-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LfAJ4ppn0b7AdsxM3SHr6F2vumy7xsKPlxYVezOc+zw3sne8QtV1bM0A+kX4TiRO KOBzJScCkrmjqxsJDPKy2Q== 0001084296-99-000008.txt : 19990517 0001084296-99-000008.hdr.sgml : 19990517 ACCESSION NUMBER: 0001084296-99-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CARD TECHNOLOGY INC CENTRAL INDEX KEY: 0001029916 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 061403123 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 333-21013 FILM NUMBER: 99623360 BUSINESS ADDRESS: STREET 1: 1355 TERRELL MILL ROAD STREET 2: BUILDING 1462, SUITE 200 CITY: MARIETTA STATE: GA ZIP: 30067 BUSINESS PHONE: 7709512284 10QSB 1 FORM 10QSB QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1999 Commission file No. __________ AMERICAN CARD TECHNOLOGY, INC. (Name of small business issuer as specified in its charter) Delaware 06-1403123 (State of incorporation) (IRS Employer Identification No.) 1355 Terrell Mill Road, Building 1462, Suite 200, Marietta, Georgia 30067 (Address of principal executive offices including zip code) Issuer's telephone number: (770) 951-2284 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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__ The number of issuer's shares of Common Stock outstanding as of March 31, 1999 was 3,901,136 Transitional Small Business Disclosure Form (check one): Yes __ No _X_ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS American Card Technology, Inc. (a development stage company) Balance Sheets Assets
Unaudited March 31,1999 December 31,1998 ------------- ---------------- Current Cash $ 65,030 $ 137,130 Accounts receivable 34,896 169,505 Inventory 155,920 151,703 Prepaid expenses and other current assets 27,532 10,533 ----------- ------- Total current assets 283,378 468,871 Equipment, net 98,722 93,681 Other assets: Software development costs, net 94,457 113,348 Deferred registration and debt costs 662,717 662,717 Other 7,820 7,820 ----------- ----------- $ 1,147,094 $ 1,346,437 ----------- ----------- Liabilities and Stockholders' Deficit Current: Accounts payable $ 663,459 $ 806,439 Accrued interest expense 575,732 525,984 Accrued salary and benefits 794,459 727,164 Other accrued expenses 72,000 52,000 Deferred revenue 196,547 196,547 Notes payable to banks 600,000 600,000 ---------- ---------- Total current liabilities 2,902,197 2,908,134 Notes payable to stockholders 309,361 309,361 Bridge financing notes payable 925,000 925,000 Notes payable 1,205,000 780,000 ---------- ---------- Total liabilities 5,341,558 4,922,495 ---------- ---------- Commitments and contingencies Stockholders' deficit : Preferred stock, $.001 par value - shares authorized 1,000,000; none issued Common stock, $.001 par value - shares authorized 20,000,000; issued and outstanding 3,901,136 3,901 3,901 Additional paid-in capital 5,352,925 5,352,925 Accumulated deficit during the development stage (9,551,290) (8,932,884) ---------- ---------- Total stockholders' deficit (4,194,464) (3,576,058) ---------- ---------- $ 1,147,094 $ 1,346,437 ---------- ---------- See accompanying notes to financial statements.
American Card Technology, Inc. (a development stage company) Statements of Operations
Unaudited Period from Unaudited June 21,1994 Three Months Ended (inception) to ----------------------------- March 31, 1999 March 31,1999 March 31,1998 ------------- ------------- ------------- Revenues $ 52,418 $ 59,589 $ 482,928 Costs of sales 36,590 74,507 471,684 ----------- ------------ ------------ Gross profit (loss) 15,828 (14,918) 11,244 ----------- ------------ ------------ Expenses General and administrative 420,459 654,703 5,228,352 Write -off of license fee - - 168,000 Research development 136,622 174,000 1,398,917 Interest and financing costs, net 77,153 483,843 3,029,765 ----------- ------------ ------------ 634,234 1,312,546 9,825,034 ----------- ----------- ------------ Net loss $ (618,406) $(1,327,464) $(9,813,790) ----------- ---------- ------------ Basic loss per share $ (0.16) $ (0.34) Weighted average number of shares outstanding 3,901,136 3,958,548 See accompanying notes to financial statements.
