor, unanimously approved by all the members of the Company Board
of Directors  trespassing  to the Company the worldwide  rights and ownership of
the issued  Patents,  and all the Patent  Pending  applications  as the Internet
Website  Program;  the  "Credit or Debit  Cards of All Kinds to be Issued With a
Bank Savings  Account  Attached",  Published by the PTO on 11/29/2001,  the "The
Multiple  Accounts and Purposes Card Method and System"  published by the PTO on
11/21/2002,  and the  International  Patent Pending  Application filed under the
Patent  Protection  Pact  the  "Prepaid  Debit  Card  System"  published  by the
Worldwide  Information  Patent  Office  (WIPO)  and the  UBUYDEBITCARDS.COM  and
UBUYCREDITCARDS.COM,  three Domain Names  registrations for use in the Internet,
RESOURCE  registered  mark,  1998  to 2002  copyrights,  and  State  Trademarks,
granting  to  the  inventor  Vincent  Cuervo,  J.D.  in  consideration  for  his
transferring  and selling to he Company all the worldwide  rights,  licenses and
permits Stock Option  Grants for the purchase of the Company  Common Stock $0.01
par value per share.  Each Grant  differs to the others in relation to number of
Stock  Option  shares,  price of each  option  share and other  terms,  but each
contract  relates to the U.S.  Patent  Office  issuing a related U.S.  Patent to
Vincent Cuervo on each of the patent pending application in each contract.

                                       15
<PAGE>

The Patents Pending Status
--------------------------

     The Company's  patents pending  application are waiting for the U.S. Patent
and Trademark  Office to grant the Patent Notice  Allowances for each one of the
present  patent pending  applications,  which should be followed by the issue of
their corresponding certificates.

     The International  patent pending application requires the determination by
the Company of those  countries that will be included in the patent when issued,
which  will  be the  United  States  of  America,  three  of the  Europe  United
countries,  Mexico,  and  Canada.  In  Spain  and  Mexico  it  is  required  the
translation  to Spanish,  in Europe  United and Canada  English is the  required
language.

     There is no assurance that any related patent will be granted on all or any
of the above mentioned patents pending, but since all have been continuations in
part of the Company's U.S. Patent #6,105,009, and 6,405,182 it would be adequate
to assume favorable expectations.

     The delay in the issuance of U.S.  Patent  number  6,405,182 was related to
the  unfortunate  and sad events of last  September 11 that caused the U.S. Post
Offices in  Washington,  D.C.  to reduce  and slow down the normal  flow of mail
including  Patent  Office  Actions and  communications  of inventors  and Patent
Attorneys with examiners and their supervisors.

     Careful  consideration  of the  most  effective  and  productive  means  of
maximizing the Company's  potential,  and in view of the  expectations of Office
Actions from the U.S. Patent and Trademark  Offices regarding the patent pending
applications,  expected positive PTO Office Actions will provide strength to the
Company's prepaid debit cards portfolio  programs.  Repeating again, there is no
assurance that these patents pending applications will ever become patents.

Ownership of the patents and patent pending applications
--------------------------------------------------------

     Vincent Cuervo, CEO of Default Proof Credit Card System,  Inc., is the sole
inventor  of the ATM  DISPENSER  OF DEBIT CARDS  patent  number  6,105,009,  the
PREPAID DEBIT CARD SYSTEM,  U.S.  Patent No.  6,405,182  "System for  Dispensing
Prepaid Debit Cards Through  Merchant's  Point of Sale  Terminals",  and all the
patent  pending  applications  that  were  filed by him at the U.S.  Patent  and
Trademark  Office,  that are all  continuations  in part of  Patent  #6,105,009,
6,405,182 as well of the other previous pending applications. The Copyrights and
Trademarks are integrated to the  intellectual  property of Default Proof Credit
Card System,  Inc.  with  worldwide  ownership of all rights,  in their  present
status as Patents,  patent  pending  applications,  and of the  related  patents
if/when they are granted.

     Under the  Employment  Agreement  executed  between the Company and Vincent
Cuervo,  J.D. on August 1986 filed with the Securities  and Exchange  Commission
Registration Statement Under the Securities Act of 1933, and since renewed every
five  years  and in  force,  there  have  never  been  exclusions,  limitations,
conditions,  discussions or waivers over Vincent Cuervo, J.D. absolute ownership
and freedom of  disposition  of his  inventions,  creations or developed  ideas,
filed,  registered or converted  into patent  applications  from which  patents,
trademark  registrations,  copyrights or other type of national or international
rights he can, and has become recipient, as well as the right of Vincent Cuervo,
J.D.  to  dispose  of the  intellectual  property  created  and  owned by him in
whatever  manner  and to whom he may  decide  to  sell,  lease or  license  this
intellectual property.


                                       16
<PAGE>

     Vincent Cuervo has always offered, and will continue giving the first right
of refusal to the Company in exchange for Stock Option Grants. Presently all the
intellectual  property  mentioned and described  above, as well as the worldwide
rights and licenses of them are owned by Default Proof Credit Card System,  Inc.
When  receiving  the stock  option  grants from the Company in exchange  for the
worldwide  ownership  of all rights and licenses of his  intellectual  property,
Vincent Cuervo never took into  consideration  the price of the Company's shares
at the time the Stock  Options were granted,  which in some  instances was at "a
penny for the lot" or at one or two pennies each. The stock options will only be
granted to Cuervo if and when a notice of patent  allowance is issued by the PTO
and received by him or the Company. Patent pending applications not mentioned in
this filing and item above, are still subject to future  agreements  between him
and the Company.

ITEM 3.  Legal Proceedings.
         ------------------

     The Company is not involved in any material  litigation and is not aware of
any potential claim that will give rise to material liability.

     On July 1, 2002 the Company  retained one of the nation's  most  successful
patent enforcement law firms, Niro, Scavone,  Haller & Niro. Mr. Raymond P. Niro
is the senior  partner of the law firm and the  attorney  who will lead  Default
Proof's  legal  team.  Mr.  Niro  has won 20  consecutive  multi-million  dollar
verdicts  resulting  in  awards  in  excess  of $400  million  for his  clients.
According to the New York Times,  patent  enforcement is a $150 billion per year
business.   The  28-attorney,   Chicago,   IL  based  law  firm  specializes  in
intellectual  property law and has a broad client base that includes Fortune 500
companies.  The agreement with the Law Firm was in very favorable  terms for the
Company.

     On August 2002 the Law Firm addressed a few national retailers proposing to
them, in full settlement of any claims, a simple non-exclusive license agreement
that will fully release them from liability under inventor Cuervo's patents.

     Obviously,  the  Company  would  very much like to  amicably  and  promptly
resolve all issues through a settlement, rather than through litigation.

     Most, if not all, of the letters sent were  answered;  some have  requested
additional  input, some have asked for a copy of the license agreement for their
review, others have asked to see copies of the patents.


                                       17
<PAGE>


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

     No matters  were  submitted to a vote of the  security  holders  during the
twelve months ended December 31, 2002.

ITEM 5. Market for Common Equity and Related Stockholders Matters.
        ----------------------------------------------------------

     The Company's common stock is traded in the over-the-counter bulletin Board
market and prices are quoted on the National  Association of Securities  Dealers
Automated  Quotation  System  (NASDAQ)  Small Cap Market in the OTC:BB under the
Symbol "DPRS".

     The  following  table sets forth the high and low bid  information  for the
Company's  common stock  monthly  during 2001.  The  quotations  provided  below
reflect inter-dealer  prices,  without mark ups, mark down or commission and may
not represent actual transactions.

                      Fiscal 2002               High          Close
                      -----------               ----          -----

                        02/02/02                4.75           4.75
                        03/01/02                3.80           3.80
                        04/01/02                4.00           4.00
                        05/01/02                5.75           5.75
                        06/04/02                4.55           4.55
                        07/06/01                4.25           4.25
                        08/05/02                4.00           4.00
                        09/06/02                2.85           2.85
                        10/01/02                2.45           1.85
                        11/07/02                1.50           1.50
                        12/02/02                3.25           3.25
                        12/28/02                1.75           1.75

     On December 31, 2002 the Company had approximately 251 holders of record of
the  Company's  common stock.  A number of those record  holders are brokers and
other institutions  holding shares in "street name" for more than one beneficial
owner.

     The Company have  received  the  information  related by NASDQ  decision of
integrating  those companies like DPRS that presently trades in the OTC:BB in to
a new exchange the BBX, and has favorable consideration to the move.

     Dividends
     ---------

     The Company has never paid any cash  dividends on its common stock and does
not anticipate  paying cash dividends in the near future.  The dividend  payment
will depend on its earnings, financial condition and other business and economic
factors  affecting  the  Company at that time which the Board of  Directors  may
consider relevant.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
          and RESULTS OF OPERATIONS
          ------------------------------------------------------------

     2002 was a fairly  positive year for Default  Proof Credit Card System.  We
couldn't  accomplish all of the expected targets we were looking for, but we did
fulfill on others,  usually loaded with difficulties and  unpredictable  delays.
Later  than  expected,  in  February  of this year  2002,  the U.S.  Patent  and
Trademarks  Office  issued a Notice of Allowance  and four months later our U.S.
Patent Number 6,405,182 was received,  precisely on June 11, 2002. This valuable
and  important  part  of  our  Prepaid  Debit  Card  Portfolio  finally  arrived
integrating the Company's Intellectual Property.

                                       18
<PAGE>

     On July 1, 2002 the Company  retained one of the nation's  most  successful
patent enforcement law firms, Niro, Scavone,  Haller & Niro. Mr. Raymond P. Niro
is the senior  partner of the law firm and the  attorney  who will lead  Default
Proof's  legal  team.  Mr.  Niro  has won 20  consecutive  multi-million  dollar
verdicts  resulting  in  awards  in  excess  of $400  million  for his  clients.
According to the New York Times,  patent  enforcement is a $150 billion per year
business.   The  28-attorney,   Chicago,   IL  based  law  firm  specializes  in
intellectual  property law and has a broad client base that includes Fortune 500
Companies.  It is consider to be a very favorable  agreement to the interest and
the future benefits to the Company.

     On August 2002 the Law Firm began  addressing  VIA FedEx  several  national
retailers selling,  offering and promoting the debit card, proposing to them, in
full settlement of any claims,  a simple  non-exclusive  license  agreement that
would fully release them from liability  under inventor  Cuervo's  patents,  now
owned by the Company.  Although not looking for litigation of any kind, in their
letters the attorneys have not waived the need of doing so.

     In 2002  there was no  revenue  income.  All the  revenue  received  by the
Company  was the result of  exercised  Stock  Options  by some of its  officers.
Careful  control of expenses and its  meticulous  administration  maintained its
balance sheet of December 31, 2002 with no figures related to short or long term
debts and  obligations.  In other words the fiscal year that ended  December 31,
2002 closed completely free of loans, debts, or debentures, that sooner or later
would have diluted the Company stock.

     The Company is fully committed to be able to enter into License  Agreements
with all interested and qualified  parties,  including those who have previously
ignored  and even  marketed  copies of our  products,  disregarding  the "Patent
Pending" and  "Confidential"  displays  that had been printed as warnings on all
our marketing  material,  on our website pages,  or the several No Disclosure No
Compete  Agreements that were signed and executed  jointly with the Company,  or
the  brochures  that had been  marked  as  "confidential"  and were  used in the
Company's presentations and discussions and apparently not respected.

