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, 1998 OR [ ]  TRANSITION  REPORT  UNDER
     SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934[NO FEE REQUIRED]
     For the transition period from __________ to ________

                           COMMISSION FILE NO. 0-17114

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

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

                  1545 MILLER ROAD, CORAL GABLES, FLORIDA 33146
       -------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

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

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

         TITLE OF EACH CLASS      NAME OF EACH EXCHANGE ON WHICH REGISTERED
         -------------------      -----------------------------------------
                  None                                None

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

                         COMMON STOCK, PAR VALUE $ 0.001
                         -------------------------------
                                (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 January 29,
1999, was: Common Stock. $0.001 par value - 1,204,351

     The number of shares  outstanding of the  registrant's  common stock $0.001
par value as of December 31, 1998 was: 12,043,510

     The number of shares outstanding of the registrant's common stock $0.01 par
value,  after the  issuer's 1 for 10 reverse  split on  February  5, 1999,  was:
1,204,351
<PAGE>







                                     PART I

ITEM 1 DESCRIPTION OF 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 and marketing of proprietary methods and systems for issuing secured
credits  and debit  cards  that are a safer  lending  risk for the  issuer.  The
Company  first and second  secured type card were  marketed  under the trademark
Resource  (the Resource  System),  and business  processes  which are related to
prepaid stored value secured debit cards (patents  pending) to be marketed as an
Automated Teller Machine Debit Card Dispenser [2 patents pending]("ATMDCD"), and
the UBUYDEBITCARDS.COM ["UBDC"] (patent pending)and  UBUYCREDITCARDS.COM [patent
pending]  both a prepaid  stored  value debit or credit  cards that soon will be
offered through the Company's web sites in the INTERNET.

     The Resource System is 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. The ATM Debit Card Dispenser, patents
pending, on the other hand, allows an applicant to made cash deposits or charges
to any bank card at an  Automated  Teller  Machines  which will  dispense to the
applicant  a debit card with a prepaid  stored  value  amount  equal to the cash
deposited  less a small  service  fee.  The  issued  debit  card will have equal
functions  as any other  MasterCard,  Visa,  Optima,  Discover,  etc, now in the
market.

     Under the Resource  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.

     Vincent  Cuervo,  President  and CEO of Default  Proof  Credit Card System,
Inc.,  is the  sole  inventor  of  the  Automated  Teller  Machine  DEBIT  CARDS
DISPENSERS   patents   pending   (ATMDCD)   and   the   ubuydebitcards.com   and
ubuycreditcards.com  [patent  pending] filed with the U.S.  Patent and Trademark
Office, Washington, D.C.
<PAGE>

     The Automated Teller Machine Debit Card Dispensers [patents pending], there
is no  assurance  that the  related  patents to these  patents  pending  will be
granted by the Patent and Trademark Office, relates to modified automated teller
machine  debit  cards  dispensers,  and  more,  particularly  to those  that are
computerized (ATM). This patent pending 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, the patent pending  stored-value card will require no formal
banking  relationship.  This  system,  and  new  technology,  incorporated  into
existing Automated Teller  Machines(ATMs),  and installed in future manufactured
ATMs,  will permit  consumers to purchase  stored value 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,  are easily  installed and adapted to the  operational  systems in use
today.

     Existing  Automated  Teller  Machines on the market  today are accessed for
cash  advances by the  insertion  of a valid  credit/debit  card and entry of an
assigned PIN number,  against the credit line balance on such credit/debit card.
Cash advances are approved or denied based on the current  available credit line
on a credit card, or the cash balance of a debit cardholder's bank account. Once
operative,  the patent  pending  system will not  provide  cash  advances  while
processing  the request for an interest  free  prepaid  stored value debit card.
Very much the opposite.  Applicants will have access to any one of the thousands
of Automated  Teller Machines  (ATMs),  (worldwide  approx.  over 400,000),  and
purchase a stored value  prepaid  debit card making cash  deposits or charges to
other bank card in varying  amounts  ($300;$  1,000; $ 3,000 and up). The amount
deposited will be determined by the potential  cardholder's  means and needs and
will determined the prepaid secured debit or ATM card's credit line.

