10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 0-52556

Card Activation Technologies Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-5769015
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1930 Village Center Circle #3-722 Las Vegas, Nevada	89134
(Address of principal executive offices)	(Zip Code)

(312) 972-1662

(Registrant's telephone number, including area code)

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

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

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

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

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

As of July 18, 2011, the issuer had 178,572,719 shares of common stock, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	1
ITEM. 1.  FINANCIAL STATEMENTS	1
CARD ACTIVATION TECHNOLOGIES INC.
UNAUDITED CONDENSED BALANCE SHEETS	1
CARD ACTIVATION TECHNOLOGIES INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS	2
CARD ACTIVATION TECHNOLOGIES INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS	3
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	7
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	11
ITEM 4.  CONTROLS AND PROCEDURES	11
PART II - OTHER INFORMATION	11
ITEM 1.  LEGAL PROCEEDINGS	11
ITEM 6.  EXHIBITS	12

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CARD ACTIVATION TECHNOLOGIES INC.

UNAUDITED CONDENSED BALANCE SHEETS

	June 30,			September 30,
	2011			2010
CURRENT ASSETS
Cash	$	72,462		$	-
Advances to affiliate		-			695,777
Other		-			-
Total current assets		72,462			695,777
TOTAL ASSETS	$	72,462		$	695,777
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable		2,083,519			828,808
Accrued expenses		13,173			14,272
Disputed liabilities		20,000			20,000
Total current liabilities		2,116,692			863,080
TOTAL LIABILITIES		2,116,692			863,080
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 1,000,000 shares authorized; none issued and outstanding as of  June 30, 2011 and September 30, 2010, respectively		-			-
Common stock, $.0001 par value, 300,000,000 shares authorized; 178,398,807 and 174,782,045 shares issued and outstanding as of  June 30, 2011 and September 30, 2010, respectively		17,840			17,478
Additional paid-in capital		1,072,383			1,509,953
Common stock, subscribed, 173,912 shares		10,000			35,250
Accumulated deficit		(3,144,453	)		(1,729,984	)
Total stockholders' equity		(2,044,230	)		(167,303	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	72,462		$	695,777

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

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CARD ACTIVATION TECHNOLOGIES INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
REVENUE
Litigation revenue	$	-		$	437,500		$	264,000		$	687,500
Total		-			437,500			264,000			687,500
COSTS AND EXPENSES
Cost of Revenue		-			83,125			92,400			170,625
General and administrative		832,313			348,283			1,625,235			670,463
Sales and marketing expenses		-			-			-			-
Total operating expenses		832,313			431,408			1,717,635			841,088
OPERATING INCOME (LOSS)		(832,313	)		6,092			(1,453,635	)		(153,588	)
OTHER (INCOME) AND EXPENSES
Interest income		(13,298	)		(24,044	)		(40,205	)		(67,162	)
Interest expense		349			345			1,039			1,043
Total other (income) expense		(12,949	)		(23,699	)		(39,166	)		(66,119	)
INCOME (LOSS) BEFORE INCOME TAXES		(819,364	)		29,791			(1,414,469	)		(87,469	)
INCOME TAX (BENEFIT) PROVISION		-			-			-			-
NET INCOME (LOSS)	$	(819,364	)	$	29,791		$	(1,414,469	)	$	(87,469	)
Weighted Average Common Share Outstanding:
Basic and diluted:		177,755,897			174,782,045			176,650,105			174,782,045
Net Income (Loss) Per Share
Basic and diluted:	$	(0.00	)	$	0.00		$	(0.01	)	$	(0.00	)

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

2

CARD ACTIVATION TECHNOLOGIES INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

