United
states


Securities
and Exchange Commission


Washington,
D.C. 20549


____________________


FORM
10-Q


____________________




(Mark
One)


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





For the
quarterly period ended December 31, 2009





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





For the
transition period from __________ to __________


__________________





Commission
File Number: 0-52556


____________________


Card
Activation Technologies, Inc.


(Exact
name of registrant as specified in its charter)





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





(312)
972-1662


(Registrant's
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days:  Yes  x
    No   ̈





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





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




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





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





As of
February 10, 2010, the issuer had 174,782,045 shares of common stock, $0.001 par
value per share, outstanding.










TABLE
OF CONTENTS




Page
      NumberPART
      I - FINANCIAL INFORMATION
            
            1Item
      1.
            
            Condensed Financial Statements (unaudited)
            
            1Condensed Balance Sheets December 31, 2009 (unaudited) and
      September 30, 2009
            
            1Condensed Statements of
Operations(unaudited)
            
            2Condensed Statements of Cash Flows
    (unaudited)
            
            3Notes to Condensed Financial Statements
      (unaudited)
            
            4Item
      2.
            
            Management Discussion & Analysis of Financial Condition
      & Results of Operations
            
            7Item
      3.
            
            Quantitative and Qualitative Disclosures About Market
      Risk
            
            9Item
      4.
            
            Controls and Procedures
            
            9PART
      II - OTHER INFORMATION
            
            10Item
      1.
            
            Legal Proceedings
            
            10Item
      6.
            
            Exhibits
            
            10


Table of Contents


PARTI – FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS





CARD
ACTIVATION TECHNOLOGIES, INC.





UNAUDITED
CONDENSED BALANCE SHEETS








December
      31, 2009
            
            
            September
      30, 2009CURRENT
      ASSETSCash
            
            $
            39,416
            
            
            $
            6,909Investments
            
            
            25,000
            
            
            
            25,000Settlement
      receivable
            
            
            –
            
            
            
            237,500Advances
      to affiliate
            
            
            1,262,088
            
            
            
            1,072,050Total
      current assets
            
            
            1,326,504
            
            
            
            1,341,459TOTAL
      ASSETS
            
            $
            1,326,504
            
            
            $
            1,341,459LIABILITIES
      AND STOCKHOLDERS' EQUITY:CURRENT
      LIABILITIES:Accounts
      payable
            
            $
            43,848
            
            
            $
            51,522Accrued
      expenses
            
            
            150,085
            
            
            
            242,857Total
      current liabilities
            
            
            193,933
            
            
            
            294,379TOTAL
      LIABILITIES
            
            $
            193,933
            
            
            $
            294,379STOCKHOLDERS'
      EQUITY:Preferred
      stock, $.001 par value, 1,000,000 shares authorized; none issued and
      outstanding as of December 31, 2009 and September 30, 2009,
      respectively
            
            
            –
            
            
            
            –Common
      stock, $.0001 par value, 300,000,000 shares authorized; 174,782,045 and
      174,782,045 shares issued and outstanding as of December 31, 2009 and
      September 30, 2009, respectively
            
            
            17,478
            
            
            
            17,478Additional
      paid in capital
            
            
            1,509,953
            
            
            
            1,509,953Accumulated
      deficit
            
            
            (394,860
            )
            
            
            (480,351
            )Total
      stockholders' equity
            
            
            1,132,571
            
            
            
            1,047,080TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            1,326,504
            
            
            $
            1,341,459





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


1
 Table of Contents


CARDACTIVATION TECHNOLOGIES, INC.





