UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2011

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 Cirle #3-722
Las Vegas, Nevada	60604-3749
(Address of principal executive offices)	(Zip Code)

(312) 972-1662

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes x No 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 February 10, 2011, the issuer had 180,072,719 shares of common stock, $0.0001 par value per share, outstanding.

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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	6

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9

ITEM 4. CONTROLS AND PROCEDURES	9

PART II - OTHER INFORMATION	9

ITEM 1. LEGAL PROCEEDINGS	9

ITEM 6. EXHIBITS	10

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARD ACTIVATION TECHNOLOGIES, INC.

UNAUDITED CONDENSED BALANCE SHEETS


	December 31, 2011			September 30, 2011
CURRENT ASSETS
Cash	$	10,516		$	49,750
Advances to affiliate		-			-
Total current assets		10,516			49,750

TOTAL ASSETS	$	10,516		$	49,750

LIABILITIES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:
Accounts payable		2,232,821			2,204,355
Accrued expenses		13,903			13,525
Note payable		15,000			-
Disputed liabilities		20,000			20,000
Total current liabilities		2,281,724			2,237,880

TOTAL LIABILITIES		2,281,724			2,237,880

STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 1,000,000 shares authorized;none issued and outstanding as of December 31, 2011and September 30, 2011, respectively		-			-
Common stock, $.0001 par value, 300,000,000 shares authorized;180,072,719 and 174,782,045 shares issued and outstanding as of December 31, 2011 and September 30, 2011 respectively		18,008			18,008
Additional paid-in capital		1,095,716			1,095,716
Accumulated deficit		(3,384,932	)		(3,301,854	)
Total stockholders' equity		(2,271,208	)		(2,188,130	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	10,516		$	49,750

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 December 31,
	2011			2010


REVENUE
Litigation revenue	$	-		$	164,000
Total		-			164,000

COSTS AND EXPENSES
Cost of Revenue		-			57,400
General and administrative		97,162			424,911
Total operating expenses		97,162			482,311
OPERATING INCOME (LOSS)		(97,162	)		(318,311	)

OTHER (INCOME) AND EXPENSES
Interest income		(14,461	)		(13,532	)
Interest expense		377			345
Total other (income) expense		(14,084	)		(13,187	)

INCOME (LOSS) BEFORE INCOME TAXES		(83,078	)		(305,124	)

INCOME TAX (BENEFIT) PROVISION		-			-

NET INCOME (LOSS)	$	(83,078	)	$	(305,124	)

Weighted Average Common Share Outstanding:
Basic and diluted:		180,072,719			176,730,616

Net Income (Loss) Per Share
Basic and diluted:	$	(0.00	)	$	(0.00	)

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

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CARD ACTIVATION TECHNOLOGIES, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

	Three Months Ended December 31,
	2011			2010




CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(83,078	)	$	(305,124	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Discount on common stock issued under subscription agreements		-			34,358
Reserve for bad debts		14,461			13,510
Changes in assets and liabilities:
Other assets		-			(6,775	)
Accounts payables		28,466			274,568
Accrued expenses and disputed liabilities		378			(1,794	)
Net cash provided by (used in) operating activities		(39,773	)		8,743

CASH FLOWS FROM FINANCING ACTIVITIES:
Advances to affiliates		(14,461	)		(15,995	)
Proceeds from note payable		15,000			-
Proceeds from the sale of common stock, net		-			64,050
Net cash provided by (used in) financing activities		539			48,055

INCREASE IN CASH		(39,234	)		56,798
CASH, BEGINNING OF YEAR		49,750			-
CASH, END OF YEAR	$	10,516		$	56,798

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. The payment technology is covered by one patent (U.S. Patent No. 6.032,859, entitled ‘METHOD FOR PROCESSING DEBIT PURCHASE TRANSACTIONS USING A COUNTER-TOP TERMINAL SYSTEM’, referred to herein as the “’859 Patent”). The ‘859 Patent covers the technology and process for taking a card with a magnetic strip or other data capture mechanism and activating the card by down loading a determined monetary value onto the card for use at a later date for different types of transactions.

Currently, our business strategy consists exclusively of attempting to enter into license agreements with third parties to license our rights under our ‘859 Patent and in pursuing patent litigation in an effort to protect our intellectual property and obtain recourse against alleged infringement of our ‘859 Patent. Our ability to continue to pursue licensing agreements and patent litigation to protect our intellectual property is subject to our pending appeals regarding the validity of the '859 Patent, our principal asset, as discussed below. The ‘859 Patent was transferred to us by MedCom USA, Incorporated (“MedCom’) upon our formation in exchange for 146,770,504 shares of our common stock.

