SECURITIES AND EXCHANGE COMMISSION
         Washington,  D.C.  20549
Form  10-K

Annual Report Pursuant to Section 13 or 
15(d) of
     the Securities and Exchange act of 
1934	
For the fiscal year ended December 31, 1997  
Commission File No. 0-17114

            DEFAULT PROOF CREDIT CARD SYSTEM, INC         
       (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS 
CHARACTER)    
            FLORIDA                           59-86523 
(State or other jurisdiction of          (I.R.S. Employer
incorporation or organization)           Identification No.)

  4520 Sunset Drive
       Miami, Florida                      33143      	     
(Address of principal 			       (ZipCode)
 executive offices)

Registrant's telephone number, including area code:
(305)856-4711

Securities Registered pursuant to Section 12(b) of the Act: 
						None
Securities Registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $ 0.001

Indicate by check mark whether the registrant (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      

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  March 15, 1998.

      Common Stock. $0.001 par value -  1,164,351.00

The number of shares outstanding of each of the registrant's 
classes of common stock as of December 31, 1997.

   Common Stock. $0.001 par value - 11,643,51

          	

DEFAULT PROOF CREDIT CARD SYSTEM, INC.
           	   CROSS REFERENCE SHEET
  PURSUANT TO RULE 14a-3(d)


Annual Report Item   
	Under Rule 14A-3(D)
(1)	Financial Statements


(2)	Form of Financial   
     Statements

(3)	Supplementary 
Financial 
Information

(4)	Accountants and    
Financial Disclosure, 
	changes and 	
	disagreements

(5)	(i) Select Financial 
	Data

(ii)Management's 	
	Discussion and 
Analysis 	of Financial
Condition and Result 
of 	Operations

(6)	Business of Registrant

(7)	Industry Segments

(8)	Directors and 
Executive 	Officers

(9)	Market Price of Common 
	Stock,  Dividends 


(10)	Annual Report on Form 
	10-K

(11)	Form of Annual Report






Caption or Location
      in Form 10-K       
Financial Statements and
Supplementary Data

Financial Statements and
Supplementary Data

Financial Statements and
Supplementary Data

Changes in and 
Disagreements
With 
AccountantsandFinancial
Disclosure


Selected Financial Data


Management's Discussion and 
 Analysis
of Financial Condition and 
Results of Operations


Business

Business

Directors and Executive
Officers of Registrant

Market for Registrants
Common Equity and Related
Stockholders Matters

Not applicable


Not applicable




PART I
ITEM 1.    BUSINESS 

Default Proof Credit Card System, Inc. (the "Company"), 
was organized in August 1985 to engage 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 secured type 
card is marketed under the trademark Resource (the Resource 
System), and the next card (Patent Pending) to be marketed 
as a Line Of Credit System (LOC ). 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 LOC Syste, on the other hand, 
allows an applicant to made cash deposits in Automatic 
Teller Machines  which will dispense to the applicant a 
debit card with a line of credit amount equal to the cash 
deposited less a small service fee. The issued bankcard will 
be equal as  any other one such as MasterCard or Visa. 

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. 

Although the Company anticipates that it will receive 
the proceeds of an assign cash surrender value within seven 
business days from a claim of the Company, there can be no 
assurance that the Company will receive such proceeds within 
that period.  If the Company does not receive such proceeds 

3
prior to the Company's obligation to pay a participating 
institution, the Company's ability to make such payment will 
be dependent upon the Company's capital. See Financial 
Statements and Report of Independent C.P.A.

THE LINE OF CREDIT SYSTEM

Last November 1997 the Company acquired from Vincent 
Cuervo, President of the Company, all the worldwide rights, 
licenses, and ownership of the Line Of Credit System(LOC) 
Patent Pending filed with the U.S. Patent and Trademark 
Office, Washington, D.C. earlier  in 1997.  Under the 
purchase 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  U.S. Patent and 
Trademark Office a Notice  of Allowance notifying the 
Company that its patent application had been allowed and 
subsequently  the issue of a  related Patent to this patent 
pending (LOC). 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.

Through the Company's Patent Pending LOC System a debit 
card will be made available to consumers, through modified 
ATMs, after the implementation of new software and hardware 
elements to the existing Automatic Teller Machines, and into 
the new ones manufactured. These compatible elements will be 
easily installed and adapted to the operational systems in 
use today. The existing Automatic Teller Machines in the 
market today, consists, wherein the machine accesses with 
the insertion of a credit/debit card in good standing and 
the entering of its assigned PIN number, for cash advances 
charged against the credit line balance in such credit/debit 
card. Cash advances are approved or denied depending on the 
remaining availability of credit in the credit card, or cash 
balance in the bank account on a 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 LOC System applicants will be able to 
use the thousands of Automatic Teller Machine (ATM) in the 
market today, and  make  cash  deposits  that may  vary  
($500;$ 1,000; $ 2,000; $ 3,000 and up) which will determine 
the amount of the Line Of Credit (LOC) of the prepaid 
secured debit card, and in accordance with his/her means and 
needs. The bankcard  will be issued by a participating bank 
or financial institution and dispensed through an Automatic 
Teller Machine. On those ATMs manufactured and presently 
operative, the Company will license those ATM builders to 

4
install the necessary additional patented elements 
(software, hardware) described in the patent pending  to 
broader their present functionality.For future built ATMs, 
the builders will be license to install these compatible new 
elements at the time they are manufactured.

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.

The cash deposited 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 LOC requested and paid for, less a 
service fee (maybe 2%); the issuing bank's customer free 
number, which will be also printed on the back of the 
bankcard, and other sundry information.

 The ATM  will dispense the debit card with its 16 
numbers (0000 0000 0000 0000) and the issuing bank's logo, 
it will have the  issued date printed  and nothing else. Now 
it will be  ready for  use. The cardholder may reload the 
card at any  of  the issuing bank ATM machines, the service 
fee will apply again. The cardholder will not need to have 
his/her good, fair or bad credit checked. There will not be 
issuing delays or paperwork. There will be  instant issue. 
It will be up to the applicant to determine  the line of 
credit  amount  when  applying  for the card, in accordance 
to his/her  means  and  needs. The ATM machines are open 24 
hours every day, banks are  usually  closed at 2.00 p.m. 
Monday through Friday. Foreign currency capability  may be 
added. Other important features are available in the patent 
pending.

The issuing banks will enjoy  foreseeable limited  
and/or minimal liability, and a) The banks  issuing these 
ATM dispensed prepaid or  stored-value cards will not suffer 
any charges off, over limit  usage, or  delinquencies; b) 
Similar or higher profits - These cards may  have all of the 
same capabilities of any other existing bankcards. The 
cardholder will be able to purchase merchandise or make cash 
advances at any ATM. The bank would  receive the same 
merchant discount fees  (between 2% to 4%) from any 
purchase, and the same ATM fees (about $2.50 per each) on 
any cash advance; c) New source of profits- The bank issuing 
these cards would  benefit of the CASH FLOW from the 
deposits made for the debit card's acquisition, as it  now 
happens with the money  when traveler's  checks are 
purchased. Millions of dollars will become line of credit  
for some time,  in  those cards 	
5
purchased, before the cardholder use them.; d) No paperwork- 
There would be no need for Equifax or Credit Bureau reports. 
The  issuing bank will not have to issue and mail monthly 
statements; e) Use of  the same terminals as the ones that 
now are in  use-  There will be no need to install new 
different expensive  terminals  at neither end. Same online 
transactions will be used; f) Servicing approx. 40 million 
individuals in the Sub-Prime market-  Because of different  
reasons  (poor credit record; bankruptcy; divorces; college 
students, etc...) about 40  million people can not have a 
bankcard. Now  the financial institutions will be able to  
service  that untapped  market, an g) It is not a Smart 
Card.

