AMERICAN CARD TECHNOLOGY INC, SB-2/A, 1999-01-12

AMERICAN CARD TECHNOLOGY INC
SB-2/A, 1999-01-12
COMPUTER PROCESSING & DATA PREPARATION

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 1999

REGISTRATION NO. 333-52169
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
--------------------------

AMERICAN CARD TECHNOLOGY, INC.

(Name of Small Business Issuer as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7379 06-1403123
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>

AMERICAN CARD TECHNOLOGY, INC.
1355 TERRELL MILL ROAD. BUILDING 1462, SUITE 200
MARIETTA, GEORGIA 30067
(612) 929-5249

(Address and Telephone Number of Principal Executive Offices and Address of
Principal Place of Business or Intended Principal Place of Business.)

RAYMOND FINDLEY, JR.
1355 TERRELL MILL ROAD. BUILDING 1462, SUITE 200
MARIETTA, GEORGIA 30067
(612) 929-5249

(Name, Address and Telephone Number of Agent for Service)
--------------------------

COPIES TO:

R. JOHN BARTZ, ESQ.
Bartz & Bartz
Southdale Office Centre
6750 France Avenue South, Suite 350
Edina, MN. 55435
(612) 920-3959 (612) 920 6494 (Fax)
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
--------------------------

If any of the Securities being registered in this form are to be offered, on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock $.001 par value................ 648,900 $11.00 $7,137,900 $2,107
Total....................................... $7,137,900 $2,107
</TABLE>

(1) Estimated pursuant to Rule 457(a) under the Securities Act of 1933, as
amended, solely for purposes of computing the registration fee.
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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PROSPECTUS

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 11, 1999
AMERICAN CARD TECHNOLOGY, INC.
1355 TERRELL MILL ROAD, BUILDING 1462, SUITE 200, MARIETTA, GEORGIA 30067 (770)
951-2284

648,900 SHARES (MAXIMUM OFFERING)
454,600 SHARES (MINIMUM OFFERING)
COMMON STOCK (PAR VALUE $.001)
$11.00 PER SHARE
------------------

All of the shares of Common Stock, par value $.001 (the "Common Stock"),
offered hereby are being sold by American Card Technology, Inc. ("the Company").
Prior to this Offering there has been no public market for the Common Stock. See
"Underwriting" for a discussion of factors considered in determining the initial
public offering price. This Offering is being made by the Company's Underwriter,
Rockcrest Securities L.L.C. of Dallas, Texas (the "Underwriter") on a "best
efforts" basis. There can be no assurance that the minimum number of shares will
be sold. All shares sold will be held in escrow with The Bank of New York (the
"Escrow Agent") until the minimum number of shares have been sold, pursuant to
an escrow agreement between the Company and Escrow Agent. If 454,600 shares (the
minimum offering) are not sold within one hundred eighty (180) days following
commencement of the public offering, the offering will terminate automatically
and all funds paid for shares will be promptly returned to the purchasers
without deductions and without interest. See "Introductory Statement," "Risk
Factors" and "Underwriting".

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS
WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 9 AND "DILUTION" ON PAGE 19.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS & PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) THE COMPANY(2)
<S> <C> <C> <C>
Per Share................................................ $11.00 $1.10 $9.90
Total Minimum (454,600 shares)........................... $5,000,600 $500,060 $4,500,540
Total Maximum (648,900 shares)........................... $7,137,900 $713,790 $6,424,110
</TABLE>

(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) The Company will have prepaid costs and expenses of the Offering totaling
$235,947, which sum represents estimated legal, accounting, copying,
advertising, underwriting and other miscellaneous items.
------------------------

The shares of Common Stock are offered by the Underwriter subject to prior
sale, when, as and if delivered to and accepted by the Underwriter, and subject
to the right of the Underwriter to reject any order in whole or in part and to
withdraw, cancel or modify this offer without notice. It is expected that
delivery of the shares of Common Stock will be made at the offices of Rockcrest
Securities L.L.C. in Dallas, Texas on or about , 1998, subject to the
minimum offering being attained ($5,000,600) or thereafter against payment
therefor in immediately available funds.
------------------------

ROCKCREST SECURITIES L.L.C.

THE DATE OF THIS PROSPECTUS IS , 1999

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AVAILABLE INFORMATION

INVESTORS SHOULD CAREFULLY REVIEW THE FINANCIAL STATEMENTS WHICH ARE AN
INTEGRAL PART OF THIS PROSPECTUS.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE COMMON STOCK AT LEVELS
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of this Offering, the Company will become subject to such requirements
and, in accordance therewith, will file periodic reports, proxy materials and
other information with the Securities and Exchange Commission (the
"Commission"). In addition, the Company will furnish its stockholders with
annual reports containing audited financial statements certified by its
independent accountants and such interim reports containing unaudited financial
information as it may determine to be necessary or desirable. The Company will
provide without charge to each person who receives a copy of this Prospectus,
upon written or oral request, a copy of any of the information that is
incorporated by reference in this Prospectus (not including exhibits to the
information that is incorporated by reference unless the exhibits are themselves
specifically incorporated by reference). Such request should be directed to
American Card Technology, Inc., 1355 Terrell Mill Road, Building 1462, Suite
200, Marietta, Georgia 30067.

No person is authorized in connection with any offering made hereby to give
any information or to make any representation other than as contained in this
Prospectus, and if given or made, such information or representation must not be
relied upon as having been authorized by the Company or by any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the shares of Common Stock offered hereby, nor does
it constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation to such person. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstance create any implication that the information contained herein is
correct as of any date subsequent to the date hereof.

In this Prospectus, references to "dollars" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.

ATTENTION OKLAHOMA, KANSAS AND WASHINGTON INVESTORS: Only investors meeting
minimum financial requirements may invest in this offering. Such requirements
state that investors must have minimum annual income of $65,000 plus minimum net
worth of $65,000 exclusive of home, furnishings and automobiles, or minimum net
worth of $150,000 excluding home, furnishings and automobiles. Investors in
these states who do not meet these minimum requirements may not invest in this
offering.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS URGED TO
READ THIS PROSPECTUS IN ITS ENTIRETY. THE STATEMENTS CONTAINED IN THIS
PROSPECTUS WHICH ARE NOT HISTORICAL FACTS ARE FORWARD LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, THOSE DESCRIBED
UNDER "RISK FACTORS." UNLESS OTHERWISE INDICATED, ALL INFORMATION CONTAINED IN
THIS PROSPECTUS, INCLUDING ALL SHARE AND PER SHARE DATA AND INFORMATION RELATING
TO THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING, GIVES EFFECT TO A
4.06-FOR-1 STOCK SPLIT EFFECTED IN JANUARY 1996, A 2.500-FOR-1 STOCK SPLIT
EFFECTED IN DECEMBER 1996 AND 1.545-FOR-1 STOCK SPLIT EFFECTED IN JULY 1998.
THERE CAN BE NO ASSURANCE THAT THE MINIMUM NUMBER OF SHARES WILL BE SOLD. IF THE
MINIMUM OFFERING IS NOT SOLD WITHIN ONE HUNDRED EIGHTY (180) DAYS FOLLOWING THE
COMMENCEMENT OF THIS OFFERING, THE OFFERING WILL TERMINATE AUTOMATICALLY AND ALL
FUNDS PAID FOR SHARES WILL BE RETURNED TO THE PURCHASERS WITHOUT DEDUCTIONS AND
WITHOUT INTEREST. SEE "UNDERWRITING."

THE COMPANY

American Card Technology, Inc. (the "Company"), a development stage company
incorporated in June 1994, was organized to design, develop and market high
security, flexible, multiple application smart card systems. A smart card is a
credit card-sized plastic card containing a microchip that provides the card
with memory storage capabilities in a secure environment and, in advanced
versions such as the Company's, enables the card to perform data processing
functions. Smart card systems are typically used by government agencies or
commercial enterprises (the "System Sponsor") to store, access and modify
participant or customer (the "User") information. The Company has received
United States Patent Number 5629508 with respect to its dual card access
technology and methods. The Company's proprietary smart card technology and
software enable System Sponsors to store data on a User's smart card, and enable
the System Sponsor, or a service provider authorized by the System Sponsor (the
"Authorized Service Provider") to access User information and read, input,
delete, modify and process such data. The Company designs its smart card systems
to perform functions for various target markets, such as employee licensing,
animal health and registration, frequent patron tracking, health care and
various government applications, and can design each system to perform various
functions in virtually any industry, depending on the System Sponsors' needs.

The dual card access technology incorporated in the Company's smart card
systems requires the simultaneous use of both a card issued to a User (a "User
Card") and a card issued to an Authorized Service Provider (an "Access Card") to
access the system. The information on the User's smart card cannot be accessed
or modified unless used in tandem with the Authorized Service Provider's card.
For example, a health maintenance organization ("HMO") could sponsor a system
whereby each User patient enrolled in the HMO would receive a smart card with
his or her medical records and insurance information stored on the card's
microprocessor chip. The HMO would issue Access Cards to its member physicians
as Authorized Service Providers and, when a patient visits any of these
HMO-affiliated physicians, the physician would be able to review and update the
patient's medical record and history. The Authorized Service Provider could be
issued separate Access Cards from the HMO allowing different functions for
different security levels. For example, the receptionist's Access Card may allow
access only to insurance information; the nurse's Access Card may allow the
nurse to view but not modify patient records; and the doctor's Access Card may
allow the doctor to access and update patient medical records. The dual card
access technology provides enhanced security for the information on the User
Card by preventing unauthorized persons from accessing or modifying such data
without the proper Access Card and allowing each Access Card to view or
manipulate only the information on the User Card which corresponds to that
Access Card's authorization level. Each System Sponsor determines how much
security it desires at each level, and the Company designs the smart card system
for that System Sponsor around those parameters. The Company believes that its
smart card systems, which offer the capability to perform multiple functions on
a single card, provide enhanced security and privacy protection not offered by
existing smart cards and

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position the Company to capitalize on perceived market opportunities for
information systems incorporating smart card technology.

Smart card technology is currently in wide use in Europe, the Pacific Rim,
Latin America and the Middle East. According to the market researcher Dataquest,
the microprocessor and memory based smart card market will grow from 544 million
cards in 1995 to 3.4 billion cards by 2001. Most smart cards currently in use
are low capacity memory-only phone cards that provide only data storage, reading
and deletion capabilities. More sophisticated smart cards, including the
Company's smart cards, are microprocessor-based and therefore have the ability
not only to store, read and delete data but also to add, modify and process
data. The Company believes that most microprocessor-based smart cards currently
in use were designed to perform functions for single purpose applications only,
such as pay television access control, medical or academic recordkeeping or
insurance claim processing. The Company believes that these smart cards
generally utilize multiple, alternative technologies, such as microchips, bar
codes and magnetic stripes simultaneously, or allow access by any Authorized
Service Provider to all the information included within the card. To the best of
the Company's knowledge there are no other cards in use that meet the same dual
card access and multiple application specifications as the Company's proprietary
system. However there is no guarantee that such cards which function in a
similar or superior fashion to the Company's proprietary system are not under
development at this time. See "Competition" under "Risk Factors."

Although the use of smart cards is increasing, most cards currently used in
electronic transactions are magnetic stripe cards, such as ordinary credit
cards. Such cards contain only limited information such as account numbers and
identification information, but cannot store or update additional information
such as current account balances. The Company believes that its proprietary
smart card systems, comprised of smart cards, read/write devices, other related
hardware and system software offer certain advantages over magnetic stripe cards
and existing smart card systems, including enhanced security features and
multiple function capabilities through the use of dual card access technology
and multiple application layering.

The Company's smart cards are uniquely designed to include multiple
application layers, with each layer enabling the performance of numerous
functions when activated by the proper Access Card. The Company's smart card
systems can provide different System Sponsors or Authorized Service Providers
with access to different application layers on one User's smart card. Therefore,
an HMO could store, on the same card that contains a User's medical records,
insurance claim records for access only by the HMO's benefits administrators.
Each application layer contains its own security feature and can only be
accessed or altered by the Authorized Service Provider holding the Access Card
programmed for that layer. By providing a System Sponsor the ability to add
applications over time, as well as allowing multiple System Sponsors to utilize
different layers of the same smart card for different purposes, the Company's
smart card systems will enable the cost per smart card to be allocated among
separate System Sponsors or different departments within a single System
Sponsor. The Company believes that these features position its smart card
systems as secure, cost-effective solutions for electronic transaction and
information processing.

To date, the Company has executed two contracts with the North American
Pari-Mutuel Regulators Association ("NAPRA") to provide and maintain an
internet-based regulatory tracking system that includes a database with
licensing information, infraction records and digital photographs of the
licensees in its jurisdictions. NAPRA is an organization comprised of nineteen
pari-mutuel wagering jurisdictions located in North America, including horse and
dog racing, jai alai and card rooms. In addition to the contracts with NAPRA,
the Company has developed and installed smart card based employee identification
and licensing systems in five NAPRA jurisdictions: the Birmingham Racing
Commission and the Macon County Racing Commission, both in Alabama, the Oregon
Racing Commission, the Idaho State Racing Commission, and the Wyoming
Pari-Mutuel Commission. In addition, the Company has a similar contract with the
Colorado Racing Commission. The Company recently submitted a proposal to an

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additional NAPRA jurisdiction, the Arizona Racing Commission, to provide a smart
card based employee identification and licensing system.

The Company has also entered into a contract with the Florida Department of
Pari-Mutuel Wagering to develop and maintain an internet accessible smart card
based employee identification and licensing database system for their 27
pari-mutuel wagering facilities around the state. The licensing system the
Company is developing for the State of Florida will be a database maintained by
ACTI and will be accessible by the Internet. The smart card licenses of the
employees will be utilized to provide secure access to the web site and the
database through the Internet. The Company expects this system to be installed
by March, 1999.

The Company has completed a pilot program in New Jersey and Pennsylvania for
the issuance of "equine medical passport" smart cards for monitoring the
identity, interstate and intrastate movement and medical records of thoroughbred
horses. The Florida Department of Agriculture and Consumer Services Bureau of
Disease Control has proposed a similar pilot project anticipated to begin as
soon as possible. The Bureau of Disease Control is responsible for ensuring the
health and marketability of livestock in the state of Florida. To prevent the
spread of a deadly disease, the federal government requires any horse crossing
state lines to have a negative Coggins Report which evidences a negative test
result for Equine Infectious Anemia. A Coggins Report is valid for one year from
the issue date. Further, each state requires a valid health certificate for any
horse entering the state. The states of Florida, Georgia and Alabama have formed
an alliance whereby a special ninety (90) day pass authorized by any of the
three states can be used to cross state lines between these states. The proposed
Florida pilot program will involve a test "livestock medical passport" program
in which each of 100 animals will be implanted with an "electronic
identification transponder" used in conjunction with smart cards to verify each
animal's identity and federal and state medical certifications. This pilot
program will replace the required paper passports for horses crossing between
these states. Although completed programs in New Jersey and Pennsylvania
successfully tested the equine medical passport smart card system and similar
electronic transponder implants are in use which are not coordinated with smart
card technology, such equine medical passport pilot programs have not resulted
in any system sales to date. There can be no assurance that any of the Company's
pilot programs will result in system purchases by any potential System Sponsor.

The Company has entered into a Memorandum of Understanding with Traquer
Systems, Inc. ("Traquer") to market the Company's smart card systems to Indian
gaming and wagering facilities in North America. Traquer has significant
expertise with the rules and regulations for Indian gaming environments. In
February 1998, the Company received its first order from Traquer to provide a
smart card based employee licensing system to an Indian tribe in Arizona. This
system was installed in October 1998.

The Company received a request from Foundation Health, a Florida based HMO,
to structure a smart card system to assist and expedite the verification of
patient insurance coverage by hospital employees. The pilot program involves
Palmetto Hospital, one of the largest hospitals in Miami, Florida, and the
Company anticipates the initial phase will be installed during the first quarter
of 1999. Other phases of this proposed project may include expanding the smart
card based verification capability to all Foundation Health member hospitals and
Authorized Service Providers in south Florida. The final phase may provide all
Foundation Health members with enhanced smart card member identification
capabilities.

The Company has also been selected as a subcontractor to Paradigm 4 for the
registered New York City Time Project. The City of New York has significant
problems tracking city employees and verifying the accuracy of actual hours
worked. This project will pilot a number of technologies, including the use of
smart cards, for time and attendance management and tracking of city employees.

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Microsoft's Windows Card beta program. The exact role of the Company in this
regard has not yet been determined or formalized, and there can be no assurances
in this regard or that meaningful opportunities for the Company will result.

The Company has formed a new business entity with AVID Identification
Devices, Inc. called Animal Passports, Inc. (API). While final business terms
remain to be negotiated, it is anticipated that API will develop, market, and
sell smart-card applications incorporating the Company's patented technology for
all animal owners worldwide. AVID, using PETtrac, a worldwide computerized
tracking system for companion animals, will be responsible for providing its
marketing and sales expertise to the new company and ACTI will be responsible
for providing smart card technology and technological support. Ownership will be
equal between the Company and AVID, however, AVID will be responsible for
funding the initial costs of API. It is anticipated that the Company's smart
card technology will be used in conjunction with AVID's radio frequency
identification devices currently being sold worldwide to veterinarians and other
customers. Owners of animals will carry with them a smart card containing animal
tracking information related to the existing PETtrac identification systems as
well as other AVID related applications, including animal records. This venture
is in the formative stages and there can be no assurances that the venture will
be undertaken as presently anticipated or that meaningful revenues will result.

The Company has issued a two year Non-Exclusive Representation Agreement to
DTEC/Comprehensive Pharmacy Services, Inc., a wholly owned subsidiary of Service
Master Corporation. DTEC/CPS provides a full range of services and technologies
to the health care industry. The core of the company's business is in pharmacy
consulting and pharmacy management expertise. DTEC/CPS has the right to market
the Company's smart card products and services to its extensive customer base
throughout the world. DTEC/CPS and the University of Tennessee are currently
engaged in several research projects where smart cards could play a significant
role. It is anticipated that the Company will greatly benefit from these
projects, however, there can be no assurance that the Company's involvement will
result in sales to the University of Tennessee or to any other DTEC/CPS
customer.

The Company's objective is to become a leading provider of smart card
systems to government and commercial System Sponsors requiring increasingly
complex, secure and cost-effective information processing systems. Although the
Company expects to continue to market smart card systems directly through its
management and employees, including a recently appointed Director of Sales, the
Company intends to establish strategic marketing alliances and licensing or
other arrangements with systems integrators, value-added resellers and other
smart card vendors and may also retain the services of sales representatives and
marketing and other consultants. 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 integrated smart card solutions, on a turnkey basis, to System Sponsors
by providing all hardware and software elements required to implement the
system.

Since inception, the Company has been engaged principally in organizational
activities, including developing a business plan, hiring personnel and
developing and enhancing its smart card technology and software, and has only
recently commenced the limited marketing of its smart card systems. The Company
has generated limited revenues and incurred significant operating losses.
Therefore, the Company has a limited operating history upon which an evaluation
of its prospects can be made. The Company's prospects must be considered in
light of the risks, uncertainties, expenses, delays and difficulties associated
with the establishment of a new business in the evolving smart card industry, as
well as those risks encountered in the shift from development to
commercialization of new products based on innovative technologies. There can be
no assurance that the Company's smart card systems will ever gain market
acceptance, or that the Company will be able to successfully implement its
marketing strategies, generate meaningful revenues or ever achieve profitable
operations.

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The Company was incorporated under the laws of the State of Delaware in June
1994. Unless otherwise indicated, all references to the Company include Canadian
Smart Card Technology Inc., its majority-owned subsidiary incorporated under the
laws of Ontario, Canada (the "Subsidiary"), which was created to exploit the
Company's technology in Canada. The Company's principal executive offices are
located at 1355 Terrell Mill Road, Building 1462, Suite 200, Marietta, Georgia
30067 and its telephone number is (770) 951-2284.

RECENT FINANCING

From July 1997 through January 1998, three directors, Raymond A. Roncari,
Harold Rothstein and Lawrence O. Perl, have provided loans to the Company in the
amounts of $320,000, $460,000 and $15,000, respectively (the "Stockholder
Loans"), each bearing interest at an annual rate of ten percent (10%). These
loans provided the Company with working capital and covered some costs
associated with this Offering. Except for $15,000, these loans, along with
certain other loans, have been converted to equity as of September 30, 1998.

In February and March 1998, the Company sold investment units to investors
for an aggregate of $1,500,000 in a private placement offering (the "1998
Private Placement"). Each unit consisted of (i) an unsecured, nonnegotiable
promissory note in the principal amount of $50,000 (the "Bridge Notes"), (A)
bearing interest at the rate of ten percent (10%) per annum, payable annually in
arrears, and (B) providing for a loan fee payable upon payoff of the Bridge Note
in an amount equal to $5,000 less interest accrued under the Bridge Note during
the first year through the date of payoff; (ii) 3,863 shares of Common Stock
(the "Bridge Shares"); and (iii) 3,863 bridge warrants, each bridge warrant
representing the right to purchase one share of Common Stock at a price of
eighty percent (80%), subsequently amended to eighty-five percent (85%), of the
per share market price of the Common Stock on the exercise date (the "Bridge
Warrants"). In addition, Messrs. Roncari and Rothstein entered into certain loan
agreements (the "Director Loan Agreements") committing each of them to loan
$450,000 (for a total of $900,000) to the Company to be used for working capital
and certain costs of this Offering (the "Director Loans"). In consideration for
this commitment, Messrs. Rothstein and Roncari were each granted 19,313 shares
of Common Stock of the Company and warrants to purchase 19,313 shares of Common
Stock at an exercise price of eighty percent (80%), subsequently amended to
eighty-five percent (85%), of the market price of the Common Stock on the
exercise date (the "Commitment Warrants"). The Company intends to use a portion
of the proceeds from this Offering to repay certain loans and other
indebtedness. The Bridge Notes are to be repaid from the proceeds of the minimum
offering, but in no event later than March 3, 2001. The accrued interest due on
the Bridge Notes is to be repaid in two parts, $67,157 from the proceeds of the
minimum offering and $109,589 from the proceeds of the maximum offering, but in
no event later than March 3, 2001. The Director Loans are to be repaid upon
closing of subsequent debt financing, but in no event later than January 1,
2001. See "Use of Proceeds," "Plan of Operation" and "Certain Transactions."

As of September 30, 1998, Messrs. Roncari and Rothstein converted $2,470,594
of loans (including $575,000 of the Bridge notes) to equity in exchange for
56,150 shares each of the Company's Common Stock. See "Capitalization," "Plan of
Operation" and "Certain Transactions."

The Company also maintains One Million-Dollar ($1,000,000) unsecured lines
of credit with both International Caribbean Trust Ltd. and Prometheus Trust.
Both lines of credit are personally guaranteed by Messrs. Roncari and Rothstein.
As of September 30, 1998 the Company had drawn down $75,000 from International
Caribbean Trust Ltd. and $125,000 from Prometheus Trust. As of December 15, 1998
an additional $455,000 had been drawn down from these lines of credit. Both
lines of credit carry a 10% interest rate and are due June 30, 2001. Advances
are at the discretion of the lenders. See "Certain Transactions."

7
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company
Minimum.................................... 454,600
Maximum.................................... 648,900

Common Stock to be outstanding after
Offering(1)
Minimum.................................... 4,355,736
Maximum.................................... 4,550,036

Use of Proceeds.............................. The Company intends to use the net proceeds
of this Offering for repayment of the Bridge
Notes; research and development; sales and
marketing; repayment of certain outstanding
obligations; administrative payroll cost; and
working capital and general corporate
purposes. See "Use of Proceeds."