     Even though  there is not need for bank  affiliation  the debit cards still
must be issued by a  participating  bank or  financial  institution  in order to
access regional,  national and international electronic funds transfer networks.
However,  though  it may  still be issue by such an  institution,  they  will be
dispensed through modified or new Automated Teller Machines.

     The  Company  will  offer  licenses  to the  manufacturers  of both new and
previously  manufactured  ATMs (Diebold;  NCR;  Siemens;  Wang Global;  Hitachi;
Triton;  Tidel  Technologies,  etc) in  order  to  make  hardware  and  software
modifications  necessary to incorporated new patented elements. As a result, the
utility and functionality of ATMs will be expanded.

     When the  combination  of these  elements is realized,  an ATM machine will
perform new  functions.  For the easy  purchase  of a debit  card,  the ATM will
accept cash deposits or charges to another bank card. It will dispense a plastic
debit or ATM card with the same  functions of most online  debit cards.  It will
allow a  cardholder  to  receive  cash  from ATM or  purchasing  merchandise  or
services by entering a confidential personal PIN number at the point of sale. It
will also facilitate car rentals, airline and hotel reservations, etc.

<PAGE>
     The cash deposited  will be scanned for  counterfeit  bills.  The applicant
will provide its postal zip number or mother's maiden name for security reasons.
The  purchaser  will  select and enter four  confidential  numbers  for  his/her
personal and confidential PIN number.

     Following these easy steps, a receipt will be provided  showing the prepaid
amount of the line-of-credit,  less a service fee that will varied in accordance
with the amount of the stored value purchased (2%; 3% or 4%). The issuing bank's
customer service  toll-free number will be provided,  printed on the back of the
card, along with other sundry information.  The ATM will dispense the debit card
with its 16 digits,  the issuing  bank's  name and the issue date.  Now the card
will be ready for use. The cardholder will have the option to reload the card at
any of the issuing bank's ATM machines. In case of reload, the service fee would
be reapplied.

     THE CARDHOLDER:

     In order to obtain this debit  card,  a  cardholder:  Will not need to have
his/her good,  fair or bad credit  checked.  Will not suffer  issuing  delays or
paperwork,  immediate  issue of an online debit card will follow  completion  of
transactions  requirement.  Will determine the line-of-credit  when applying for
the card. The deposit amount would  correspond to his/her means and needs.  Will
not have to pay fees for late  payments,  over  the  limit  usage,  or  interest
charges.  It can be purchased or reloaded 24 hours a day. ATMs are open 24 hours
a day,  with around the clock  availability  while most banks close by 2.00 p.m.
Monday through Friday.  Foreign currency capability may be added. Other valuable
features are included in the patent pending.

     THE ISSUING BANKS:

     Would enjoy foreseeable limited and/or minimal liability.  Will not have to
suffer  charge  offs,  over the limit usage,  or  delinquencies.  The  financial
institutions  will enjoy  earnings  similar or higher  profits that the ones now
obtain collecting  merchant discount fees and ATMs transactions  fees. Will also
benefit from the CASH FLOAT of deposits made from the debit card's purchases, as
now happens  when  traveler's  checks are  purchased.  Millions of dollars  will
become available for some time to the issuing bank as a line-of-credit  on those
cards purchased,  before the cardholder uses them.  Paperwork will be reduced as
we; as time.  There would be no need for Equifax or Credit Bureau reports.  The
bank issuing the debit card will not have to prepare and mail monthly statements
if so desires.  The Point Of Sale terminals will remain the same as the ones now
in use. There will be no need to install new or different expensive terminals at
the Point of Sale (POS). The same online  terminals  currently being in use will
suffice. They will start servicing individuals in the Sub-Prime market. Due to a
variety of reasons such as poor credit, bankruptcy,  divorces, college students,
etc.,  over 40 million  people cannot have a bank card.  The  technology of this
patents  pending will make it possible for banks and financial  institutions  to
service this untapped , sub-prime market,  and merchants will not be required to
purchase new POS expensive terminals.