	Nine Months Ended June 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(1,414,469	)	$	(87,469	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Discount on common stock issued under subscription agreements		82,994			-
Reserve for bad debts		15,168			-
Changes in assets and liabilities:
Other assets		-			237,500
Accounts payables		1,254,711			406,594
Accrued expenses and disputed liabilities		(1,099	)		(184,232	)
Net cash provided by (used in) operating activities		(62,695	)		372,393
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances to affiliates		(118,669	)		(382,584	)
Proceeds from the sale of common stock, net		141,325			-
Cash received from subscription of common stock		9,000			-
Advances from affiliates		103,501			6,708
Net cash provided by (used in) financing activities		135,157			(375,876	)
INCREASE IN CASH		72,462			(3,483	)
CASH, BEGINNING OF YEAR		-			6,909
CASH, END OF YEAR	$	72,462		$	3,426
Supplemental Cash Flow Information:
Issuance of subscribed stock	$	35,250		$	-
Common stock received as loan repayment	$	695,777		$	-

The accompanying notes are an integral part of these financial statements

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CARD ACTIVATION TECHNOLOGIES INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Background

Card Activation Technologies Inc. ("we," "us," "our" or the "Company") was incorporated in the state of Delaware on August 29, 2006. The Company was formed to own and commercially develop our patented point-of-sale technology for the activation and processing of transactions related to debit-styled cards, which include gift cards, phone cards and other stored value cards.  Currently, our business strategy consists exclusively of attempting to enter into license agreements with third parties to license our rights under our patent and in pursuing patent litigation in an effort to protect our intellectual property and obtain recourse against alleged infringement of our patent.

In order to develop our business plan, we will require funds for working capital. The Company is currently being funded by the sale of its common stock and revenue from litigation settlements.  The Company anticipates increasing its sources of funds in the future by entering into license agreements with third parties to license the use of its patent.  However, no such agreements have been entered into at this time, and the Company cannot predict when, if ever, it will enter into such agreements.

We were formerly a wholly owned subsidiary of MedCom USA Incorporated ("MedCom").  In connection with our formation, MedCom transferred a patent relating to its card technology business to us in exchange for 146,770,504 shares of our common stock.  On October 31, 2006, MedCom's board of directors declared a stock dividend to its shareholders of record at the end of business on December 15, 2006 of one share of our common stock for every one share of common stock of MedCom owned by its shareholders.  On March 1, 2007, MedCom distributed 86,770,504 shares of our common stock to its shareholders pursuant to the stock dividend and retained the balance of 60,000,000 shares of our common stock.  MedCom remains our largest shareholder.

Note 2. Basis of Presentation

The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") which contemplate continuation of the Company as a going concern.   During the three months ended June 30, 2011, the Company recognized a net loss of $819,364.  The Company has incurred an accumulated net loss from the period August 29, 2006 (inception) through June 30, 2011 of $3,144,453.  Further, the Company has inadequate working capital to maintain or develop its operations and is dependent upon funds from private investors and the support of certain stockholders.

These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.  In this regard, our management is proposing to raise any necessary additional funds through a financial institution or through the sale of equity, debt, or a combination of equity and debt, if the Company does not receive additional funding through litigation settlements. There is no assurance that the Company will be successful in raising additional capital.

4

The accompanying condensed financial statements included herein have been prepared by us, without audit, in accordance with the accounting policies described in our audited financial statements and notes thereto for the fiscal year ended September 30, 2010, as presented in our annual report on Form 10-K/A, and pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.  In the opinion of our management, the accompanying condensed financial statements include all adjustments (consisting only of those of a normal recurring nature), which are necessary for a fair presentation of the results for the interim periods presented.  Interim results are not necessarily indicative of results to be expected for any future interim period or for the entire fiscal year.

These condensed financial statements should be read in conjunction with the notes to the audited financial statements presented in our annual report on Form 10-K/A for the year ended September 30, 2010, filed with the SEC.  Our reports are available electronically by visiting the SEC website at http://www.sec.gov.

Recent Accounting Guidance

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

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

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

5

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

Note 3. Related Party Transactions

As of June 30, 2011, the Company was managed by its sole officer and director, Robert Kite.  Mr. Kite serves as sole director and Chairman of the Company's Board of Directors and acts as the Company's principal executive and principal financial officer.  Mr. Kite also serves as chairman of the board of directors, president and chief executive officer of MedCom, a related party, and owns shares of common stock of both MedCom and the Company.  MedCom is also a significant shareholder of the Company.

