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EX-32.1 - EXHIBIT 32.1 - Card Activation Technologies Inc | ex32_1.htm |
EX-31.1 - EXHIBIT 31.1 - Card Activation Technologies Inc | ex31_1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended September 30, 2009
or
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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)
|
Registrant's
telephone number, including area code: (312) 972-1662
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
|
Name of each exchange on which
registered
|
None
|
None
|
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, $0.0001 Par Value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes
o
|
No
x
|
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.
Yes
o
|
No
x
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes
x
|
No
o
|
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, 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
o
|
No
o
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x
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 the 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 Act).
Yes
o
|
No
x
|
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant on March 31, 2009 was $6,319,905, computed by
reference to the $0.07 closing price of such common stock equity on March 31,
2009.
As of
January 11, 2010, there were 174,782,045 shares of common stock
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
PART
I
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||
ITEM
1.
|
1 | |
ITEM
1A.
|
4 | |
ITEM
2.
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4 | |
ITEM
3.
|
4 | |
ITEM
4.
|
4 | |
PART
II
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||
ITEM
5.
|
4 | |
ITEM
6.
|
5 | |
ITEM
7.
|
6 | |
ITEM
7A.
|
9 | |
ITEM
8.
|
10 | |
ITEM
9.
|
24 | |
ITEM
9A(T).
|
24 | |
ITEM
9B.
|
25 | |
PART
III
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||
ITEM
10.
|
25 | |
ITEM
11.
|
26 | |
ITEM
12.
|
28 | |
ITEM
13.
|
29 | |
ITEM
14.
|
29 | |
PART
IV
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||
ITEM
15.
|
30 | |
31 |
PART
I
Forward
Looking Statements
Certain
statements made or incorporated by reference in this Annual Report on Form
10-K, in our other filings with the Securities and Exchange
Commission (SEC), in our press releases and in statements made by or with the
approval of authorized personnel constitute “forward looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as amended ( the
Securities Act) and Section 21E of the Securities Exchange Act of 1934, as
amended ( the Exchange Act), with respect to, among other things, future events
and financial trends affecting us. Forward looking statements are
typically identified by words such as believes, estimates, expects, anticipates,
plans, should, would and similar expressions.
Although
we believe the expectations reflected in any forward looking statements are
reasonable, readers are cautioned that forward looking statements involve known
and unknown risks and uncertainties, are not guarantees of future performance
and that actual results, performance or achievements may differ materially from
any future results, performance or achievements expressed or implied by such
forward looking statements.
Forward
looking statements in this Annual Report on Form 10-K speak only as of the date
hereof, and forward looking statements in documents incorporated by reference
speak only as of the date of those documents. Unless otherwise
required by law, we undertake no obligation to publicly update or revise these
forward looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, we
cannot ensure that the forward looking statements contained in this Annual
Report on Form 10-K will, in fact, transpire.
ITEM 1. BUSINESS.
General
Card
Activation Technologies, Inc. (“we,” “us,” “our” or the “Company”) was
incorporated as a Delaware corporation on August 29, 2006. Our
principal executive office is located at 53 West Jackson Boulevard, Suite 1618,
Chicago, Illinois 60604, and our telephone number is (312)
972-1662.
The
Company was formed to own and commercially develop 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. Currently, our business strategy consists exclusively of
attempting to enter into license agreements with third parties to license our
rights under our patent and in pursuing patent litigation in an effort to
protect our intellectual property and obtain recourse against alleged
infringement of our patent. During the fiscal year ended September
30, 2009, our sole revenues from operations were generated from settlements of
patent litigation with third parties pursuant to which such third parties paid
us royalties for use of our patent.
We were
formerly a wholly owned subsidiary of MedCom USA Incorporated
(“MedCom”). In October 2006, MedCom announced its intention to
spin-off its card technology business from its other businesses. In
connection with our formation, MedCom transferred a patent relating to its card
technology business to us in exchange for 146,770,504 shares of our common
stock. On October 31, 2006, MedCom's 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 for every one share of common stock of
MedCom owned by its shareholders. On March 1, 2007, MedCom
distributed 86,770,504 shares of our common stock to its shareholders pursuant
to the stock dividend and retained the balance of 60,000,000 shares of our
common stock. MedCom remains our largest shareholder.
Description
of Our Patent
Our
principal asset is our patented payment technology that we acquired from MedCom
in connection with our spin-off. The payment technology is covered by
one patent which was assigned to us by MedCom upon our formation (U.S. Patent
No. 6,032,859). 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 loading a determined monetary value onto the card for use
at a later date for different types of transactions. This process can
be used for gift cards, phone cards and other stored value cards.
Patents
generally have a life span of 20 years from the date of application depending
upon the relevant jurisdiction. An application for the patent was
filed in September 1997 and subsequently granted on March 7,
2000. Based on the September 1997 application date, the patent has a
remaining term of approximately seven years and will expire in
2017.
Business
Strategy
Our
business strategy consists exclusively of attempting to enter into license
agreements with third parties to license our rights under our patent and in
pursuing patent litigation in an effort to protect our intellectual property and
obtain recourse against alleged infringement of our patent. We are
presently engaged in an aggressive program to identify potential third-party
infringers of our patent, notify such third-parties of their infringement and
seek licensing fees for the use of our patent. We may obtain such
licensing fees pursuant to license agreements entered into by the Company and
the third-parties, or we may pursue patent litigation to obtain remedies for
infringement. We intend to aggressively enforce our rights during the
entire life of the patent, and to seek royalty payments from all infringing
parties until the patent expires in 2017.
Licensing
the use of our patented technology
We have
identified hundreds of retail chains who the company believes are utilizing our
patented technology with the use of debit cards, gift cards, phone cards,
affinity cards and stored value cards. We have, through our
attorneys, sent letters to these retailers notifying them of their potential
infringement on our patent and requesting that the retailers enter into
negotiations with the Company regarding a license agreement for the
patent. The letters also notify the retailers of the Company's intent
to pursue legal action to enforce its rights with respect to the patent should
the retailers choose not to negotiate a licensing agreement. If the
Company successfully pursues legal action, any damages awarded to the Company
will be determined based on the date of the letter of notice. The
Company has and continues to negotiate licenses with several retailers that
responded to the correspondence. We intend to generate revenues by
charging licensing fees to the retailers who are utilizing our patented
technology and voluntarily enter into licensing agreements.
Patent
infringement settlements
We also
generate revenue through settlements with retailers who are infringing on our
patent. Since our acquisition of the patent from MedCom, we have,
through our attorneys, initiated lawsuits against 16 major retailers, and we have
entered into settlement and license agreements with 12 major
retailers. The terms of these settlement and license agreements are
typically confidential and grant a non-exclusive license to the retailers in
exchange for royalty fees. During the fiscal year ended September 30,
2009, our sole revenues from operations were generated from settlements of
patent litigation with third parties pursuant to which such third parties paid
us royalties for use of our patent. In addition, we recently
announced our intent to file up to 45 additional lawsuits against major
retailers in the near future.
In the
ordinary course of our patent litigation, we are the subject of, or party to,
various pending or threatened legal actions regarding the validity of the
patent. As a part of these actions, we have been involved in "Markman
Hearings," which are proceedings under U.S. patent law in which plaintiffs and
defendants present their arguments to the court as to how they believe the
patent claims – which define the scope of the patent holder's rights under the
patent – should be interpreted for purposes of determining at trial whether the
patents have been infringed. Other parties may take actions to
challenge our patent. We can make no assurances that we will not lose
all or some of the claims covered by our patent as the result of such challenges
or other litigation, including actions initiated by us, regarding our
patent.
Marketing
We market
our technology to retailers and other companies who utilize point of sale
technology. Our primary market is the hundreds of retailers who we
believe are utilizing our patented technology. Since inception the
Company has negotiated with and actively pursued infringers of our
patent. Once the company is 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.