     This expanded  functionality will represent future opportunities for branch
banks.  Not  only  will  the  ATM be  convenient,  more  personalized  and  more
enjoyable, but now it does more too.



<PAGE>

     MARKET

     With this new ATM technology financial institutions that have been shifting
operations for quite sometime to  electronically  networked  enterprises will be
helped. ATMs have lead the change,  providing  consumers with quick,  convenient
access to cash. Everyone knows how it works: personal I.D., number in, cash out,
but automated  teller machines  haven't  fulfilled yet all the customer's  needs
yet.

     After  an  initial   placement  of  ATMs  in  banks  and  other   financial
institutions,  they  will  be  placed  at gas  stations,  theaters,  stores  and
supermarkets,  also they can now be found in hotel  lobbies,  fast food  stores,
convenience stores, drug stores, malls, nightclubs,  service stations, airports,
hospitals,  and many  other  places.  Several  ATM  manufacturers  are now offer
theater coupons or vouchers,  video advertising,  and check cashing capabilities
for personal and two party checks.

     SALES PLAN

     Being this a new product, we cannot provide a very detailed 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 revenue and  earning.
Both of these cards offer  convenience  to the  consumer,  but the dollar values
being much higher here. There are three areas of sales  opportunities,  one with
financial  institutions,  our own bank with its own 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  licenses  offering 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.  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 machines into debit card dispensers.  Once the new system makes the
expected impact in the market, it is likely that new manufactured  machines will
include this system.

     ATMs are either  owned by or leased by financial  institutions,  or in some
cases they are owned and leased by the  manufacturers  to  merchants or to small
banks. 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.


<PAGE>

     PATENTS PENDING 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 2%; 3% or
4% of the stored  value 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 line of credit 4% fee will generate
$40.per card,  will,  this 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 to come online,  this will allow
for additional ATM machines to be purchased and placed. This will also allow for
increased  advertising  and  promotion  which 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.

     The  Company's  Patent  Pending,  once  operative,  does not  provide  cash
advances while  processing the  solicitation  of the interest free prepaid debit
card,  very much the opposite.  Under the ATMDCD  applicants will be able to use
the  approximated  five  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) which will determine the
amount of the ATMDCD of the prepaid  secured debit card, and in accordance  with
his/her means and needs. The bank card will be issued by a participating bank or
financial  institution and dispensed  through an Automated  Teller  Machine.  On
those ATMs manufactured and presently operative,  the Company will license those
ATM  manufacturers  for the  installing  of the  necessary  additional  patented
elements  (software,  hardware) described in the patent pending to broader their
present  functionality.  For future ATMs, the  manufacturers  will be license to
install these compatible new elements at the time they are manufactured.
<PAGE>

     Once the  simple  coupling  of these  elements,  the ATM will  perform  new
functions,  it will accept cash  deposits  and dispense a debit card ready to be
used for merchandise purchases,  cash advances, car rentals,  airlines and hotel
reservations, etc.

     If cash  is  deposited  it  will be  scanned  for  counterfeit  bills,  the
applicant  will  provide  his  postal  zip number or  mother's  maiden  name for
security reasons, he or she will select and enter the four confidential  numbers
for the PIN number. Following these steps the ATM will provide a receipt showing
the  ATMDCD  requested  and paid for,  less a service  fee (from 2% to 4%);  the
issuing bank's customer toll free number, which will be also printed on the back
of the bank card, and other sundry information.

     PLANNED MARKETING OF THE AUTOMATED DEBIT CARDS DISPENSER (ATMDCD)

     The  Company  believes  that the  ATMDCD  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 low  lines of
credit,  or wish to  establish  their  credit  worthiness  for the future.  This
individuals  will be able to prepaid  the  stored  value  desired  for a line of
credit by using the ATMDCD.

