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, 2000

                   -------------------------------------------
                                       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 ______ 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 file 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 [X].

     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 2,
2000, was: Common Stock $0.01 par value $12,109,389.

     The number of shares  issued and  outstanding  of the  registrant's  common
stock $0.01 par value as of December 31, 2000 was: 1,424,634.

<PAGE>

                               TABLE OF CONTENTS

                                                                     PAGE
                                                                     ----

PART I.    Item 1.  Description of Products and Business...........     2

PART II.   Item 2.  Description of Property........................    10

           Item 3.  Legal Proceedings..............................    11

           Item 4.  Submission of Matters to Vote of
                    Security Holders...............................    11

           Item 5.  Market for Common Equity and Related
                    Stockholders Matters...........................    11

           Item 6.  Management's Discussion and Analysis of
                    Financial Conditions and Results of Operations.    11

           Item 7.  Financial Statements...........................    13

           Item 8.  Changes in and Disagreements with Accountants
                    on Accounting and Financial Disclosure.........    13

PART III.  Item 9.  Directors, Executive Officers, Promoters and
                    Control Persons; Compliance with Section16(a)
                    of the Exchange Act............................    14

           Item 10. Executive Compensation.........................    15

PART IV.   Item 11. Security Ownership of Certain Beneficial
                    Owners and Management..........................    16

           Item 12. Certain Relationships and Relate Transactions..    16

           Item 13. Exhibits and Reports on Form 8-K...............    19

           Signatures..............................................    25

Annex I    Financial Statements of Default Proof Credit Card System, Inc.



<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF PRODUCTS & BUSINESS.
        -----------------------------------

     Default Proof Credit Card System, Inc. (the "Company"), 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 credits and
debit  cards that are a safer  lending  risk for the issuer.  The Company  first
secured type cards were marketed under the trademark Resource(R), presently owns
first class technology  related to ATMs machines and to the prepaid debit cards.
On August 15, 2000 United States Patent and  Trademarks  Office issue the Patent
No.  6,106,009  entitled  Automated  Teller  Machine  Dispenser  of Debit  Cards
("ATMDDC")  for which it has purchased  all  worldwide  rights and licenses from
it's inventor Dr. Vincent  Cuervo,  founder of Default Proof Credit Card System,
Inc., and also the inventor of the patent pending applications "INTERNET WEBSITE
PROGRAM" for the purchase,  issuing,  activation and dispensing of prepaid debit
cards, in the web under the domain name UBUYDEBITCARDS.COM  ["UBDC"] and "SYSTEM
FOR DISPENSING PREPAID DEBIT CARDS THROUGH  POINT-OF-SALE  TERMINALS" in the web
as "THE OVER-THE-COUNTER  PREPAID DEBIT CARD ". This patent pending applications
are  continuation in part of the company's  patent  #6,105,009 that was filed on
June 16, 1997 and from whom the company has purchased  all the worldwide  rights
and licenses. The above mentioned intellectual property are also protected under
the United States and  international  copyright  laws,  and the State of Florida
Trademark registrations.

     The  Resource  System  was  designed  to enable  owners  of life  insurance
policies with cash surrender  values to obtain a  collateralized  line of credit
pursuant to the issuance by a participating bank or other financial  institution
of a credit or debit card, such as MasterCard or Visa.

     Under the Resource(R)  System,  applicants who own life insurance with cash
surrender values will assign to the Company,  as collateral,  the cash surrender
values of their life  insurance  policies in exchange for a line of credit to be
granted by a  Participating  Institution  equal to at least 80% of the  assigned
collateral through the issuance of a credit or a debit card, or any other credit
instrument.   Other  than  with  respect  to  the  cash  surrender  values,  the
assignments will not affect any provisions of such life insurance policies.  The
collateral will be used to protect the  participating  institutions  against the
cardholder's  failure to pay the  credit/debit  cards  charges  when due. In the
event  of  such  failure,  the  Company,  as  guarantor  will  agree  to pay the
participating  institution the defaulted amount and, in turn, will be reimbursed
by the cardholder's  life insurance  company from the proceeds of a loan made by
the insurance company to the policyholder and charged,  as a policy loan, to the
cardholder's insurance policy.  Although the foregoing represents the method the
Company  intends  to use in the  implementing  of  the  Resource  System,  it is
possible that the actual operation of the Resource System, if any, may vary from
the foregoing plan.

     U.S. PATENT NO. 6,105,009

                                        2

<PAGE>

     Automated Teller Machine Dispenser of Debit Card, U.S. Patent No. 6,105,009
a  patented  system  and  technology  for  controlled  purchase,   issuance  and
dispensing of prepaid debit cards.  The consumer designs this prepaid debit card
in accordance to his economic means and needs.  The Debit Card Dispenser will be
incorporated  into newly  manufactured ATMs as well as existing ATMs with system
modifications or will operate in stand-alone kiosks. The system dispenses actual
Debit Cards, not vouchers.

     Default  Proof's  Patented  ATM  Debit  Card  Dispenser  provides  numerous
benefits  to the  sponsoring  financial  institution  such  as:  Interim  use of
depositor's  funds, also known as cash float;  Fees from merchant  discounts and
ATM transactions;  Eliminates  charge-offs,  over limit usage and delinquencies;
Elimination of expenses associated with mailings and from losses associated with
fraud and theft;  Limited or minimal  liability;  Utilization  of  existing  ATM
(system  modifications  required),  and access to a potential of millions of new
"customers" worldwide.

     This patent will  provide a system for  dispensing  and  controlling  debit
cards.  These  cards  will  require  a minimum  of  paperwork,  maintenance  and
financial  disclosure  from a card  purchaser,  and unlike  typical online debit
cards,  these  prepaid  debit card will not require  previous or formal  banking
relationship   with  the  issuing  bank.   This  system,   and  new  technology,
incorporated  into existing  Automated Teller Machines (ATMs),  and installed in
future  manufactured  ATMs,  will permit  consumers to purchase and  designing a
desire prepaid debit cards from widely  available ATMs by using cash, or through
charges  to  existing  debit and or credit  cards.  These  compatible  elements,
inexpensive to manufacture and maintain, will be easily installed and adapted to
the operational systems in use today.

          ATM DEBIT CARDS DISPENSER (PATENT PENDING) POTENTIAL REVENUE

     Based  on  information,  recently  published  in  trade  magazines,  of the
existence of over 40 million  individuals who can't obtain credit,  debit or ATM
cards for a variety of  different  reasons  (bad  credit,  divorcees,  students,
bankruptcies,  recent migrant  arrivals,  etc.),  this could be one of the first
expected group to purchase prepaid debit cards.