American Card Technology, Inc. (a development stage company) Statements of Cash Flows
Unaudited Period from Unaudited June 21,1994 Three months ended (inception) to ---------------------------- -------------- March 31,1999 March 31,1998 March 31,1999 Cash flows from operating activities: Net loss $ (618,406) $ (1,327,464) $ (9,813,790) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 29,133 28,136 251,414 Amortization of deferred financing costs - 23,278 312,120 Issuance of debt for services rendered - - 72,774 Issuance of stock for services rendered - 300,116 300,116 Issuance of stock for loan commitment - 300,116 300,116 Notes receivable exchange for services - - 5,000 Deferred registration costs written off - - 352,966 Amortization of bridge financing discount - 60,937 1,162,500 Changes in assets and liabilities: (Increase) decrease in assets: Accounts receivable 134,609 (19,873) (34,896) Inventory (4,218) 2,183 (155,921) Prepaid expenses and other current assets (16,999) (9,051) (27,532) Other assets - - (7,820) Increase (decrease) in liabilities: Accounts payable (142,980) 185,436 663,459 Deferred revenue - - 196,547 Accrued expenses 137,043 131,763 1,472,191 --------- -------- ---------- Total adjustments 136,588 702,809 4,863,034 --------- -------- ---------- Net cash used in operating activities (481,818) (324,423) (4,950,756) --------- --------- ----------- Cash flows from investing activities: Capital expenditures (15,282) (7,146) (217,895) Software development costs - - (226,696) --------- --------- ---------- Net cash used in investing activities (15,282) (7,146) (444,591) --------- --------- ---------- Cash flows from financing activities: Issuance of common stock - - 1,000 Deferred registration costs - original - - (352,966) Deferred registration costs - current - (121,721) (662,718) Deferred financing costs - (63,476) (312,120) Borrowings on line of credit 425,000 - 1,805,000 Proceeds from the issuance of notes to stockholders - 417,500 3,514,681 Payments on notes to stockholders - (22,500) (32,500) Payments on bridge financing - (1,250,000) (1,250,000) Proceeds from the issuance of bridge financing - 1,500,000 2,750,000 ------- --------- --------- Net cash provided by financing activities 425,000 459,803 5,460,377 ------- --------- --------- Net increase (decrease) in cash (72,100) 128,234 65,030 Cash, beginning of period 137,130 27,203 - ------- --------- --------- Cash, end of period $ 65,030 $ 155,437 $ 65,030 ------- --------- --------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 12,275 $ 105,570 $ 264,139 ------- --------- -------- Income taxes $ - $ - $ - ------- --------- -------- See accompanying notes to financial statements.
American Card Technology, Inc. (a development stage company) Notes to Financial Statements March 31, 1999 1. Basis of Presentation The financial statements include the accounts of American Card Technology, Inc. (a development stage company) (the "Company") and its majority-owned Canadian subsidiary, which was formed in June 1996 and whose results of operations have been immaterial through March 31, 1999. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company, a Delaware corporation, was incorporated on June 21, 1994 to design, develop and market high security, flexible multiple application smart card systems. The Company is in the development stage and its activities to date have been limited to organizational activities including developing a business plan, hiring personnel and developing and enhancing its proprietary smart card technology and software, and it has only recently commenced the limited marketing of its smart card systems. Revenues to date, which have been received from few customers, have been limited. Certain stock splits were effected in 1996 and 1998 and reflected retroactively in these financial statements. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of operations. Since inception the Company has been involved in organizational activities. The Company's ultimate ability to attain profitable operations is dependent upon obtaining additional financing adequate to complete its development activities, and to achieve a level of sales adequate to support its cost structure. Through March 31, 1999, the Company has incurred losses totaling $9,813,790 and at March 31, 1999, has deficiencies in working capital and equity of $2,618,819 and $4,194,464, respectively. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company filed a Registration Statement on Form SB-2 with the Securities and Exchange Commission that was declared effective on February 12, 1999. The public offering is being made on a "best efforts" basis with the minimum and maximum estimated net proceeds to the Company of $4,500,000 and $6,424,000, respectively. However, there can be no assurance that the Company will be successful in consummating its plans, including closing the IPO, or that such plans, if consummated, will enable the Company to attain profitable operations or continue as a going concern. The accompanying 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-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial statements are unaudited, but in the opinion of management, contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Results of operations and cash flows for the interim three month periods are not necessarily indicative of what the results of operations and cash flows will be for an entire year. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1998. 2. Notes Payable At March 31, 1999 and December 31, 1998, the Company had lines of credit with certain banks. Loans totaling $600,000 bear interest at the respective banks prime interest rates and are due on demand or through June 1999. Borrowings of $300,000 under these lines of credit are secured by certificates of deposit of one of the Company's stockholders held by the banks. Another stockholder has guaranteed the balance of these loans. In September 1998, the Company entered into additional unsecured lines of credit with two different Offshore Trusts for $1,000,000 each. Loans under each of these credit lines bear interest at 10% per annum and are due June 30, 2001. During 1999, the Company entered into another unsecured line of credit with a third Offshore Trust for $250,000. This line bears interest at 10% and is due on June 30, 2001 or earlier to the extent that the Company realizes gross profits (gross receipts less cost of goods sold) after the closing of the Company's contemplated initial public offering. The Company has drawn down an aggregate of $1,205,000 and $780,000 from these lines of credit as of March 31, 1999 and December 31, 1998, respectively. Certain stockholders have guaranteed this debt. 3. Notes Payable to Stockholders Notes payable to stockholders totaling $309,361 at March 31,1999 and December 31, 1998, bear interest at 10% per annum and were originally payable on demand. The due dates of these notes have been extended to the earlier of January 1, 2001 or the closing of a subsequent debt financing. These notes have been used to finance operations. Notes totaling $500,000 were converted to equity in 1995, notes totaling $550,000 were converted to equity in January 1997 and notes totaling $1,895,594 were converted to equity in September 1998. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company was organized in June 1994 and is in the development stage. Since inception, the Company has been engaged principally in organizational activities, including developing a business plan, hiring personnel and developing and enhancing its proprietary smart card technology and software, and has only recently commenced the limited marketing of its smart card systems. The Company's objective is to become a leading provider of smart card systems to government and commercial enterprises ("System Sponsors") requiring increasingly complex, secure and cost-effective information processing systems. The Company intends to market its products through strategic marketing alliances and licensing or other arrangements with systems integrators, value added resellers and other smart card vendors. The Company anticipates that, under certain circumstances, its smart card products will be bundled with its strategic partners' products and services to create a complete integrated system that can be marketed to potential System Sponsors. The Company will also seek to provide complete smart card solutions, on a turnkey basis, to System Sponsors by providing all of the hardware and software elements required to implement the system. Liquidity and Capital Resources At March 31, 1999, the Company had cash on hand of $65,030, a working capital deficit of $2,618,819 and a stockholders' deficit of $4,194,464. The Company's primary capital requirements will be to fund the Company's continuing smart card system development and enhancement efforts, its sales and marketing activities and the Company's working capital. The Company has historically financed its capital requirements through the issuance of equity and debt securities, contributions to capital and bank borrowings. The Company's capital requirements have been and will continue to be significant. The Company has been dependent on the sales of its securities to private investors, as well as on capital contributions and loans from affiliates and certain financial institutions guaranteed by certain stockholders of the Company. During the period from inception through March 31, 1999, the Company raised capital through such means in the estimated aggregate amount of $6,560,000. As of March 31, 1999, the Company had lines of credit in original principal amount aggregating $2,850,000 from certain banks and trusts, of which $1,045,000 principal amount remained available as of March 31, 1999. On February 12, 1999, the Securities and Exchange Commission declared effective the Company's registration statement on Form SB-2 relating to the offering of a minimum of 454,600 shares (and a maximum of 648,900 shares) of common stock, at a price of $11.00 per share (the "Offering"). The Company is dependent on and intends to use the proceeds of the Offering to continue the implementation of its proposed plan of operation. The Company anticipates, based on assumptions relating to its current operations (including assumptions regarding the Company's ability