     At present,  there is lots of optimism  among the officers of Default Proof
Credit Card System Inc. On November 22, 2002  Charles A.  Menendez,  C.P.A.  has
joined the Company as its new  President  and CFO. His  incorporation  has added
optimism and expectations for a 2003, which hopefully should be a better year".

The Company
-----------

     The  Company's  operations  commenced  in 1986  with the  licensing  of the
Default Proof Method and System, all patents and other proprietary rights to the
system,  as well as the rights to the use of the registered  trademark  Resource
from the Company's President.

     Since  inception,  the  Company  has  invested  approximately  $119,000  in
developing  computer  software,  acquiring  computer  hardware,  and  paying for
technical support for the operation of the Resource(R)  System.  The Company has
expended in excess of $467,000 for  newspaper and TV  advertising,  video tapes,
brochures, personal officers' travel expenses to make presentations,  on printed
material and  applications  which were mailed or  distributed  as "take ones" at
various stores and businesses.

                                       19
<PAGE>

     Patents filing fees, applications,  Patent Attorneys' legal fees, travel to
the Patent & Trademark Offices in Washington, D.C., and maintenance patent fees,
come close to $221,000 from the Company's general  expenses.  Well over $345,000
were spent in  developing  the Resource  System,  the ATM, and the Prepaid Debit
Card  Programs.  The Company also spent over  $1,000,000  in litigation vs State
Street Bank and Trust Company (State Street Bank),  and vs American Express over
the Company's RESOURCE registered trademark in 1993.

     Street Bank litigation forced the Company to attempt the raising of capital
to implement a new strategy that involved the possible purchase of its own bank,
thought that was soon discarded. Soon after, it was realized that the litigation
and the lack of funds had put the company in a defensive  position,  with meager
possibilities  to raise funds for a system to be used by a bank in an authorized
fashion. Other banks, that had been interested in the Resource System backed off
once the  litigation  was  initiated.  Subsequent  efforts to raise capital also
failed. The litigation was settled in 1993 after almost five years,  leaving the
Company without  economic  resources.  Another  consequence was that the Company
lost its  privilege  as a NASDAQ  Member  for its  falling  below the  necessary
financial  requirements.  Dozens of approaches were received and discussed,  but
were declined due to the deplorable terms that were offered.

     The new added intellectual  property and the new presently planed marketing
campaign will allow the Company to offer the ATM and its valuable  Prepaid Debit
Cards Program U.S.  Patent  No.6,405,182  to retailers and entities that will be
licensed to offer,  sell, and  distribute  the programs.  From this, the Company
should derive fees and income revenue, to provide the cash flow that is expected
that it will make 2003 the year of rewards to shareholder's patience and faith.

     The present  interest and growth in the prepaid  debit card in its multiple
names and applications,  like GIFT CARD, PAYROLL CARD, STORED VALUE CARD, TRAVEL
EXPRESS CARD, etc. are encouraging.

     ATM  DEBIT  CARDS  DISPENSER,  the  "Over-The-Counter  Prepaid  Debit  Card
Program",  the U.S.A.  patents pending applications to be launched in the Web in
2003 the Company Internet Website Program marketed as http://ubuydebitcards.com,
the new "CREDIT OR DEBIT CARDS OF ALL KINDS ISSUED WITH A BANK  SAVINGS  ACCOUNT
ATTACHED",  the  "Multiple  Accounts and Purposes  Card Method and System",  the
"Prepaid Debit Card System"  International Patent Pending Application (PCT), all
carrying  exciting  features and  technology  are part of the promising  future.
There is no  assurance  that  these  patents  pending  will be  granted  related
patents.

Employees
---------

     The Company isn't a manufacturing  corporation.  Its main source of revenue
and income will be the  royalties  and fees earned from the licenses  sold.  The
need of  administration  personal  for office and daily duties will be required,
and in time added.  As of this date, the Company has five  employees,  3 serving
also as officers,  like the CEO, the Counsel and  Company's  Secretary,  and the
valuable Chales A. Menendez, C.P.A, newly appointed President and C.F.O.

                                       20
<PAGE>


ITEM 7.    Financial Statements
           --------------------
                                  CONTENTS
                                                                     Page
                                                                     ----
         AUDITORS' REPORT........................................     F-2

         FINANCIAL STATEMENTS

                  BALANCE SHEET.....................................  F-3

                  STATEMENTS OF OPERATIONS..........................  F-4

                  STATEMENT OF STOCKHOLDERS' EQUITY/DEFICIENCY.       F-5-F-10

                  STATEMENTS OF CASH FLOWS..........................  F-11

         NOTES TO FINANCIAL STATEMENTS....................            F-12-F-17


ITEM 8.  Changes in and Disagreements With Accountants On
         Accounting And Financial Disclosure
         ------------------------------------------------

     On February 9, 2000, the Company  engaged Joel S. Baum,  CPA,  President of
BAUM & Co., P.A.,1515  University Drive,  Suite 209, Coral Springs,  FL 33071 as
its independent certified public accountants to audit the Company's Consolidated
Financial  Statements for the year ended December 31, 1999.  Joel S. Baum,  CPA,
and his Company remain as the Company CPA Auditors.

                              PART III

ITEM 9.   "Section 16(a) Beneficial Ownership Reporting
          Compliance of the Exchange Act".
          ---------------------------------------------

     Based  solely  upon  a  review  of  Forms  3 and 4 and  amendments  thereto
furnished to the  registrant  under Rule 16a-3(d)  during its most recent fiscal
year and Forms 5 and amendments thereto furnished to the registrant with respect
to its most recent fiscal year,  and any written  representation  referred to in
paragraph  (b)(2)(i) of Item 405 of Regulation S-K, David J. Koss failed to file
on a timely basis reports  required by section 16(a) of the Securities  Exchange
Act during the most recent fiscal year or prior fiscal years as follows:

Name of       Number of           Number of Transaction Not         Forms Not
Person        Late Reports        Reported on a Timely Basis        Filed
-------       ------------        --------------------------        ---------
David J.Koss      Nil                    Three                      F-4


                                       21
<PAGE>

Directors, Executive Officers, Promoters and ControlPersons
-----------------------------------------------------------

     The directors and  executive  officers of the Company are as follows:

        Name                               Age                Position
        ----                               ---                --------

Vincent Cuervo, C.E.O.                      73                Director
Ciro B. Sosa, Vice President                74                Director
Eng. Jose E. Aguirre                        42                Director
Pedro P. Llaguno, Vice President            71                Director
Charles A. Menendez, President, CFO         72

     All directors hold office until the next annual meeting of stockholders and
the  election  and  qualification  of their  successors.  Officers  are  elected
annually by the Board of Directors and serve at the discretion of the Board.

     Vincent Cuervo has been Chief  Executive  Officer and Chairman of the Board
of Directors  of the Company  since its  inception in August 1985.  From January
1984 until  March 1986 he was the  general  managing  agent for  Travelers  Life
Insurance  Co.,  O. Ltd.,  and Summit  National  Life  Insurance  Company.  From
September 1962 through  December  1983, he was general  managing agent for Crown
Life  Insurance  Company for South  Florida.  Mr.  Cuervo holds a Jurist  Doctor
Degree from the University of Havana, Cuba.

     Ciro B. Sosa has been a Vice-President  and a Director of the Company since
January  1986.  Since 1964,  Mr. Sosa has been owner of Futura  Advertising,  an
advertising agency located in Coral Gables, Florida.

     Pedro  P.Llaguno  has been  Secretary  and a Director of the Company  since
January 1986. Since 1977 Mr. Llaguno has been an attorney at Law.

     Charles A.  Menendez,  C.P.A.  has been president and CFO since December 6,
2002, an over 15 years Certified Public Accountant in South Florida.

     Eng. Jose E. Aguirre,  for the last four years have been rendering  several
valuable  jobs,   bringing   counseling  and  help  to  different  projects  and
developments of the Company.  For over ten years an Officer of Cordis Corp., now
a wholly owned corporation of Johnson & Johnson.

     Mr. Cuervo may be deemed a "parent" or "promoter" of the Company,  as those
terms are defined under the federal securities laws.

     There is family  relationships  between two of the  Company's  directors or
executive officers.

     During  the last ten  years  none of the  following  events  occurred  with
respect to any  executive  officer  or  director  of the  Company as of the date
hereof.

          (i) Any  bankruptcy  petition  was filed by or against any business of
     which such  person  was a general  partner  or an  executive  officer at or
     within two years before the time of such filing;

          (ii) Any  conviction  in a criminal  proceeding  or being subject of a
     pending criminal  proceeding  (excluding traffic violations and other minor
     offenses);

          (iii) Being subject to any order, judgment or decree, not subsequently
     reserved,  suspended or vacated,  of any court of  competent  jurisdiction,
     permanently  or  temporarily  enjoining,  barring,  suspending or otherwise
     limiting his  involvement  in any type of business,  securities  or banking
     activities; and

          (iiii)  Being found by a court of competent  jurisdiction  (in a civil
     action),  the Securities and Exchange  Commission or the Commodity  Futures
     Trading  Commission  to have  violated  a federal  or state  securities  or
     commodities  law,  and the  judgment  has not been  reversed,  suspended or
     vacated.

                                       22
<PAGE>

ITEM 10.  Executive Compensation
          ----------------------

          General.  The following table sets forth the total annual compensation
     paid or accrued by the Company to or for the account of the Company's chief
     executive officer and any other executive officer whose total  compensation
     for the fiscal year ended  December 31, 2002 exceeded one hundred  thousand
     dollars.
<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                             LONG-TERM COMPENSATION
                             ----------------------
                       Annual Compensation              Awards        Payouts
                    --------------------------------------------------------------------
(a)            (b)    (c)     (d)        (e)        (f)         (g)      (h)         (i)
Name                                    Other                 Securities             All
and                                     Annual     Restricted Underlying             Other
Principal                               Compen-    Stock      Options/    LTIP       Compen-
Position       Year  Salary($) Bonus($) sation($)  Awards($)  SARs(@)     Payouts($) sation ($)

<S>            <C>      <C>      <C>      <C>       <C>       <C>          <C>          <C>

C. A Menendez  2002     0        0        0         3,540     24,000       0            0
V.Cuervo,CEO   2002     0        0        0             0          0       0            0
P.P.Llaguno    2002     0        0        0             0     80,000       0            0
C.B.Sosa       2002     0        0        0             0     80,000       0            0
J.E.Aguirre    2002     0        0        0             0     80,000       0            0
M.C.Schafer    2002     0        0        0             0     25,000       0            0
V.Cuervo CEO   2001     0        0        0             0          0       0            0
</TABLE>


<TABLE>
<CAPTION>


                            Aggregated Option/SAR Exercises in Last fiscal Year
                                        and FY-End Option/SAR Values
------------------------------------------------------------------------------------------------------------
(a)                  (b)              (c)                   (d)               (e)
                                                          Number of
                                                          securities         Value of
                                                          Underlying         Unexercised
                                                          Unexercised        In-The-M
                                                          Options/SARs       Options/SAR at
                                                          FY-END ($)         FY-End ($)

                       Shares Acquired                   Exercisable/        Exercisable/
Name           on Exercise (#)    Value Realized ($)     Unexercisable       Unexercisable

<S>              <C>                <C>                 <C>
V.CUERVO         265,000            $768,500.
V.Cuervo                                               *726,866/ 172,000 x 1.75 = 301,000/

</TABLE>

ITEM 11.     SECURITY  OWNERSHIP OF  CERTAIN  BENEFICIAL OWNERS
             AND MANAGEMENT
             --------------------------------------------------

     The  following  table sets forth  information  on early January 2002 and at
February 18, 2003 based on  information  obtained  from the persons named below,
with respect to the  beneficial  ownership of shares of Common Stock by (I) each
person  known by the  Company  to be owner  of more  than 5% of the  outstanding
shares of Common Stock. (ii) each director, and (iii) all officers and directors
as a group. The filing by a shareholder of Schedule 13D related to the number of
shares  beneficially  owned by this  shareholders  exceeding  5% of the  Company
outstanding shares.

