Card Activation (CDVT) 10-Q/A 2009 Q2 Quarterly report (amended)

United states

Securities and Exchange Commission

Washington, D.C. 20549

____________________

FORM 10-Q/A

(Amendment No. 1)

____________________

(Mark One)

x  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2008

¨  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act

For the transition period from __________ to __________

__________________

Commission File Number: 0-52556

____________________

Card Activation Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-5769015
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
53 West Jackson Blvd., Suite 1618 Chicago, Illinois	60604-3749
(Address of principal executive offices)	(Zip Code)

(312) 972-1662

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.  Yes  ¨  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b–2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  ¨
Non–Accelerated filer  ¨ (Do not check if a smaller reporting company)	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).  Yes  ¨  No  x

As of February 10, 2009, the issuer had 174,542,045 shares of common stock, $0.001 par value per share, outstanding.

EXPLANATORY NOTE

Card Activation Technologies, Inc. (the "Company"), is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008 for the purpose of amending and restating the Company's unaudited condensed financial statements and related notes as of December 31, 2008 and for the three months ended December 31, 2008.  The restatement corrects inadvertent errors in accounting for contingency fees related to litigation revenue received by the Company during the period as discussed in Note 3 to the accompanying restated condensed financial statements.

The information contained in this Amendment, including the financial statements and the notes thereto, amends only Items 1 and 2 of Part I of the Company's originally filed Quarterly Report on Form 10-Qfor the quarter ended December 31, 2008, and no other items in the originally filed Form 10-Q are amended hereby.  In accordance with Rule 12b-15 of the Securities and Exchange Act of 1934, as amended, the complete text of those items in which amended language appears is set forth herein, including those portions of the text that have not been amended from that set forth in the original Form 10-Q.  Except for the aforementioned adjustments, this Form 10-Q/A does not materially modify or update other disclosures in the original Form 10-Q, including the nature and character of such disclosure to reflect events occurring after February 17, 2009, the filing date of the original Form 10-Q. Accordingly, this Form 10-Q/A should be read in conjunction with the Company's filings made with the Securities and Exchange Commission (the "SEC").

In addition, in accordance with applicable SEC rules, this Amendment includes currently-dated certifications from the Company's principal executive officer, who also serves as the Company's principal financial officer, in Exhibits 31.1 and 32.2.

CARD ACTIVATION TECHNOLOGIES, INC.

INDEX TO FORM 10-Q FILING

FOR THE THREE MONTHS ENDED December 31, 2008

TABLE OF CONTENTS

		Page Numbers
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Balance Sheets	1
	Statements of Operation	2
	Statements of Cash Flows	3
	Notes to  Financial Statements	4
Item 2.	Management Discussion & Analysis of Financial Condition & Results of  Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
Item 5	Other information	28
Item 6.	Exhibits	28
CERTIFICATIONS
	Exhibit 31 – Management Certification
	Exhibit 32 – Sarbanes-Oxley Act

PART I – FINANCIAL INFORMATION

CARD ACTIVATION TECHNOLOGIES INC.
BALANCE SHEET
	December 31,			September 30,
	2008
	As Restated
	(Unaudited)
CURRENT ASSETS
Cash	$	192,955		$	-
Notes receivable - affiliate		695,587			507,149
Total current assets		888,542			507,149
TOTAL ASSETS	$	888,542		$	507,149
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Bank overdraft	$	-		$	1,963
Accounts payable		115,802			20,859
Accrued expenses		7,076			28,960
Total current liabilities		122,878			51,782
TOTAL LIABILITIES		122,878			51,782
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 1,000,000 shares authorized; zero shares issued and outstanding		-			-
Common stock, $.0001 par value, 175,000,000 shares authorized; 174,782,045 and 169,968,289 shares issued and outstanding as of March 31, 2009 and September 30, 2008		17,455			16,998
Additional paid-in capital		1,468,976			1,055,845
Accumulated deficit		(720,767	)		(617,476	)
Total stockholders' equity		765,664			455,367
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	888,542		$	507,149

The accompanying notes are an integral part of these financial statements.

1

CARD ACTIVATION TECHNOLOGIES INC.
STATEMENT OF OPERATIONS
(Unaudited)
	Three Months Ended
	December 31,
	2008			2007
	As Restated
REVENUE
Litigation revenue	$	375,000		$	-
Total		375,000			-
OPERATING EXPENSES:
General and administrative		478,478			138,007
Sales and marketing expenses		8,808			20,837
Total operating expenses		487,286			158,844
OPERATING LOSS		(112,286	)		(158,844	)
OTHER (INCOME) AND EXPENSES
Interest income		(8,995	)		-
LOSS BEFORE INCOME TAXES		(103,291	)		(158,844	)
INCOME TAX (BENEFIT) PROVISION		-			-
NET LOSS	$	(103,291	)	$	(158,844	)
Weighted Average Common Share Outstanding:
Basic and diluted:		172,255,167			164,375,456
Net Loss Per Share
Basic and diluted:	$	(0.00	)	$	(0.00	)

The accompanying notes are an integral part of these financial statements.