     Revenues  should be expected  from  licensing ATM  manufacturers,  and from
licenses sold to financial  institutions who own their own ATM and would like to
added the many features in this Patent.

     The  company,  revenue or income  permitting,  may purchase as many ATMS as
possible,  and projections  derived from ATMs future owned by the Company,  from
partnerships or licensing multiple of banks are possible from frequent available
information  published in trade  magazines.  To be counted will be the Company's
earnings from the processing  fees against the prepaid  purchased  value line of
credit purchased by the prepaid debit card, example:  $1000 line of credit a net
4% fee will  generate  $40.per card,  this will provide a significant  source of
revenue to the Company.

     Trade  magazines  estimate that most ATMs currently  generate an average of
$400(gross)  in fees per month per ATM from  conventional  transactions.  We are
only  making  these  projections  at this time  because we want to  examine  the
incremental business that this ATM Debit Card Dispenser will generate. It can be
assumed  that  starting  with owing 500 ATMs which may  produce  500 x $400 x 12
months = 2.4 Million dollars. We believe, even though there no assurance,  it is
possible to generate  this  average or at least close to this  amounts.  Part of
these earnings will go to the cost of renting space at locations  where the ATMs
will be located.  Once the company's  revenue stream starts to increase from the
income  generated from the INTERNET Website Program  ubuydebitcards.com  online,
and the revenue income from the  Over-The-Counter  Prepaid Debit Card, this will
allow for  additional  ATM machines to be purchased  and placed.  This will also
allow for increased advertising and promotion that should increase the amount of
ATM debit cards being purchased per machine. The above does not reflect reloads,
nor other  individuals  whom,  while in good credit rating,  purchases a prepaid
stored value debit card.

                                        3
<PAGE>

     SALES PLAN

     Being  a  new  product,  we  will  not  provide  a  very  detailed  earning
Projections plan as yet, but we can give an overview of where we want to go. The
success of the  telephone  card must be taken into  account to realize  that the
potential available in this product is several times greater than the phone card
in revenues and earnings. Both of these cards offer convenience to the consumer,
but dollar values being much higher here.

     There  are  three  areas  of  sales   opportunities,   one  with  financial
institutions, consideration of the company own bank and ATM machines and lastly,
by way of Automated Teller Machines manufacturers.

     Regarding the licensing of financial  institutions,  we will approach large
money-centered  banks that are heavily involved in the deployment of ATMs on and
off premises,  also license offerings of the system will be available to smaller
institutions who are now deploying off premise ATMs, and will like to enter this
market.

         There are several  major ATMs  manufacturers,  Diebold  Inc;  NCR Inc.;
Siemens;  Triton  Systems Inc.;  Tidel  Technologies  Inc.,  etc. The new patent
pending system should be of interest to all of these manufacturers,  as it would
provide  additional  sources of revenue.  Worldwide  there are over 450,000 ATMs
presently  operating and of them a large  percentage  is  considered  not in top
shape or without  updated  technology,  which  would  require  the adding of new
technology  elements  that would modify those quasi  obsolete ATMs machines that
can be targeted for adding the ATM prepaid debit card  dispenser  feature.  Once
the new system makes the expected impact in the market new manufactured machines
will include the feature.

     The Company's US Patent  6,105,009,  does not provide cash  advances  while
processing  the purchase of the interest free prepaid debit card,  very much the
opposite.  Under the ATM Debit Card Dispenser applicants will be able to use the
approximated  five hundred  thousand of Automated  Teller  Machine  (ATM) in the
worldwide market today, and make cash deposits that may vary ($100;  $200; $300;
$500; $1,000;  $2,000; $3,000 and up) that will determine the amount of the line
of credit in the prepaid stored value debit card minus a small  processing  fee,
and in accordance with the purchaser means and needs.

     The  bankcard  will  be  issued  by  a  participating   bank  or  financial
institution and dispensed through an Automated Teller Machine.

     There are several major ATMs manufacturers, Diebold Inc; NCR Inc.; Siemens;
Triton Systems Inc.; Tidel Technologies Inc., etc. The new patent pending system
should  be of  interest  to all of  these  manufacturers,  as it  would  provide
additional  sources of revenue.  Worldwide there are over 400,000 ATMs presently
operating  and of them a large  percentage  is  considered  not in top  shape or
without  updated  technology,  which would require the  installation  of the new
elements that would modify these ATM machines into debit card  dispensers.  Once
the new system  makes the expected  impact in the market,  it is likely that the
new manufactured machines will include this feature.

     PATENT PENDING APPLICATIONS

     UBUYDEBITCARDS.COM  - INTERNET WEBSITE PROGRAM (patent pending application,
     continuation in part of US Patent #6,105,009)

     SYSTEM FOR  DISPENSING  PREPAID DEBIT CARDS  THROUGH POS TERMINALS  (patent
     pending application, continuation in part of US Patent #6,105,009)

     PATENT  COOPERATION  TREATY  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 countries.


                                        4

<PAGE>

     Patent  pending  applications  differ  from  present  methods  and  ways of
soliciting and purchasing.  Through the use of cyberspace and the Internet,  for
subscribers  shopping and saving for the RESOURCE  prepaid debit card  selecting
and designing the amount of line of credit  desired which be used with more than
one card to transfer funds and other incentives.

     The prepaid debit card will be issued by a participating  bank or financial
institution  and in the near  future may be  dispensed  by an  Automated  Teller
Machine  (ATMDCD),  also can be pick it up at any of the  participating  issuing
bank branches, or by mail if so desired, UBYDC solves the problem of obtaining a
debit card in an efficient  and  economical  way.  There is no assurance  that a
related patent to this patent pending  application  will be issue,  nevertheless
being a continuation in part of the Company's US Patent #6,105,009 makes it more
likely.

     "INTERNET  WEBSITE  PROGRAM"  for the  purchase,  issuing,  activation  and
dispensing  of  prepaid   debit  cards,   in  the  web  under  the  domain  name
WWW.UBUYDEBITCARDS.COM ["UBDC"]

     "SYSTEM FOR DISPENSING PREPAID DEBIT CARDS THROUGH POINT-OF-SALE TERMINALS"
marketed,    described    and   referred   to   in   the    Company's    website
http://members.aol.com/dpccsystem/  as "RESOURCE(R) THE OVER-THE-COUNTER PREPAID
DEBIT CARD".

     The   "Over-the-Counter"   Prepaid   Debit  Cards  would  be  purchased  at
participating stores from merchants,  at supermarkets,  drugstores,  convenience
stores and from many other merchants.  Virtually  anyone,  anywhere in the world
could be a purchaser and buy one or many.

     The following would be brief information about the company's patent pending
applications, it will be disclosed the maximum permitted at this time.