                                       23
<PAGE>


Name of Beneficial    Amount and Nature of          Percentage of
      Owner           Beneficial Ownership     Outstanding Shares Owned
------------------    --------------------     ------------------------

Vincent Cuervo             655,291                     36.71%
Miami, FL 33146

Ciro B. Sosa                24,276                      1.36%
Miami, FL 33134

Pedro P. Llaguno            38,642                      2.16%
Miami, FL 33145

Charles A. Menendez          2,000                      0.01%
Coral gables, FL 33146

Eng. Jose E. Aguirre         4,900                      0.03%
Weston, FL 33327

Officers/directors,
promoters, as a group      725,109                     40.61%


     The Company is not aware of any  arrangements  which may result in a change
of control of the Company.

ITEM 12.  Certain Relationships and Relate Transactions.
          ---------------------------------------------

     On  November  1997  the  Company  acquired  from  Vincent  Cuervo,  all the
worldwide  rights,  licenses,  and  ownership  of the ATM Debit  Card  Dispenser
patents pending filed with the US Patent and Trademark Office, Washington,  D.C.
earlier in 1997.  Under the  understanding  agreement  between  the  Company and
Vincent Cuervo,  the Company will issue to Vincent Cuervo 225,000.  Stock Option
of the Company's Common Stock $0.01 par value per Share at an exercising  Option
Price of $0.15 per share,  the day after the Company receives from the US Patent
and Trademark Office a Notice of Allowance  notifying  Vincent Cuervo and/or the
Company that its patent  application has been allowed and subsequently the issue
of a related Patent to this patent pending (ATMDCD) will be issued.  The related
U.S. Patent No.6,105,009 was issued on August 15, 2000.

     On the  Special  Meeting,  that  took  place on  October  2,  1998,  of the
Company's  Board of Directors  was  unanimously  approved an  agreement  between
Vincent Cuervo and the Company  regarding the amount of money, the result of the
numerous loans, at no interest, made by V. Cuervo to the Company, providing with
this loans and or payments of the expenses, the continuity of its operations and
existence. It was approved that Vincent Cuervo will have the choice of demanding
the full  payment in cash,  or to be issued in his name one Common  Stock  $0.01
(post  split) par value per share for each one dollar the Company  owes  Vincent
Cuervo at the time he demands payment of the debt the Company owes him.

                                       24
<PAGE>

     On  December  1998  the  Company  acquired  from  Vincent  Cuervo,  all the
worldwide  rights,  licenses,  and  ownership of the INTERNET  WEBSITE  PROGRAM,
(WWW.UBUYDEBITCARDS.COM)  patent pending  application filed by Vincent Cuervo at
his own expense with the US Patent and Trademark  Office,  Washington,  D.C. and
continuation  in part of US Patent  6,105,009.  Under the agreement  between the
Company and Vincent  Cuervo,  the Company will issue to Vincent Cuervo  300,000.
Stock  Option of the  Company's  Common  Stock $0.01 par value per share,  at an
exercising  Option Price of $1.00 per share,  the day after the Company receives
from the US Patent and Trademark Office a Notice of Allowance  notifying Vincent
Cuervo  and/or the  Company  that its patent  application  has been  allowed and
subsequently a related Patent to this patent pending application will be issued.
The related U.S. Patent is still pending issue.

     If the U.S.  Patent  and  Trademark  Office  does  not  issue  the  related
patent(s) the Company will not issue shares of the stock option grant to Vincent
Cuervo and the  understanding  agreement will be void and canceled.  There is no
assurance  that the U.S.  Patent and Trademark  Office will grant the patents on
any or all of the patents pending.

     On May 2000 the Company  acquired  from Vincent  Cuervo,  all the worldwide
rights, licenses, and ownership of the SYSTEM FOR DISPENSING PREPAID DEBIT CARDS
THROUGH  Merchants  POS TERMINALS  (The OTC Prepaid  Debit Card) patent  pending
application filed with the US Patent and Trademark Office,  Washington,  D.C. by
Vincent Cuervo at his expense,  and continuation in part of US Patent 6,105,009.
Under the  agreement  between the Company and Vincent  Cuervo,  the Company will
issue to Vincent Cuervo  500,000 shares of the Company's  Common Stock $0.01 par
value per share, at an exercising Option Price of $0.10 per share, the day after
the  Company  receives  from the US  Patent  and  Trademark  Office a Notice  of
Allowance   notifying   Vincent  Cuervo  and/or  the  Company  that  its  patent
application  has been allowed and  subsequently  a related Patent to this patent
pending  application will be issued.  The related U.S. Patent was issued on June
11, 2002.

     On November  22, 2002 the Company  acquired  from Vincent  Cuervo,  all the
worldwide rights, licenses, and ownership of the two patent pending applications
numbers  09/894,581  and  10/114,522,  the Company will issue to Vincent  Cuervo
150,000 shares of the Company's  Common Stock $0.01 par value per share for each
of the above numbered patent pending applications,  both at an exercising Option
Price of $1.00 per share,  the day after the Company receives from the US Patent
and Trademark Office a Notice of Allowance  notifying  Vincent Cuervo and/or the
Company  that its patent  application(s)  has been  allowed and  subsequently  a
related Patent to this patent(s) pending application will be issued. This patent
applications are still pending,  both have been published by the U.S. Patent and
Trademark  Office,  No.  09/894,581  on November 29, 2001 and No.  10/114,522 on
November 21, 2002.

     If the U.S.  Patent  and  Trademark  Office  does  not  issue  the  related
patent(s)  the Company  will not issue the shares of the stock  option  grant to
Vincent Cuervo and the understanding agreements will be void and canceled. There
is no assurance that the U.S. Patent and Trademark Office will grant the patents
on any or all of the patents pending.

                                       25
<PAGE>

Securities  Outstanding
-----------------------

     The Company has 2,500,000 authorized shares of $0.01 par value common stock
(the Shares).  As of December 31, 2001 there are 1,785,134  currently issued and
outstanding shares, and 725,109 of the Company outstanding shares are restricted
shares.  The Company also has 36,000 Stock Options of the Company's Common Stock
$0.01 par value at an exercise  price  ranging from $0.75 to $1.75 per share (an
average exercise price of $1.05 per share),  and another 35,000 Stock Options of
the Company's  Common Stock $0.01 par value to purchase shares until February 2,
2002, at an exercise price of $1.50 per share,  and 175,000 Stock Options of the
Company's  Common  Stock  $0.01 to  purchase  shares  exercisable  for five year
periods at a price of $1.40.  There are  200,000  Stock  Options of the  Company
Common  Stock  $0.01  exercise  price  ranging  from  $0.38 to $1.87  per  share
exercisable  from May 2000 to April 2012.  225,000  Stock Option Shares at $1.50
per share  exercisable  up to April 24,  2010.  Granted  over the year there are
170,000 Stock Options shares with an exercising  price per share at $4.50,  $11.
and $12.00 per option  share.  In 2002 there were 185,000  Stock  Option  Shares
Forfeited and 265,000 Stock Option Shares exercised.

     On  November  2,  2000  Vincent  Cuervo  exercised  125,283  shares  of the
Company's  Common Stock $0.01 par value per share at the exercise price of $1.00
per share or one share per each dollar owed by the company to Vincent  Cuervo as
per  October  2,  1998  Special  Meeting  of the Board of  Directors.  See Stock
Options.

     The holders of Common Stock are entitled to one vote for each share held of
record on all  matters to be voted on by  shareholders.  There is no  cumulative
voting  with  respect to the  election  of  directors,  with the result that the
holders of more than 50% of the shares voted can elect all the directors.

Stock Options
-------------

     On August 2, 1993 the Company issued to its principal  stockholder  Vincent
Cuervo, J.D. and to one of its officers, Pedro P.Llaguno, Esq., Stock Options of
the Company's Common Stock $0.01 par value to purchase yearly for a term of five
years, 7,000 Vincent Cuervo,  and 2,500 Pedro P. Llaguno  exercisable for a term
of five years  from the date of each Stock  Option  annually  issued.  The Stock
Option price range varies from $0.50 to $1.75. The Stock Option issued on August
2, 1993 to both,  Vincent  Cuervo and Pedro P.  Llaguno,  were not  exercised on
August 2, 1998, the expiration date and were canceled.  2,500 stock options have
been exercised and the balance  outstanding awards continue to be exercisable as
of December 31, 2003.

     On February 1995, the Company issued to its principal  shareholder  Vincent
Cuervo and one of its officers P. P. Llaguno,  Stock Options to purchase  20,000
Vincent  Cuervo and 15,000 Pedro P. Llaguno,  Esquire,  of the Company's  Common
Stock $0.01 par value  yearly for a term of five years,  and  exercisable  for a
term of five years from the date of each Stock Option annually issued. The Stock
Option  price at $0.10 and $0.15  respectably.  15,000  stock  options have been
exercised and the balance of the  outstanding  awards continue to be exercisable
as of December 31, 2003.

                                       26
<PAGE>

     On July 17, 1998, the Company issued to its principal  shareholder  Vincent
Cuervo,  J.D., one of its officers  Pedro P. Llaguno,  Stock options to purchase
20,000 Vincent Cuervo and 5,000 Pedro P. Llaguno,  Esq., of the Company's Common
Stock $0.01 par value  yearly for a term of five years,  and  exercisable  for a
term of five years from the date of each Stock Option annually issued. The Stock
Option price is of $0.14.  No stock options have been forfeited or exercised and
all outstanding awards continue to be exercisable as of December 31, 2003.

     On June 29,1999 on a Special  Meeting of the  Company's  Board Of Directors
David J. Koss,  newly  appointed  President  and Chief  Financial  Officer,  was
granted  25,000  Stock  Option  Shares per year for four years of the  Company's
Common  Shares  $0.01  par value  per  share at an  exercise  price of $0.38 per
shares.  David J. Koss will receive the Option  Shares each year or to such time
he shall cease providing services to the Company for whatever reason,  including
the year in which his services to the Company are terminated.  The Option Shares
shall be deemed  restricted  stock  pursuant to Rule 144  promulgated  under the
Securities Act of 1933, as amended.

     The above stock options to purchase the Company's Common Stock, were issued
to  the  Company's  President/Principal  Stockholder  for  his  daily  work  and
services.  Vincent  Cuervo  received  minimal  compensation  during 1993, and no
compensation  since 1994 first quarter,  at which time he also waived his salary
and bonuses up to that date.  Since  March 1994 he has made no bearing  interest
loans  to the  Company  for the  payment  of its  administrative  expenses.  The
officer,  P.P. Llaguno has rendered his legal services,  and many other services
beyond his  obligations at no charge.  David J. Koss have not received salary or
refund of personal expenses since mid 1998.