On September 30, 2010, the Company entered into an agreement with MedCom to repay the amount due from advances made in the amount of $1,478,526.  The Company agreed to accept shares of its common stock valued at the closing price on the date received.  On October 1, 2010, the Company received 8,697,210 shares of its common stock valued at $0.08 per share or $695,777.

The Company advances funds to MedCom at a 7% interest rate per annum.  As of June 30, 2011 and September 30, 2010 the Company had receivables from affiliate advances of zero and $695,777, respectively.

Note 4. Disputed Liabilities

The Company allegedly is party to a note payable with a principle amount of $20,000 at a 7% interest rate with no due date.  The Company is disputing this obligation as management believes that the party entering into the note on behalf of the Company did not have the authority to do so.

Note 5.  Equity

The Company periodically issues shares of its common stock to investors in connection with private placement transactions.  Absent an arm’s length transaction with an independent third-party, the value of any such issued shares is based on the trading value of the stock at the date of issuance.  The Company expenses the difference between the sales price and the fair value of all such issuances in the period incurred.  During the three and nine months ended June 30, 2011, the Company issued 1,668,191 and 2,888,191 common shares for cash values of $94,500 and $158,550, respectively.  During the three and nine months ended June 30, 2011, the Company recognized an expense related to the trading value of the stock issued in excess of amounts received in the amount of $48,637 and $82,994.

6

During the three months ended June 30, 2011 the Company entered into subscription agreements whereby it sold 173,912 shares of common stock to third parties for a value of $10,000.

Note 6.  Commitments and Contingencies

The Company enters into contingency agreements with law firms that represent the Company in certain of its patent litigations.  Under these agreements, the Company typically pays a law firm 35% of the settlement amounts received by the Company and amounts based on future patent litigation successes.  Other cases are handled on an hourly fee basis.

Note 7.  Litigation

In an action pending in the United States District Court for the District of Delaware, the Court recently ruled that the '859 Patent owned by Card Activation Technologies  (“Card”) is invalid. Card’s' only significant asset is the '859 Patent.  Management disagrees with the Court's findings and continues the process of determining the issues for appeal, the likely effects of the Court's ruling on the pending reexamination of the '859 Patent being conducted by the U.S. Patent and Trademark Office ("PTO"), and the likelihood of success in prevailing against adverse rulings issued by the Federal District Court and PTO.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

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

The following discussion contains management's discussion and analysis of financial condition and results of operations.  Management's discussion and analysis should be read in conjunction with "Item 1.  Financial Statements" of this quarterly report on Form 10-Q and Management's Discussion and Analysis of Financial Condition and Results of Operations presented in our annual report on Form 10-K/A for the fiscal year ended September 30, 2010.

7

Overview

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

Results of Operations

Three Months Ended June 30, 2011, Compared to Three Months Ended June 30, 2010

Revenues decreased to zero for the three months ended June 30, 2011, compared to $437,500 for the three months ended June 30, 2010.  The decrease in revenues was due to no settlements for the three months ended June 30, 2011 compared to two for the three months ended June 30, 2010.

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

Cost of revenue consists of contingency fees paid to legal counsel equal to 35% of settlement revenue.  Certain of our settlements are not subject to contingency fees.  Cost of revenue decreased to zero for the three months ended June 30, 2011 from $83,125 for the three months ended June 30, 2010 as a result of no settlements for the three months ended June 30, 2011 compared to two for the comparable period in 2010.

General and administrative expenses consist of salaries and benefits, legal, professional and consulting fees, corporate costs, facilities costs, insurance, travel and entertainment.  General and administrative costs increased 139.0% to $832,213 for the three months ended June 30, 2011 from $348,283 for the three months ended June 30, 2010.  This increase was primarily due to additional legal fees.

Nine Months Ended June 30, 2011, Compared to Nine Months Ended June 30, 2010

Revenues decreased to $264,000 for the nine months ended June 30, 2011, compared to $687,500 for the nine months ended June 30, 2010.  The decrease in revenues was due to four smaller settlement amounts during the nine months ended June 30, 2011 compared to four during the nine months ended June 30, 2010, primarily due to settling with retailers which have less volume utilizing our patent.