     The intellectual property of the Company's patent pending applications that
are detailed in the applications filed about 24 and 16 months ago,  respectably,
both as a Continuation In Part of the U.S. Patent  #6,105,009 which  application
was filed on June 16, 1997 and of which all  worldwide  rights and  licenses are
owned by Default Proof Credit Card System,  Inc., was issued on August 15, 2000,
the Automated Teller Machine DISPENSER OF DEBIT CARDS comprise the following:

     The Patent  #6,105,009  show all 8 claims and  features  related to prepaid
     debit cards purchased and dispensed through the ATM.

     The patent pending application "Internet Website Program" for the purchase,
issuance,  activation and deliver of prepaid debit cards,  filed as Continuation
In Part of U.S.  Patent  #6,105,009,  shows in  detail  11 new  claims  with its
features  related to the  prepaid  debit card to be  purchased  on the  Internet
e-commerce.

         Soon accessing the Company's WWW.UBUYDEBITCARDS.COM through cyberspace,
Internet applicants would apply for a self designed, prepaid debit card with any
desired dollar amount or other currency,  and may be use with more than one card
to  transfer  funds,  purchase  merchandise  or  services  and other  attractive
incentives and selections.

         The patent pending  application  "SYSTEM FOR  DISPENSING  PREPAID DEBIT
CARDS  THROUGH  POINT-OF-SALE  TERMINALS"  relates to RESOURCE  Over-the-Counter
Prepaid Debit  Card(TM)(C),  also filed as  Continuation  In Part of U.S. Patent
#6,105,009, was filed and shows in detail 8 new claims with its features related
to the prepaid debit card.  The Company's OTC Prepaid Debit Card patent  pending
application  will enjoy of the same facilities,  advantages,  global use, plus a
variety and many other features as compared to the debit cards now being offered
in the marketplace.


                                       5
<PAGE>

     Massive  marketing and  advertising  campaigns will detail to consumers the
variety, multitude of benefits and new features available in these prepaid debit
cards products, which very likely will be a VISA, a AMEX, a MasterCard, etc.

     The bank or financial institution, licensed by DPCCS to issue O-T-C Prepaid
Debit Cards,  do not need to carry or open a checking or savings  account for be
purchase,  not will the purchaser require to open or previously have any of such
bank  accounts.  Immediately  after the purchase  this prepaid  debit card might
become the cardholder's own and only "bank account".  The cardholder will use it
as a credit  style  charge  card,  use it as you can use a credit  card,  use it
anywhere,  use it for  everything,  for  purchasing  or  returning  merchandise,
services or cash advances at ATMs.

     We strongly believe that prepaid debit cards are the most exciting, rapidly
growing  segment of the entire  "charge card"  industry.  Our prepaid debit card
products offers vastly improved  functionality and because there are significant
differences  between  them,  should not be  confused  with "copy cats  products"
commonly referred to as "stored value cards" or "gift cards".

     As compared to the Company's products, those others available in the market
have very limited functionality electronically, geographically and economically,
are basically promotional, and bordering possible patent infringements.

     It can be purchase at the ATMs, in the INTERNET,  or OTC from a merchant at
participating  stores,  wherever or however is this prepaid debit card purchased
brings  all  the  power a  consumer  may  expect.  Each  one  contain  the  same
incentives, advantages, global use, plus many other new features, among them the
link to the ATM Dispenser of Debit Cards,  compared to the debit cards now being
offered.  With the Default  Proof  Credit Card  System  prepaid  debit cards the
cardholders  may purchase  merchandise or services  anywhere can use it wherever
credit cards are accepted,  at any POS terminals,  on the internet to buy stuff,
at any place that  currently  accepts  Visa,  Master Card,  Optima,  or Discover
credit cards since Resource will be one of them.

     It is in the best interest of the company that the shareholders,  investors
and mainly the general public be aware having an  understanding of Default Proof
Credit Card System, Inc. products.

     When reviewing  comparable  InterneT programs,  the offered products found,
none is comparable  and most are clearly  inferior to our programs and products.
The cards in question are referred to as stored  value cards,  pre-funded  debit
cards, and others similar to phone cards that are limited to telecommunications.

     We found no functionality  comparable products.  All the stored value cards
offer limited dollar amount  transactions  and can only be used within a limited
geographical  area.  Almost all are used for  promotional  purposes or issued by
department  stores  for there  costumers.  There  are also  stored  value  cards
"privately"  issued and sold by corporations to their employees for their use on
those Corporation premises.  Some cards that carry small value amounts of $5 and
$10 dollars are for their use at vending  machines  placed in office  buildings,
malls and theaters.


                                       6
<PAGE>

     With the RESOURCE Prepaid Debit Card, Default Proof Credit Card System will
be offering cardholders, multiple valuable features. At the stores counters when
swiped at the Point of Sale terminal consumer designs the dollar value wishes to
store in the prepaid debit card been  purchase from the merchant.  A full charge
card that can be purchased  and issued in amounts  from $100 to  $10,000(maximum
allowed);  A Prepaid debit card which after activated,  usually within 24 hours,
will be good for  payment on  purchases  of  merchandise,  services  or ATM cash
advances; Availability for car rentals, airline flights, and hotel reservations,
and a prepaid  debit card that user don't  throw away when funds are very low or
exhausted, and can be reload. The purchasers will soon find out that it is not a
"common stored value card", it is the unique and patented Prepaid Debit Card.

     The Default Proof applauds the recent acknowledgement of VISA, Master Card,
and AMEX  regarding  the market  potential  for prepaid card  products and their
increased participation in it. For example, VISA(R) predicts that debit accounts
will again account for 10% of all consumer  payments by the end of next year. In
2000 VISA  processed  over 40 Billion debit  transactions,  including  over $800
million  in  movie  theaters  and  fast  food  restaurants,  according  to trade
magazines.

     Default Proof has been candid about delays caused by careful  consideration
of  the  most  effective  and  productive  means  of  maximizing  the  Company's
potential,  and having  present the  expectations  of Office Actions from the US
Patent  and  Trademark   Offices  in  regards  to  any  of  the  patent  pending
applications.  Positive  PTO Office  Actions  will bring  strength to  Company's
prepaid debit cards "niche" programs. There is no assurance that these Company's
patent pending application become patents.