     During  2001  Stock  Option  Shares for the total  amount of  170,000  were
granted to: Rosa Scavo,  Esquire;  Eng. Jose E. Aguirre;  Pedro Emilio  Llaguno;
David J. Koss, and J.  Sanchelima,  Esquire for past present and future services
to the  Company.  The  exercising  price varied from $4.75;  $11.,  and $12. per
option share.

     The above stock options are available and contingent  upon the  individuals
providing their continuing services to the Company. In the event of termination,
options  through  the year of  termination  will be  available.  The options are
deemed  restricted  stock pursuant to Rule 144 promulgated  under the Securities
Act of 1934 as amended.

     All the above  Stock  Option  Shares are for the  purchase of shares of the
Company's Common Stock $0.01 par value per share.

Securities Transfer Agent
-------------------------

     The  Transfer  Agent  for  the  Company's  Securities  continue  to be  the
Registrar and Transfer Company, 10 Commerce Dr., Cranford, NJ 07016.

Recent Sales of Unregistered Securities
---------------------------------------

     On January 11,  2001 the  Company  issued  14,000  shares of the  Company's
Common Stock $0.01 par value per share to  Francisco  de  Monteverde y Benito de
Lugo in payment for her continuous, marketing works, among them the translations
of the Resource and Website Programs to Spanish (Castilian),  and other services
at his personal expenses, meetings and traveling during the last three years and
providing his continue services.

                                       27
<PAGE>


     On July 30, 2001 the Company  issued 3,000  shares to Maria T. C.  Schafer,
Webmaster;  5,000 shares to David J. Koss, President, and 1,000 shares to Robert
A. Schreiber,  Esquire,  all the shares of the Company's  Common Stock $0.01 par
value per share and all in payment for their past present and continue  services
to the Company.

Item 13.  Exhibits and Reports on Form  8-K
          ---------------------------------

EXHIBIT #1
----------

     On February 1, 1999 the  Registrant  approved a Reverse  Stock Split of the
Corporation's Common Stock Shares.

     The Board of Directors of Default  Proof  Credit Card  System,  Inc.  (OTC-
BB:DPRS) on an  Extraordinary  Meeting  held today  February 1, 1999,  after the
casting and tallying of the votes  submitted  from January 14. 1999 to this date
by the Company's  shareholders resulting in the approval of the proposed ten-for
one reverse split by a 99% of all the votes received,  has unanimously  voted to
implement a ten-for-one reverse split of the Company's Common Stock. The reverse
stock  split will  become  effective  as of the close of business on February 4,
1999.  On February 5, 1999 for each  pre-split  ten (10) shares of the Company's
Common Stock  $0.001 par value the holder of record will receive one  post-split
share of the  Company's  Common stock $0.01 par value per post split share.  The
new stock certificates will have a new cusip number 244626 40 4.

     The new  certificates  will be issued  in the  normal  course  of  business
whenever the appropriate  transfer is requested by the shareholders.  Fractional
shares  resulting  from the  reverse  stock split will be settled in cash at the
shares  closing  price of the  shares  traded  at the close of  business  of the
effective  date February 4, 1999.  The reverse split will decrease the number of
shares  outstanding,  but not the  value  of  shares  held by the  shareholders.
Shareholders  will  maintain the same  percentage of equity as before the split.
The Company will make a news release through the news media, Business Wire, Wall
Street Journal, etc., for general public information.  Attached hereto and filed
as a part of this Report are the financial  statements.  The Exhibits  described
below are incorporated by reference herein.

EXHIBIT #2
----------

Registrant's changing of Certified Public Accountant's firm.
------------------------------------------------------------

     The Board of Directors of Default Proof Credit Card System,  Inc.  (OTC-BB:
DPRS) on this  Extraordinary  Meeting  held today  February  12,  2000  approved
unanimously  the  resolution  terminating  the  services of  Infante,  Lagos and
Company as the Company's  certified public accounts who were responsible for the
preparation  and  completion of Default  Proof Credit Card System,  Inc. for the
year ended December 31, 1998 audited balance sheet and financials filed on 1999.
The end of their  services to be effective on this  February  11th.,  2000.  The
reason for this change is their  expensive  fees and charges at a times when the
Company can not afford such expenses.

                                       28
<PAGE>

     On this  above  mentioned  Meeting  of the Board of  Directors  it was also
unanimously  approved,  effective February 11th., 2000 the engagement  agreement
with Joel S. Baum, C.P.A.,  President of BAUM & COMPANY, P.A. at 1515 University
Drive, Suite 209, Coral Spring, Florida 33071. The new certified public accounts
firm will be  responsible  for the audit of the balance sheet and  financials of
Default Proof Credit Card System, Inc., for the year ending on December 31, 1999
and the related statements of income,  retained earnings, and cash flows for the
year then ended.  The newly engaged  certified  public  accountant  firm,  while
promising the same quality  service,  offered  reasonable and accessible cost to
the Company.

         Exhibits:
         ---------
         3.1*     Certificate of Incorporation of Registrant

         3.2*     By-Laws of Registrant

         4.1**    Form of Certificate evidencing Common Stock, $.001 par value

         4.2**    Form of Redeemable Common Stock Purchase Warrant (1988
                  Public Offering)

         4.3**    Form of Warrant Agreement  between  Registrant,  the
                  Underwriter  (Normandy  Securities,  Inc.) and Continental
                  Stock Transfer and Trust Company. (1988 Public Offering)

         4.6****  Form of Option  Agreement  for 60,000 Stock Option  shares for
                  Marina S. Klein.

         10.1*    License Agreement between Vincent Cuervo and the Registrant
                  dated August 14, 1985

         10.2**   Amendments to License Agreement between Vincent Cuervo and the
                  Registrant

         10.3*    Agreement dated August 14, 1986 between Vincent Cuervo and
                  SSS Associates and Felix Guardiola.

         10.4**   Lease between Registrant and Douglas Entrance Restoration and
                  Development Group.

         10.4(a)  Lease between Registrant and Miami Board of Realtors.

         10.5***  Employment  Agreement between the Company and Vincent Cuervo.

         10.6**   Employment Agreement between the Company and Hugh Vanhoose.

         10.7**   Sales Agreement between the Company and James Branam Jr.

         10.8**   Form of 1988 Stock Option Plan.

         14****   Material Foreign Patents - Notice of Allowance for Patent
                  from Canada's Consumer and Corporate Affairs.

         (28)**** Minutes of Special meeting of the Board of Directors of
                  Default Proof Credit Card System, Inc. for January 9, 1990

                                       29
<PAGE>

         Reports on Form 8 K
         Exhibit #1 Report on Form 8-K
         Reverse Split 10 for 1 filed 2-1-99
         Exhibit #2 Report on Form 8-K
         Change of Auditor CPA
         Item 13(b) Exhibits

         The Exhibits described above are incorporated by reference here:

     *  Incorporated  by reference to the Company's  Annual Report on Form 10-K,
file No.33-9185A for the fiscal year ended December 31, 1987.

     **  Incorporated  by reference to the Company's  Registration  Statement on
Form  S-1,  File  No.  33-22677,  filed  with the SEC on  August  3,  1988,  and
incorporated by reference herein.

     ***  Previously  filed as an exhibit the  Company's  Annual  Report on form
10-K, File No. 90-17114, for the fiscal year ended December 31, 1988.

     ****  Previously  filed as an Exhibit the  Company's  Annual Report in Form
10-K, File No.0-7114, for the fiscal year ended December 31, 1990.

     ***** Form 10-SB\A  filed  November 1994 General Form for  Registration  of
Small  Business  Issuers  Pursuant to Section 12(b) or (g) of The Securities and
Exchange Commission.

EXHIBIT #1.
-----------
                       SECURITIES AND EXCHANGE COMMISSION
                       ----------------------------------
                             Washington, D.C. 20549
                             ----------------------

                                   FORM 8 - K
                                   ----------

                                 CURRENT REPORT

               PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
                            AND EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

                                February 1, 1999

                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
             (Exact Name of Registrant as Specified in its Charter)


                                       30
<PAGE>

             Florida                                 0-17114
(State or other Jurisdiction                   (Commission File No.)
Of Incorporation or Organization)

                                   59-2686523
                     (I.R.S. Employer Identification Number)

         1545 Miller Road
         Coral Gables, Florida                        33146-2309
         (Address of Principal                        (Zip Code)
         Executive Offices)

         Registrant's Telephone Number,
         including Area Code:                       (305) 666-1460



Item 5.     Registrant's Reverse Stock Split of Corporation's Common
            Stock Shares
            --------------------------------------------------------

The Board of Directors of Default Proof Credit Card System,  Inc.  (OTC-BB:DPRS)
on an  Extraordinary  Meeting held today February 1, 1999, after the casting and
tallying  of the  votes  submitted  from  January  14.  1999 to this date by the
Company's  shareholders  resulting in the  approval of the proposed  ten-for-one
reverse  split by a 99% of all the  votes  received,  has  unanimously  voted to
implement a ten-for-one reverse split of the Company's Common Stock. The reverse
stock  split will  become  effective  as of the close of business on February 4,
1999.  On February 5, 1999 for each  pre-split  ten (10) shares of the Company's
Common Stock  $0.001 par value the holder of record will receive one  post-split
share of the  Company's  Common stock $0.01 par value per post split share.  The
new stock certificates will have a new cusip number 244626 40 4.

The new  certificates  will be issued in the normal course of business  whenever
the appropriate  transfer is requested by the  shareholders.  Fractional  shares
resulting  from the  reverse  stock  split will be settled in cash at the shares
closing  price of the shares  traded at the close of business  of the  effective
date  February 4, 1999.  The reverse  split will  decrease  the number of shares
outstanding, but not the value of shares held by the shareholders.  Shareholders
will  maintain the same  percentage  of equity as before the split.  The Company
will make a news  release  through the news media,  Business  Wire,  Wall Street
Journal, etc., for the general public information.



                                       31
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant has duly caused this report on its behalf by the undersigned hereunto
duly authorized.

                                       Default Proof Credit Card System, Inc.
                                                                 (Registrant)


Date: February 1, 1999                 By: VINCENT CUERVO
                                       Vincent Cuervo, President & CEO


EXHIBIT #2.
-----------

                       SECURITIES AND EXCHANGE COMMISSION
                       ----------------------------------
                             Washington, D.C. 20549
                             ----------------------

                                   FORM 8 - K
                                   ----------

                                 CURRENT REPORT

               PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
                            AND EXCHANGE ACT OF 1934

                Date of Report (Date of earliest event reported):

                                February 12, 2000

                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
             (Exact Name of Registrant as Specified in its Charter)

     Florida                                        0-17114
(State or other Jurisdiction                   (Commission File No.)
Of Incorporation or Organization)

                                   59-2686523
                     (I.R.S. Employer Identification Number)

         1545 Miller Road
         Coral Gables, Florida                     33146-2309
         (Address of Principal                     (Zip Code)
         Executive Offices)

         Registrant's Telephone Number,
         including Area Code:                  (305) 666-1460



                                       32
<PAGE>

Item 5.   Registrant's changing of Certified Public Accountant's firm.
          ------------------------------------------------------------

The Board of Directors of Default Proof Credit Card System,  Inc.  (OTC-BB:DPRS)
on this  Extraordinary  Meeting held on February 12, 2000  unanimously  approved
this resolution  terminating  the services of Infante,  Lagos and Company as the
Company's certified public accounts who were responsible for the preparation and
completion of the audited  balance sheet and financials  filed on 1999 on behalf
of Default Proof Credit Card System,  Inc. for the year ended December 31, 1998.
The end of their  services to be effective on this  February  11th.,  2000.  The
reason for this  change:  their  expensive  fees and  charges at a time when the
Company could not afford such expenses.