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

Cost of revenue consists of contingency fees paid to legal counsel equal to 35% of settlement revenue.  Certain of our settlements are not subject to contingency fees.  Cost of revenue decreased $78,225 to $92,400 for the nine months ended June 30, 2011 from $170,625 for the nine months ended June 30, 2011 as a result of four lower settlement amounts during the nine months ended June 30, 2011 compared to four higher settlement amounts in 2010.

8

General and administrative expenses consist of salaries and benefits, legal, professional and consulting fees, corporate costs, facilities costs, insurance, travel and entertainment.  General and administrative costs increased 142.4% to $1,625,235 for the nine months ended June 30, 2011 from $670,463 for the nine months ended June 30, 2010.  This increase was primarily due to additional legal fees.

Liquidity and Capital Resources

Our primary sources of liquidity are the sale of our common stock and cash generated from operations.  We sold 2,888,191 shares of common stock, issued 728,571 shares of common stock for previous subscription agreements and entered into subscription agreements to sell 173,912 shares of our common stock and received four settlements during the nine months ended June 30, 2011.

The Company anticipates increasing its sources of funds in the future by entering into license agreements with third parties to license the use of its patent.  However, no such agreements have been entered into at this time, and the Company cannot predict when, if ever, it will enter into such agreements.  Management anticipates that the Company's current funds will be able to sustain the Company through the end of the fiscal year, at which point the Company may be required to seek additional financing through a financial institution or through the sale of equity, debt, or a combination of equity or debt, if the Company has not received additional funding through litigation settlements at that time.  The Company does not have any contractual commitments that would be impacted by a loss of funding at this time.

From time to time the Company advances funds to MedCom.  As of June 30, 2011 there were no outstanding amounts due from related parties.

At June 30, 2011, we had cash of $72,462 compared to $0 at September 30, 2010.  The net change in cash for the periods presented was comprised of the following:

	June 30, 2011			June 30, 2010
Cash flow provided by (used in) operating activities	$	(62,695	)	$	372,393
Cash flow provided by (used in) financing activities		135,157			(375,876	)

Cash flow from operating activities was primarily due to net loss of $1,414,469 offset by an increase in accounts payable of approximately $1,255,000 for the nine months ended June 30, 2011.  For the nine months ended June 30, 2010, cash flow from operating activities was primarily due to net loss of $87,469, an increase in other assets and accounts payable offset by a decrease in accrued expenses.

Cash flow from financing activities was due to sale of stock and stock subscriptions of $150,000 offset by a net advance to affiliate of $15,000 for the nine months ended June 30, 2011 compared to net advances to affiliates of approximately $376,000 for the nine months ended June 30, 2010.

9

Recently Issued Accounting Guidance

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

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

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

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

Other Considerations

In an action pending in the United States District Court for the District of Delaware, the Court recently ruled that the '859 Patent owned by Card Activation Technologies  (“Card”) is invalid. Card’s' only significant asset is the '859 Patent.  Management disagrees with the Court's findings and continues the process of determining the issues for appeal, the likely effects of the Court's ruling on the pending reexamination of the '859 Patent being conducted by the U.S. Patent and Trademark Office ("PTO"), and the likelihood of success in prevailing against adverse rulings issued by the Federal District Court and PTO.

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

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter (the quarter ended June 30, 2011) 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

In an action pending in the United States District Court for the District of Delaware, the Court recently ruled that the '859 Patent owned by Card Activation Technologies  (“Card”) is invalid. Card’s' only significant asset is the '859 Patent.  Management disagrees with the Court's findings and continues the process of determining the issues for appeal, the likely effects of the Court's ruling on the pending reexamination of the '859 Patent being conducted by the U.S. Patent and Trademark Office ("PTO"), and the likelihood of success in prevailing against adverse rulings issued by the Federal District Court and PTO.

