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, 2008





OR


o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For the
transition period from N/A to N/A


____________________





Commission
File No. 0-52556


____________________


Card
Activation Technologies, Inc.


(Name of
small business issuer as specified in its charter)


Delaware
              20-5769015State
      of Incorporation
              IRS
      Employer Identification No.53
      West Jackson Blvd., Suite 1618Chicago,
      Illinois 60604-3749(Address
      of principal executive
offices)


(312)
972-1662


(Issuer’s
telephone number)




Common
Stock, $.0001 Par Value


Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule405 of the Securities Act.oYesoNo




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. o
Yes    o
No




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 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. o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):




Large accelerated filer  o
                Non-accelerated filer  o
              
              Accelerated filer  o
                Small Business Issuer  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 voting stock held by non-affiliates of the registrant
on September 30, 2008 was approximately $6,460,000




State the
number of shares outstanding of each of the issuer’s classes of equity
securities, as of the latest practicable date: As at September 30, 2008, there
were 169,968,289 shares of Common Stock, $0.0001 par value per share issued and
outstanding and preferred stock, $0.001 par value per share, none issued
outstanding.


Documents
Incorporated By Reference: None













TABLEOF CONTENTS




PART IITEM 1.
              
              BUSINESS
              
              3ITEM 1A.
              
              RISK FACTORS
              
              6ITEM 2.
              
              PROPERTIES
              
              10ITEM 3.
              
              LEGAL PROCEEDINGS
              
              10ITEM 4.
              
              SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
              
              11PART IIITEM 5.
              
              MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
      MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
              
              11ITEM 6.
              
              SELECTED FINANCIAL DATA
              
              13ITEM 7.
              
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS
              
              13ITEM 7A.
              
              QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
              
              16ITEM 8.
              
              FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
              
              F-1ITEM 9.
              
              CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
              
              17ITEM 9A.
              
              CONTROLS AND PROCEDURES
              
              18ITEM 9B.
              
              OTHER INFORMATION
              
              19PART IIIITEM 10.
              
              DIRECTORS, EXECUTIVE OFFICERS,
      PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE ACT.
              
              19ITEM 11.
              
              EXECUTIVE COMPENSATION
              
              20ITEM 12.
              
              SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      AND RELATED STOCKHOLDER MATTERS
              
              23ITEM 13.
              
              CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
              
              25ITEM 14.
              
              PRINCIPAL ACCOUNTANT FEES AND SERVICES
              
              26PART IVITEM 15.
              
              EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
              
              26SIGNATURES
              
              27





2
 Table of Contents





PARTI




ITEM
1.  BUSINESS.




Except for historical information contained herein, the
following discussion contains forward-looking statements that involve risks and
uncertainties.  Such forward-looking statements include, but are not
limited to, statements regarding future events and the Company’s plans and
expectations.  Actual results could differ materially from those
discussed herein.  Factors that could cause or contribute to such
differences include, but are not limited to, those discussed elsewhere in this
Form 10-K or incorporated herein by reference, including those set forth in
Management’s
Discussion and Analysis or Plan of Operation.




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 the Company by
MedCom USA, Incorporated (“MedCom”) 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
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).




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 technologywas
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
            Card
      is 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.




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.





3
 Table of Contents





Our
Growth Strategies




Ø
            The
      Company was incorporated for the purpose of licensing its technology to
      the thousands of current users and believes that many retailers,
      supermarkets, convenience stores, phone companies and others specialty
      retailers.




Ø
            The
      Company is looking at expanding its market and looks for an acquisition
      that complements the Company 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.




The
company is actively seeking to license its technology to the thousands of
current users and believes 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




Patent
Technology




In
October 2006, MedCom transferred the patented technology to the company.
Presently, the company has 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 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.  The company received, through a
spin off, the ownership of a patent of MedCom USA Incorporated.  MedCom has
assigned its patent number 6,032,859 to the Company upon its
formation





4
 Table of Contents





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.




Additional
Information




Card
files 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 100 F Street, N.E., 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.





Employees





As of
fiscal year end September 30, 2008, the Company had two executive officers, Mr.
Williams, President and CEO and Mr. Michael Malet our Executive Vice President.
These gentlemen are employees of MedCom and do not receive compensation from us
at this time. All of our executive officers will be providing as much time as
needed to the Company. We have no full or part-time employees. Presently our
business activities are focused on the lawyers that are overseeing the patent
legal work. The Company is not operating only in the capacity of protecting the
patented technology.





5
 Table of Contents





ITEM1A - 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.





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.





6
 Table of Contents





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.





7
 Table of Contents





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.




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





8
 Table of Contents





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.




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.




FORWARD-LOOKING
STATEMENTS




This
Annual Report contains certain forward-looking statements regarding management’s
plans and objectives for future operations including plans and objectives
relating to our planned marketing efforts and future economic performance. The
forward-looking statements and associated risks set forth in this Annual Report
include or relate to, among other things, (a)  our growth strategies,
(b) anticipated trends in our industry, (c) our ability to obtain and
retain sufficient capital for future operations, and (d) our anticipated
needs for working capital. These statements may be found under “Management’s
Discussion and Analysis or Plan of Operations” and “Business,” as well as in
this Annual Report generally. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various
factors, including, without limitation, the risks outlined under “Risk Factors”
and matters described in this Annual Report generally. In light of these risks
and uncertainties, there can be no assurance that the forward-looking statements
contained in this Annual Report will in fact occur.





9
 Table of Contents





The
forward-looking statements herein are based on current expectations that involve
a number of risks and uncertainties. Such forward-looking statements are based
on assumptions described herein. The assumptions are based on judgments with
respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Accordingly, although we believe that the assumptions underlying the
forward-looking statements are reasonable, any such assumption could prove to be
inaccurate and therefore there can be no assurance that the results contemplated
in forward-looking statements will be realized. In addition, as disclosed
elsewhere in the “Risk Factors” section of this prospectus, there are a number
of other risks inherent in our business and operations which could cause our
operating results to vary markedly and adversely from prior results or the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause us to alter marketing, capital investment and other
expenditures, which may also materially adversely affect our results of
operations. In light of significant uncertainties inherent in the
forward-looking information included in this prospectus, the inclusion of such
information should not be regarded as a representation by us or any other person
that our objectives or plans will be achieved.