This expanding ATM functionality will  represent future 
opportunities for branch banks. This way, not only is the 
ATM easier, more personalized and more enjoyable, but it 
does more, too.

As of today, eventhough there is not assurance that a 
related patent will be issued, the Company has  received 
favorable actions from the Patent and Trademark Office in 
Washington, D.C.,  and the Company's patent pending 
continues through the Patent Office's  usual  process. 

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 
$50,000 in developing computer software and acquiring 
computer hardware for the operation of the Resource System. 
 The Company has expended approximately $ 350,000 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. The Company has expended 
approximately $ 225,000 in developing the Resource System 
and obtaining patents therefor. The Company also expended 
approximately $ 1,000,000 in litigation with State Street 
Bank and Trust Company (State Street Bank).The State Street 
Bank litigation forced the Company to attempt 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 a
system being used by a bank in an unauthorized fashion. 
Banks, which were very interested in the Resource System 
backed off once the litigation was initiated. Subsequent 
efforts to raise capital failed.

In mid 1997, the Company renewed it's marketing efforts 

6
and early in 1998  the management contracted financial  
consultants, F.P.I.	 Inc., to promote the  Resource System. 
 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 
renewed marketing efforts offering the Company's Resource 
System to banks for licensing has developed  some  new 
interest. Conversations with  several  banks' officers  are 
encouraging, since they are demonstrating  interest in the 
secured credit/debit card products.  Marketing efforts will 
continue jointly with the offering of  the Company's LOC 
System Patent Pending new product.  

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 Visa or MasterCard 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.
 						
If  a cardholder becomes delinquent, the participating 
bank or financial institution, after unsuccessfully pursuing 
its own collection procedures, will notify the Company of 
the existence and amount of delinquency. Prior to receiving 
payment from the Company, the participating financial 
institution will be required to, among other things, release 
the Company from any future obligations or liability 
regarding the delinquent cardholder and cancel the credit or 
debit  card. The Company will request a defaulting 
cardholder's life insurance company to provide to the 
Company with the amount 

7
necessary to cover the delinquent outstanding balances owed 
by such cardholder by creating a loan against the 
cardholder's policy. Upon receipt of the policy loan funds, 
the Company  will  recover its  processing costs, the amount 
to be paid to the participating institutions plus interest 
incurred between the date the Company pays the participating 
institution and the date the Company is paid by the life 
insurance company, at the same rate charged on the bankcard. 
If, at any time that the Company is required to pay a 
participating institution, the Company has not then received 
the proceeds of the assigned cash surrender value of a 
defaulting cardholder, then to the extent that the Company 
has the capital therefor, the Company will pay the 
participating institution the amount it is owed  by  the 
cardholder. The  Company  will  only  obtain from the life 
insurance  company  the amount necessary  to  be reimbursed 
 in  full  for  the amount  it  paid to the participating 
institution to pay  in  full  any  delinquent outstanding 
balances owed by the cardholder plus interest and processing 
costs. Although the foregoing represents the method  the  
Company  intends to  use and  implement the  Resourcer 
System,  it  is possible that the actual operation, if any, 
of the Resource System may vary from the foregoing plan. 
There can be no assurance that the Resource System can be 
successfully implemented or, if so implemented, that  the  
Company  will  ever  earn  a profit.

The ability  of  a cardholder to assign the cash 
surrender value of a life insurance policy is governed by 
the terms of the insurance policy which is a contract 
between the insurance company and the policy holder. The 
Company believes that an insurance company can not terminate 
an assignment of a cash surrender  value to the Company 
without the consent of the Company. Although the Company has 
never experienced a situation where, pursuant to the terms 
of a life insurance policy, the cash surrender value was 
unassignable, there can be no assurance that this will not 
occur. The Company has not yet engaged any legal counsel to 
conduct research with respect to the existence of any laws, 
rules or regulations which may preclude or limit the 
Company's ability to receive assignments
of cash surrender values of life insurance policies or which 
may allow a life insurance company to terminate such 
assignments without the consent of the Company. Any 
litigation resulting from attempts by the Company, 
Participating Institutions or insurance companies in 
connection with the Resource System would adversely affect 
the Company's cash flow, if any.

Prior to issuing a credit card collateralized by the 
Resource System, the Company must obtain the consent to the 
assignment of the cash surrender value from the 
policyholder. The Company will then notify the insurance 
company of the assignment. The successful application of the 
Resource System, 

8
although not dependent upon acceptance by insurance 
companies, is dependent among other things, upon the 
cooperation of insurance companies in registering 
assignments in their records and confirming assignments to 
the Company. 

Although the Company has not experience 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  assignment of  the cash  surrender  value 
of certain life insurance policies  by  them to 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.

MARKETING THE LOC SYSTEM

The Company believes that the LOC  System 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 individual will be able to 
prepay their line of credit by the use of the LOC System_. 
*	Individuals who for whatever reason want to manage 
their funds, or  other 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 LOC System is that its 
much more safer than cash while working  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 LOC System  will function just like cash, while  
providing a safety element.
*	Travelers  wishing to prepay their traveling  expenses, 
 in stead  of   just charging it The LOC System 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 the 
safety  it represents.
*	Individuals not wanting to go through all the hassle of 
 applying and maintaining a 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.

9
There are other multiple uses of the LOC debit  card 
that the Company  is presently studying and identifying. It 
is clear to the Company that the total and complete 
penetration of bankcards  such as MasterCard and/or Visa, 
coupled with the widespread distribution of ATMs, create 
exciting new possibilities for the future cashless society. 
We see the LOC System as an integral part of this 
phenomenon. 


ITEM 2.  DESCRIPTION OF PROPERTY

The Company  is the worldwide owner  of the United 
States Patent Numbers 4,718,009 and  5,2025,138; the 
Canadian Patent Number 1,280, 213; the worldwide rights and 
ownership  of the Patent Pending related to Automatic Teller
 Machines (LOC  SYSTEM), and the trademark Resource.
  
The Company's  executive offices are located at 4520
Sunset Rd., Miami, Florida 33143, and its telephone 
number is (305) 856-4711.The Company's executive
 offices consist of approximately   400 square feet.

ITEM 3. LEGAL PROCEEDINGS

Not applicable. No legal proceedings pending.

ITEM 4. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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 LOC System to one or several 
banks or financial institutions or joint venture the LOC 
System_. 

The  Company is now having substantive interviews and 
conversations  with several banks and financial 
institutions' officers  regarding the implementation of its 
 systems.  It  is the first  time in the last three years 
that such interest has been shown. There is no assurance 
that such discussions will realize any of the Company 
objectives, and there can be no assurance that any of its 
plans can be realized.