2

CARD ACTIVATION TECHNOLOGIES INC.
STATEMENT OF CASH FLOWS
(Unaudited)
	Three Months Ended
	December 31,
	2008			2007
	As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$	(103,291	)	$	(158,844	)
Adjustments to reconcile net income to net cash (used in) operating activities:
Common stock issued for services		17,087			86,714
Changes in assets and liabilities:
Prepaid expenses		-			(30,000	)
Accounts payables		92,981			-
Accrued expenses		(21,884	)		-
Net cash used in operating activities		(15,107	)		(102,130	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash from investing activities		-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft		-			3,431
Proceeds from the sale of common stock		102,500			-
Loans to affiliates		(188,438	)		-
Common stock issued in conjuction with related party issuance		294,000			-
Loans from affiliates		-			85,000
Net cash provided by financing activities		208,062			88,431
INCREASE IN CASH		192,955			(13,699	)
CASH, BEGINNING OF YEAR		-			13,699
CASH, END OF YEAR	$	192,955		$	-

The accompanying notes are an integral part of these financial statements

3

CARD ACTIVATION TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007

NOTE 1 – BACKGROUND

Card Activation Technologies, Inc. ("Card" or the "Company") was incorporated in the state of Delaware on August 29, 2006. The company has begun the process of operating this business and is in the process of pursuing patent infringement litigation.  The Company was incorporated for the sole purpose of financing and litigating patent infringements related to the unauthorized use of electronic activation of phone, gift and infinity cards. Card is incorporated in Delaware with the focus on the licensing of the proprietary patented technology of electronic activation of phone, gift and affinity cards.  The patent covers the technology and process for taking a card with a magnetic strip or other data capture mechanism and activating the card by downloading a determined monetary value onto the card for use at a later date for different types of transactions. This process can be utilized for prepaid phone cards, gift cards, and affinity cards.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern.   During the three months ended December 31, 2008 the Company recognized a net loss of $103,291, as restated.  Additionally, the Company incurred an accumulated net loss through December 31, 2008 of $720,767, as restated.  Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.

These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.  In this regard, Management is proposing to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.

NOTE 3 – INTERIM FINANCIAL STATEMENTS

The accompanying reviewed interim financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company's annual report on Form 10-K for the year ended September 30, 2008. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

4

The Company is filing this Amendment No. 1 to this Quarterly report on Form 10-Q for the three months ended December 31, 2008.  This Amendment No. 1 is being filed to restate the Condensed Balance Sheet as of December 31, 2008, the Condensed Statement of Operations and the Condensed Statement of Cash Flows for the three months ended December 31, 2008 to reflect the correction of an error.  The Company did not properly account for contingency fees related to litigation revenue received during the period.

The following table illustrates the adjustments that were made to the amounts reported in the 10-Q as of and for the three months ended December 31, 2008:

	As Reported			Adjustment			As Restated
CURRENT ASSETS
Cash	$	192,955					$	192,955
Notes receivable - affiliate		695,587						695,587
Total current assets		888,542			-			888,542
TOTAL ASSETS	$	888,542		$	-		$	888,542
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Bank overdraft	$	-					$	-
Accounts payable		37,053			78,750			115,803
Accrued expenses		7,076						7,076
Total current liabilities		44,128			78,750			122,878
TOTAL LIABILITIES		44,128			78,750			122,878
STOCKHOLDERS' EQUITY:
Preferred stock		-						-
Common stock		17,455						17,455
Additional paid-in capital		1,468,976						1,468,976
Accumulated deficit		(642,017	)		(78,750	)		(720,767	)
Total stockholders' equity		844,414			(78,750	)		765,664
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	888,542		$	-		$	888,542
REVENUE
Litigation revenue	$	375,000					$	375,000
Total		375,000			-			375,000
OPERATING EXPENSES:
General and administrative		399,729			78,750			478,479
Sales and marketing expenses		8,808						8,808
Total operating expenses		408,536			78,750			487,286
OPERATING LOSS		(33,536	)		(78,750	)		(112,286	)
OTHER (INCOME) AND EXPENSES
Interest income		(8,995	)					(8,995	)
LOSS BEFORE INCOME TAXES		(24,541	)		(78,750	)		(103,291	)
INCOME TAX (BENEFIT) PROVISION		-			-			-
NET LOSS	$	(24,541	)	$	(78,750	)	$	(103,291	)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$	(24,541	)	$	(78,750	)	$	(103,291	)
Adjustments to reconcile net income to net cash (used in) operating activities:
Common stock issued for services		17,087						17,087
Changes in assets and liabilities:
Prepaid expenses		-						-
Accounts payables		14,231			78,750			92,981
Accrued expenses		(21,884	)					(21,884	)
Net cash used in operating activities		(15,107	)		-			(15,107	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash from investing activities		-			-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft		-						-
Proceeds from the sale of common stock		102,500						102,500
Loans to affiliates		(188,438	)					(188,438	)
Common stock issued in conjunction with related party issuance		294,000						294,000
Loans from affiliates		-						-
Net cash provided by financing activities		208,062			-			208,062
INCREASE IN CASH		192,955						192,955
CASH, BEGINNING OF YEAR		-						-
CASH, END OF YEAR	$	192,955		$	-		$	192,955

5

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America.  Significant accounting policies are as follows:

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.  These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period.  Management evaluates these estimates and assumptions on a regular basis.  Actual results could differ from those estimates.

Revenue Recognition

Revenue recognized the use of our patent technology by receiving royalties or licensing fees from the deployment of our technology. Revenue is recorded when sales are generated from third parties that have deployed our technology and generated sales from that technology.  Revenue is recognized from litigation and royalty payments from those companies that have violated our patented technology and entered into licensing agreements.  Revenue is recognized from the settlement of litigation and subsequent payment of royalties for the use of our patented technologies if any.  The Company recognizes revenue when a litigated matter is settled and a stipulated order has been entered into the court for the infringement of our patent.   We will recognize royalty revenue based on royalty reports received from settling parities that deploy our technology.  In accordance with contract terms, we will charge a royalty fee to patented users and each contract will be negotiated at the settlement of our law suits.  Although if parties chose to pay the entire life of the royalty we will deferred revenues amortized over the life of our patent.  We will recognize revenues as licensing revenue when our revenue recognition criteria have been met. Presently we do not have any licensing agreements executed that generate royalty payments.