     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 ATMDCD 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  MasterCard in just about every retail
outlet,  and the strong  presence of ATMs,  the ATM's debit cards will  function
just like cash, while providing a safety element.

     Travelers  wishing to prepaid their  traveling  expenses,  in stead of just
charging  it. The ATMDCD may be obtained in any  currency  desired and used just
like cash in the visiting country.  It will work just like travelers checks with
the added convenience of a debit card and its safety  Individuals not wanting to
go through all the hassle of 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.

<PAGE>


     There are other  multiple  uses of the ATMDCD 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 ATMs,  create  exciting new  possibilities  for the
future cash less  society.  We see the ATMDCD System 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.

     These  cash  surrender  values  are  owned  by the  cardholder  and will be
utilized  by the  Company  only if he or she  becomes  delinquent  in paying his
credit balance to the issuing bank. Any  cardholder/policyowner  will be able to
request and obtain a release of the assignment of the life  insurance  policy by
paying any outstanding  balance on the credit card,  returning the  credit/debit
card to the participating financial institution and providing the Company with a
written   request  for  a  release.   Before  the  issuance  of  a  credit  card
collateralized  by the Resource  System the consent to assignment to the Company
of the cash  surrender  value from the  policyholder  should be  obtained.  The
Company will then notify the insurance company of the assignment.

     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.

     Although the Company has not  experienced  any  difficulty  with  insurance
companies  in  this  respect,  there  can  be  no  assurance  there  will  be no
difficulties in the future. From 1988 to 1991,  approximately 350 life insurance
companies  acknowledged the assignments  received of the cash surrender value of
certain life insurance policies by them from the Company.  In only two instances
did the Company collect from the cash surrender  value of a cardholder's  policy
to apply it to a delinquent payment, one due to the death of the policyowner.

<PAGE>

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 and its telephone
(305) 666-1460, its Fax No. is (305) 665-3462. E-Mail dpccsystem@aol.com and the
Web    site     addresses     are:     htt://members.aol.com/dpccsystem/     and
ubuydebitcards.com/confidential/

     The Company is the  worldwide  owner of the United  States  Patent  Numbers
4,718,009  and  5,2025,138;   the  Canada  Patent  Number  1,280,  213;  has  an
understanding agreement with the inventor for the worldwide rights and ownership
of the Patents  Pending(3)  related to two Automated Teller Machines Debit Cards
Dispenser the  UBUYDEBITCARDS.COM and  UBUYCREDITCARDS.COM  patents pending. Two
Domain Name registrations for use in the Internet.

     THE PATENTS PENDING STATUS

     The  Company's  patents  pending are pending the U.S.  Patent and Trademark
Office  granting the related  patents.  Even though there is no  assurance,  the
Company  expects to receive the Grant for the ATM DEBIT CARDS DISPENSER at early
1999 winter and that the ubuydebitcards.com is expected to follow.

     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.

     The UBUYDEBITCARDS.COM and  UBUYCREDITCARDS.COM,  Internet Domain Names are
integrated  to the  Company's  intellectual  property,  as it is  the  trademark
Resource.

     ITEM 3. LEGAL PROCEEDINGS.

     The Company is not involved in any material  litigation and is not aware of
any potential claims which 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, 1998.

                                     PART II

     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 Bulletin Board under the symbol
"DPRS".

     The  following  table sets forth the high and low bid  information  for the
Company's  common stock  monthly  during 1998.  The  quotations  provided  below
reflect inter-dealer  prices,  without mark ups, mark down or commission and may
not represent actual transactions.