The Company realizes that in order to undertake the 
marketing of one or both of its concepts, it must raise 
capital, something that it has not been able to do since its 
original public issuance. It is with this reality check, 
that the Company its now entertaining the joint venture or 
sale of one of  its products.


10
ITEM 5. SECURITY  OWNERSHIP OF  CERTAIN  BENEFICIAL OWNERS  
          AND MANAGEMENT

The following table sets forth information at March 2, 1998 
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.
Name of Beneficial    Amount and Nature of  Percentage of 
Owner            Beneficial Ownership   Outstanding 	
							     Shares Owned
Vincent Cuervo                          
Miami, FL 33143		  3,779,416			33%

Ciro B. Sosa
Miami, FL 33145		    242,762		 	 2%

Pedro P. Llaguno
Miami, FL 33145		    161,425		    1.4%

Dave I.B.Williams       	    197,500	         1.6%
(died in 1997)

Officers/directors 
as a group			  4,381,103 		    	38%

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

ITEM 6.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND    
         CONTROL  PERSONS OF THE REGISTRANT.

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

Name				Age		Position

Vincent Cuervo, President		68		Director

Ciro B. Sosa, Vice President		71		Director		
					
Pedro P. Llaguno, Vice President	67		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 President and Chairman of the 
Board of Directors of the Company since its inception in 

11
August 1985. From January 1984 until March 1986 he was the 
general managing agent for Travelers Life Insurance Co., O. 
Ltd., and Summit National Life Insurance Company. From 
September 1962 through December 1983, he was general 
managing agent for Crown Life Insurance Company for the area 
encompassing Dade, Broward and Monroe Counties in Florida, 
all of South America, Central America, the Caribbean and 
Spain. During such time he was responsible for supervising 
over 200 life insurance brokers and agents. Mr. Cuervo holds 
a Juris Doctorate degree from Havana University, Cuba.
10
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. In addition, from 1982 
through 1983, Mr. Sosa was a real estate broker.

 	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 practicing in Miami, Florida.

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

In 1997 the Company lost the services of a long time 
friend, Officer and Director, David I. B. Williams who died. 
He has not been replaced as an Officer or Director. 

The Company is  in the process of interviewing several 
individuals to replace Mr. Williams vacancy.

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 

12
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 7. 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, 1997 exceeded $ 40,000.

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

      OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
  Aggregated Option/SAR Exercises In Last Fiscal Year
            And FY-End Option/SAR Value

     NONE 

ITEM 8.    Employment Agreement.

On September 1, 1988, Dr. Vincent Cuervo, the 
president/principal stockholder entered into an employment 
agreement with the Company. Pursuant to the agreement, the 
President and CEO is to receive an annual salary of $ 
144,000, increased annually by the grater of 5% or the 
increase in the consumer price index.

On July 25, 1994, at the Company's Special Meeting of 
The Board of Directors, the Company renew the September 1, 
1988 Employment Agreement between Dr. Vincent Cuervo and the 
Company for another five year term, commencing on September 
1, 1994.

In January 1991 at his request the salary was reduced 
to $ 60,000 annually and the rights to those increases have 
been waived by him since then. The agreement also provided 
for the Company's payment of Dr. Cuervo's health, life, and 
disability insurance premiums, and other benefits, all of 
them, at his request, also have been waived on March 1991. 


13
Since January 1994 Vincent Cuervo has waived all 
monetary compensation and benefits paid to him. Effective  
January  1, 1997 all of his accrued compensation, to which 
he was entitled under the present employment agreement 
between the Company and Cuervo in exchange for shares of the 
Company's Common Stock $0.001 par value per share. All other 
term of Cuervo's employment agreement remain as of this 
date, valid and in force. The Board of Directors has agreed 
to enter into discussions with Cuervo and other officers, 
regarding their future annual compensation and benefits at 
such time on which the Company's earnings will merit 
compensation payments to its officers.

ITEM 9.  EMPLOYEES

As of the date hereof, the Company  had no employees  
other than its President and the Counsel and Company's  
Secretary. 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 10.  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, 1997 there are 11,643,510 currently outstanding 
shares, and 4,998,103 of the Company outstanding shares are 
restricted shares. The Company also has 475,000 Stock 
Options at an exercise price ranging from $0.25 to $1.25 per 
share (an average exercise price of $0.75 per share), and 
another 1,400,000 Stock Options to purchase shares until 
February 2, 2000, at an exercise price of $0.10 and $0.15 
cents per share. 
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.

ITEM 11. STOCK OPTIONS CERTAIN RELATIONSHIPS AND RELATED 	 
    TRANSACTIONS.

On August 2, 1993 the Company granted to its principal 
stockholder Dr. Vincent Cuervo and one of its officers, 
Pedro P. Llaguno, Esq., options to purchase stock in 
accordance to the following:


14
Name     Date of   #ofShares    Exercise    Expiration
    	Grant     Issuable     Price	       Date
Cuervo	8/2/93	 70,000	   $ 0.25		8/2/98
	Llaguno	8/2/93	 25,000	   $ 0.25		8/2/98
Cuervo	8/2/94	 70,000	   $ 0.50		8/2/99
Llaguno	8/2/94	 25,000	   $ 0.50		8/2/99
Cuervo	8/2/95     70,000	   $ 0.75		8/2/2000
Llaguno	8/2/95	 25,000	   $ 0.75		8/2/2000
Cuervo	8/2/96	 70,000	   $ 1.00		8/2/2001
Llaguno	8/2/96	 25,000	   $ 1.00		8/2/2001
Cuervo	8/2/97	 70,000	   $ 1.25 	8/2/2002
Llaguno	8/2/97	 25,000	   $ 1.25		8/2/2002

On February 1995, the Company granted to its principal 
stockholder, Dr. Cuervo and one of its officers P.P. Llaguno 
options to purchase stock in accordance to the following:

Name 	Date of  # of Shares     Exercise     Expiration
     Grant 	Issuable        Price	      Date
Cuervo	2/2/95	200,000		$ 0.10		2/2/2000
Llaguno	2/2/95	150,000		$ 0.10		2/2/2000
Cuervo	2/2/96	200,000		$ 0.15		2/2/2001
Llaguno	2/2/96	150,000		$ 0.15		2/2/2001
Cuervo	2/2/97	200,000		$ 0.15		2/2/2002
Llaguno	2/2/97	150,000		$ 0.15		2/2/2002
Cuervo	2/2/98	200,000		$ 0.15		2/2/2003
Llaguno	2/2/98	150,000		$ 0.15		2/2/2003

The above stock options to purchase the Company's 
Common Stock, were granted 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 loans to the Company for the payment 
of its administrative expenses, bills, patent maintenance 
fees, etc.., from Dr. Cuervo's personal funds and without 
charging interest to the Company. These numerous loans were 
in the tens of thousands of dollars. The officer, Pedro P. 
Llaguno has rendered his legal services, and many other 
services beyond his obligations at no charge to the Company.

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 Securities Act of 1993, as amended.