Risk Factors................................. The securities offered hereby are speculative
and involve a high degree of risk and
immediate substantial dilution and should not
be purchased by investors who cannot afford
the loss of their entire investment. See
"Risk Factors" and "Dilution."

Proposed Nasdaq symbol....................... Common Stock--"ACRD."
</TABLE>

- ------------------------

(1) Does not include (i) 417,150 shares of Common Stock reserved for issuance
upon exercise of options granted or available for future grant under the
Stock Option Plan, as defined herein; (ii) 46,350 shares of Common Stock
reserved for issuance upon exercise of options granted or available for
future grant under the Directors' Plan, as defined herein; (iii) 154,500
shares of Common Stock reserved for issuance upon exercise of the Shreveport
Option, as defined herein; (iv) 77,250 shares of Common Stock reserved for
issuance upon exercise of the Chapman Option, as defined herein; (v) 38,626
shares of Common Stock reserved for issuance upon exercise of the Commitment
Warrants; or (vi) 115,882 shares of Common Stock reserved for issuance upon
exercise of the Bridge Warrants.

8
<PAGE>
SUMMARY FINANCIAL INFORMATION

The summary financial information set forth below is derived from and should
be read in conjunction with the financial statements of the Company, including
the notes thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 21, 1994
NINE MONTHS ENDED SEPTEMBER (INCEPTION)
YEAR ENDED DEC 31, 30, TO SEPTEMBER
---------------------------- --------------------------- 30,
1996 1997 1997 1998 1998
------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues............................... $ 27,034 $ 76,912 $ 47,604 $ 208,327 $ 385,745
Cost of sales.......................... 16,279 86,995 21,219 204,738 376,633
Research and development expense....... 167,000 260,000 195,000 517,000 1,124,000
General and administrative expense..... 919,546 1,176,885 823,336 1,251,772 4,436,977
Write-off of license fee............... 20,000 -- -- -- 168,000
Interest and financing costs, net...... 129,126 1,065,240 866,686 1,667,525 2,906,123
Net loss............................... (1,224,917) (2,512,208) (1,858,637) (3,432,708) (8,625,988)
Net loss per share--basic and
diluted.............................. (.35) (.62) (.46) (.80)
Weighted average number of shares
outstanding.......................... 3,506,642 4,040,705 4,034,296 4,268,246
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------------------------
DECEMBER 31, AS ADJUSTED
1997 ACTUAL FOR MINIMUM(1) MAXIMUM(2)
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital (deficit)........................... $ (2,881,624) $ (2,454,617) $ 1,120,923 $ 3,044,493
Total assets........................................ 594,536 953,919 4,293,512 5,617,082
Total liabilities................................... 4,144,316 (3,960,581) 3,035,581 2,435,581
Total stockholders' equity (deficit)................ (3,549,780) (3,006,662) 1,257,931 3,181,501
</TABLE>

- ------------------------

(1) Gives effect to the sale of the 454,600 shares of Common Stock being offered
hereby and the anticipated application of the estimated net proceeds
therefrom, including $925,000 representing the repayment of the Bridge Notes
and $235,947 representing prepaid costs of this Offering. See "Use of
Proceeds."

(2) Gives effect to the sale of the 648,900 shares of Common Stock being offered
hereby and the anticipated application of the estimated net proceeds
therefrom, $925,000 representing the repayment of the Bridge Notes, $600,000
representing repayment of all outstanding bank debt and $235,947
representing prepaid costs of this Offering. See "Use of Proceeds."

9
<PAGE>
RISK FACTORS

THE SECURITIES BEING OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK, INCLUDING, BUT NOT LIMITED TO, THOSE RISK FACTORS SET FORTH
BELOW, AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT IN THE
COMPANY, SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS INHERENT IN AND
AFFECTING THE BUSINESS OF THE COMPANY AND THIS OFFERING.

THE DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS," "PLAN OF OPERATION" AND "BUSINESS" AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.

DEVELOPMENT STAGE COMPANY; LIMITED OPERATING HISTORY. 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 it has only recently
commenced the limited marketing of its smart card systems. Therefore, the
Company has a limited operating history upon which an evaluation of its
prospects can be made. The Company's prospects must be considered in light of
the risks, uncertainties, expenses, delays and difficulties associated with the
establishment of a new business in the evolving smart card industry, as well as
those risks encountered in the shift from development to commercialization of
new products based on innovative technologies. See "Plan of Operation."

LIMITED REVENUES; SIGNIFICANT AND CONTINUING LOSSES; ACCUMULATED DEFICIT;
EXPLANATORY PARAGRAPH IN INDEPENDENT AUDITORS' REPORT. The Company has
generated limited revenues to date and does not expect to generate meaningful
revenues in the near future until such time, if ever, as its smart card systems
are successfully commercialized. The Company has incurred significant losses in
each operating period since its inception, resulting in an accumulated deficit
at September 30, 1998 of $8,363,488, and losses are continuing through the date
of this Prospectus. Inasmuch as the Company will continue to have a high level
of operating expenses and will be required to make significant up-front
expenditures in connection with both the development of its business and the
commercialization of its smart card systems (including, without limitation,
salaries of executive, technical, marketing and other personnel), the Company
anticipates that it will continue to incur significant and increasing losses for
the foreseeable future until such time, if ever, as the Company is able to
generate sufficient revenues to finance its operations. Furthermore, the Company
has incurred costs related to a possible debt placement, which costs have to
date been deferred. In the event the planned debt placement is not successful,
these costs will be subsequently charged to operations. The Company's
independent certified public accountants have included an explanatory paragraph
in their report stating that the Company's dependence on outside financing, lack
of existing commitments from lenders to provide necessary financing, lack of
sufficient working capital and losses since inception raise substantial doubt
about the Company's ability to continue as a going concern. There can be no
assurance that the Company's smart card systems will gain market acceptance, or
that the Company will be able to successfully implement its business strategy,
generate meaningful revenues or achieve profitable operations. See "Plan of
Operation" and Financial Statements.

UNCERTAINTY OF PROPOSED PLAN OF OPERATION. The success of the Company's
proposed plan of operation will be largely dependent upon market acceptance of
smart cards generally, as well as on the Company's ability to successfully
market its smart card systems by persuading potential System Sponsors of the
perceived benefits of its dual card access and multiple application layering
concepts (including the benefits to be derived from allocating total card
program costs among individual application layers within a card) and to develop
and commercialize further applications of its proprietary technology. In
addition, the Company's proposed plan of operation and prospects will be
dependent upon, among other things, the Company's ability to enter into
strategic marketing and licensing or other arrangements on a timely basis and on
favorable terms; establish satisfactory arrangements with sales representatives
and marketing consultants; hire and retain skilled management as well as
financial, technical, marketing and other

10
<PAGE>
personnel; successfully manage growth (including monitoring operations,
controlling costs and maintaining effective quality, inventory and service
controls); and obtain adequate financing when and as needed. The Company has
limited experience in developing new products based on innovative technology and
there is limited information available concerning the performance of the
Company's technologies or market acceptance of the Company's products. There can
be no assurance that the Company will be able to successfully implement its plan
or that unanticipated expenses or problems or technical difficulties will not
occur which would result in material delays in its implementation. Moreover,
there can be no assurance that the Company will have sufficient capacity to
satisfy any increased demand for its smart card products and technologies
resulting from the Company's implementation of its plan of operation. See "Plan
of Operation" and "Business."

NEW CONCEPT; UNCERTAINTY OF MARKET ACCEPTANCE. The smart card industry in
the United States is an emerging business characterized by an increasing and
substantial number of new market entrants that have introduced or are developing
an array of new products and services relating to electronic transactions and
information processing. Each of these entrants is or may be seeking to position
its products and services as the preferred method of effectuating highly
individualized, easy-to-use electronic transaction and information processing.
The success of the smart card industry depends, in large part, on the ability of
market participants to convince governmental authorities, commercial enterprises
and other potential System Sponsors to adopt a smart card system in lieu of
existing or alternative systems such as magnetic stripe card and paper-based
systems, thereby changing the way certain transaction and information processing
tasks are accomplished. In addition, due to the large capital and infrastructure
investment made by debit and credit card issuers and significantly lower costs
associated with the use of magnetic stripe cards, many potential System Sponsors
may be reluctant to convert to smart card technology in the near future.
Accordingly, there can be no assurance that there will be significant market
opportunities for smart card systems in the United States or that the acceptance
of smart card based systems in other countries will be sustained. The Company's
dual card access and multiple application layering technologies are new
concepts. As such, demand for and market acceptance of the Company's smart card
systems are subject to a high level of uncertainty. The Company has limited
marketing experience and limited financial, personnel and other resources to
undertake extensive marketing activities. Potential System Sponsors of the
Company's smart card systems, as well as the Company's potential strategic
partners, must be persuaded that the costs of adopting and implementing smart
card systems, in general, and, in particular, of adopting and implementing the
Company's smart card systems, which incorporate dual card access technology and
multiple application layering, are justified by the benefits to be derived
therefrom. Achieving market acceptance for the Company's products and services
will require significant efforts and expenditures by the Company to create
awareness, demand and interest by potential System Sponsors, strategic partners
and others regarding the perceived benefits of the Company's technologies,
including the possible allocation of costs among different System Sponsors
and/or departments of one or more System Sponsors. There can be no assurance
that the Company's smart card technology will prove to be economically viable
for a sufficient number of System Sponsors, that substantial markets will
develop, in the United States or elsewhere, for the Company's smart card systems
or that the Company will be able to meet its current marketing objectives,
succeed in positioning its cards and services as a preferred method of
delivering electronic transaction and information processing or achieve
significant market acceptance of its products. See "Business--Marketing and
Sales."

SIGNIFICANT CAPITAL REQUIREMENTS; WORKING CAPITAL DEFICIT; DEPENDENCE ON
PROCEEDS OF THIS OFFERING; POSSIBLE FUTURE FINANCING. The Company's capital
requirements have been and will continue to be significant. At September 30,
1998, the Company had a working capital deficit of $2,454,617 due to, among
other things, costs associated with the development, commercialization and
market testing of the Company's smart card systems, including the development of
the Company's initial pilot programs. The Company has been dependent on the
sales of its securities to private investors (including the 1998 Private
Placement), 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 the date of

11
<PAGE>

this Prospectus, the Company has raised capital in the estimated aggregate
amount of $6,230,000 (including approximately $5,775,000 through September 30,
1998) through such means. The Company is dependent on and intends to use the
proceeds of this Offering to continue the implementation of its proposed plan of
operation. The Company anticipates, based on assumptions relating to its
operations (including assumptions regarding the Company's ability to meet its
current marketing objectives and the timing and costs associated therewith),
that the net proceeds of this 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 consummation of this
Offering. In the event the Company's plans change, its assumptions change or
prove to be inaccurate or if the proceeds of this 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 proceeds of the minimum 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 this
Offering may require proceeds greater than the proceeds of this Offering or
otherwise currently available to the Company. Further, if the minimum closing of
this Offering is delayed, the Company may not have sufficient capital to fund
operations and the anticipated expenses of this Offering. There can be no
assurance that additional financing will be available to the Company on
commercially reasonable terms, or at all. Although the Company believes it may
be able to raise at least a portion of its future financing requirements for
such period among its officers, directors and/or stockholders, no officer,
director or stockholder of the Company has made any further commitment to the
Company to provide any portion of the Company's future financing requirements
and there are no assurances that any officer, director or stockholder will do
so. At some future date, the Company intends to offer up to approximately $30
million in debt financing, to be negotiated by Lilly Beter Capital Group, Ltd.
("Beter"). The Company has no written agreement with Beter with regard to such
possible future financing. There can be no assurance that such additional
financing, or any other additional financing, will be available to the Company
on reasonable terms, or at all. Further, if such additional financing is
attempted, there can be no assurance that such additional financing, or any
other additional financing, will be successful. 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. To the extent that the Company
finances its operations through the issuance of additional equity securities,
any such issuance may involve substantial dilution to the Company's
then-existing stockholders. Additionally, to the extent that the Company incurs
indebtedness or issues debt securities, the Company will be subject to all of
the risks associated with incurring substantial indebtedness, including the
risks that interest rates may fluctuate and cash flow may be insufficient to pay
principal and interest on any such indebtedness. See "Use of Proceeds," "Plan of
Operation" and "Certain Transactions."

LIMITED MARKETING CAPABILITIES AND EXPERIENCE; DEPENDENCE ON THIRD-PARTY
MARKETING ARRANGEMENTS. The Company has limited marketing capabilities,
experience and resources. To date, the Company has conducted only limited
marketing activities and has relied primarily on the efforts of its executive
officers in connection with such activities. It will be the role of the
Company's management and its Director of Sales to guide the Company from the
research and development phase to a company with full marketing and sales
strategies for direct and indirect sales. Although the Company expects to
continue to market smart card systems directly through the Company's management
and employees, the Company intends to establish strategic marketing alliances
and licensing or other arrangements with systems integrators, value-added
resellers and other smart card vendors and may also retain the services of sales
representatives and marketing and other consultants. The Company's success will
depend in part on its ability to enter into agreements with such third parties,
and on the ability and efforts of such third parties to successfully market the
Company's smart card systems. Moreover, marketing arrangements with third
parties may require financial or other commitments by the Company. There can be
no assurance that the

12
<PAGE>
Company will be able, for financial or other reasons, to enter into third-party
marketing arrangements on commercially acceptable terms, or at all. The failure
of the Company to complete its third-party marketing strategy or the failure of
any such party to develop and sustain a market for the Company's smart cards
could have a material adverse effect on the Company. Although the Company views
third party marketing arrangements as a major factor in the commercialization of
its smart card systems, there can be no assurance that any strategic partners,
licensees or others would view an arrangement with the Company as significant to
their businesses. See "Business--Marketing and Sales" and "Management."

COMPETITION; TECHNOLOGICAL OBSOLESCENCE. The market for the Company's smart
card systems is characterized by intense competition. The market is currently
dominated by cards utilizing magnetic stripes, and is expected to be dominated
by magnetic stripe cards for the foreseeable future due to the lower costs of
production of such cards and the substantial capital and infrastructure
investments made by debit and credit card issuers in such cards. The Company
also competes with numerous well-established companies, including Gemplus, Bull
PTS (a unit of Groupe Bull), Schlumberger Electronic Transactions (a business
segment of Schlumberger Limited), Orga Kartensysteme GMBH, Giesecke & Devrient
and Mondex International, which design, manufacture and/or market smart card
systems. Although the Company believes its proprietary dual card access and
multiple application layering technologies will allow the Company to compete on
the basis of enhanced security, flexibility, scalability, cost-effectiveness and
quality, the Company's smart card systems incorporate new concepts and may be
unsuccessful even if they are superior to those of its competitors. In addition,
certain companies may be developing technologies or products of which the
Company may be unaware which may be functionally similar or superior to those
developed by the Company. Most of the Company's competitors and potential
competitors possess substantially greater financial, marketing, personnel and
other resources than the Company and have established reputations relating to
the design, development, manufacture, marketing and service of smart card
systems. As the market for smart card systems grows, new competitors are likely
to emerge. Additional competition could adversely affect the Company's
operations. There can be no assurance that the Company will be able to compete
successfully, that competitors will not develop technologies or products that
render the Company's systems obsolete or less marketable or that the Company
will be able to successfully enhance its products or develop new products when
necessary. See "Business-- Competition."

TECHNOLOGICAL FACTORS. The Company's research and development efforts are
subject to all of the risks inherent in the development of new products and
technology (including unanticipated delays, expenses and difficulties). There
can be no assurance that the Company's products will satisfactorily perform the
functions for which they are designed, that they will meet applicable price or
performance objectives or that unanticipated technical or other problems will
not occur which would result in increased costs or material delays in the
development thereof. Furthermore, software products as complex as those
developed by the Company and incorporated into its smart card products may
contain errors or failures when installed, updated or enhanced. There can be no
assurance that, despite testing by the Company and by current and potential end
users, errors will not be found in new products after the delivery by the
Company, resulting in loss of or delay in market acceptance. See
"Business--Technology Overview" and "--Products."

The Company has entered into agreements with SoftChip Israel Ltd. of
Jerusalem, Israel and SoftChip Technologies (3000) Ltd. to purchase from
SoftChip Israel, Ltd., the DVK-1 Chip Mask Operating System and architecture
("DVK-1 System") for a purchase price of $100,000 and with SoftChip Technologies
(3000) Ltd. to provide technical support and development to the Company for a
two-year period for an additional $450,000 plus a maintenance fee ranging from
$.125 to $.25 for each smart card sold by the Company that incorporates the
DVK-1 System. Upon closing, which is scheduled to occur after the earlier of
closing of the minimum Offering or March 15, 1999, these agreements will provide
the Company ownership of its own chip mask and access to the technical resources
needed to develop a completely new and proprietary chip mask and operating
system. The chip mask provides the basic

13
<PAGE>

instructions to the microchip and its internal components and facilitates the
orderly utilization of all of the microchip's components and allows the device
to be utilized. The Company had also executed a purchase order with SoftChip
Israel Ltd. for technical services for a monthly fee of $18,000, which commenced
December 1, 1997 and expired on September 30, 1998. As of September 30, 1998 the
Company owed $100,000 under this purchase order and such amount is included in
the use of proceeds as repayment of certain outstanding obligations. Under the
agreement, ownership of the DVK-1 System will be transferred to the Company at
closing upon payment in full of the purchase price and technical support fees.
If the closing of the minimum offering is delayed beyond March 15, 1999, the
Company believes it may be able to reach a mutual agreement with both companies
to extend the closing date of the agreement, but there can be no assurance that
the Company will be able to reach such agreement, or that the Company will
ultimately secure ownership of the DVK-1 System if the closing of the minimum
offering is delayed beyond March 15, 1999. Additionally there can be no
assurance that ownership of the DVK-1 System will result in the successful
development of new technology. See "Plan of Operation" and
"Business--Intellectual Property."

PROPRIETARY RIGHTS. The Company's success will depend in part on its
ability to enforce its patents, protect trade secrets and operate without
infringing on the proprietary rights of others. The Company has received United
States patent number 5629508 with respect to its dual card access technology and
methods. The Company contemplates filing patent applications in selected foreign
jurisdictions where such filings would, in the Company's opinion, provide it
with a competitive advantage. The patent laws of other countries may differ from
those of the United States as to the patentability of the Company's products or
technology and the degree of protection afforded by foreign patents may be
different from that in the United States. The failure by the Company to obtain
any foreign patents could have a material adverse effect on the Company's
ability to successfully commercialize its smart card systems outside the U.S.
Even though the Company has been able to obtain a U.S. patent, there can be no
assurance that this patent will afford the Company commercially significant
protection for its technology. Other companies may independently develop
equivalent or superior technologies or products and may obtain patent or similar
rights with respect to them. The Company is not aware of any infringement by its
technology on the proprietary rights of others and has not received any notice
of claimed infringement. However, the Company has not conducted any
investigation as to possible infringement and there can be no assurance that
third parties will not assert infringement claims against the Company in
connection with its products, that any such assertion of infringement will not
result in litigation, or that the Company would prevail in such litigation.
Moreover, in the event that the Company's technology or proposed products were
deemed to infringe upon the rights of others, the Company would be required to
obtain licenses to utilize such technology. There can be no assurance that the
Company would be able to obtain such licenses in a timely manner on acceptable
terms and conditions, and the failure to do so could have a material adverse
effect on the Company. If the Company were unable to obtain such licenses, it
could encounter significant delays in product market introductions while it
attempted to design around the infringed upon patents or rights, or could find
the development, manufacture or sale of products requiring such license to be
foreclosed. In addition, patent disputes occur in the smart card and computer
industries and there can be no assurance that the Company will have the
financial resources to enforce or defend a patent infringement or proprietary
rights action. The Company has received a federal trademark registration for its
SMART-ID-Registered Trademark- mark and design and has applied for a federal
trademark registration for its Cheeze! mark. SMART-ID-Registered Trademark- is a
smart card based system that provides positive identification, transaction
tracking and the ability to layer multiple applications on a single smart card.
Cheeze! is a program currently used by nineteen pari-mutuel licensing
jurisdictions to photograph licensees and transmit the photograph and license
data to a central database, which is currently housed at the Company's offices.
The Company's use of its software, name and mark may be subject to challenge by
others, which, if successful, could have a material adverse effect on the
Company.

The Company also relies on trade secrets and proprietary know-how and
employs various methods to protect the concepts, ideas and documentation
relating to its proprietary technology. However, such

14
<PAGE>
methods may not afford the Company complete protection and there can be no
assurance that others will not independently obtain access to the Company's
trade secrets and know-how or independently develop products or technologies
similar to those of the Company. Furthermore, although the Company has and
expects to have confidentiality and non-competition agreements with its
employees and appropriate suppliers and manufacturers, there can be no assurance
that such arrangements will adequately protect the Company's trade secrets. See
"Business--Intellectual Property."

LENGTHY SALES CYCLE; POSSIBLE FLUCTUATIONS IN OPERATING RESULTS. The
Company's sales cycle is expected to commence at the time a prospective System
Sponsor demonstrates an interest in purchasing a smart card system from the
Company or issues a request for a proposal or information or takes similar
action and ends upon the installation of a smart card system for the System
Sponsor. The sales cycle will vary by System Sponsor and could extend for
periods of up to twelve months or more, depending upon, among other things, the
time required by the System Sponsor to complete a pilot test of the Company's
smart card system, make a determination regarding an acquisition thereof and
negotiate payment terms with the Company. The Company's operating results could
vary from period to period as a result of this fluctuation in the length of the
Company's sales cycle and as a result of fluctuations in the purchasing patterns
of potential System Sponsors, technological factors, variations in marketing
strategies for different target markets and non-recurring smart card system
sales. See "Plan of Operation--Possible Fluctuations in Operating Results."

POSSIBLE DEPENDENCE ON GOVERNMENT CONTRACTS. As part of its strategy, the
Company intends to market its smart card systems to government agencies in the
United States and Canada. If successful, the Company will become subject to the
special risks involving government contracts, including delays in funding,
lengthy review processes for awarding contracts, non-renewal, delay, termination
at the convenience of the government, reduction or modification of contracts in
the event of changes in the government's policies or as a result of budgetary
constraints and increased or unexpected costs resulting in losses, any or all of
which could have a material adverse effect on the Company.

The Company will also be required to obtain most potential government
contracts through the competitive bidding process. There can be no assurance
that the Company will be successful in having its bids accepted or, if accepted,
that awarded contracts will generate sufficient revenues to result in profitable
operations. The competitive bidding process is typically lengthy and often
results in the expenditure of financial and other resources in connection with
bids that are not accepted. Additionally, inherent in the competitive bidding
process is the risk that actual performance costs may exceed projected costs
upon which a submitted bid or contract price is based. To the extent that actual
costs exceed projected costs, the Company could incur losses, which could
adversely affect the Company's operating margins and results of operations.
Moreover, in most instances, the Company may be required to post bid and/or
performance bonds in connection with contracts with government agencies. Any
inability by the Company to obtain bonding coverage in sufficient amounts could
have a material adverse effect on the Company. See "Business--Government
Regulation and Industry Standards."