     The Default Proof Credit Card System,  ATM Debit Card Dispenser,  US Patent
No. 6,105,009, provides a patented system and technology for controlled issuance
and  delivery  of  Prepaid  Debit  Cards.  The  Debit  Card  Dispenser  will  be
incorporated  into newly  manufactured ATMs as well as existing ATMs with system
modifications or will operate in stand-alone kiosks. The system dispenses actual
Debit Cards NOT  vouchers  Default  Proof's  Patented  ATM Debit Card  Dispenser
provides numerous benefits to the sponsoring financial  institution or bank when
becoming funds depositories, such as:

     As the  depository  of the  prepaid  funds,  will  be the  interim  user of
     deposited  funds,  also known as cash  float.  Fee  income:  earnings  from
     merchant discounts and ATM transactions.  Elimination of charge-offs,  over
     limit usage and  delinquencies.  Elimination  of expenses  associated  with
     mailings  and from  losses  associated  with fraud and theft.  Limited  and
     minimal liability.  Utilization of existing  ATMs(system changes required).
     Access to a potential of millions of new "customers" worldwide.

     These  RESOURCE  Prepaid  Debit Cards  dispensed  by the ATM will require a
minimum of paperwork, maintenance or financial disclosure from a card purchaser,
and unlike  typical online debit cards,  it will not require  previous or formal
banking  relationship  with the issuing bank.  This system,  and new technology,
incorporated  into existing  Automated Teller  Machines(ATMs),  and installed in
future  manufactured ATMs, will permit consumers to purchase and design a desire
prepaid debit cards from widely available ATMs using cash, or through charges to
existing debit and or credit cards.  These compatible  elements,  inexpensive to
manufacture  and  maintain,  would  be  easily  installed  and  adapted  to  the
operational  systems in use today. Fees per ATM transactions are paid to owners,
lessors,  banks, etc., banks are aware of the profitability of the ATMs they now
operate and the fee income per transaction  the ATMs generate,  the benefits and
savings obtained from electronic banking,  and the speed at which the ATM market
is  expanding.  Debit cards and ATM cards are becoming very popular and are been
accepted everywhere.


                                       7
<PAGE>

     ATM DEBIT CARDS DISPENSER POTENTIAL REVENUE

     Forecasting  revenues  for a  brand  new  product  is not  easy.  Based  on
information  of the  existence of over 40 million  individuals  who can't obtain
credit,  debit or ATM cards for a variety  of  different  reasons  (bad  credit,
divorcees, students, bankruptcies, etc.), this could be the first expected group
to purchase stored value prepaid debit cards.

     Revenue  will be from the Company own ATMs.  This will include the 3% or 4%
of the prepaid line of credit of the prepaid debit card issued as the processing
fee,  the  normal fee a bank  receives  when a credit  card is used to  purchase
merchandise or cash advances, the ATM's transaction fees and the earnings on the
cash float the bank will have at its  disposal,  less the lease  payment for the
space where they are deployed.

     Revenues should also be expected from licensing ATM manufacturers, and from
licenses  sold to  financial  institutions.  It is not  possible at this time to
forecast revenues that may be generated from the ATM manufacturers.

     Revenue  projections   derived  from  ATMs  owned  by  the  Company,   from
partnerships or licensing multiple of banks are possible from frequent available
information  published in trade  magazines.  To be counted will be the Company's
earnings from the processing fees against the stored value line of credit issued
in the prepaid debit card, example:  $1000 prepaid line of credit the net 4% fee
will  generate  $40 per card,  a minimum of 1000  cards a month  will  provide a
significant source of revenue to the Company.

     ATMs currently generate an average of $400(gross) in fees per month per ATM
from  conventional  transactions.  We are only making these  projections at this
time  because we want to examine the  incremental  business  that this ATM Debit
Card  Dispenser  will  generate.  It can be assumed that starting with owing 500
ATMs which may produce 500 x $400 x 12 months = 2.4 Million dollars. We believe,
even though there no  assurance,  it is possible to generate  this average or at
least  close  to this  number.  Part of  these  earnings  will go to the cost of
renting space for our owned ATMS.

     Once the company's  revenue  stream  starts,  it will allow  additional ATM
machines to be purchased and placed.  This will also allow for the increasing in
advertising  and  marketing.  Increases  in  revenue  income  will  provide  for
additional number of ATM that can be purchased.

     The above does not reflect  revenue  income from  reloads,  not income from
other individuals  whom, while in good credit rating,  purchase a prepaid stored
value debit card.

     Once  operative  the  modified  ATMS will not be limited  to  provide  cash
advances  only,  while  processing  purchases of the interest free prepaid debit
card.  Under the ATMDCD  applicants  will be able to use the  approximated  five
hundred  thousands of Automated  Teller  Machine (ATM) in the  worldwide  market
today,  and make cash deposits  that may vary  ($100;$200;$300;$500;$  1,000;  $
2,000;  $ 3,000 and up) and will  determine the amount store in the card, and in
accordance with his or her means and needs.

     The card will be issued by a  participating  bank or financial  institution
and dispensed through an ATM, or through the Internet or the Over-The-Counter.


                                       8
<PAGE>

             PLANNED MARKETING OF THE COMPANY"S PREPAID DEBIT CARDS
                 AUTOMATED TELLER MACHINES DEBIT CARDS DISPENSER
             UBUYDEBITCARDS.COM AND RESOURCE OTC PREPAID DEBIT CARD

         The  Company  believes  that  prepaid  debit  cards can be  effectively
marketed to selected members of the general public that fall among the following
categories:

     Individuals  that  have no credit or can only  qualify  for small  lines of
credit,  or wish to establish  their  credit  worthiness  for the future.  These
individuals  will be able to prepaid  the  stored  value  desired  for a line of
credit by purchasing either of the Company programs.

     Individuals  who for whatever  reason want to manage  their  funds,  or the
funds they may want to make available to others, within a predetermine budget or
allowance. This will allow individuals with the need not to exceed their prepaid
budget, to do so while still carrying a debit card.

     It will  allow  Companies  that have  employees  in an  allowance  to issue
prepaid cards,  instead of travel  advances.  Parents may send their children to
college with a controlled  monthly budget.  One important feature of the prepaid
debit card is that its much more safer  than cash  while  working,  is just like
cash. In today's environment, safety is a paramount issue.

     With the  proliferation  of Visa and Master Card in just about every retail
outlet,  and the strong  presence of ATMs and the  Internet,  the prepaid  debit
cards will function just like cash, while providing a safety element.

     Travelers  wishing to prepaid  their  traveling  expenses,  instead of just
charged it. This prepaid debit card may be obtained in any currency  desired and
used just like cash in the  visiting  country,  but  better,  if cash is lost is
lost,  the card can be  replaced  and for a small  charge  recuperate  what ever
balance is still  available.  It will work just like  travelers  checks with the
added  convenience of a debit card and its safety.  Individuals don't need to be
wanting  through all the hassle applying and maintaining a present offered debit
card. There will be no application,  no delays,  no credit reports,  no payments
and no paperwork. But probably most important to some individuals, there will be
no overspending.