6

Upon execution of our licensing agreement we will from time to time we exercise our right to conduct royalty audits pursuant to our contracts with customers. As a result of such audits we will recognize royalty revenue that relates to prior periods. Differences between amounts initially recognized and amounts subsequently audited or reported as an adjustment to those amounts are recognized in the period the adjustment is determined.

The Company recognizes product revenue in accordance with Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition in Financial Statement" which established that revenue can be recognized when persuasive evidence of an arrangement exists, the product has been shipped, all significant contractual obligations have been satisfied and collection is reasonably assured.

Reclassification

Certain prior period amounts have been reclassified to conform to current year presentations.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At December 31, 2008, cash and cash equivalents include cash on hand and cash in the bank.

Property and Equipment

Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon.  Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.

7

The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follow:

Asset Category	Depreciation/ Amortization Period
Furniture and Fixture	3 Years
Office equipment	3 Years
Leasehold improvements	5 Years

Intangible Assets

The Company adopted Statement of Financial Accounting Standard ("SFAS") No. 142, Goodwill and Other Intangible Assets, effective July 1, 2002. As a result, the Company discontinued amortization of goodwill, and instead annually evaluates the carrying value of goodwill for impairment, in accordance with the provisions of SFAS No. 142. The Company holds one asset the cost basis of the development of the patent infringement litigation.

Impairment of Long-Lived Assets

In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.  There were no events or changes in circumstances that necessitated a review of impairment of long lived assets.

Income Taxes

Deferred income taxes are provided based on the provisions of SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109"), to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Earnings Per Share

Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.  As of December 31, 2008, there were no potential dilutive instruments that could result in share dilution.

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.

The carrying amounts of the Company's financial instruments, including cash, accounts payable and accrued liabilities, income tax payable and related party payable approximate fair value due to their most maturities.

8

Stock-Based Compensation

Statements of Financial Accounting Standards ("SFAS No.") No. 123, Accounting for Stock-Based Compensation, ("SFAS No. 123") established accounting and disclosure requirements using a fair-value based method of accounting for stock-based employee compensation. In accordance with SFAS No. 123, the Company has elected to continue accounting for stock based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."

The Company accounts for stock awards issued to nonemployees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF") Issue No. 96-18 Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services.  Under SFAS No. 123 and EITF 96-18, stock awards to nonemployees are accounted for at their fair value as determined under Black-Scholes option pricing model.

In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of January 1, 2006. Based on the number of shares and awards outstanding as of December 31, 2005 (and without giving effect to any awards which may be granted in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to have a material impact on the financial statements.

In October 10, 2006 FASB Staff Position issued Financial Statement Position ("FSP") FAS No. 123(R)-5 "Amended of FASB Staff Position FAS 123(R)-1 "Classification and Measurement of Freestanding Financial Instruments Originally issued in Exchange of Employee Services under FASB Statement No. 123(R)".  The FAS provides that instruments that were originally issued as employee compensation and then modified, and that modifications made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP shall be applied in the first reporting period beginning after the date the FSP is posted to the FASB website. The Company does not expect the adoption of FSP FAS No. 123(R)-5 to have a material impact on its results of operations and financial condition.

Concentration of Credit Risk

The Company maintains its operating cash balances in banks in Scottsdale, Arizona.  The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $250,000.

Recent Accounting Pronouncements

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

9

In June 2008, the FASB issued FSP Emerging Issues Task Force ("EITF") Issue No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The FSP affects entities that accrue dividends on share-based payment awards during the awards' service period when the dividends do not need to be returned if the employees forfeit the award. This FSP is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of FSP EITF 03-6-1 on its financial position and results of operations.

Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)

In May 2008, the FASB issued FSP Accounting Principles Board ("APB") Opinion No. 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)." The FSP clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion.  The FSP requires issuers to account separately for the liability and equity components of certain convertible debt instruments in a manner that reflects the issuer's nonconvertible debt (unsecured debt) borrowing rate when interest cost is recognized.  The FSP requires bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in our statement of operations.  The FSP requires retrospective application to the terms of instruments as they existed for all periods presented.  The FSP is effective as of January 1, 2009 and early adoption is not permitted.  The Company is currently evaluating the potential impact of FSP APB 14-1 upon its financial statements.

The Hierarchy of Generally Accepted Accounting Principles

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" (FAS No.162).  SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements.  SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles".  The implementation of this standard will not have a material impact on the Company's financial position and results of operations.

Determination of the Useful Life of Intangible Assets

In April 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position on Financial Accounting Standard ("FSP FAS") No. 142-3, "Determination of the Useful Life of Intangible Assets", which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under SFAS No. 142 "Goodwill and Other Intangible Assets".  The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of the expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007) "Business Combinations" and other U.S. generally accepted accounting principles.    The Company is currently evaluating the potential impact of FSP FAS No. 142-3 on its financial statements.

Disclosure about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161, "Disclosure about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133", and (SFAS 161). This statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The Company is required to adopt SFAS No. 161 on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 161 on the Company's financial statements.

10

Delay in Effective Date

In February 2008, the FASB issued FSP FAS No. 157-2, "Effective Date of FASB Statement No. 157". This FSP delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material to the Company's financial condition or results of operations.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R) "Business Combinations" (SFAS 141(R)).  This Statement replaces the original SFAS No. 141.  This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. The objective of SFAS No. 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS No. 141(R) establishes principles and requirements for how the acquirer:

a. Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.

b. Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase.

c. Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company does not expect the effect that its adoption of SFAS No. 141(R) will have on its results of operations and financial condition.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of SFAS No. 115" (SFAS No. 159), which becomes effective for the Company on February 1, 2008, permits companies to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The Company does not anticipate that the election, of this fair-value option will have a material effect on its financial condition, results of operations, cash flows or disclosures.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS No. 157). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 addresses the requests from investors for expanded disclosure about the extent to which companies' measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Company in the first quarter of fiscal year 2008. The Company is unable at this time to determine the effect that its adoption of SFAS No. 157 will have on its results of operations and financial condition.