BROAD DISCRETION IN APPLICATION OF PROCEEDS; ALLOCATION OF PROCEEDS TO PAY
CERTAIN OBLIGATIONS, INCLUDING INDEBTEDNESS TO PRINCIPAL STOCKHOLDERS; BENEFIT
TO RELATED PARTIES. Approximately $487,540 (10.8%) of the estimated net
proceeds of the minimum offering or $591,110 (9.3%) of the estimated net
proceeds of the maximum offering has been allocated to working capital and
general corporate purposes. Accordingly, the Company's management will have
broad discretion as to the application of such proceeds. In addition, the
Company intends to use approximately $992,000 (22.1%) of the estimated net
proceeds of the minimum offering or $1,702,000 (26.5%) of the estimated net
proceeds of the maximum offering to repay indebtedness (including all the Bridge
Notes to be repaid from the proceeds of the minimum offering and the accrued
interest due on the Bridge Notes, to be repaid in two parts, $67,157 from the
proceeds of the minimum offering and $109,589 from the proceeds of the maximum
offering; both the Notes and the interest are to be repaid no later than March
3, 2001) and satisfy pre-existing obligations

15
<PAGE>

and, therefore, such funds will be unavailable to fund future growth. Included
in the indebtedness to be repaid from the proceeds of the minimum offering are
the Bridge Notes payable to Lawrence O. Perl, the Company's Chairman of the
Board and Chief Executive Officer, in the principal amount of $25,000, together
with accrued interest thereon, and Bridge Notes payable to Harold Rothstein and
Raymond A. Roncari, each a director of the Company, in the principal amounts of
$150,000 and $225,000, respectively. Included in the indebtedness to be repaid
from the proceeds of the maximum offering are the interest due on the Bridge
Notes payable to Messrs. Rothstein and Roncari. Included in certain outstanding
obligations to be repaid from the proceeds of the maximum offering is
approximately $42,000 payable to Lawrence Owen Associates, a corporation
wholly-owned by Mr. Perl, for use of office space and related services. In
addition, Mr. Rothstein has personally guaranteed and/or pledged personal assets
to secure the Company's indebtedness to Fleet National Bank, The Mechanics
Savings Bank and First Southern Bank, and Mr. Roncari has personally guaranteed
all of the Company's indebtedness to The First National Bank of Suffield. The
Company intends to use approximately $600,000 of the proceeds from the closing
of the maximum offering to repay the bank indebtedness; repayment of such
indebtedness will, in effect, release such guarantees or pledges. The Company
will also use a portion of the proceeds of the minimum and maximum offerings to
pay compensation (including accrued compensation) of its executive officers (for
a total anticipated to be approximately $625,000 if the minimum offering is
reached and $1,400,000 if the maximum offering is reached, during the twelve
months following the date of this Prospectus). See "Use of Proceeds," "Plan of
Operation," "Management" and "Certain Transactions."

DEPENDENCE ON MANAGEMENT AND KEY PERSONNEL. The success of the Company will
be largely dependent on the personal efforts of Lawrence O. Perl, its Chairman
of the Board and Chief Executive Officer, Raymond Findley, Jr., its President
and Chief Operating Officer, Frank Fuino Jr., its Chief Financial Officer and
Vice President of Finance, Robert H. Dixon, its Vice President of Technical
Operations, Robert Cartagine, its Director of Sales, and other key personnel.
Although the Company has entered into an employment agreement with each of the
above gentlemen, the loss of services of any of these key personnel would have a
material adverse effect on the Company's business and prospects. The Company has
obtained "key man" insurance on the lives of Messrs. Perl and Findley in the
amount of $2,000,000 each. In order to successfully implement and manage its
proposed expansion, the Company will be dependent upon, among other things, its
ability to attract and retain qualified managerial, technical and marketing
personnel with experience in business activities such as those contemplated by
the Company. Competition for qualified personnel is intense and there can be no
assurance that the Company will be able to hire or retain additional personnel.
Any inability to attract and retain qualified personnel would have a material
adverse effect on the Company. See "Management."

CONTROL BY MANAGEMENT. After the closing of this Offering, the Company's
directors and executive officers (or trusts created by or for such individuals
or their families) will beneficially own, in the aggregate, no less than
approximately 79.1 percent of the outstanding shares of Common Stock (assuming
no exercise of any warrants or other options) issued in the minimum offering, or
no less than approximately 75.7 percent of the outstanding shares of Common
Stock (assuming no exercise of any warrants or other options) issued in the
maximum offering. Accordingly, such persons, acting together, will be in a
position to elect the directors, adopt amendments to the Company's Certificate
of Incorporation (the "Certificate") and By-Laws (the "By-Laws"), approve
mergers and other significant corporate transactions, including a sale of
substantially all of the Company's assets, and otherwise control the Company's
affairs. Purchasers of the shares of Common Stock offered hereby will be
minority stockholders, and, although entitled to vote on matters submitted for a
vote of the stockholders, will not control the outcome of such a vote. See
"Management" and "Principal Stockholders."

YEAR 2000. The Company believes that software developed and utilized by the
Company is Year 2000 compliant. However, hardware, software, embedded microchips
and other material provided by others may not be compliant, and there can be no
assurances that the hardware, software, embedded microchips and

16
<PAGE>

other material provided by others will not have a negative effect on the
software developed by the Company.

POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK. The
Certificate, as amended, authorizes the Company's Board of Directors (the
"Board") to issue up to 1,000,000 shares of a class of preferred stock, par
value $.001 per share (the "Preferred Stock"). The Certificate authorizes the
Board to establish and issue, out of the authorized but unissued shares of
Preferred Stock, "blank check" preferred stock in one or more series. One or
more of such series may be issued at any time or times upon authorization of the
Board. Without further approval of the stockholders, the Board is authorized to
fix the dividend rights and terms, conversion rights, voting rights, redemption
rights and terms, liquidation preferences, and any other rights, preferences,
privileges and restrictions applicable to each new series of the Preferred
Stock. The issuance of new series of Preferred Stock could, among other results,
adversely affect the voting power of the holders of Common Stock and, under
certain circumstances, could make it more difficult for a third party to gain
control of the Company, prevent or substantially delay such a change of control,
discourage bids for the Common Stock at a premium, or otherwise adversely affect
the market price of the Common Stock. Preferred Stock could, for example, be
issued quickly by the Board with terms that are expressly designed to prevent or
substantially delay a change of control of the Company that could otherwise
benefit stockholders or to make removal of management more difficult. Although
the Company has no current plans to issue any Preferred Stock, there can be no
assurance that the Board will not decide to do so in the future. See
"Description of Securities."

IMMEDIATE AND SUBSTANTIAL DILUTION. Investors in this Offering will incur
immediate and substantial dilution of $10.84 per share (99%) if the minimum
offering is reached, or $10.42 per share (95%), if the maximum offering is
reached, between the adjusted net tangible book value per share after this
Offering and the initial public offering price of $11.00 per share. See
"Dilution."

ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE
VOLATILITY OF MARKET PRICE OF COMMON STOCK; LIMITED STATE REGISTRATION. Prior
to this Offering, there has been no public trading market for the Common Stock.
Consequently, the initial public offering price of the Common Stock has been
determined by negotiations between the Company and the Underwriter and is not
necessarily related to the Company's asset value, net worth or other criteria of
value. There can be no assurance that a regular trading market for the Common
Stock will develop after this Offering or that, if developed, it will be
sustained. The market price for the Company's securities following this Offering
may be highly volatile, as has been the case with the securities of other small
capitalization companies. The factors considered in determining the offering
price included an evaluation by management of the history of and prospects for
the industry in which the Company competes and the prospects for earnings of the
Company. Factors such as the Company's financial results, announcements of
developments related to the Company's business and the introduction of products
and product enhancements by the Company or its competitors may have a
significant impact on the market price of the Company's securities.
Additionally, in recent years, the stock market in general, and the market for
securities of small capitalization stocks in particular, have experienced wide
price fluctuations which have often been unrelated to the operating performance
of such companies. The Underwriter will register this Offering in a limited
number of states, which may limit or prohibit possible resale of the Common
Stock in certain states in which the Offering is not registered. See
"Underwriting."

NO DIVIDENDS. The Company has never paid any cash or other dividends on its
Common Stock. Payment of dividends on the Common Stock is within the discretion
of the Board of Directors of the Company and will depend upon the Company's
earnings, capital requirements and financial condition, and on any other
relevant factors. For the foreseeable future, the Board of Directors intends to
retain future earnings, if any, to finance its business operations and does not
anticipate paying any cash dividends with respect to the Common Stock. In
addition, the payment of cash dividends may be limited or prohibited by the
terms of any future loan agreements or any Preferred Stock that may be issued by
the Company. See

17
<PAGE>
"Dividend Policy," "Plan of Operation--Liquidity and Capital Resources" and
"Description of Securities--Preferred Stock."

LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS. The Certificate
includes provisions to eliminate, to the full extent permitted by the Delaware
General Corporation Law (the "DGCL") as in effect from time to time, the
personal liability of directors of the Company for monetary damages under
certain circumstances. The Certificate and By-Laws also include provisions to
the effect that (subject to certain exceptions) the Company shall, to the
maximum extent permitted from time to time under the law of the State of
Delaware, indemnify, and upon request shall advance expenses to, any director or
officer to the extent that such indemnification and advancement of expenses is
permitted under such law, as it may from time to time be in effect. As a result
of such provisions, stockholders may be unable to recover damages against the
directors and officers of the Company for actions taken by them that constitute
negligence, gross negligence or a violation of their fiduciary duties. In
anticipation of this Offering, the Board has authorized and directed the Company
to enter into indemnification agreements with each director of the Company,
pursuant to which the Company would, in general, (i) agree to indemnify and hold
harmless each director to the full extent permitted or authorized by the DGCL as
in effect from time to time and (ii) specify the various terms and conditions
relating to the advancement of expenses in connection with indemnifiable claims.
Each of the provisions described above may reduce the likelihood of stockholders
instituting derivative litigation against directors and may discourage or deter
stockholders from suing directors, officers, employees and agents of the Company
for (among other things) breaches of their duty of care, even though such an
action, if successful, might otherwise benefit the Company and its stockholders.
See "Management--Limitation of Liability and Indemnification."

ADOPTION OF CERTAIN CHARTER AND BY-LAW PROVISIONS HAVING ANTI-TAKEOVER
EFFECTS. The Certificate and By-Laws contain various provisions which, under
certain circumstances, could make it more difficult for a third party to gain
control of the Company (e.g., by means of a tender offer), prevent or
substantially delay such a change of control, discourage bids for the Common
Stock at a premium, or otherwise adversely affect the market price of the Common
Stock. The Certificate provides that the Board will be classified into three
classes of directors, with each class serving a staggered three-year term. This
provision, together with the provision authorizing the Board to issue one or
more series of Preferred Stock, could make it more difficult for stockholders to
effect certain corporate actions that might facilitate a proposed acquisition of
the Company and could have the effect of delaying or preventing a change of
control of the Company. See "Description of Securities--Antitakeover
Provisions."

OUTSTANDING OPTIONS. As of the date of this Prospectus, the Company has
outstanding options to purchase 422,560 shares of Common Stock, of which 312,865
shares are exercisable at $7.77 per share and 109,695 shares are exercisable at
$11.00 per share. Further, the Company has granted warrants to purchase (i)
77,250 shares of Common Stock at an exercise price equal to eighty percent,
subsequently amended to eighty-five percent (85%) of the per share market price
of Common Stock at the time of exercise to Chapman Group, LLC (the "Chapman
Option"); (ii) 38,626 shares to Messrs. Rothstein and Roncari, in consideration
for entering into their respective Director Loan Agreements, at an exercise
price equal to eighty percent, subsequently amended to eighty-five percent (85%)
of the per share market price of Common Stock at the time of exercise,
represented by 19,313 warrants to purchase 19,313 shares of Common Stock to each
of Messrs. Rothstein and Roncari (collectively, the "Commitment Warrants"); and
(iii) 115,882 shares to investors in a March 1998 private placement offering
("the 1998 Private Placement") at an exercise price equal to eighty percent,
subsequently amended to eighty-five percent (85%) of the per share market price
of Common Stock at the time of exercise (the "Bridge Warrants"). In addition,
the Company plans to issue additional options to acquire shares of Common Stock
to employees and directors in the future. Exercise of the foregoing options will
have a dilutive effect on the Company's stockholders. Furthermore, the terms
upon which the Company may be able to obtain additional equity financing may be
adversely affected, since the holders of the options, if they choose to exercise
the options, can be expected to exercise them at a time when the Company would
likely be able to obtain any needed capital on terms

18
<PAGE>
more favorable to the Company than those provided in the options. See "Certain
Transactions" and "Management--1996 Stock Option Plan" and "--Nonemployee
Directors' Stock Option Plan" and "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. From the proceeds of
the maximum offering, the Company will have between 4,355,736 shares, if the
minimum is attained, and 4,550,036 shares, if the maximum is attained, of Common
Stock outstanding, of which the shares of Common Stock offered hereby (a minimum
of 454,600 shares and a maximum of 648,900 shares) will be freely tradable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"). All of the remaining 3,901,136 shares of Common
Stock outstanding are "restricted securities," as that term is defined under
Rule 144 promulgated under the Securities Act, and in the future may only be
sold pursuant to an effective registration statement under the Securities Act,
in compliance with the exemption provisions of Rule 144 or pursuant to another
exemption under the Securities Act. The 3,901,136 restricted shares of Common
Stock will become eligible for sale under Rule 144, subject to certain volume
limitations prescribed by Rule 144 and to the contractual restrictions described
below, at various times commencing 90 days from the date of this Prospectus. The
Company has granted certain "piggyback" registration rights to the holders of
193,133 shares of Common Stock and the 231,758 shares of Common Stock underlying
the Bridge Warrants and the Commitment Warrants, and to the holder of the
Chapman Option. No prediction can be made as to the effect, if any, that sales
of shares of Common Stock or even the availability of such shares for sale will
have on the market prices prevailing from time to time. All of the Company's
officers, directors and stockholders have agreed not to sell or otherwise
dispose of (other than in a private transfer) any of their shares of Common
Stock for a period of 12 months from the date of this Prospectus without the
prior written consent of the Underwriter (other than in the case of the Bridge
Shares, as defined herein, and Bridge Warrant Shares, as defined herein, which
cannot be transferred during such period even with the consent of the
Underwriter). However, the possibility that substantial amounts of Common Stock
may be sold in the public market may adversely affect prevailing market prices
for the Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities. See "Certain Transactions,"
"Description of Securities," "Shares Eligible for Future Sale," "Management" and
"Underwriting."

NASDAQ REQUIREMENTS; DISCLOSURE RELATING TO LOW-PRICED STOCKS. The
Company's stock is not presently included for trading on the Nasdaq system and
there can be no assurances that the Company will ultimately qualify for
inclusion within that system. In order for an issuer to be included in the
Nasdaq system, the Company must maintain $2,000,000 in net tangible assets,
$35,000,000 in market capitalization or $500,000 net income. In addition the
Company must maintain 1,000,000 shares of public float (shares not held directly
or indirectly by any officer or director of the Company or by any other person
who is the beneficial owner of more than ten percent (10%) of the total shares
outstanding) with a minimum market value of $4,000,000. Further, continued
inclusion requires two market makers, a minimum bid price of $1.00 per share and
at least 300 round lot shareholders (holders of 100 shares or more). In addition
to quantitative standards, the staff of Nasdaq may also consider other factors
including, but not limited to, the nature and scope of the Company's operations
in conjunction with any and all conditions and/or circumstances surrounding an
entity's operations. The Company's initial application for inclusion in the
Nasdaq Small Cap Market was denied because the Company does not meet the above
qualitative standards. No assurances can be given that the Company will ever
qualify for inclusion on the Nasdaq system and qualification for inclusion is
not a prerequisite to proceeding with this Offering. Until the Company's shares
qualify for inclusion in the Nasdaq system, the Company's securities will be
traded in the over-the-counter markets through the "pink sheets" or on the OTC
Bulletin Board. The Securities and Exchange Commission has adopted regulations
which generally define "penny stock" to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price less than
$5.00 per share, subject to certain exceptions. Since the securities offered
hereby will be offered at a market price of $11.00 per share, such securities
will initially be exempt from the definition of penny stock. During such periods
when the Company's Common Stock does not qualify for inclusion on the Nasdaq
Small Cap

19
<PAGE>
Market, if the securities offered hereby become offered at a market price less
than $5.00 per share, and do not qualify for another exemption from the penny
stock regulations, the Company's securities may become subject to additional
regulations relating to low-priced securities adopted by the Securities and
Exchange Commission that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchase and receive the purchaser's written
agreement to the transaction prior to the sale. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a disclosure schedule prepared by the
Securities and Exchange Commission relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing the recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. In addition, certain broker-dealers are
precluded from acting as market makers for non-NASDAQ securities and these
securities may be ineligible for margin loans. The additional burdens imposed
upon broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in the Common Stock, which could severely limit the
market liquidity of the Common Stock and the ability of purchasers in this
Offering to sell the Common Stock in the secondary market.

LACK OF PUBLIC MARKET; MINIMUM/MAXIMUM. Prior to this Offering, there has
been no public market for the Company's securities. There can be no assurances
that a public trading market for the securities offered hereby will develop or
that a public trading market, if developed, will be sustained. Although the
Company anticipates that upon completion of this Offering, the Common Stock will
be eligible for inclusion on the OTC Bulletin Board, no assurance can be given
that the Common Stock will be listed on the OTC Bulletin Board as of the
effective date. Consequently, there can be no assurance that a regular trading
market for the Common Stock, other than the pink sheets, will develop after the
completion of this Offering. If a trading market does in fact develop for the
Common Stock offered hereby, there can be no assurance that it will be
maintained. If for any reason the Common Stock is not listed on the OTC Bulletin
Board or a public trading market does not develop, purchasers of the Common
Stock may have difficulty in selling their securities should they desire to do
so. In any event, because certain restrictions may be placed upon the sale of
securities at prices under $5.00, unless such securities qualify for an
exemption from the "penny stock" rules, such as a listing on the Nasdaq Small
Cap Market, some brokerage firms will not effect transactions in the Company's
securities if their market price falls below $5.00, and it is unlikely that any
bank or financial institution will accept such securities as collateral, which
could have an adverse effect in developing or sustaining any market for the
Common Stock.

There can be no assurance that the minimum number of shares will be sold. If
the minimum offering is not sold within one hundred eighty (180) days following
commencement of this Offering, the Offering will terminate automatically and all
funds paid for shares will be returned to the purchasers without deductions and
without interest. Even if the minimum number of shares is sold, there can be no
assurance that the maximum number of shares will be sold. If the minimum number
of shares is sold but the maximum number of shares is not sold, the Company
would be able to continue its operations for at least twelve months but the
proceeds from this Offering would be less than anticipated and could have a
material adverse effect on the Company's future operations.

20
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $4,500,540 if the minimum
offering is attained and $6,424,110 if the maximum offering is attained. The
expenses of this Offering will have been prepaid by the Company to the extent of
$235,947 as of June 30, 1998. The Company expects to use the net proceeds
approximately as follows:

APPLICATION OF PROCEEDS

<TABLE>
<CAPTION>
MINIMUM OFFERING MAXIMUM OFFERING
------------------------- -------------------------
AMOUNT PERCENT AMOUNT PERCENT
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Repayment of indebtedness(1)....................................... $ 992,000 22.1% $ 1,702,000 26.5%
Sales and marketing(2)............................................. 633,000 14.1% 754,000 11.7%
Research and development(3)........................................ 1,387,000 30.8% 1,442,000 22.4%
Repayment of certain outstanding obligations(4).................... 619,000 13.7% 1,399,000 21.8%
Administrative payroll costs(5).................................... 382,000 8.5% 536,000 8.3%
Working capital and general corporate purposes(6).................. 487,540 10.8% 591,110 9.3%
------------ ----- ------------ -----
Total.......................................................... $ 4,500,540 100.0% $ 6,424,110 100.0%
------------ ----- ------------ -----
------------ ----- ------------ -----
</TABLE>

- ------------------------

(1) The minimum offering figure represents the payment of the Bridge Notes,
together with partial payment of accrued interest in the aggregate amount of
$67,157. Included in the Bridge Notes to be repaid are $25,000, plus accrued
interest, payable to Lawrence O. Perl, the Company's Chairman of the Board
and Chief Executive Officer, $150,000 payable to Harold Rothstein, a
director of the Company, and $225,000 payable to Raymond A. Roncari, a
director of the Company. The maximum offering figure represents all items
paid in the minimum offering plus the payment of accrued interest related to
the Bridge Notes payable to Messrs. Rothstein and Roncari, in the aggregate
amount of $109,589, plus the repayment of bank debt, in the aggregate amount
of $600,000, which has been personally guaranteed or secured with the
private assets of Messrs. Roncari and Rothstein. See "Plan of Operation" and
"Certain Transactions."

(2) Consists of salaries of sales and marketing personnel, fees paid to
marketing consultants and anticipated costs and expenses associated with
sales presentations, preparation of marketing materials and attendance at
industry trade shows. See "Business--Marketing and Sales."

(3) Represents a $550,000 payable to SoftChip Israel Ltd. and SoftChip
Technologies (3000) Ltd. in connection with the purchase of the DVK-1 System
and portion of costs associated with the enhancement of the Company's
proprietary technology as well as development of system applications and
pilot programs for potential System Sponsors. See "Business--Research and
Development."

(4) Consists of payment of certain past due obligations of the Company to
accountants, attorneys and consultants, and deferred compensation to both
current and past employees. In addition, the Company intends to use $42,000
of the proceeds from the maximum offering to repay a payable due to Lawrence
Owen Associates, a Company wholly owned by Mr. Perl. See "Management."

(5) Consists of the proportionate amount of salaries deemed to be administrative
in nature.

(6) Includes amounts for the payment of relocation expenses, rent, professional
fees and other operating expenses.

21
<PAGE>
DIVIDEND POLICY

The Company has never paid any cash or other dividends on its Common Stock.
Payment of dividends on the Common Stock is within the discretion of the Board
and will depend upon the Company's earnings, capital requirements and financial
condition, and on any other relevant factors. For the foreseeable future, the
Board of Directors intends to retain future earnings, if any, to finance its
business operations and does not anticipate paying any cash dividends with
respect to the Common Stock. In addition, the payment of cash dividends may be
limited or prohibited by the terms of any future loan agreements or any
Preferred Stock that may be issued by the Company. See "Plan of
Operation--Liquidity and Capital Resources" and "Description of
Securities--Preferred Stock."

DILUTION

The net tangible book value of the Company at September 30, 1998 was a
deficit of $3,801,618 (excludes intangible assets of $132,239 in software
development and $662,717 in deferred registration and debt costs), or $(.98) per
share of Common Stock. The difference between the initial public offering price
per share of Common Stock and the adjusted net tangible book value per share of
Common Stock after this Offering constitutes the dilution to investors in this
Offering. Net tangible book value per share on any given date is determined by
dividing the net tangible book value (total tangible assets less total
liabilities) of the Company on such date by the number of shares of Common Stock
outstanding on such date.