15
PART II

ITEM`12.  MARKET FOR REGISTRANT'S COMMON EQUITY
     Dividends and Other Stockholder Matters.

The Common Stock of the Company have been traded in the 
over-the-counter market and the Bulletin Board under the 
Symbol DPRS.
The following table sets forth volume, high and low bid 
prices for the Company's Common Stock weekly during 1997 and 
early 1998 weekly  as quoted on the E. Bulletin Board.      
                            
Date      Volume      High/Ask     Low/Bid        Close
01/03/97	 10,000	   0.14        0.14         0.14   
01/24/97    6,000	   0.15        0.14         0.15   
01/31/97 	121,000      0.14        0.11         0.13   
02/07/97   30,000	   0.15        0.13         0.13   
02/28/97  154,500	   0.22        0.14         0.21   
03/07/97  135,500      0.18        0.13         0.14   
03/14/97    9,300      0.17        0.13         0.14   
04/18/97   68,000      0.20        0.17         0.17   
04/25/97  315,800      0.24        0.20         0.24   
05/16/97  173,400      0.25        0.20         0.21   
06/27/97  128,700      0.25        0.19         0.25 
07/04/97   31,100      0.20        0.20         0.20   
08/04/97    9,000      0.17        0.15         0.17
10/03/97   28,500      0.18        0.15         0.14
11/21/97  725,800      0.50        0.15         0.22
11/28/97  296,800      0.29        0.20         0.28   
12/05/97  243,000      0.34        0.16         0.16   
12/12/97   37,900      0.19        0.15         0.17   
12/26/97    4,500      0.12        0.12         0.12  
01/02/98   23,000  	   0.12        0.12         0.12
03/20/98  324,800      0.25        0.17         0.21

To date, the Company has not paid any dividends on its 
Common Stock. The payment of dividends, if any, in the 
future is within the discretion of the Board of Directors 
and will depend upon the Company's earnings, its capital 
requirements and financial condition, and other relevant 
factors. The Board does not intent to declare any dividends 
in the foreseeable future, but instead intends to retain all 
earnings, if any, for use in the Company's business 
operations. As of December 31, 1997 there were approximately 
211 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.

Securities Transfer Agent

The Transfer Agent for the Company's Securities is 
Chase 


16
Mellon Shareholders Services, L.L.C., Overpeck Centre, 85 
Challenger Rd., Ridgefield Park, NJ 07660.

Recent Sales of Unregistered Securities.

On February 22, 1994 the Company issued 25,000 shares 
to Emil Chabala in consideration for his past, present and 
future services. Mr. Chabala made contacts with Credit Union 
 officers for issuing the Resourcer System bankcards in 
Philadelphia and Washington, D.C. Also on that date the 
Company issued 25,000. shares to Salvador Cuervo(brother to 
the President of the Company) for similar efforts with 
investors in Mexico City, Mexico. Also on that date to Jose 
Abascal for his efforts in Puerto Rico. In all cases they 
made phone calls and traveled at their own expenses.
On July 1994 the Company issued 30,000. shares to 
william Tribwaser for his arranged meeting and agreement 
between the Company and Onix Corp., an investment banker. 
Also on that date the Company issued 5,000. shares to Robert 
Parma for the 
secretarial services related to Onix Corp. in connection to 
the private placement preparation. Also in that date the 
Company issued 5,000. shares to Yolanda G. Ricard for her 
past and  present services. Mrs. Ricard supplied secretarial 
services to the Company without pay.
On July 25, 1995 the Company issued to Dr. Eric H. 
Spellman, 125,000 shares of the Company's Common Stock, as 
consideration for his past, present and future services. Dr. 
Spellman provided business meetings between the Company and 
investment bankers, and investors. The value attributable to 
such shares was $ 125.
On June 12, 1996 the Company issue 25,000 shares of the 
Company's Common Stock, to Eduardo Garcia, the Company's 
accountant, in consideration for his present and future 
services' fees to be accrued; and it issued Dr. Alan Parker 
60,000 shares of the Company's Common Stock, in 
consideration for his past, and continuing maintenance 
service on the Company's computer hardware and software, 
including the WWW pages in the Internet.
On August 28, 1996 the Company issued 30,000. shares to 
Arturo Padrera for his past, present and future services. 
Mr. Padrera supplied consulting services in connection with 
obtaining investors fro Ecuador, S.A. Also on that date the 
Company issued 50,000. shares to John H. Faro, Esq., for 
services related to patent infringement with a new patent 
related to ours on 401K pension plans funded with life 
insurance cash  values. 
On August 28, 1996 the Company issued to Dr. Vincent 
Cuervo, President and principal shareholder of the Company, 
2,000,000 shares of the Company's Common Stock $0.001 par 
value per share in consideration of  Dr. Cuervo's waiving, 
effective January 1, 1997 all of his accrued salaries and 
bonuses in  the amount of several hundreds of thousand of 

17
dollars and money loaned to the Company up to and to be 
effective December 31, 1996.
On February 1997 the Company issued to Ciro B. Sosa, a 
Director of the Company for his  services to the Company. Mr 
Sosa has supplied advertising, marketing,  and supplies to 
the Company at no charge since 1991. Also on that the 
Company issued 15,000 shares to Marina S. Klein for her 
services. Mrs. Klein supplied frequent securities legal 
advice since May 1995.
On November 1997 the Company issued 20,000. shares to 
Yoland Ricard for her past, present and future services. 
Mrs. Ricard provided the Company with her secretarial 
services  without compensation. Also on that date, the 
Company issued to A.G.I. Consulting for present services. 
A.G.I. Consulting is engaged in advice and preparation of 
the Company's 1997 form 10-K. Also on that date the Company 
issued 276,100. shares (and cancelled 50,000. shares 
subsequently) to International Buying Power, Corporation, 
Boca Raton, FL., I.B.P. Corp., was involved in financial 
public relations services to promote the Company's new 
Patent Pending  LOC System_ secured debit card among 
investors.
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 news and  marketing of  the 
Company's new Patent Pending acquisition  LOC System _.  The 
Company issued 276,100. shares of the Common Stock $0.001 
per share as payment for the 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 cancelled in January 1998.

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.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
             	   CONDITION AND RESULTS OF OPERATION

(1) Liquidity and Capital Resources
Management believes that the Company's cash position is 
insufficient to support its operations for any given period 
of time. The Company expects to continue with the financial 
assistance of  the President of the Company, Dr. Vincent 
Cuervo, while the marketing efforts started in mid 1997 and 
the remarkable interest developed by the new patent pending, 
LOC SYSTEM_ will created a favorable financial condition to 
allow the Company  to succeed in its planned programs.




18
ITEM 14. CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 	 
            ACCOUNTING AND FINANCIAL DISCLOSURE 
           
       	            Not Applicable.					
PART III

ITEM15.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND       
           REPORTS ON FORM  8-K

Attached hereto and filed as a part of this Report are 
the financial statements and the exhibits listed below.

ITEM 15(a)(1)	Financial Statements:

Report of Independent Certified Public Accountants

Balance Sheets 

Statement of  Loss

Statement of  Stockholders'  Equity

Notes  to  Financial  Statements

ITEM 15(a)(2)	Financial Statement Schedules

All schedules are omitted as not applicable or because 
the required information is included in the Financial 
Statements and Notes thereto.