Description
of the Industry
The
implementation of card activation for consumers has been expanding rapidly
throughout the United States. Significant users include phone cards populated
with value by retailers, the expansion of gift cards at major department and big
box stores, 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. Retailers continue to add this product offering to
augment their 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 does not incur the cost of providing goods and services
until the customer actually utilizes the card at time of
purchase. Other benefits to retailers for the use of gift cards
include the fact that not all cards are fully utilized or used at all thereby
providing a 100% profit to the retailer for the amount not used, merchandise
returns are reduced, potential new customers are created and the amount of
purchase is potentially increased.
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 do not require
activation. Also as technologies advance there is always a risk of new
technology and more competition. The overall market of the gift and
affinity cards is significant and continues to grow.
We are
actively seeking to license our technology and believe that many retailers, gas
stations, phone companies and others that utilize stored value cards, such as
gift and debit, are infringing on our patent.
Employees
At
September 30, 2009, the Company was managed by its sole officer and director,
Robert Kite. We have no other full or part-time employees. Our
business operations are focused on the patent infringement activity and the
protection of our patent through our legal counsel and are conducted through the
use of consultants and our administrative services agreement with MedCom which
we entered into in connection with our spin-off.
Available
Information
We file
annual and quarterly reports and other information with the Securities and
Exchange Commission. You may read and copy any document that we file
at the Securities and Exchange Commission’s Public Reference Room at 100 F
Street, N.E., Washington, D.C., 20549. Please call 1-800-SEC-0330 for
further information on the operation of the Public Reference
Room. Reports and other information regarding issuers, including us,
that file electronically with the Securities and Exchange Commission are also
available to the public from the Securities and Exchange Commission’s Web site
at http://www.sec.gov.
ITEM 1A. RISK FACTORS.
The
Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and is not required to provide the information required under this
item.
ITEM 2. PROPERTIES.
The
Company has office space in Scottsdale, Arizona. The space is shared
with MedCom. We believe that our existing facilities are adequate for our
current needs and that additional space will be available as
needed. The Company pays $500 a month in rent on a month to month
basis.
ITEM 3. LEGAL PROCEEDINGS.
In the
ordinary course of business, we are the subject of, or party to, various pending
or threatened legal actions, including various counterclaims in connection with
our intellectual property enforcement activities. Card Activation,
through its attorneys, has sent letters to over 600 potential infringers of the
patent, placing the infringers on notice of the patent and seeking a license
agreement under the patent. While we believe that any liability arising from
these actions will not have a material adverse effect on our financial position,
results of operations or cash flows, we can make no assurances that we will not
lose all or some of the claims covered by our patent as the result of such
actions.
Information
regarding the Company's legal proceedings outside the ordinary course of
business is disclosed under Notes 5 and 6 to the Company's Financial Statements
of Item 8 of Part II of this Annual Report on Form 10-K, which is incorporated
herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
The
Company submitted no matters to a vote of its security holders during the fiscal
year ended September 30, 2009.
PART
II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
Our
common stock is traded in the over-the-counter market, and quoted in the
National Association of Securities Dealers Inter-dealer Quotation System
(“Electronic Bulletin Board”) and can be accessed on the Internet at
www.otcbb.com under the symbol “CDVT.” The following table sets forth for the
periods indicated the high and low bid quotations for Card’s common
stock. These quotations represent inter-dealer quotations, without
adjustment for retail markup, markdown or commission and may not represent
actual transactions.
High
|
Low
|
|||||||
Fiscal
Year 2009
|
||||||||
First
Quarter (October – December 2008)
|
$ | .12 | .05 | |||||
Second
Quarter (January – March 2009)
|
$ | .11 | .04 | |||||
Third
Quarter (April – June 2009)
|
$ | .08 | .02 | |||||
Fourth
Quarter (July – September 2009)
|
$ | .20 | .07 | |||||
Fiscal
Year 2009
|
||||||||
First
Quarter (October – December 2007)
|
$ | .29 | .28 | |||||
Second
Quarter (January – March 2008)
|
$ | .31 | .26 | |||||
Third
Quarter (April – June 2008)
|
$ | .23 | .20 | |||||
Fourth
Quarter (July – September 2008)
|
$ | .09 | .06 |
As of
January 11, 2010, there were 990 holders of record of our common stock and the
closing price on the Electronic Bulletin Board was $0.09.
Dividend
Policy
We have
never declared or paid cash dividends on our common stock. We intend
to follow a policy of retaining earnings to finance the growth of our business
and do not anticipate paying any cash dividends in the foreseeable
future. The declaration and payment of future dividends on our common
stock will be at the sole discretion of our Board of Directors and will depend
on our profitability, our financial condition, capital requirements, future
prospects and other factors the Board of Directors deem relevant.
Issuer Repurchases
of Equity Securities
On August
1, 2009, our Board of Directors approved a share repurchase plan under which,
subject to price and market conditions, we may purchase shares of our common
stock from time to time in the open market or in privately negotiated
transactions using available cash. There has been no time limit set
for completion of the repurchase plan. There is no maximum number of
shares that may be purchased pursuant to the plan. There have been no
share repurchases pursuant to this plan.
Equity
Compensation Plan
We have a
2006 Stock Option Plan (the “Plan”) for employees, directors and consultants and
reserved 1,000,000 shares for issuance under the Plan. No shares have
been issued under this Plan.
ITEM 6. SELECTED FINANCIAL DATA.
The
Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and is not required to provide the information required under this
item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The
following is management’s discussion and analysis of certain significant factors
that have affected our financial position and operating results during the
periods included in the accompanying financial statements, as well as
information relating to the plans of our current management. This report
includes forward-looking statements. Generally, the words “believes,”
“anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,”
“continue,” and similar expressions or the negative thereof or comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth
in this report or other reports or documents we file with the Securities and
Exchange Commission from time to time, which could cause actual results or
outcomes to differ materially from those projected. Undue reliance should not be
placed on these forward-looking statements which speak only as of the date
hereof. We undertake no obligation to update these forward-looking
statements.
The
following discussion and analysis should be read in conjunction with our
financial statements and the related notes thereto and other financial
information contained elsewhere in this Form 10-K.
Overview
We own
and commercially develop 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. Currently, our business strategy consists exclusively of
attempting to enter into license agreements with third parties to license our
rights under our patent and in pursuing patent litigation in an effort to
protect our intellectual property and obtain recourse against alleged
infringement of our patent.
Results
of Operations
Fiscal
Year Ended September 30, 2009, Compared to Fiscal Year Ended September 30,
2008
Revenues
increased 100.0% to $993,000 for the year ended September 30, 2009 from zero for
the year ended September 30, 2008. The increase in revenues was due
to the settlement of patent litigation with 10 parties compared to no
settlements in the prior year. There are currently 4 lawsuits pending and over 600 parties have been
notified that they are infringing on our patent.
Operating
expenses consist of cost of revenue, general and administrative expenses and
sales and marketing costs.
Cost of
revenue consists of contingency fees paid to legal counsel of 35% of settlement
revenue. Cost of revenue increased 100% to $347,550 for the year
ended September 30, 2009 from zero for the year ended September 30, 2008 as a
result of increased revenue.
General
and administrative expenses consist of salaries and benefits, legal,
professional and consulting fees, corporate costs, facilities cost, insurance,
travel and entertainment. General and administrative costs increased
37.3% to $569,606 for the year ended September 30, 2009 from $414,822 for the
year ended September 30, 2008. This increase was primarily due to
increased salaries, benefits and travel and entertainment costs for executives
which was offset by reduced commissions due to less activity in raising
capital.