Some of
the information in this prospectus contains forward-looking statements that
involve substantial risks and uncertainties. Any statement in this prospectus
and in the documents incorporated by reference into this prospectus that is not
a statement of an historical fact constitutes a “forward-looking statement”.
Further, when we use the words “may”, “expect”, “anticipate”, “plan”, “believe”,
“seek”, “estimate”, “internal”, and similar words, we intend to identify
statements and expressions that may be forward- looking statements. We believe
it is important to communicate certain of our expectations to our investors.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions that could cause our future results
to differ materially from those expressed in any forward-looking statements.
Many factors are beyond our ability to control or predict. You are accordingly
cautioned not to place undue reliance on such forward-looking statements.
Important factors that may cause our actual results to differ from such
forward-looking statements include, but are not limited to, the risk factors
discussed herein.





ITEM2.  PROPERTIES.




The
Company has office space in Chicago under a monthly agreement on a month to
month basis.  At present, we require little dedicated office space. We
believe that our existing facilities are adequate for our current needs and that
additional space will be available as needed.  The Company pays $300 a
month in rent on a month to month basis and is payable upon the settlement of
patent litigation.





ITEM3.  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.





10
 Table of Contents





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.





ITEM4.  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, 2008.





PART
II





ITEM5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.





Card
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.”








At
September 30, 2008, there were 169,968,289 shares of common stock of Card
outstanding and there were approximately 681 shareholders of record of the
Company’s common stock.





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.





Periods
                
                High
                
                
                LowFiscal
      Year 2008First
      Quarter (October – December 2007)
                
                $
                .29
                
                
                $
                .28Second
      Quarter (January – March 2008)
                
                $
                .31
                
                
                $
                .26Third
      Quarter (April – June  2008)
                
                $
                .23
                
                
                $
                .20Fourth
      Quarter (July – September 2008)
                
                $
                .09
                
                
                $
                .06Fiscal
      Year 2007First
      Quarter (October – December 2006)
                
                $
                .00
                
                
                $
                .00Second
      Quarter (January – March 2007)
                
                $
                .00
                
                
                $
                .00Third
      Quarter (April – June  2007)
                
                $
                .00
                
                
                $
                .00Fourth
      Quarter (July – September 2007)
                
                $
                .00
                
                
                $
                .00





11
 Table of Contents





Card has
never paid dividends on any of its common stock shares. Card does not anticipate
paying dividends at any time in the foreseeable future and any profits will be
reinvested in Card’s business.  Card’s Transfer Agent and Registrar
for the common stock is Corporate Stock Transfer located in Denver,
Colorado.





Sale
of Unregistered Securities





During year ended
September 30, 2008, the Company has issued 600,000 shares of its common stock as
consideration for of the legal services rendered for the Company.  The
values of those shares were determined based on the fair value of the trading
value of the stock for those services.   The Company expensed the
value of the value of the shares issued.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.
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 year ended
September 30, 2008, the Company has issued 600,000 shares of its common stock in
consideration of termination of an employee of Med Com.  The values of
those shares were determined based on the fair value of the trading value of the
stock for those services.   The Company recorded this against the
affiliate advance with MedCom USA, Inc and there is an amount due from
MedCom in the amount of $84,000.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. 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 September 30,
2008 the Company issued 4,853,572 shares of its common stock for
$704,450.  The shares were issued to third parties in a private
placement of the Company’s common stock.  The shares were sold
throughout the year ended September 30, 2008, ranging from $.35 per share at the
beginning of the year to $.14 per share at the end of the
year.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.





12
 Table of Contents





Transfer
Agent





On
September 30, 2008, the Company engaged Corporate Stock Transfer to serve in the
capacity of transfer agent. Their mailing address and telephone number Corporate
Stock Transfer, 3200 Cherry Creek Drive South, Suite 430. Denver,
CO  80209 - Phone is (303) 282-4800.





ITEM6.  SELECTED FINANCIAL DATA.





The
following information has been summarized from financial information included
elsewhere and should be read in conjunction with such financial statements and
notes thereto.





Summary
of Statements of Operations of CVDT





Year Ended September
30, 2008 and 2007




Statement
      of Operations DataYears
      Ended September 30,2008
                            
                            
                            2007Revenues
                            
                            
                            
                            
                            $
                            45,000Operating
      and Other Expenses
                            
                            
                            (409,406
                            )
                            
                            
                            (237,312
                            )Net
      Loss
                            
                            $
                            (409,406
                            )
                            
                            $
                            (192,312
                            )Balance
      Sheet Data:Years
      Ended September 30,2008
                            
                            
                            2007Current
      Assets
                            
                            $
                            507,149
                            
                            
                            $
                            13,699Total
      Assets
                            
                            
                            507,149
                            
                            
                            
                            13,699Current
      Liabilities
                            
                            
                            51,782
                            
                            
                            
                            40,235Non
      Current Liabilities
                            
                            
                            -
                            
                            
                            
                            165,142Total
      Liabilities
                            
                            
                            51,782
                            
                            
                            
                            205,377Working
      Capital (Deficit)
                            
                            
                            455,367
                            
                            
                            
                            (26,536
                            )Shareholders'Equity
      (Deficit)
                            
                            $
                            455,367
                            
                            
                            $
                            (191,678
                            )





ITEM7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OR PLAN OF OPERATION.





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.





13
 Table of Contents





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.





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.





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
consolidated results of operations and financial condition.





14
 Table of Contents





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.





RESULTS
OF OPERATIONS





Fiscal
Year End September 30, 2008, Compared to Fiscal Year End September 30,
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 and will be funded primarily from the
sale of our common stock and we have sold $704,450 in the sale of common
stock. Additional the Company retains a revolving line of credit from
Medcom USA, a related Party, in the amount of $750,000.  From
time to time the Company advances funds to MedCom USA as of September 30, 2008
the Company has advanced $507,149.  Currently, the Company 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, the Company
is looking at expanding its market and looks for an acquisition that complements
the Company and generates revenues, although no such prospective
acquisition candidates have been ascertained.





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 do not
presently generate sufficient revenue to fund our operations and the planned
development of our business. In order to sustain our current operations and
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.





15
 Table of Contents





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, the Company’s 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 the Company’s
anticipated rapid growth.





ITEM7A. 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.





16
 Table of Contents





ITEM8.  FINANCIAL STATEMENTS





CARD
ACTIVATION TECHNOLOGIES, INC.





TABLE OF CONTENTS
                    PageINDEPENDENT
      REGISTERED PUBLIC ACCOUNTING FIRM:
                    F-2Tarvaran,
      Askelson & Co.FINANCIAL
      STATEMENTS:Balance
      Sheet at September 30, 2008
                    F-4Statements
      of Operations for the years ended September 30, 2008 and
    2007
                    F-5Statements
      of Stockholders’ Equity for the years ended September 30, 2008 and
      2007
                    F-6Statements
      of Cash Flows for the years ended September 30, 2008 and
    2007
                    F-7NOTES
      TO FINANCIAL STATEMENTS
                    F-8





F-1
 Table of Contents












REPORT OF
INDEPENDENT REGISTERED ACCOUNTING FIRM





To the
Board of Directors and Stockholders


of Card
Activation Technologies, Inc.