11

Accounting Changes and Error Corrections

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" (SFAS No. 154), which replaces Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28". SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections, and it establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted SFAS No. 154 in the first quarter of fiscal year 2007 and does not expect it to have a material impact on its results of operations and financial condition.

NOTE 5 – SHARE CAPITAL

On August 29, 2006, the Company authorized 175,000,000 shares of common stock, at $.0001 par value. As of December 31, 2008 there were 174,242,045 common stock shares issued and outstanding. The Company authorized 1,000,000 of preferred shares at a par value of .001 and no shares were issued to its shareholders as of December 31, 2008.

On October 1, 2008 the Company issued 96,000 shares of common stock to a related party American Nortel Communications Inc. The issuances were valued at $.088 per share which was the closing price of the day of issue and the company recognized compensation expenses to William P. Williams of $8,438.

On December 4, 2008 the Company issued 96,000 shares of common stock to a related party American Nortel Communications Inc. The issuances were valued at $.089 per share which was the closing price of the day of issue and the company recognized compensation expenses to William P. Williams of $8,630.

On October 21, 2008, the Company issued 3,000,000 shares of common stock in benefit of its related party, MedCom USA related to the acquisition of MedPay LLC which MedCom USA entered into in October 2008.  The value of the shares was $.088 per share which was the closing price of the day of issue. The Company recorded an affiliate advance receivable from MedCom USA, a related party, in the amount of $294,000.

During the quarter ended December 31, 2008, the Company entered into subscription agreements for 1,381,756 shares of common stock to third parties. The shares were valued at their closing price for a total amount of $102,500.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

The Company has entered into various consulting agreements with outside consultants.  However, certain of these agreements included additional compensation on the basis of performance.  The consulting agreements are the key shareholders that are instrumental to the success of the company and its development of it product.

The Company also has a contingency agreement with Orum and Roth the law firm that represents the Company in the patent litigation where as Orum and Roth is paid one-third of the settlement of the pending and future patent litigations successes.

12

The Company is a Plaintiff in a pending law suit against prior management William P. Williams, Eva S. Williams; Wilcom, Inc., a Texas Corporation; WPW Aircraft LLC an Arizona Limited Liability Corporation; and American Nortel Communications, Inc., a Nevada Corporation in Case No. 2:09-cv-00298 filed in the United States District Court in the District of Arizona.  The Company has alleged (9) nine causes of action and we are uncertain the legal costs associated with this suit or its outcome.

NOTE 7 – RELATED PARTY

Card Activation is managed by its key officers and directors Michael De La Garza and Robert Kite, as of December 31, 2008.  The officers of the Company Michael De La Garza and Robert Kite also serve as officers of MedCom USA, Inc. a related party. Additionally the officers of the Company are shareholders of both MedCom USA Inc. and the Company. Further MedCom USA, Inc. is a significant shareholder of the Company.

On October 1, 2008, the Company issued 96,000 shares of common stock to a related party American Nortel Communications Inc. The issuances were valued at $.088 per share which was the closing price of the day of issue and the Company recognized compensation expenses to William P. Williams of $8,438.

On December 4, 2008 the Company issued 96,000 shares of common stock to a related party American Nortel Communications Inc. The issuances were valued at $.089 per share which was the closing price of the day of issue and the Company recognized compensation expenses to William P. Williams of $8,630.

On October 21, 2008, the Company issued 3,000,000 shares of common stock in benefit of its related party, MedCom USA related to the acquisition of MedPay LLC which MedCom USA entered into in October 2008.  The value of the shares was $.088 per share which was the closing price of the day of issue. The Company recorded an affiliate advance receivable from MedCom USA, a related party, in the amount of $294,000.

On July 1, 2008, the Company entered into a revolving line of credit with MedCom USA, Inc. whereby the company could borrow up to $750,000 from MedCom USA, Inc. The terms of the agreement provide a 7% interest per annum. As of December 31, 2008 no amounts were due under the revolving line of credit.

The Company also advances funds to MedCom USA Inc., a related party. During the year ended December 31, 2008, the Company entered into subscription agreements whereby it sold its shares of common stock to third parties. The shares were valued at their closing pricing on the date of the agreements. The funds from the sale of some of shares of common stock sold by the Company during the year ended December 31, 2008 were deposited into MedCom USA, Inc. a related party. The Company has accounted and recorded an affiliate receivable due from MedCom USA, Inc. to the Company as a result of the deposit of the funds related to the issuances of the company's shares of common stock to third parties. As of December 31, 2008, the Company had a receivable from affiliate advances in the amount of $695,587 in which the company recognizes a 7% interest rate on that advance..

NOTE 8 - NET LOSS PER SHARE

Restricted shares and warrants are not included in the computation of the weighted average number of shares outstanding during the periods. There are no restricted shares or warrants issued in the Capital of Card Activation. The net loss per common share is calculated by dividing the loss by the weighted average number of shares outstanding during the periods.

13

NOTE 9 – SPIN OFF

The Company was incorporated in August 2006 in order to own and commercially develop the assigned patent which covers point-of-sale technology for the activation and processing of transactions related to debit styled cards, which include gift cards, phone cards and other stored value cards MedCom has assigned its patent number 6,032,859 to the Company upon its formation. The MedCom point-of-sale technology was created by MedCom as part of its card building technology endeavors in the 1990's. The patent covers point-of-sale technology for the activation and processing of transactions related to debit styled cards, which include gift cards, phone cards and other stored value cards. New View Technologies, which was acquired by MedCom, developed the patent and all patents were assigned by New View Technologies to MedCom.