On  this  above  mentioned  Meeting  of the  Board  of  Directors  it  was  also
unanimously  approved,  effective February 11th., 2000 the engagement of Joel S.
Baum, C.P.A.,  President of BAUM & COMPANY, P.A. at 1515 University Drive, Suite
209, Coral Spring, Florida 33071. The new certified public accounts firm will be
responsible  for the audit of the balance sheet and  financials of Default Proof
Credit Card  System,  Inc.,  for the year  ending on  December  31, 1999 and the
related statements of income, retained earnings, and cash flow for the year then
ended. The new engaged  certified public  accountants,  while promising the same
quality  services,  offered  reasonable  and  accessible  cost  to the  Company.
SIGNATURES  Pursuant to the requirements of the Securities Exchange Act of 1934,
the  Registrant  has duly caused  this  report on its behalf by the  undersigned
hereunto duly authorized. DEFAULT PROOF CREDIT CARD SYSTEM, Inc. (Registrant)


Date: February 11, 2000                By: VINCENT CUERVO
                                           Vincent Cuervo
                                           President & CEO

CERTIFICATION BY CORPORATE SECRETARY

I hereby  certify that the  following is a true and correct copy of a resolution
duly and regularly  passed by the Directors of DEFAULT PROOF CREDIT CARD SYSTEM,
Inc., at a  extraordinary  meeting of the Board of Directors  held on the 11th.,
day February,  2000 at the Corporate offices situated at 2050 Coral Way, Suite #
404,  City of  Miami,  County  of  Miami-Dade,  Florida,  33145 and that at such
meeting a quorum of Directors was present and voting; and I further certify that
said Resolution is still in force and effect and has not been revoked,  modified
nor changed in any manner.

RESOLVED:

The Board of Directors of Default Proof Credit Card System, Inc. (OTCBB:DPRS) on
this  Extraordinary   Meeting  held  today  February  11,  2000,  approves  this
unanimously  resolution terminating the services of Infante, Lago and Company as
the Company's certified public accounts who were responsible for the preparation
and  completion  of Default Proof Credit Card System,  Inc.,  for the year ended
December 31, 1998 audited balance sheet and financials filed on 1999. The end of
their services to be effective on this February 11th., 2000. The reason for this
change is for their  expensive  fees and  charges at a time when the Company can
not afford such expenses.

                                       33
<PAGE>

On  this  above  mentioned  Meeting  of the  Board  of  Directors  it  was  also
unanimously  approved,  effective February 11th., 2000 the engagement  agreement
with Joel S. Baum, C.P.A.,  President of BAUM & COMPANY, P.A. at 1515 University
Drive,  Suite #209,  Coral  Springs,  Florida  33071.  The new certified  public
accountants  firm  will be  responsible  for the audit of the  balance  sheet of
Default Proof Credit Card System,  Inc., as of December 31, 1999 and the related
statements of income,  retained earnings, and cash flow for the year then ended.
The new engaged certified public  accountants,  while promising the same quality
service, offered a more reasonable and accessible cost to the Company.

Dated at the City of Miami, Florida this 12th. February, 2000


                                              By: PEDRO P. LLAGUNO, Esq.
                                              --------------------------
                                              Pedro P.Llaguno, Secretary


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant has duly caused this report on its behalf by the undersigned hereunto
duly authorized.


                                 DEFAULT PROOF CREDIT CARD SYSTEM, Inc.
                                 --------------------------------------
                                (Registrant)



Date: February 12, 2000          By: VINCENT CUERVO
                                 ------------------
                                 Vincent Cuervo, CEO


                                 By: PEDRO P. LLAGUNO, Esq.
                                 --------------------------
                                 Pedro P. Llaguno, Secretary



                                       34
<PAGE>


                                 C O N T E N T S


                                                                 Page
                                                                 ----

AUDITORS' REPORT................................................ F-2

FINANCIAL STATEMENTS

         BALANCE SHEET.......................................... F-3

         STATEMENTS OF OPERATIONS............................... F-4

         STATEMENT OF STOCKHOLDERS' EQUITY/DEFICIENCY........... F-5 - F-10

         STATEMENTS OF CASH FLOWS..............................  F-11

NOTES TO FINANCIAL STATEMENTS................................... F-12 - F-17


                                      F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Default Proof Credit Card System, Inc.

We have  audited the  accompanying  balance  sheet of Default  Proof Credit Card
System,  Inc., (a  development  stage  company) as of December 31, 2002, and the
related  statements of operations,  stockholders'  deficiency and cash flows for
the year then ended.  These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an  opinion  on the
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides 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 Default  Proof Credit Card
System,  Inc. (a  development  stage  company)  as of December  31, 2002 and the
results  of its  operations  and its  cash  flows  for the  year  then  ended in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements  the Company's  dependence on outside  financing,  lack of
existing  commitments  from  lenders to  provide  necessary  financing,  lack of
sufficient working capital,  and losses since inception raise substantial doubts
about its ability to continue as a going concern.  Management's plans concerning
these  matters are also  described in Note 2. The  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.


Coral Springs, Florida
March 12, 2003








                                      F-2
<PAGE>


                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                                  Balance Sheet

                                December 31, 2002


                                     ASSETS
                                     ------
CURRENT ASSETS
   Cash                                                               $      76
   Prepaid Expenses                                                      20,092
                                                                         ------
               Total Current Assets                                      20,168


PROPERTY AND EQUIPMENT (Net of
   Accumulated Depreciation of $6,988)                                    2,805

OTHER ASSETS
   Deferred Patent Costs, Net                                             1,161
                                                                          -----
               Total Assets                                           $  24,134
                                                                      =========


                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
       Accounts Payable & Accrued Expenses                            $   1,183
      Due to Related Party                                               21,922
                                                                         ------

Total Liabilities                                                        23,105

STOCKHOLDERS' DEFICIENCY
      Common Stock, $0.01 Par Value, 2,500,000
         Shares Authorized, 1,785,884 Issued and Outstanding             17,859
      Additional Paid-In Capital                                      4,531,027
      Deficit Accumulated During Developmental Stage                 (4,547,857)
                                                                     ----------
               Total Stockholders' Equity                                 1,029
                                                                          -----
                  Total Liability and Stockholders Equity            $   24,134
                                                                     ==========



                 See Accompanying Notes to Financial Statements
                                      F-3
<PAGE>


                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                          (A DEVELOPMENT STAGE COMPANY)


                            Statements of Operations

<TABLE>
<CAPTION>
                                                      Cumulative From
                                                      August 14, 1985      For The Years Ended
                                                       (Inception)             December 31,
                                                        Through            -------------------
                                                     December 31, 2002     2002           2001
                                                     -----------------     ----           ----
<S>                                                    <C>                <C>            <C>
EXPENSES
    General & Administrative                           $ 3,508,584        $ 156,796     $ 214,223
    Officer Salary                                         986,556                -             -
    Marketing                                              393,358                -             -
    Depreciation & Amortization                            105,695            1,895         3,134
    Expired Public Offering Costs                          179,211                -             -
                                                         ---------        ---------     ---------
    Total Expenses                                       5,173,404          158,691       217,357
                                                         ---------        ---------     ---------

OTHER INCOME (EXPENSE)
    Litigation Settlements (Note 7)                        (90,000)               -             -
    Interest & Other Income                                423,220                -             -
    Loss on Marketable Securities                          (96,529)               -             -
    Loss on Sale of Equipment                              (34,144)               -             -
                                                        ----------        ---------     ---------
    Total Other Income (Expense)                           202,547                -             -
                                                        ----------
Net Loss before Income Taxes and Extraordinary Item     (4,970,857)        (158,691)     (217,357)
Income tax benefit                                          25,436               -              -
                                                        ----------        ---------     ---------
Net Loss before Extraordinary Item                      (4,945,421)        (158,691)     (217,357)

Extraordinary item - Gain from restructuring of
    debt (net of Income Taxes of $165,200)                 257,800                -             -
Benefit from utilization of net operating loss
  carry forward                                            139,764                -             -
                                                       -----------       ----------     ----------
NET (LOSS) INCOME                                      $(4,547,857)      $ (158,691)    $(217,357)
                                                       ===========       ===========    ===========

Net (Loss) Earnings per Common Share                                     $    (0.10)    $   (0.15)
                                                                         ==========     =========

Weighted Average Number of  Common
    Shares Outstanding                                                    1,585,170     1,488,024
                                                                          =========     =========

</TABLE>





                See Accompanying Notes to Financial Statements.
                                      F-4
<PAGE>
                    DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


                 Statement of Stockholders' Equity (Deficiency)


<TABLE>
<CAPTION>


                                                                                                Deficit
                                                        Common Stock                           Accumulated
                                                    ----------------------     Additional      During the
                                                    # of Shares                Paid-In         Development
                                                      Issued        Amount     Capital         Stage             Total
                                                      ------        ------     ----------      -----------    -----------

<S>                                                 <C>             <C>        <C>              <C>           <C>
To a Director, for Cash & Other Property
 (A, B, C)                                        2,518,000         2,518         11,705                -         4,223
To Directors & Officers for non-Cash
 Considerations Received (A, B, D)                  582,750           583         16,900                -        17,483
To Others for non-Cash Considerations
 Received (A, B, D)                                  49,250            49          1,428                -         1,477
                                                  ---------       -------       --------       -----------    ----------
BALANCE - DECEMBER 31, 1985                       3,150,000         3,150         30,033                -        33,183
Private Placement Offering, Net of
 Issuance Costs of $16,453 (A, E)                   312,500           312        108,235                -       108,547
Patent License Costs (M)                                  -            -        (125,000)               -      (125,000)
Dec. 31/86--Net Loss                                      -            -               -          (44,461)      (44,461)
                                                  ---------       -------       --------       -----------    ----------
BALANCE - DECEMBER 31, 1986                       3,462,500         3,462         13,268          (44,461)      (27,731)
May 7/87-- to a Director/Officer for Property
 (A, B, C)                                          500,000           500           (500)                -            -
May 12/87-- to a Director/Officer for Cash
 (A, F)                                             100,000           100         39,900                 -       40,000
Reversal of Accrued License Costs (M)                     -             -         25,000                 -       25,000
Capital Contribution by Principal Stockholder             -             -         78,076                 -       78,076
Oct. 12/87-- Public Offering, net of Costs          $76,314     1,131,010          1,132         1,336,318    1,337,450
Dec. 31/87--Net Loss                                     -             -               -          (176,052)    (176,052)
                                                  ---------       -------       --------       -----------    ----------
BALANCE - DECEMBER 31, 1987                       5,193,510         5,194      1,492,062          (220,513)   1,276,743
Apr. 7/88-- to Directors/Officers for Property
 (A, G)                                             800,000           800              -                 -          800
May 1/88-- to Others for non-Cash Considerations
 Received (A, H)                                     95,750            96            (96)                -            -
May 19/88-- Proceeds from Public Offering, net of
 Public Offering Costs of                           487,287     2,300,000          2,300         1,810,413    1,812,713
Patent License Costs (M)                                  -             -       (100,000)                -     (100,000)
Warrants Converted at $1.25 per Share               128,300           128        160,247                 -      160,375
Dec. 31/88--Net Loss                                      -             -                -        (405,875)    (405,875)
                                                  ---------       -------       --------       -----------    ----------
BALANCE - DECEMBER 31, 1988                       8,517,560         8,518      3,362,626          (626,388)   2,744,756
Warrants Converted at $2.00 per Share                 3,000             3          5,997                 -        6,000
Issuance of Stock by Principal Stockholder                -             -        110,000                 -      110,000
Dec. 31/89--Net Loss                                     -              -               -       (1,129,559)  (1,129,559)
                                                  ---------       -------       --------       -----------    ----------
BALANCE - DECEMBER 31, 1989                       8,520,560       $ 8,521    $ 3,478,623      ($ 1,755,947)  $ 1,731,197
Dec. 31/90--Net Loss                                                                            (1,175,201)   (1,175,201)
                                                  ---------       -------       --------       -----------    ----------
BALANCE - DECEMBER 31, 1990                       8,520,560         8,521      3,478,623        (2,931,148)     555,996
Jul. 10/91--to Various Parties for Professional
  Services Rendered (A, I)                          125,000           125          7,375             7,500
Oct. 3/91-- To Directors & Officers for non-Cash
 Considerations Received (A, J)                      85,000            85          5,015             5,100
Dec. 31/91--Net Loss                                                                              (430,800)    (430,800)
                                                  ---------       -------       --------       -----------    ----------
BALANCE - DECEMBER 31, 1991                       8,730,560         8,731      3,491,013          (3,361,948)    137,796