We have
audited the accompanying balance sheet of Card Activation Technologies, Inc. (A
Development Stage Company) as of September 30, 2008, and the related statements
of income, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Card Activation Technologies, Inc. as of
September  30, 2007 and the related statements of operations for the
period from August 29, 2006 (inception) through September 30, 2007 were audited
by another auditor, whose report dated December 12,
2007and December 20,
2008 with respect to note 9 on those statements included an
explanatory  paragraph describing conditions that raised substantial
doubt as to the Company's ability to continue as a going concern as discussed in
Note 2 to the financial statements.





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, 2008 and the results of their operations and their cash
flows for the year 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


December
26, 2008




F-2




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  To the
Board of Directors and Stockholders of
 CARD
ACTIVATION TECHNOLOGIES, INC.
 
 We have
audited the accompanying balance sheet of Card Activation Technologies, Inc. (A
Development Stage Company) as of September 30, 2007 and the related statements
of operations, changes in shareholders' deficit and cash flows for the years
then ended September 30, 2007 and 2006 and for period from August 29, 2006
(inception) through September 30, 2007. 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 audit 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. 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 provided 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.
(A Development Stage Company) as of September 30, 2007, and the results of their
operations and its cash flows for the periods then ended September 30, 2007 and
from August 29, 2006 (inception) through September 30, 2007 in conformity with
accounting principles generally accepted in the United States of
America.
 
 These
financial statements have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 2 to the financial statements, the
Company has operating and liquidity concerns, has incurred in a net losses
approximately $206,000 during the period August 29, 2006 (inception) through
September 30, 2007.  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 are no assurances that the Company will be successful in
raising additional capital.
 
 As
further discussed in Note 9 to the accompanying financial statements, the
Company determined that it should effectuate the issuance of common stock in
lieu of compensation and fess, as of September 30, 2007, resulting in a
retroactive restatement.  This issuance did not materially affect the
financial statements previously filed.  The effect of the change was
$1,714 to the previously reported financial statements.
 
 
 JEWETT,
SCHWARTZ, WOLFE & ASSOCIATES
 
 
 Hollywood,
Florida
 December
12, 2007 and December 20, 2008 with respect to note 9
 
 200 South
Park Road, Suite 150  •  Hollywood,
Florida 33021  •  Main
954.922.5885  •  Fax
954.922.5957  •  www.jsw-cpa.com
 Member -
American Institute of Certified Public Accountants • Florida Institute of
Certified Public Accountants
 Private
Companies Practice Section of the AICPA • Registered with the Public Company
Accounting Oversight Board of SEC




F-3
 Table of Contents





CARD
ACTIVATION TECHNOLOGIES INC.


(A
Development Stage Company)





BALANCE
SHEET


September
      30,2008
                  
                  
                  2007ASSETSCURRENT
      ASSETSCash
                  
                  $
                  -
                  
                  
                  $
                  13,699Total
      current assets
                  
                  
                  -
                  
                  
                  
                  13,699Affiliate
      advances
                  
                  
                  507,149
                  
                  
                  
                  -TOTAL
      ASSETS
                  
                  $
                  507,149
                  
                  
                  $
                  13,699LIABILITIES
      AND STOCKHOLDERS' EQUITY:CURRENT
      LIABILITIES:Bank
      overdraft
                  
                  $
                  1,963
                  
                  
                  $
                  -Accounts
      payable
                  
                  
                  20,859
                  
                  
                  
                  40,235Accured
      expenses
                  
                  
                  28,960
                  
                  
                  
                  -Total
      current liabilities
                  
                  
                  51,782
                  
                  
                  
                  40,235Loans
      payable - Affiliate
                  
                  
                  -
                  
                  
                  
                  165,142Total
      liabilities
                  
                  
                  51,782
                  
                  
                  
                  205,377Commitments
      and Contingencies
                  
                  
                  -
                  
                  
                  
                  -STOCKHOLDERS'
      EQUITY:Preferred
      stock, $.001 par value, 1,000,000 shares authorized; none issued and
      outstanding as of Septmeber 30, 2008 and 2007
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $.0001 par value, 175,000,000 shares authorized; 169,968,289 and
      163,914,717 shares issued and outstanding as of September 30, 2008 and
      2007, respectively
                  
                  
                  16,998
                  
                  
                  
                  16,392Additional
      paid in capital
                  
                  
                  1,055,845
                  
                  
                  
                  -Accumulated
      deficit
                  
                  
                  (617,476
                  )
                  
                  
                  (208,070
                  )Total
      stockholders' equity
                  
                  
                  455,367
                  
                  
                  
                  (191,678
                  )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  507,149
                  
                  
                  $
                  13,699








The
accompanying notes are an integral part of these financial
statements





F-4
 Table of Contents





CARD
ACTIVATION TECHNOLOGIES INC.


(A
Development Stage Company)





STATEMENT
OF OPERATIONS


For
      the Periodfrom
      August 29, 2006September
      30,
                  
                  
                  (inception)
      to2008
                  
                  
                  2007
                  
                  
                  September
      30, 2008REVENUELitigation
      revenue
                  
                  $
                  -
                  
                  
                  $
                  45,000
                  
                  
                  $
                  45,000Total
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -OPERATING
      EXPENSES:General
      and Administrative
                  
                  
                  365,554
                  
                  
                  
                  235,036
                  
                  
                  
                  616,348Sales
      and Marketing expenses
                  
                  
                  51,530
                  
                  
                  
                  2,276
                  
                  
                  
                  53,806Total
      operating expenses
                  
                  
                  417,084
                  
                  
                  
                  237,312
                  
                  
                  
                  670,154OPERATING
      LOSS
                  
                  
                  (417,084
                  )
                  
                  
                  (192,312
                  )
                  
                  
                  (625,154
                  )OTHER
      (INCOME) AND EXPENSESInterest
      income
                  
                  
                  (7,678
                  )
                  
                  
                  -
                  
                  
                  
                  (7,678
                  )Total
      other expense
                  
                  
                  (7,678
                  )
                  
                  
                  -
                  
                  
                  
                  (7,678
                  )LOSS
      BEFORE INCOME TAXES
                  
                  
                  (409,406
                  )
                  
                  
                  (192,312
                  )
                  
                  
                  (617,476
                  )INCOME
      TAX (BENEFIT) PROVISION
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -NET
      LOSS
                  
                  $
                  (409,406
                  )
                  
                  $
                  (192,312
                  )
                  
                  $
                  (617,476
                  )Weighted
      Average Common Share Outstanding:Basic
      and diluted:
                  
                  
                  166,844,138
                  
                  
                  
                  155,389,289Net
      Loss Per ShareBasic
      and diluted:
                  
                  $
                  -
                  
                  
                  $
                  -








The
accompanying notes are an integral part of these financial
statements





F-5
 Table of Contents





CARD
ACTIVATION TECHNOLOGIES INC.