The patent was transferred to the Company by MedCom USA, Incorporated on the formation of the Company and in exchange for 146,770,504 shares of Common Stock.  On October 31, 2006, the MedCom Board of Directors declared a stock dividend to its shareholders of record at the end of business on December 15, 2006 of one share of Common Stock of the Company for every one share of common stock of MedCom owned by its shareholders, such stock being distributed on March 1, 2007. This was a dividend of 86,770,504 shares of our Common Stock.  MedCom retained the balance of 60,000,000 shares of Common Stock.

Separation Agreement:

The separation agreement was executed on October 31, 2006 where as MedCom desired to separate its several businesses comprised of its healthcare and financial transaction solutions business and its proprietary patented payment transaction technology which had been operating in their respective businesses for substantially more than five years, into independent companies. Such separation allowed the separate companies focus on their separate business models and markets, allow management to focus on their respective businesses and enhance access to financing by allowing banks and the financial community to focus separately on the respective businesses. MedCom spun off the patent technology into the Company. MedCom completed the spin off of the Company on December 15, 2006 and reserved 12,000,000 common shares to be distributed to employees and or consultants of the company and will be registered and restricted common shares.

The Company has no outstanding obligations outstanding as of December 31, 2008 as part of this agreement.

The Separation agreement allowed for ancillary agreements such as tax sharing agreement and administrative services agreement.

Administration Agreement:

On October 31, 2006 the Company executed an administration agreement by and between   MedCom  and  the Company each  of  them  agrees, from and after  the  Spin-off  date  and  for  a transition period of up to one year following  the  Spin-off date, to provide the other on an "as needed" basis with  the  following  services:

(1)   Tax consultation and assistance with tax return preparation and audits. Any taxes due shall be paid in accordance with that Tax Sharing Agreement of even date herewith between the parties;

(2)   Assistance with the preparation of (i) periodic filings under the Securities Exchange Act of 1934 or with the National Association of Securities Dealers, Inc., (ii) reports to stockholders, and (iii) other external financial reports;

14

(3)   Design and implementation of internal audit procedures;

(4)   Coordination of independent audits by nonaffiliated auditors;

(5)   Consultation on cash management, financing and other treasury matters;

(6)   Insurance and risk management services involving administration, placement of insurance, and broker selection for past and future insurance and risk management programs; and

(7)   Such other services as may be mutually agreed upon between the parties.

(b)    Each party shall use its respective best efforts in providing the above services and, except for gross negligence or willful misconduct, shall not be responsible for the accuracy, completeness or timeliness of any advice or service or any return, report, filing or other document which it provides, prepares or assists in preparing.

Notwithstanding the foregoing, neither party shall be obligated to provide the above services if that party determines in its reasonable judgment that providing such services would unreasonably interfere with the conduct of its own business activities. The parties shall cooperate in planning the scope and timing of services to be provided by each of them under this agreement so as to lessen or eliminate any such interference.

REIMBURSEMENT. The parties agree to reimburse each other for services rendered in accordance with an hourly fee schedule to be agreed upon from time to time by the parties. The hourly fee schedule may provide different rates for different categories of personnel. In addition, each party agrees to reimburse the other for all out-of-pocket expenses incurred by the providing party in connection with performing such services. The parties shall, on a periodic basis to be agreed upon, but not less frequently than quarterly, submit to and exchange with each other their respective statements of fees and expenses for payment, accompanied by such supporting detail as the recipient of the statement may reasonably request. Only the amount owed to one party for any period in excess of the amount owed by that party for the same period need be paid. Payment shall be due 30 days after date of the statement.

The Company has outstanding obligations with MedCom USA Inc. and has recorded those amounts in the Advances from Affiliate as of December 31, 2008.

TAX SHARING AGREEMENT

The Company executed October 31, 2006, by and between MedCom USA, Incorporated and Card Activation Technologies Inc., which as of the date of this agreement was a wholly owned subsidiary of MedCom. Therefore, in consideration of the mutual covenants and subject to the terms and conditions contained in this agreement, the parties agree as follows:

LIABILITIES ATTRIBUTABLE TO PRE-SPIN-OFF PERIODS.

(a)      RETURNS. MedCom, on a basis with CAT has timely filed (or has obtained or will obtain valid extensions of time for filing and will file) all federal and state income tax returns which are required to be filed for periods up to and including the Spin-off Date.

15

(b)      TAX LIABILITIES. Reasonable estimates of federal and state income taxes of CAT for all pre-Spin-off periods (and taxes deemed to be attributable to pre-Spin-off periods, pursuant to Section 3) have been or will be reflected in the pre-Spin-off financial statements of CAT in accordance with MedCom's tax allocation and settlements policy, subject to adjustments to be made upon filing the final MedCom federal income tax return in which CAT are included.

(c)      TAX CARRYFORWARDS. The parties agree that none of MedCom's accrued federal net operating loss, investment tax credit and other federal tax carryforwards "CARRYFORWARDS"), if any, are attributable to CAT's operations and no portion of the same will be allocated to CAT.

(d)      SETTLEMENT OF TAX LIABILITY. Prior to, or concurrent with, the Spin-off, CAT will settle with MedCom, its current income tax liability and intercompany tax note accounts (as determined in Section 1(b), before the return adjustments noted in such section). Such settlement shall be effected by payments and/or adjustments to shareholder's equity of CAT, as mutually agreed by the parties.

The Company has no outstanding obligations outstanding as of December 31, 2008 as part of this agreement.