UNAUDITED
CONDENSED STATEMENTS OF OPERATIONS





Three Months Ended
              December 31,2009
            
            
            2008REVENUELitigation
      revenue
            
            $
            250,000
            
            
            $
            375,000Total
            
            
            250,000
            
            
            
            375,000COSTS
      AND EXPENSESCost
      of revenue
            
            
            87,500
            
            
            
            131,250General
      and administrative
            
            
            98,004
            
            
            
            351,097Sales
      and marketing expenses
            
            
            –
            
            
            
            4,940Total
      operating expenses
            
            
            185,504
            
            
            
            487,287OPERATING
      INCOME (LOSS)
            
            
            64,496
            
            
            
            (112,287
            )OTHER
      (INCOME) AND EXPENSESInterest
      income
            
            
            (21,348
            )
            
            
            (8,995
            )Interest
      expense
            
            
            353
            
            
            
            –Total
      other (income) expense
            
            
            (20,995
            )
            
            
            (8,995
            )INCOME
      (LOSS) BEFORE INCOME TAXES
            
            
            85,491
            
            
            
            (103,291
            )INCOME
      TAX (BENEFIT) PROVISION
            
            
            –
            
            
            
            –NET
      INCOME (LOSS)
            
            $
            85,491
            
            
            $
            (103,291
            )Weighted
      Average Common Shares Outstanding:Basic
      and diluted:
            
            
            174,782,045
            
            
            
            172,255,167Net
      Income (Loss) Per Share:Basic
      and diluted:
            
            $
            (0.00
            )
            
            $
            (0.00
            )




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


2
 Table of Contents


CARDACTIVATION TECHNOLOGIES, INC.





UNAUDITED
CONDENSED STATEMENTS OF CASH FLOWS




Three Months Ended
              December 31,2009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
            
            $
            85,491
            
            
            $
            (103,291
            )Adjustments
      to reconcile net income to net cash (used in) operating
      activities:Common
      stock issued for services
            
            
            –
            
            
            
            17,088Changes
      in assets and liabilities:Settlement
      receivable
            
            
            237,500
            
            
            
            –Accounts
      payables
            
            
            (7,674
            )
            
            
            92,980Accrued
      expenses
            
            
            (92,772
            )
            
            
            (21,884
            )Net
      cash provided by (used in) operating activities
            
            
            222,545
            
            
            
            (15,107
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Advances
      to affiliates
            
            
            (194,270
            )
            
            
            (178,995
            )Proceeds
      from the sale of stock
            
            
            –
            
            
            
            102,500Advances
      from affiliates
            
            
            4,232
            
            
            
            284,557Net
      cash provided by (used in) financing activities
            
            
            (190,038
            )
            
            
            208,062INCREASE
      IN CASH
            
            
            32,507
            
            
            
            192,955CASH,
      BEGINNING OF YEAR
            
            
            6,909
            
            
            
            –CASH,
      END OF YEAR
            
            $
            39,416
            
            
            $
            192,955Supplemental
      Cash Flow Information:Issuance
      of stock for affiliate acquisition
            
            $
            –
            
            
            $
            294,000




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


3
 Table of Contents


CARDACTIVATION TECHNOLOGIES, INC.


NOTES
TO CONDENSED FINANCIAL STATEMENTS


(Unaudited)








Note
1.   Background





Card
Activation Technologies, Inc. (“we,” “us,” “our” or the “Company”) was
incorporated in the state of Delaware on August 29, 2006. The Company was
incorporated in order to own and commercially develop our patented point-of-sale
technology for the activation and processing of transactions related to debit
styled cards, which include gift cards, phone cards and other stored value
cards.  We also vigorously defend our patent and actively litigate
infringements related to the unauthorized use of our technology.  The
patent was transferred to us by MedCom USA, Incorporated (“MedCom”) upon our
formation in exchange for 146,770,504 shares of our common stock.  The
patent covers the technology and process for taking a card with a magnetic strip
or other data capture mechanism and activating the card by downloading a
determined monetary value onto the card for use at a later date for different
types of transactions.





Note
2.   Basis of Presentation





The
accompanying condensed financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
which contemplate continuation of the Company as a going
concern.   During the three months ended December 31, 2009, the
Company recognized net income of $85,491.  However, the Company
incurred an accumulated net loss from period August 29, 2006 (inception) through
December 31, 2009 of $394,860.  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, our management is proposing to raise
any necessary additional funds through loans and additional sales of our common
stock. There is no assurance that the Company will be successful in raising
additional capital.