MINIMUM OFFERING

After giving effect to the sale by the Company of the 454,600 shares offered
hereby in the minimum offering, at an assumed initial public offering price of
$11.00 per share and after deducting the estimated underwriting discounts and
commissions and offering expenses, the net tangible book value, as adjusted, of
the Company at September 30, 1998 would have been approximately $698,922 or $.16
per share, representing an immediate increase in such net tangible book value of
$1.14 per share to existing stockholders and an immediate dilution in net
tangible book value of $10.84 per share to purchasers of Common Stock in the
minimum offering. The following table illustrates this per share dilution
applicable to the minimum offering:

<TABLE>
<S> <C> <C> <C>
Initial public offering price....................... $ 11.00
Net tangible book value (deficit) before minimum
offering........................................ $ (.98)
Increase attributable to new investors............ 1.14
---------
Adjusted pro-forma net tangible book value after
minimum offering.................................. .16
---------
Dilution per share to new investors................. $ 10.84
---------
---------
</TABLE>

MAXIMUM OFFERING

After giving effect to the sale by the Company of the 648,900 shares offered
hereby in the maximum offering, at an assumed initial public offering price of
$11.00 per share and after deducting the estimated underwriting discounts and
commissions and offering expenses, the net tangible book value as adjusted of
the Company at September 30, 1998 would have been approximately $2,622,492, or
$.58 per share, representing an immediate increase in such net tangible book
value of $1.56 per share to existing stockholders and an immediate dilution in
net tangible book value of $10.42 per share to purchasers of

22
<PAGE>
Common Stock in the maximum offering. The following table illustrates this per
share dilution applicable to the maximum offering:

<TABLE>
<S> <C> <C> <C>
Initial public offering price....................... $ 11.00
Net tangible book value (deficit) before maximum
offering........................................ $ (.98)
Increase attributable to new investors............ 1.56
---------
Adjusted pro-forma net tangible book value after
maximum offering.................................. .58
---------
Dilution per share to new investors................. $ 10.42
---------
---------
</TABLE>

The following tables set forth as of June 30, 1998 a comparison between the
existing stockholders and the new investors in this Offering with respect to the
number of shares of Common Stock acquired from the Company, the percentage
ownership of such shares, the total consideration paid, the percentage of total
consideration paid and the average price per share:

MINIMUM OFFERING

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................................ 3,901,136 89.6% 5,356,826 51.7% $ 1.37
New Investors........................................ 454,600 10.4% 5,000,600 48.3% $ 11.00
---------- ----- ------------ -----
Total............................................ 4,355,736 100.0% 10,357,426 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>

MAXIMUM OFFERING

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................................ 3,901,136 85.7% 5,356,826 42.9% $ 1.37
New Investors........................................ 648,900 14.3% 7,137,900 57.1% $ 11.00
---------- ----- ------------ -----
Total............................................ 4,550,036 100.0% 12,494,726 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>

The foregoing table assumes no exercise of any outstanding options. See
"Management--1996 Stock Option Plan," "--Nonemployee Directors' Stock Option
Plan" and "Certain Transactions."

23
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company (i) on an
actual basis, (ii) as adjusted to give effect to the sale of the minimum
offering of shares of Common Stock offered hereby and the application of the
estimated net proceeds therefrom, and (iii) as adjusted to give effect to the
sale of the maximum offering of shares of Common Stock offered hereby and the
application of the estimated net proceeds therefrom.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------------
AS ADJUSTED FOR
----------------------------
ACTUAL MINIMUM(1) MAXIMUM(2)
------------- ------------- -------------
<S> <C> <C> <C>
Notes Payable............................................... $ 1,109,362 $ 1,109,362 $ 509,362
Bridge Note................................................. 925,000 -- --
Stockholders' Equity (Deficit)
Preferred Stock, $.001 par value--1,000,000 shares
authorized; no shares issued and outstanding............ -- -- --
Common Stock, $.001 par value--20,000,000 shares
authorized; 3,901,136 shares issued and outstanding,
actual; 4,355,736, as adjusted for the minimum offering;
4,550,036, as adjusted for the maximum offering(4)...... 3,901 4,356 4,550
Additional paid-in capital................................ 5,352,925 9,617,063 11,540,439
Accumulated deficit during the development stage.......... (8,363,488) (8,363,488) (8,363,488)
------------- ------------- -------------
Total stockholders' equity (deficit).................... (3,006,662) 1,257,931 3,181,501
------------- ------------- -------------
Total capitalization.................................. $ (972,300) $ 2,367,293 $ 3,690,863
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

- ------------------------

(3) Does not include (i) 417,150 shares of Common Stock reserved for issuance
upon exercise of options granted or available for future grant under the
Stock Option Plan; (ii) 46,350 shares of Common Stock reserved for issuance
upon exercise of options granted or available for future grant under the
Directors' Plan; (iii) 154,500 shares of Common Stock reserved for issuance
upon exercise of the Shreveport Option; (iv) 77,250 shares of Common Stock
reserved for issuance upon exercise of the Chapman Option; (v) 38,626 shares
of Common Stock reserved for issuance upon exercise of the Commitment
Warrants; or (vi) 115,882 shares of Common Stock reserved for issuance upon
exercise of the Bridge Warrants. See "Management--1996 Stock Option Plan,"
"--Nonemployee Directors' Stock Option Plan," "Certain Transactions," and
"Description of Securities."

24
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data for the years ended December 31, 1996
and 1997 and the balance sheet data at December 31, 1997 are derived from, and
are qualified by reference to, the Company's financial statements audited by BDO
Seidman, LLP included elsewhere in this Prospectus. The statement of operations
data for the nine-month periods ended September 30, 1997 and 1998 and the period
from inception to September 30, 1998 and the balance sheet data at September 30,
1998 are derived from unaudited financial statements of the Company included
elsewhere in this Prospectus, which, in the opinion of management, contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the Company's results of operations for such periods and
financial condition at such date. The results of operations for the nine months
ended September 30, 1998 are not necessarily indicative of the results to be
expected for the full year or future periods.

The following data should be read in conjunction with the financial
statements of the Company, including the notes thereto, appearing elsewhere in
this Prospectus.

STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEAR ENDED DEC 31, 30, INCEPTION(1)
---------------------------- ---------------------------- TO SEPTEMBER
1996 1997 1997 1998 30, 1998
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues............................ $ 27,034 $ 76,912 $ 47,604 $ 208,327 $ 385,745
Cost of sales....................... 16,279 86,995 21,219 204,738 376,633
Research and development expense.... 167,000 260,000 195,000 517,000 1,124,000
General and administrative
expense........................... 919,546 1,176,885 823,336 1,251,772 4,436,977
Write-off of license fee............ 20,000 -- -- -- 168,000
Interest and financing costs, net... 129,126 1,065,240 866,686 1,667,525 2,906,123
Net loss(2)......................... (1,224,917) (2,512,208) (1,858,637) (3,432,708) (8,625,988)
Net loss per share--basic and
diluted........................... (.35) (.62) (.46) (.80)
Weighted average number of shares
outstanding....................... 3,506,642 4,040,705 4,034,296 4,268,246
</TABLE>

- ------------------------

(1) The Company's date of inception is June 21, 1994.

(2) During the periods presented through June 30, 1996, the Company elected to
be treated as an S corporation for federal income tax purposes and,
accordingly, no provision for income taxes during such periods is reflected
in the Company's financial statements. The Company terminated its status as
an S corporation effective July 1, 1996. See Notes to Financial Statements.

BALANCE SHEET DATA

<TABLE>
<CAPTION>
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Working capital (deficit).............................. $ (2,881,624) $ (2,454,617)
Total assets........................................... 594,536 953,919
Total liabilities...................................... 4,144,316 3,960,581
Total stockholders' deficit............................ (3,549,780) (3,006,662)
</TABLE>

25
<PAGE>
PLAN OF OPERATION

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.

To date, the Company has developed and installed, on a limited basis,
employee identification and licensing smart card systems for the thoroughbred
racing industry. To date, the Company has executed two contracts with the North
American Pari-Mutuel Regulators Association ("NAPRA") to provide and maintain an
internet-based regulatory tracking system that includes a database with
licensing information, infractions records and digital photographs of the
licensees in its jurisdictions. NAPRA is an organization comprised of nineteen
pari-mutuel wagering jurisdictions located in North America, including horse and
dog racing, jai alai and card rooms. In addition to the contracts with NAPRA,
the Company has developed and installed smart card based employee identification
and licensing systems in five NAPRA jurisdictions: the Birmingham Racing
Commission and the Macon County Race Course, both in Alabama, the Oregon Racing
Commission, the Idaho State Racing Commission, and the Wyoming Pari-Mutuel
Commission. In addition, the Company has a similar contract with the Colorado
Racing Commission. The Company recently submitted a proposal to an additional
NAPRA jurisdiction, the Arizona Racing Commission, to provide a smart card based
employee identification and licensing system.

In addition, the Company has completed a pilot program in New Jersey and
Pennsylvania for the issuance of "equine medical passport" smart cards for
monitoring the identity, interstate and intrastate movement and medical records
of thoroughbred horses. The Florida Department of Agriculture and Consumer
Services Bureau of Disease Control has proposed a similar pilot project
anticipated to begin as soon as possible. The Bureau of Disease Control is
responsible for ensuring the health and marketability of livestock in the state
of Florida. To prevent the spread of a deadly disease, the federal government
requires any horse crossing state lines to have a negative Coggins Report which
evidences a negative test result for Equine Infectious Anemia. A Coggins Report
is valid for one year from the issue date. Further, each state requires a valid
health certificate for any horse entering the state. The states of Florida,
Georgia and Alabama have formed an alliance whereby a special ninety (90) day
pass authorized by any of the three states can be used to cross state lines
between these states. The proposed Florida pilot program will involve a test
"livestock medical passport" program in which each of 100 animals will be
implanted with an "electronic identification transponder" used in conjunction
with smart cards to verify each animal's identity and federal and state medical
certifications. This pilot program will replace the required paper passports for
horses crossing between these states. Although completed programs in New Jersey
and Pennsylvania successfully tested the equine medical passport smart card
system and similar electronic transponder implants are in use which are not
coordinated with smart card technology, such equine medical passport pilot
programs have not resulted in any system sales to date. There can be no
assurance that any of the Company's pilot programs will result in system
purchases by any potential System Sponsor.

26
<PAGE>

On November 11, 1998, the Company began discussions with Microsoft regarding
its Windows Card Operating System. The Windows Card Operating System represents
Microsoft's foray into the smart card industry. As a result of that initial
meeting in November, and subsequent meetings thereafter, the Company has been
asked to participate in the development and systems integration component of
Microsoft's Windows Card beta program. The exact role of the Company in this
regard has not yet been determined or formalized, and there can be no assurances
in this regard or that meaningful opportunities for the Company will result.

The Company has formed a new business entity with AVID Identification
Devices, Inc. called Animal Passports, Inc. (API). While final business terms
remain to be negotiated, it is anticipated that API will develop, market, and
sell smart-card applications incorporating the Company's patented technology for
all animal owners worldwide. AVID, using PETtrac, a worldwide computerized
tracking system for companion animals, will be responsible for providing its
marketing and sales expertise to the new company and ACTI will be responsible
for providing smart card technology and technological support. Ownership will be
equal between the Company and AVID, however, AVID will be responsible for
funding the initial costs of API. It is anticipated that the Company's smart
card technology will be used in conjunction with AVID's radio frequency
identification devices currently being sold worldwide to veterinarians and other
customers. Owners of animals will carry with them a smart card containing animal
tracking information related to the existing PETtrac identification systems as
well as other AVID related applications, including animal records. This venture
is in its formative stages and there can be no assurances that the venture will
be undertaken as presently anticipated or that meaningful revenues will result.

The Company has entered into a two year Non-Exclusive Representation
Agreement to DTEC/ Comprehensive Pharmacy Services, Inc., a wholly owned
subsidiary of Service Master Corporation. DTEC/ CPS provides a full range of
services and technologies to the health care industry. The core of the company's
business is in pharmacy consulting and pharmacy management expertise. DTEC/CPS
has the right to market the Company's smart card products and services to its
extensive customer base throughout the world. DTEC/CPS and the University of
Tennessee are currently engaged in several research projects where smart cards
could play a significant role. It is anticipated that the Company will greatly
benefit from these projects, however, there can be no assurance that the
Company's involvement will result in sales to the University of Tennessee or to
any other DTEC/CPS customer.

The Company's objective is to become a leading provider of smart card
systems to government and commercial 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.

27
<PAGE>

The Company has generated limited revenues to date and does not expect to
generate meaningful revenues in the near future until such time, if ever, as its
smart card systems are successfully commercialized. The Company has incurred
significant losses in each operating period since its inception, resulting in an
accumulated deficit at September 30, 1998 of $8,363,488, and losses are
continuing through the date of this Prospectus. Inasmuch as the Company will
continue to have a high level of operating expenses and will be required to make
significant up-front expenditures in connection with both the development of its
business and the commercialization of its smart card systems (including, without
limitation, salaries of executive, technical, marketing and other personnel),
the Company anticipates that it will continue to incur significant and
increasing losses for the foreseeable future until such time, if ever, as the
Company is able to generate sufficient revenues to finance its operations. The
Company will also incur non-recurring charges relating to the 1998 Private
Placement of approximately $187,000 upon closing of the minimum offering.
Furthermore, the Company has incurred costs related to a possible debt
placement, which costs have to date been deferred. In the event the planned debt
placement is not successful, these costs will be subsequently charged to
operations. The Company's independent certified public accountants have included
an explanatory paragraph in their report stating that the Company's dependence
on outside financing, lack of existing commitments from lenders to provide
necessary financing, lack of sufficient working capital and losses since
inception raise substantial doubt about the Company's ability to continue as a
going concern.

The success of the Company's proposed plan of operation will be largely
dependent upon market acceptance of smart cards generally, as well as on the
Company's ability to successfully market its smart card systems by persuading
potential System Sponsors of the perceived benefits of its dual card access and
multiple application layering concepts (including the benefits to be derived
from allocating total card program costs among individual application layers
within a card) and to develop and commercialize further applications of its
proprietary technology. In addition, the Company's proposed plan of operation
and prospects will be dependent upon, among other things, the Company's ability
to enter into strategic marketing and licensing or other arrangements on a
timely basis and on favorable terms; establish satisfactory arrangements with
sales representatives and marketing consultants; hire and retain skilled
management as well as financial, technical, marketing and other personnel;
successfully manage growth (including monitoring operations, controlling costs
and maintaining effective quality, inventory and service controls); and obtain
adequate financing when and as needed. The Company has limited experience in
developing new products based on innovative technology and there is limited
information available concerning the performance of the Company's technologies
or market acceptance of the Company's products. There can be no assurance that
the Company will be able to successfully implement its plan or that
unanticipated expenses or problems or technical difficulties will not occur
which would result in material delays in its implementation. Moreover, there can
be no assurance that the Company will have sufficient capacity to satisfy any
increased demand for its smart card products and technologies resulting from the
Company's implementation of its plan of operation.

As of the date of this Prospectus, the Company has ten full-time employees,
consisting of four executive officers and six employees engaged in engineering,
technical support, product development, marketing and sales, and administration,
including the Company's recently appointed Director of Sales. See "Management."
The Company also uses the resources of independent programmers and consultants
from time to time on an as needed basis. The Company anticipates that it will
hire additional sales and technical personnel to continue to implement the
Company's marketing and product development efforts and may engage independent
sales representatives and industry-specific marketing consultants to assist the
Company in marketing the Company's smart card systems to potential System
Sponsors.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1998, the Company had cash on hand of $20,143, working
capital deficit of $2,454,617 and a stockholders' deficit of $3,006,662. 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

28
<PAGE>
requirements through the issuance of equity and debt securities, contributions
to capital and bank borrowings.

Since the inception of the Company, Lawrence O. Perl, the Chairman of the
Board and Chief Executive Officer of the Company, (both individually and through
The 1994 Perl Trust Indenture, a trust for the benefit of the family of Lawrence
O. Perl (the "Perl Trust")), Raymond Findley, the Chief Operating Officer of the
Company, Raymond A. Roncari, a director of the Company, and Harold Rothstein, a
director of the Company, (both individually and through The Rothstein Family
Trust, a trust for the benefit of the family of Harold Rothstein (the "Rothstein
Trust")), (each of the foregoing being referred to individually as an "Original
Stockholder"), have made the loans to the Company in amounts aggregating
$30,177, $15,177, $1,008,854 and $1,300,747, respectively (the "Stockholder
Loans"). The Stockholder Loans bear interest at ten percent (10%) per annum. Of
this total of $2,354,955, $1,050,000 had previously been converted to equity and
an additional $995,594 was converted to equity as of September 30, 1998. The
remaining balance of the loans, together with accrued interest, are to be repaid
with the proceeds of a subsequent debt financing, but in no event later than
January 1, 2001. These loans were to provide the Company working capital and
cover costs associated with this Offering. See "Use of Proceeds," "Plan of
Operation" and "Certain Transactions."

In March 1995, $250,000 of the then-outstanding principal amount of the
Stockholder Loans of each of Messrs. Rothstein and Roncari was recharacterized
as paid-in capital of the Company (the "Capital Contribution"). Pursuant to an
agreement among the Original Stockholders, the Capital Contribution was
allocated equally among the Original Stockholders, in consideration for which
Mr. Findley issued to Mr. Roncari and the Perl Trust issued to the Rothstein
Trust a promissory note in the amount of $125,000 (each, a "Capital Contribution
Note"). Mr. Findley and the Perl Trust subsequently transferred 25,000 shares of
Common Stock to Mr. Roncari and the Rothstein Trust, respectively, in
satisfaction of the indebtedness represented by the Capital Contribution Notes.
Upon the consummation of a January, 1997 private placement offering (the "1997
Private Placement"), $12,675 of the Perl Trust's Stockholder Loans, $12,675 of
Mr. Findley's Stockholder Loans, $223,260 of Mr. Roncari's Stockholder Loans and
$301,390 of Mr. Rothstein's Stockholder Loans were converted into 2,535, 2,535,
44,652 and 60,278 shares of Common Stock, respectively. See "Certain
Transactions."

From March through June of 1995, Joseph D. Basch, the President, Chief
Executive Officer and sole director of the Subsidiary, loaned the Company an
aggregate of $300,000. The loans accrued interest at ten percent (10%) per annum
and were payable on demand. In July 1996, the Company and Mr. Basch entered into
an agreement pursuant to which the then-outstanding principal amount of the
loans, together with accrued interest thereon of approximately $30,000, was
converted into an aggregate of 370,800 shares of Common Stock, for a per share
value of $.89. As of September 30, 1998, Mr. Basch made a capital contribution
to the Company of 22,460 of these shares.

In July, September and November 1996, the Company borrowed an aggregate of
$300,000 from The First National Bank of Suffield ("First Suffield"). Interest
accrues on such borrowings at the prime lending rate established by First
Suffield from time to time, which was 8.75% as of September 30, 1998, and is
payable monthly. The aggregate outstanding principal amount owed by the Company
to First Suffield, together with accrued interest thereon, is payable on March
23, 1999. Mr. Roncari has personally guaranteed all of the Company's
indebtedness to First Suffield. The loan agreements prohibit the Company, except
with the prior consent of First Suffield, from paying dividends on its stock
(other than dividends payable in stock), merging or consolidating with another
company or purchasing or retiring any of its outstanding stock. The loan
agreements also provide that it shall constitute an event of default thereunder
if, among other events, either the Company or Mr. Roncari shall become insolvent
or if First Suffield, in good faith, deems that it has insufficient security
with respect to the loans. This debt is to be repaid from the proceeds of the
maximum offering. See "Certain Transactions."

From July through October 1996, the Company borrowed $150,000 from Fleet
National Bank ("Fleet"). Such amount is payable on demand. Interest accrues on
such borrowings at the prime lending rate established by Fleet from time to
time, which was 8.5% as of September 30, 1998, and is payable

29
<PAGE>
monthly. The Company's indebtedness to Fleet (the "Fleet Loan") is personally
guaranteed by Mr. Rothstein, and is secured by personal assets pledged by Mr.
Rothstein in the form of a certificate of deposit in the amount of $150,000.
This debt is to be repaid from the proceeds of the maximum offering. See
"Certain Transactions."

In October 1996, the Company borrowed $100,000 from The Chase Manhattan
Bank. The loan was subsequently acquired by The Mechanics Savings Bank
("Mechanics"). Such amount is payable on March 23, 1999. Interest accrues at the
prime lending rate established by Mechanics from time to time, which was 7.75%
as of September 30, 1998, and is payable monthly. The Company's indebtedness to
Mechanics (the "Mechanics Loan") is secured by personal assets pledged by Mr.
Rothstein in the form of a certificate of deposit in the amount of $105,000.
This debt is to be repaid from the proceeds of the maximum offering. See
"Certain Transactions."

Mr. Rothstein has agreed with the Company that, in the event a demand is
made by Fleet with respect to the Fleet Loan and/or a demand is made by
Mechanics with respect to the Mechanics Loan prior to the earlier of the closing
of the maximum offering, subsequent debt financing or March 3, 2001, he shall
either (i) secure replacement financing to pay the amount so demanded or (ii)
personally satisfy the amount demanded, either through surrender of the
collateral previously pledged by him or through other means satisfactory to
Fleet and/or Mechanics, as the case may be. In the event Mr. Rothstein elects to
personally satisfy the demanded amount, the Company has agreed to reimburse Mr.
Rothstein for the full amount of such payment on the earlier of the closing of
the maximum offering, subsequent debt financing or March 3, 2001. See "Certain
Transactions."

In December 1996, the Company borrowed $50,000 from First Southern Bank
("FSB"). Such amount is payable on April 9, 1999 and bears interest at a rate of
7.25% payable annually. The Company's indebtedness to FSB is secured by personal
assets pledged by Mr. Rothstein in the form of a certificate of deposit in the
amount of $50,000. This debt is to be repaid from the proceeds of the maximum
offering. See "Certain Transactions."

The Company also maintains One Million-Dollar ($1,000,000) unsecured lines
of credit with both International Caribbean Trust Ltd. and Prometheus Trust.
Both lines of credit are personally guaranteed by Messrs. Roncari and Rothstein.
As of September 30, 1998 the Company had drawn down $75,000 from International
Caribbean Trust Ltd. and $125,000 from Prometheus Trust. As of December 15,
1998, an additional $455,000 had been drawn down from these lines of credit.
Both lines of credit carry a 10% interest rate and are due June 30, 2001.
Advances are at the discretion of the lenders. See "Certain Transactions."

From July 1997 through January 1998, three directors, Raymond A. Roncari,
Harold Rothstein and Lawrence O. Perl, provided the Stockholder Loans to the
Company in the amounts of $320,000, $460,000

30
<PAGE>

and $15,000, respectively, each bearing interest at an annual rate of ten
percent (10%). These Loans provided the Company working capital and covered some
costs associated with this Offering and except for the $15,000 payable to Mr.
Perl, have been previously converted to equity and are part of the
aforementioned Stockholder Loans.

In March 1998, the Company entered into the 1998 Private Placement, through
which the Company completed the sale to fourteen private investors (holders
included Lawrence O. Perl, the Company's Chairman of the Board and Chief
Executive Officer, Raymond A. Roncari, a director of the Company, Harold
Rothstein, a director of the Company and Bruce R. Bonadies, a director of the
Company) of 30 Units, each Unit consisting of (i) an unsecured non-negotiable
promissory note in the principal amount of $50,000 (the "Bridge Notes"), (A)
bearing interest at the rate of ten percent (10%) per annum, payable annually in
arrears, and (B) providing for a loan fee payable upon payoff of the Bridge Note
in an amount equal to $5,000 less interest accrued under the Bridge Note during
the first year through the date of payoff; (ii) 3,863 shares of Common Stock
(the "Bridge Shares"); and (iii) 3,863 Bridge Warrants. The purchase price per
Unit was $50,000. The Company received gross proceeds of $1,500,000 from the
sale of such Units. After payment of approximately $10,000 in costs associated
with the 1998 Private Placement, the Company received net proceeds of
approximately $1,490,000 in connection with the 1998 Private Placement.
Approximately $1,345,000 of the net proceeds was used to exercise certain
options to repurchase securities sold in the 1997 Private Placement. Some
holders of the 1997 Units chose to invest in the 1998 Private Placement and
defer all interest due them from the 1997 Units; such holders included Lawrence
O. Perl, the Company's Chairman of the Board and Chief Executive Officer,
Raymond A. Roncari, a director of the Company, Harold Rothstein, a director of
the Company and Bruce R. Bonadies, a director of the Company, Richard Shelton,
Susan Shelton and Ronald Seplowitz. These holders deferred a total of $26,764 in
interest, to be repaid in two parts: $12,157 from the proceeds of the minimum
offering and $14,607 from the proceeds of the maximum offering. The balance of
the net proceeds are being used for working capital and general corporate
purposes, as well as to fund some expenses of this Offering. The Bridge Notes,
together with accrued interest thereon, are due on the earlier of March 3, 2001
or the closing of an IPO by the Company. $575,000 of the Bridge Notes were
converted to equity by two Directors of the Company and $925,000 of the Bridge
Notes are to be repaid from the proceeds of the minimum offering. The accrued
interest due on the Bridge Notes is to be repaid in two parts, $67,157 from the
proceeds of the minimum offering and $109,589 from the proceeds of the maximum
offering, but in no event later than March 3, 2001.