NOTE 10 – SUBSEQUENT EVENTS

Prior Management Williams P. Williams and Michael Malet have resigned from the Company.  The Company has closed the Scottsdale Arizona office and is moving their corporate offices to Henderson, Nevada.  The Company is a Plaintiff in a pending law suit against prior management William P. Williams, Eva S. Williams; Wilcom, Inc., a Texas Corporation; WPW Aircraft LLC an Arizona Limited Liability Corporation; and American Nortel Communications, Inc., a Nevada Corporation in Case No. 2:09-cv-00298 filed in the United States District Court in the District of Arizona.  The Company has alleged (9) nine causes of action and we are uncertain the legal costs associated with this suit or its outcome.  The company further learned that Williams P. Williams issued 96,000 commons shares of the company to American Nortel Communications, Inc. and 250,000 common shares of the company to Wilcom, Inc. in January 2009.

*  *  *  *  *  *

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis contains various "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to "anticipates", "believes", "plans", "expects", "future" and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company's business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company adopted at management's discretion, the most conservative recognition of revenue based on the most astringent guidelines of the SEC in terms of recognition of software licenses and recurring revenue. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

16

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2008 as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

Overview

Card Activation Technologies Inc. ("Company" "Card") is a Delaware corporation headquartered in Chicago, Illinois that owns a patented point-of-sale technology for the activation and processing of transactions related to debit styled cards, which include gift cards, phone cards and other stored value cards. The patent was transferred to us by MedCom USA, Incorporated ("MedCom") on the formation of our company and in exchange for 146,770,504 shares of our Common Stock.  On October 31, 2006, the MedCom Board of Directors declared a stock dividend to its shareholders of record at the end of business on December 15, 2006 of one share of our Common Stock in the Company for every one share of common stock of MedCom owned by its shareholders, such stock being distributed on March 1, 2007. This was a dividend of 86,770,504 shares of our Common Stock.  MedCom retained the balance of 60,000,000 shares of Common Stock. MedCom is a publicly traded Delaware corporation, headquartered in Scottsdale, Arizona. (EMED.OB).

We were incorporated in August 2006 in order to own and commercially develop the assigned patent which covers point-of-sale technology for the activation and processing of transactions related to debit styled cards, which include gift cards, phone cards and other stored value cards MedCom has assigned its patent number 6,032,859 to us upon its formation. The MedCom point-of-sale technology was created by MedCom as part of its card building technology endeavors in the 1990's. The patent covers point-of-sale technology for the activation and processing of transactions related to debit styled cards, which include gift cards, phone cards and other stored value cards. New View Technologies, which was acquired by MedCom, developed the patent and all patents were assigned by New View Technologies to MedCom.

Plan of Operations

We were incorporated in Delaware in August of 2006 as Card Activation Technologies, Inc.

We believe we have the following principal competitive strengths, which positions us to further grow and become a dominant player in our industry:

Ø We were incorporated in Delaware with the focus on the licensing of the proprietary patented technology for processing debit and gift card transactions.

Ø We have identified hundreds of retail chains who the company believes are presently utilizing our patented technology in the use of debit cards, gift cards, phone cards, affinity cards and value cards.

17

Ø We intend to generate revenues primarily by charging licensing fees to the retailers who are utilizing our patented technology

Ø Under an administrative services agreement between the MedCom and us, we have agreed to share certain administrative functions and personnel until we can establish our own administrative operating systems and hire its own personnel.

Our Growth Strategies

Ø We were incorporated for the purpose of licensing its technology to the thousands of current users and believe that many retailers, supermarkets, convenience stores, phone companies and others specialty retailers.

Ø We were looking at expanding its market and looks for an acquisition that complements us and generates revenues.

Ø Once we begin receiving royalties, we expect the revenues of such royalties shall permit us to be self-funding.

Ø We intend to require, wherever our patents apply, reasonable royalties in exchange for licensing our intellectual property.

Ø By providing a licensing model, we expect to be able to convert many, if not all, of these providers to licensees for our patented system.

Competition

Competition in the technology industry is intense. The main competition is the entities that are using fully loaded cards with a predetermined value that are not activated. Also as technologies advances there is always a risk of new technology and more competition.  The overall market of the gift and affinity cards is very large and represents a large method of sales for companies.  The gift cards are sold at many companies to generate a way of generating a new revenue model for those companies that are selling our patent technology.

We are actively seeking to license its technology to the thousands of current users and believe that many retailers, gas stations, phone companies and others that utilize those stored value cards, such as gift and debit, infringe its patent.

Marketing

In developing our marketing approach, in November, 2006, we secured the services of the law firm of Orem and Roth LLC to begin the negotiations concerning the licensing of the proprietary patented technology.  As a result, the company is aggressively pursuing litigation against these infringers of our technology.

We intend to generate revenues primarily by charging licensing fees to the retailers who are utilizing our patented technology. We have identified hundreds of retail chains who the company believes are presently utilizing our patented point-of-sale technology for the activation and processing of transactions related to debit styled cards, which include gift cards, phone cards and other stored value cards

18

Patent Technology

In October 2006, MedCom transferred the patented technology to us. Presently, we have sent notice of our patented technology to numerous companies and initiated six lawsuits against companies that have infringed patent and will continue to pursue the litigation against those companies that have infringed the company's patent. Once we are successful in the pursuit of the patent infringers and in its licensing program, we anticipate receiving the appropriate royalties from the use of our technology by third parties by allowing licensing arrangements to our technology and anticipated royalties for the use of our patent.  We received, through a spin off, the ownership of a patent of MedCom USA Incorporated.  MedCom has assigned its patent number 6,032,859 to us upon its formation

Description of the Industry

From the increased use of phone cards populated with value by retailers to the expansion of gift cards at major department stores and big box stores, to the creation of affinity cards by retailers building customer loyalty, and the sale of these cards in supermarkets, convenience stores, coffee shops and other outlets, the implementation of card activation for consumers has been expanding greatly throughout the United States. Many retailers every day are adding this product availability to its sales efforts.