<PAGE>


          FISCAL 1998                  HIGH             LOW
          -----------                  ----             ---
             02/06/98                  .0125             .125
             03/06/98                  .42               .30
             04/03/98                  .0625             .18
             05/01/98                  .40               .25
             06/05/98                  .28               .22
             07/02/98                  .22               .18
             08/07/98                  .16               .125
             09/04/98                  .125              .12
             10/02/98                  .125              .125
             11/06/98                  .125              .09
             12/04/98                  .08               .08
             12/31/98                  .35               .23

     On December 31, 1998 the Company had approximately 209 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  payment  of
dividends by the Company 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,
patents  pending  to one or several  banks or  financial  institutions  or joint
venture.

     The  company  would will  consider  to raise 14  million  dollars to enter,
through the  acquisition or control of a small Florida bank, 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  Debit cards (at about 7 to 9,000
dollars  each).  The  balance  will  be  used  for  administrative,   marketing,
advertising and promotion expenses.

     The ATM Debit Card Dispensers will 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 will be issued through the 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 the capture of
extra  revenue  along with a  potential  for very  significant  cash  float.  An
important  consideration  here is that having the Company its own bank allows us
to generate a huge cash float from debit card purchase balances that cardholders
on average  will not use  immediately.  This allows us to generate  considerable
income off this float.  As an 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.  The
Company is now having  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  $75,000  in
developing  computer software and acquiring  computer hardware for the operation
of the  Resource  System.  The Company  has  expended in excess of $ 550,000 for
advertising  which has included  newspaper  and  television  advertising,  video
tapes,  and brochures and applications  which were distributed  through the mail
and to various stores and businesses.

     Patents  fees  applications,  as well as  Patent's  attorneys  legal  fees,
maintenance patent fees, are close to $100,000 of Company expenses.  The Company
expend well over $225,000 in developing  the Resource  System.  The Company also
expended over $ 1,000,000 in litigation with State Street Bank and Trust Company
(State Street Bank),  American  Express  litigation over the Company's  RESOURCE
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 attempted
to raise more  capital in order to implement a new  strategy  that  involved the
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.

     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 bank cards
issuing  financial  institutions,  and it now appears that the effort to protect
its patent rights will pay off after all. The renewed marketing efforts offering
the Company's Resource System to banks for licensing has developed new interest.
Conversations  with  several  banks'  officers are  encouraging,  since they are
demonstrating  interest in the Company's  secured  credit/debit  card  products.
Marketing  efforts will continue  jointly with the offering of the Company's ATM
DEBIT CARDS  DISPENSER,  patents  pending,  and the about to be launched late in
1999 Fall our Internet  UBUYDEBITCARDS.COM  patent pending, all of them with new
exciting Company's technology.  There is no assurance that these patents pending
will be granted related patents.

<PAGE>

     EMPLOYEES

     As of the  date  hereof,  the  Company  has no  employees  other  than  its
President and the Counsel and Company's  Secretary and the valuable  acquisition
of David J.  Koss as a  consultant,  a very  helpful  relationship.  Cuervo  and
Llaguno have received  Stock Options  Grants (see:  Stock  Options) for all work
(without monetary  compensation)  done by them in the last several years.  Those
stock options to Cuervo were granted also, because of his loans, at no interest,
to the Company, and other expenses paid by him on behalf of the Company.


     ITEM 7. FINANCIAL STATEMENTS

                      CONTENTS                                    PAGE
                      --------                                    ----

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

         FINANCIAL STATEMENTS

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

                  STATEMENTS OF OPERATIONS.........................F-6

                  STATEMENT OF STOCKHOLDERS' EQUITY/DEFICIENCY.....F-8

                  STATEMENTS OF CASH FLOW..........................F-10

         NOTES TO FINANCIAL STATEMENTS.............................F-11


     ITEM 8. CHANGES IN AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     On July 16,  1999,  the  Company  engaged  INFANTE,  LAGO & Company  as its
independent  certified  public  accountants to audit the Company's  Consolidated
Financial Statements for the year ended December 31, 1998.

                                    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, President           70               Director

Ciro B. Sosa, Vice President        71               Director

Pedro P. Llaguno, Vice President    68               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.