</TABLE>


<PAGE>

                    DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)

           Statement of Stockholders' Equity (Deficiency) (Continued)
<TABLE>
<CAPTION>


                                                                                                Deficit
                                                        Common Stock                           Accumulated
                                                    ----------------------     Additional      During the
                                                    # of Shares                Paid-In         Development
                                                      Issued        Amount     Capital         Stage             Total
                                                      ------        ------     ----------      -----------    -----------

<S>                                                 <C>             <C>        <C>              <C>            <C>
BALANCE - DECEMBER 31, 1991                         8,730,560        8,731      3,491,013       (3,361,948)    137,796
Aug. 12/92-- to an Individual for Professional
  Services Rendered (A, K)                             50,000           50          2,950            3,000
Dec. 31/92--Net Loss                                                                              (173,144)   (173,144)
                                                   ----------     --------     ----------       ----------    ---------
BALANCE - DECEMBER 31, 1992                       8,780,560         8,781      3,493,963        (3,535,092)    (32,348)
Feb. 12/93-- to a Related Entity in Consideration
  for Deferral of Loan Repayment (A, L)              46,850            47          2,753             2,800
Dec. 31/93--Net Loss                                                                              (450,366)   (450,366)
                                                   ----------     --------     ----------       ----------    ---------
BALANCE - DECEMBER 31, 1993                       8,827,410         8,828      3,496,716        (3,985,458)   (479,914)
Feb. 22/94-- to Various Parties for Professional
  Services Rendered (A, N)                           75,000            75          7,425             7,500
Jul. 25/94--to an Individual for Professional
  Services Rendered (A, O)                           30,000            30          5,970             6,000
Jul. 25/94-- to Various Parties for Secretarial
  Services Rendered (A, P)                           10,000            10          1,990             2,000
Dec. 31/94--Net Loss                                                                              (198,366)   (198,366)
                                                   ----------     --------     ----------       ----------    ---------
BALANCE - DECEMBER 31, 1994                       8,942,410         8,943      3,512,101        (4,183,824)   (662,780)
Jul. 25/95--to an Individual for Professional
  Services Rendered (A, Q)                          125,000           125         18,625            18,750
Dec. 31/95--Net Loss                                                                              (103,635)   (103,635)
                                                   ----------     --------     ----------       ----------    ---------
BALANCE - DECEMBER 31, 1995                       9,067,410       $ 9,068    $ 3,530,726      ($ 4,287,459)  ($747,665)
Jul. 12/96--to an Individual for Professional
  Services Rendered (A, R)                           25,000            25          3,725             3,750
Jul. 12/96--to an Individual for Professional
  Services Rendered (A, K)                           60,000            60          8,940             9,000
Aug. 28/96--to an Individual for Professional
  Services Rendered (A, S)                           30,000            30          4,470             4,500
Aug. 28/96--to an Individual for Professional
  Services Rendered (A, T)                           50,000            50          7,450             7,500
Sep. 13/96--to the President/Principal Shareholder
  in Exchange for Accrued Salaries Waiver up to
  12/31/96 (A, U)                                 2,000,000         2,000        298,000           300,000
Dec. 31/96--Net Loss                                                                               (39,711)    (39,711)
                                                   ----------     --------     ----------       ----------    ---------
BALANCE - DECEMBER 31, 1996                      11,232,410        11,233      3,853,311        (4,327,170)   (462,626)
Feb. 26/97--to Director/Officer for Professional
  Services Rendered (A, V)                           50,000            50          8,950             9,000
Feb. 26/97-- to an Individual for Professional
  Services Rendered (A, W)                           15,000            15          2,685             2,700
Nov. 5/97-- to an Individual for Professional
  Services Rendered (A, P)                           20,000            20          2,980             3,000
Nov. 5/97--to a Financial Public Relations Company
  for  Professional Services Rendered (A, X)        226,100           226         24,634            24,860
Nov. 5/97-- to a Consulting Company for Professional
  Services Rendered (A, Y)                          100,000           100         10,900            11,000
Dec. 31/97--Net Gain                                                                               349,910     349,910
                                                 ------------     --------     ----------       ----------    ---------
BALANCE - DECEMBER 31, 1997                      11,643,510        11,644      3,903,460        (3,977,260)    (62,156)

</TABLE>


                 See Accompanying Notes to Financial Statements
                                      F-6
<PAGE>

                    DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)

           Statement of Stockholders' Equity (Deficiency) (Continued)

<TABLE>
<CAPTION>


                                                                                                Deficit
                                                        Common Stock                           Accumulated
                                                    ----------------------     Additional      During the
                                                    # of Shares                Paid-In         Development
                                                      Issued        Amount     Capital         Stage             Total
                                                      ------        ------     ----------      -----------    -----------

<S>                                                 <C>             <C>        <C>              <C>           <C>
BALANCE - DECEMBER 31, 1997                         11,643,510      11,644     3,903,460        (3,977,260)     (62,156)
Jan. 22/98--to a Financial Public Relations Co.
  for Professional Services Rendered (X)              200,000          200        21,800                         22,000
Apr. 13/98--for Professional Services Rendered (X)    100,000          100        14,900                         15,000
Jun. 4/98--for Professional Services Rendered (Y)      50,000           50         8,950                          9,000
Aug. 4/98--for Professional Services Rendered (R)      50,000           50         7,950                          8,000
Dec. 31/98--Net Loss                                                                               (71,231)     (71,231)
                                                  -----------     ----------  ----------      ------------    ---------
BALANCE - DECEMBER 31, 1998                        12,043,510     $ 12,044    $3,959,560      ($ 4,048,491)   ($ 76,887)
Feb. 1/99--10 to 1 Reverse Stock Split            (10,839,159)                                              (10,839,129)
Various/99--for Professional Services Rendered         66,000          660        22,825                         23,485
Dec. 31/99--Net Loss                                                                               (64,319)     (64,319)
BALANCE - DECEMBER 31, 1999                         1,270,351       12,304     3,982,385        (4,112,810)    (118,121)
Feb. 28/00--for Professional Services Rendered          7,000           70        26,180                         26,250
Apr. 2/00--for Professional Services Rendered           4,000           40         8,680                          8,720
Apr. 12/00--for Professional Services Rendered            500            5         1,245                          1,250
Jul. 26/00--for Professional Services Rendered          2,500           25         1,850                          1,875
Nov./00--for Exercise of Stock Options in Exchange
  for Extingment of Debt                              140,283        1,403       146,380                        147,783
Dec. 31/00--Net Loss                                                                               (58,999)     (58,999)
                                                  -----------     ----------  ----------      ------------    ---------
BALANCE - DECEMBER 31, 2000                         1,424,634       14,247     4,166,720       ( 4,171,809)       9,158
Jan 11/01-for Professional Services Rendered           14,500          145        67,355                         67,500
Jan/Apr 01 Stock Options for Services                                             34,500                         34,500
Jan 31/ 01-Exercise of Stock Options for Cash          35,000          350        34,650                         35,000
May 11/01Exercise of Stock Options for Cash            25,000          250         9,125                          9,375
 July 31/01 for Professional Services Rendered          9,000           90        80,910                         81,000
Dec 31/01 Net Loss                                                                               (217,357)     (217,357)
                                                  -----------     ----------  ----------      ------------    ---------
BALANCE -DECEMBER 31, 2001                           1,508,134      15,082     4,393,260       (4,389,166)       19,176
Jan/Nov 02 for Services                                 12,750         127        26,362                         26,489
July 02 Stock Options for Services                                                87,555                         87,555
Aug 14/02 Exercise of Stock Options for Cash           265,000       2,650        23,850                         26,500
Dec 31/02 Net Loss                                                                               (158,691)     (158,691)
                                                  -----------     ----------  ----------      ------------    ---------
 BALANCE -DECEMBER 31, 2002                          1,785,784     $17,859    $4,531,027      $(4,547,857)      $ 1,029
                                                  ============    ==========  ===========     ============    =========
</TABLE>



                 See Accompanying Notes to Financial Statements
                                      F-7

<PAGE>
                    DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


           Statement of Stockholders' Equity (Deficiency) (Continued)

(A)  The shares are subject to restrictions on transfers  imposed by Rule 144 of
     the Securities Act of 1993, as amended.

(B)  In  addition  to the  shares of common  stock  issued,  the same  number of
     warrants  were issued  entitling the  shareholder  to purchase one share of
     common stock at $1.50 per share until April 12, 1990 (extended to August 2,
     1991). On May 4, 1990 the Company,  pursuant to a Resolution adopted by its
     Board  of  Directors  at a  special  meeting  of its  Board  of  Directors,
     terminated and canceled the warrants.

(C)  Other property  consisted of an exclusive license to a patent and a service
     mark recorded at par value ($.001) of the shares of common stock issued. At
     the time of issuance of the shares,  the fair market  value of the property
     exchanged was not determinable.

(D)  Non-cash consideration received consisted of professional services rendered
     in connection with the  organization  and  development of the Company.  The
     shares of stock  issued for  non-cash  services  were  recorded at the fair
     market value of the services rendered.

(E)  The Company sold 312,500 shares of $.001 par value common stock at $.40 per
     share in a private placement offering during August 1986.

(F)   In addition to the shares of common stock issued, the shareholder received
      three hundred thousand warrants,  each entitling him to purchase one share
      of common  stock at $1.50 per share  until  April 12,  1990  (extended  to
      August 2, 1991).  On May 4, 1990 the  Company,  pursuant  to a  Resolution
      adopted  by its Board of  Directors  at a Special  Meeting of its Board of
      Directors, terminated and canceled the warrants.

