U.S.
Securities and Exchange Commission


Washington,
D.C. 20549


____________________


FORM
10-Q


____________________


(Mark
      One)S
              Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended March 31, 2008.£
              Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act




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 1618


Chicago,
Illinois 60604-3749




(Address of principal executive
offices)


(312)
972-1662


(Issuer’s
telephone number)


Securities
registered under Section 12(b) of the Exchange Act:


None


Securities
registered under Section 12(g) of the Exchange Act:


Common
Stock, $0.001 par value per share


(Title
of Class)





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 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   ̈
            Accelerated
      filer   ̈
            Non–Accelerated
      filer   ̈
            Small
      Business Issuer  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





Transitional
Small Business Disclosure Format (check one): Yes £ No x





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.




Class
            Outstanding
      at  May 7, 2008Common
      stock, $0.001 par value
            164,614,717





1




CARD
ACTIVATION TECHNOLOGIES, INC.


INDEX
TO FORM 10-Q FILING


FOR
THE THREE AND SIX MONTHS ENDED March 31, 2008





TABLE
OF CONTENTS





PART
I


FINANCIAL
      INFORMATION
            PAGEPage
      NumbersPART
      I - FINANCIAL INFORMATIONItem 1.
            Condensed Financial Statements (unaudited)Condensed Balance Sheets
            3Condensed Statements of Income
            4Condensed Statement of Cash Flows
            5Notes to Condensed Financial Statements
            6Item 2.
            Management Discussion & Analysis of Financial Condition and
      Results of Operations
            7Item 3
            Quantitative and Qualitative Disclosures About Market
      Risk
            12Item 4.
            Controls and Procedures
            12PART
      II - OTHER INFORMATIONItem 1.
            Legal Proceedings
            13Item 1A
            Risk Factors
            14Item 2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            15Item 3.
            Defaults Upon Senior Securities
            16Item 4.
            Submission of Matters to a Vote of Security
      Holders
            16Item 5
            Other information
            16Item 6.
            Exhibits
            16







CERTIFICATIONS





Exhibit
      31 – Management certification
            17-18Exhibit
      32 – Sarbanes-Oxley Act
            19-20


2
 Table of Contents




PART
I – FINANCIAL INFORMATION





ITEM 1 – FINANCIAL STATEMENTS





CARD
ACTIVATION TECHNOLOGIES, INC.


(A
Development Stage Company)


CONDENSED BALANCES
SHEETS







ASSETS:March
      31,
              2008
            
            
            September 30,
              2007(unaudited)CURRENT
      ASSETSCash
            
            $
            41,734
            
            
            $
            13,699Prepaid
      expenses and other current assets
            
            
            30,000
            
            
            
            -Total
      current assets
            
            
            71,734
            
            
            
            13,699TOTAL
      ASSETS
            
            $
            71,734
            
            
            $
            13,699LIABILITIES
      AND STOCKHOLDERS' DEFICIENCY:CURRENT
      LIABILITIES:Accounts
      payable
            
            $
            33,235
            
            
            $
            40,235Total
      current liabilities
            
            
            33,235
            
            
            
            40,235Notes
      payable - affiliates
            
            
            261,141
            
            
            
            165,142TOTAL
      LIABILITIES
            
            
            294,377
            
            
            
            205,377STOCKHOLDERS'
      DEFICIENCY:Preferred
      stock, $.001 par value, 1,000,000 shares authorized; zero shares issued
      and outstandingCommon
      stock, $.0001 par value, 175,000,000 shares authorized; 164,614,717 and
      146,770,504 shares issued and outstanding as of March 31, 2008
      and September 30, 2007
            
            
            16,461
            
            
            
            14,678Additional
      paid in capital
            
            
            126,930
            
            
            
            -Accumulated
      deficit during the Development Stage
            
            
            (366,034
            )
            
            
            (206,356
            )Total
      stockholders' deficit
            
            
            (222,643
            )
            
            
            (191,678
            )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIENCY
            
            $
            71,734
            
            
            $
            13,699








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


3
 Table of Contents





CARD
ACTIVATION TECHNOLOGIES INC.