ITEM 15(a)(3)	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.



19
10.1*	License Agreement between Vincent Cuervo and 
the Registrant dated August 14, 1985

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

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

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

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

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

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

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

10.8**	Form of 1988 Stock Option Plan.

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

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

ITEM 15(b)		Reports on Form 8 K

None

ITEM 15(c)		Exhibits

The Exhibits described above in Item 14(a)(3) are 
incorporated by reference herein.		

ITEM 15(d)		Not applicable
___________________________

*		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 


20
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.





































21

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of 
the Securities and Exchange Act of 1934, the registrant has 
duly caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.

(Registrant)  Default Proof Credit Card System, Inc.,
   
By: (Signature and Title)VINCENT CUERVO
                                           
                         Vincent Cuervo, President

Date: March 25, 1998

Pursuant to the requirements of the Securities Exchange 
Act of 1934, this report has been signed below by the 
following persons on behalf of the registrant and in the 
capacities and dates indicated.

By (Signature and Title)  Vincent Cuervo

      			       Vincent Cuervo, President, 
Director and Chief Executive Officer

Date March 25, 1998

By (Signature and Title) Ciro B. Sosa 

                    Ciro B.Sosa,Vice President,Director

Date March 25, 1998

By (Signature and Title) Pedro P. Llaguno

      Pedro P. Llaguno, Secretary, Vice 	
			     President and Director.

Date March 25, 1998













22

























	
    DEFAULT PROOF CREDIT CARD SYSTEM, INC.

Financial Statements

   December 31, 1997, 1996, 1995 and 1994

	





























	C O N T E N T S


Page

AUDITORS' REPORT	3

FINANCIAL STATEMENTS

BALANCE SHEET	F-4

STATEMENT OF OPERATIONS  	F-5
                      
STATEMENT OF CASH FLOWS	F-6

STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)	F-7

NOTES TO FINANCIAL STATEMENTS                           F-12



















	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, 1997, and the related statements 
of operations, stockholders' equity (deficiency in assets) 
and cash flows for the years ended December 31, 1997, 1996, 
1995 and 1994. These financial statements are the 
responsibility of the Company's management.  Our 
responsibility is to express an opinion on these financial 
statements based on our audit.  The 1993 financial 
statements, which included the cumulative period from August 
14, 1985 (inception) to December 31, 1993, were audited by 
other auditors whose report, dated June 8, 1994, included an 
explanatory paragraph which raised substantial doubt about 
the Company's ability to continue as a going concern.

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. as of 
December 31, 1997 and the results of its operations and its 
cash flows for each of the years ended  December 31, 1997, 
1996, 1995 and 1994, in conformity with generally accepted 
accounting principles.

Further, based on our audit and the report of the other 
auditors, the amounts reported in the statements of 
operations, shareholders' equity (deficiency in assets) and 
cash flows for the cumulative period from August 14, 1985 
(inception) to December 31, 1997, are fairly presented.

As discussed in Note 2, as of December 31, 1997, the Company 
has suffered losses prior to commencement of operations and 
has a working capital deficiency.  These factors raise 
substantial doubt about its ability to continue as a going 
concern.  Management's  plans with regard to 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.


Alberni & Alberni, P.A.
Certified Public Accountants

Coral Gables, Florida
March 17, 1998

 
	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	(A DEVELOPMENT STAGE COMPANY)
	Balance Sheet
	December 31, 1997


            	ASSETS

                                                            
                                             
CAPITALIZED PATENT COST 	   $	3,945
Total Assets		$	   3,945
LIABILITIES AND DEFICIENCY IN ASSETS

CURRENT LIABILITIES
Accrued Expenses	$   26,711			Due to Directors                   $	39,390

Total Current Liabilities	     $	 66,101

DEFICIENCY IN ASSETS
Common Stock, $.001 Par Value, 25,000,000 
Shares Authorized, 11,643,510 Issued and
      Outstanding	11,644
Additional Paid-In Capital	  3,903,460		
Deficit Accumulated During 
   Developmental Stage 	(3,977,260)	      		
Total Deficiency in Assets 	  (62,156)

Total Liabilities and Deficiency in Assets	$3,945	   		   



See Accompanying Notes and Auditors' Report
                               F-4


                DEFAULT PROOF CREDIT CARD SYSTEM, INC.
         	             Statement of Operations	
                                       Years Ended December 31            
  1997                    1996                   
1995
EXPENSES
General & Administrative      $ 63,590    $ 39,711   $ 
43,204
Officer Salary                   -0-         -0-       
72,000	                       
  Marketing                        -0-         -0-        -
0-	        			
  Depreciation & Amortization      -0-         -0-        -
0-	      
Expired Public Offering          -0-         -0-        -
0-  
    Total Expenses           $  63,590     $  39,711  $ 
115,204
OTHER INCOME (EXPENSE)
Cancellation of Debt            413,000          -0-     
10,000	
Litigation Settlements(Note7)   -0-            -0-        
-0-
Interest & Other Income         -0-            -0-      
1,569
Loss on Marketable Securities   -0-            -0-        
-0-	
Loss on Sale of Equipment       -0-            -0-        
-0-
Total Other Income (Expense) 413,000          -0-     
11,569
NET LOSS (GAIN)              $ (349,410)   $  39,711  $ 
103,635
NET LOSS (GAIN)
   PER COMMON SHARE          $    (.031)   $    .004  $    
 .012
WEIGHTED AVERAGE 
   NUMBER OF COMMON
    SHARES OUTSTANDING         11,344,228		 9,636,560 	8,942,410	










See Accompanying Notes and Auditors' Report	
                                    F-5(a)


   	  	   	DEFAULT PROOF 
CREDIT CARD SYSTEM, Inc.,
            	   	 Statements of Operations
                           (continued)


                                       Cumulative      
Cumulative
                                       from Aug.14,     from 
Aug.14,
                                       1985(incep.)     
1985(Incep.)
                               1994   to Dec.31,1993  to 
Dec.31,1997
EXPENSES
General & Administrative    $ 105,583  $ 2,692,887      $ 
2,944,975   
Officers  Salary               90,000      824,556          
986,556
Marketing                       -0-        393,358          
393,358
Depreciation & Amortization     2,908       95,799          
 98,707
Expired Public Offering Costs   -0-        179,211          
179,211   
  Total Expenses              198,491    4,185,811        
4,602,807
OTHER INCOME (EXPENSE)
Cancellation of Debt            -0-          -0-            
423,000
Litigation Settlements(note7)   -0-        (90,000)         
(90,000)
Interest & Other Income           125      421,016          
422,720
Loss on Marketable Securities   -0-        (96,529)         
(96,529)
Loss on Sale of Equipment       -0-        (34,144)         
(34,144)
  Total Other Income (Expense)    125      200,353          
625,047
NET LOSS (GAIN)            $  198,366  $ 3,985,458      $ 
3,977,760
 PER COMMON SHARE          $     .022  $      .545      $   
   .490
WEIGHTED AVERAGE
 NUMBER OF COMMON
  SHARES OUTSATANDING       8,906,577    7,315,870        
8,113.061
See Accompanying Notes to Auditor's Report.                 
                F-5(b)
                          F-5(b)	 