(G)  Property  consists  of  an  exclusive  license  Patent  No.  4,718,009,   a
     Registered Trademark  "Resource",  and a  Continuation-In-Part  of a patent
     application  called  "Debit  Card".  The Canadian  patent for Default Proof
     Credit Card  System was  granted and the Company was advised  that fees for
     issuance of such patent were due before December 12, 1990. The Company paid
     such fees on October 30, 1990.  The shares of common stock were recorded at
     fair market value ($1.00 per share). Additional paid-in capital was reduced
     by $799,200 to adjust for the excess of the fair market value of the shares
     issued over the contributors' cost of the license agreement.

(H)  Non-cash   consideration   received   consisted  of  services  rendered  in
     connection with the Company's 1987  self-underwriting  public offering. The
     shares of common  stock were  recorded at fair market  value at the date of
     issuance,  net of discounts for restricted stock  (approximately  $1.00 per
     share).  A corresponding  charge was made to additional  paid-in capital to
     reflect the public offering costs.

(I)   Non-cash   consideration   received  consisted  of  professional  services
      rendered  in  connection  with the  lawsuit  between the Company and State
      Street  Bank & Trust  Company.  The shares of stock  issued  for  non-cash
      services were recorded at the fair market value at the date of issuance.

(J)  Shares  were  issued  to the  directors  and  officers  of the  Company  as
     consideration for their services as directors of the Company. The shares of
     stock issued for non-cash  services  were recorded at the fair market value
     of the shares at the date of issuance.


                 See Accompanying Notes to Financial Statements
                                      F-8
<PAGE>
                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


(K)  Non-cash consideration received consisted of professional services rendered
     for software  consulting.  The shares of stock issued for non-cash services
     were  recorded  at the  fair  market  value  of the  shares  at the date of
     issuance.

(L)  Non-cash consideration received consisted of a deferral on a loan repayment
     to an entity controlled by the Company's principal stockholder.  The shares
     of stock issued for non-cash consideration were recorded at the fair market
     value of the shares at the date of issuance.

(M)  In  connection  with a  license  agreement  between  the  Company  and  its
     principal  stockholder,  the  stockholder  was paid a fee in the  amount of
     $200,000  from the  proceeds  and  earnings of the  Company's  October 1987
     self-underwriting   public  offering.  The  $200,000  fee  was  charged  to
     additional paid-in capital.

(N)  Non-cash  consideration received consisted of promotion efforts with Credit
     Union  officers.  The shares of stock  issued for  non-cash  services  were
     recorded at the fair market value of the shares at the date of issuance.

(O)  Non-cash  consideration  received  consisted of  arranging  meetings and an
     agreement. The shares of stock issued for non-cash  services were recorded
     at the fair market value of the shares at the date of issuance.

(P)  Non-cash   consideration  received  consisted  of  secretarial  and  typing
     services. The shares of stock issued for non-cash services were recorded at
     the fair market value of the shares at the date of service.

(Q)  Non-cash  consideration  received  consisted of arranging  various meetings
     with  bankers,  investors  etc.  The shares of stock  issued  for  non-cash
     services  were  recorded at the fair market value of the shares at the date
     of service.

(R)  Non-cash  consideration received consisted of accounting services performed
     to date. The shares of stock issued for non-cash  services were recorded at
     the fair market value of the shares at the date of service.

(S)  Non-cash  consideration received consisted of introductions to investors in
     Ecuador.  The shares of stock issued for non-cash services were recorded at
     the fair market value of the shares at the date of service.

(T)  Non-cash  consideration  received  consisted  of work  related to  possible
     infringement on Company's  patent.  The shares of stock issued for non-cash
     services  were  recorded at the fair market value of the shares at the date
     of service.

(U)  Non-cash  consideration received consisted of waiver of accrued salaries up
     to 12/31/96. The shares of stock issued for non-cash services were recorded
     at the fair market value of the shares at the date of service.

(V)  Non-cash  consideration  received  consisted of  advertising  and marketing
     services  supplied at no charge since 1995.  The shares of stock issued for
     non-cash  services  were recorded at the fair market value of the shares at
     the date of service.

(W)  Non-cash  consideration  received  consisted of security legal advice since
     May 1995. The shares of stock issued for non-cash services were recorded at
     the fair market value of the shares at the date of service.


                 See Accompanying Notes to Financial Statements
                                      F-9

<PAGE>


                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                          (A DEVELOPMENT STAGE COMPANY)


(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.

(Y)  Non-cash consideration received consisted of consulting services related to
     the  preparation  of 10K  filing..  The shares of stock issued for non-cash
     consideration  were  recorded at the fair market value of the shares at the
     date of issuance.

(26) In 2001,  25,500  shares of common  stock,  valued  at  $148,500  and stock
     options to outside  consultants  for 69,000 shares,  valued at $34,500 were
     issued for services.


(A1) In 2002, 12,750 shares of common stock, valued at $26,489 and stock options
     to outside  consultants for 275,000  shares,  valued at $87,555 were issued
     for services.


                 See Accompanying Notes to Financial Statements
                                      F-10



<PAGE>
                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


                            Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                 Cumulative from        Years ended
                                                                 Aug. 14, 1985 to        December 31
                                                                 Dec. 31, 2002        2002          2001
                                                                 -------------        ----          ----
OPERATING ACTIVITIES
<S>                                                               <C>             <C>           <C>

Net (Loss) Gain                                                   $ (4,547,857)   $ (158,691)   $ (217,357)
Adjustments to Reconcile Net (Loss) Gain to
    Net Cash Used in Operating Activities:
    Depreciation & Amortization                                        105,628         1,895         3,134
    Loss on Marketable Securities                                      130,741             -             -
    Expired Public Offering Costs                                      110,000             -             -
    Cancellation of Stockholder Note Receivable                         55,490             -             -
    Stock Issued in lieu of Cash for Prof. Services                    503,544        26,489       148,500
    Stock  Options Issued in lieu of Cash for Prof. Services           122,035        87,555        34,500
    Stock Issued in lieu of Cash for Waived Salaries                   294,000             -             -
    Loss on Sale of Equipment                                           34,144             -             -
    Decrease (Increase) in Other Assets                                (-1,161)            -             -
    Decrease (Increase) in Prepaid Expenses                            (20,092)      (20,092)
    Increase (Decrease) in Due to Related Party                         21,922        21,922             -
    Increase (Decrease) in Accrued Expenses                                800           384           800
                                                                    ----------      --------     ---------
    Net Cash Used in Operating Activities                           (3,288,507)      (40,538)      (30,423)
                                                                    ----------      --------     ---------
INVESTING ACTIVITIES
Purchases of Marketable Securities                                    (130,741)            -             -
Purchases of Property & Equipment                                     (125,227)            -             -
Patent License Expenditures                                           (152,098)            -             -
Proceeds from Sale of Equipment                                         22,994             -             -
                                                                    ----------      --------     ---------
    Net Cash Used in Investing Activities                             (385,072)            -             -
                                                                    ----------      --------     ---------
FINANCING ACTIVITIES
Proceeds from Issuance of Stock-Private Offerings                      234,783             -             -
Proceeds from Issuance of Stock-Public Offerings                     3,150,163             -             -
Proceeds from Issuance of Stock-Exercise of Warrants                   311,233        26,500        44,375
Capital Contributions                                                   78,076             -             -
Net Receipts/Advances to Stockholder                                  (100,600)            -
                                                                    ----------      --------     ---------
    Net Cash Provided by Financing Activities                        3,673,655        26,500        44,375
                                                                    ----------      --------     ---------
    NET INCREASE (DECREASE) IN CASH                                         76      (14,038)        13,952
                                                                    ----------      --------     ---------
    CASH - BEGINNING                                                         -       14,114            162
    CASH - ENDING                                                   $       76     $     76       $ 14,114


</TABLE>



                 See Accompanying Notes to Financial Statements
                                      F-11
<PAGE>



                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)

                          Notes to Financial Statements
                                December 31, 2002

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Organization  and  Business  Activity
          -------------------------------------

          Default   Proof  Credit  Card  System,   Inc.  (the   "Company")   was
          incorporated  on  August  14,  1985  under  the  laws of the  State of
          Florida.  The Company owns the  intellectual  property of several U.S.
          Patents  and  patent  pending  applications  and  is  engaged  in  the
          marketing of secured  credit cards and of the ATM Prepaid  Debit Cards
          Dispenser for which received  notice of patent  allowance on April 24,
          2000,  the over the counter sale and dispensing of prepaid debit cards
          (patent  pending)  and the  e-commerce  internet  dispensed of prepaid
          debit  cards  under the Domain  name  ubuydedbitcards.com  also patent
          pending.  The Company's offices are located in Coral Gables,  Florida.
          The Company is in the development stage and its operation to date have
          largely  consisted of the research,  marketing and  development of its
          products.

          Use of Estimates
          ----------------
          The  preparation of financial  statements in conformity 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 and the reported amounts of revenues
          and expenses during the reporting period.  Actual results could differ
          from those estimates.

          Earnings (Loss) Per Common Share
          --------------------------------
          In February 1997, the Financial  Accounting  Standards  Board ("FASB")
          issued Statement of Financial  Accounting  Standards ("SFAS") No. 128,
          "Earnings  per Share" which  simplifies  the  standards  for computing
          earnings per share ("EPS")  previously  found in APB No. 15, "Earnings
          Per  Share".  It  replaces  the  presentation  of  primary  EPS with a
          presentation of basic EPS. It also requires dual presentation of basic
          and diluted EPS on the face of the income  statement  for all entities
          with complex capital  structures and requires a reconciliation  of the
          numerator and denominator of the diluted EPS computation.  The Company
          adopted  SFAS No. 128 in January 1998 and its  implementation  did not
          have an effect on the financial statements.  EPS has been restated for
          all prior  periods  presented.  Net loss per common  share  (basic and
          diluted)  is based on the net loss  divided  by the  weighted  average
          common shares outstanding during each year. The Company's  potentially
          issuable shares of common stock pursuant to outstanding  stock options
          has been  excluded from the  calculation  of diluted loss per share in
          2002 and 2001 since the effect  would have been  anti-dilutive  to the
          Company's net loss per common share.

          Patent Costs
          ------------
          Costs incurred in connection with obtaining the license agreement of a
          patent  have  been  capitalized  and are  being  amortized  using  the
          straight-line  method  over 17 years from the date of  issuance of the
          patents.

          Income Taxes
          ------------
          The Company  accounts for income taxes  pursuant to the  provisions of
          FASB No. 109  "Accounting  for Income Taxes",  which  requires,  among
          other things,  a liability  approach to  calculating  deferred  income
          taxes. The asset and liability approach requires the recognition



                 See Accompanying Notes to Financial Statements
                                      F-12
<PAGE>

                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


                    Notes to Financial Statements (Continued)
                                December 31, 2002

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Income Taxes (Continued)

          of deferred tax  liabilities  and assets for the  expected  future tax
          consequences of temporary differences between the carrying amounts and
          the tax bases of assets and liabilities. The Company has had operating
          losses since  inception  and  accordingly  has not provided for income
          taxes.  Realization of the benefits  related to the net operating loss
          carryforwards  may be limited in any one year due to IRS Code  Section
          382, change of ownership rules.