Sales and
marketing costs increased 140.2% to $5,434 for the year ended September 30, 2009
from $2,262 for the year ended September 30, 2008 due to fewer press
releases.
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 trading value of the stock at the date of issuance, and
the Company recognized compensation expenses to William P. Williams of
$8,448.
On
October 21, 2008, the Company issued 3,000,000 shares of common stock in benefit
of its related party, MedCom, for that company's acquisition of PayMed
LLC. The value of the shares was $.088 per share, which was the
trading value of the stock at the date of issuance. The Company recorded a
receivable from MedCom in the amount of $294,000. In connection with
the Settlement Agreement discussed above, this transaction will be unraveled
whereby the ownership of PayMed LLC will revert back to the previous owner and
the shares of our common stock will be returned to us.
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 trading value of the stock at the date of issuance, and
the Company recognized compensation expenses to William P. Williams of
$8,630.
During
the three months 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 trading value on the date o issue for a total amount of
$119,500.
On
January 15, 2009, we issued 240,000 shares to a related party, Wilcom, Inc.,
valued at $0.10 per share which was its trading value on the date of
issue. We recognized compensation expense in the amount of
$24,000.
Fiscal
Year Ended September 30, 2008, Compared to Fiscal Year Ended September 30,
2007
Revenues
decreased 100.0% to zero for the year ended September 30, 2008 from $45,000 for
the year ended September 30, 2007. The decrease in revenues was due
to no patent litigation settlements for the year ended September 30, 2008
compared to one patent litigation settlement in the prior year.
Operating
expenses consist of cost of revenue, general and administrative expenses and
sales and marketing costs.
Cost of
revenue consists of contingency fees paid to legal counsel of 35% of settlement
revenue. Cost of revenue decreased 100% to zero for the year ended
September 30, 2008 from $15,750 for the year ended September 30, 2007 as a
result of decreased revenue.
General
and administrative expenses consist of salaries and benefits, legal,
professional and consulting fees, corporate costs, facilities cost, insurance,
travel and entertainment. General and administrative costs increased
89.2% to $414,822 for the year ended September 30, 2008 from $219,286 for the
year ended September 30, 2007. This increase was primarily due to
increased legal expenses and commissions due to raising capital.
Sales and
marketing costs remained flat for the year ended September 30, 2008 compared to
September 30, 2007.
Liquidity
and Capital Resources
The
Company's operating requirements have historically been funded from the sale of
our common stock and litigation settlement revenue. We expect our
future operations will be funded from the litigation revenue settlements as well
as revenues from licensing our technology. In addition, the Company
is researching potential business combinations that would utilize our technology
or enhance our strategy, although no such target acquisition has been
identified.
In order
to develop our business plan, we will require funds for working capital. 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.
Critical
Accounting Policies and Estimates
Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America. As such, we are required to
make estimates and assumptions about the effects of matters that are inherently
uncertain. Those estimates and assumptions are derived and
continually evaluated based on historical experience, current facts and
circumstances, and changes in the business environment. However,
actual results may sometimes differ materially from estimates under different
conditions. We have summarized our significant accounting policies in
note 1 to our financial statements. Of the accounting policies, we
believe the following may involve a higher degree of judgment and
complexity.
Revenue
Recognition
Revenue
is recognized from litigation settlements received from companies that have
violated our patented technology and is recorded upon
receipt. Revenue is recognized from the receipt of royalties or
licensing fees from the use of our patent technology and is recorded
when sales are generated from third parties that have generated sales from the
use of our technology. We have no licensing agreements executed that
generate royalty payments at this time.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period
presentation for comparative purposes.
Recent Accounting
Guidance
Updates
issued and adopted
On
September 30, 2009, the Company adopted updates issued by the Financial
Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These
changes establish the FASB Accounting Standards CodificationTM (ASC) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. These changes and the
Codification itself do not change GAAP. Other than the manner in which new
accounting guidance is referenced, the adoption of these changes had no impact
on the Financial Statements.
In
June 2009, the FASB issued guidance now codified as ASC Topic 105,
“Generally Accepted Accounting Principles” (“ASC 105”), which establishes the
FASB Accounting Standards Codification as the source of GAAP to be applied to
nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive
releases of the SEC under authority of federal securities laws as authoritative
GAAP for SEC registrants. ASC 105 became effective for interim or annual periods
ending after September 15, 2009. ASC 105 does not have a material impact on
the Company’s financial statements presented hereby.
In
May 2009, the FASB issued guidance now codified as ASC Topic 855,
“Subsequent Events” (“ASC 855”). The pronouncement modifies the definition of
what qualifies as a subsequent event—those events or transactions that occur
following the balance sheet date, but before the financial statements are
issued, or are available to be issued—and requires companies to disclose the
date through which it has evaluated subsequent events and the basis for
determining that date. The Company adopted the provisions of ASC 855 in
September 30 2009, in accordance with the effective date.
On June
30, 2009, the Company adopted updates issued by the FASB to fair value
disclosures of financial instruments. These changes require a
publicly traded company to include disclosures about the fair value of its
financial instruments. Such disclosures include the fair value of all
financial instruments, for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial position; the
related carrying amount of these financial instruments; and the method(s) and
significant assumptions used to estimate the fair value. Other than
the required disclosures, the adoption of these changes had no impact on the
Financial Statements.
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 our product, and the ability to develop new products based
on new or evolving technology and the market's acceptance of those
products.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
The
Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and is not required to provide the information required under this
item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
CARD
ACTIVATION TECHNOLOGIES, INC.
|
|
Index to Financial
Statements
|
Page
|
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM:
|
11 |
Tarvaran,
Askelson & Company, LLP
|
|
FINANCIAL
STATEMENTS
|
|
Balance
Sheets at September 30, 2009 and 2008
|
12 |
Statements
of Operations for the years ended September 30, 2009 and
2008
|
13 |
Statements
of Stockholders' Equity for the years ended September 30, 2009 and
2008
|
14 |
Statements
of Cash Flows for the years ended September 30, 2009 and
2008
|
15 |
NOTES
TO FINANCIAL STATEMENTS
|
16 |
REPORT OF
INDEPENDENT REGISTERED ACCOUNTING FIRM
To the
Board of Directors and Stockholders
of Card
Activation Technologies, Inc.
We have
audited the accompanying balance sheets of Card Activation Technologies, Inc. as
of September 30, 2009 and 2008, and the related statements of income,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Card Activation Technologies, Inc.
as of September 30, 2009 and 2008, and the results of their operations and their
cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed further in Note 2, the Company has
incurred significant losses. The Company's viability is dependent
upon its ability to obtain future financing and the success of its future
operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan in regard
to these matters is also described in Note 2. The financial statements do
not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Tarvaran Askelson &
Company, LLP
Laguna
Niguel, California
January
13, 2010
CARD
ACTIVATION TECHNOLOGIES, INC.
BALANCE
SHEET
September
30,
|
||||||||
2009
|
2008
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 6,909 | $ | – | ||||
Investments
|
25,000 | – | ||||||
Settlement
receivable
|
237,500 | – | ||||||
Advances
to affiliate
|
1,072,050 | 507,149 | ||||||
Other
current assets
|
20,000 | – | ||||||
Total
current assets
|
1,341,459 | 507,149 | ||||||
TOTAL
ASSETS
|
$ | 1,341,459 | $ | 507,149 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY:
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Bank
overdraft
|
$ | – | $ | 1,963 | ||||
Accounts
payable
|
51,522 | 20,860 | ||||||
Accrued
expenses
|
242,857 | 28,960 | ||||||
Total
current liabilities
|
294,379 | 51,783 | ||||||
TOTAL
LIABILITIES
|
$ | 294,379 | $ | 51,783 | ||||
STOCKHOLDERS'
EQUITY:
|
||||||||
Preferred
stock, $.001 par value, 1,000,000 shares authorized; none issued and
outstanding as of September 30, 2009 and 2008,
respectively
|
– | – | ||||||
Common
stock, $.0001 par value, 300,000,000 shares authorized; 174,782,045 and
169,968,289 shares issued and outstanding as of September 30, 2009 and
2008, respectively
|
17,478 | 16,997 | ||||||
Additional
paid in capital
|
1,509,953 | 1,055,845 | ||||||
Accumulated
deficit
|
(480,351 | ) | (617,476 | ) | ||||
Total
stockholders' equity
|
1,047,080 | 455,366 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 1,341,459 | $ | 507,149 |
The
accompanying notes are an integral part of these financial
statements.