     There are other  multiple  applications  of the prepaid debit card that the
Company is presently  studying and identifying.  It is clear to the Company that
the total and complete penetration of bank cards such as MasterCard and/or Visa,
coupled with the widespread  distribution of this debit card create exciting new
possibilities  for the  future  cash less  society.  We see this  product  as an
integral part of this phenomenon.

     THE RESOURCE SYSTEM

     The Resource  System is designed to provide  individuals  with a convenient
method of  obtaining,  at fair low  cost,  immediate  access to credit  which is
collateralized  by the cash surrender  value of their life  insurance  policies.
Applicants  who wish to obtain a credit  card  using the  Resource  System  will
transmit to the Company an  application  in which they assign the cash surrender
values of their insurance policy to the Company as collateral.

     The participating  financial institution will then issue to the applicant a
MasterCard  or Visa with an initial  line of credit equal to at least 80% of the
cash surrender value of the policy.  The Company will guarantee the cardholder's
obligation to the banks through the registered  assignment by the life insurance
company  who issued the life  insurance  policy,  of the cash values in the life
insurance policy of the cardholder/policyholder.

     The  successful  application  of the  Resource  System,  although it is not
dependent upon  acceptance by insurance  companies,  it is dependent among other
things,   upon  the  cooperation  of  insurance  companies  in  registering  the
assignments in their records and confirming assignments to the Company.


                                       9
<PAGE>


                                     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,  haven't charged,  nor receives payments for the space leased by
the Company  since March 1995.  Furniture,  general  office  equipment,  several
computers, printers and scan.
Telephone number: (305) 666-1460; Fax Number:(305)665-3462.
E-Mail: ubuyde@bellsouth.net
Website; htt://members.aol.com/dpccsystem/

     The Company has  understanding  agreements  with the  inventor and owns the
worldwide  rights and  ownership  of the  issued  Patents,  the  Patent  Pending
applications  related  to the  Internet  Website  Program,  The  System  for the
Dispensing   Prepaid   Debit   Cards   Through  the  POS   Terminals,   and  the
UBUYDEBITCARDS.COM and  UBUYCREDITCARDS.COM,  two Domain Names registrations for
use in the Internet,  RESOURCE  registered  mark, 1998 to 2001  copyrights,  and
State Trademarks.

     THE PATENTS PENDING STATUS

     The Company's  patents pending  application are waiting for the U.S. Patent
and Trademark Office to grant, first the patent allowances of each one and to be
followed by the issue of the patents.

     There is no  assurance  that  related  patents  will be granted by the U.S.
Patent  and  Trademark  Office  on all or any  of the  above  mentioned  patents
pending,  being both  continuation in part of the company's US Patent #6,105,009
there  are great  expectations  of  favorable  Office  Actions  by the US Patent
Office.

     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  and the
patent pending applications "Internet Website Program"  (ubuydebitcards.com) and
"System for Dispensing Prepaid Debit Cards Through Point of Sale Terminals" (The
Over-The-Counter  Prepaid Debit Card) that were filed by him at the U.S.  Patent
and Trademark Office, being both continuation in part of Patent #6,105,009.

     Under the  Employment  Agreement  executed  between the Company and Vincent
Cuervo on August 1986,  and 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  absolute  ownership and
freedom of disposition of his inventions,  creations or developed ideas,  filed,
registered or converted in to 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 to dispose
of the intellectual  property owned by him in whatever manner and to whom he may
decide to sell, lease or license this intellectual property.

     Vincent  Cuervo has always  given the first  right of refusal  offer to the
Company in exchange  for Stock Option  Grants.  Presently  all the  intellectual
property  mentioned and described in this document and all the worldwide  rights
and licenses are owned by Default Proof Credit Card System,  Inc. Vincent Cuervo
when  receiving  the stock  option  grants from the Company in exchange  for the
worldwide  ownership  of all rights and licenses of his  intellectual  property,
never took in to  consideration  the Company's  stock price of the shares at the
time the Stock  Option was granted,  which in most  instances it was at "a penny
for the lot".


                                       10
<PAGE>


     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.

     ITEM  4.   SUBMISSION   OF   MATTERS  TO  A  VOTE  OF   SECURITY   HOLDERS.
                ----------------------------------------------------------------

     No matters  were  submitted to a vote of the  security  holders  during the
three months ended December 31, 2000.

     ITEM  5.  MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDERS  MATTERS.
               -----------------------------------------------------------------

     The  Company's  common stock is traded in the  over-the-counter  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 2000.  The  quotations  provided  below
reflect inter-dealer  prices,  without mark ups, mark down or commission and may
not represent actual transactions.


                      FISCAL 2000             HIGH          CLOSE
                      -----------             ----          -----

                        02/04/00              2.375          2.25
                        03/03/00              6.875          2.5
                        04/04/00              2.125          2.125
                        05/05/00              3.5            3.125
                        06/07/00              2.625          2.6875
                        07/10/00              4.625          3.625
                        08/04/00              6.69           6.375
                        09/08/00             14.125          13.25
                        10/06/00             28.625          19.125
                        11/10/00             26.             22.18
                        12/08/00             11.             10.
                        12/31/99              5.5             5.

     On December 31, 2000 the Company had approximately 224 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.

     DIVIDENDS

     The Company has never paid any cash  dividend on its common  stock and does
not anticipate  paying cash dividends in the near future.  The dividends 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.
              ------------------------------------------------------------------

     During the next  twelve  months,  the  Company  plans to (i)  either  begin
marketing of the Resource  System with one or more  Financial  Institutions,  or
license,  joint  venture,  or sell the  Resource  System to a bank or  financial
institution,  (ii) to begin the licensing of its ATM Debit Cards  Dispenser U.S.
Patent No. 6,105,009 to one or several banks or financial  institutions or joint
venture.

                                       11
<PAGE>


     The company would will  consider to raise the  necessary  funds to be able,
through  the  acquisition  or  control  of a small  Florida  bank,  to enter the
off-premise  ATM  business.  It will  require  3.5 to 5 million  dollars for the
purchase of 500 automated  teller machines that can dispense prepaid debit cards
(about 6 to 8,000 dollars  each).  The balance will be used for  administrative,
marketing, advertising and promotion expenses.

     The ATM  Debit  Card  Dispensers  would  be  placed  in fast  food  stores,
airports,  gasoline stations, bus terminals,  etc. The company will pay rent for
the space  the ATM  occupies  or a  percentage  of the  earnings  per  installed
machine.  The cards  dispensed by an ATM may be issued  through a  company-owned
bank as well as by licensed institutions issuing credit and debit cards now.