 			DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                      Statements of Cash Flows 
		            
                                                            
                                                            
                                      
                                         Years Ended 
December 31                                                 
                1997       1996     1995 
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) Gain                     $ 349,410 $ (39,711) $ 
(103,635)
Adjustments to Reconcile Net (Loss)
Gain to net cash Used in Operating                          
          
Activities:	
Depreciation & Amortization           -0-       1,767     
    200
  Offering
  Cancellation of Stockholder Notes 	    	
  Receivable                            -0-         -0-     
    -0-   
  Stock Issued in lieu of Cash for
  Prof. Services                      50,560   30,750  18,750
  Stock Issued in lieu of Cash for
  Waived Salaries      	              	                      
                              -0-	294,000	-0-
Loss on Sale of Equipment	                                 
       	                 -0-	-0-	-0-
Decrease in Other Receivables              -0-            
       	   7,500       -0-
Decrease (Increase) in Other Assets	     	             -0-	  
                -0-	-0-
Increase (Decrease) in Accrued	         
  Expenses		(405,550)	          
           (299,700)	 85,410	
Total Adjustments                 		  (354,990)	       
34,317	      104,360	
Net Cash Provided By
   (Used in) Operating Activities		(5,580)	         
(5,394)	                     725 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Marketable Securities	 	     -0-	     -0-	     -0-	
Purchases of Property & Equipment		  -0-	  -0-	  -0-	
Patent License Expenditures		                      
                       -0-	-0-	-0-
Proceeds from Sale of Equipment		  -0-	  -0-	6,001	
Proceeds from (Issuance of 
Contingency Bond                             -0-       -0-  
     -0-
Net Cash Provided by  
   (Used in ) Operating Activities        -0-       -0-  
   6,001

See Accompanying Notes to Auditor's Report
                          F-6(a)

                        DEFAULT PROOF CREDIT CARD SYSTEM, 
INC.
 
                               Statements of Cash Flows     
                                                            
       (continued)       

                                        Years Ended December 
31     
                                           1997     1996    
 1995
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of 
Stock-Private Offerings                      -0-       -0-  
   -0-
Proceeds from Issuance of 
Stock-Public Offerong                        -0-       -0-  
   -0-
Proceeds from Issuance of
Stock-Exercise of Warrants                   -0-       -0-  
   -0-
Proceeds from Capital Contributions          -0-       -0-  
   -0-
Net Receipts/Advances to Stockholders       5,580     5,394 
 (6,761)
Net Cash Provided by(used in)
Financing Activities                        5,580     5,394 
 (6,761)
  NET INCREASE(DECREASE)
   IN CASH AND EQUIVALENTS                   -0-       -0-  
    (35)
  CASH AND EQUIVALENTS-BEGINING              -0-       -0-  
     35 
  CASH AND EQUIVALENTS-ENDING          $     -0-       -0-  
   -0-  

















See Accompanying Notes and Auditors' Report
                               F-6(b)                       
       

	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Statements of Cash Flows 
                                      (continued) 
Cumulative    
Cumulative                                                  
                 from Aug,14  from Aug.14   
                                               1985(Incep.) 
 1985(Incep.)                                               
           1994 to Dec.31,1993 toDec.31,1997    
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) Gain                     $ (198,366) $(3,985,458) 
$(3,977,760)
Adjustments to Reconcile Net (Loss)
Gain to Net Cash Used in Operation	
Activities:	
Depreciation and Amortization          2,908       92,876 
      97,751
Loss on Marketable Securities           -0-       130,741 
     130,741 
Expired Public Offering Costs           -0-       110,000 
     110,000
Cancellation of Stockholder             
  Note Receivable                         -0-        55,490 
      55,490
  Stock Issued in Liu of Cash

  for Prof. Services                    15,500       18,400 
     133,960
Stock Issued in lieu of Cash 
  for Waived Salaries                     -0-          -0-  
     294,000 
  Loss on Sale of Equipment               -0-        34,144 
      34,144
  Decrease on Sale of Receivables         -0-        (7,500) 
       -0-
Decrease (Increase) in Other Assets     -0-        
(25,480)    (25,480)
Increase(Decrease) in Accrued 
  Expenses                              78,700      567,974 
      26,834 
Total Adjustments                    97,108      976,645 
     857,440 
Net Cash Provided By
   (Used in)Operating Activities      (101,258)  (3,008,813) 
 (3,120,320)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Marketable Securities        -0-      (130,741) 
   (130,741)
Purchases of Property and Equipment       -0-      (136,980) 
   (136,980)
Patent License Expenditures               -0-      (201,864) 
   (201,864)
Proceeds from Sale of Equipment           -0-        16,993 
      22,994
Proceeds from (Issuance of Contingency 
Bond                                      -0-          -0-  
        -0-  
 Net Cash Provided by (Used in)
  	 Operating Activities                  -0-      (452,592) 
   (446,591)	
See Accompanying Notes and Auditors' Report.
                              F-6(c)

                      DEFAULT PROOF CREDIT CARD SYSTEM, INC.
                             Statements of Cash Flows
                                   (continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Stock-
Private Offerings                            -0-     108,547 
  108,547	  
Proceeds from Issuance of Stock-
Public Offerings                             -0-   3,150,163 
3,150,163
Exercise of Warrants                         -0-     240,358 
  240,358
Proceeds from Capital Contributions          -0-      78,076 
   78,046
Net Receipts/Advances to Stockholder        61,914   
(76,360)  (10,233)
Net Cash Provided by
   (Used in ) Financing Activities          61,914 3,500,784 
3,566,911
NET INCREASE (DECREASE) 
   IN CASH AND EQUIVALENTS              (39,679)  39,379 
     -0-
CASH AND EQUIVALENTS-BEGINNING            39,379    -0-  
      -0-   
CASH AND EQUIVALENTS-ENDING            $      35  $39,379 
     -0-  



























See Accompanying Notes and Auditors' Report.
                             F-6(d)



	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Statement of Stockholders' Equity (Deficiency in  Assets) 
                                                            
                                                         
Deficit                                                     
     Accumulated
                         Common Stock  Additional during the
                          # of Shares  Paid-In  Development 
                      Issued Par Value  Capital    Stage    
Total    
BALANCE-12/31/85 $   -0-    $   -0-  $   -0-   $    -0-  $  
 -0-  To a Director for
Cash &Other
Property (A, B, C)2,518,000    2,518    11,705      -0-    
14,223
To Directors & 
Officers for 
Non-Cash 
Consideration 
Received (A, B, D)  582,750      583    16,900      -0-    
17,483
To Others for 
Non-Cash 
Consideration 
Received(A,B,D)      49,250       49     1,428      -0-     
1,477
                  3,150,000    3,150   30,033       -0-   
33,183 
Private Placement 
Offering, net of 
Issuance Costs of 
$16,453(A, E)       312,500      312  108,235      -0-   
108,547
Patent  License  
Costs  (M)            -0-       -0-  (125,000)     -0-  
(125,000)
Net Loss             -0-       -0-     -0-     (44,461) 
(44,461)
BALANCE-12/31/86  3,462,500  3,462   13,268   (44,461) 
(27,731)
May 7, 1987, to a
Director/Officer 
for Property(A,B,C) 500,000      500     (500)     -0-      
 -0-
May 12, 1987, to a 
Director/Officer 
for Cash (A, F)      100,000      100   39,900      -0-    
40,000
Reversal of Accrued 
License Costs (M)      -0-       -0-    25,000      -0-    
25,000
Capital Contribution 
by the Principal 
Stockholder            -0-       -0-    78,076      -0-    
78,076
October 14, 1987, 
Proceeds from 
Public Offering,            
Net of Public 
Offering Costs 
of  $76,314       1,131,010    1,132 1,336,318     -0- 
1,337,450
Net Loss              -0-       -0-      -0-   
(176,052)(176,052)
See Accompanying Notes and Auditors' Report.
           F-7 