CARD
ACTIVATION TECHNOLOGIES, INC.
STATEMENTS
OF OPERATIONS
September
30,
|
||||||||
2009
|
2008
|
|||||||
REVENUE
|
||||||||
Litigation
revenue
|
$ | 993,000 | $ | – | ||||
Total
|
993,000 | – | ||||||
COSTS
AND EXPENSES
|
||||||||
Cost
of revenue
|
347,550 | – | ||||||
General
and administrative
|
569,606 | 414,822 | ||||||
Sales
and marketing expenses
|
5,434 | 2,262 | ||||||
Total
operating expenses
|
922,590 | 417,084 | ||||||
OPERATING
LOSS
|
70,410 | (417,084 | ) | |||||
OTHER
(INCOME) AND EXPENSES
|
||||||||
Interest
income
|
(67,297 | ) | (7,678 | ) | ||||
Interest
expense
|
582 | – | ||||||
Total
other (income) expense
|
(66,715 | ) | (7,678 | ) | ||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
137,125 | (409,406 | ) | |||||
INCOME
TAX (BENEFIT) PROVISION
|
– | – | ||||||
NET
INCOME (LOSS)
|
$ | 137,125 | $ | (409,406 | ) | |||
Weighted
Average Common Shares Outstanding:
|
||||||||
Basic
and diluted:
|
174,416,237 | 166,844,138 | ||||||
Net
Income (Loss) Per Share:
|
||||||||
Basic
and diluted:
|
$ | .001 | $ | (.002 | ) |
The
accompanying notes are an integral part of these financial
statements.
CARD
ACTIVATION TECHNOLOGIES, INC.
STATEMENTS
OF STOCKHOLDERS’ EQUITY
Common
Stock
|
Preferred
Stock
|
Additional
|
Accumulated
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Paid in Capital
|
Deficit
|
Total
|
||||||||||||||||||||||
Balance
as of September 30, 2007
|
163,914,717 | $ | 16,392 | – | $ | – | $ | – | $ | (208,070 | ) | $ | (191,678 | ) | ||||||||||||||
Common
stock issued for legal matters at $.49
|
500,000 | 50 | – | – | 244,950 | 245,000 | ||||||||||||||||||||||
Common
stock issued for legal matters at $.23
|
100,000 | 10 | – | – | 22,990 | 23,000 | ||||||||||||||||||||||
Common
stock issued in benefit of affiliate at $.14
|
600,000 | 60 | – | – | 83,940 | 84,000 | ||||||||||||||||||||||
Common
stock issued in private placement
|
4,853,572 | 485 | – | – | 703,965 | 704,450 | ||||||||||||||||||||||
Net
loss
|
(409,406 | ) | (409,406 | ) | ||||||||||||||||||||||||
Balance
as of September 30, 2008
|
169,968,289 | $ | 16,997 | – | $ | – | $ | 1,055,845 | $ | (617,476 | ) | $ | 455,366 | |||||||||||||||
Common
stock issued under subscription agreements
|
1,381,756 | 138 | – | – | 119,362 | 119,500 | ||||||||||||||||||||||
Common
Stock issued in connection with PayMed acquisition
|
3,000,000 | 300 | – | – | 293,700 | 294,000 | ||||||||||||||||||||||
Common
stock issued for compensation
|
432,000 | 43 | – | – | 41,046 | 41,089 | ||||||||||||||||||||||
Net
loss
|
(137,125 | ) | (137,125 | ) | ||||||||||||||||||||||||
Balance
as of September 30, 2009
|
174,782,045 | $ | 17,478 | – | $ | – | $ | 1,509,953 | $ | (480,351 | ) | $ | 1,047,080 |
The
accompanying notes are an integral part of these financial
statements.
CARD
ACTIVATION TECHNOLOGIES INC.
STATEMENT
OF CASH FLOWS
September
30,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
(loss)
|
$ | 137,125 | $ | (409,406 | ) | |||
Adjustments
to reconcile net income to cash (used in) operating
activities
|
||||||||
Common
stock issued for services
|
41,089 | 352,000 | ||||||
Changes
in assets and liabilities:
|
||||||||
Other
assets
|
(237,500 | ) | – | |||||
Accounts
payables
|
30,662 | (19,375 | ) | |||||
Accrued
expenses
|
213,897 | 28,960 | ||||||
Net
cash used in operating activities
|
185,273 | (47,821 | ) | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase
of short term investments
|
(25,000 | ) | – | |||||
Net
cash from investing activities
|
(25,000 | ) | – | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Bank
overdraft
|
(1,963 | ) | 1,963 | |||||
Loans
to affiliates
|
(396,694 | ) | – | |||||
Repayment
of notes from affiliates
|
125,793 | (1,175,691 | ) | |||||
Proceeds
from the sale of stock
|
119,500 | 704,450 | ||||||
Loans
from affiliates
|
– | 503,400 | ||||||
Net
cash provided by financing activities
|
(153,364 | ) | 34,122 | |||||
INCREASE
IN CASH
|
6,909 | (13,699 | ) | |||||
CASH,
BEGINNING OF YEAR
|
– | 13,699 | ||||||
CASH,
END OF YEAR
|
$ | 6,909 | $ | – | ||||
Supplemental
Cash Flow Information:
|
||||||||
Issuance
of stock for affiliate acquisition
|
$ | 294,000 | $ | – |
The
accompanying notes are an integral part of these financial
statements.
CARD
ACTIVATION TECHNOLOGIES, INC.
NOTES TO
FINANCIAL STATEMENTS
FOR THE
YEARS ENDED SEPTEMBER 30, 2009 AND 2008
NOTE 1 –
BACKGROUND
Card
Activation Technologies, Inc. (“we,” “us,” “our” or the “Company”) was
incorporated in the state of Delaware on August 29, 2006. The Company was
incorporated in order to own and commercially develop 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. We also vigorously defend our patent and actively litigate
infringements related to the unauthorized use of our technology. The
patent was transferred to us by MedCom USA, Incorporated (“MedCom”) upon our
formation in exchange for 146,770,504 shares of our common stock. 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 down loading a
determined monetary value onto the card for use at a later date for different
types of transactions.
NOTE 2 –
BASIS OF PRESENTATION AND GOING CONCERN ISSUES
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 year ended September 30, 2009
the Company recognized net income of $137,125. However, the Company
incurred an accumulated net loss from period August 29, 2006 (Inception) through
September 30, 2009 of $480,351. 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 –
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
is recognized from litigation settlements received from companies that have
violated our patented technology and is recorded upon
receipt. Revenue is recognized from the receipt of royalties or
licensing fees from the use of our patent technology and is recorded when sales
are generated from third parties that have generated sales from the use of our
technology. We have no licensing agreements executed that generate
royalty payments at this time.
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 September 30, 2009,
cash and cash equivalents include cash on hand and cash in the
bank.
Income
Taxes
Deferred
income taxes are provided based on the provisions of ASC Topic 740, "Accounting
for Income Taxes", 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.
