<PAGE>
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_
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
American Card Technology, Inc.
(a development stage company)
Balance Sheets
Assets
<TABLE>
<CAPTION>
Unaudited
March 31,1999 December 31,1998
------------- ----------------
<S> <C> <C>
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
<S> <C> <C>
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.
</TABLE>
<PAGE>
American Card Technology, Inc.
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
Unaudited
Period from
Unaudited June 21,1994
Three Months Ended (inception) to
----------------------------- March 31, 1999
March 31,1999 March 31,1998
------------- ------------- -------------
<S> <C> <C> <C>
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.
</TABLE>
<PAGE>
American Card Technology, Inc.
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Unaudited
Period from
Unaudited June 21,1994
Three months ended (inception) to
---------------------------- --------------
March 31,1999 March 31,1998 March 31,1999
<S> <C> <C> <C>
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.
</TABLE>
<PAGE>
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.
<PAGE>
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
<PAGE>
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).
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<PAGE>
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
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.<PAGE>
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. <PAGE>
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
<PAGE>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>4
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 65,030
<SECURITIES> 0
<RECEIVABLES> 34,896
<ALLOWANCES> 0
<INVENTORY> 155,920
<CURRENT-ASSETS> 283,378
<PP&E> 217,897
<DEPRECIATION> ( 119,175)
<TOTAL-ASSETS> 1,147,094
<CURRENT-LIABILITIES> 2,902,197
<BONDS> 0
0
0
<COMMON> 3,901
<OTHER-SE> (4,198,365)
<TOTAL-LIABILITY-AND-EQUITY> 1,147,094
<SALES> 52,418
<TOTAL-REVENUES> 52,418
<CGS> 36,590
<TOTAL-COSTS> 557,081
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,153
<INCOME-PRETAX> (618,406)
<INCOME-TAX> 0
<INCOME-CONTINUING> (618,406)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (618,406)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