to meet its current marketing objectives and the timing and costs associated therewith), that the proceeds of the Offering, together with projected cash flow from operations, will be sufficient to fund the Company's operations and capital requirements for at least twelve months following the closing of the minimum offering. In the event that the Company's plans change, its assumptions change or prove to be inaccurate or the proceeds of the Offering prove to be insufficient to fund operations (due to unanticipated expenses, technical difficulties, problems or otherwise), the Company would be required to seek additional financing sooner than currently anticipated. There can be no assurance that the Offering will close or that the proceeds of the Offering will be sufficient to permit the Company to successfully further develop and commercialize the Company's smart card technology or that any assumptions relating to the Company's operations will prove to be accurate. In addition, any implementation of the Company's business plans subsequent to the twelve month period following the Offering may require proceeds greater than the proceeds of the Offering or otherwise currently available to the Company. There can be no assurance that additional financing will be available to the Company on commercially reasonable terms, or at all. Further, if the closing of the Offering is delayed, the Company may not have sufficient capital to fund operations and the anticipated expenses of the Offering. Any inability to obtain additional financing when needed may have a material adverse effect on the Company, including requiring the Company to curtail its activities and possibly causing the Company to cease its operations. The Company's accountants have included an explanatory paragraph in their report on the December 31, 1998 financial statements expressing substantial doubt about the Company continuing in business. Results of Operations for the Quarter ended March 31, 1999 For the quarter ended March 31, 1999, revenues were $52,418 as compared to $59,589 for the first quarter of 1998, a decrease of 12%. Costs of sales in the same period decreased from $74,507 for the first quarter of 1998 to $36,590 for the first quarter of 1999. The Company recognizes revenue upon the shipment of products or the performance of services. The sales cycle will vary by customer and could extend for periods of up to twelve months, depending upon, among other things, the time required for development, testing, and installation. Although sales for the first quarter of 1999 were lower than the comparable period of 1998, management estimates that 1999 sales will exceed those of the prior year. In addition, during April 1999, the Company completed a project which the Company believes will result in recognition during the second quarter of fiscal year 1999 of the $196,547 of Deferred Revenue reflected on the March 31, 1999 Balance Sheet. For the quarter ended March 31, 1999, general and administrative expenses were $420,459 as compared to $654,703 for the first quarter of 1998, a decrease of 36%. The decrease of $234,244 is primarily due to the following item. During the first quarter of fiscal year 1998, the Company issued shares of common stock and warrants to an affiliate of the Company's general counsel in consideration for services rendered. The Company expensed $300,000 in connection with this transaction which is included in general and administrative expenses. This reduction was offset by an increase in payroll costs of approximately $34,000 due to increased staff levels and an increase of $35,000 in costs of professional services due to issues related to general corporate matters. For the quarter ended March 31, 1999, research and development expense was $136,622 as compared to $174,000 for the first quarter of 1998, a decrease of 21.5%. The decrease is primarily due to a $72,000 reduction in fees paid to an outside contractor, offset by a $31,000 increase in payroll costs due to the hiring of additional personnel. For the quarter ended March 31, 1999, interest and financing expenses were $77,153 as compared to $483,843 for the first quarter of 1998, a decrease of 84%. During the first quarter of fiscal year 1998, the Company amortized $23,000 of deferred financing costs and $61,000 of original issue discount costs related to its bridge loans. No such costs were incurred during 1999. Also, during the first quarter of fiscal year 1998, $300,000 was charged to interest expense relating to shares of common stock issued in consideration for a loan commitment. Forward-Looking Statements This quarterly report contains forward-looking statements about the business, financial condition, and prospects of the Company and other forward-looking statements within the meaning of section 27a of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect assumptions made by management and management's beliefs based on information currently available to it. When used in this quarterly report, words such as "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. The Company can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of management's assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, the Company's actual results may differ materially from those indicated by the forward-looking statements as a result of many factors, including the risk factors set forth in the Company's annual report on Form 10-KSB filed with the Securities and Exchange Commission on April 14, 1999, as well as those set forth herein. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any pending legal proceeding (and none of its property is the subject of any pending legal proceeding). ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On February 12, 1999, the Securities and Exchange Commission declared effective the Company's registration statement on Form SB-2 relating to the offering of a minimum of 454,600 shares (and a maximum of 648,900 shares) of common stock, at a price of $11.00 per share. The offering has not yet closed. During the first quarter of 1999, the Company granted three employees options to purchase in the aggregate 12,000 shares of the Company's common stock at an exercise price of $11.00 per share. The options were granted pursuant to the Company's 1996 Stock Option Plan (the "Stock Option Plan") and will vest in annual installments of twenty-five percent (25%) beginning on the date of grant. Pursuant to the Stock Option Plan, stock options covering an aggregate of 417,150 shares of the Company's Common Stock may be granted to the foregoing persons. Under the Stock Option Plan, "incentive stock options" ("Incentive Options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), may be granted to employees (including officers), and non-incentive stock options ("Non-incentive Options") may be granted to any such employee and to other persons (including directors) who perform substantial services for or on behalf of the Company. Incentive Options and Non-incentive Options are collectively referred to herein as "1996 Options." The options granted during the first quarter of 1999 are Incentive Options. The Stock Option Plan is administered by the Company's board of directors (the "Board") or, at its discretion, by the compensation committee of the Board (the "Compensation Committee"). The Board or the Compensation Committee have complete authority to administer and interpret the Stock Option Plan, to determine the terms upon which 1996 Options may be granted, to prescribe, amend and rescind such interpretations and determinations and to grant 1996 Options. The Board or the Compensation Committee has the power to terminate or amend the Stock Option Plan from time to time in such respects as it deems advisable, except that no termination or amendment shall materially adversely affect any outstanding Option without the consent of the grantee, and the approval of the Company's stockholders will be required in respect of any amendment which would (i) change the total number of shares subject to the Stock Option Plan or (ii) change the designation or class of employees or other persons eligible to receive Incentive Options or Non-incentive Options. The price at which shares covered by a 1996 Option may be purchased pursuant thereto shall be no less than the par value of such shares and no less than the fair market value of such shares on the date of grant (the "Fair Market Value"); provided, however, that in the case of Incentive Options, if the optionee directly or indirectly beneficially owns more than ten percent (10%) of the total combined voting power of all of the outstanding voting stock of the Company (a "10% Holder"), the purchase price shall not be less than one hundred ten percent (110%) of the Fair Market Value on the date of grant. The Fair Market Value will generally be equal to the last sale price quoted for shares of Common Stock on Nasdaq on the date of grant. The purchase price of shares issuable upon exercise of an option may be paid in cash or by delivery of shares with a value equal to the exercise price of the option. The Company may also loan the purchase price to the optionee, or guarantee third-party loans to the optionee, on terms and conditions acceptable to the Board or the Compensation Committee. In the event the aggregate fair market value of the shares of common stock (determined at the time the option is granted) with respect to which Incentive Options are exercisable for the first time by the optionee during any calendar year (under all such option plans maintained by the Company) exceeds $100,000, then only the first $100,000 of such shares so purchased will be treated as Incentive Options and any excess over $100,000 so purchased shall be treated as Non-incentive Options (the "$100,000 Limitation"). This rule shall be applied by taking 1996 Options into account in the order or sequence in which they were granted. The number of shares covered by an option is subject to adjustment for stock splits, mergers, consolidations, combinations of shares, reorganizations and recapitalizations. The 1996 Options are generally non-transferable except by will or by the laws of descent and distribution, and in the case of employees, with certain exceptions, may be exercised only so long as the optionee continues to be employed by the Company. If the employee dies or becomes disabled, the right to exercise the Option, to the extent then vested, continues for specified periods. 