(A
Development Stage Company)


CONDENSED STATEMENT OF OPERATIONS


FOR
THE THREE AND SIX MONTHS ENDED MARCH 31, 2008 AND 2007


AND
FOR THE PERIOD FROM AUGUST 29, 2006 (INCEPTION) TO MARCH 31, 2008





For
      the Periodfrom
      August 29, 2006Three
      Months Ended
            
            
            Six
      Months Ended
            
            
            (inception)
      to2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            March
      31, 2008(unaudited)
            
            
            (unaudited)
            
            
            (unaudited)
            
            
            (unaudited)REVENUELitigation
      revenue
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            45,000Total
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -OPERATING
      EXPENSES:General
      and Administrative
            
            
            836
            
            
            
            15,000
            
            
            
            138,842
            
            
            
            94,296
            
            
            
            387,922Sales
      and Marketing expenses
            
            
            -
            
            
            
            -
            
            
            
            20,837
            
            
            
            -
            
            
            
            23,112Total
      operating expenses
            
            
            836
            
            
            
            15,000
            
            
            
            159,679
            
            
            
            94,296
            
            
            
            411,034OPERATING
      LOSS
            
            
            (836
            )
            
            
            (15,000
            )
            
            
            (159,679
            )
            
            
            (94,296
            )
            
            
            (366,034
            )OTHER
      (INCOME) AND EXPENSESTotal
      other expense
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -LOSS
      BEFORE INCOME TAXES
            
            
            (836
            )
            
            
            (15,000
            )
            
            
            (159,679
            )
            
            
            (94,296
            )
            
            
            (366,034
            )INCOME
      TAX (BENEFIT) PROVISION
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -NET
      LOSS
            
            $
            (836
            )
            
            $
            (15,000
            )
            
            $
            (159,679
            )
            
            $
            (94,296
            )
            
            $
            (366,034
            )Weighted
      Average Common Share Outstanding:Basic
      and diluted:
            
            
            164,614,717
            
            
            
            14,677,504
            
            
            
            164,614,717
            
            
            
            14,677,504Net
      Loss Per ShareBasic
      and diluted:
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )








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


4
 Table of Contents




CARD
ACTIVATION TECHNOLOGIES INC.


(A
Development Stage Company)


CONDENSEDSTATEMENT OF CASH FLOWS


FOR
THE SIX MONTHS ENDED MARCH 31, 2008 AND 2007


AND
FOR THE PERIOD FROM AUGUST 29, 2006 (INCEPTION) TO MARCH 31, 2008





For
      the Periodfrom
      August 29, 2006(inception)
      to2008
            
            
            2007
            
            
            March
      31, 2008(unaudited)
            
            
            (unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss)
            
            $
            (159,679
            )
            
            $
            (94,296
            )
            
            $
            (366,034
            )Adjustments
      to reconcile net income to net cash (used in) operating
      activities:Common
      stocks issued in spin off
            
            
            -
            
            
            
            14,677
            
            
            
            14,677Common
      stocks issued in conjunction with related party issuance
            
            
            1,764
            
            
            
            
            
            
            
            1,764Common
      stocks issued for services
            
            
            84,950
            
            
            
            
            
            
            
            84,950Changes
      in assets and liabilities:Prepaid
      expenses
            
            
            (30,000
            )
            
            
            32,736
            
            
            
            (30,000
            )Accounts
      payables
            
            
            (7,000
            )
            
            
            
            
            
            
            33,235Net
      cash used in operating activities
            
            
            (109,965
            )
            
            
            (46,883
            )
            
            
            (261,408
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:-
            
            
            
            -
            
            
            
            -Net
      cash from investing activities
            
            
            -
            
            
            
            -
            
            
            
            -CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from the sale of common stock
            
            
            42,000
            
            
            
            -
            
            
            
            42,000Loans
      from affiliates
            
            
            96,000
            
            
            
            46,883
            
            
            
            261,142Net
      cash provided by financing activities
            
            
            138,000
            
            
            
            46,883
            
            
            
            303,142INCREASE
      IN CASH
            
            
            28,035
            
            
            
            -
            
            
            
            41,734CASH,
      BEGINNING OF YEAR
            
            
            13,699
            
            
            
            -
            
            
            
            -CASH,
      END OF YEAR
            
            
            41,734
            
            
            
            -
            
            
            
            41,734








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


5
 Table of Contents




CARD
ACTIVATION TECHNOLOGIES, INC.


NOTES TO CONDENSED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED
MARCH 31, 2008 and 2007





NOTE
1.  DESCRIPTION OF BUSINESS





Overview


Card
Activation Technologies Inc. (“Company/ CAT”) is a Delaware corporation
headquartered in Chicago, Illinois that owns proprietary patented payment
transaction technology relating to debit and gift card
transactions.