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 December 31, 2011, the Company recognized a net loss of $83,078. The Company has incurred an accumulated net loss from the period August 29, 2006 (inception) through December 31, 2011 of $3,384,932. 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.

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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, 2011, as presented in our annual report on Form 10-K, and pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with 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 for the year ended September 30, 2011, filed with the SEC. Our reports are available electronically by visiting the SEC website at http://www.sec.gov.

Recent Accounting Guidance

None.

Note 3. Related Party Transactions

As of December 31, 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 recorded a reserve for bad debt on the remaining balance of $782,749 for the year ended September 30, 2010.

The Company advances funds to MedCom at a 7% interest rate per annum. As of December 31, 2011 and September 30, 2011 the Company had receivables from affiliate advances of zero.

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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Note 5. Note Payable

On December 27, 2011, the Company entered into a note payable in the amount of $15,000 due December 26, 2012, bearing interest at 20%. The holder has an option to convert the note to common stock at $0.005 per share during the term of the note. The Company has the right to purchase the note, including interest and conversion rights for $37,500 during the term of the note.

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 the Company is invalid. The Company’s only significant asset is the ‘859 Patent. Management disagrees with the Court’s findings and continues to prosecute an appeal of this decision before the United States Court of Appeals for the Federal Circuit. Pursuant to a reexamination proceeding, the United States Patent and Trademark Office has issued an Final Office Action ruling that all claims of the '859 Patent are invalid. Management also disagrees with the findings and determination made by the United States Patent and Trademark Office and continues to prosecute an appeal of the determination to the Board of Patent Appeals and Interferences.

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.

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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.

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 ‘859 Patent and in pursuing patent litigation in an effort to protect our intellectual property and obtain recourse against alleged infringement of our ‘859 Patent. Our ability to continue to pursue licensing agreements and patent litigation to protect our intellectual property is subject to our pending appeals regarding the validity of the ‘859 Patent. If the pending appeals concerning the ‘859 Patent result in a favorable determination of validity, we intend to aggressively enforce our rights during the remaining life of the ‘859 patent, and to seek royalty payments from all infringing parties until the ‘859 Patent expires in 2017.

Results of Operations

Three Months Ended December 31, 2011, Compared to Three Months Ended December 31, 2010

Revenues decreased to zero for the three months ended December 31, 2011, compared to $164,000 for the three months ended December 31, 2010. The decrease in revenues was due to no settlements for the three months ended December 31, 2011 compared to three for the three months ended December 31, 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 December 31, 2011 from $57,400 for the three months ended December 31, 2010 as a result of no settlements for the three months ended December 31, 2011 compared to three 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 decreased 77.1% to $97,162 for the three months ended December 31, 2011 from $424,911 for the three months ended December 31, 2010. This increase was primarily due to decreased legal fees.

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Liquidity and Capital Resources

Our primary sources of liquidity are the sale of our common stock, cash borrowings and cash generated from operations. We borrowed $15,000 with a 12 month term and interest rate of 20% during the three months ended December 31, 2011.

The Company’s operating requirements have historically been funded from the sale of our common stock and litigation settlement revenue. Subject to the pending appeals regarding the ‘859 Patent discussed above, we expect our future operations will be funded from the litigation revenue settlements as well as revenues from licensing our technology. In addition the Company is researching potential business combinations that would utilize our technology or enhance our strategy, although no such target acquisition has been identified.

In order to develop our business plan, we will require funds for working capital. We are attempting to raise additional working capital through the sale of equity, debt or a combination of equity and debt. We do not presently have any firm commitments for additional working capital and there are no assurances that such capital will be available to us when needed or upon terms and conditions which are acceptable to us. If we are able to secure additional working capital through the sale of equity securities, the ownership interests of our current stockholders will be diluted. If we raise additional working capital through the issuance of debt or additional dividend paying securities our future interest and dividend expenses will increase. If we are unable to secure additional working capital as needed, our ability to grow our sales, meet our operating and financing obligations as they become due and continue our business and operations could be in jeopardy.

The Company is currently being funded by the sale of its common stock and revenue from litigation settlements. Subject to the pending appeals regarding the ‘859 Patent discussed above, 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 ‘859 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 next three to six months, 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 and 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 December 31, 2011 there were no outstanding amounts due from related parties.

Recently Issued Accounting Guidance

None.

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Other Considerations

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.

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 December 31, 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

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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.

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

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SIGNATURES

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

		Card Activation Technologies Inc.

Dated: February 10, 2011	By:	/s/ Robert Kite
		Robert Kite
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer and Principal Financial Officer)

Card Activation Technologies Inc 10-Q