In conjunction with the closing of the 1998 Private Placement, the Company
entered into Director Loan Agreements with each of Harold Rothstein and Raymond
A. Roncari pursuant to which Messrs. Rothstein and Roncari each committed to
loan $450,000 (for a total of $900,000) to the Company to be used for working
capital and certain costs of this Offering. These amounts, together with
approximately $157,000 of the proceeds of the 1998 Private Placement, were used
to fund certain costs of this Offering and provide required working capital. In
consideration for this commitment, Messrs. Rothstein and Roncari were each
granted 19,313 shares of Common Stock of the Company and 19,313 Commitment
Warrants. Pursuant to each Director Loan Agreement, the Company has the right to
draw down advances from each of Messrs. Rothstein and Roncari (each a "Director
Lender") as funds are required and the Director Lender is obligated to so
advance funds within three (3) business days of any such request. Any amounts
advanced will bear interest at a rate of ten percent (10%) per annum. The entire
$900,000 principal outstanding was converted to equity as of September 30, 1998.
All accrued interest thereon will be due and payable in full on the earlier of
(i) January 1, 2001, or (ii) the closing of subsequent debt financing.

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 the date of this Prospectus,
the Company has raised capital through such means in the estimated aggregate
amount of $6,230,000 (including approximately $5,775,000 through September 30,
1998).

31
<PAGE>
The Company is dependent on and intends to use the proceeds of this 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
this 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 if the proceeds of this 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 proceeds of this
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 this Offering may require proceeds greater than
the proceeds of this 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
this Offering is delayed, the Company may not have sufficient capital to fund
operations and the anticipated expenses of this Offering. Although the Company
believes it may be able to raise at least a portion of the Company's future
financing requirements for such period among the officers, directors and/or
stockholders of the Company, no officer, director or stockholder of the Company
has made any further commitment to the Company to provide any portion of the
Company's future financing requirements and there are no assurances that any
officer, director or stockholder will do so. 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. To the extent that the Company finances its
operations through the issuance of additional equity securities, any such
issuance would result in dilution of the interests of the Company's
then-existing stockholders. At some future date, the Company intends to offer up
to approximately $30 million in debt financing, to be negotiated by Beter. There
can be no assurance that such additional financing, or any other additional
financing, will be available to the Company on commercially reasonable terms, or
at all. Further, if such additional financing is attempted, there can be no
assurance that such additional financing, or any other additional financing,
will be successful. To the extent that the Company incurs indebtedness or issues
debt securities, the Company will be subject to all of the risks associated with
incurring substantial indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay principal and interest on any
such indebtedness.

The Company believes that software developed and utilized by the Company is
Year 2000 compliant. However, hardware, software, embedded microchips and other
material provided by others may not be compliant, and there can be no assurances
that the hardware, software, embedded microchips and other material provided by
others will not have a negative effect on the software developed by the Company.

POSSIBLE FLUCTUATIONS IN OPERATING RESULTS

The sales cycle for a prospective System Sponsor is expected to commence at
the time the prospective System Sponsor demonstrates an interest in purchasing a
smart card system from the Company or issues a request for a proposal or
information or takes similar action and ends upon the installation of a smart
card system for the System Sponsor. The sales cycle will vary by System Sponsor
and could extend for periods of up to twelve months or more, depending upon,
among other things, the time required by the System Sponsor to complete a pilot
test of the Company's smart card system, make a determination regarding an
acquisition thereof and negotiate payment terms with the Company. The Company's
operating results could vary from period to period as a result of this
fluctuation in the length of the Company's sales cycle and as a result of
fluctuations in the purchasing patterns of potential System Sponsors,
technological factors, variations in marketing strategies for different target
markets and non-recurring smart card system sales.

32
<PAGE>
BUSINESS

GENERAL

The Company, a development stage company, was organized to design, develop
and market high security, flexible, multiple application smart card systems. A
smart card is a credit card-sized plastic card containing a microchip that
provides the card with memory storage capabilities in a secure environment and,
in advanced versions such as the Company's, enables the card to perform data
processing functions. Smart card systems are typically used by government
agencies or commercial enterprises (the "System Sponsor") to store, access and
modify participant or customer (the "User") information. The Company's
proprietary smart card technology and software enable System Sponsors to store
data on a User's smart card, and enable the System Sponsor, or a service
provider authorized by the System Sponsor (the "Authorized Service Provider"),
to access User information and read, input, delete, modify and process such
data. The Company designs its smart card systems to perform functions for
various target markets, such as employee licensing, animal health and
registration, frequent patron tracking, health care and various government
agency applications and can design each system to perform various functions in
virtually any industry, depending on the System Sponsor's needs. The Company
believes that its smart card systems, which offer the capability to perform
multiple functions on a single card, provide enhanced security and privacy
protection not offered by existing smart cards and position the Company to
capitalize on perceived market opportunities for information systems
incorporating smart card technology.

INDUSTRY BACKGROUND

Smart card technology was developed in France in the mid 1970s and is
currently in wide use in Europe, the Pacific Rim, Latin America and the Middle
East. According to the market researcher Dataquest, the microprocessor and
memory based smart card market will grow from 544 million cards in 1995 to 3.4
billion cards by 2001. Most smart cards currently in use are low capacity
memory-only phone cards which provide only data storage, reading and deletion
capabilities. More sophisticated smart cards, including the Company's smart
cards, are microprocessor-based and therefore have the ability not only to
store, read and delete data but also to add, modify and process data. However,
the Company believes that most microprocessor-based smart cards currently in use
were designed to perform functions for single purpose applications only, such as
pay television access control, medical or academic recordkeeping or insurance
claim processing. The Company believes that these smart cards also generally
utilize multiple, alternative technologies such as microchips, bar codes and
magnetic stripes simultaneously, or allow access by any Authorized Service
Provider to all the information included within the card.

Most cards currently used in electronic transactions are magnetic stripe
cards, such as ordinary credit cards. Such cards contain only limited
information such as account numbers and identification information, but cannot
store or update additional information such as current account balances. The
Company believes that the market for smart cards in North America remains
relatively unexploited due to the large capital and infrastructure investments
made by debit and credit card issuers and the significantly lower costs
associated with the use of magnetic stripe cards. However, smart cards have
recently been introduced in the United States in a number of venues. For
example, a stored value card program designed to facilitate purchases from
participating vendors was used during the 1996 Summer Olympics. In addition, the
National Football League's Jacksonville Jaguars and the National Hockey League's
St. Louis Blues have each installed smart card systems to be used for the
purchase of concession items at their respective sports games. Government
Technology Magazine stated in a February 1996 issue that U.S. welfare reform
legislation mandates that every state replace its paper food stamp system with
an Electronic Benefit Transfer (EBT) scheme by the year 2002, consistent with
the government's push towards a paperless society. Pursuant to this mandate,
many states use magnetic stripe cards for their food stamp programs, and the
States of Mississippi, Ohio and Wyoming have each proposed plans to replace food
stamps with a card-based system to improve convenience and efficiency, as well
as to decrease fraud. A joint pilot program in Manhattan's Upper West Side
between MasterCard, Chase Manhattan Bank, VISA and

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Citibank brings the idea of electronic cash to New York consumers and merchants,
with almost 700 merchants participating in the program. The Company's smart
cards are based on concepts similar to these applications, but the Company's
cards can contain more information due to the Company's patented method of
multiple application layering. In addition, only the Company can utilize its
patented dual card access technology. The Company believes the enhanced security
features and multiple function capabilities of its cards take existing smart
card technology several steps further.

The Company believes that smart cards offer certain advantages over magnetic
stripe cards including the ability to store pages of information and update or
otherwise utilize data as circumstances require. In addition, while the data
contained on magnetic stripe cards is difficult to secure, smart cards can be
programmed to prevent manipulation of data stored in the card. A smart card can
also be programmed with an unalterable memory, prohibiting the writing of new
data on top of old data, and can be programmed to utilize public and private key
encryption algorithms to lower the risk of theft of sensitive data. Furthermore,
unlike magnetic stripe cards, most smart cards are extremely difficult and
expensive to alter, duplicate or reproduce. The Company believes that the
limitations of magnetic stripe cards will present significant market
opportunities in North America for smart card systems featuring enhanced
security and multiple application layering as electronic transactions, including
government benefits transfers, licensing and frequent patron tracking, become
more complex.

TECHNOLOGY OVERVIEW

The Company's proprietary smart card systems incorporate dual card access
technology and multiple application layering. The Company believes that these
components result in certain advantages over magnetic stripe cards and existing
smart card systems, including enhanced security features and multiple function
capabilities. The Company's patented dual card access technology (analogous to a
dual key system for access to a safe deposit box) requires the simultaneous use
of both a "User Card" and an "Access Card" to activate the system. User Cards
are issued by a System Sponsor (such as an HMO, welfare agency, state motor
vehicle department or retail store) to Users such as patients, benefits
recipients, drivers or customers. Access Cards are issued by the System Sponsor
to Authorized Service Providers affiliated with the particular System Sponsor
(such as HMO participating physicians, welfare administrators, police officers
and cashiers). Each User Card issued by the System Sponsor has stored within it
an individualized database containing User-specific information, which is stored
in a "common pool."

By virtue of the dual card access and multiple application layering features
of the Company's technology, a basic set of data carried on a single smart card
can be processed and configured according to the specific requirements of each
application layer of the card. As a result, a vast array of information and
electronic documents and reports can be generated for various categories of
System Sponsors and Authorized Service Providers, thereby substantially
increasing the potential number of uses for each card. For example, one User's
smart card provided by the Company could generate a medical history when
activated by an HMO's participating physician's Access Card, an insurance claim
record when activated by the HMO's benefits administrator's Access Card, a
welfare benefits record when activated by a welfare administrator's Access Card,
and a driver's license when activated by a police officer's Access Card. By
providing a System Sponsor with the ability to add applications over time and
allowing multiple System Sponsors to utilize different layers of the same smart
card, the Company's smart card systems will enable the cost per smart card to be
allocated among separate System Sponsors or different departments within a
single System Sponsor.

The Company's patented method of multiple application layering technology
allows an Access Card to retrieve from this common pool of information only the
data that the Access Card in use is programmed to access. The data stored on the
User Card is then displayed and processed in accordance with the requirements of
the application layer activated by the particular Access Card in use. This
process increases the potential number of uses of the User Card and enables a
single User Card to serve multiple System Sponsors as well as multiple
Authorized Service Providers within a single System Sponsor. The Company

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believes that these features position its smart card systems as secure,
cost-effective solutions for electronic transaction and information processing.

Generally, smart cards can incorporate advanced security features, ranging
in sophistication from a password, photograph or personal identification number
system to a fingerprint, retinal scan or facial geometry recognition system,
which are not found in magnetic stripe cards. The Company believes that the
multiple application layering feature of its smart card systems provide enhanced
security and privacy protection. Each application layer is separate, with
"firewall"-type safeguards to prevent unauthorized access to data in another
application layer. Moreover, each layer can be programmed with the level of
security appropriate to the sensitivity of the data contained in such layer. In
addition, the Company's systems establish an "audit trail" which will record
specific information regarding each instance in which data is accessed,
including the time, the date and the identity of the person accessing
information.

The Company's technology also permits easy adaptation and customization,
allowing the Company to provide a smart card system tailored to the System
Sponsor's needs. The Company's technology provides system scalability by
allowing a System Sponsor, over time, to increase the number of applications
performed by its smart cards, provide additional services or add other System
Sponsors. Furthermore, the Company's technology can support a communication
system in which messages and data updates can be sent between the System Sponsor
and the Authorized Service Provider and/or User, including messages that render
a card inoperable if no longer valid.

PRODUCTS

The Company was organized to design, develop and market high security,
flexible, multiple application smart card systems, which are comprised of the
following products:

SMART CARDS. The Company currently uses commercially available microchips
with varying amounts of memory, depending upon each System Sponsor's
requirements. The Company arranges for initial entry of database information on
the User Cards and authorized access codes on the Access Cards to the System
Sponsor's specifications.

READ/WRITE DEVICES. A read/write device is hardware that provides the data
interface between a smart card and the host computer, allowing data to be
transferred between a database and a smart card. Information can be uploaded and
downloaded between the Access Card and the User Card at any read/ write device
within the system. The Company's smart card systems utilize basic, relatively
inexpensive read/ write devices because certain functions that would otherwise
be performed by the read/write devices are performed by the software within the
Company's smart cards. In addition, because the Company's smart cards conform to
applicable industry standards, the cards are compatible with various types of
read/write devices currently in use.

PRINTERS. The Company utilizes smart card printers for printing images and
other information required to be displayed on the face of the smart cards. These
printers may also include a chip encoder that can write information to the chip
at the same time as the smart card is printed. Numerous such printers are
available in the industry.

CUSTOMIZED APPLICATION SOFTWARE. Each smart card system developed by the
Company, in order to perform the various applications included in that system,
requires customized application software to be written relating to the specific
tasks to be accomplished. Typically, such customized application software
includes software that performs certain basic functions, as well as software
that performs the specific functions required by the particular system. The
Company has developed software that performs the basic functions required to be
performed by all of the Company's smart card systems. By virtue of having
developed such software, the Company is able to create the customized
applications required for a particular system more quickly than if all of the
software necessary to implement the system were required to be developed for
each particular application. The Company's proprietary software has been
developed

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for use on a workstation personal computer. In addition, the Company is a member
of the Microsoft developer network and participates in alpha and beta testing of
new Microsoft products. The Company's proprietary software is compatible with
Windows 3.x-TM-, Windows 95-TM-, Windows NT-TM-, and Windows 98-TM-.

The Company intends to provide each System Sponsor with a customized
configuration of its products based upon the System Sponsor's specific needs and
constraints, ranging from subsystems comprised of selected components which may
be integrated with products or systems provided by third parties, to complete
"turnkey" systems. Each System Sponsor will utilize system stations to
facilitate initial and ongoing operation of each system installed by the
Company. An issue station will issue personalized smart cards, and will be
comprised of one or more personal computers, video cameras for systems requiring
photographs on User Cards, read/write devices, card printers and system
software. An update station will implement necessary changes to the Company's
smart cards, such as updating of information or modification of an Authorized
Service Provider's ability to access particular User information, and will be
comprised of a personal computer, one or more read/write devices and system
software. One or more display stations will permit a User or Authorized Service
Provider to view information stored on a User Card, and will be comprised of a
personal computer, notebook computer and/or hand-held display device, read/write
devices and system software. One personal computer may in some cases function as
issue station, update station and display station, depending on the rights
encoded in the Access Card used. The Company anticipates that a System Sponsor
may, under certain circumstances, seek to utilize, or otherwise procure, its own
system station hardware. In such cases, the Company would expect to aid the
System Sponsor in integrating such hardware with the smart card system products
provided by the Company.

PRICING. The prices of the Company's products will depend on the System
Sponsor's specifications and requirements relating thereto (including the number
and type of application layers per card) and any applicable volume discounts.
The price of the Company's customized application software will depend upon
various factors, including the nature and complexity of the smart card products
and required system interfaces. The off-the-shelf products comprising the
balance of the components of the smart card systems offered by the Company
(including personal computers, notebook computers and hand-held display devices)
will be offered at then-prevailing market prices.

WARRANTY AND SERVICE. The Company offers a limited warranty covering both
parts and labor, pursuant to which the Company or its authorized service
representatives will make repairs and replace parts that become defective due to
normal use. The Company does not anticipate that the cost of servicing its smart
card systems will be material. Furthermore, substantially all component parts of
the Company's smart card systems will be covered by warranties from the
suppliers thereof. However, there can be no assurance that future warranty
expenses will not have an adverse effect on the Company.

TECHNICAL SUPPORT. The Company offers technical support to its System
Sponsors at no charge on a limited basis, as described in each individual System
Sponsor contract. Beyond the specified level, the Company charges an hourly rate
for additional technical support. The Company does not anticipate that the cost
of offering such technical support services will be material.

SMART CARD PRODUCT DEVELOPMENT

The Company believes there are numerous potential applications for its smart
card systems, including but not limited to the following:

EMPLOYEE LICENSING--Licensing and identifying employees in certain regulated
industries, including photo identification, time and attendance records,
specific database information required by the employer and access control to
secure areas.

ANIMAL HEALTH AND REGISTRATION--Tracking of lineage history, medical
information, identification, breed information, nutritional information,
performance data and history of interstate and intrastate movement of
thoroughbred horses and various other racing and show animals and domestic pets.

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GOVERNMENT APPLICATIONS--Issuing citizen photo identification and government
licenses (such as motor vehicle, professional and weapons licenses) and
maintaining and processing government entitlement information (including
Medicare, Medicaid and welfare information).

FREQUENT PATRON PROGRAMS AND TRACKING--Awarding of points, miles or other
credits for retail purchases and tracking of customer purchases to facilitate
more focused target marketing.

GAMING--Controlling and monitoring loss limits, employee licensing and
frequent player tracking.

HEALTH CARE--Simplifying and expediting the verification of patient
insurance coverage and maintaining paperless medical records by medical service
providers.

SOFT TRADING DESK--Reconfiguring the hardware and software of a securities
trading desk through the use of information embedded in each individual trader's
smart card to accommodate each trader's individual screen and information
preferences.

The Company has installed an employee licensing system for the Birmingham
Racing Commission. The agreement provides for the Company to deliver smart cards
and hardware in connection with the licensing and monitoring of racetrack
personnel and others. Pursuant to the agreement, the Company has developed a
licensing database containing more than 30 categories of information for each
licensee, including name, address, date and place of birth, height, weight,
employer's name, fines, rulings, suspensions and revocations. To date, the
Company has provided the Birmingham Racing Commission with over 15,000 smart
cards, a smart card printer and chip encoder and two (2) read/write devices. The
term of the agreement is five years, subject to early termination upon 30 days
notice to the Company. The Company may not terminate the license before
expiration of the five-year term of the agreement. The Company has installed a
similar system at the Macon County Race Course in Alabama under a separate
contract. See "Certain Transactions."

The Company has also installed an employee licensing system at the Oregon
Racing Commission and, to date, the Company has sold approximately 9,500 smart
cards and four (4) read/write devices to the Oregon Racing Commission. The
Company also has two contracts with NAPRA for a national licensing system that
includes a database for nineteen racing jurisdictions, including information on
licensing data, infractions and digital photographs.

In March 1998, the Company installed an employee licensing system at the
Idaho Racing Commission. The system utilizes approximately 1,500 processor cards
for mobile employees who travel between racing facilities, such as jockeys,
owners and trainers, plus over 2,000 memory only cards for stationary employees,
such as food vendors and ticket takers.

In June, 1998, the Company received contracts or purchase orders from the
Florida, Wyoming and Colorado racing commissions to provide smart card based
licensing systems.

From June 1 to September 1, 1995, the Company conducted a pilot program at
Atlantic City Raceway and Monmouth Park in New Jersey and Philadelphia Park in
Pennsylvania involving the issuance of equine medical passport smart cards to
track the identity, movement and medical records of thoroughbred racehorses. To
prevent the spread of a deadly disease, the federal government requires any
horse crossing state lines to have a negative Coggins Report which evidences a
negative test result for Equine Infectious Anemia. A Coggins Report is valid for
one year from the issue date. Further, each state requires a valid health
certificate for any horse entering the state. Under the New Jersey and
Pennsylvania program, data on approximately 500 thoroughbred racehorses that
would otherwise have been provided in paper documents was entered into smart
cards provided by the Company and each track gatekeeper in the program utilized
a reader terminal that interfaced with the cards to determine whether particular
horses were eligible for entry on racetrack grounds. The pilot was co-sponsored
by The Jockey Club Racing Services, Inc. During the pilot program, the Company
issued approximately 500 equine medical passport smart cards. The Company is
currently developing enhancements to the smart card system utilized in the

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pilot program in order to address certain operational issues that arose during
the program. Although the completed program successfully tested the equine
medical passport smart card system, such pilot program has not resulted in any
system sales to date. There can be no assurances that any of the Company's pilot
programs will result in system purchases by any potential System Sponsor.

The Florida Department of Agriculture and Consumer Services Bureau of
Disease Control has proposed a similar pilot project anticipated to begin as
soon as possible. The Bureau of Disease Control is responsible for ensuring the
health and marketability of livestock in the state of Florida. The states of
Florida, Georgia and Alabama have formed an alliance whereby a special ninety
(90) day pass authorized by any of the three states can be used to cross state
lines between these states. The proposed Florida pilot program will involve a
test "livestock medical passport" program in which each of 100 animals will be
implanted with an "electronic identification transponder" used in conjunction
with smart cards to verify each animal's identity and federal and state medical
certifications. This pilot program will replace the required paper passports for
horses crossing between these states. Although completed programs in New Jersey
and Pennsylvania successfully tested the equine medical passport smart card
system and similar electronic transponder implants are in use which are not
coordinated with smart card technology, such equine medical passport pilot
programs have not resulted in any system sales to date.

The Company has entered into a Memorandum of Understanding with Traquer to
market the Company's smart card systems to Indian gaming and wagering facilities
in North America. Traquer has significant expertise with the rules and
regulations for Indian gaming environments. In February 1998, the Company
received its first order from Traquer to provide a smart card based employee
licensing system to an Indian tribe in Arizona. This system was installed in
October 1998.

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Owners of animals will carry with them a smart card containing animal tracking
information related to the existing PETtrac identification systems as well as
other AVID related applications, including animal records. This venture is in
its formative stages and there can be no assurances that the venture will be
undertaken as presently anticipated or that meaningful revenues will result.

The Company, either alone or in conjunction with strategic partners, is
currently in discussions and negotiations with certain potential System Sponsors
regarding possible future smart card projects. The Company, through the
Subsidiary, has entered into a Memorandum of Understanding with SHL Systemhouse,
an international systems integrator owned by Worldcom, to form a joint venture
for the purpose of attempting to secure a project to develop a smart card system
for the Province of Ontario, Canada. There can be no assurance that any such
projects will be implemented or, if implemented, generate meaningful revenues.

MARKETING AND SALES

The Company's objective is to become a leading provider of smart card
systems to government and commercial System Sponsors requiring increasingly
complex, secure and cost-effective information processing systems. Because the
Company believes there are numerous potential target markets for the Company's
smart card systems, the Company intends to market its products through multiple
channels, including through strategic marketing alliances and licensing or other
arrangements with systems integrators, value added resellers and other smart
card vendors. The Company believes that such arrangements will enable it to have
access to substantial numbers of potential smart card System Sponsors, and that
third-party partners can provide knowledge, experience and/or financial
resources appropriate to a specific market opportunity and may enhance the
Company's ability to achieve significant penetration in select markets,
especially in those involving government services. 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.