1996 Options may be exercised within a period not exceeding ten years from the date of grant, except that the term of any Incentive Options granted to a 10% Holder may not exceed five years from the date of grant. The terms of Incentive Options are subject to additional restrictions provided by the Stock Option Plan. ITEM 5. OTHER INFORMATION As of May 1, 1999, Robert Cartagine, the Company's Director of Sales, resigned his position as an employee of the Company. The Company is in the process of finding a replacement for Mr. Cartagine. The Company's sales efforts will continue to be led by Raymond Findley, President of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits The exhibits set forth in the Exhibit Index on the page immediately preceding the exhibits are filed herewith as a part of this report. b. Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended March 31, 1999. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN CARD TECHNOLOGY, INC. By: /S/ LAWRENCE O. PERL -------------------- Lawrence O. Perl, Chief Executive Officer By: /S/ FRANK S. FUINO, JR. ----------------------- Frank S. Fuino, Jr. Chief Financial Officer EXHIBIT INDEX Exhibit Number Description of Document 3.1 Articles of Incorporation. (1) 3.2 By-Laws. (1) 3.2.1 Amended By-laws. (1) 4.1 Sample Certificate for Common Stock. (1) 10.1 Amended Employment Agreement between the Company and Lawrence O. Perl. (1) 10.2 Employment Agreement between the Company and Raymond Findley, Jr. (1) 10.3 Amended Employment Agreement between the Company and Robert H. Dixon. (1) 10.3.1 Employment Agreement between the Company and Frank S. Fuino, Jr. (1) 10.4 Escrow Agreement, Bank of New York. (1) 10.4.1 Amended Escrow Agreement, Bank of New York, Dated August 24, 1999. (1) 10.4.2 Amended Escrow Agreement, Bank of New York, Dated February 5, 1999.(1) 10.7.1 Subscription Agreement. (1) 10.7.2 Stock Option Agreement (warrant), Chapman Group, LLC. (1) 10.7.2.1 Amended, Stock Option Agreement (warrant), Chapman Group, LLC. (1) 10.7.3 Stock Option Agreement (warrant), Harold Rothstein. (1) 10.7.3.1 Amended, Stock Option Agreement (warrant), Harold Rothstein. (1) 10.7.4 Stock Option Agreement (warrant), Raymond Roncari. (1) 10.7.4.1 Amended, Stock Option Agreement (warrant), Raymond Roncari. (1) 10.8.1 Stock Option Agreement for non-employees and Amendment, Lilly Beter. (1) 10.8.2 Stock Option Agreement/non-employees and Amendment, Harold Rothstein. (1) 10.8.3 Stock Option Agreement/non-employees and Amendment, Raymond Roncari. (1) 10.8.4 Stock Option Agreement for non-employees and Amendment, Bruce Bonadies. (1) 10.8.5 Stock Option Agreement for non-employees and Amendment, Gordon Walker. (1) 10.8.6 1996 Nonemployee Director's Stock Option Plan. (1) 10.8.6.1 Amended, 1996 Nonemployee Director's Stock Option Plan. (1) 10.8.7 1996 Stock Option Plan for Employees. (1) 10.8.7.1 Amended, 1996 Stock Option Plan for Employees. (1) 10.8.8 Amended Director Loan Agreement, Harold Rothstein. (1) 10.8.9 Amended Director Loan Agreement, Raymond Roncari. (1) 10.9.1 Amended Agreement with SoftChip Israel Ltd. and the Company. (1) 10.9.1.1 Amended, Agreement with SoftChip Israel Ltd. and the Company. (1) 10.9.1.2 Amended Technology Purchase Agreement. 10.9.2 Agreement with SoftChip Technology (3000) Ltd. and the Company. (1) 10.9.2.1 Agreement with SoftChip Technology (3000) Ltd. and the Company. (1) 10.9.3 Stock Option Agreement and Amendment, Shreveport Acquisition Corp. (1) 10.9.3.1 Amended, Stock Option Agreement, Amendment and Second Amendment, Shreveport Acquisition Corp. (1) 10.9.4 Amended, Stock Option Agreement for employee, Robert Dixon. (1) 10.9.5 Amended, Stock Option Agreement for employee, Michael Pate. (1) 10.9.6 Amended, Stock Option Agreement for employee, Robert Patten. (1) 10.9.7.1 Amended, Stock Option Agreement for employee, Shawn Nixon. (1) 10.9.7.2 Amended, Stock Option Agreement for employee, Jeremy Zela. (1) 10.9.7.3 Stock Option Agreement for employee, Phyllis Burke. (1) 10.9.8 Stock Option Agreement for employee, Robert Cartagine. (1) 10.9.9 Stock Option Agreement for employee, Frank S. Fuino, Jr. (1) 10.10.1 Loan Agreement between the Company and Prometheus Trust. (1) 10.10.2 Promissory Note between the Company and Prometheus Trust. (1) 10.10.3 Loan Agreement between the Company and International Caribbean Trust, Ltd. (1) 10.10.4 Promissory Note between the Company and International Caribbean Trust, Ltd. (1) 10.10.5 Articles of Incorporation of Animal Passports, Inc. (1) 10.10.6 Bylaws of Animal Passports, Inc. (1) 10.10.7 Consent of BOD, of Animal Passports Inc., acting in lieu of first meeting. (1) 10.10.8 Promissory Note between the Company and Butterfly Ltd. Trust 10.10.9 Loan Agreement between the Company and Butterfly Ltd. Trust 27.1 Financial Data Schedule. 