(A
Development Stage Company)





STATEMENTS
OF STOCKHOLDERS’ EQUITY


Common
      Stock
                                
                                
                                Preferred
      Stock
                                
                                
                                Additional
      Paid
                                
                                
                                AccumulatedShares
                                
                                
                                Amount
                                
                                
                                Shares
                                
                                
                                Amount
                                
                                
                                in
      Capital
                                
                                
                                Deficit
                                
                                
                                TotalStock
      Issued August 29, 2006
                                
                                
                                146,770,504
                                
                                
                                $
                                14,678
                                
                                
                                
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                14,678Net
      loss
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (15,758
                                )
                                
                                
                                (15,758
                                )Balance
      as of September 30, 2006
                                
                                
                                146,770,504
                                
                                
                                $
                                14,678
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                (15,758
                                )
                                
                                $
                                (1,080
                                )Common
      stock issued in separation agreement
                                
                                
                                17,144,213
                                
                                
                                
                                1,714
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                1,714Net
      loss
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (192,312
                                )
                                
                                
                                (192,312
                                )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
                                
                                
                                
                                
                                
                                
                                
                                245,000Common
      stock issued for legal matters at $.23
                                
                                
                                100,000
                                
                                
                                
                                10
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                22,990
                                
                                
                                
                                
                                
                                
                                
                                23,000Common
      stock issued in benefit of affiliate at $.14
                                
                                
                                600,000
                                
                                
                                
                                60
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                83,940
                                
                                
                                
                                
                                
                                
                                
                                84,000Common
      stock issued for cash in a private placement
                                
                                
                                4,853,572
                                
                                
                                
                                485
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                703,965
                                
                                
                                
                                
                                
                                
                                
                                704,450Net
      loss
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (409,406
                                )
                                
                                
                                (409,406
                                )Balance
      as of September 30, 2008
                                
                                
                                169,968,289
                                
                                
                                $
                                16,998
                                
                                
                                
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                1,055,845
                                
                                
                                $
                                (617,476
                                )
                                
                                $
                                455,367








The
accompanying notes are an integral part of these financial
statements





F-6
 Table of Contents




CARD
      ACTIVATION TECHNOLOGIES INC.(A
      Development Stage Company)STATEMENT
      OF CASH FLOWSFor
      the Periodfrom
      August 29, 2006September
      30,
                  
                  
                  (inception)
      toCASH
      FLOWS FROM OPERATING ACTIVITIES:
                  
                  2008
                  
                  
                  2007
                  
                  
                  September
      30, 2008Net
      (loss)
                  
                  $
                  (409,406
                  )
                  
                  $
                  (192,312
                  )
                  
                  $
                  (617,476
                  )Adjustments
      to reconcile net income to net cash (used in) operating
      activities:Common
      stocks issued in spin off
                  
                  
                  -
                  
                  
                  
                  14,678
                  
                  
                  
                  14,678Common
      stock issued for services
                  
                  
                  352,000
                  
                  
                  
                  1,714
                  
                  
                  
                  353,714Changes
      in assets and liabilities:
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  -Accounts
      payable
                  
                  
                  (19,375
                  )
                  
                  
                  40,235
                  
                  
                  
                  20,860Bank
      overdraft
                  
                  
                  1,963
                  
                  
                  
                  
                  
                  
                  
                  1,963Accrued
      expenses
                  
                  
                  28,960
                  
                  
                  
                  
                  
                  
                  
                  28,960Net
      cash used in operating activities
                  
                  
                  (45,858
                  )
                  
                  
                  (135,685
                  )
                  
                  
                  (197,301
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from the sale of common stock
                  
                  
                  704,450
                  
                  
                  
                  -
                  
                  
                  
                  704,450Proceeds
      on advances to affiliate
                  
                  
                  503,400
                  
                  
                  
                  
                  
                  
                  
                  503,400Payment
      on advances to affiliates
                  
                  
                  (1,175,691
                  )
                  
                  
                  149,384
                  
                  
                  
                  (1,010,549
                  )Net
      cash provided by financing activities
                  
                  
                  32,159
                  
                  
                  
                  149,384
                  
                  
                  
                  197,301INCREASE
      IN CASH
                  
                  
                  (13,699
                  )
                  
                  
                  13,699
                  
                  
                  
                  -CASH,
      BEGINNING OF YEAR
                  
                  
                  13,699
                  
                  
                  
                  -
                  
                  
                  
                  -CASH,
      END OF YEAR
                  
                  
                  -
                  
                  
                  
                  13,699
                  
                  
                  
                  -SUPPLEMENTAL
      CASH FLOW INFORMATION:Taxes
      paid
                  
                  $
                  -
                  
                  
                  $
                  -Interest
      paid
                  
                  $
                  -
                  
                  
                  $
                  -








The
accompanying notes are an integral part of these financial
statements





F-7
 Table of Contents





CARD
ACTIVATION TECHNOLOGIES, INC.


(A
Development Stage Company)


NOTES TO
FINANCIAL STATEMENTS


FOR THE
YEARS ENDED SEPTEMBER 30, 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 is a development stage
company.  The company has not begun the process of operating this
business and is still in the process of reviewing the impact of the patent
infringement costs, and future cash flow from successful litigation. The Company
was incorporated for the sole purpose of financing and litigation 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 year ended September 30, 2008
the Company recognized a net loss of $409,406.  Additionally, the
Company incurred an accumulated net loss from period August 29, 2006 (Inception)
through September 30, 2008 of $617,476.  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:




Basis of
Presentation





The
Company has produced minimal revenue from its principal business and is a
development stage company as defined by the Statement of Financial Accounting
Standards (SFAS) No. 7 “Accounting and Reporting by Development State
Enterprises”.





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.





F-8
 Table of Contents





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.




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 September 30, 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.





F-9
 Table of Contents





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





Asset
      Category
                  
                  Depreciation/
                    Amortization
      PeriodFurniture
      and Fixture
                  
                  3
      YearsOffice
      equipment
                  
                  3
      YearsLeasehold
      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
September 30, 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.