The
accompanying condensed financial statements included herein have been prepared
by us, without audit, in accordance with the accounting policies described in
our audited financial statements and notes thereto for the fiscal year ended
September 30, 2009, as presented in our annual report on Form 10-K, and pursuant
to the rules and regulations of the Securities and Exchange Commission, or the
SEC.  Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted pursuant
to such rules and regulations, although we believe that the disclosures are
adequate to make the information presented not misleading.  In the
opinion of our management, the accompanying condensed financial statements
include all adjustments (consisting only of those of a normal recurring nature),
which are necessary for a fair presentation of the results for the interim
periods presented.  Interim results are not necessarily indicative of
results to be expected for any future interim period or for the entire fiscal
year.





These
condensed financial statements should be read in conjunction with the notes to
the 2009 audited financial statements presented in our annual report on Form
10-K for the year ended September 30, 2009, filed with the SEC.  Our
reports are available electronically by visiting the SEC website at
http://www.sec.gov.


4
 Table of Contents


Recent
Accounting Guidance





On
September 30, 2009, the Company adopted updates issued by the Financial
Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These
changes establish the FASB Accounting Standards Codification (ASC) as the source
of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. These changes and the
Codification itself do not change GAAP. Other than the manner in which new
accounting guidance is referenced, the adoption of these changes had no impact
on the Financial Statements.





In
June 2009, the FASB issued guidance now codified as ASC Topic 105,
“Generally Accepted Accounting Principles” (“ASC 105”), which establishes the
FASB Accounting Standards Codification as the source of GAAP to be applied to
nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive
releases of the SEC under authority of federal securities laws as authoritative
GAAP for SEC registrants. ASC 105 became effective for interim or annual periods
ending after September 15, 2009. ASC 105 does not have a material impact on
the Company’s financial statements presented hereby.





In
May 2009, the FASB issued guidance now codified as ASC Topic 855,
“Subsequent Events” (“ASC 855”). The pronouncement modifies the definition of
what qualifies as a subsequent event—those events or transactions that occur
following the balance sheet date, but before the financial statements are
issued, or are available to be issued—and requires companies to disclose the
date through which it has evaluated subsequent events and the basis for
determining that date. The Company adopted the provisions of ASC 855 on
September 30 2009, in accordance with the effective date.





On June
30, 2009, the Company adopted updates issued by the FASB to fair value
disclosures of financial instruments.  These changes require a
publicly traded company to include disclosures about the fair value of its
financial instruments.  Such disclosures include the fair value of all
financial instruments, for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial position; the
related carrying amount of these financial instruments; and the method(s) and
significant assumptions used to estimate the fair value.  Other than
the required disclosures, the adoption of these changes had no impact on the
Financial Statements.





Note
3.   Related Party Transactions





As of
December 31, 2009, the Company was managed by its sole officer and director,
Robert Kite.  Michael De La Garza previously served as a director of
the Company and as the Company’s President and Chief Executive
Officer.  On April 27, 2009, holders of more than a majority of the
outstanding shares of the Company’s common stock, acting by written consent,
effected the removal of Mr. De La Garza from the Company’s Board of
Directors.  Following Mr. De La Garza’s removal as a director by
stockholders, Mr. Kite, the Company’s sole director, acted to remove Mr. De La
Garza from his position as President and Chief Executive Officer.  Mr.
Kite now serves as sole director and Chairman of the Company’s Board of
Directors and acts as the Company’s principal executive and principal financial
officer.  Mr. Kite also serves as chairman of the board of directors,
president and chief executive officer of MedCom, a related party, and owns
shares of common stock of both MedCom and the Company.  MedCom is also
a significant shareholder of the Company.