99.1 Dual Smart Card Access, Patent Number # TX 3-639-032 for the Company. (1) 99.2 Amended Rothstein personal guarantee. (1) 99.3 Database Services Agreement and Addendum (Florida). (1) 99.4 Falcetta, Wachtel & Knochenhauer, LLC regarding the Company. (1) (1) Previously filed as an Exhibit to the Company's Registration Statement on Form SB-2 (File No. 333-52169). EX-10.10.8 2 PROMISSORY NOTE EXHIBIT PROMISSORY NOTE $250,000.00 Miami, Florida March 23, 1999 FOR VALUE RECEIVED, AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation ("Maker") promises to pay to the order of BUTTERFLY LTD. TRUST, a trust formed under the laws of the British West Indies, having its chief executive office at P.O. Box 2471, Providenciales, Turks and Caicos Islands, British West Indies, or at such other place as may be designated in writing from time to time by Holder, the maximum aggregate principal sum of up to Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), together with interest accruing on the unpaid balance of this Note, at a fixed rate per annum equal to ten percent (10.00%). Interest shall be charged on the principal balance from time to time outstanding on the basis of the actual number of days elapsed computed on the basis of a three hundred sixty (360) day year. Interest shall be due and payable in arrears on the Maturity Date, as hereinafter defined. Commencing on the date in which Maker first realizes Gross Profits (as hereinafter defined) after the closing of the Company's contemplated initial public offering, payments in an amount equal to Gross Profits for the immediately preceding calendar month shall be due and payable to Holder. Such payments shall be applied first to accrued interest and then to reduce the principal balance of the indebtedness evidenced by this Note. For purposes hereof, "Gross Profits" shall mean gross receipts less cost of goods sold. Notwithstanding the foregoing, the outstanding principal amount, together with all accrued but unpaid interest thereon, shall be due and payable in full on June 30, 2001 (the "Maturity Date"). The principal amount of this Note shall be advanced by Holder, at Holder's sole discretion, from time to time. Advances and payments under this Note shall be evidenced by a ledger maintained by Holder and attached hereto which shall set forth, among other things, the principal amount of any advances and payments therefor. This Note is subject in all respects to the terms and conditions of that certain Loan Agreement dated this date between Maker and Holder, including, without limitation, Events of Default and repayment terms set forth therein. Maker hereof further promises to pay, in addition to said principal sum and interest, all taxes assessed upon this Note, and all reasonable costs and expenses, including, without limitation, attorneys' fees, incurred in the collection of this Note. Maker shall have the right to prepay the outstanding principal amount of this Note, in whole or in part at any time. Any partial prepayments shall be applied first to accrued and unpaid interest and second to the principal outstanding under this Note. Notwithstanding any provisions of this Note, it is the understanding and agreement of Maker and Holder that the rate of interest to be paid by Maker to Holder shall not exceed the highest or maximum rate of interest permissible to be charged by a lender such as Holder to a commercial borrower such as Maker under the laws of the State of Georgia. Any amount paid in excess of such rate shall be considered to have been payments in reduction of principal. Maker waives diligence, demand, presentment for payment, notice of nonpayment, protest and notice of protest, and notice of any renewals or extensions of this Note, and all rights under any statute of limitations, and agrees that the time for payment of this Note may be extended at Holder's sole discretion, without impairing Maker's liability thereon. This Note shall be governed by and construed in accordance with the laws of the State of Georgia. AMERICAN CARD TECHNOLOGY, INC. By: /S/ LAWRENCE O. PERL ------------------------ Lawrence O. Perl Its Chief Executive Officer EX-10.10.9 3 LOAN AGREEMENT EXHIBIT LOAN AGREEMENT THIS AGREEMENT made as of the 23rd day of March, 1999 by and between AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation with its principal office at 1355 Terrell Mill Road, Building 1462, Suite 200, Marietta, Georgia, 30067 (the "Company"), and BUTTERFLY LTD. TRUST, a trust organized under the laws of the British West Indies, having an office at P.O. Box 2471, Providenciales, Turks and Caicos Islands, British West Indies (hereinafter referred to as "Lender"). W I T N E S S E T H : WHEREAS, the Company desires to borrow up to Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) (hereinafter referred to as the "Loans") from Lender, and Lender is willing to make the Loans to the Company, on the terms and conditions and in reliance on the representations and warranties of the Company hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing and in further consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Representations and Warranties. The Company represents and warrants to Lender that: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with all the requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted and is duly qualified and in good standing in every jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary; (b) The execution and delivery of this Agreement and each and every other agreement, instrument or document required to be executed and delivered to Lender by the Company pursuant to the terms hereof, have been duly authorized, are each valid, legal and binding upon it and enforceable in accordance with their respective terms; (c) The execution and delivery of this Agreement and each and every other agreement, instrument or document required to be executed and delivered to Lender by the Company pursuant to the terms hereof, the consummation of the transactions herein contemplated, the fulfillment of or compliance with the terms and provisions hereof and of each and every other instrument, agreement or document required to be executed and delivered to Lender by the Company pursuant to the terms hereof, are within its powers, are not in contravention of any provisions of its certificate of incorporation or any amendments thereto, or of its by-laws. 2. Amount and Terms of Loans. Pursuant to the terms of this Agreement Lender may, in the exercise of its sole discretion, make Loans to the Company upon request of the Company, which on a cumulative basis do not exceed Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00). The Loans, and each of them, shall be upon the following terms and conditions: (a) The maximum aggregate principal amount of the Loans which Lender may from time to time lend to the Company shall be in the amount of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), and shall be evidenced by a promissory grid note (the "Note") with appropriate insertions of names, dates and amounts. The Loans shall bear interest at a rate per annum equal to ten percent (10%). Interest shall be charged on the principal balance outstanding on the basis of the actual number of days elapsed computed on the basis of a three hundred sixty (360) day year. Interest shall be due and payable, in arrears on the Maturity Date (as hereinafter defined); (b) In the event that the Company desires a loan hereunder, the Company shall request the same by delivering to Lender a request for advance, signed by the Chief Financial Officer of the Company, with appropriate insertions of dates and amounts. Such request may be conveyed to Lender by facsimile transmission, in which case Lender shall be entitled to rely upon such facsimile transmission. The Company agrees to indemnify Lender if it should have so relied in good faith to its detriment, for losses and expenses, if any, arising from such reliance. (c) Commencing on the date in which the Company first realizes Gross Profits (as hereinafter defined) after the closing of the Company's contemplated initial public offering, payments in an amount equal to Gross Profits for the immediately preceding calendar month shall be due and payable to Lender. Such payments shall be applied first to accrued interest and then to reduce the principal balance of the indebtedness evidenced by this Note. For purposes hereof, "Gross Profits" shall mean gross receipts less cost of goods sold. Notwithstanding the foregoing, the outstanding principal amount, together with all accrued but unpaid interest thereon, shall be due and payable in full on June 30, 2001 (the "Maturity Date"); and (d) The Company shall have the right to prepay the outstanding principal amount of this Note, in whole or in part, at any time. 3. Default Provisions. Any one or more of the following shall constitute an Event of Default under this Agreement and the Note: (a) the institution of any bankruptcy proceedings against the Company and a failure to have such proceedings dismissed within a period of sixty (60) days; (b) the institution of any voluntary bankruptcy proceedings by the Company; (c) the Company ceases to do business; or (d) the Company dissolves or otherwise terminates its corporate existence. 4. General Provisions. (a) This Agreement shall survive until the Loans have been paid in full; (b) This Agreement is an integrated document and all terms and provisions are embodied herein and shall not be varied by parol; (c) It is the specific desire and intention of the parties that it shall in all respects be construed under the laws of the State of Georgia; (d) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided, however, that the Company shall not assign, voluntarily, by operation of law or otherwise, any of its rights hereunder without the prior written consent of Lender and any such attempted assignment without such consent shall be null and void. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals, as of the day and year first above written. AMERICAN CARD TECHNOLOGY, INC. By: /S/ LAWRENCE O. PERL -------------------- Lawrence O. Perl Its Chief Executive Officer BUTTERFLY LTD. TRUST By: /S/ HEMERICK KASSIN --------------------- Hemerick Kassin Its Vice President /TEXT EX-27.1 4 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 65,030 0 34,896 0 155,920 283,378 217,897 ( 119,175) 1,147,094 2,902,197 0 0 0 3,901 (4,198,365) 1,147,094 52,418 52,418 36,590 557,081 0 0 77,153 (618,406) 0 (618,406) 0 0 0 (618,406) (.16) (.16)
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