The Company will seek to identify potential System Sponsors and strategic
partners and attempt to increase the visibility of the Company. It will be the
role of the Director of Sales, under the direction of management, to guide the
Company from the research and development phase to a company with full marketing
and sales strategies for direct and indirect sales. The Company intends to
market its smart card systems directly through its management and employees and
may also retain the services of third parties such as independent sales
representatives and marketing and other consultants. The Company utilizes
independent sales representatives in the United States and abroad, whose
relationships with the Company are generally governed by a written contract for
a specified term, subject to renewal under certain circumstances, and provides
for a limited exclusive territorial or industry representation, specified fees
or commissions and specified sales targets. The Company may, in the case of
potential System Sponsors within certain target industries, sell its systems
through marketing and other consultants with relationships in such industries.

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The Company also plans to market its systems through sales brochures, direct
mailings, advertisements in trade publications and participation in industry
trade shows. The Company intends to utilize a portion of the proceeds of this
Offering to expand its marketing and sales activities.

RESEARCH AND DEVELOPMENT AND TECHNOLOGY PURCHASE

For the years ended December 31, 1996 and December 31, 1997, the Company
incurred costs relating to research and development activities in the
approximate amounts of $167,000 and $260,000, respectively. The Company intends
to utilize a portion of the proceeds of this Offering for research and
development, including $730,000 (of which $180,000 has been expensed through
September 30, 1998, $100,000 is expected to be capitalized and $450,000 is
expected to be expensed ratably over approximately a two year period) payable to
SoftChip Israel Ltd. and SoftChip Technologies (3000) Ltd. in connection with
the purchase of the DVK-1 System and the further enhancement of the Company's
proprietary technology as well as the development of system applications and
pilot programs for potential System Sponsors. The Company further intends to
pursue additional patents on various aspects of its technology.

MANUFACTURING

The Company does not manufacture its own microprocessor chips or associated
hardware or assemble its own smart cards. Components for the Company's smart
cards, such as microprocessor chips and plastic cards as well as associated
hardware, may be purchased from a number of qualified electronic parts
manufacturers and distributors. The Company is under no obligation to purchase
any such components from any one particular manufacturer and therefore may
obtain quality components at the best possible prices the Company can find.

COMPETITION

The market for the Company's smart card systems is characterized by intense
competition. The market is currently dominated by cards utilizing magnetic
stripes, and is expected to be dominated by magnetic stripe cards for the
foreseeable future due to the lower costs of production of such cards and the
substantial capital and infrastructure investments made by debit and credit card
issuers in such cards. The Company also competes with numerous well-established
companies, including Gemplus, Bull PTS (a unit of Groupe Bull), Schlumberger
Electronic Transactions (a business segment of Schlumberger Limited), Orga
Kartensysteme GMBH, Giesecke & Devrient and Mondex International, which design,
manufacture and/or market smart card systems. Although the Company believes that
its dual card access and multiple application layering technologies will allow
the Company to compete on the basis of enhanced security, flexibility,
scalability, cost-effectiveness and quality, the Company's smart card systems
incorporate new concepts and may be unsuccessful even if they are superior to
those of its competitors. In addition, certain companies may be developing
technologies or products of which the Company is unaware which may be
functionally similar or superior to those developed by the Company. Most of the
Company's competitors and potential competitors possess substantially greater
financial, marketing, personnel and other resources than the Company and have
established reputations relating to the design, development, manufacture,
marketing and service of smart card systems. As the market for smart card
systems grows, new competitors are likely to emerge. Additional competition
could adversely affect the Company's operations. Smart card technology competes
with other electronic transaction and information processing technologies,
including magnetic stripe cards, bar code cards, laser optical cards and radio
frequency contactless cards, as well as traditional methods of transaction and
information processing, whether effected or recorded on paper or otherwise.

GOVERNMENT REGULATION AND INDUSTRY STANDARDS

In the United States, the Company is not currently subject to direct
regulation other than federal and state regulations applicable to businesses
generally. However, changes in the regulatory environment

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relating to the smart card industry could have an adverse effect on the
Company's business. Legislative proposals from federal and state government
bodies in the area of privacy rights could impose additional regulations and
obligations upon all smart card providers. The Company cannot predict the
likelihood that any such legislation will pass, nor the financial impact, if
any, that any such legislation may have. Moreover, the applicability to smart
card System Sponsors and Authorized Service Providers of existing laws governing
issues such as personal privacy is uncertain.

The Company believes that its smart card systems are currently in compliance
with the quality assurance standards of ISO-7816, an international standard
promulgated by the International Organization for Standardization, a worldwide
federation of standards bodies from approximately 100 countries. The European
Community and others have adopted these standards as their preferred quality
standards. However, as technological advances occur in the smart card industry,
other emerging standards may gain widespread acceptance. While compliance with
applicable and emerging standards is the responsibility of the Company's
suppliers, any failure on the part of the Company's suppliers to comply with
such standards could materially and adversely affect the Company's sales to
various System Sponsors and prevent the Company's expansion into certain
markets.

As part of its strategy, the Company intends to market its smart card
systems to government agencies in the United States and Canada. If successful,
the Company will become subject to the special risks involving government
contracts, including delays in funding, lengthy review processes for awarding
contracts, non-renewal, delay, termination at the convenience of the government,
reduction or modification of contracts in the event of changes in the
government's policies or as a result of budgetary constraints and increased or
unexpected costs resulting in losses.

The Company will also be required to obtain most potential government
contracts through the competitive bidding process. The competitive bidding
process is typically lengthy and often results in the expenditure of financial
and other resources in connection with bids that are not accepted. Additionally,
inherent in the competitive bidding process is the risk that actual performance
costs may exceed projected costs upon which a submitted bid or contract price is
based. Moreover, in some instances, the Company would be required to post bid
and/or performance bonds in connection with contracts with government agencies.

To the extent that the Company is able to successfully expand its operations
into foreign markets, the Company may become subject to trade restrictions
(including restrictions on the export of critical technology), export duties and
tariffs and international political and regulatory developments.

INTELLECTUAL PROPERTY

The Company's success will depend in part on its ability to enforce its
patents, protect trade secrets and operate without infringing on the proprietary
rights of others. The Company has received United States patent number 5629508
with respect to its dual card access technology and methods. In addition, the
Company has filed a continuation-in-part on its patent. If granted, this will
significantly expand the Company's intellectual property rights pertaining to
dual card-based data retrieval and access control. The Company contemplates
filing patent applications in selected foreign jurisdictions where such filings
would, in the Company's opinion, provide it with a competitive advantage. The
patent laws of other countries may differ from those of the United States as to
the patentability of the Company's products or technology and the degree of
protection afforded by foreign patents may be different from that in the United
States. The failure by the Company to obtain any foreign patents could have a
material adverse effect on the Company's ability to successfully commercialize
its smart card systems outside the U.S. Even though the Company has been able to
obtain a patent, there can be no assurance that this patent will afford the
Company commercially significant protection for its technology. Other companies
may independently develop equivalent or superior technologies or products and
may obtain patent or similar rights with respect to them. The Company is not
aware of any infringement by its technology on the proprietary rights

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of others and has not received any notice of claimed infringement. However, the
Company has not conducted any investigation as to possible infringement and
there can be no assurance that third parties will not assert infringement claims
against the Company in connection with its products, that any such assertion of
infringement will not result in litigation, or that the Company would prevail in
such litigation. Moreover, in the event that the Company's technology or
proposed products were deemed to infringe upon the rights of others, the Company
would be required to obtain licenses to utilize such technology. There can be no
assurance that the Company would be able to obtain such licenses in a timely
manner on acceptable terms and conditions, or at all, and the failure to do so
could have a material adverse effect on the Company. If the Company were unable
to obtain such licenses, it could encounter significant delays in product market
introductions while it attempted to design around the infringed upon patents or
rights, or could find the development, manufacture or sale of products requiring
such license to be foreclosed. In addition, patent disputes occur in the smart
card and computer industries and there can be no assurance that the Company will
have the financial resources to enforce or defend a patent infringement or
proprietary rights action. In addition, the Company has received a federal
trademark registration for its SMART-ID-Registered Trademark- mark and design
and has applied for a federal trademark registration for its Cheeze! mark.
SMART-ID-Registered Trademark- is a smart card based system that provides
positive identification, transaction tracking and the ability to layer multiple
applications on a single smart card. Cheeze! is a program currently used by
nineteen pari-mutuel licensing jurisdictions to photograph licensees and
transmit the photograph and license data to a central database, which is
currently housed at the Company's offices. The Company's use of its software,
name and marks may be subject to challenge by others, which, if successful,
could have a material adverse effect on the Company.

The Company has entered into agreements with SoftChip Israel Ltd. of
Jerusalem, Israel and SoftChip Technologies (3000) Ltd. to purchase the DVK-1
Chip Mask Operating System and architecture ("DVK-1 System") for a purchase
price of $100,000 from SoftChip Israel Ltd. and with SoftChip Technologies
(3000) Ltd. to provide technical support and development to the Company for a
two-year period for an additional $450,000 plus a maintenance fee ranging from
$.125 to $.25 for each smart card sold by the Company that incorporates the
DVK-1 System. Upon closing, which is scheduled to occur after the earlier of
closing of the minimum Offering or March 15, 1999, these agreements will provide
the Company ownership of its own chip mask and access to the technical resources
needed to develop a completely new and proprietary chip mask and operating
system. The chip mask provides the basic instructions to the microchip and its
internal components and facilitates the orderly utilization of all of the
microchip's components and allows the device to be utilized. The Company had
also executed a purchase order with SoftChip for technical services for a
monthly fee of $18,000, which commenced December 1, 1997 and expired on
September 30, 1998. As of September 30, 1998, the Company owed $100,000 under
this purchase order and such amount is included in the use of proceeds as
repayment of certain outstanding obligations. Under the agreement, ownership of
the DVK-1 System will be transferred to the Company at closing upon payment in
full of the purchase price and technical support fees. If the closing of the
minimum offering is delayed beyond March 15, 1999, the Company believes it may
be able to reach a mutual agreement with SoftChip to extend the closing date of
the agreement, but there can be no assurance that the Company will be able to
reach such agreement with SoftChip, or that the Company will ultimately secure
ownership of the DVK-1 System if the closing of the minimum offering is delayed
beyond March 15, 1999. Additionally there can be no assurance that ownership of
the DVK-1 System will result in the successful development of new technology.
See "Plan of Operation" and "Business--Intellectual Property."

The Company also relies on trade secrets and proprietary know-how and
employs various methods to protect the concepts, ideas and documentation
relating to its proprietary technology. However, such methods may not afford the
Company complete protection and there can be no assurance that others will not
independently obtain access to the Company's trade secrets and know-how or
independently develop products or technologies similar to those of the Company.
Furthermore, although the Company has and expects to have confidentiality and
non-competition agreements with its employees and appropriate

42
<PAGE>
suppliers and manufacturers, there can be no assurance that such arrangements
will adequately protect the Company's trade secrets.

The Company purchases many of the hardware and non-proprietary software
components of its smart card systems through normal electronic and computer
distribution channels. Typically, such components are sold with standardized
license agreements containing non-negotiated terms, conditions and restrictions
established by the manufacturer.

EMPLOYEES

As of the date of this Prospectus, the Company had twelve full-time
employees, consisting of four executive officers and eight employees engaged in
engineering, technical support, product development and marketing and sales. See
"Management." The Company also uses the resources of independent programmers and
consultants from time to time on an as needed basis. The Company anticipates
that it will hire additional sales and technical personnel to continue to
implement the Company's marketing and product development efforts and may engage
independent sales representatives and industry-specific marketing consultants to
assist the Company in marketing the Company's smart card systems to potential
System Sponsors.

FACILITIES

The Company leases, pursuant to a sublease, approximately 2,750 square feet
of office space at 1355 Terrell Mill Road, Marietta, Georgia. The sublease
commenced on January 1, 1997 and will continue through January 31, 2000.
Pursuant to the sublease, the Company is required to pay rent of approximately
$3,005 per month, increasing through the term of the sublease to approximately
$3,100 per month.

43
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The current directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Lawrence O. Perl.................... 56 Chief Executive Officer, Chairman of the Board & Director
Raymond Findley, Jr................. 50 President, Chief Operating Officer & Director
Frank S. Fuino, Jr.................. 52 Chief Financial Officer & Vice President of Finance
Robert H. Dixon..................... 38 Vice President of Technical Operations
Lilly Beter......................... 64 Secretary & Director
Harold Rothstein.................... 76 Director
Raymond A. Roncari.................. 74 Director
Bruce R. Bonadies................... 56 Director
Gordon W. Walker.................... 57 Director
</TABLE>

LAWRENCE O. PERL, a co-founder of the Company, has served as Chairman of the
Board and Chief Executive Officer and a director of the Company since its
inception. From April 1993 to June 1994, Mr. Perl served as Chief Executive
Officer and a director of McKinnie Systems, Inc. ("McKinnie"), a privately held
supplier of computerized management information systems to the pari-mutuel
industry. From September 1984 through March 1993, Mr. Perl served as a financial
consultant for Roncari Industries, Inc., a privately held producer of quarry,
asphalt and concrete products. In addition, since August 1977, Mr. Perl has
served as President of Lawrence Owen Associates, Inc., a privately held hotel
and financial consulting firm, and, since 1978, has been affiliated with other
privately held entities engaged in hotel ownership and management.

RAYMOND FINDLEY, JR., a co-founder of the Company, has been President, Chief
Operating Officer and a director of the Company since its inception. From June
1990 to May 1994, Mr. Findley served as President and Chief Executive Officer of
Phoenix DataCrypt Systems, Inc., a privately held designer and developer of
smart card-based technology and business applications. From September 1988 to
April 1990, Mr. Findley was President and Chief Executive Officer of British
Telecom CBP, Inc., a developer and marketer of financial telecommunications and
trading systems.

FRANK S. FUINO, JR. was appointed as the Company's Chief Financial Officer
and Vice President of Finance on August 4, 1998. From January 1996 to July 1998,
Mr. Fuino was Senior Vice President and Chief Financial Officer of Mayor's
Jewelers, Inc. From June 1988 to December 1995, Mr. Fuino was both an
independent consultant providing financial services and a reorganization and
management specialist for various corporations, most recently as Executive Vice
President of Finance and Chief Financial Officer of Jan Bell Marketing, Inc., a
position he held from May 1993 to May 1995. In prior years, Mr. Fuino served in
various capacities, including Vice President and Treasurer for Allied Stores
Corporation from May 1977 to September 1987.

ROBERT H. DIXON has been Vice President of Technical Operations of the
Company since July 1994. From September 1987 to July 1994, Mr. Dixon was
employed as software manager of McKinnie and from April 1984 to August 1987 Mr.
Dixon was employed as computer programmer by Tri-State Lighting, Inc., a
privately held lighting fixture manufacturer.

HAROLD ROTHSTEIN, a co-founder of the Company, has been a director of the
Company since January 1996. In 1967, Mr. Rothstein founded Utility Development
Corporation, a Connecticut-based privately held general contracting firm which
is primarily engaged in building federally insured multi-family and low-income
housing. Mr. Rothstein has served as the Chief Executive Officer of Utility
Development Corporation since its inception.

44
<PAGE>
RAYMOND A. RONCARI, a co-founder of the Company, has been a director of the
Company since January 1996. From 1979 to July 1995, Mr. Roncari served as the
President and Chief Executive Officer of Roncari Industries, Inc., thereafter
serving as President and Chief Executive Officer of Tilcon-Roncari, Inc., a
partial successor-in-interest to Roncari Industries, Inc. until January 1997, at
which time he retired. Mr. Roncari continues to serve as President and Chief
Executive Officer of Roncari Industries, Inc. Mr. Roncari has also served as
Chairman, President and Chief Executive Officer of Roncari Development Co., a
real estate development company, since 1970 and of Roncari Associates, Inc., a
cargo facilities company, since 1980. In addition, from 1965 to 1985, Mr.
Roncari served as a director and Chairman of the Executive Committee of the
Northern Connecticut National Bank--Windsor Locks.

LILLY BETER, Secretary and member of the Board since December 31, 1997, is
President of Lilly Beter Capital Group, Ltd., with offices in Washington, D.C.,
Minneapolis, Minnesota and Century City, California. She co-founded the firm
over thirty years ago with her late husband, with whom she was also associated
in his law practice, providing government representation to clients. Ms. Beter
represents companies doing business in the Pacific Rim, South America, Europe
and the Caribbean. She is a member of the American League of Lobbyists and the
American Arbitration Association.

BRUCE R. BONADIES, a member of the Board since December 31, 1997, retired in
March 1998 from his position as Vice President, Business Development of Marriott
Health Care Services, a division of Marriott International. Mr. Bonadies has
held numerous positions with various Marriott companies since 1977, including
Senior Vice President of National Food Services and Facilities, Vice President
of Sales and Vice President of Area Sales, and Director of Sales, and is
currently president of Brandon Scott Associates, LLC, a recently formed sales
training and consulting company.

GORDON W. WALKER became a director of the Company in February 1997. Mr.
Walker served as counsel to Miller Thomson, a Toronto, Ontario law firm. From
1978 to 1985, Mr. Walker held various government cabinet positions for the
Province of Ontario, including Minister of Correctional Services, Provincial
Secretary for Justice, Minister of Industry and Trade, and Minster of Consumer
and Commercial Relations. Between 1971 and 1985, Mr. Walker served three terms
as a member of the Ontario legislature.

Executive officers serve at the discretion of the Board. Directors of the
Company hold office until the expiration of the term for which they are elected
and until their respective successors have been elected and qualified, or until
their prior death, resignation or removal. The Board is classified into three
classes of directors, with each class serving a staggered three-year term.
Messrs. Bonadies and Findley and Ms. Beter are Class I directors, Messrs.
Roncari and Walker are Class II directors, and Messrs. Perl and Rothstein are
Class III directors. The terms of the Class I, Class II and Class III directors
will expire at the annual meetings of stockholders to be held in 2000, 2001, and
1999, respectively. The Company reimburses the directors for reasonable travel
expenses incurred in connection with their activities on behalf of the Company,
but does not pay its directors any fees for Board participation (although it may
do so in the future). Pursuant to the Nonemployee Directors' Stock Option Plan,
non-employee directors will automatically be granted each year, on the date of
the Company's annual meeting of stockholders, Non-incentive Options (as
hereinafter defined) to purchase 3,863 shares of Common Stock of the Company at
an exercise price equal to the fair market value thereof on the date of grant.
See "--Nonemployee Directors' Stock Option Plan."

COMMITTEES OF THE BOARD

AUDIT COMMITTEE. Upon the consummation of this Offering, the Company will
establish an Audit Committee of the Board (the "Audit Committee") consisting of
at least two directors who are not employees of the Company. Audit Committee
members will meet regularly with the Company's financial management and
independent auditors to review the results of their examination, the scope of
audits and their opinions on the adequacy of internal controls and quality of
financial reporting.

45
<PAGE>
COMPENSATION COMMITTEE. Upon the consummation of this Offering, the Company
will establish a Compensation Committee of the Board (the "Compensation
Committee") consisting of at least two directors who are not employees of the
Company. The Committee will make recommendations to the Board of Directors
concerning the salaries of all elected officers. In addition, the Compensation
Committee will administer the Company's Stock Option Plan and determine the
amounts of, and the individuals to whom, awards shall be made thereunder. See
"1996 Stock Option Plan."

EXECUTIVE COMMITTEE. Upon the consummation of this Offering, the Company
will establish an Executive Committee of the Board (the "Executive Committee").
The Executive Committee will have all the powers of the Board (except those
specifically reserved under the DGCL to the full Board of Directors) in the
management and direction of the business of the Company.

ADVISOR TO THE BOARD

The Company has secured the services of Dr. Mary Mundinger as advisor to the
Board. Dr. Mundinger currently holds the position of Dean and Professor at the
School of Nursing, as well as an Associate Dean in the Faculty of Medicine, at
Columbia University in New York. She sits as a consultant and advisor to various
state and federal commissions including: The Federally Commissioned Committee to
advise the Department of Veteran Affairs on Innovations in Nursing, 1997; The
White House Steering Committee on Health, 1996; Co-Chair of the International
Society of Technology Assessment in Health Care, Nursing and Technology
Assessment Panel, 1993; and the Health Professions Review Group, appointed by
President Clinton to review proposals of the Health Reform Task Force, 1993. She
has authored two books on nursing and healthcare, as well as numerous articles
in various nursing journals and magazines. Dr. Mundinger is also on the Boards
of Directors of Cell Therapeutics, Inc. and United Healthcare. Her contacts and
experience are expected to be instrumental in promoting smart card technology in
the healthcare industry.

KEY EMPLOYEE INSURANCE

The Company has obtained "key man" insurance on the lives of Messrs. Perl
and Findley in the amount of two million dollars each.

OTHER KEY EMPLOYEE

ROBERT J. CARTAGINE, a 1984 graduate of New York University with a Business
Administration degree and a 1985 graduate of the New York Institute of
Technology with a Sales Management degree, brings several years of sales
experience to the Company as its Director of Sales. He has developed training
syllabuses for the Regional Bell Operating Companies and was employed for
several years with Nynex, New York Telephone, Bell Atlantic and New Jersey Bell
as Northeast Regional Sales Director. Mr. Cartagine performed sales services for
the Company on a contract basis beginning in February 1998 and became a regular
employee in April 1998. Mr. Cartagine will enter into a two-year employment
agreement no later than the closing of the minimum offering.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding the
compensation in each of the last three fiscal years paid to the person who
served as the Company's Chief Executive Officer and to the other officers of the
Company who earned $100,000 or more during such periods (collectively, the
"Named Officers").

46
<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------------- ------------------------------------ -----------
OTHER ANNUAL RESTRICTED STOCK SECURITIES
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) UNDERLYING LTP PAYOUTS
POSITION YEAR ($) ($) ($) ($) OPTIONS SARS ($)
- ------------------------ --------- --------- ----------- ----------------- ------------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence O. Perl 1998 112,500(1) -- -- -- -- --
Chief Executive 1997 156,000(2) -- -- -- -- --
Officer 1996 200,000(3) -- -- -- -- --
1995 192,308 -- -- -- -- --

Raymond Findley, Jr. 1998 176,000(1) -- -- -- -- --
President and Chief 1997 189,955(2) -- -- -- -- --
Operating Officer 1996 200,000(3) -- -- -- -- --
1995 192,308 -- -- -- -- --

Frank S. Fuino, Jr. 1998 160,000(4) -- -- -- 92,700(5) --
Vice President of
Finance and Chief
Financial Officer

<CAPTION>
ALL OTHER
NAME AND PRINCIPAL COMPENSATION
POSITION ($)
- ------------------------ -----------------
<S> <C>
Lawrence O. Perl --
Chief Executive --
Officer --
--
Raymond Findley, Jr. --
President and Chief --
Operating Officer --
--
Frank S. Fuino, Jr. --
Vice President of
Finance and Chief
Financial Officer
</TABLE>

- ------------------------------

(1) Does not include $137,500 and $74,000 in accrued but unpaid salary payable
to each of Messrs. Perl and Findley, respectively.

(2) Does not include $94,000 and $60,045 in increased but unpaid salary to each
of Messrs. Perl and Findley, respectively.

(3) Does not include $50,000 in accrued but unpaid salary payable to each of
Messrs. Perl and Findley.

(4) Mr. Fuino's employment with the Company commenced August 4, 1998. The salary
actually paid to him by the Company for 1998 equals $60,000.