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, that provides innovative healthcare and financial
transaction solutions for electronically processing HIPAA compliant transactions
within the healthcare industry (EMED.OB).  MedCom provides a terminal based
service package and a compatible web portal add-on for physicians, clinics and
hospitals and dentists that include the following services: real-time
transactions including; patient eligibility, referrals, claims status and
service authorizations, 100% paperless claims processing, patient easy pay,
credit/debit cards, and check guarantee.





The
Company is a development stage company that was incorporated in August 2006 in
order to own and commercially develop the assigned patent which
covers debit and gift card transactions. This process is utilized for debit
cards, prepaid phone cards, gift cards, and affinity cards, and other cards. As
of the date of this prospectus, we have never entered into any patent license
agreements.





NOTE
2.  BASIS OF PRESENTATION





Interim
Financial Statements




The
accompanying interim unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
8 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In our opinion, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 2008 are
not necessarily indicative of the results that may be expected for the year
ending September 30, 2008. For further information, refer to the financial
statements and footnotes thereto included in our Form 10-KSB Report for the
fiscal year ended September 30, 2007.


6
 Table of Contents




NOTE
3. GOING CONCERN





As
indicated in the accompanying financial statements, the Company has incurred
cumulative net operating losses of ($366,034) since inception.  The
Company’s activities to date have been funded by its affiliate company, MedCom
USA, Inc and the existing business plan requires a $1.0 to $2.0 million
investment over the next several years to implement the acquisition and
litigation of patent infringements.  There is no assurance that
additional funds of this magnitude will be advanced by the affiliate company or
that sufficient investor interest will be developed to provide this level of
funding. These matters raise substantial doubt about the Company’s ability to
continue as a going concern.  However, the accompanying financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business.  These financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to continue as
a going concern.





NOTE
4 - RECENT PRONOUNCEMENTS





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 FASB
Statement No. 133, (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 161 on January 1, 2009. The
Company is currently evaluating the potential impact of SFAS No. 161 on the
Company’s consolidated financial statements.





Determination
of the Useful Life of Intangible Assets





In April
2008, the FASB issued FSP FAS 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 FASB 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 142 and the period of
the expected cash flows used to measure the fair value of the asset under FASB
141 (revised 2007) “Business Combinations” and other U.S. generally accepted
accounting principles.    The Company is currently evaluating the
potential impact of FSP FAS 142-3 on its consolidated financial
statements.





The
Fair Value Option for Financial Assets and Financial Liabilities





In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities, including an
amendment of FASB Statement No. 115”. SFAS 159 permits entities to choose
to measure many financial instruments and certain other items at fair value at
specified election dates. This Statement applies to all entities, including
not-for-profit organizations. SFAS 159 is effective as of the beginning of an
entity’s first fiscal year that begins after November 15, 2007. As such,
the Company is required to adopt these provisions at the beginning of the fiscal
year ended December 31, 2008. The Company is currently evaluating the
impact of SFAS 159 on its consolidated financial statements.





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





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


7
 Table of Contents


Forward-looking
statements involve risks, uncertainties and other factors, which may cause our
actual results, performance or achievements to be materially different from
those expressed or implied by such forward-looking statements. Factors and risks
that could affect our results and achievements and cause them to materially
differ from those contained in the forward-looking statements include those
identified in the section titled “Risk Factors” in the Company’s Annual Report
on Form 10-KSB for the year ended September 30, 2007 as well as other factors
that we are currently unable to identify or quantify, but that may exist in the
future.




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





Overview





Plan
of Operations





We were
incorporated in Delaware in August of 2006 as Card Activation Technologies, Inc.
("CAT")





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







Ø
              CAT
      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 management 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 MedCom and us, we have
      agreed to share certain administrative functions and personnel until we
      can establish our own administrative operating systems and hire our
      own personnel.






Our
Growth Strategies




Ø
              The
      Company was incorporated for the sole purpose of financing and litigation
      patent infringements related to the unauthorized use of our patented
      technology for the processing of debit, gift and other
    cards.


8
 Table of Contents




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 are 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 by many companies to generate
new revenue and such companies are using our patent
technology.