     Owning or having controlling interest in a bank will allow of extra revenue
along  with  a  potential  for  very   significant   cash  float.  An  important
consideration  here is that  having  the  Company  its own bank will  allows the
company to  generate a huge cash float from debit card  purchase  balances  that
cardholders, on average, may not expend immediately.  This allows us to generate
considerable  income off this cash float.  As the issuing  bank the company will
also receive 50% of the transactions fees that VISA, MASTERCARD charges to their
merchants, i.e. projection - 120 million line of credit eventually translates to
120,000,000 x 1.7% transaction fee x 50% to issuing bank = 1,020,000  dollars in
revenue.  Constantly the Company maintains substantive interviews,  meetings and
conversations.

     THE COMPANY

         The Company's  operations commenced in 1986 with the licensing to it by
the Company's  President of the default proof method and system, all patents and
other  proprietary  rights to the  system  and the  right to use the  registered
trademark Resource.

     Since  inception,   the  Company  has  expended  approximately  $95,000  in
developing  computer software and acquiring  computer hardware for the operation
of the Resource(R)  System.  The Company has expended in excess of $ 430,000 for
advertising  which have  included  newspaper  and TV  advertising,  video tapes,
brochures  and  applications  which  were  distributed  through  the mail and to
various stores and businesses.

     Patents  filing  fees   applications,   Patent's   attorneys   legal  fees,
maintenance  patent  fees,  are close to $190,000 of the Company  expenses.  The
Company expend well over $345,000 in developing the Resource  System and the ATM
and Prepaid  Debit Card  Programs.  The Company  also expend over $ 1,000,000 in
litigation vs State Street Bank and Trust Company (State Street Bank),  American
Express litigation over the Company's RESOURCE(R)  registered trademark in 1991,
Securities attorneys legal fees, and in other legal and C.P.A.'s fees. The State
Street  Bank  litigation  forced the  Company to attempt the raise of capital in
order to implement a new strategy that involved the possible purchase of its own
bank. The litigation and lack of funds  basically put the company in a defensive
position with very little possibilities to raise funds for the system being used
by a bank in an authorized  fashion.  Banks,  which were very  interested in the
Resource System backed off once the litigation was initiated. Subsequent efforts
to raise capital  failed.  The  litigation was settled in 1993 after almost five
years, leaving the Company without economic resources.


                                       12
<PAGE>


     As it is well known from the news media,  charge offs and  delinquencies in
the credit  card  Industry  are higher  than it is  desirable  to the  bankcards
issuing  financial  institutions,  and it now appears that the effort to protect
its patent  rights will pay off after all. The new added  intellectual  property
and the new marketing efforts offering the Company's ATM and Prepaid Debit Cards
Programs to banks for licensing has developed new interest.

     The  results  from   conversations   with  several   banks'   officers  are
encouraging,  since we are receiving  demonstrating of interest in the Company's
secured, credit and prepaid debit card programs. Marketing efforts will continue
jointly with the offering of the  Company's ATM DEBIT CARDS  DISPENSER,  the two
patents pending  applications  and the about to be launched in the Web, later in
2001 the Company Internet Website Program marketed as WWW.UBUYDEBITCARDS.COM and
the OTC  Prepaid  Debit  Cards,  all of them  with  new  exciting  features  and
technology.  There is no assurance  that these  patents  pending will be granted
related patents.

      EMPLOYEES

     As of the date  hereof,  the Company  has 5  employees,  3 serving  also as
officers,  like the CEO, the Counsel and  Company's  Secretary  and the valuable
acquisition of David J. Koss that was, in June 2000 was appointed  president and
C.F.O.  Pedro  P.Llaguno  and David J. Koss have received  Stock Options  Grants
(see: Stock Options) for all work (without monetary compensation) done by them.

     Those Stock Options include those to Cuervo were in payment for loans since
1998, at no interest charged, to the Company, for Company expenses, supplies and
fees paid by Cuervo on behalf of the  Company.  Also  David J. Koss was  granted
25,000  Stock  Options  per year for a period of four years from the date of his
appointment as President of the Company.

     ITEM 7. FINANCIAL STATEMENTS.
             ---------------------

     For  information  required by Item 7 refer to: " DEFAULT  PROOF CREDIT CARD
SYSTEM, INC. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATMENTS DECEMBER 31, 2000
filed as part of this document in Annex I.

                                    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 FLOW...........................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. The reason for this
change was for the high  expensive fees and charges made by the previous one, at
times when the Company can not afford such expenses.  Joel S. Baum, CPA, and his
Company remain as the Company CPA.




                                       13
<PAGE>


                                    PART III
                                    --------


     ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND CONTROL  PERSONS;
              COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
              ------------------------------------------------------------------

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

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

Vincent Cuervo, C.E.O.                      71                Director

David J. Koss. President                    41

Ciro B. Sosa, Vice President                72                Director

Pedro P. Llaguno, Vice President            69                Director


     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., 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 Juris 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.

     DAVID J.  KOSS,  has been  president  and CFO since  June  2000,  a 18 year
financial  services  professional  and with a large  experience  in the  banking
industry.

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

     There are no family relationships between any of the Company's directors or
executive officers.

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



                                       14
<PAGE>

     ( 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

     (iv ) 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 judgement has not been reversed, suspended or vacated.

     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, 2000 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)         (1)
                                         OTHER                SECURITIES
NAME                                     ANNUAL   RESTRICTED  UNDER              ALL OTHER AND
                                         COMPEN-     STOCK    LYING      LTIP    COMPEN-
PRINCIPAL                                SATION      AWARDS   OPTIONS/  PAYOUTS  SATION
Position       year  Salary($) Bonus($)    ($)        ($)     SARs(@)     ($)    ($)
----------------------------------------------------------------------------------------------
<S>             <C>    <C>       <C>      <C>       <C>         <C>       <C>         <C>
VINCENT CUERVO
CEO            2000     0         0        0          0            0       0          0
               1999     0         0        0          0            0       0          0
               1998     0         0        0       20,000          0       0          0

</TABLE>

                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-MONEY
                                             OPTIONS/SARS    OPTIONS/SAR AT
                                             FY-END ($)      FY-END ($)

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

V.CUERVO        0              0              228,000/0     228,000x5=1,140,000/



                                       15
<PAGE>


                                    PART IV

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

     The  following  table sets forth  information  on early January 2000 and at
February 18, 2000 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.

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

VINCENT CUERVO
Miami, FL 33143                370,291                26.%

CIRO B. SOSA
Miami, FL 33145                 24,276                1.7%

PEDRO P. LLAGUNO
Miami, FL 33145                 33,642                2.4%

KATHY WILLIAMS
Mississuaga, Ontario            19,750                1.4%

DAVID J. KOSS                   10,000                0.7%
Miami, Fl 33145

ERIC H. SPELLMAN                83,500                5.93%
Larchmont, NY
Officers/directors,
promoters, as a group          541,459               38.13%

     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.
              ----------------------------------------------

     Last  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.