 <PAGE>


     VINCENT CUERVO has been President 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 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.  Mr.  Cuervo may be deemed a "parent" or
"promoter"  of the  Company,  as those  terms  are  defined  under  the  federal
securities  laws.  The Company lost the services of a long time friend,  Officer
and Director, David I. B. Williams who died.

     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.

     (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,  judgement 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, 1998 exceeded one Dollar.

                           SUMMARY COMPENSATION TABLE
                             LONG-TERM COMPENSATION

ANNUAL COMPENSATION                          AWARDS
-------------------                          ------

NAME AND (# OF SHARES)                      (# OF SHARES)

PRINCIPAL  SALARY OTHER ANNUAL  RESTRICTED  OPTIONS/SAR  ALL OTHER POSITION YEAR
$BONUS COMP. $ STOCK AWARDS

     NONE


<PAGE>

     OPTION/SAR  EXERCISES  AND  YEAR-END  VALUE  TABLE  AGGREGATED   OPTION/SAR
EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUE

     NONE.

     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth  information  on early January 1999 and at
February 18, 1999 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              3,482,916                   29%

CIRO B. SOSA
Miami, FL 33145                242,762                    2%

PEDRO P. LLAGUNO
Miami, FL 33145                161,425                  1.4%

KATHY WiLLIAMS
Mississuaga, Ontario           197,500                  1.6%

ERIC H. SPELLMAN               835,000                  6.2%
Larchmont, NY

Officers/directors,
promoters, as a group        4,919,603                 38.4%

     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 2,250,000. Stock Option
of the Company's Common Stock $.001 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.  If the U.S.
Patent and Trademark  Office does not issue the related  patent the Company will
not grant the stock  option to Vincent  Cuervo and the  understanding  agreement
will be void and  canceled.  There is no  assurance  that  the U.S.  Patent  and
Tredemark Office will grant the patents on any or all of the patents pending.


<PAGE>

     SECURITIES OUTSTANDING

     The Company is  authorized to issue  25,000,000  shares of $0.001 par value
common  stock  (the  Shares).  As of  December  31,  1998  there are  12,043,510
currently  outstanding  shares, and 4,919,603 of the Company  outstanding shares
are  restricted  shares.  The  Company  also has  380,000  Stock  Options of the
Company's  Common Stock $0.001 par value at an exercise price ranging from $0.50
to $1.25 per share (an average  exercise price of $0.75 per share),  and another
1,400,000  Stock  Options  of the  Company's  Common  Stock  $0.001 par value to
purchase  shares until February 2, 2000, at an exercise price of $0.10 and $0.15
cents per share,  and  1,250,000  Stock  Options of the  Company's  Common Stock
$0.001 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/NMS:BB to July 17, 1998.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.

     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 $0.001 par value to purchase 70,000
Vincent  Cuervo , and 20,000 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 $1.25.  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.  No stock options have been forfeited or exercised and all outstanding
awards continue to be exercisable as of December 31, 1998. On February 1995, the
Company  issued  to its  principal  shareholder  Vincent  Cuervo  and one of its
officers P. P. Llaguno,  Stock Options to purchase  200,000  Vincent  Cuervo and
150,000  Pedro P. Llaguno, Esq., of the Company's  Common Stock $0.001 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. No stock options have been forfeited or exercised and all
outstanding  awards  continue to be exercisable as of December 31, 1998. 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 200,000 Vincent
Cuervo and 50,000 Pedro P. Llaguno,  Esq., of the Company's  Common Stock $0.001
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, 1998. 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.  He
received minimal compensation during 1993, and no compensation since early 1994,
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.
<PAGE>

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

     All the above Stock  Option  shares are  Company's  Common Stock $0.001 par
value per share and when  exercised  will be subject 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 ChaseMellon Shareholders
Services,  L.L.C.,  Overpeck  Centre,  85 Challenger  Road,  Ridgefield Park, NJ
07660.

     RECENT SALES OF UNREGISTERED SECURITIES.