                             DEFAULT PROOF CREDIT CARD SYSTEM, INC.
Statement of Stockholders' Equity (Deficiency in Assets)
           (Continued)    
Balance-12/31/87  5,193,510  5,194 1,492,062 
(220,513)1,276,743
April 7,1988,to 	
Directors/Officers
for Property(A,G)   800,000    800     -0-      -0-      -0-
May, 1988, to Others 
for Non-Cash 
Consideration 
Received (A, H)      95,750     96       (96)   -0-       -
0-
August 19, 1988, 
Proceeds from
Public Offering 
Costs of$487,287  2,300,000  2,300 1,810,413    -0-  
1,812,713
Patent License 
Costs (M)              -0-      -0-  (100,000)   -0-   
(100,000)  Warrants Converted 
at $1.25 Per Share  128,300    128   160,247    -0-    
160,375
Net Loss	                                -0-      -0-    -0- 
  (405,875)(405,875)                
BALANCE-12/31/88  8,517,560  8518  3,362,626 
(626,388)2,744,756
Warrants Converted 
at $2.00 Per Share    3,000     3   5,997     -0-         
6,000
Issuance of Stock by 
Principal Stockholder  -0-    -0-  110,000     -0-       
110,000
Net Loss                -0-    -0-    -0-  
(1,129,559)(1,129,559)  BALANCE-12/31,19898,520,560  8521 
3,478,623(1,755,947)(1,731,197)
Net Loss               -0-    -0-   -0-  
(1,175,201)(1,175,201)
BALANCE-12/31/19908,520,560 8521 3,478,623 (2,931,148)   
555,996
July 10, 1991, to
Various Parties for
ProfessionalServices 
Rendered (A,I)      125,000  125    7,375      -0-        
7,500
October 3, 1991 to
Directors/Officers for
Non-cash Consideration 
Received (A, J)      85,000   85    5,015      -0-        
5,100
Net Loss                -0-   -0-     -0-   (430,800) 
(430,800)
BALANCE-12/31/19918,780,560 8731 3,491,013 (3,361,948)  
137,796
August 12, 1992, 
to an Individual for 
Professional Services 
Rendered (A, K)      50,000   50     2,950      -0-       
3,000
Net Loss              -0-     -0-     -0-    (173,144)  
(173,144)



See Accompanying Notes and Auditors' Report  
                             F-8

	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Statement of Stockholders' Equity (Deficiency in Assets)
	(Continued)
                                                            
     BALANCE-12/31/1992 8,780.560 8781 3,493,963 (3,535,092) 
(32,348)
February 12, 1993, 
To a Related Entity 
in Consideration  
for deferral of 
Loan Repayment(A,L)  46,850   47     2,753      -0-      
2,800
Net Loss                -0-  -0-      -0-   (450,366) 
(450,366)
Balance-12/31/1993 8,827,410 8828 
3,496,716(3,985,458)(479,914)
February 22,1994,
to Various Parties 
for Professional 
Services Rendered(A,N)75,000   75     7,425      -0-     
7,500
July 25,1994, 
to an Individual for 
Professional Services
Rendered (A,O)        30,000   30     5,970      -0-     
6,000
July 25, 1994, to 
Various Parties for 
Secretarial Services 
Rendered (A,P)        10,000   10     1,990      -0-     
2,000
Net Loss                -0-   -0-      -0-   
(198,366)(198,366)
BALANCE-12/31/1994 8,942,410 8943 
3,512,101(4,183,824)(662,780)
July 25,1995,to an
Individual for 
Professional Services 
Rendered (A, Q)      125,000  125    18,625     -0-     
18,750
Net Loss               -0-    -0-     -0-   (103,635) 
(103,636)
BALANCE-12/31/1995 9,067,410 8943 
3,512,101(4,183,824)(747,665)
July 12,1996,to an
Individual for 
Accounting Services 
Rendered to date(A,R) 25,000   25     3,725     -0-      
3,750
July12,1996,to an 
Individual for 
Professional Services 
Rendered (A, K)       60,000   60     8,940     -0-      
9,000
August28,1996,to an 
Individual for 
Professional Services
Rendered(A,S)         30,000   30     4,470     -0-      
4,500
See Accompanying Notes and Auditors' Report.                
                                        F-9

	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Statement of Stockholders' Equity (Deficiency in Assets)
	(Continued)

August 28, 1996, to 
an Individual for 
Professional Services 
Rendered (A, T)      50,000    50     7,450      -0-      
7,500
September 13,1996,to 
the President and
Principal Stockholder 
in Exchange for Accrued 
Salaries Waiver up to 
12/31/96 (A, U)   2,000,000  2,000  298,000      -0-    
300,000
Net Loss             -0-      -0-     -0-     (39,711) 
(39,711)

BALANCE- December
31,1996          11,232,410 11233 
3,853,311(4,327,170)(462,626)
February 26,1997,to
a Director/Officer for
Professional Services 
Rendered(A,V)        50,000    50     8,950      -0-     
9,000
February 26,1997,to 
an Individual for 
Professional Services 
Rendered (A, W)      15,000    15     2,685      -0-     
2,700
November 5,1997,to 
an Individual for 
Professional Services 
Rendered (A, P)      20,000    20     2,980      -0-     
3,000
November 5,1997,to a 
Financial Public 
Relations Service 
Company for Professional 
Services Rendered 
(A, X)              226,000   226    24,634      -0-    
24,860
November 5,1997,to a
Consulting Company
Professional for 
Services Rendered 
(A, Y)              100,000   100    10,900      -0-    
11,000
Net Gain              -0-     -0-      -0-    349,910  
349,910
BALANCE-
 12/31//97   11,643,510 $ 11644 $3,903,460 
$(3,977,260)(62,156)




See Accompanying Notes to Financial Statements and Auditors' 
Report.
	F-10




	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Statement of Stockholders' Equity (Deficiency in Assets)
	(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 a a special meeting of its Board 
of Directors, 	terminated and cancelled 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  	developmentof the Company.The 
sharesofstock 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       at a Special Meeting  of its board 
of Directors terminated and     cancelled the warrants.