The
Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In
Income Taxes-An Interpretation Of ASC Topic 740 ("Topic 740"). Topic 740
contains a two-step approach to recognizing and measuring uncertain tax
positions. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates it is more likely than
not, that the position will be sustained on audit, including resolution of
related appeals or litigation processes, if any. The second step is to measure
the tax benefit as the largest amount, which is more than 50% likely of being
realized upon ultimate settlement. The Company considers many factors when
evaluating and estimating the Company's tax positions and tax benefits, which
may require periodic adjustments. At September 30, 2009, the Company did
not record any liabilities for uncertain tax positions.
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
September 30, 2009, there were no potential dilutive instruments that could
result in share dilution.
Fair
Value of Financial Instruments
The
company financial instruments consist primarily of cash, affiliate receivable,
settlement receivable, accounts payable and accrued expenses and
debt. The carrying amounts of such financial instruments approximate
their respective estimated fair value due to the short-term maturities and
approximate market interest rates of these instruments. The estimated
fair value is not necessarily indicative of the amounts the Company would
realize in a current market exchange or from future earnings or cash
flows.
The
Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which
defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. The standard
provides a consistent definition of fair value which focuses on an exit price
that would be received upon sale of an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement
date. The standard also prioritizes, within the measurement of fair
value, the use of market-based
The
three-level hierarchy for fair value measurements is defined as
follows:
|
Ÿ
|
Level 1 – inputs to the valuation
methodology are quoted prices (unadjusted) for identical assets or
liabilities in active
markets;
|
|
Ÿ
|
Level 2 – inputs to the valuation
methodology include quoted prices for similar assets and liabilities
in active markets, and inputs that are observable or the asset or
liability other than quoted prices, either directly or indirectly
including inputs in markets that are not considered to be
active;
|
|
Ÿ
|
Level 3 – inputs to the valuation
methodology are unobservable and significant to the fair value
measurement
|
Share-Based
Compensation
The
Company applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based
compensation, which requires the measurement of the cost of services received in
exchange for an award of an equity instrument based on the grant-date fair value
of the award. Compensation cost is recognized when the event occurs. The
Black-Scholes option-pricing model is used to estimate the fair value of options
granted.
Concentration
of Credit Risk
Financial
instruments, which potentially subject the Company to concentration of credit
risk, consist primarily of cash and cash equivalents. Cash
equivalents consist of interest-bearing deposits, money market funds and debt
instruments in financial institutions. Cash and cash equivalents are
not in excess of Federal Deposit Insurance Corporation insurance
limits. The Company has not experienced any losses in such
accounts.
Impairment
of Long-Lived Assets
In
accordance with ASC Topic 360, 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. 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 an impairment of long lived assets.
Recent
Accounting Updates
Updates
issued and adopted
On
September 30, 2009, the Company adopted updates issued by the Financial
Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These
changes establish the FASB Accounting Standards CodificationTM (ASC) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. These changes and the
Codification itself do not change GAAP. Other than the manner in which new
accounting guidance is referenced, the adoption of these changes had no impact
on the Financial Statements.
In
June 2009, the FASB issued guidance now codified as ASC Topic 105,
“Generally Accepted Accounting Principles” (“ASC 105”), which establishes the
FASB Accounting Standards Codification as the source of GAAP to be applied to
nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive
releases of the SEC under authority of federal securities laws as authoritative
GAAP for SEC registrants. ASC 105 became effective for interim or annual periods
ending after September 15, 2009. ASC 105 does not have a material impact on
the Company’s financial statements presented hereby.
In
May 2009, the FASB issued guidance now codified as ASC Topic 855,
“Subsequent Events” (“ASC 855”). The pronouncement modifies the definition of
what qualifies as a subsequent event—those events or transactions that occur
following the balance sheet date, but before the financial statements are
issued, or are available to be issued—and requires companies to disclose the
date through which it has evaluated subsequent events and the basis for
determining that date. The Company adopted the provisions of ASC 855 in
September 30 2009, in accordance with the effective date.
On June
30, 2009, the Company adopted updates issued by the FASB to fair value
disclosures of financial instruments. These changes require a
publicly traded company to include disclosures about the fair value of its
financial instruments. Such disclosures include the fair value of all
financial instruments, for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial position; the
related carrying amount of these financial instruments; and the method(s) and
significant assumptions used to estimate the fair value. Other than
the required disclosures, the adoption of these changes had no impact on the
Financial Statements.
NOTE 4 -
INCOME TAXES
The
Company adopted ASC Topic 740 which requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statement or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Temporary differences between taxable income reported for financial
reporting purposes and income tax purposes are insignificant.
For
income tax reporting purposes, the Company’s aggregate unused net operating
losses approximate $478,873 which expire in various years through 2028, subject
to limitations of Section 382 of the Internal Revenue Code, as amended. The
Company has provided a valuation reserve against the full amount of the net
operating loss benefit, because in the opinion of management based upon the
earning history of the Company; it is more likely than not that the benefits
will not be realized.
Under the
Tax Reform Act of 1986, the benefits from net operating losses carried forward
may be impaired or limited on certain circumstances. Events which may cause
limitations in the amount of net operating losses that the Company may utilize
in any one year include, but are not limited to, a cumulative ownership change
of more than 50% over a three-year period. The impact of any limitations that
may be imposed for future issuances of equity securities, including issuances
with respect to acquisitions have not been determined.
The
provision (benefit) for income taxes from continued operations for the years
ended September 30, 2009 and 2008 consist of the following:
September
30,
|
||||||||
2009
|
2008
|
|||||||
Current:
|
||||||||
Federal
|
$ | – | $ | – | ||||
State
|
– | – | ||||||
Deferred:
|
||||||||
Federal
|
$ | – | $ | 138,695 | ||||
State
|
– | 28,081 | ||||||
166,776 | ||||||||
Change
in valuation allowance
|
– | (166,776 | ) | |||||
(Benefit)
provision for income taxes
|
$ | – | $ | – |
The
difference between income tax expense computed by applying the federal statutory
corporate tax rate and actual income tax expense is as follows:
September
30,
|
||||||||
2009
|
2008
|
|||||||
Statutory
federal income tax rate
|
34.0 | % | 34.0 | % | ||||
State
income taxes and other
|
4.8 | % | 7.0 | % | ||||
Utilization
of net operating loss carryforward
|
(38.8 | %) | 41.0 | % | ||||
Effective
tax rate
|
0.0 | % | 0.0 | % |
Deferred
income taxes result from temporary differences in the recognition of income and
expenses for the financial reporting purposes and for tax purposes. The tax
effect of these temporary differences representing deferred tax asset and
liabilities result principally from the following:
September
30,
|
||||||||
2009
|
2008
|
|||||||
Net
operating loss carry forward
|
185,889 | 166,776 | ||||||
Valuation
allowance
|
(185,889 | ) | (166,776 | ) | ||||
Deferred
income tax asset
|
$ | – | $ | – |
NOTE 5 –
COMMITMENTS AND CONTINGENCIES
The
Company also has a contingency agreement with Orum and Roth, one of the law
firms that represent the Company in the patent litigation. Orum and
Roth is paid thirty five percent of settlement entered in by the
company and future patent litigation successes.
The
Company was a party to litigation in federal court involving certain related
parties, which was recently dismissed. The Company was a plaintiff,
along with MedCom, in a lawsuit against prior management, Michael Malet and
Annette Malet, and William P. Williams, Eva S. Williams and certain of their
affiliated entities, Wilcom, Inc., a Texas Corporation, WPW Aircraft LLC, an
Arizona Limited Liability Corporation and American Nortel Communications, Inc.,
a Nevada Corporation, which was filed in February 2009 in the United States
District Court in the District of Arizona (Case No.