F-10
 Table of Contents





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.





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 $100,000.





F-11
 Table of Contents







Recent Accounting
Pronouncements




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





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.





F-12
 Table of Contents





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.




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.





F-13
 Table of Contents





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.




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 4 –
SHARE CAPITAL


On August
29, 2006, the Company authorized 175,000,000 shares of common stock, at $.0001
par value and no shares were issued to its shareholders. 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 September 30, 2008.
 
 On
November 20, 2007 the company issued 500,000 shares of common stock to its
attorneys for legal services. The services were valued at $.49 per share and the
company recognized legal expenses of $245,000.
 
 On April
30, 2007 the company issued 500,000 shares of common stock to its attorneys for
legal services. The services were valued at $.23 per share and the company
recognized legal expenses of $23,000.
 
 On June
24, 2008, the company issued 600,000 shares of common stock in benefit of its
related party, MedCom USA related to a legal settlement which MedCom USA entered
into with its consultant. The value of the shares was $.14 per share, its
trading value at the date of issue. The company recorded an affiliate advance
receivable from MedCom USA, a related party, in the amount of
$84,000.
  During
the year ended September 30, 2008 the company entered into subscription
agreements for 4,853,572 shares of common stock to third parties. The shares
were valued at their closing price for a total amount of
$704,450.





NOTE 5 -
INCOME TAXES





The
provision (benefit) for income taxes from continued operations for the years
ended September 30, 2008 and 2007 consist of the following:





September
      30,2008
                    
                    
                    2007Current:Federal
                    
                    $
                    
                    
                    
                    $StateDeferred:Federal
                    
                    $
                    138,695
                    
                    
                    $
                    150,889State
                    
                    
                    28,081
                    
                    
                    
                    40,110166,776
                    
                    
                    
                    191,000Change
      in valuation allowance
                    
                    
                    (166,776
                    )
                    
                    
                    (191,000
                    )(Benefit)
      provision for income taxes, net
                    
                    $
                    -
                    
                    
                    $
                    -





F-14
 Table of Contents





The
difference between income tax expense computed by applying the federal statutory
corporate tax rate and actual income tax expense is as follows:





September
      30,2008
                  
                  
                  2007Statutory
      federal income tax rate
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %State
      income taxes and other
                  
                  
                  6.968
                  %
                  
                  
                  8.9
                  %Effective
      tax rate
                  
                  
                  40.968
                  %
                  
                  
                  42.9
                  %





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
      30,2008
                    
                    
                    2007Net
      operating loss carryforward
                    
                    
                    166,776
                    
                    
                    
                    191,000Valuation
      allowance
                    
                    
                    (166,776
                    )
                    
                    
                    (191,000
                    )Deferred
      income tax asset
                    
                    $
                    -
                    
                    
                    $
                    -





The
Company has a net operating loss carryforward of approximately $617,476
available to offset future taxable income through 2030.





NOTE 6 -
COMMITMENTS AND CONTIGENCIES





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 Orem and Roth the law firm that
represents the Company in the patent litigation where as Oren and Roth is paid
one-third of the settlement of the pending and future patent litigations
successes.





NOTE 7 –
RELATED PARTY


Card
Activation is managed by it s key officers and directors William P. Williams and
Mr. Michael Malet, as of September 30, 2008. The officers of the company William
P Williams and Mr. Michael Malet 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 June
24, 2008, the company issued 600,000 shares of common stock in benefit of its
related party, MedCom USA related to a legal settlement which MedCom USA entered
into with its consultant. The value of the shares was .14 per share, its trading
value at the date of issue. The company recorded an affiliate advance receivable
from MedCom USA, a related party, in the amount of $84,000.
 
 In 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 September 30, 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 September 30, 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 September 30, 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
September 30, 2008 the company had a receivable from affiliate advances in the
amount of $507,149.


F-15
 Table of Contents





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.





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 technologywas
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 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.





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 September 30, 2008 as
part of this agreement.





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





F-16
 Table of Contents





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;




(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.




2.     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 no outstanding obligations outstanding as of September 30, 2008 as
part of this agreement.





F-17
 Table of Contents





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:





1.   LIABILITIES
ATTRIBUTABLE TO PRE-SPIN-OFF PERIODS.





(a) 
   RETURNS. MedCom, on a consolidated 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.
 
 (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 consolidated federal income tax return in which CAT are
included.
 
 (c)     TAX
CARRYFORWARDS. The parties agree that none of MedCom's accrued consolidated
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 September 30, 2008 as
part of this agreement.





NOTE 10 –
STOCK BASED COMPENSATION





The
Company can grant options under their stock option plan.  The
Company's Incentive Stock Option Plan has allocated and reserved 1,000,000
common shares for the Plan. The following sets forth certain information as of
September 30, 2008 concerning the stock options and stock bonuses granted by the
Company pursuant to the Plans. Each option represents the right to purchase one
share of the Company's Common Stock.





No
options have been awarded for the year ended September 30, 2008 and
2007.





Total
      shares reserved under the plan
                                  
                                  
                                  Remaining
      options under the plan2006
      Stock Option Plan (designated for Officers and Directors of the
      Company
                                  
                                  
                                  500,000
                                  
                                  
                                  
                                  500,0002006  Stock
      Option Plan (designated for consultants of the Company
                                  
                                  
                                  500,000
                                  
                                  
                                  
                                  500.000





F-18
 Table of Contents





NOTE 11 –
SUBSQUENT EVENTS





The
Company entered into a Patent License and Settlement agreement on November 3,
2008 with TJX Companies, Inc. in regards to the allegations violations of the
Companies Patent #6,032,859.  In exchange for payment the Company
granted TJX Companies, Inc. all current, past, and future affiliates a
world-wide, royalty free, fully paid up, non- exclusive right and license under
the licensed Patents to make, have made, use, sell, offer to sell, import and
export the subject matter disclosed and/or claimed in the licensed
Patents.  The parties entered into a stipulation to dismiss the
case.





*  *  *  *  *  *





ITEM9.    CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.




On
December 1, 2008, Tarvaran, Askelson & Company, LLP ("TAC") was appointed as
the independent auditor for Card Activation Technologies, Inc. (the "Company")
commencing with the year ending September 30, 2008, and Jewett, Schwartz, Wolfe
& Associates, Inc. ("JSW") were dismissed as the independent auditors for
the Company as of December 1, 2008. The decision to change auditors was approved
by the Board of Directors on December 1, 2008.