On June
4, 2009, the Company entered into a settlement agreement with Mr. De La Garza,
MedCom, certain shareholders of MedCom, Robin De La Garza, Mr. De La Garza’s
spouse, PayMed USA, LLC, and Absolute Medical Software Systems, LLC (the
“Settlement Agreement”).  The Settlement Agreement resolved pending
Arizona state court litigation against Mr. De La Garza, in which the Company’s
largest shareholder, MedCom, sought, among other things, injunctive and
declaratory relief that Mr. De La Garza was not authorized to act on behalf of
MedCom as an officer or director.  The Settlement Agreement became
final and effective on August 11, 2009.





Under the
terms of the Settlement Agreement, Mr. De La Garza affirmed in writing that he
holds no position with the Company, whether as an officer, a director or
otherwise, and he resigned from any such position to the extent he could be said
to hold any such position, which resolved any potential disputes relating to his
removal from such offices in April 2009, as discussed above.


5
 Table of Contents




As of
December 31, 2009 and 2008, the Company had a receivable from affiliate advances
in the amount of $1,262,088 and $695,587, respectively.





Note
4.  Commitments and Contingencies





The
Company enters into contingency agreements with law firms that represent the
Company in patent litigation.  Under these agreements, the Company
typically pays a law firm thirty five percent of the settlement amounts received
by the Company and amounts based on future patent litigation
successes.




The
Company was a party to litigation in federal court involving certain related
parties, which was recently dismissed.  The Company was a plaintiff,
along with MedCom, in a lawsuit against prior management, Michael Malet and
Annette Malet, and William P. Williams, Eva S. Williams and certain of their
affiliated entities, Wilcom, Inc., a Texas Corporation, WPW Aircraft LLC, an
Arizona Limited Liability Corporation and American Nortel Communications, Inc.,
a Nevada Corporation, which was filed in February 2009 in the United States
District Court in the District of Arizona (Case No.
2:09-cv-00298).  The Company alleged nine causes of action including,
among other things, securities fraud, racketeering, and other state law causes
of actions, which related to alleged acts arising out of certain of the
defendants’ prior service as management of the Company and
MedCom.  The Company and MedCom were seeking certain compensatory
damages, punitive damages, treble damages, injunctive relief and disgorgement of
personal profits and compensation realized by the defendants and reasonable
attorneys’ fees, costs and expenses associated with the lawsuit.





In August
2009, the parties filed a stipulation for dismissal without prejudice, which was
approved by the court pursuant to an order issued on August 25,
2009.  The parties intend to seek to resolve the claims outside the
context of a court proceeding to mitigate expenses.  To this end, the
parties have entered in tolling agreements preserving claims against statutes of
limitations and other applicable time-based defenses.  If the parties
can’t reach a resolution, the Company and MedCom may seek to reinstate the
litigation.  The Company is uncertain of the legal costs associated
with this suit or its ultimate outcome.


6
 Table of Contents


ITEM2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





With the
exception of historical facts, the matters discussed in this quarterly report on
Form 10-Q are forward looking statements.  Forward-looking statements
may relate to, among other things, future actions, future performance generally,
business development activities, future capital expenditures, strategies, the
outcome of contingencies such as legal proceedings, future financial results,
financing sources and availability and the effects of regulation and
competition.  When we use the words "believe," "intend," "expect,"
"may," "will," "should," "anticipate," "could," "estimate," "plan," "predict,"
"project," or their negatives, or other similar expressions, the statements
which include those words are usually forward-looking
statements.  When we describe strategy that involves risks or
uncertainties, we are making forward-looking statements.





These
forward-looking statements are based on the current plans and expectations of
our management and are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical results or those
anticipated.  These factors include, but are not limited
to:  our ability to protect our patented technology, our failure to
satisfy our working capital needs from operations and the availability of and
costs associated with potential sources of financing.





We warn
you that forward-looking statements are only predictions.  Actual
events or results may differ as a result of risks that we
face.  Forward-looking statements speak only as of the date they were
made, and we undertake no obligation to update them.