The
Company believes that debit styled cards, which include gift cards, infringe the
patent when the gift card is activated, when the gift card is used for
purchasing items or when value is added to the gift card by the method disclosed
in our patent.  The method, in general terms, requires that the
card be processed through a counter-top terminal, and therefore processing a
step through a terminal other than a counter top terminal would not infringe the
patent.  As part of the due diligence involved in this matter, the
professionals studies specific examples of counter top processing systems and
conducted research into the magnitude of transactions involving the use of debit
styled cards, which include gift cards.





Patent
Technology





In
October 2006, MedCom transferred the patented technology to us.
Presently, we have sent notice of our patented technology to numerous
companies and initiated seven lawsuits against companies that have infringed
patent and will continue to pursue the litigation against those companies that
have infringed our patent. Once we are successful in the pursuit
of the patent infringers and in its licensing program, we anticipate receiving
the appropriate royalties from the use of our technology by third parties by
allowing licensing arrangements to our technology and anticipated royalties for
the use of our patent. 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





McDonald’s
Corporation and the Company settled an infringement suit on February 27,
2007, pursuant to the terms and conditions of a settlement agreement between the
parties (the “Settlement Agreement”).”  Under the terms and conditions
of the Settlement Agreement, the Company received $45,000 and McDonald’s
Corporation was granted the Licensed Patents (.S. Patent No. 6,032,859) pursuant
to a Patent License and Covenant Not to Sue. There were no other material
provisions in the Settlement agreement or Patent License and Covenant Not to
Sue.





CAT has
filed several patent infringement actions, which are all pending in the Federal
District Court for the Northern District of Illinois.  On October 13,
2006 CAT filed an infringement action against Walgreen Co. On November 28, 2006
a patent infringement suit was filed against Sears Holding Corporation CAT filed
infringement suits against Barnes & Noble, Inc. and Aeropastale, Inc. on
March 2, 2007.  CAT also filed infringement actions against OfficeMax,
Inc. and TJX Companies, Inc. on May 1, 2007 and November 6, 2007,
respectively.


9
 Table of Contents


CAT won a
significant court ruling on March 20, 2008 in its lawsuit against major
retailers Barnes & Nobles and Aeropostale in Federal District Court which
further contributed to the validation of CAT’s patent and its
technology.





Results
of Operations





We are a
development stage company and have generated revenues consisting of a $45,000
settlement from McDonalds Corporation.





Liquidity
and Capital Resources





The
Company's operating requirements has been and will be funded primarily from its
related party entity MedCom USA, Inc. The Company will use funds advanced
MedCom. 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
$250,000 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 of $250,000 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.





The
Company has financed operations by advances from its parent, MedCom USA
Incorporated, which total $261,141 through March 31, 2008.





Critical
Accounting Policies





We
prepare our consolidated 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.




10
 Table of Contents




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.




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.





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.


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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 has adopted the Securities and Exchange Commission’s Staff Accounting
Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements.





Common
Stock





During
Six Months ended March 31, 2008 and 2007:





The
Company has issued shares of its common stock as consideration to shareholders
as well as considered to consultant for the fair value of the investment in the
amount of 17,644,213 common shares.  The value of those shares is
determined based on the trading value of the stock at the dates on which the
agreements were entered into for the services and the value of services
rendered.   The values of these common shares issued were
expensed during the year.





Duringthe six months ended
March 31, 2008, the Company issued 200,000 shares of its common stock for
$42,000.  The shares were issued to third parties in a private
placement of the Company’s common stock.  The shares were sold at $.21
per share.





Additional
Information





CAT 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 450 Fifth Street, N.W., Washington, D.C.,
20549.  You can obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330.  You can
also get copies of documents that the Company files with the Commission through
the Commission’s Internet site at www.sec.gov.




ITEM 3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





We do not
hold any derivative instruments and do not engage in any hedging activities.
Most of our activity is the litigation of our patent technology.





ITEM 4.
            CONTROLS
      AND PROCEDURES




(a)
Evaluation of Disclosure Controls and Procedures.Our management,
with the participation of our President, evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, our President concluded that our disclosure
controls and procedures as of the end of the period covered by this report were
effective such that the information required to be disclosed by us in reports
filed under the Securities Exchange Act of 1934 is (i) recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms and (ii) accumulated and communicated to our management, including
our President, as appropriate to allow timely decisions regarding disclosure. A
controls system cannot provide absolute assurance, however, that the objectives
of the controls system are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within a company have been detected.