          Accounting Pronouncements

          Statement  of  Position  ("SOP")  98-5,  "Reporting  on the  Costs  of
          Start-up Activities",  provides guidance on the financial reporting of
          start-up costs and  organization  costs. It requires costs of start-up
          activities and organization costs to be expensed as incurred.  The SOP
          is effective for financial statements for fiscal years beginning after
          December 15, 1998. The Company's  management  does not expect this SOP
          to have a  material  impact on the  Company's  financial  position  or
          results of operations.

          In March 1998, the American  Institute of Certified Public Accountants
          ("AICPA") issued Statement of Position 98-1,  Accounting for the Costs
          of Computer  Software  Developed  or Obtained  for  Internal Use ("SOP
          98-1").  SOP 98-1 requires  computer  software costs  associated  with
          internal  use  software  to be  expensed  as  incurred  until  certain
          capitalization  criteria  are met.  The  Company  adopted  SOP 98-1 on
          January 1, 1999.  Adoption of this statement is not expected to have a
          material  impact  on the  Company's  financial  position,  results  of
          operations or cash flows.

          SFAS No.  133,  "Accounting  for  Derivative  Instruments  and Hedging
          Activities",   establishes  accounting  and  reporting  standards  for
          derivative instruments and for hedging activities. It requires that an
          entity  recognize all  derivatives  as either assets or liabilities in
          the statement of financial  position and measure those  instruments at
          fair value. The Statement applies to all entities and is effective for
          all fiscal quarters of the fiscal years beginning after June 15, 1999.
          The  Company  did not  engage in  derivative  instruments  or  hedging
          activities in any periods presented in the financial statements.

NOTE 2. GOING CONCERN CONSIDERATION

          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 through December 31, 2003.




                                      F-13
<PAGE>
                    DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


                    Notes to Financial Statements (Continued)
                                December 31, 2002

NOTE 3. DUE FROM STOCKHOLDER

          Due from stockholder consisted of various non-interest bearing and due
          upon demand advances.

NOTE 4. LICENSE AGREEMENT

          The Company's  C.E.O.  and principal  stockholder  was issued two U.S.
          patents and one  Canadian  patent  between  January  1988 and February
          1991,  and also  registered in the U.S. the trademark  "Resource".  On
          February 9, 1993, the Company  entered into a license  agreement which
          revoked the prior agreement dated January 8, 1991,  which provides the
          Company the exclusive rights and use of the aforementioned patents and
          trademark  for an  indefinite  period  of time in return  for  nominal
          consideration to the  stockholder.  The Company C.E.O. has transferred
          to the Company all the worldwide  rights and ownership of three patent
          applications for stock options to purchase shares of the Company,  the
          stock options to be granted if the patent  applications  received from
          the U.S. Patent and Trademarks  offices the related patent allowances.
          On April 24,  2000 the U.S.  Patent  and  Trademark  Office  notice of
          allowance of the patent  application ATM Prepaid Debit Cards Dispenser
          notifying  that all its eight claims were  allowed.  The other patents
          pending,  the sale,  dispensed and activated over the counter  prepaid
          debit cards, as well as the purchase,  sale and dispensed  through the
          Internet e-commerce,  known as the domain name  ubuydebitcards.com are
          now in process of receive patent allowances.

NOTE 5. EMPLOYMENT AGREEMENT

          On September 1, 1988, the president/principal stockholder entered into
          an employment  agreement with the Company.  Pursuant to the agreement,
          the stockholder is to receive an annual salary of $144,000,  increased
          annually by the greater of 5% or the  increase in the  consumer  price
          index.  However,  rights to this  salary and its  increases  have been
          permanently waived by the stockholder until such time as the Company's
          cash flows improve.  The agreement  terminates upon the  stockholder's
          seventy-sixth  birthday, or his death or disability,  whichever occurs
          first.  The agreement also provides that in the event of a termination
          for other than cause, death or disability,  he shall receive severance
          pay in the amount equal to his salary, payable during the remainder of
          his employment term.

NOTE 6. STOCK OPTIONS

          1988 STOCK OPTION PLAN

          In August 1988, the Company adopted the 1988 Stock Option Plan.  Under
          this plan,  stock options to purchase  600,000  shares of common stock
          may be granted to  employees,  officers  and other  persons  providing
          services to the Company, a parent or a subsidiary of the Company.

          The 1988 Stock  Option Plan is  intended  to qualify as an  "Incentive
          Stock Option Plan" under  Section 422A of the Internal  Revenue  Code.
          Under the Stock Option Plan, incentive stock options may be granted at
          not less than 100  percent of the fair market  value of the  Company's
          common  stock at the date the option is granted  (110% of fair  market
          value for 10% or greater




                                      F-14

<PAGE>
                    DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


                    Notes to Financial Statements (Continued)
                                December 31, 2002

NOTE 6. STOCK OPTIONS

          1988 STOCK OPTION PLAN (Continued)

          shareholders)  and  options  granted  to any one  participant  may not
          exceed  $100,000  in option  price per year.  Options  may be  granted
          within the (10) years from the adoption of the 1988 Stock Option Plan.
          Each option granted under the 1988 Stock Option Plan must be exercised
          within ten (10) years from the date of grant.

          No options were granted under the 1988 Stock Option Plan.

          OTHER STOCK OPTIONS

          During 1998,  five-year non-plan options to purchase 695,000 shares of
          common stock at prices ranging  between $0.14 and $1.50 per share were
          granted to the  President  and Vice  President of the  Company.  These
          options were fully vested at the date of grant.

          During 1997 five-year  non-plan  options to purchase 445,000 shares of
          common stock, at prices ranging between $0.15 and $1.25 per share were
          granted to the  President  and Vice  President of the  Company.  These
          options were fully vested at the date of grant.

          At December 31, 1998 and 1997 total non-plan options  outstanding were
          2,125,000 and 1,525,000,  respectively.  At December 31, 1998 and 1997
          2,125,000 and 1,525,000,  respectively,  of the non-plan  options were
          fully vested.

          As of  December  31, 1998 and 1997 the Company has agreed to grant its
          President other five-year non-plan options of 3,000,000 and 2,250,000,
          respectively,  contingent upon the issuance of certain patents.  These
          options will have exercise prices of $0.10 and $0.15, respectively.

          As of May 19,  2000 the  Company  has agreed to grant its  C.E.O.  and
          inventor  over ten year  non-plan  options to purchase  the  Company's
          Common  Stock  $0.01  par value  per  share in the  amount of  500,000
          shares,  contingent upon the issuance of patent allowance related to a
          certain patent application. In February 2002, the patent was granted.

          In 2001,  69,000  options,  at exercise  prices  ranging from $4.75 to
          $11.00,  were issued for outside  services.  The company  also granted
          corporate  officers  options for 101,000  shares at prices of $4.75 to
          $12.00 per share.

          In 2002 195,000 options at an exercise price of $ 4.00 were issued for
          outside services.  The company also granted corporate officers options
          for 304,000 shares at prices of $1.77 to $4.00 per share.

          In October 2002. as part of the  termination  settlement of the former
          President of the company 285,000 options at prices from $.50 to $ 6.50
          were issued,  which were offset by 350,000 forfeited Options at prices
          of $.38 to $4.75.

          As of November 22, 2002 the Company has agreed to grant its C.E.O. and
          inventor  over ten year  non-plan  options to purchase  the  Company's
          Common  Stock at $1.00 per  share in the  amount  of  150,000  shares,
          contingent upon the issuance of patent allowance  related to a certain
          patent application.

                                      F-15
<PAGE>

                    DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


                    Notes to Financial Statements (Continued)
                                December 31, 2002

NOTE 6. STOCK OPTIONS

          OTHER STOCK OPTIONS (Continued)

          As required by Statement of Financial  Accounting  Standards  ("SFAS")
          123, pro-forma  information  regarding net loss and loss per share has
          been determined as if the Company had accounted for its employee stock
          options under the fair value method of that statement.  The fair value
          for  these  options  was  estimated  at the  date  of  grant  using  a
          Black-Scholes option pricing model.

          The  Black-Scholes  option  valuation  model was  developed for use in
          estimating  the fair  value of traded  options  that have not  vesting
          restriction and are fully transferable.  In addition, option valuation
          models require the input of highly  subjective  assumptions  including
          the  expected  stock price  volatility.  Because the  Company's  stock
          options  have  characteristics  significantly  different  from  traded
          options,  and because changes in the subjective input  assumptions can
          materially  affect the fair value estimate,  the existing  models,  in
          management's  opinion,  do not  necessarily  provide a reliable single
          measure  of the fair  value of its  stock  options.  .The  charge  for
          options issued to employees in 2001 would increase the loss by $50,500
          or $ .03 per share and options  issued in 2002 would increase the loss
          by $130,491 or $ .08 per share

          A summary of the status of the  Company's  fixed stock option plan and
          non-plan  options as of December 31, 2002 and 2001, and changes during
          the years then ended is presented below:

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                          2002                   2001
                                                        --------                --------
                                                        Weighted                Weighted
                                                         Average                 Average
                                                         Exercise                Exercise
                                              Shares      Price      Shares*      Price
                                              ------      -----      -------      -----
     <S>                                     <C>         <C>       <C>           <C>

     Outstanding at beginning of year        1,327,500   $  2.50   1,287,500     $ 2.17
     Granted                                   754,000   $  3.34     170,000     $ 7.46
     Exercised                                (265,000)        -     (60,000)         -
     Forfeited/Expired                        (389,500)        -     (70,000)         -
     Outstanding at end of year               1,427,000   $ 3.33   1,327,500     $ 2.50
</TABLE>



NOTE 7. COMMON STOCK SPLIT

          On February 1, 1999, the Board of Directors of the company  approved a
          10 to 1 reverse stock split. All financial data has been appropriately
          adjusted.



                                      F-16

<PAGE>
                    DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A Development Stage Company)


                    Notes to Financial Statements (Continued)
                                December 31, 2002



NOTE 8. INCOME TAXES

          At December  31,  2002,  the Company  had a net  operating  loss carry
          forward of approximately $4 million, that expires through 2016.

          The Company has a deferred tax asset of approximately  $1,500,000 as a
          result of net  operating  loss  carry  forwards,  which is offset by a
          valuation allowance of the same amount due to the uncertainties behind
          its realization.

NOTE 9. PATENTS ISSUED

          On August 15, 2000,  the U.S.  Patent and Trademark  Office issued the
          Patent Number  6,105,009,  the Automated  Teller Machine  Dispenser of
          Debit Cards. The Patent Certificate was received on August 23, 2000.

          On June 11,  2002 the U.S.  Patent  and  Trademark  Office  issued the
          Patent Number 6,405,182, the System for Dispensing Prepaid Debit Cards
          Through Point-Of-Sale Terminals.

NOTE 10. DUE TO RELATED PARTY

          This  balance  represents  net  cash  advances,  made  by the  CEO and
          majority stockholder,  in contemplation of exercising stock options in
          2003.

NOTE 11. SUBSEQUENT EVENTS

          In January 8, 2003 the company  received the complete  assignments  of
          Patents numbers  6,105,009 and 6,405,182.  The patents  assignments to
          the company by the Inventor and CEO and majority stockholder have been
          registered at the U.S. Patent and Trademark Office.

          In January 2003, the company instituted patent infringement litigation
          in U.S. District Court against various defendants.



                                      F-20