     In  November  10,  1997  the  Company   entered  into  an  agreement   with
International  Buying Power,  Corp., a financial public relations  network.  The
agreement  purpose was the  distribution of marketing and business plan packages
of the Company's new patents  pending  acquisitions.  The Company issued 276,000
shares of the Common Stock $0.001 par value for their services.  On December 16,
1997 the Company terminated the contract as provided. At the time of termination
the Company had  withheld  the last 50,000.  shares  under the  contract.  These
50,000.  shares were subsequently  canceled in January 1998. In January 16, 1998
the Company entered into an agreement with F.P.I.  ,Inc.  Financial  consultants
with  offices at 1776 Oxford Ct.,  Highland  Park,  IL 60035 the Company  issued
Common Stock $0.001 par value per share for their services,  seven  certificates
three(3)  for  100,000  each and four (4) for 75,000  each for  payments  in the
following  twelve months  duration of the  agreement.  Due to termination of the
agreement on 8-18-98 four (4) certificates  for 75,000.  Shares each, and one(1)
certificate  for 100,000  were  canceled  and  returned to the  Company's  Stock
Transfer Agent for  cancellation and for entering in the Company's  reserve.  In
February 11, 1998 the Company  issued  100,000  shares of the  Company's  Common
Stock $0.001 par value per share to A.G.I,  Consultants  in accordance  with the
agreement  entered on October 31, 1997 for services  related with the  Company's
preparation of the filings and reports in payment for services, on that date the
shares closed at $0.08 per shares.  In April 13, 1998 the Company issued 100,000
shares of the  Company's  Common Stock $0.001 par value per share to Alan Parker
for computer, Edgar transmitting, and Internet related services, in payments for
services,  on 4/17/98 the shares closed at $0.15 per share.  In June 4, 1998 the
Company  issued to Alberni & Alberni,  P.A. of 4649 Ponce de Leon  Blvd.,  Suite
#404, Coral Gables,  FL 33146 50,000 shares of the company's Common Stock $0.001

<PAGE>

par value per share in lieu of cash payment for services.  On September 23, 1997
an  agreement  was signed by Alberni & Alberni,  P.A. and the Company as payment
for C.P.A.  services related to the 10-K for 12/31/97.  On April 13, 1998 due to
the economic conditions,  the Company was unable to pay Alberni & Alberni,  P.A.
the  $5,000  requested  for the  services  rendered,  and at that date  Board of
Directors  Meeting it was resolved to offered A&A P.A. the Company  Common Stock
Shares  $0.001  par  value  in  payment  for  those  services.  After  weeks  of
conversations and in view of the cash flow conditions of the Company,  A&A, P.A.
accepted the shares and on June 4, 1998 the Stock  Transfer  Agent  ChaseMellon,
was  requested to issued the shares.  On June 5, 1998 the shares closed at $0.22
per share.  In August 4, 1998 the  Company  issued  50,000  shares of the Common
Stock $0.001 par value per share to Eduardo Garcia  accountant,  for the IRS and
State Tax bookkeeping and filing services in payment for services,  on August 7,
1998 the shares closed at $0.12 per share.  The foregoing sales were exempt from
registration  pursuant to Section 4(2) of the Securities Act of 1933 inasmuch as
no public offering was involved.

     ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K


     Attached  hereto  and  filed  as a part of this  Report  are the  financial
statements. The Exhibits described below are incorporated by reference herein.

     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
          TrustCo. (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.



<PAGE>


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

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

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

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

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

     10.8**Form of 1988 Stock Option Plan.

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

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

     REPORTS ON FORM 8 K EXHIBIT  #1 REPORT ON FORM 8-K  Reverse  Split 10 for 1
          filed 2-1-99

     ITEM 13(B) EXHIBITS

     The  Exhibits  described  above are  incorporated  by reference  herein.  *
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.

<PAGE>

                                  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)

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

         (305) 666-1460
         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.


<PAGE>


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: October __, 1999        By: /s/ VINCENT CUERVO
                                  Vncent Cuervo, President & CEO