The Retail industry has adopted the method of activating cards at the time of purchase in order to reduce theft and cost of holding cards with pre-loaded values included. The retailer benefits significantly because it receives revenue from the customer and provides an interest free float on those monies until the customer actually utilizes the card for purchasing. This creates a tremendous profit opportunity for the retailer which has resulted in their encouragement of consumers to acquire gift cards as a gift solution.

The retailer also benefits because a percentage of the cards are not fully utilized or used at all thereby providing a 100% profit to the retailer for the amount not used.

The retailer benefits thirdly from consumers who may not normally frequent the store, but do so because they have a gift card and then often increment the sale above the value of the gift card with additional purchases.

Lastly, the retailer accrues a benefit by reducing returns of merchandise from unsatisfied customers who received merchandise as gifts.

RESULTS OF OPERATIONS

Quarter  Ended December 31, 2008, Compared to Quarter Ended December 31, 2007

We are a development stage company and have generated no revenues from the anticipated royalty income.

Liquidity and Capital Resources

The Company's operating requirements has been funded primarily from the sale of our common stock and we have received $102,500 in the sale of common stock during the quarter ending December 31, 2008. Although the Company is starting to settle patent infringement litigation with parties that have violated our patent.  We have settled two law suits with total of $375,000.  Additional we retain a line of credit for $750,000 of which there is no outstanding balance.  From time to time, we advance funds to MedCom USA.  As of December 31, 2008, we have advanced to affiliated $ 695,587 in which the company recognizes a 7% interest rate on that advance.  Currently, our costs are limited to professional fees and subject to a contingency fee from our patent litigation attorneys. We anticipate MedCom will continue to provide funds through a revolving line of credit of which funds will be drawn down on an as needed basis until we begin to realize sufficient revenues from royalty payments.  Once we begin receiving royalties, we expect the revenues of such royalties shall permit us to be self-funding. In addition, we are looking at expanding its market and looks for an acquisition that complements us and generates revenues, although no such prospective acquisition candidates have been ascertained.

19

Liabilities

We anticipate MedCom will continue to provide funds through a revolving line of credit which funds will be drawn down on an as needed basis until we begin to realize sufficient revenues from royalty payments.

We are attempting to raise additional working capital through the sale of equity, debt or a combination of equity and debt. We do not presently have any firm commitments for additional working capital and there are no assurances that such capital will be available to us when needed or upon terms and conditions which are acceptable to us. If we are able to secure additional working capital through the sale of equity securities, the ownership interests of our current stockholders will be diluted. If we raise additional working capital through the issuance of debt or additional dividend paying securities our future interest and dividend expenses will increase. If we are unable to secure additional working capital as needed, our ability to grow our sales, meet our operating and financing obligations as they become due and continue our business and operations could be in jeopardy.

Other Considerations

There are numerous factors that affect the business and the results of its operations.  Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for product services, and the ability to develop new services based on new or evolving technology and the market's acceptance of those new services, our ability to timely and effectively manage periodic product transitions, the services, and our ability to continue to improve our infrastructure including personnel and systems to keep pace with our anticipated rapid growth.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.

The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company's financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period presentation for comparative purposes.

20

Stock Based Compensation

In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of January 1, 2006. Based on the number of shares and awards outstanding as of December 31, 2005 (and without giving effect to any awards which may be granted in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to have a material impact on the financial statements.

FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that instruments that were originally issued as employee compensation and then modified, and that modification is made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP shall be applied in the first reporting period beginning after the date the FSP is posted to the FASB website. The Company has adopted SP FAS 123(R)-5 but it did not have a material impact on its results of operations and financial condition.

Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.  As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management's initial estimates as reported.  A summary of significant accounting policies are detailed in notes to the financial statements which are an integral component of this filing.

The Company has declared no common stock dividends since its inception.

Additional Information

We file reports and other materials with the Securities and Exchange Commission.  These documents may be inspected and copied at the Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549.  You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.  You can also get copies of documents that the Company files with the Commission through the Commission's Internet site at www.sec.gov.

21

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any derivative instruments and do not engage in any hedging activities.  We are in the patent infringement litigation business from infringer that violates our patent.

ITEM 4.  CONTROLS AND PROCEDURES

Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, December 31, 2008. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company and its independent registered public accounting firm identified certain significant internal control deficiencies during their audit for the year ended September 30 2008. We considered these weakness, in the aggregate, to be a material weakness. The primary concern was the preparation of the stock subscription, severance agreements, and asset purchase agreements.  The other area of concern was the proper depositing of those stock subscriptions with the appropriate entity.  These same issues have continued through the quarter ended December 31, 2008. Due to the size of our Company and the costs associated to remediate these issues, we still consider these concerns to be relevant. Based on that evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures as of December 31, 2008 may not be effective due to possible material weakness in our internal controls over financial reporting described below, and other factors related to the Company's financial reporting processes. The Company is in the process of evaluating the internal controls and procedures to ensure that the internal controls and procedures satisfy the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework.

Our principal executive officer and our principal financial officer, are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Management is required to base its assessment of the effectiveness of our internal control over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations (COSO). The COSO framework, published in Internal Control-Integrated Framework, is known as the COSO Report. Our principal executive officer and our principal financial officer, have has chosen the COSO framework on which to base its assessment.

Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in our annual reports on Form 10-K for the annual reporting periods through September 30, 2009.

There were no changes in our internal control over financial reporting that occurred during the last quarter of 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

22

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Our principal executive officer and our principal financial officer's, report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control Over Financial Reporting

During the quarter December 31, 2008, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As of September 30, 2006, we had initiated lawsuits against McDonald's Corporation, Walgreen Co. and Sears Holding Corporation, Barnes & Noble, Aeropostale, Inc., TJ Max, and OfficeMax Inc.  In addition more than 500 letters have been sent to other retailers for infringing its payment transaction patent but no responses had been filed in those actions by the defendants. As of the date herein, there are no pending or threatened legal proceedings against the Company.