2:09-cv-00298). The Company alleged nine causes of action including,
among other things, securities fraud, racketeering, and other state law causes
of actions, which related to alleged acts arising out of certain of the
defendants’ prior service as management of the Company and
MedCom. The Company and MedCom were seeking certain compensatory
damages, punitive damages, treble damages, injunctive relief and disgorgement of
personal profits and compensation realized by the defendants and reasonable
attorneys’ fees, costs and expenses associated with the lawsuit. In
August 2009, the parties filed a stipulation for dismissal without prejudice,
which was approved by the court pursuant to an order issued on August 25,
2009. The parties intend to seek to resolve the claims outside the
context of a court proceeding to mitigate expenses. To this end, the
parties have entered in tolling agreements preserving claims against statutes of
limitations and other applicable time-based defenses. If the parties
can’t reach a resolution, the Company and MedCom may seek to reinstate the
litigation. The Company is uncertain of the legal costs associated
with this suit or its ultimate outcome.
NOTE 6 –
RELATED PARTY
As of
September 30, 2009, the Company was managed by its sole officer and director,
Robert H. Kite. Michael De La Garza previously served as a director
of the Company and as the Company’s President and Chief Executive
Officer. On April 27, 2009, holders of more than a majority of the
outstanding shares of the Company’s common stock, acting by written consent,
effected the removal of Mr. De La Garza from the Company’s Board of
Directors. Following Mr. De La Garza’s removal as a director by
stockholders, Mr. Kite, the Company’s sole director, acted to remove Mr. De La
Garza from his position as President and Chief Executive Officer. Mr.
Kite now serves as sole director and Chairman of the Company’s Board of
Directors and acts as the Company’s principal executive and principal financial
officer. Mr. Kite also serves as chairman of the board of directors,
president and chief executive officer of MedCom, a related party, and owns
shares of common stock of both MedCom and the Company. MedCom is also
a significant shareholder of the Company. He also serves in the same capacity of
MedCom, a related party and significant shareholder. Additionally Mr. Kite is a
significant shareholder of both entities.
On June
4, 2009, the Company entered into a settlement agreement with Mr. De La Garza,
MedCom, certain shareholders of MedCom, Robin De La Garza, Mr. De La Garza’s
spouse, PayMed USA, LLC, and Absolute Medical Software Systems, LLC (the
“Settlement Agreement”). The Settlement Agreement resolved pending
Arizona state court litigation against Mr. De La Garza, in which the Company’s
largest shareholder, MedCom, sought, among other things, injunctive and
declaratory relief that Mr. De La Garza was not authorized to act on behalf of
MedCom as an officer or director. The Settlement Agreement became
final and effective on August 11, 2009.
Under the
terms of the Settlement Agreement, Mr. De La Garza affirmed in writing that
holds no position with the Company, whether as an officer, a director or
otherwise, and he resigned from any such position to the extent he could be said
to hold any such position, which resolved any potential disputes relating to his
removal from such offices in April 2009, as discussed above.
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 trading value of the stock at the date of issuance, and
the Company recognized compensation expenses to William P. Williams of
$8,448.
On
October 21, 2008, the Company issued 3,000,000 shares of common stock in benefit
of its related party, MedCom, for that company's acquisition of PayMed
LLC. The value of the shares was $.088 per share, which was the
trading value of the stock at the date of issuance. The Company recorded a
receivable from MedCom in the amount of $294,000. In connection with
the Settlement Agreement discussed above, this transaction will be unraveled
whereby the ownership of PayMed LLC will revert back to the previous owner and
the shares of our common stock will be returned to us.
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 trading value of the stock at the date of issuance, and
the Company recognized compensation expenses to William P. Williams of
$8,630.
On
January 15, 2009, we issued 240,000 shares to a related party, Wilcom, Inc.,
valued at $0.10 per share which was its trading value on the date of
issue. We recognized compensation expense in the amount of
$24,000.
During
the year ended September 30, 2009 and 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 price on the date of the agreements. The
funds from the sale of some shares of common stock sold by the company during
the year ended September 30, 2008 were deposited into MedCom. The
company has accounted for and recorded an affiliate receivable due from MedCom
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
September 30, 2009 and 2008 the company had a receivable from affiliate advances
in the amount of $1,072,050 and $507,149, respectively.
NOTE 7 -
NET LOSS PER SHARE
The net
loss per common share is calculated by dividing the loss by the weighted average
number of shares outstanding during the periods.
NOTE 8 –
STOCK BASED COMPENSATION
The
Company can grant options under their stock option plan. The
Company's Incentive Stock Option Plan (the "Plan") has allocated and reserved
1,000,000 common shares for the Plan, of which 500,000 shares are designated for
Officers and Directors of the Company and 500,000 shares are designated for
consultants of the Company. Each option represents the right to
purchase one share of the Company's Common Stock.
No
options have been awarded under the Plan.
NOTE 9 –
EQUITY
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 trading value of the stock at the date of issuance, and
the Company recognized compensation expenses to William P. Williams of
$8,448.
On
October 21, 2008, the Company issued 3,000,000 shares of common stock in benefit
of its related party, MedCom, for that company's acquisition of PayMed
LLC. The value of the shares was $.088 per share, which was the
trading value of the stock at the date of issuance. The Company recorded a
receivable from MedCom in the amount of $294,000. In connection with
the Settlement Agreement discussed above, this transaction will be unraveled
whereby the ownership of PayMed LLC will revert back to the previous owner and
the shares of our common stock will be returned to us.
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 trading value of the stock at the date of issuance, and
the Company recognized compensation expenses to William P. Williams of
$8,630.
During
the three months 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 trading value on the date o issue for a total amount of
$119,500.
On
January 15, 2009, we issued 240,000 shares to a related party, Wilcom, Inc.,
valued at $0.10 per share which was its trading value on the date of
issue. We recognized compensation expense in the amount of
$24,000.
NOTE 10 –
SUBSEQUENT EVENTS
From the
period October 1, 2009 through December 31, 2009, the Company settled litigation
with two additional parties in the total amount of $250,000.
* * * * * *
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A(T). CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
Our
principal executive officer, who also serves as 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
end of the period covered by this report. Based on that evaluation,
our principal executive officer has concluded that our disclosure controls and
procedures may not be effective for ensuring 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. The Company is in the process of
evaluating our disclosure controls and procedures in an effort to develop
remedial measures to correct the deficiencies.
Management’s
Report on Internal Control over Financial Reporting
Our
principal executive officer, who also serves as our principal financial officer,
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).
Our internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles.
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.
Our
principal executive officer conducted an assessment of the effectiveness of our
internal control over financial reporting as of September 30, 2009. This
assessment was based on the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO, in Internal
Control—Integrated Framework. Based on this assessment, our principal
executive officer has concluded and concluded that our internal control over
financial reporting as of September 30, 2009 was not effective at the reasonable
assurance level due to the possible material weakness described below, and other
factors related to the Company’s financial reporting processes.
The
Company and its independent registered public accounting firm identified certain
significant internal control deficiencies that we considered to be, in the
aggregate, a material weakness. The primary concern was the preparation of the
stock subscription agreements and the proper depositing of cash received. During
the year ended September 30, 2009 the Company issued and sold stock to third
parties through subscription agreement however the Company requested the
investors to write the checks in the name of MedCom a related party. These
payments were deposited in Medcom a related party. The company accounted for
these deposits as affiliate receivables and accrues interest at a rate of seven
percent annually. Due to the size of our Company and the costs
associated to remediate these issues, we still consider these concerns to be
relevant.
The
Company is in the process of evaluating its internal control over financial
reporting in an effort to develop remedial measures to correct the
deficiencies.
This
Annual Report on Form 10-K does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the SEC that permit us to
provide only management’s report in this Annual Report on Form
10-K.
Changes
in Internal Control over Financial Reporting
During
the year September 30, 2009, 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.
ITEM 9B. OTHER INFORMATION.
None.
PART
III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.