(5) Although 92,700 options were granted to Mr. Fuino during 1998, only 23,175
of stock options are exercisable during 1998.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS GRANTED TO EXERCISE OR
UNDERLYING OPTIONS/ EMPLOYEES IN FISCAL BASE PRICE
NAME SARS GRANTED (#) YEAR ($/SH) EXPIRATION DATE
- --------------------------------- ------------------- ----------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Frank S. Fuino, Jr. ............. 92,700 34.6% $ 11.00 August 4, 2008
</TABLE>

EMPLOYMENT AGREEMENTS

Each of the Company's officers, with the exception of Ms. Beter, has
executed a five-year employment agreement to be effective upon closing of the
minimum offering.

1996 STOCK OPTION PLAN

In order to attract, retain and motivate employees (including officers),
directors, consultants and other persons who perform substantial services for or
on behalf of the Company, the Company has adopted the 1996 Stock Option Plan
(the "Stock Option Plan"). 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."

47
<PAGE>
The Stock Option Plan is administered by the Board or, at its discretion, by
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.

As of August 4, 1998, Employee Incentive Options to purchase an aggregate of
268,058 shares of Common Stock were outstanding under the Stock Option Plan,
including 77,250 shares to Robert Dixon and 92,700 shares to Frank S. Fuino,
Jr., both officers of the Company; plus 15,450 shares to Robert Cartagine and
1,545 shares to Phyllis Burke, both employees of the Company. All of such
Incentive Options will be exercisable at a per share price equal to $7.77, with
the exception of the Incentive Options granted to Mr. Fuino, Mr. Cartagine and
Ms. Burke, all of whose Incentive Options will be exercisable at a per share
price equal to $11.00, and will vest in annual installments of twenty-five
percent (25%) beginning on the date of grant. No Non-incentive Options have been
granted under the Stock Option Plan.

Shares subject to 158,363 of the 1996 Options, including the 1996 Options
held by Mr. Dixon, are exercisable at a price of $7.77 per share. Shares subject
to the remaining 109,695 1996 Options, including the 1996 Options held by Mr.
Fuino, are exercisable at a per share price equal to $11.00. The right to

48
<PAGE>

exercise all 1996 Options vests in annual installments of twenty-five percent
(25%) commencing on the date of grant. All 1996 Options are Incentive Options
except for 25,772 of the 1996 Options held by Mr. Dixon and 56,340 of the 1996
Options held by Mr. Fuino, which are Non-Incentive Options. The Non-Incentive
Options held by Mr. Dixon and Mr. Fuino are Non-Incentive Options due to the
$100,000 Limitation.

NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN

In order to attract and retain the services of non-employee members of the
Board of Directors and to provide them with increased motivation and incentive
to exert their best efforts on behalf of the Company by enlarging their personal
stake in the Company, the Company has adopted the Nonemployee Directors' Stock
Option Plan (the "Directors' Plan"). Pursuant to the Directors' Plan, stock
options covering an aggregate of 46,350 shares of the Company's Common Stock may
be granted to such non-employee directors.

Pursuant to the Directors' Plan, each member of the Board of Directors of
the Company who is not an employee of the Company (or a subsidiary) (a
"Nonemployee Director") and who is elected or re-elected as a director of the
Company by the stockholders at any annual meeting of stockholders commencing
with the first annual meeting in 1999 will receive, as of the date of each such
election or re-election, options to purchase 3,863 shares of the Company's
Common Stock at the fair market value thereof on the date of grant. In addition,
each Nonemployee Director shall be granted options to purchase 3,863 shares of
Common Stock at each annual meeting of the Board during the term of such
Nonemployee Director's directorship. All options granted under the Directors'
Plan are to be Non-incentive Options.

On February 2, 1998, each Nonemployee Director was issued an option to
purchase 3,863 shares of Common Stock (aggregating 19,315 shares) at an exercise
price of $7.77 per share, pursuant to the Directors' Plan.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Section 145 of the DGCL contains provisions entitling the Company's
directors and officers to indemnification from judgments, fines, amounts paid in
settlement, and reasonable expenses (including attorney's fees) as the result of
an action or proceeding in which they may be involved by reason of having been a
director or officer of the Company. In the Certificate, the Company has included
a provision that limits, to the fullest extent now or hereafter permitted by the
DGCL, the personal liability of its directors to the Company or its stockholders
for monetary damages arising from a breach of their fiduciary duties as
directors. Under the DGCL as currently in effect, this provision limits a
director's liability except where such director (i) breaches his duty of loyalty
to the Company or its stockholders, (ii) fails to act in good faith or engages
in intentional misconduct or a knowing violation of law, (iii) authorizes
payment of an unlawful dividend or stock purchase or redemption as provided in
Section 174 of the DGCL, or (iv) obtains an improper personal benefit. This
provision does not prevent the Company or its stockholders from seeking
equitable remedies, such as injunctive relief or rescission. If equitable
remedies are found not be to available to stockholders in any particular case,
stockholders may not have any effective remedy against actions taken by
directors that constitute negligence or gross negligence.

The Certificate and By-Laws also include provisions to the effect that
(subject to certain exceptions) the Company shall, to the maximum extent
permitted from time to time under the law of the State of Delaware, indemnify,
and upon request shall advance expenses to, any director or officer to the
extent that such indemnification and advancement of expenses is permitted under
such law, as it may from time to time be in effect. At present, the DGCL
provides that, in order to be entitled to indemnification, an individual must
have acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the Company's best interests.

49
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information as of the date of this Prospectus
and as adjusted to reflect the sale by the Company of a minimum of 454,600 and a
maximum of 648,900 shares of Common Stock offered hereby and the exercise of the
options, based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
who is known by the Company to beneficially own more than five percent (5%) of
the outstanding shares of Common Stock, (ii) each director of the Company and
(iii) all of the Company's officers and directors as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OWNED AFTER MINIMUM OWNED AFTER MAXIMUM
OFFERING(2) OFFERING OFFERING
----------------------- ----------------------- -----------------------
NUMBER OF NUMBER OF NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES PERCENT SHARES PERCENT SHARES PERCENT
- ----------------------------------------------- ---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lawrence O. Perl(3)............................ 698,667 17.9% 698,667 16.0% 698,667 15.4%
Raymond Findley................................ 696,735 17.9% 696,735 16.0% 696,735 15.3%
Harold Rothstein(4)............................ 1,024,138 26.3% 1,024,138 23.5% 1,024,138 22.5%
Raymond A. Roncari(5).......................... 999,995 25.6% 999,995 23% 999,995 22.0%
Lilly Beter(6)................................. 3,863 0.1% 3,863 0.1% 3,863 0.1%
Bruce Bonadies(7).............................. 5,795 0.2% 5,795 0.1% 5,795 0.1%
Gordon Walker(8)............................... 3,863 0.1% 3,863 0.1% 3,863 0.1%
Joseph Basch................................... 348,340 8.9% 348,340 8.0% 348,340 7.7%
All officers and directors as a group (nine
persons)..................................... 3,506,444 89.9% 3,506,444 80.5% 3,506,444 77.1%
</TABLE>

Lawrence O. Perl, Raymond Findley, Harold Rothstein and Raymond A. Roncari
may be deemed "promoters" of the Company, as such term is defined under the
federal securities laws.

- ------------------------

(1) The address for each such person is c/o American Card Technology, Inc., 1355
Terrell Mill Road, Building 1462, Suite 200, Marietta, Georgia 30067.

(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within 60
days from the date of this Prospectus upon the exercise of options, warrants
or convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible securities that
are held by such person (but not those held by any other person) and which
are exercisable within 60 days of the date of this Prospectus have been
exercised. Assumes 3,901,136 shares of Common Stock outstanding prior to
this Offering, 4,355,736 shares of Common Stock outstanding immediately
after the minimum offering and 4,550,036 shares of Common Stock outstanding
immediately after the maximum offering, before any consideration is given to
outstanding options, warrants or convertible securities.

(3) Includes 696,735 shares held by the Perl Trust, a family trust for the
benefit of the family of Lawrence O. Perl, of which Mr. Perl is a
beneficiary. As of May 1, 1998, the Perl Trust entered into a voting trust
agreement with respect to the 696,735 shares held by the Perl Trust. As of
July 8, 1998 Lilly Beter has been appointed the voting trustee of such
shares; such appointment shall expire April 30, 1999. Does not include 1,932
shares issuable upon exercise of warrants received in connection with the
1998 Private Placement.

(4) Includes 908,118 shares held by the Rothstein Trust, a family trust for the
benefit of the family of Harold Rothstein, and 3,863 shares issuable upon
exercise of the option issued pursuant to the Directors' Plan. As of May 1,
1998, the Rothstein Trust entered into a voting trust agreement with

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<PAGE>
Lilly Beter pursuant to which Ms. Beter was appointed the voting trustee
with respect to the 908,118 shares held by the Rothstein Trust; such
appointment shall expire April 30, 1999. Does not include 36,694 shares
issuable upon exercise of warrants received in connection with the 1998
Private Placement or the 19,313 shares issuable upon exercise of his
Commitment Warrants.

(5) Includes 3,863 shares issuable upon exercise of the option issued pursuant
to the Directors' Plan. Does not include 36,694 shares issuable upon
exercise of warrants received in connection with the 1998 Private Placement
or 19,313 shares issuable upon exercise of his Commitment Warrants. Does not
include shares issuable upon exercise of an option to purchase 154,500
shares granted to Shreveport, pursuant to the Shreveport Option, which has
since been assigned to Mr. Roncari.

(6) Includes 3,863 shares issuable upon exercise of the option issued pursuant
to the Directors' Plan.

(7) Includes 3,863 shares issuable upon exercise of the option issued pursuant
to the Directors' Plan. Does not include 1,931 shares issuable upon exercise
of warrants received in connection with the 1998 Private Placement.

(8) Includes 3,863 shares issuable upon exercise of the option issued pursuant
to the Directors' Plan.

CERTAIN TRANSACTIONS

Pursuant to an agreement dated as of January 1, 1993, Shreveport Acquisition
Corp. ("Shreveport"), a corporation which was founded by Lawrence O. Perl, the
Chairman of the Board and Chief Executive Officer and Raymond A. Roncari, a
director of the Company, and which was owned by Mr. Perl, Mr. Roncari and Harold
Rothstein, a director of the Company, but was dissolved on December 31, 1997,
acquired all of the outstanding stock of McKinnie, a supplier of computerized
management information systems to the pari-mutuel industry, for a purchase price
of $2 million, which was paid $75,000 in cash and $1,925,000 by delivery of a
one-year promissory note which was guaranteed by Mr. Roncari. Concurrently with
such acquisition, McKinnie entered into an agreement (the "McKinnie License
Agreement") with Amazing Controls!, Inc. and Phoenix DataCrypt Systems, Inc.
("Phoenix"), a company of which Raymond Findley, Jr., the Company's President,
Chief Operating Officer and a director, was co-founder, President and Chief
Executive Officer. Pursuant to the McKinnie License Agreement, Phoenix granted
to McKinnie an exclusive license to use, in connection with McKinnie's
management information systems, the smart card technology and computer software
owned or licensed by Phoenix (including technology then licensed by Phoenix) for
use in the pari-mutuel industry and McKinnie agreed to purchase all of its smart
card requirements from Phoenix, a distributor of Amazing Controls!, Inc.'s smart
cards.

In May 1994, Mr. Findley severed his relationship with Phoenix in order to
pursue smart card-related business opportunities with Messrs. Perl, Roncari and
Rothstein. In June 1994, Messrs. Findley, Perl, Roncari and Rothstein formed the
Company to develop and market smart card technology and applications. In order
to pursue their business plan, Messrs. Perl, Roncari and Rothstein elected to
divest themselves of control of McKinnie. In July 1994, Shreveport sold a 51%
equity interest in McKinnie to The Jockey Club Racing Services, Inc. ("The
Jockey Club"). In connection therewith, The Jockey Club agreed to cause McKinnie
to transfer to the Company all of McKinnie's rights to any smart card
technology, including certain software technology and all rights under the
McKinnie License Agreement. The Jockey Club purchased the balance of the
McKinnie stock from Shreveport effective December 31, 1997.

In December 1996, the Company issued to Shreveport the Shreveport Option to
purchase 154,500 shares of Common Stock at an exercise price of $3.24 per share,
which has since been increased to $7.77 per share and assigned to Mr. Roncari.
The Shreveport Option is exercisable at any time during the five-year period
commencing the earlier of January 1, 1999 or 90 days following the closing of
the minimum offering. The Shreveport Option provides that upon exercise, in lieu
of a cash payment, the option may be exchanged for a number of shares of Common
Stock equal to (a) the total number of shares issuable upon exercise of such
option for cash, minus (b) a number of shares equal to the quotient of (i) the
aggregate

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exercise price of the exercised portion of the option, divided by (ii) the then
current market price of a share of Common Stock.

In connection with the formation of the Company in June 1994, each of the
Perl Trust, Mr. Roncari, the Rothstein Trust and Mr. Findley (collectively, the
"Original Stockholders") purchased 784,088 shares of Common Stock for a purchase
price of $250. In January 1995, each of the Original Stockholders sold to Robert
Dixon, the Company's Vice President of Technical Operations, 7,725 shares of
Common Stock for a purchase price of $1,250.

Since the inception of the Company, the Perl Trust and Messrs. Findley,
Roncari and Rothstein (either individually or through the Rothstein Trust) have
made the Stockholder Loans to the Company in amounts aggregating $30,177,
$15,177, $1,008,854 and $1,300,747, respectively. The Stockholder Loans bear
interest at ten percent (10%) per annum. Of this total amount of $2,354,955,
$1,050,000 had previously been converted to equity and an additional $995,595
was converted to equity as of September 30, 1998. The remaining principal
balance of the loans, together with accrued interest, are to be repaid from the
proceeds of subsequent debt financing, but in no event later than January 1,
2001. In March 1995, $250,000 of the then-outstanding principal amount of the
Stockholder Loans of each of Messrs. Rothstein and Roncari was recharacterized
as paid-in capital of the Company. Pursuant to an agreement among the Original
Stockholders, the aggregate $500,000 Capital Contribution was allocated equally
among the Original Stockholders, in consideration for which Mr. Findley issued
to Mr. Roncari, and the Perl Trust issued to the Rothstein Trust, Capital
Contribution Notes, each in the amount of $125,000. Pursuant to the Debt
Conversion which occurred upon the consummation of the 1997 Private Placement in
January 1997, $12,675 of the Perl Trust's Stockholder Loans, $12,675 of Mr.
Findley's Stockholder Loans, $223,260 of Mr. Roncari's Stockholder Loans and
$301,390 of Mr. Rothstein's Stockholder Loans were converted into 3,917, 3,917,
68,988 and 93,130 shares of Common Stock, respectively. Mr. Findley and the Perl
Trust subsequently transferred 38,625 shares of Common Stock to Mr. Roncari and
the Rothstein Trust, respectively, in satisfaction of the indebtedness
represented by the Capital Contribution Notes.

Pursuant to an agreement dated as of July 1, 1994, the Company agreed to pay
Lawrence Owen Associates, a corporation wholly owned by Mr. Perl, a monthly fee
of $1,000 in consideration for the use of office space in West Hartford,
Connecticut and for accounting and other general and administrative services.
The Company extended this arrangement until December 31, 1997, after which time
the agreement expired. Upon expiration $42,000 was due to Lawrence Owen
Associates from the Company.

From March through June 1995, Joseph D. Basch, the President, Chief
Executive Officer and sole director of the Subsidiary, loaned the Company an
aggregate of $300,000. The loans accrued interest at ten percent (10%) per annum
and were payable on demand. In July 1996, the Company and Mr. Basch entered into
an agreement pursuant to which the then-outstanding principal amount of the
loans, together with accrued interest thereon of approximately $30,000, was
converted into an aggregate of 370,800 shares of Common Stock.

In January 1996, the Company sold 154,500 shares of Common Stock to Stephen
S. Weisglass at a price of $.16 per share. Mr. Weisglass became a director of
the Company in November 1996. In July 1997, Mr. Weisglass resigned from the
Board and transferred his shares to Lilly Beter Capital Group, Ltd. Mr.
Weisglass introduced the Company to Whale Securities Corp L.P. ("Whale"). Whale
was thereafter retained by the Company to act as placement agent for a private
placement to be followed by an initial public offering. The private placement
was effected, but Whale subsequently refused to underwrite the public offering.
Because of Mr. Weisglass' relationship with Whale, and the Company's dispute
with Whale over Whale's failure to underwrite the public offering, the Company
asked Mr. Weisglass to resign from the Board and to divest himself of his shares
of Common Stock in the Company at his cost. Mr. Weisglass did as requested.

Mr. Rothstein has personally guaranteed all of the Company's indebtedness to
Fleet and has pledged personal assets in the form of a certificate of deposit in
the amount of $150,000 to secure such

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indebtedness; Mr. Roncari has personally guaranteed all of the Company's
indebtedness to First Suffield; and Mr. Rothstein has pledged to Chase a
certificate of deposit in the amount of $105,000 to secure the Company's
indebtedness to Chase. In addition, Mr. Rothstein has agreed with the Company
that, in the event a demand is made by Fleet with respect to the Fleet Loan
and/or a demand is made by Chase with respect to the Chase Loan prior to the
earlier of the closing of the maximum offering, subsequent debt financing or
March 3, 2001, he shall either (i) secure replacement financing to pay the
amount so demanded or (ii) personally satisfy the amount demanded, either
through surrender of the collateral previously pledged by him or through other
means satisfactory to Fleet and/or Chase, as the case may be. In the event Mr.
Rothstein elects to personally satisfy the demanded amount, the Company has
agreed to reimburse Mr. Rothstein for the full amount of such payment on the
earlier of the closing of the maximum offering, subsequent debt financing or
March 3, 2001. See "Plan of Operation--Liquidity and Capital Resources."

In January 1997, pursuant to the 1997 Private Placement, the Company
completed the sale to 23 private investors (including Lawrence O. Perl, an
officer and director of the Company, and Mr. Roncari, Mr. Rothstein and Bruce
Bonadies, all directors of the Company) of 25 1997 Units. Each 1997 Unit
consisted of (i) one 1997 Bridge Note; (ii) 7,725 1997 Bridge Shares; and (iii)
38,625 1997 Bridge Warrants. The purchase price per 1997 Unit was $50,000. The
Company received gross proceeds of $1,250,000 from the sale of the 1997 Private
Placement. A total of $262,500 of the 1997 Private Placement funds was assigned
to the value of the common stock and warrants, which resulted in an effective
interest rate of 30% on the 1997 Bridge Notes. After payment of $125,000 in
placement fees to Whale, which acted as placement agent for the Company with
respect to the 1997 Private Placement, and other offering expenses of
approximately $105,000, the Company received net proceeds of approximately
$1,020,000 in connection with the 1997 Private Placement. The net proceeds from
the 1997 Private Placement were used in connection with the Company's
operations, including to fund the Company's research and development efforts, to
fund its sales and marketing activities, to repay certain outstanding
obligations, and for working capital and general corporate purposes. It was
anticipated that the Company would shortly thereafter undertake an initial
public offering underwritten by Whale pursuant to a letter of intent between the
Company and Whale. However, Whale eventually declined to underwrite the initial
public offering, and in July of 1997, the Company commenced exploration of
alternative financing arrangements. In connection with that initiative, the
Company retained Beter as a consultant to work with the Company to obtain new
financing. During the course of the Company's discussions with Beter and a
number of the prospective underwriters, it became evident that the structure of
the 1997 Private Placement was an impediment to additional financing. In order
to meet the requirements for the Company to undertake a best efforts initial
public offering to be underwritten by the Underwriter, it was necessary for the
Company to redeem the 1997 Units. The Company entered into a series of option
agreements dated November 19, 1997 to purchase the 1997 Units sold to investors
for an aggregate of $1,250,000 in the 1997 Private Placement. The 1997 Units
were redeemed with a portion of the net proceeds from the 1998 Private
Placement.

In January 1997, in connection with the 1997 Private Placement, the Company
borrowed from Messrs. Perl, Rothstein and Roncari $175,000 and issued to them
1997 Bridge Notes in such aggregate principal amount, an aggregate of 27,038
1997 Bridge Shares, at the same price per share as that paid by purchasers of
the 1997 Private Placement, and 135,188 1997 Bridge Warrants. Such 1997 Bridge
Notes, 1997 Bridge Shares and 1997 Bridge Warrants were repurchased by the
Company as part of the 1998 Private Placement.

Between July 1997 and January 1998, Messrs. Rothstein, Roncari, and Perl
provided a portion of the Stockholder Loans to the Company in the amounts of
$460,000, $320,000, and $15,000, respectively. These loans were to provide the
Company working capital and cover costs associated with this Offering, and
except for the $15,000 payable to Mr. Perl, have been previously converted to
equity and are part of the aforementioned Stockholder Loans. In addition,
various employees of the Company have deferred salary totaling approximately
$583,000 as of September 30, 1998. Such employees continue to defer salaries and
such deferred salary amounts are to be paid, together with interest at ten
percent (10%), in two parts,

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$50,000 at the closing of the minimum offering and the remainder, estimated to
be $618,000 as of December 31, 1998, from the proceeds of the maximum offering,
but in no event later than January 1, 2001.

In March 1998, the Company entered into the 1998 Private Placement, through
which the Company completed the sale to fourteen private investors (including
certain officers and directors of the Company) of 30 Units, each Unit consisting
of (i) one Bridge Note; (ii) 3,863 Bridge Shares; and (iii) 3,863 Bridge
Warrants. The purchase price per Unit was $50,000. The Company received gross
proceeds of $1,500,000 from the sale of such Units. After payment of
approximately $10,000 in costs associated with the 1998 Private Placement, the
Company received net proceeds of approximately $1,490,000 in connection with the
1998 Private Placement. A total of $900,000 of the 1998 Private Placement funds
was assigned to the value of the common stock and warrants. Approximately
$1,345,000 of the net proceeds was used to exercise certain options to
repurchase securities sold in the 1997 Private Placement. Some holders of the
1997 Units chose to invest in the 1998 Private Placement and defer all interest
due them from the 1997 Units; such holders included Lawrence O. Perl, the
Company's Chairman of the Board, Chief Executive Officer and Chief Financial
Officer, Raymond A. Roncari, a director of the Company, Harold Rothstein, a
director of the Company and Bruce R. Bonadies, a director of the Company,
Richard Shelton, Susan Shelton and Ronald Seplowitz. These holders deferred a
total of $26,764 in interest, to be repaid in two parts: $12,157 from the
proceeds of the minimum offering and $14,607 from the proceeds of the maximum
offering. The balance of the net proceeds are being used for working capital and
general corporate purposes, as well as to fund some expenses of this Offering.
$575,000 of the Bridge Notes were converted to equity by two directors of the
Company as of September 30, 1998 and the remaining $925,000 are to be repaid
from the proceeds of the minimum offering.

In conjunction with the closing of the 1998 Private Placement, the Company
issued 38,625 shares of Common Stock, valued at $7.77 per share for a total of
$300,116, and an option to purchase 77,250 shares of Common Stock, exercisable
at 85% of the per share market price of the Common Stock on the exercise date,
subject to adjustment (the "Chapman Option") to Chapman Group LLC, a company
affiliated with Cohn & Birnbaum P.C., general counsel to the Company. These
shares and options were issued in partial consideration for services rendered by
Cohn & Birnbaum P.C. from the date of the Company's inception through the
closing of an IPO by the Company and in consideration of deferral of fees at
different times during such same time period.