The
report of JSW on the financial statements for either of the one most recent
completed fiscal years did not contain any adverse opinion or disclaimer of
opinion or was qualified or modified as to uncertainty, audit scope or
accounting principles, except for the following:




“These
financial statements have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 2 to the financial statements, the
Company has operating and liquidity concerns, has incurred in a net losses
approximately $206,000 during the period August 29, 2006 (inception) through
September 30, 2007.  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 are no assurances that the Company will be successful in
raising additional capital.”




During
the Company's one most recent annual report September 30, 2007, and three prior
interim quarters December 31, 2007, March 31, 2008, and June 30, 2008, and
through December 1, 2008, there were no disagreements with JSW on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
JSW, would have caused it to make reference to the subject matter of the
disagreements in connection with its report with respect to the financial
statements of the Company. During the Company's two most fiscal year and any
subsequent interim period through the date of dismissal, there were no
disagreements with JSW on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of JSW, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report.




17
 Table of Contents




During
the Company's one most recent annual report September 30, 2007, and three prior
interim quarters December 31, 2007, March 31, 2008, and June 30, 2008, and
through December 1, 2008, there were no "reportable events" as such term is
described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), with respect to the
Company.




During
the Company's one most recent annual report September 30, 2007, and three prior
interim quarters December 31, 2007, March 31, 2008, and June 30, 2008, and
through December 1, 2008, the Company did not consult with TAC with
respect to the Company regarding (i) the application of accounting principles to
a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company’s financial statements, (ii) any
matter that was either the subject of a disagreement (as defined in Item
304(a)(1)(iv) of Regulation S-K under the Exchange Act and the related
instructions to Item 304 of Regulation S-K) or a "reportable event" (as such
term is described in Item 304(a)(1)(v) of Regulation S-K), or (iii) any of the
matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation
S-K.




There
were no consultations with TAC during the Company's two most fiscal year and any
subsequent interim period, prior to December 1, 2008, the date upon which TAC
was engaged.




The
Company has furnished a copy of this Report to JSW and requested them to furnish
the Company with a letter addressed to the Securities and Exchange Commission
stating whether it agrees with the statements made by the Company herein in
response to Item 304(a) of Regulation S-K and, if not, stating the respects in
which it does not agree. The letter from JSW is herby submitted as exhibit
16.1.





ITEM9A. 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, September 30, 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. Based on
that evaluation, our Chief Executive Officer has concluded that our disclosure
controls and procedures as of September 30, 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. 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 and severance agreements. The other area of concern was the proper
depositing of those stock subscriptions with the appropriate
entity.  Due to the size of our Company and the costs associated to
remediate these issues, we still consider these concerns to be
relevant.





18
 Table of Contents





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.





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 Securities and
Exchange Commission that permit us to provide only management’s report in this
annual report on Form 10-K.





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.





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 year September 30, 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.





ITEM9B. OTHER
INFORMATION





None.





PART
III





ITEM10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.





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.





19
 Table of Contents




Name
                
                Age
                
                TitleWilliam
      P. Williams
                
                55
                
                President
      and Chief Executive Officer, Director, Principle Accounting
      OfficerMichael
      Malet
                
                61
                
                Executive
      Vice President





William P. Williams,
President and Chief Executive Officer, Principle Accounting Officer,
Director





William
P. Williams has been the Chairman, Chief Executive Officer of the Company since
inception and has held the same positions with MedCom since August 2001. He is
also currently Chief Executive Officer and Chairman of the Board for American
Nortel Communications, Inc., a publicly traded company located in Scottsdale,
Arizona, which is in the business of long-distance telephone service
domestically, as well as internationally. From 1983 to 1995, he was President
and Chairman of the Board of Shelton Financial, Inc., a financial factoring firm
headquartered in San Antonio, Texas. Mr. Williams has a Bachelor of Arts and a
Master of Business Administration in Finance from
Baylor University





Michael Malet, Executive
Vice President





Mr. Malet
has served as Executive Vice President of MedCom since 2001. From 1998 to 2001
he was the chief operating office of MedCom. From 1995 to 1997 he was President
of New View Technologies Inc. which manufactured on-line phone card vending
machines and produced software for point-of-sale terminals for the activation of
debit transactions and phone card/gift card activation. New View Technologies
was purchased by MedCom in 1998. From 1986 to 1994 he was President of Keyosk
Corporation, a manufacturer of on-line intelligent vending
machines.





Audit
Committee Financial Expert





The
Company does not have an audit committee or a compensation committee of its
board of directors. In addition, the 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 and
a compensation committee and will seek an audit committee financial expert for
its board and audit committee.





COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT


The
Company is aware that all filings of Form 4 and 5 required of Section 16(a) of
the Exchange Act of Directors, Officers or holders of 10% of the Company's
shares have not been timely.





ITEM11.  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 of the officers to provide compensation for
their executive services to the Company.





20
 Table of Contents





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.





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 from August 26, 2006 through September 30, 2008. Currently, William P.
Williams is the Chairman, Chief Executive Officer, President and Principle
Financial Officer and Michael Malet Executive Vice President.




2008
      and 2007 SUMMARY COMPENSATION TABLEName
      and Principal Position
                    
                    Year
                    
                    Salary ($)
                    
                    
                    Bonus ($)
                    
                    
                    Restricted
      Stock
                      Awards
                      ($)
                    
                    
                    Securities
      Underlying Option
                      Awards
                      ($)
                    
                    
                    Non-Equity
                      Incentive
      Plan
                      Compensation
                      ($)
                    
                    
                    Change
      in
                      Pension
                      Value
      and
                      Nonqualified
                      Deferred
                      Compensation
                      Earnings
                      ($)
                    
                    
                    All
      Other
                      Compensation
                      ($)
                    
                    
                    Total
                      ($)William
      P Williams and
                    
                    2008
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0William
      P Williams
                    
                    2007
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    500
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Michael
      Malet
                    
                    2008
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Michael
      Malet
                    
                    2007
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    500
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0




OPTION
      EXERCISES AND STOCK VESTED TABLEOption
      Awards
                        
                        
                        Stock
      AwardsName
                        
                        Number of Shares
                          Acquired on Exercise
                          (#)
                        
                        
                        Value Realized
                          on
      Exercise
                          ($)
                        
                        
                        Number of Shares
                          Acquired on Vesting
                          (#)
                        
                        
                        Value Realized
                          on
      Vesting
                          ($)William
      P. Williams 2008
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0William
      P. Williams 2007
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        5000000
                        
                        
                        
                        500Michael
      Malet 2008
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0Michael
      Malet 2007
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        5000000
                        
                        
                        
                        500





21
 Table of Contents




PENSION
      BENEFITS TABLEName
                
                Plan Name
                
                
                Number of Years
                  Credited
      Service
                  (#)
                