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

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

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

During the three months ended June 30, 2011, the Company continued its private offering (the "Private Offering") of shares of common stock (the "Common Stock") of the Company.  To date, the Company has sold a total of 3,790,674 shares of Common Stock through the Private Offering for an aggregate price of $203,800.  Total commissions paid to date with respect to the sale of the Common Stock are $18,225.  The Private Offering is being conducted pursuant to an exemption from registration under Regulation D of the Securities Act of 1933, as amended.  The Company believes it falls within this exemption because (i) it has not sold and does not intend to sell Common Stock in the Private Offering to more than 35 purchasers (calculated pursuant to Rule 501(e)); and (ii) each purchaser of the Common Stock pursuant to the Private Offering is either an accredited investor or, if not an accredited investor, the Company reasonably believes that the purchaser, either alone or with his purchaser representative(s), has such knowledge and experience in financial and business matters that the purchaser is capable of evaluating the merits and risks of the prospective investment.

ITEM 6.  EXHIBITS

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

32.1 Certification of Principal Executive and Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

12

SIGNATURES

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

		Card Activation Technologies Inc.
Dated: August 1, 2011	By:	/s/ Robert Kite
		Robert Kite
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer and Principal Financial Officer)

13

EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Kite, certify that:

1. I have reviewed this Report on Form 10-Q of Card Activation Technologies Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 1, 2011	By:	/s/ Robert Kite
		Robert Kite
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer and Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350 AS

ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT

In connection with the Quarterly Report of Card Activation Technologies Inc. (the "Company") on Form 10-Q for the period ending June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert Kite, Principal Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 1, 2011	By:	/s/ Robert Kite
		Robert Kite
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer and Principal Financial Officer)

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Balance Sheet (Parenthetical) (USD $)	Jun. 30, 2011	Sep. 30, 2010
Balance Sheet (Parenthetical) [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized (in shares)	300,000,000	300,000,000
Common stock, issued (in shares)	178,398,807	174,782,045
Common stock, outstanding (in shares)	178,398,807	174,782,045
Common stock, subscribed (in shares)	173,912	173,912

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UNAUDITED CONDENSED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
REVENUE
Litigation revenue	$ 0	$ 437,500	$ 264,000	$ 687,500
Total	0	437,500	264,000	687,500
COSTS AND EXPENSES
Cost of Revenue	0	83,125	92,400	170,625
General and administrative	832,313	348,283	1,625,235	670,463
Sales and marketing expenses	0	0	0	0
Total operating expenses	832,313	431,408	1,717,635	841,088
OPERATING INCOME (LOSS)	(832,313)	6,092	(1,453,635)	(153,588)
OTHER (INCOME) AND EXPENSES
Interest income	(13,298)	(24,044)	(40,205)	(67,162)
Interest expense	349	345	1,039	1,043
Total other (income) expense	(12,949)	(23,699)	(39,166)	(66,119)
INCOME (LOSS) BEFORE INCOME TAXES	(819,364)	29,791	(1,414,469)	(87,469)
INCOME TAX (BENEFIT) PROVISION	0	0	0	0
NET INCOME (LOSS)	$ (819,364)	$ 29,791	$ (1,414,469)	$ (87,469)
Weighted Average Common Share Outstanding:
Basic and diluted:	177,755,897	174,782,045	176,650,105	174,782,045
Net Income (Loss) Per Share
Basic and diluted:	$ 0.00	$ 0.00	$ (0.01)	$ 0.00

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Document And Entity Information (USD $)	9 Months Ended
	Jun. 30, 2011	Jul. 18, 2011	Mar. 31, 2010
Entity Registrant Name	Card Activation Technologies Inc
Entity Central Index Key	0001384522
Current Fiscal Year End Date	--09-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 9,028,378
Entity Common Stock, Shares Outstanding		178,572,719
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011

XML



Litigation

6 Months Ended

Jun. 30, 2011

Litigation [Abstract]

Litigation

Note 7.  Litigation

In an action pending in the United States District Court for the District of Delaware, the Court recently ruled that the '859 Patent owned by Card Activation Technologies  (“Card”) is invalid. Card's' only significant asset is the '859 Patent.  Management disagrees with the Court's findings and continues the process of determining the issues for appeal, the likely effects of the Court's ruling on the pending reexamination of the '859 Patent being conducted by the U.S. Patent and Trademark Office ("PTO"), and the likelihood of success in prevailing against adverse rulings issued by the Federal District Court and PTO.