Card Activation, through its attorneys, has sent letters to over 500 potential infringers of the patent, placing the infringers on notice of the patent and seeking a license agreement under the patent.

Card Activation has sued six parties and to date Card Activation has settled a lawsuit with one infringer.  That infringer, McDonald Corporation, has taken a license under the patent.

The intellectual property attorneys are pursuing these cases on a contingent fee basis, whereby they will receive 35% of amounts recovered, if successful.  The Company settled with TJ Max in November 2008.

The Company is a Plaintiff in a pending law suit against prior management William P. Williams, Eva S. Williams; Wilcom, Inc., a Texas Corporation; WPW Aircraft LLC an Arizona Limited Liability Corporation; and American Nortel Communications, Inc., a Nevada Corporation in Case No. 2:09-cv-00298 filed in the United States District Court in the District of Arizona.  The Company has alleged (9) nine causes of action including but not limited to securities violation of Section 10 of the Securities Exchange Act of 1934, thereunder Rule 10b-5 and we are uncertain the legal costs associated with this suit or its outcome.

ITEM 1A - Risk Factors

You should carefully consider the following risk factors before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline and you may lose all or a part of your investment.

23

OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION

Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.

WE MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL TO PURSUE OUR LITIGATION AND THEREFORE WOULD BE UNABLE TO ACHIEVE OUR PLANNED FUTURE GROWTH:

We intend to pursue a growth strategy that includes development of the Company business and technology.  Currently we have limited capital which is insufficient to pursue our plans for development and growth.  Our ability to implement our growth plans will depend primarily on our ability to obtain additional private or public equity or debt financing.  We are currently seeking additional capital.  Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us.  Our failure to obtain additional capital will have a material adverse effect on our business.

OUR LACK OF DIVERSIFICATION IN OUR BUSINESS SUBJECTS INVESTORS TO A GREATER RISK OF LOSSES:

All of our efforts are focused on the development and growth of that business and its technology in an unproven area.  Although the medical billing is substantial, we can make no assurances that the marketplace will accept our products.

WE DO NOT INTEND TO PAY DIVIDENDS

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are rapid, there is no assurance with respect to the amount of any such dividend.

24

BECAUSE WE ARE QUOTED ON THE OTCBB INSTEAD OF AN EXCHANGE OR NATIONAL QUOTATION SYSTEM, OUR INVESTORS MAY HAVE A TOUGHER TIME SELLING THEIR STOCK OR EXPERIENCE NEGATIVE VOLATILITY ON THE MARKET PRICE OF OUR STOCK.

Our common stock is traded on the OTCBB. The OTCBB is often highly illiquid, in part because it does not have a national quotation system by which potential investors can follow the market price of shares except through information received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities that trade on the OTCBB as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves.

FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.

It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.

If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2007, we will be required to prepare assessments regarding internal controls over financial reporting and beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2008, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. There also can be no assurance that our auditors will be able to issue an unqualified opinion on management's assessment of the effectiveness of our internal control over financial reporting. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price.

In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover "material weaknesses" in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines "significant deficiency" as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.

25

In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.

Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

THE REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONTAINS EXPLANATORY LANGUAGE THAT SUBSTANTIAL DOUBT EXISTS ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN

The independent auditor's report on our financial statements contains explanatory language that substantial doubt exists about our ability to continue as a going concern. The report states that we depend on the continued contributions of our executive officers to work effectively as a team, to execute our business strategy and to manage our business. The loss of key personnel, or their failure to work effectively, could have a material adverse effect on our business, financial condition, and results of operations. If we are unable to obtain sufficient financing in the near term or achieve profitability, then we would, in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.

OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON SHARES MAY NOT BE INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING MARKET. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or "risky" investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

26

Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.

As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES

There were no changes in securities and small business issuer purchase of equity securities during the three months ended December 31, 2008, except as follows:

On October 1, 2008, the Company issued 96,000 shares of common stock to a related party American Nortel Communications Inc. The issuances were valued at $.088 per share which was the closing price of the day of issue and the Company recognized compensation expenses to William P. Williams of $8,448.  The issuance of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act. A legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

27

On October 21, 2008, the Company issued 3,000,000 shares of common stock in benefit of its related party, MedCom USA related to the acquisition of MedPay LLC which MedCom USA entered into in October 2008.  The value of the shares was $.088 per share which was the closing price of the day of issue. The Company recorded an affiliate advance receivable from MedCom USA, a related party, in the amount of $294,000 The issuance of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act. A legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

On December 4, 2008, the Company issued 96,000 shares of common stock to a related party American Nortel Communications Inc. The issuance were valued at $.089 per share which was the closing price of the day of issue and the company recognized compensation expenses to William P. Williams of $8,630 The issuance of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act. A legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

During the year ended December 31, 2008, the Company entered into subscription agreements for 1,381,756 shares of common stock to third parties. The shares were valued at their closing price for a total amount of $102,500.  The shares were issued to third parties in a private placement of the Company's common stock.  The shares were sold at $.18 per share.  .  The offer and sale of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act, based on the following: (a) the investors confirmed to us that they were "accredited investors," as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors acknowledged that all securities being purchased were "restricted securities" for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the period ended December 31, 2008.

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

There were no matters submitted to the vote of securities holders during the period ended December 31, 2008.

ITEM 5.  OTHER INFORMATION

 

None.

28

ITEM 6.  EXHIBITS

31.1	Certification of Principal Executive and Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification of Principal Executive and Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

SIGNATURES

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

		Card Activation Technologies, Inc.
Dated: July 20, 2009	By:	/s/ Robert Kite
		Robert Kite
		Chairman, President and Chief Executive Officer
		(Principle Executive Officer and Principal Financial Officer)

29