Director
and Executive Officer
Set forth
below is information regarding the Company’s current directors and executive
officers. There are no family relationships between any of our directors or
executive officers. The directors are elected annually by stockholders. The
executive officers serve at the pleasure of the Board of Directors.
Name
|
Age
|
Title
|
Robert
H. Kite
|
55
|
Sole
Director (Chairman), President and Chief Executive
Officer
|
Robert H.
Kite joined the Company’s Board of Directors in September 2008. He
has been Chairman of the Board of Directors since April 2009, and President and
Chief Executive Officer of the Company since April 2009. Since 1981,
Mr. Kite has been President and COO of Kite Family Co., Inc. and the Managing
General Partner of KFT LLLP, a family owned company whose assets and operations
include but are not limited to, commercial and industrial buildings, land
holdings, stock, bonds, commodities, MRI clinics, and hotel and
retail development. Mr. Kite is a director with five publicly traded
companies, two privately held companies, and two charitable
organizations. Public companies include: MedCom USA Incorporated
(MedCom), a medical software provider and Company affiliate, Ants Software Inc.
(Ants), a software company based in Burlingame, California, National Energy
Group (NEG), an oil and gas company based in Dallas Texas, Petrol Oil & Gas
(POIG), an oil and gas exploration and development company based in Overland
Park, Kansas, and Jardinier, developer of highly efficient irrigation systems,
based in Santa Ana, California. He also serves on the boards of
E2020, an internet education company, and Financials, an accounting software
company. Mr. Kite’s public service work includes board membership
with Child Help USA and the FBI Citizen’s Academy.
Mr. Kite
previously worked in the construction industry in Saudi Arabia with Beck-Arabia,
and in Central America in gold mining and manufacturing
operations. He is a graduate of Southern Methodist University with a
Bachelor of Science, Political Science and Psychology with a Minor in
Business.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16 (a) of the Exchange Act requires the Company's officers and directors and
persons who own more than 10% of the registered class of the Company's equity
securities to file reports of ownership on Form 3 and changes in ownership on
Form 4 or Form 5 with the Securities and Exchange Commission (the "SEC"). Such
officers, directors, and 10% stockholders are also required by the SEC rules to
furnish the Company with copies of all Section 16(a) forms they
file.
To our
knowledge, based solely on a review of Forms 3, 4, 5 and amendments thereto
furnished to us and written representations that no other reports were required,
during and for the fiscal year ended December September 30, 2009, all Section
16(a) filing requirements applicable to our directors, executive officers and
greater than 10% beneficial owners were complied with in a timely
manner.
Code
of Ethics
Given our
limited operations and resources, and the limited size of our management team,
our Company has not adopted a code of ethics applicable to our principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions.
Audit
Committee Financial Expert
Given our
limited operations and resources, and the limited size of our management team,
our Company's board of directors does not have an audit committee. In addition,
our Company’s board of directors has determined that the Company does not have
an audit committee financial expert serving on the board. When the Company
develops its operations, it will create an audit committee and will seek an
audit committee financial expert for its board and audit committee.
ITEM 11. EXECUTIVE COMPENSATION.
It is
anticipated that once the company begins to generate revenues, the Company’s
officers, will begin receiving compensation from the company, but the amount has
yet to be determined. In addition, it is anticipated that the Company will
provide the officers with normal and customary benefits, including health,
vacation, expense reimbursement, and retirement plan contributions.
There is
currently no arrangement with any officer to provide compensation for their
executive services to the Company.
Summary
Compensation Table
The
following table sets forth the cash compensation paid by the Company to its
Chief Executive Officer and to all other executive officers for services
rendered for the last two completed fiscal years.
Name
and Principal Position (1)
|
Year
|
Salary
|
Bonus
|
All
Other Compensation
|
Total
|
||||||||||||
Robert
H. Kite
|
2009
|
$ | – | $ | – | $ | – | $ | – | ||||||||
Chairman,
President and Chief Executive Officer
|
2008
|
– | – | – | – | ||||||||||||
William
P. Williams
|
2009
|
– | – | 113,750 | (2) | 113,750 | |||||||||||
Former
Chairman, Former President and Former Chief Executive
Officer
|
2008
|
– | – | – | – |
(1)
Pursuant to applicable regulations, certain columns of the Summary Compensation
Table and each of the remaining tables required by applicable SEC regulations
have been omitted, if there was no compensation awarded to, or earned by or paid
to the named executive officers by us.
(2)
Represents amounts paid for management fees and value of stock issued in lieu of
cash compensation.
Non-Employee
Director Compensation
The
Company has no formal plan for director compensation, but anticipates that it
will reimburse the reasonable and customary expenses of any future non-employee
directors associated with their service on the board, including travel expenses
and standard fees for attending board meetings. In addition, the Company has
established the 2006 Stock Option Plan (the “Plan”) for employees, directors and
consultants and reserved 1,000,000 shares for issuance under the Plan. At the
date hereof, no options have been issued under this Plan.
Compensation
of Directors
Mr. Kite
is the sole director of the Company and is not being compensated for those
services.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The
following table lists stock ownership of our Common Stock as of January 11,
2010. The information includes beneficial ownership by (i) holders of more than
5% of our Common Stock, (ii) each director and executive officer and (iii) all
of our directors and executive officers as a group. Except as noted below, to
our knowledge, each person named in the table has sole voting and investment
power with respect to all shares of our Common Stock beneficially owned by
them. As of January 11, 2010, there were 174,782,045 shares of our
Common Stock outstanding.
Title
of Class
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership (1)
|
Percent
of Class
|
|
Common
Stock
|
Robert
H. Kite
7038
E Fifth Avenue
Scottsdale,
AZ 85251
|
84,497,656
(2)
|
48.3%
|
|
Common
Stock
|
All
Officers and Directors
As
a Group
|
84,497,656
(2)
|
48.3%
|
|
Common
Stock
|
William
Williams
7303
E. Earl Dr., Suite 140
Scottsdale,
AZ 85251
|
30,464,746
(3)
|
17.4%
|
|
Common
Stock
|
American
Nortel Communications, Inc.
7975
N. Hayden Rd., Suite D333
Scottsdale,
AZ 85258
|
20,196,862
(4)
|
11.6%
|
|
Common
Stock
|
MedCom
USA, Incorporated
7038
E Fifth Avenue
Scottsdale,
AZ 85251
|
52,400,000
(5)
|
29.9%
|
|
Common Stock |
Philip
Wyatt
c/o Medical Associates Network
801 N. Brand Boulevard
Glendale, CA 91203
|
9,254,000 (6) | 5.3% |
*
Constitutes less than 1% of the Company's outstanding common stock.
(1)
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities.
(2)
Amount inclues: (i) 1,632,910 shares held directly by Mr. Kite; (ii) 52,400,000
shares held by MedCom USA, Incorporation; and (iii) 30,464,746 shares held by
Mr. Williams or entities related to Mr. Williams as described in footnote (3) to
this table. Mr. Kite is President, Chief Executive Officer and
Chairman of the Board of Directors of MedCom USA, Incorporated, and therefore
may be deemed to share voting and investment power over those
shares. Mr. Kite holds an irrevocable proxy to vote certain shares
beneficially owned by Mr. Williams as described in footnote 3 to his table, and
therefore may be deemed to hold sole voting power over those
shares.
(3) The
ownership reported with respect to Mr. Williams and entities related to Mr.
Williams is based on a Schedule 13D filed with the Securities and Exchange
Commission on August 12, 2009. According to the 13D, Mr. Williams
holds sole dispositive power with respect to: (i) 20,196,862 shares held
directly by American Nortel Communications, Inc., (ii) 7,481,384 shares held
directly by Wilcom, Inc., (iii) 2,586,500 shares held directly by the Williams
Family Trust, and (iv) 200,000 shares held directly by Mr. Williams'
spouse. Mr. Kite holds an irrevocable proxy to vote the foregoing
shares, and therefore may be deemed to hold sole voting power over those
shares. The proxy is effective until the earlier of (i) March 10,
2010; (ii) the death of Mr. Kite; or (iii) termination of the proxy
by Mr. Kite.