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Related Party Transactions

9 Months Ended

Jun. 30, 2011

Related Party Transactions [Abstract]

Related Party Transactions

Note 3. Related Party Transactions

As of June 30, 2011, the Company was managed by its sole officer and director, Robert Kite.  Mr. Kite serves as sole director and Chairman of the Company's Board of Directors and acts as the Company's principal executive and principal financial officer.  Mr. Kite also serves as chairman of the board of directors, president and chief executive officer of MedCom, a related party, and owns shares of common stock of both MedCom and the Company.  MedCom is also a significant shareholder of the Company.

On September 30, 2010, the Company entered into an agreement with MedCom to repay the amount due from advances made in the amount of $1,478,526.  The Company agreed to accept shares of its common stock valued at the closing price on the date received.  On October 1, 2010, the Company received 8,697,210 shares of its common stock valued at $0.08 per share or $695,777.

The Company advances funds to MedCom at a 7% interest rate per annum.  As of June 30, 2011 and September 30, 2010 the Company had receivables from affiliate advances of zero and $695,777, respectively.

XML



Background

9 Months Ended

Jun. 30, 2011

Background [Abstract]

Background

Note 1. Background

Card Activation Technologies Inc. ("we," "us," "our" or the "Company") was incorporated in the state of Delaware on August 29, 2006. The Company was formed to own and commercially develop our patented point-of-sale technology for the activation and processing of transactions related to debit-styled cards, which include gift cards, phone cards and other stored value cards.  Currently, our business strategy consists exclusively of attempting to enter into license agreements with third parties to license our rights under our patent and in pursuing patent litigation in an effort to protect our intellectual property and obtain recourse against alleged infringement of our patent.

In order to develop our business plan, we will require funds for working capital. The Company is currently being funded by the sale of its common stock and revenue from litigation settlements.  The Company anticipates increasing its sources of funds in the future by entering into license agreements with third parties to license the use of its patent.  However, no such agreements have been entered into at this time, and the Company cannot predict when, if ever, it will enter into such agreements.

We were formerly a wholly owned subsidiary of MedCom USA Incorporated ("MedCom").  In connection with our formation, MedCom transferred a patent relating to its card technology business to us in exchange for 146,770,504 shares of our common stock.  On October 31, 2006, MedCom's board of directors declared a stock dividend to its shareholders of record at the end of business on December 15, 2006 of one share of our common stock for every one share of common stock of MedCom owned by its shareholders.  On March 1, 2007, MedCom distributed 86,770,504 shares of our common stock to its shareholders pursuant to the stock dividend and retained the balance of 60,000,000 shares of our common stock.  MedCom remains our largest shareholder.

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Disputed Liabilities

9 Months Ended

Jun. 30, 2011

Disputed Liabilities [Abstract]

Disputed Liabilities

Note 4. Disputed Liabilities

The Company allegedly is party to a note payable with a principle amount of $20,000 at a 7% interest rate with no due date.  The Company is disputing this obligation as management believes that the party entering into the note on behalf of the Company did not have the authority to do so.

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Equity

9 Months Ended

Jun. 30, 2011

Equity [Abstract]

Equity

Note 5.  Equity

The Company periodically issues shares of its common stock to investors in connection with private placement transactions.  Absent an arm's length transaction with an independent third-party, the value of any such issued shares is based on the trading value of the stock at the date of issuance.  The Company expenses the difference between the sales price and the fair value of all such issuances in the period incurred.  During the three and nine months ended June 30, 2011, the Company issued 1,668,191 and 2,888,191 common shares for cash values of $94,500 and $158,550, respectively.  During the three and nine months ended June 30, 2011, the Company recognized an expense related to the trading value of the stock issued in excess of amounts received in the amount of $48,637 and $82,994.

During the three months ended June 30, 2011 the Company entered into subscription agreements whereby it sold 173,912 shares of common stock to third parties for a value of $10,000.