     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.


                                       16
<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 $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  the issue of a related Patent to this patent  pending  application
will be issued.

     If the U.S.  Patent  and  Trademark  Office  does  not  issue  the  related
patent(s)  the Company will not issue 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  THE  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.  Stock Option 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  the issue of a related Patent to
this patent pending application will be issued.

     If the U.S.  Patent  and  Trademark  Office  does  not  issue  the  related
patent(s)  the Company will not issue 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.

     SECURITIES OUTSTANDING

     The  Company is  authorized  to issue  2,500,000  shares of $0.01 par value
common stock (the Shares). As of December 31, 2000 there are 1,424,634 currently
outstanding shares, and 541,459 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 145,000 Stock Options of
the Company's  Common Stock $0.01 par value to purchase shares until February 2,
2002, at an exercise  price of $0.15 cents per share,  and 125,000 Stock Options
of the Company's Common Stock $0.01 to purchase shares exercisable for five year
periods  at a price of $0.14 or the last  preceding  day on which the  Company's
shares were trade as reported on the  NASDAQ:OTC-BB  on July 17, 1998. 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 1999 to April 2012.

     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.


                                       17
<PAGE>

     SOCK OPTIONS

     On August 2, 1993 the  Company  issued  to its  principal  stockholder  Dr.
Vincent Cuervo and one of its officers, Pedro P.Llaguno,  Esq., Stock Options to
purchase  stock of the Company's  Common Stock $0.01 par value to purchase 7,000
Vincent Cuervo,  and 2,000 Pedro P. llaguno 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 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, 2000.

     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, 2000.

     On July 17, 1998, the Company issued to its principal  shareholder  Vincent
Cuervo and to one of its officer  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, 2000.

     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 Dr. Cuervo 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.

     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.

                                       18
<PAGE>


     All the above Stock  Option  shares are  Company's  Common  Stock $0.01 par
value per share and adjusted to the reverse  split of 10 Common Stock $0.001 per
1 Common stock $0.01 under the reverse ten for one split dated  February 5, 1999
stipulations.

     SECURITIES TRANSFER AGENT

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

     RECENT SALES OF UNREGISTERED SECURITIES.

     On February  18,  2000 the Company  issued  7,000  shares of the  Company's
Common  Stock  $0.01 par value per  share to Maria T. C.  Schafer  webmaster  in
payment for her continuous  services in the conditioning and preparation for the
web  internet  e-commerce  related to the  Company's  INTERNET  WEBSITE  PROGRAM
(patent pending.

     On February 28, 2000 the Company issued 500 shares of the Company's  Common
Stock  $0.01 par value per share to Rosa E.  Scavo,  Esquire in payment  for her
recent legal services.

     On April 12, 2000 the  Company  issued 500 shares of the  Company's  Common
Stock  $0.01 per  shares to Pedro E.  Llaguno,  for his  computer  services  and
assistance, and 4,000 shares to Engineer Jose E. Aguirre for services related to
bankers and investors meetings and presentations.

     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 the 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.


                                       19
<PAGE>

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
approves this unanimously  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 for their high  expensive  fees and  charges at times
when the Company can 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  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 new engaged certified public  accountants,  while promising
the  same  quality  services,  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 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.


                                       20
<PAGE>

          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

         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)

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



                                       21
<PAGE>

                                   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.

                                   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

                                       22
<PAGE>

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


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 today  February  12,  2000  approves  this
unanimously 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 for their high  expensive  fees and  charges at times when the Company
can 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  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 new engaged certified public  accountants,  while promising
the  same  quality  services,  offered  reasonable  and  accessible  cost to the
Company.

                                       23
<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 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 as 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 high expensive fees and charges at times
when the Company can 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  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 flows 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


                                       24
<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: March 14, 2001                   By: VINCENT CUERVO
                                           -----------------
                                           Vincent Cuervo
                                           President & CEO


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



                                       25
<PAGE>
                                                                        ANNNEX 1



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

                              FINANCIAL STATMENTS
                               DECEMBER 31, 2000

<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


<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, 2000, 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, 2000 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.

/s/ Baum & Company, P.A.
------------------------
Coral Springs, Florida
February 28, 2001


                                      F-2
<PAGE>


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

                                  BALANCE SHEET

                                December 31, 2000



                                     ASSETS
CURRENT ASSETS
   Cash                                                                  162

PROPERTY AND EQUIPMENT (Net of
   Accumulated Depreciation of $1,959)                                 7,835

OTHER ASSETS
   Deferred Patent Costs, Net                                          1,161
                                                                ------------
               TOTAL ASSETS                                     $      9,158
                                                                ============




                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES                                                      -0-

STOCKHOLDERS' DEFICIENCY
      Common Stock, $0.01 Par Value, 2,500,000
         Shares Authorized, 1,424,634 Issued and Outstanding          14,247
      Additional Paid-In Capital                                   4,166,720
      Deficit Accumulated During Developmental Stage              (4,191,809)
                                                                   ---------
               TOTAL STOCKHOLDERS' DEFICIENCY                          9,158
                                                                ------------
                                                                $      9,158


                 See Accompanying Notes to Financial Statements

                                      F-3
<PAGE>
                       DEFAULT PROOF CREDIT CARD SYSTEMS
                         (A DEVELOPMENT STAGE COMPANY)


                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                     CUMULATIVE FROM
                                                                     AUGUST 14, 1985          FOR THE YEARS ENDED
                                                                       (INCEPTION)                 DECEMBER 31,
                                                                         THROUGH              -------------------
                                                                     DECEMBER 31, 2000       2000               1999
                                                                    --------------------    ------------     -----------
<S>                                                                  <C>                     <C>             <C>
EXPENSES
    General & Administrative                                             $ 3,137,565        $    57,040      $    64,319
    Officer Salary                                                           986,556                  -                -
    Marketing                                                                393,358                  -                -
    Depreciation & Amortization                                              100,666              1,959                -
    Expired Public Offering Costs                                            179,211                  -                -
                                                                       -------------        -----------      -----------
    Total Expenses                                                         4,797,356             58,999           64,319
                                                                       -------------        -----------      -----------

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(4,594,809)               (58,999)           (64,319)
Income tax benefit                                                            25,436                  -                -
                                                                       -------------        -----------      -----------
Net Loss before Extraordinary Item                                        (4,569,373)           (58,999)               -

Extraordinary item - Gain from restructuring of
    debt (net of Income Taxes of $165,200)                                   257,800                  -                -
Benefit from utilization of net operating loss carryforward                  139,764                  -                -
                                                                       -------------        -----------      -----------
NET (LOSS) INCOME                                                      $  (4,171,809)       $   (58,999)     $   (64,319)
                                                                       =============        ===========      ===========