The
following discussion contains management's discussion and analysis of financial
condition and results of operations.  Management's discussion and
analysis should be read in conjunction with "Item 1.  Financial
Statements" of this quarterly report on Form 10-Q and Management's Discussion
and Analysis of Financial Condition and Results of Operations presented in our
annual report on Form 10-K for the year ended September 30, 2009.





Overview





We own
and commercially develop our patented point-of-sale technology for the
activation and processing of transactions related to debit styled cards, which
include gift cards, phone cards and other stored value
cards.  Currently, our business strategy consists exclusively of
attempting to enter into license agreements with third parties to license our
rights under our patent and in pursuing patent litigation in an effort to
protect our intellectual property and obtain recourse against alleged
infringement of our patent.





Results
of Operations





Three
Months Ended December 31, 2009, Compared to Three Months Ended December 31,
2008





Revenues
decreased 33.3% to $250,000 for the three months ended December 31, 2009 from
$375,000 for the three months ended December 31, 2008.  The decrease
in revenues was due to smaller amounts received for two settlements of patent
litigation for the three months ended December 31, 2009 compared to the amounts
received for the two settlements during the three months ended December 31,
2008.  There are currently four lawsuits pending and over 600 parties
have been notified that they are infringing on our patent.




Operating
expenses consist of cost of revenue, general and administrative expenses and
sales and marketing costs.


7
 Table of Contents


Cost of
revenue consists of contingency fees paid to legal counsel of 35% of settlement
revenue.  Cost of revenue decreased 33.3% to $87,500 for the three
months ended December 31, 2009 from $131,250 for the three months ended December
31, 2008 as a result of decreased revenue.




General
and administrative expenses consist of salaries and benefits, legal,
professional and consulting fees, corporate costs, facilities cost, insurance,
travel and entertainment.  General and administrative costs decreased
72.1% to $98,005 for the three months ended December 31, 2009 from $351,097 for
the three months ended December 31, 2008.  This decrease was primarily
due to decreased salaries, benefits and travel and entertainment costs for
executives, which was offset by expert witness and other costs related to
litigation.




Sales and
marketing costs decreased 100% to zero for the three months ended December 31,
2009 from $4,940 for the three months ended December 31, 2008 as a result of no
marketing efforts.




Liquidity
and Capital Resources





Our
primary sources of liquidity are the sale of our common stock and cash generated
from operations.  We had no sales of our common stock and two
settlements during the three months ended December 31, 2009.  We
expect our future operations will be funded from settlements and revenues from
licensing our technology.  However, we may need additional working
capital.  Efforts to seek additional finding could be made through
equity, debt or other external financing.  Additional funding may not
be available on favorable terms, or at all.  If we are unable to
obtain additional funding when needed we may not be able to execute our business
plans and our business may suffer.





From time
to time the Company advances funds to MedCom.  As of December 31, 2009
we were owed $1,262,088 including interest from related parties.





At
December 31, 2009, we had cash of $39,416 compared to $6,909 at September 30,
2009.  The net change in cash for the periods presented was comprised
of the following:





December
      31, 2009
            
            
            September
      30, 2009Cash
      flow provided by (used in) operating activities
            
            $
            222,545
            
            
            $
            (15,107
            )Cash
      flow provided by (used in) financing activities
            
            
            (190,038
            )
            
            
            208,062




Cash flow
from operating activities was primarily due to net income of $85,491 and cash
receipts from settlement receivable $237,500.  These amounts were
offset by the pay down of accounts payable and accrued expenses for the three
months ended December 31, 2009.  For the three months ended December
31, 2008, we incurred a net loss of $103,291 and incurred approximately $93,000
of accrued expenses which was primarily due to $83,000 of increased receivables
related to the settlement receivable.





Cash flow
from financing activities was due to net loans to affiliates of approximately
$190,000 for the three months ended December 31, 2009 compared to net loans from
affiliates of approximately $106,000 and common stock sales of $102,500 for the
three months ended December 31, 2008.