                
                Present Value
                  of Accumulated
                  Benefit
                  ($)
                
                
                Payments During Last
                  Fiscal
      Year
                  ($)William
      P. Williams 2008
                
                
                (1
                )
                
                
                0
                
                
                
                0
                
                
                
                0William
      P. Williams 2007
                
                
                (1
                )
                
                
                0
                
                
                
                0
                
                
                
                0Michael
      Malet 2008
                
                
                (1
                )
                
                
                0
                
                
                
                0
                
                
                
                0Michael
      Malet 2007
                
                
                (1
                )
                
                
                0
                
                
                
                0
                
                
                
                0




NONQUALIFIED DEFERRED
COMPENSATION TABLE




Name
                
                Executive
      Contributions
                  in
      Last Fiscal Year
                  ($)
                
                
                Registrant
                  Contributions
      in Last
                  Fiscal
      Year
                  ($)
                
                
                Aggregate
      Earnings in Last Fiscal Year
                  ($)
                
                
                Aggregate
      Withdrawals /
                  Distributions
                  ($)
                
                
                Aggregate
      Balance at
                  Last
      Fiscal Year-End
                  ($)William
      P. Williams 2008
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0William
      P. Williams 2007
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Michael
      Malet 2008
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Michael
      Malet 2007
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0




DIRECTOR COMPENSATION
TABLE




Name
                
                Fees
      Earned or
                  Paid
      in Cash
                  ($)
                
                
                Stock
      Awards
                  ($)
                
                
                Option
      Awards
                  ($)
                
                
                Non-Equity
      Incentive Plan Compensation
                  ($)
                
                
                Change
      in Pension
                  Value
      and
                  Nonqualified
      Deferred Compensation Earnings
                  ($)
                
                
                All
      Other
                  Compensation
                  ($)
                
                
                Total
                  ($)William
      P. Williams 2008
                
                $
                0-
                
                
                $
                0
                
                
                $
                0-
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                $
                0-William
      P. Williams 2007
                
                $
                0-
                
                
                $
                500
                
                
                $
                0-
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                $
                500-Michael
      Malet 2008
                
                $
                0-
                
                
                $
                0
                
                
                $
                0-
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                $
                0-Michael
      Malet 2007
                
                $
                0-
                
                
                $
                500
                
                
                $
                0-
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                $
                500-






ALL OTHER COMPENSATION
TABLE




Name
                  
                  
                  
                  Perquisites
                    and
      Other Personal Benefits
                    ($)
                  
                  
                  Tax
      Reimbursements
                    ($)
                  
                  
                  Insurance
      Premiums
                    ($)
                  
                  
                  Company
      Contributions
                    to
      Retirement and 401(k) Plans
                    ($)
                  
                  
                  Severance
      Payments / Accruals
                    ($)
                  
                  
                  Change
      in Control Payments / Accruals
                    ($)
                  
                  
                  Total
                    ($)William
      P. Williams
                  
                  2008
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0William
      P. Williams
                  
                  2007
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Michael
      Malet
                  
                  2008
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Michael
      Malet
                  
                  2007
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0





22
 Table of Contents




PREREQUISITES
TABLE




Name
                  
                  Year
                  
                  Personal
      Use of Company Car/Parking
                  
                  
                  Financial
      Planning/ Legal Fees
                  
                  
                  Club
      Dues
                  
                  
                  Executive
      Relocation
                  
                  
                  Total
      Perquisites and
                    Other
      Personal BenefitsWilliam
      P. Williams
                  
                  2008
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0William
      P. Williams
                  
                  2007
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Michael
      Malet
                  
                  2008
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Michael
      Malet
                  
                  2007
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0




POTENTIAL PAYMENTS UNDER
TERMINATION OR CHANGE IN CONTROL TABLE




Name
                  
                  Benefit
                  Before
      Charge in Control Termination w/o Cause or for Good Reason
                  
                  After
      Change in Control Termination w/o Cause or for Good Reason
                  
                  
                  Voluntary
      Termination
                  
                  
                  Death
                  
                  
                  Disability
                  
                  
                  Change
      in ControlWilliam
      P. Williams 2008
                  
                  Severance
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0William
      P. Williams 2007
                  
                  Severance
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Michael
      Malet 2008
                  
                  Severance
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Michael
      Malet 2007
                  
                  Severance
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0





Compensation
of Directors





Mr.
Williams is the sole directors of the Company and are not being compensated for
those services.





ITEM12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.




The following table lists stock
ownership of our Common Stock as of September 30, 2008. The information includes
beneficial ownership by (i) holders of more than 5% of our Common Stock, (ii)
each oftwo directors and executive officers
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.





Name
      and Address of Owner
                
                Title
      of Class
                
                Number
                  of
      Shares
                  Owned
      (1)
                
                Percentage
                  of
      Class
                
                Percentage
      of
                  Class
      After
                  OfferingWilliam
      P. Williams
                  7975
      N. Hayden Rd., Suite D333
                  Scottsdale,
      AZ 85258
                
                Common
      Stock
                
                6,979,833
                
                4.3%
                
                4.3%Michael
      Malet
                  2102
      Business Center Drive
                  Suite
      G115
                  Irvine,
      CA 92612
                
                Common
      Stock
                
                5,792,001
                
                3.5%
                
                3.5%All
      Officers and Directors
                  As
      a Group (2 persons)
                
                Common
      Stock
                
                7,771,834
                
                7.8%
                
                7.8%American
      Nortel Communications, Inc.
                  7975
      N. Hayden Rd., Suite D333
                  Scottsdale,
      AZ 85258
                
                Common
      Stock
                
                21,505,469
                
                13.1%
                
                13.1%MedCom
      USA, Incorporated
                  7975
      N. Hayden Rd., Suite D333
                  Scottsdale,
      AZ 85258
                
                Common
      Stock
                
                60,000,000
                
                39.6%
                
                36.6%





(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)
            American Nortel
      Communications Inc. and MedCom USA, Inc. are controlled by William P.
      Williams.




23
 Table of Contents




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.




DESCRIPTION
OF SECURITIES




General




The
Company has authorized a total of 176,000,000 shares, consisting of 175,000,000
shares of Common Stock, par value $0.0001 per share, and 1,000,000 shares of
Preferred Stock, par value $0.001 per share. As of September 30, 2008, the
Company had 169,968,289 shares of Common Stock issued and outstanding and no
shares of Preferred Stock issued and outstanding.





Common
Stock





Voting Rights





Each
holder of Common Stock is entitled to one vote for each share of Common Stock
held on all matters submitted to a vote of stockholders.