Basic Loss per Common Share
    Loss before extraordinary income                                   $       (0.55)       $     (0.01)     $     (0.01)
    Extraordinary item (net, plus Tax Benefits)                        $       (0.05)       $         -      $         -
                                                                       -------------        -----------      -----------
Net (Loss) Earnings per Common Share                                   $       (0.50)       $     (0.01)     $     (0.01)
                                                                       =============        ===========      ===========

Diluted Loss per Common Share
    Loss before extraordinary income                                   $       (0.46)       $     (0.01)    $      (0.01)
    Extraordinary item (net, plus Tax Benefits)                        $       (0.04)       $         -     $          -
                                                                       -------------        -----------     ------------
Net (Loss) Earnings per Common Share                                   $       (0.42)       $     (0.01)    $      (0.01)
                                                                       =============        ===========     ============

Weighted Average Number of  Common
    Shares Outstanding                                                                        1,347,493        1,198,296
                                                                                              =========        =========


</TABLE>
                 See Accompanying Notes to Financial Statements

                                      F-4
<PAGE>
                       DEFAULT PROOF CREDIT CARD SYSTEMS
                         (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>
                 See Accompanying Notes to Financial Statements

                                      F-5
<PAGE>
                       DEFAULT PROOF CREDIT CARD SYSTEMS
                         (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)
                                                        ----------        -------   -----------   -----------    -----------
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 BALANCE - DECEMBER 31, 1996 ....................    11,232,410         11,233     3,853,311    (4,327,170)      (462,626)
 . 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 SYSTEMS
                         (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
                                                     ============    ============    ============   ============    ============

</TABLE>

                 See Accompanying Notes to Financial Statements

                                      F-7
<PAGE>
                        DEFAULT PROOF CREDIT CARD SYSTEMS
                          (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 SYSTEMS
                          (A DEVELOPMENT STAGE COMPANY)


           STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)


(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.

                 See Accompanying Notes to Financial Statements
                                      F-9
<PAGE>


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


           STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

(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.

(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.




                 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, 2000          2000         1999
                                                                   ----------------        ----         ----
OPERATING ACTIVITIES

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

Net (Loss) Gain                                                    $    (4,107,990)    $ (58,999)   $ (64,319)
Adjustments to Reconcile Net (Loss) Gain to
    Net Cash Used in Operating Activities:
    Depreciation & Amortization                                            102,494         1,959         2,784
    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                        228,555        38,095             -
    Stock Issued in lieu of Cash for Waived Salaries                       294,000             -             -
    Loss on Sale of Equipment                                               34,144             -             -
    Decrease (Increase) in Other Assets                                    (25,480)            -             -
    Increase (Decrease) in Accrued Expenses                                 10,266       (28,515)       61,535
                                                                   ---------------     ---------    ----------
    NET CASH USED IN OPERATING ACTIVITIES                               (3,167,780)      (47,460)       64,319
                                                                   ---------------     ---------    ----------

INVESTING ACTIVITIES
Purchases of Marketable Securities                                        (130,741)            -             -
Purchases of Property & Equipment                                         (125,227)       11,753             -
Patent License Expenditures                                               (201,864)            -             -
Proceeds from Sale of Equipment                                             22,994             -             -
                                                                   ---------------     ---------    ----------
    NET CASH USED IN INVESTING ACTIVITIES                                 (434,838)       11,753             -
                                                                   ---------------     ---------    ----------

FINANCING ACTIVITIES
Proceeds from Issuance of Stock-Private Offerings                          234,783       126,236             -
Proceeds from Issuance of Stock-Public Offerings                         3,150,163             -             -
Proceeds from Issuance of Stock-Exercise of Warrants                       240,358             -             -
Capital Contributions                                                       78,076             -             -
Net Receipts/Advances to Stockholder                                      (100,600)      (90,367)            -
                                                                   ----------------    ---------    ----------
    NET CASH PROVIDED BY FINANCING ACTIVITIES                            3,602,780        35,869             -
                                                                   ---------------     ---------    ----------

    NET INCREASE (DECREASE) IN CASH                                            162           162             -
    CASH - BEGINNING                                                             -             -             -
                                                                  ----------------     ---------    ----------
    CASH - ENDING                                                 $            162     $     162    $        -
                                                                  ================     =========    ==========

</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, 2000

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
     2000 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 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.




                                      F-12

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


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                December 31, 2000


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INCOME TAXES (CONTINUED)

     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  will  adopt 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 31,2001.


                                      F-13
<PAGE>
PAGE>
                     DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                         (A DEVELOPMENT STAGE COMPANY)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                December 31, 2000

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, 2000

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 tne (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 certain patent application.

     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 with the  following  weighted-average  assumptions  for 1998;
     risk-free rate of return of 5.0%; dividend yield of 0.0%; volatility factor
     of the  expected  market  price of the  Company's  common stock of 1.41 and
     expected lives ranging from 1 to 5 years.

                                      F-15
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                December 31, 2000


NOTE 6. STOCK OPTIONS OTHER STOCK OPTIONS (CONTINUED)

     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.

     A summary  of the  status of the  Company's  fixed  stock  option  plan and
     non-plan  options as of December 31, 2000 and 1999,  and changes during the
     years then ended is presented below:

                                               Year Ended December 31,
                                              2000                 1999
                                     --------------------  ------------------
                                                 WEIGHTED             WEIGHTED
                                                 AVERAGE              AVERAGE
                                                 EXERCISE             EXERCISE
                                       SHARES    PRICE     SHARES*    PRICE
                                     ----------  --------  -------    ------
Outstanding at beginning of year        302,000  $ 3.30    212,500    $ 3.30
Granted                               1,025,000  $ 1.375   100,000    $ 0.87
Exercised                               (17,500)    -            -         -
Forfeited                               (22,000) $  -       (9,500)   $(0.50)
                                     ----------            -------
Outstanding at end of year            1,287,500  $ 2.17    302,000    $ 3.30
                                     ----------
Options exercisable at year-end         527,000  $ 2.50    302,000    $ 3.30
                                     ==========            =======

* The 1999 shares have been restated to reflect 10 to 1 reverse stock split.




                                      F-16

<PAGE>

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


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                December 31, 2000


NOTE 6. COMMON STOCK SPLIT

     On February 1, 1999, the Board of Directors of the company approved a 10 to
     1 reverse stock split.

NOTE 7. INCOME TAXES

     At December 31, 2000, the Company had a net operating loss carry forward of
     approximately $4 million, that expires through 2015.

     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 8. PATENT 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.





                                      F-17