(G)	Property consists of an exclusive license U.S.Patent 
	No.4,718,009; U.S. Patent No.5,205,138; a Registered 
Trademark 	"Resource". The Canadian patent for Default Proof 
Credit Card 	System was granted and the Company was advised 
that fees for 	issuance of patent before December 12, 
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 contributots' 
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, 
See Accompanying Notes and Auditors' Report.
                             F-11
	DEFAULT PROOF CREDIT CARD SYSTEM, INC.

	Statement of Stockholders' Equity (Deficiency in Assets)
	(Continued)

net of discounts for restricted stock (approximate $1,00 
per 	share). A corresponding charge was made to additional 
paid-in   		   	 
           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.

(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  	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 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.	
See Accompanying Notes and Auditors' Report.          F-12

	DEFAULT PROOF CREDIT CARD SYSTEM, INC.

	Statement of Stockholders' Equity (Deficiency in Assets)
	(Continued)

(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 
markevalue 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 yp 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 	  n  o 
charge since 1995. The shares of 	stock issued for non-cash 
services were recorded at the 	fair market value of the 
shares at the date of service.

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

(X)	Non-cash consideration received consisted of services 
	related to communications relating to 	                   
              n ve        stor relations. The shares of 
	stock issued for non-cashserviceswererecorded 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 10-K 
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 and Auditors' Report.

                                F-13

	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Notes to Financial Statements
	December 31, 1997, 1996, 1995 and 1994
	
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.  For the period from August 
14, 1985 		(inception) to December 31, 1985, the Company 
was promoting 		and marketing the Resource System ( a 
Registered 		Servicemark).  Activities through March 
1989 have been 		limited to the sale of its 
securities, planning, procurement 		of personnel and 
limited marketing activities including the 		sale of 
Resource System applications. The Company's 		principal 
business activity is to market, sell anddistribute 		a 
patented financial business system forextending 		lines 
of credit on a collaterized basis to consumers. 

During the period from April 1989 through February 
1993, the 		Company's development activities were 
severely impeded as 		a result of litigation involving 
the use of proprietary 		information believed to be owned 
by the Company.  In 		February 1993, the Company 
settled its dispute with a 		certain financial 
institution.

In 1997, the Company filed for a new patent.  The 
patent 		pending, as well as the original Resource System, 
have 		generated interest and the Company is now engaged in 
		discussions with several financial institutions for 
the 		licensing or joint venture of this product.

Net Loss Per Common Share
Net loss per common share was computed based on the 
weighted 		average number of common shares outstanding.  
No assumption 		was made for the exercise of common stock 
options into 		common shares since the effect of their 
exercise would 		decrease net loss per share.

Patent License 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 		fromthe date of issuance of the patents.

Income Taxes

The Financial Accounting Standards Board has adopted 
		Statement No. 109, "Accounting for Income Taxes", 
which 		significantly changes existing practice by 
requiring, among 		other things, a liability approach 
to calculating deferred 		income taxes.  The statement 
is effective for years 		beginning after December 15, 
1992.  The adoption of 		FASBNo.109 by the Company for 
the year ended December 31, 		1997 did not have a 
material effect othe Company's financial 	
	statements.
See Auditors' Report.         F-14
	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Notes to Financial Statements
	(Continued)
	December 31, 1997, 1996, 1995 and 1994



At December 31, 1997, the Company had a deferred tax 
asset 		of approximately $1,580,000 as a result of net 
operating 		loss carryforwards, which is offset by a 
valuation 		allowance in the same amount due to the 
uncertainties behind 		its realization.  The Company 
has been unable to obtain tax 		benefits from its 
net operating losses incurred 		since inception.
  
At December 31, 1997, the Company has tax net 
operating loss 		carryforwards available of 
approximately $4,000,000 expiring 		between 2000 and 
2011.

Cash and Equivalents

Cash and equivalents consist of cash and all short-
term, 		highly liquid investments that are readily 
convertible to 		known amounts of cash.

NOTE 2.	GOING CONCERN CONSIDERATION

The accompanying financial statements have been 
prepared 		assuming the Comapny 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 
achievingprofitableoperations, 		or obtaining debt or 
equity financing, the Company may not 		have sufficient 
funds to continue through December 31, 1998.   

NOTE 3.	DUE FROM STOCKHOLDER

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

NOTE 4.	LICENSE AGREEMENT

The Company's president 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. 
 A new 		patent is now in process on a new card system.
See Auditors' Report.
	F-15
	DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Notes to Financial Statements
	(Continued)
	December 31, 1997, 1996, 1995 and 1994

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 
waived by the stockholder until 		such time as the 
Company's cash flows improve.  The 		agreement 
terminates upon the stockholder's seventieth 	
	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, CERTAIN RELATIONSHIPS AND 
RELATEDTRANSACTIONS

On August 22, 1993, the Company granted to its 
principal 		stockholder, (A) and one of its 
officers, (B) options to 		purchase stock in 
accordance with the following:

 		                       # of Shares Exercise 
Expiration             Individual Date of Grant Issuable    
Price     Date                                              
                
           A	8/2/93	70,000	$0.25	8/2/98
           B	8/2/93	25,000	$0.25	8/2/98
A	8/2/94	70,000	$0.50	8/2/99
B	8/2/94	25,000	$0.50	8/2/99
A	8/2/95	70,000	$0.75	8/2/00
B	8/2/95	25,000	$0.75	8/2/00
A	8/2/96	70,000	$1.00	8/2/01
B	8/2/96	25,000	$1.00	8/2/01
A	8/2/97	70,000	$1.25	8/2/02
B	8/2/97	25,000	$1.25	8/2/02
In February 1995, the Company granted to its 
principal stockholder, (A) and one of its 	
	officers, (B) options to purchase stock in accordance 
with the following:

                                                            
                                     # of Shares Exercise  
Expiration           Individual Date of Grant   Issuable   
Price     Date 
A	2/2/95	200,000 	$0.10	2/2/00
B	2/2/95	200,000	$0.10	2/2/00
A	2/2/96	200,000	$0.15	2/2/01
B	2/2/96	150,000	$0.15	2/2/01
A	2/2/97	200,000	$0.15	2/2/02
B	2/2/97	150,000	$0.15	2/2/02
A	2/2/98	200,000	$0.15	2/2/03
B	2/2/98	150,000	$0.15	2/2/03	
See Auditors' Report.
	F-16
   	
   
            DEFAULT PROOF CREDIT CARD SYSTEM, INC.
	Notes to Financial Statements
	(Continued)
	December 31, 1997, 1996, 1995 and 1994

The above stock options to purchase the Company's 
Common 		Stock were granted to the 
Company'spresident/principal 		stockholder for 
his daily work and services.  He received 	
	minimal compensation during 1993, and no compensation 
since 		early 1994, at which time he waived his salary, 
bonuses and 		all other benefits.  Since 
March 1994, he has made loans to 		the 
Company for the payment of its administrative expenses, 
bills, patent maintenance fees, etc., from his personal 
funds and without charging interest to the Company.
These numerous loans were in 
the tens of thousands of dollars.  		The 
officer has rendered his legal services, and many other 
services beyond his obligations at no charge to the Company. 

The above stock options are available and contingent 
upon 		the individuals providing their continuous 
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 Securities Act of 1993, as amended.	




















See Auditors' Report.
	F-17