Dividends





Subject
to preferences that may be applicable to any then-outstanding shares of
Preferred Stock, if any, and any other restrictions, holders of Common Stock are
entitled to receive ratably those dividends, if any, as may be declared from
time to time by the Company’s board of directors out of legally available funds.
The Company and its predecessors have not declared any dividends in the past.
Further, the Company does not presently contemplate that there will be any
future payment of any dividends on Common Stock.





24
 Table of Contents





Preferred
Stock





Our board
of directors has the authority to issue 1,000,000 shares of preferred stock in
one or more series and to determine all of the rights, preferences, privileges
and restrictions of the preferred stock. As of the date of this prospectus, the
Company does not have any preferred stock issued or outstanding. If we issue any
preferred stock in the future, it may have the effect of delaying or preventing
a change in control without further action by our stockholders and may adversely
affect the voting, dividend and other rights of the holders of our common stock.
In addition, the issuance of preferred stock with voting and/or conversion
rights may adversely affect the voting power of the holders of our common stock,
including the loss of voting control to others.





Options





The
Company has established a 2006 Stock Option Plan (the “Plan”) for employees,
directors and consultants and reserved 1,000,000 shares for issuance under the
Plan. At the time of this Offering, no options have been issued under this
Plan.




Convertible
Securities





At
September 30, 2008, we have no convertible securities.




Amendment
of our Bylaws




Our
bylaws may be adopted, amended or repealed by the affirmative vote of a majority
of our outstanding shares. Subject to applicable law, our bylaws also may be
adopted, amended or repealed by our board of directors.





Transfer
Agent





On
September 30, 2008, the Company engaged Corporate Stock Transfer to serve in the
capacity of transfer agent. Their mailing address and telephone number Corporate
Stock Transfer, 3200 Cherry Creek Drive South, Suite 430. Denver,
CO  80209 - Phone is (303) 282-4800.





ITEM13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDPENDENCE.





During
the year ended September 30, 2008, the Company had affiliate advances
due from MedCom USA, a related Party, in the amount
of $507,149.   The advances are generally short term in
nature with an interest rate of 7% based on a revolving line of credit approved
by MedCom to fund the Company’s operations or for the Company to fund MedCom’s
operations.  The Company entered into a revolving line of credit with
its affiliated MedCom USA, Inc. in October, 2006 and it was amended in
September, 2008 which allows the companies to advance funds from time to time to
each other through this line of credit.





The
Company’s president and chairman is a significant shareholder and is its sole
officer and director of the Company.  The chairman controls American
Nortel Communications, Inc. and MedCom USA, Inc. which is also a significant
shareholder of the Company.  The Company shares office space and
management and administrative personnel with this related
entity.  Certain of the Company’s personnel perform functions for the
related entity but there was no allocation of personnel related expenses to the
related entity in the years ended September 30, 2008 and 2007.





The
company issued 10,000,000 common shares of stock in accordance with the
Separation Agreement executed on October 31, 2006.  The stock was
issued to employees and consultants of the company in payment for services
rendered from inception.





25
 Table of Contents





ITEM PRINCIPAL ACCOUNTANT
FEES AND SERVICES




Audit Fees.  The
aggregate fees billed by Jewett Schwartz Wolfe and Associates. for
professional services rendered for the audit of the Company’s annual financial
statements for the fiscal years ended September 30, 2007 approximated
$23,000.  The aggregate fees billed by Tarvaran, Askelson and Company,
LLP for professional services rendered for the audit of the Company’s annual
financial statements for fiscal years ended September 30, 2008 approximated
$13,000.  The aggregate fees billed by Jewett, Schwartz, Wolfe &
Associates for the review of the financial statements included in the Company’s
Forms 10-Q for fiscal year 2007  and 2008 approximated
$22,500.





Audit-Related Fees.  The
aggregate fees billed by Jewett, Schwartz, Wolfe & Associates and
Tarvaran, Askelson and Company, LLP for assurance and related services that
are reasonably related to the performance of the audit or review of the
Company’s financial statements for the fiscal years ended September 30, 2008 and
2007, and that are not disclosed in the paragraph captioned “Audit Fees” above,
were $0 and $0, respectively.





Tax Fees.The
aggregate fees billed by Jewett Schwartz Wolfe & Associates and
Tarvaran, Askelson & Company, LLP for professional services rendered
for tax compliance, tax advice and tax planning for the fiscal year ended
September 30, 2008 and 2007 were $0.





All Other Fees.  The
aggregate fees billed by Jewett Schwartz Wolfe & Associates and Tarvaran,
Askelson & Company, LLP for products and services, other than the
services described in the paragraphs “Audit Fees,” “Audit-Related Fees,” and
“Tax Fees” above for the fiscal years ended September 30, 2008 and 2007
approximated $23,000 and 13,000 respectively.





ITEM15.  EXHIBITS AND REPORTS.




Exhibits


3.1
                
                Certificate
      of Incorporation of Card Activation Technologies Inc., filed with the
      Secretary of State of Delaware August 29, 2006(1)3.2
                
                Bylaws
      of Card Activation Technologies Inc. (1)5.1
                
                Opinion
      of Joseph I. Emas, Attorney at Law(1)5.2
                
                Tax
      Opinion of David Kozak, Esq. of Mohr Hackett, Pederson, Blakely, and
      Randolph, P.C. (1)10.1
                
                The
      Company 2006 Stock Option Plan(1)10.2
                
                Separation
      Agreement with MedCom(1)10.3
                
                Tax
      Sharing Agreement with MedCom(1)10.4
                
                Administrative
      Services Agreement with MedCom(1)10.5
                
                Revolving
      Line of Credit with MedCom USA Incorporated(1)10.6
                
                Settlement
      Agreement(1)10.7
                
                Licensing
      Agreement(1)23.1
                
                Consent
      of Jewett, Schwartz Wolfe and Associates
(2)


__________________________________________________





(1).
Incorporated by reference to the same exhibit filed with the Company’s
Registration Statement on Form SB-2 (Commission File No.
333-439677)





(2)
Attached hereto,





26
 Table of Contents





ITEM15: SIGNATURES





SIGNATURES





In
accordance with 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, there unto duly authorized.





Registrant
                      Date:
      December 29, 2008
                    Card
      USA Incorporated
                      By:
      /s/ William P. WilliamsWilliam
      P. WilliamsChairman,
      President Chief Executive Officer (Principle Executive
      Officer)








Date:
      December 29, 2008
                By:
      /s/ William P. WilliamsWilliam
      P. WilliamsPrinciple
      Financial Officer
   27