Recently
Issued Accounting Guidance





On
September 30, 2009, the Company adopted updates issued by the Financial
Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These
changes establish the FASB Accounting Standards CodificationTM (ASC) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. These changes and the
Codification itself do not change GAAP. Other than the manner in which new
accounting guidance is referenced, the adoption of these changes had no impact
on the Financial Statements.


8
 Table of Contents


In
June 2009, the FASB issued guidance now codified as ASC Topic 105,
“Generally Accepted Accounting Principles” (“ASC 105”), which establishes the
FASB Accounting Standards Codification as the source of GAAP to be applied to
nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive
releases of the SEC under authority of federal securities laws as authoritative
GAAP for SEC registrants. ASC 105 became effective for interim or annual periods
ending after September 15, 2009. ASC 105 does not have a material impact on
the Company’s financial statements presented hereby.





In
May 2009, the FASB issued guidance now codified as ASC Topic 855,
“Subsequent Events” (“ASC 855”). The pronouncement modifies the definition of
what qualifies as a subsequent event—those events or transactions that occur
following the balance sheet date, but before the financial statements are
issued, or are available to be issued—and requires companies to disclose the
date through which it has evaluated subsequent events and the basis for
determining that date. The Company adopted the provisions of ASC 855 on
September 30 2009, in accordance with the effective date.





On June
30, 2009, the Company adopted updates issued by the FASB to fair value
disclosures of financial instruments.  These changes require a
publicly traded company to include disclosures about the fair value of its
financial instruments.  Such disclosures include the fair value of all
financial instruments, for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial position; the
related carrying amount of these financial instruments; and the method(s) and
significant assumptions used to estimate the fair value.  Other than
the required disclosures, the adoption of these changes had no impact on the
Financial Statements.





Other
Considerations





There are
numerous factors that affect the business and the results of its
operations.  Sources of these factors include general economic and
business conditions, federal and state regulation of business activities, the
level of demand for our product, and the ability to develop new products based
on new or evolving technology and the market's acceptance of those
products.





ITEM3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK





Not
applicable.





ITEM4.  CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





Our
principal executive officer, who also serves as our principal financial officer,
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as such term is defined under Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the
end of the period covered by this report.  Based on that evaluation,
our principal executive officer has concluded that our disclosure controls and
procedures are not effective for ensuring that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act, is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms.  The Company is in the process of
evaluating our disclosure controls and procedures in an effort to develop
remedial measures to correct the deficiencies.





Changes
in Internal Control Over Financial Reporting





There
were no changes in our internal control over financial reporting that occurred
during our last fiscal quarter (the quarter ended December 31, 2009) that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.


9
 Table of Contents


PART
II – OTHER INFORMATION





ITEM1.  LEGAL PROCEEDINGS





In the
ordinary course of business, we are the subject of, or party to, various pending
or threatened legal actions, including various counterclaims in connection with
our intellectual property enforcement activities.  Card Activation,
through its attorneys, has sent letters to over 600 potential infringers of the
patent, placing the infringers on notice of the patent and seeking remedies for
such infringement. While we believe that any liability arising from these
actions will not have a material adverse effect on our financial position,
results of operations or cash flows, we can make no assurances that we will not
lose all or some of the claims covered by our patent as the result of such
actions.




Information
regarding the Company's legal proceedings outside the ordinary course of
business is disclosed under Notes 3 and 4 to the Company's Condensed Financial
Statements (unaudited) of Part I of this Quarterly Report on Form 10-Q, which is
incorporated herein by reference.




ITEM6.  EXHIBITS




31.1
            Certification
      of Principal Executive and Financial Officer Pursuant to Section 302 of
      the Sarbanes-Oxley Act32.1
            Certification
      of Principal Executive and Financial Officer Pursuant to Section 906 of
      the Sarbanes-Oxley Act.





SIGNATURES





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





Card
      Activation Technologies, Inc.Dated:
      February 22, 2010
            By:
            /s/
      Robert KiteRobert
      KiteChairman,
      President and Chief Executive Officer
              (Principle
      Executive Officer and Principal Financial
  Officer)







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