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Commitments and Contingencies

9 Months Ended

Jun. 30, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 6.  Commitments and Contingencies

The Company enters into contingency agreements with law firms that represent the Company in certain of its patent litigations.  Under these agreements, the Company typically pays a law firm 35% of the settlement amounts received by the Company and amounts based on future patent litigation successes.  Other cases are handled on an hourly fee basis.

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UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ (1,414,469)	$ (87,469)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Discount on common stock issued under subscription agreements	82,994	0
Reserve for bad debts	15,168	0
Changes in assets and liabilities:
Other assets	0	237,500
Accounts payables	1,254,711	406,594
Accrued expenses and disputed liabilities	(1,099)	(184,232)
Net cash provided by (used in) operating activities	(62,695)	372,393
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances to affiliates	(118,669)	(382,584)
Proceeds from the sale of common stock, net	141,325	0
Cash received from subscription of common stock	9,000	0
Advances from affiliates	103,501	6,708
Net cash provided by (used in) financing activities	135,157	(375,876)
INCREASE IN CASH	72,462	(3,483)
CASH, BEGINNING OF YEAR	0	6,909
CASH, END OF YEAR	72,462	3,426
Supplemental Cash Flow Information:
Issuance of subscribed stock	35,250	0
Common stock received as loan repayment	$ 695,777	$ 0

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Basis of Presentation

9 Months Ended

Jun. 30, 2011

Basis of Presentation [Abstract]

Basis of Presentation

Note 2. Basis of Presentation

The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") which contemplate continuation of the Company as a going concern.   During the three months ended June 30, 2011, the Company recognized a net loss of $819,364.  The Company has incurred an accumulated net loss from the period August 29, 2006 (inception) through June 30, 2011 of $3,144,453.  Further, the Company has inadequate working capital to maintain or develop its operations and is dependent upon funds from private investors and the support of certain stockholders.

These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.  In this regard, our management is proposing to raise any necessary additional funds through a financial institution or through the sale of equity, debt, or a combination of equity and debt, if the Company does not receive additional funding through litigation settlements. There is no assurance that the Company will be successful in raising additional capital.

The accompanying condensed financial statements included herein have been prepared by us, without audit, in accordance with the accounting policies described in our audited financial statements and notes thereto for the fiscal year ended September 30, 2010, as presented in our annual report on Form 10-K/A, and pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.  In the opinion of our management, the accompanying condensed financial statements include all adjustments (consisting only of those of a normal recurring nature), which are necessary for a fair presentation of the results for the interim periods presented.  Interim results are not necessarily indicative of results to be expected for any future interim period or for the entire fiscal year.

These condensed financial statements should be read in conjunction with the notes to the audited financial statements presented in our annual report on Form 10-K/A for the year ended September 30, 2010, filed with the SEC.  Our reports are available electronically by visiting the SEC website at http://www.sec.gov.

Recent Accounting Guidance

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

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

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

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

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Balance Sheet (USD $)	Jun. 30, 2011	Sep. 30, 2010
CURRENT ASSETS
Cash	$ 72,462	$ 0
Advances to affiliate	0	695,777
Other	0	0
Total current assets	72,462	695,777
TOTAL ASSETS	72,462	695,777
CURRENT LIABILITIES:
Accounts payable	2,083,519	828,808
Accrued expenses	13,173	14,272
Disputed liabilities	20,000	20,000
Total current liabilities	2,116,692	863,080
TOTAL LIABILITIES	2,116,692	863,080
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 1,000,000 shares authorized; none issued and outstanding as of June 30, 2011 and September 30, 2010, respectively	0	0
Common stock, $.0001 par value, 300,000,000 shares authorized; 178,398,807 and 174,782,045 shares issued and outstanding as of June 30, 2011 and September 30, 2010, respectively	17,840	17,478
Additional paid-in capital	1,072,383	1,509,953
Common stock, subscribed, 173,912 shares	10,000	35,250
Accumulated deficit	(3,144,453)	(1,729,984)
Total stockholders' equity	(2,044,230)	(167,303)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 72,462	$ 695,777