(4) The
ownership reported with respect to American Nortel Communications, Inc. is based
on a Schedule 13D filed with the Securities and Exchange Commission on August
12, 2009. According to the 13D, Mr. Williams holds sole dispositive
power with respect to the shares held by American Nortel Communications,
Inc.
(5) Mr.
Kite is President, Chief Executive Officer and Chairman of the Board of
Directors of MedCom USA, Incorporated, and therefore may be deemed to share
voting and investment power over those shares.
(6)
The ownership reported with respect to Mr. Wyatt is based on a Schedule 13D
filed with the Securities and Exchange Commission on August 12, 2009. According
to the 13D, Mr. Wyatt holds: (i) 2,770,000 directly in his name; (ii) 3,200,000
shares jointly with his spouse; (iii) 1,275,000 share in his spouse's name; (iv)
1,094,000 shares in a trust established for his children; and (v) 915,000 shares
in a defined benefit plan. Mr. Wyatt hold sale voting and dispositive power for
4,779,000 and 4,770,000 shares respectively, with the remaining shares subject
to
shared voting or dispositive power, as applicable.
Securities
Authorized for Issuance under Equity Compensation Plans
The
Company has adopted an employee stock option plan, which acts as an incentive
stock option plan, under which the Company’s officers, directors, consultants,
and employees will be eligible to receive, in relevant part, either securities
or stock options exercisable for the Company’s securities at exercise prices
that may be equal to or lower than the offering price. The Company has reserved
1,000,000 shares of Common Stock for issuance under this plan. No options have
been issued under this plan.
Changes
in Control
We are
not aware of any arrangements that may result in a change in control of the
Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
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 trading value of the stock at the date of issuance, and
the Company recognized compensation expenses to William P. Williams of
$8,448.
On
October 21, 2008, the Company issued 3,000,000 shares of common stock in benefit
of its related party, MedCom, for that company's acquisition of PayMed
LLC. The value of the shares was $.088 per share, which was the
trading value of the stock at the date of issuance. The Company recorded a
receivable from MedCom in the amount of $294,000. In connection with
the Settlement Agreement discussed above, this transaction will be unraveled
whereby the ownership of PayMed LLC will revert back to the previous owner and
the shares of our common stock will be returned to us.
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 trading value of the stock at the date of issuance, and
the Company recognized compensation expenses to William P. Williams of
$8,630.
On
January 15, 2009, we issued 240,000 shares to a related party, Wilcom, Inc.,
valued at $0.10 per share which was its trading value on the date of
issue. We recognized compensation expense in the amount of
$24,000.
As of
September 30, 2009 and 2008 the company had a receivable from affiliate advances
in the amount of $1,072,050 and $507,149, respectively.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES.
The
following table sets forth the approximate aggregate fees incurred by our
principal accountants for 2009 and 2008 services:
2009
|
2008
|
|||||||
Audit
fees
|
$ | 31,550 | $ | 14,100 | ||||
Other
|
- | - | ||||||
Tax
|
5,000 | - | ||||||
Total
Fees
|
$ | 36,550 | $ | 13,000 |
Tarvaran,
Askelson and Company, LLP, did not provide any services related to financial
information systems design and implementation during 2009 or 2008.
It is the
policy of the Company's Board of Directors to pre-approve all engagements and
fees of the independent public accountant and during 2009 and 2008 all such
engagements and fees were pre-approved.
PART
IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES.
(a) Financial
Statements, Financial Statement Schedules, and Exhibits
(1) Financial
Statements
The
financial statements filed as part of this filing are listed on the Index to
Financial Statements under Item 8.
(2) Financial Statement
Schedules
Not
Applicable.
(3) Exhibits
Refer to
Item 15(b) below.
(b) Exhibits
The
exhibits filed in response to Item 601 of Regulation S-K are listed in the Index
to Exhibits.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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:
January 15,
2010
|
By
|
/s/ Robert Kite
|
Robert
Kite
|
||
Chairman,
President and Chief Executive Officer
|
||
(Principal
Executive Officer and Principal Financial
Officer)
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
Dated:
January 15,
2010
|
By
|
/s/ Robert Kite
|
Robert
Kite
|
||
Chairman,
President and Chief Executive Officer
|
||
(Principal
Executive Officer and Principal Financial
Officer)
|
Index to
Exhibits
Exhibit
|
Description
|
3.1
|
Certificate
of Incorporation of the Company, which is attached as Exhibit 3.1 to the
Company's Registration Statement on Form SB-2, as amended (Registration
No. 333-139677), filed on October 31, 2006, is hereby incorporated by
reference as Exhibit 3.1.
|
3.2
|
Bylaws
of the Company, which is attached as Exhibit 3.2 to the Company's
Registration Statement on Form SB-2, as amended (Registration No.
333-139677), filed on October 31, 2006, is hereby incorporated by
reference as Exhibit 3.2.
|
10.1*
|
Card
Activation Technologies, Inc. Stock Option Plan, which is attached as
Exhibit 10.1 to the Company's Registration Statement on Form SB-2, as
amended (Registration No. 333-139677), filed on October 31, 2006, is
hereby incorporated by reference as Exhibit 10.1.
|
10.2
|
Separation
Agreement, dated October 31, 2006, by and between the Company and MedCom
USA, Incorporated, which is attached as Exhibit 10.2 to the Company's
Registration Statement on Form SB-2, as amended (Registration No.
333-139677), filed on October 31, 2006, is hereby incorporated by
reference as Exhibit 10.2.
|
10.3
|
Tax
Sharing Agreement, dated October 31, 2006, by and between the Company and
MedCom USA, Incorporated, which is attached as Exhibit 10.3 to the
Company's Registration Statement on Form SB-2, as amended (Registration
No. 333-139677), filed on October 31, 2006, is hereby incorporated by
reference as Exhibit 10.3.
|
10.4
|
Administrative
Services Agreement, dated October 31, 2006, by and between the Company and
MedCom USA, Incorporated, which is attached as Exhibit 10.4 to the
Company's Registration Statement on Form SB-2, as amended (Registration
No. 333-139677), filed on October 31, 2006, is hereby incorporated by
reference as Exhibit 10.4.
|
10.5
|
Settlement
Agreement, dated February 27, 2007, by and between the Company and
McDonald's Corporation, which is attached as Exhibit 10.6 to the Company's
Registration Statement on Form SB-2, as amended (Registration No.
333-139677), filed on October 31, 2006, is hereby incorporated by
reference as Exhibit 10.5.
|
10.6
|
Patent
License and Covenant Not to Sue Agreement, dated February 27, 2007, by and
between the Company and McDonald's Corporation, which is attached as
Exhibit 10.7 to the Company's Registration Statement on Form SB-2, as
amended (Registration No. 333-139677), filed on October 31, 2006, is
hereby incorporated by reference as Exhibit 10.6.
|
10.7
|
Settlement
Agreement and Mutual Release, dated May 21, 2009, by and among the
Company, MedCom USA, Incorporation and additional parties thereto, which
is attached as Exhibit 10.1 to the Company's Current Report on Form 8-K
(Commission File No. 000-52556), filed on June 12, 2009, is hereby
incorporated by reference as Exhibit 10.7.
|
Certification
of Principal Executive and Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act is attached hereto as Exhibit
31.1.
|
|
Certification
of Principal Executive and Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act is attached hereto as Exhibit
31.2.
|
*
Management contracts or compensatory plan or arrangement
32