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Management’s
Report on Internal Control over Financial Reporting.Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).
Our internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United
States.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives. Furthermore, smaller reporting companies face additional
limitations.  Smaller reporting companies employ fewer individuals and find
it difficult to properly segregate duties.  Often, one or two individuals
control every aspect of the Company’s operation and are in a position to
override any system of internal control.  Additionally, smaller reporting
companies tend to utilize general accounting software packages that lack a
rigorous set of software controls.





Our
management, with the participation of the Chief Executive Officer, evaluated the
effectiveness of the Company’s internal control over financial reporting as of
March 31, 2008.  In making this assessment, our management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control — Integrated Framework.  Based
on this evaluation, our management, with the participation of the President,
concluded that, as of March 31, 2008, our internal control over financial
reporting was effective.




(b)
 Changes in Internal
Control over Financial Reporting.  There were no changes in our
internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, during our most recently completed fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.





PART
II – OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS





As of,
March 31, 2008, we had initiated lawsuits against McDonald’s Corporation (which we settled),
Walgreen Co. and Sears Holding Corporation, Barnes & Noble, Aeropostale,
Inc., OfficeMax Inc.  In addition more than 600 letters have been sent
to other retailers for infringing its payment transaction patent.  As
of the date herein, there are no pending or threatened legal proceedings against
the Company.





CAT,
through its attorneys, has sent letters to over 600 potential infringers of the
patent, placing the infringers on notice of the patent and seeking a license
agreement under the patent.





CAT has
sued seven parties and to date CAT has settled a lawsuit with one alleged
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.


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ITEM 1A - Risk Factors





I. Risk Factors That May
Affect Our Results of Operations and Financial Condition





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.





The
Liquidity Of Our Common Stock Is Seriously Limited And There Is A Limited Market
For Our Common Stock





Our stock
is currently being traded on the NASDAQ Over-The-Counter Bulletin Board, and the
liquidity of our common stock is limited. The Bulletin Board is a limited market
and subject to substantial restrictions and limitations in comparison to the
NASDAQ system. Any broker/dealer that makes a market in our stock or other
person that buys or sells our stock could have a significant influence over its
price at any given time.





II.  Risks
Associated with Our Current Stage of Business





Management
May Not Run the Company in a Profitable Manner and If It Does Not You May Lose
Your Entire Investment:




The
company has not been profitable since inception and is still a development stage
company under FASB 7.


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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 CAT 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.





We
Depend Upon Key Management Personnel and the Loss of Any of Them Would Seriously
Disrupt Our Operations:




Two of
our directors have full time employment outside the Company and are available to
participate in management decisions, meetings, and conferences in person and
telephonically with council. The directors also attend settlement conferences,
trade shows and investor conferences to promote the company.  None of
our directors have entered into written employment agreements with us and none
is expected to do so in the foreseeable future.  In the event of
competing demands for their time, these two outside directors may grant priority
to their full time positions rather than to us.





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 patent litigation is
substantial, we can make no assurances that the marketplace will accept the
litigation settlements.





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





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





We issued
17,644,213 in common stock for services rendered by consultant and
professionals.  The stock was issued to consultants and, employees
based up on the separation agreement related with MedCom,deferred compensations,
investors, professional services rendered, for services rendered for services
provided to the company in lieu of cash payments.  We recorded that
common stock as an expense to the financial statements. The issuance of such
shares of our common stock were effected in reliance on the exemptions for sales
of securities not involving a public offering, as set forth in Rule 506
promulgated under the Securities Act and in Section 4(2) of the Securities
Act. A legend was placed on the certificates representing each such security
stating that it was restricted and could only be transferred if subsequent
registered under the Securities Act or transferred in a transaction exempt from
registration under the Securities Act.





We sold
200,000 shares of common stock at $.21 per shares for $42,000 in cash to a third
party in a private placement.  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.


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ITEM 3.  DEFAULTS UPON SENIOR SECURITIES





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





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





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





ITEM 5.  OTHER INFORMATION





None.





ITEM 6. EXHIBITS





31.1
            Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act31.2
            Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act.32.1
            Certification
      of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act.32.2
            Certification
      of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act.





SIGNATURES





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




Registrant
            Card
      Activation Technologies, Inc.Date:
            By:
      /s/ William P. WilliamsMay
      15, 2008William
      P. WilliamsChairman,
      President Chief Executive Officer (Principle Executive
      Officer)







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