In conjunction with the closing of the 1998 Private Placement, the Company
entered into Director Loan Agreements with each of Harold Rothstein and Raymond
A. Roncari pursuant to which Messrs. Rothstein and Roncari each committed to
loan $450,000 (for a total of $900,000) to the Company to be used for working
capital and certain costs of the anticipated IPO. These amounts, together with
approximately $155,000 of the proceeds of the 1998 Private Placement, were used
to fund certain costs of this Offering, and provide required working capital. In
consideration for this commitment, Messrs. Rothstein and Roncari were each
granted 19,313 shares of Common Stock of the Company, valued at $7.77 per share
for a total of $300,116, and 19,313 Commitment Warrants. Pursuant to each
Director Loan Agreement, the Company has the right to draw down advances from
each of Messrs. Rothstein and Roncari (each a "Director Lender") as funds are
required and the Director Lender is obligated to so advance funds within three
(3) business days of any such request. Any amounts advanced will bear interest
at a rate of ten percent (10%) per annum. The entire $900,000 principal
outstanding was converted to equity as of September 30, 1998. All accrued
interest thereon, will be due and payable in full on the earlier of (i) January
1, 2001, or (ii) the closing of subsequent debt financing.

As of May 1, 1998 the Perl Trust and the Rothstein Trust had each entered
into separate voting trust agreements. Respectively on July 8, 1998 and May 1,
1998, Lilly Beter was appointed voting trustee with respect to the 741,655
shares held by the Perl Trust and the 908,118 shares held by the Rothstein
Trust, respectively. Pursuant to the voting trust agreements, Ms. Beter is
empowered to vote these shares as voting trustee until April 30, 1999.

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As of September 30, 1998, the 1994 Perl Trust Indenture and Messrs. Findley,
and Basch contributed shares of Common Stock to the Company by way of a capital
contribution in the respective amounts of 44,920, 44,920 and 22,460.
Contemporaneously, Messrs. Rothstein and Roncari converted $1,235,000 and
$1,235,594, respectively, of Company debt to equity in exchange for 56,150
shares of Common Stock each. The converted debt consisted of a portion of their
respective loans to the Company and some of the Bridge Notes each acquired in
connection with the 1998 Private Placement.

The Company also maintains a One Million-Dollar ($1,000,000) unsecured line
of credit with both International Caribbean Trust Ltd. and Prometheus Trust.
Both lines of credit are personally guaranteed by Messrs. Roncari and Rothstein.
As of September 30, 1998 the Company has drawn down $75,000 from International
Caribbean Trust Ltd. and $125,000 from Prometheus Trust. As of December 15,
1998, an additional $455,000 had been drawn down from these lines of credit.
Both lines of credit carry a 10% interest rate and are due June 30, 2001.
Advances are at the discretion of the lenders.

Although the Company believes that the foregoing transactions were on terms
no less favorable to the Company than would have been available from
unaffiliated third parties in arm's length transactions, there can be no
assurance that this is the case. Since its inception the Company has had an
unwritten policy that all transactions and loans between the Company and its
officers, directors and 5% stockholders must be on terms no less favorable to
the Company than could be obtained from independent third parties; however, no
written policy regarding this matter was in effect until 1998. All future
transactions and loans between the Company and its officers, directors and 5%
stockholders will be on terms no less favorable to the Company than could be
obtained from independent third parties. In addition, all future material
affiliated transactions and loans, and any forgiveness of loans, must be
approved by a majority of the Company's independent directors who do not have an
interest in the transactions and who have access, at the Company's expense, to
the Company's or independent legal counsel. There can be no assurance, however,
that future transactions or arrangements between the Company and its affiliates
will be advantageous, that conflicts of interest will not arise with respect
thereto or that if conflicts do arise, they will be resolved in favor of the
Company.

DESCRIPTION OF SECURITIES

GENERAL

Upon completion of this Offering, the authorized capital stock of the
Company will consist of (i) if the minimum offering is reached, 20,000,000
shares of Common Stock, $.001 par value per share, of which 4,355,736 shares
will be outstanding and 1,000,000 shares of Preferred Stock, $.001 par value per
share, of which no shares will be outstanding, or (ii) if the maximum offering
is reached, 20,000,000 shares of Common Stock, $.001 par value per share, of
which 4,550,036 shares will be outstanding and 1,000,000 shares of Preferred
Stock, $.001 par value per share, of which no shares will be outstanding. The
following description of the securities of the Company and certain provisions of
the Certificate of Incorporation and By-Laws is a summary and, while all
material provisions are included, the following description is qualified in its
entirety by the provisions of the Certificate and By-Laws as currently in
effect.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders, including the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election if they choose to do so. The Certificate does not provide
for cumulative voting for the election of directors. Holders of Common Stock
will be entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board out of funds legally available therefor, and will
be entitled to receive, pro rata, all assets of the Company available for
distribution to such holders upon liquidation. Holders of Common Stock have no
preemptive, subscription or redemption rights. The rights of the

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holders of the Common Stock are subject to any rights that may be fixed for
holders of Preferred Stock, when and if any Preferred Stock is issued. All of
the outstanding shares of Common Stock are fully paid and non-assessable. Upon
issuance, all of the shares of Common Stock offered hereby will be fully paid
and nonassessable.

PREFERRED STOCK

The Company is authorized to issue 1,000,000 shares of Preferred Stock from
time to time in one or more series, which may rank senior to the Common Stock
with respect to payment of dividends and in the event of the liquidation,
dissolution or winding up of the Company. The Board has the power, without
stockholder approval, to issue shares of one or more series of Preferred Stock,
at any time, for such consideration and with such relative rights, privileges,
preferences and other terms as the Board may determine (including, but not
limited to, terms relating to dividend rates, redemption rates, liquidation
preferences and voting, sinking fund and conversion or other rights). The rights
and terms relating to any new series of Preferred Stock could adversely affect
the voting power or other rights of the holders of the Common Stock or could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company.

WARRANTS ISSUED IN 1998 PRIVATE PLACEMENT

The Bridge Warrants and Commitment Warrants issued in connection with the
1998 Private Placement (collectively, the "Warrants") will be exercisable at any
time commencing on March 3, 1999 through and including March 3, 2003 at a price
per share of eighty-five percent (85%) of the per share market price of the
Common Stock on the exercise date, subject to adjustment. The Warrants provide
that, upon exercise, in lieu of a cash payment, the Warrants to be exercised may
be exchanged for a number of the warrant shares underlying the warrants (the
"Warrant Shares") equal to (a) the total number of Warrant Shares issuable upon
exercise of such Warrants for cash minus (b) a number of Warrant Shares equal to
the quotient of (i) the aggregate exercise price of the exercised Warrants,
divided by (ii) the then current market price of a share of the Company's Common
Stock.

The Warrants are redeemable by the Company at any time commencing on March
3, 2000, upon notice of not less than 30 days, at a price of $.10 per Warrant,
provided that the closing bid quotation of the Common Stock on all 20 trading
days ending on the third day prior to the date on which the Company gives notice
has been at least $11.65. The Warrants will be exercisable until the close of
business on the date fixed for redemption.

REGISTRATION RIGHTS

In connection with the 1998 Private Placement, the Company has agreed to
grant certain "piggyback" registration rights in connection with the Bridge
Shares and the Bridge Warrants and the Commitment Shares and Commitment
Warrants. The Company has also agreed to grant certain "piggyback" registration
rights in connection with the Chapman Option.

The Company has also agreed to include the Bridge Shares and the shares
underlying the Bridge Warrants (the "Bridge Warrant Shares") in any registration
statement (the "Post-IPO Registration Statement") which the Company prepares and
files with the Commission on a date following the one-year anniversary of the
closing of this Offering so as to permit the public trading of the Bridge Shares
and Bridge Warrant Shares pursuant thereto, subject to customary underwriter
cutbacks. Notwithstanding the foregoing, the holders of the Bridge Shares and
the Bridge Warrant Shares must agree not to sell any of such securities at least
until the expiration of any applicable holding period established by the NASD
and/ or any of the various state securities commissions in those states where
the anticipated IPO will be effected.

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The Company shall bear all fees and expenses incurred in the preparation and
filing of the Post-IPO Registration Statement.

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and thus subject to Section 203 of the
DGCL ("Section 203"), which is generally viewed as an anti-takeover statute. In
general, Section 203 prohibits a publicly traded Delaware corporation from
engaging in any "business combination" (as defined) with any "interested
stockholder" (as defined) for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least eighty-five percent (85%) of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (a)
by persons who are directors and also officers and (b) by employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) at or subsequent to such time, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of the stockholders, and not by written consent, by the affirmative vote
of at least 66% of the outstanding voting stock which is not owned by the
interested stockholder.

In general, Section 203 defines a "business combination" to include: (i) any
merger or consolidation involving the corporation and the interested
stockholder; (ii) any sale, transfer, pledge or other disposition involving the
interested stockholder of ten percent (10%) or more of the assets of the
corporation; (iii) (subject to certain exceptions) any transaction which results
in the issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series of the corporation beneficially owned by the interested
stockholder; or (v) the receipt by the interested stockholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits provided by
or through the corporation. In general, Section 203 defines an "interested
stockholder" as (a) any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation or (b) any entity or person
affiliated with or controlling or controlled by such entity or person.

The existence of Section 203 would be expected to have the effect of
discouraging takeover attempts involving the Company, including attempts that
might result in a premium over the market price of the Common Stock (if it is
then publicly traded).

TRANSFER AGENT AND REGISTRAR

The Company's Transfer Agent and Registrar is The Bank of New York.

REPORTS TO STOCKHOLDERS

The Company intends to file, prior to the date of this Prospectus, an
application with the Commission to register the Common Stock under the
provisions of Section 12(g) of the Exchange Act. The Company has agreed with the
Underwriter that the Company will use its best efforts to continue to maintain
such registration. Such registration will require the Company to comply with
periodic reporting, proxy solicitation and certain other requirements of the
Exchange Act.

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SHARES ELIGIBLE FOR FUTURE SALE

From the proceeds of this Offering, the Company will have 4,355,736 shares
of Common Stock outstanding if the minimum offering is reached and 4,550,036
shares of Common Stock outstanding if the maximum offering is reached, of which
the minimum 454,600 and maximum 648,900 shares of Common Stock offered herein by
the Company will be freely tradable without restriction or further registration
under the Securities Act, except for any shares purchased by an affiliate of the
Company (in general, a person who has a control relationship with the Company),
which shares will be subject to the resale limitations of Rule 144 under the
Securities Act. All of the remaining 3,901,136 shares of Common Stock are deemed
to be "restricted securities," as that term is defined under Rule 144
promulgated under the Securities Act, and in the future may only be sold
pursuant to a registration statement under the Securities Act, in compliance
with the exemption provisions of Rule 144 or pursuant to another exemption under
the Securities Act. The 3,901,136 restricted shares of Common Stock will become
eligible for sale under Rule 144, subject to the volume limitations prescribed
by Rule 144 and to the contractual restrictions described below, at various
times commencing 90 days from the date of this Prospectus.

In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated), who has owned restricted
shares of Common Stock beneficially for at least one year is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the shares of Common Stock are quoted on Nasdaq, the average weekly trading
volume during the four calendar weeks preceding the sale. A person who has not
been an affiliate of the Company for at least the three months immediately
preceding the sale and who has beneficially owned shares of Common Stock for at
least one year is entitled to sell such shares under Rule 144 without regard to
any of the limitations described above.

The Company has granted certain "piggyback" registration rights to the
holders of 193,133 shares of Common Stock and the 231,758 shares of Common Stock
underlying the Warrants and the Chapman Option.

Under Rule 701 of the Securities Act, persons who purchase shares upon
exercise of options granted prior to the date of this Prospectus are entitled to
sell such shares after the 90th day following the date of this Prospectus in
reliance on Rule 144, without having to comply with the holding period
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. Affiliates are subject to all Rule 144 restrictions after this 90-day
period, but without a holding period.

Prior to this Offering, there has been no market for the shares of Common
Stock and no prediction can be made as to the effect, if any, that market sales
of shares of Common Stock or the availability of such securities for sale will
have on the market prices prevailing from time to time. Nevertheless, the
possibility that substantial amounts of shares of Common Stock may be sold in
the public market may adversely affect prevailing market prices for the Common
Stock and could impair the Company's ability to raise capital through the sale
of its equity securities.

58
<PAGE>
UNDERWRITING

In May 1998, the Company entered into an Underwriting Agreement with the
Underwriter to underwrite this Offering on a best efforts basis. The Underwriter
has agreed, subject to the terms and conditions of the Underwriting Agreement,
to use its best efforts to sell the shares as the Company's agent. The
Underwriter will offer the shares on a "best efforts" basis, and has made no
firm commitment to purchase any of the shares.

The maximum number of shares to be offered will be 648,900 shares, which, if
sold at the offering price, will generate proceeds to the Company, net of sales
commissions, in the approximate amount of $6,424,110. The minimum number of
shares to be sold is 454,600, which, if sold at the offering price, would
generate proceeds to the Company, net of sales commissions, in the approximate
amount of $4,500,540.

All funds received by the Underwriter with respect to the first 454,600
shares will be deposited with The Bank of New York as Escrow Agent. In the event
454,600 shares are not sold within 180 days from the commencement of this
Offering, the funds in escrow will be refunded to the subscribers in full
without deductions and without interest. The shares are to be sold fully paid
only. Stock certificates will be issued to purchasers only if the proceeds from
the sale of 454,600 shares are released to the Company. Until such time as the
funds have been released from escrow and the certificates delivered to the
purchasers thereof, the purchasers will be deemed subscribers only and not
shareholders. The Company's officers, directors and other promoters have the
right to purchase shares of this Offering for the purpose of meeting the minimum
offering requirements.

The Underwriter is to receive a cash commission of $1.10 per share sold. In
addition, the Company has deposited with the Underwriter $25,000 to fund all
anticipated expenses of this Offering.

The obligations of the Underwriter are subject to certain terms and
conditions set forth in the Underwriting Agreement, including the right of the
Underwriter to terminate the Underwriting Agreement under the conditions and
circumstances set forth therein.

The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.

Prior to the Offering made hereby, there has been no public market for the
Common Stock. Accordingly, the initial public offering price has been determined
by negotiation between the Company and the Underwriter and is not necessarily
related to the Company's asset value, net worth or other criteria of value.
There can be no assurance that a regular trading market for the Common Stock
will develop after this Offering or that, if developed, it will be sustained.
The market price for the Company's securities following this Offering may be
highly volatile, as has been the case with the securities of other small
capitalization companies. The factors considered in determining the offering
price included an evaluation by management of the history of and prospects for
the industry in which the Company competes and the prospects for earnings of the
Company. Factors such as the Company's financial results, announcements of
developments related to the Company's business and the introduction of products
and product enhancements by the Company or its competitors may have a
significant impact on the market price of the Company's securities.
Additionally, in recent years, the stock market in general, and the market for
securities of small capitalization stocks in particular, have experienced wide
price fluctuations which have often been unrelated to the operating performance
of such companies.

The Underwriter expects to register this Offering in a limited number of
states, which action may limit or prohibit possible resale of the Common Stock
in certain states in which the Offering is not registered.

Under the terms of the Underwriting Agreement, the Company may not enter
into any securities offering for a period of one year without the prior written
consent of the Underwriter. The Underwriter has granted the Company written
consent to pursue up to $30 million in any subsequent debt financing negotiated
by Beter.

59
<PAGE>
The foregoing is a brief summary of the provisions of the Underwriting
Agreement and does not purport to be a complete statement of its terms and
conditions. The Underwriting Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by the Law Offices of Bartz & Bartz, Southdale Office Centre, 6750
France Avenue South, Suite 350, Edina, Minnesota 55435. The validity of the
Common Stock offered hereby will be passed upon by the Underwriter by its
internal counsel.

The Company is represented in general corporate matters by Cohn Birnbaum &
Shea P.C., 100 Pearl Street, Hartford, Connecticut 06103-4500.

EXPERTS

The financial statements included in this Prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the periods set forth in their report (which contains an explanatory
paragraph regarding uncertainties about the Company continuing as a going
concern) appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form SB-2, including
amendments thereto, under the Securities Act with respect to the securities
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules filed
therewith. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to such Registration Statement, exhibits
and schedules. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, each such statement being qualified in all respects by such reference.
The Registration Statement, and the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Securities and Exchange Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices of the Commission:
13th Floor, Seven World Trade Center, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission, Washington, D.C. at prescribed rates. The Commission also maintains
a Web site at http://www.sec.gov that contains reports, proxy and information
statements. Such reports and other information may also be inspected at NASDAQ,
1735 K Street, N.W., Washington, D.C. 20006.

60
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1997
PERIODS ENDED SEPTEMBER 30, 1997 AND 1998 (UNAUDITED) AND
PERIOD FROM JUNE 21, 1994 (INCEPTION) TO SEPTEMBER 30, 1998 (UNAUDITED)

F-1
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

<TABLE>
<CAPTION>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-3

FINANCIAL STATEMENTS

Balance sheets............................................ F-4
Statements of operations.................................. F-5
Statements of stockholders' deficit....................... F-6
Statements of cash flows.................................. F-7
Summary of Significant accounting policies................ F-8 - F-10
Notes to financial statements............................. F-11 - F-15
</TABLE>

F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors
American Card Technology, Inc.

We have audited the accompanying balance sheet of American Card Technology,
Inc. (a development stage company) as of December 31, 1997, and the related
statements of operations and cash flows for the years ended December 31, 1996
and 1997 and the statements of stockholders' deficit for each of the years
(period) from June 21, 1994 (inception) to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Card Technology,
Inc. as of December 31, 1997, and the results of its operations and its cash
flows for the years ended December 31, 1996 and 1997 in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's dependence on outside financing, lack of
existing commitments from lenders to provide necessary financing, lack of
sufficient working capital, and losses since inception raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

BDO Seidman, LLP

New York, New York
March 10, 1998, except for
Note 8, which is as of
July 9, 1998

F-3
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT:
Cash................................................................ $ 27,203 $ 20,143
Accounts receivable................................................. 6,730 11,606
Inventory........................................................... 3,918 26,483
Prepaid expenses and other current assets........................... 11,657 13,370
Deferred financing costs............................................ 28,228 --
------------ --------------
TOTAL CURRENT ASSETS.............................................. 77,736 71,602
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $69,692 AND $97,778..... 91,405 79,540
OTHER ASSETS:
Software development costs, net..................................... 188,913 132,239
Deferred registration and debt costs................................ 228,911 662,717
Other............................................................... 7,571 7,821
------------ --------------
$ 594,536 $ 953,919
------------ --------------
------------ --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT:
Accounts payable.................................................... $ 398,397 $ 708,474
Accrued interest expense............................................ 310,154 506,427
Accrued salary and benefits......................................... 369,126 636,756
Other accrued expenses.............................................. 42,620 74,562
Notes payable to banks (Note 2)..................................... 600,000 600,000
Bridge financing notes payable (Note 4(a)).......................... 1,239,063 --
------------ --------------
TOTAL CURRENT LIABILITIES......................................... 2,959,360 2,526,219
NOTES PAYABLE TO STOCKHOLDERS (NOTE 3)................................ 1,184,956 309,362
BRIDGE FINANCING NOTES PAYABLE (NOTE 4(b))............................ -- 925,000
NOTES PAYABLE (NOTE 2)................................................ -- 200,000
------------ --------------
TOTAL LIABILITIES................................................. 4,144,316 3,960,581
------------ --------------
COMMITMENTS AND CONTINGENCIES (NOTES 1, 5 AND 7)
STOCKHOLDERS' DEFICIT (NOTE 8):
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 4,055,625 and 3,901,136........................... 4,056 3,901
Additional paid-in capital.......................................... 1,669,444 5,352,925
Stock subscriptions receivable...................................... (30,000) --
Accumulated deficit during the development stage.................... (5,193,280) (8,363,488 )
------------ --------------
TOTAL STOCKHOLDERS' DEFICIT....................................... (3,549,780) (3,006,662 )
------------ --------------
$ 594,536 $ 953,919
------------ --------------
------------ --------------
</TABLE>

See accompanying summary of significant accounting policies and notes to
financial statements.

F-4
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED PERIOD FROM JUNE
DECEMBER 31, SEPTEMBER 30 21, 1994
---------------------------- ---------------------------- (INCEPTION) TO
1996 1997 1997 1998 SEPTEMBER 30, 1998
------------- ------------- ------------- ------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES.......................... $ 27,034 $ 76,912 $ 47,604 $ 208,327 $ 385,745
COSTS OF SALES.................... 16,279 86,995 21,219 204,738 376,633
------------- ------------- ------------- ------------- ------------------

GROSS PROFIT (LOSS)............. 10,755 (10,083) 26,385 3,589 9,112
------------- ------------- ------------- ------------- ------------------

EXPENSES:
General and administrative...... 919,546 1,176,885 823,336 1,251,772 4,436,977
Research development............ 167,000 260,000 195,000 517,000 1,124,000
Write-off of license fee (Note
5)............................ 20,000 -- -- -- 168,000
Interest and financing costs,
net (Notes 2, 3, and 4(b)).... 129,126 1,065,240 866,686 1,667,525 2,906,123
------------- ------------- ------------- ------------- ------------------

1,235,672 2,502,125 1,885,022 3,436,297 8,635,100
------------- ------------- ------------- ------------- ------------------

NET LOSS.......................... $ (1,224,917) $ (2,512,208) $ (1,858,637) $ (3,432,708) $ (8,625,988)
------------- ------------- ------------- ------------- ------------------
------------- ------------- ------------- ------------- ------------------

BASIC LOSS PER SHARE.............. $ (.35) $ (.62) $ (.46) $ (.80)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------

WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING..................... 3,506,642 4,040,705 4,034,296 4,268,246
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

See accompanying summary of significant accounting policies and notes to
financial statements.

F-5
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
PERIOD FROM JUNE 21, 1994 (INCEPTION) TO SEPTEMBER 30, 1998
-------------------------------------------------------------------------------
ACCUMULATED
DEFICIT
COMMON STOCK ADDITIONAL STOCK DURING THE
--------------------- PAID-IN SUBSCRIPTIONS DEVELOPMENT
SHARES AMOUNT CAPITAL RECEIVABLE STAGE TOTAL
---------- --------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of shares to founders................... 3,136,350 $ 3,136 $ (2,136) $ (250) $ -- $ 750
Net loss......................................... -- -- -- -- (434,545) (434,545)
---------- --------- ------------ ------------ ------------- -------------

BALANCE, DECEMBER 31, 1994....................... 3,136,350 3,136 (2,136) (250) (434,545) (433,795)

Capital contribution (conversion of loan)........ -- -- 500,000 -- -- 500,000

Net loss......................................... -- -- -- -- (1,021,610) (1,021,610)
---------- --------- ------------ ------------ ------------- -------------

BALANCE, DECEMBER 31, 1995....................... 3,136,350 3,136 497,864 (250) (1,456,155) (955,405)

Issuance of shares............................... 185,400 186 29,814 (30,000) -- --
Issuance of shares for debt...................... 370,800 371 329,629 -- -- 330,000
Net loss......................................... -- -- -- -- (1,224,917) (1,224,917)
Receipt of stock subscriptions................... -- -- -- 250 -- 250
---------- --------- ------------ ------------ ------------- -------------

BALANCE, DECEMBER 31, 1996....................... 3,692,550 3,693 857,307 (30,000) (2,681,072) (1,850,072)

Shares and warrants issued in connection with the
first bridge financing (Note 4(a))............. 193,125 193 262,307 -- -- 262,500
Issuance of shares for debt...................... 169,950 170 549,830 -- -- 550,000
Net loss......................................... -- -- -- -- (2,512,208) (2,512,208)
---------- --------- ------------ ------------ ------------- -------------

BALANCE, DECEMBER 31, 1997....................... 4,055,625 4,056 1,669,444 (30,000) (5,193,280) (3,549,780)

Period ended March 31, 1998 (unaudited)
Forfeiture of shares........................... (154,500) (154) (24,846) 25,000 -- --
Receipt of stock subscriptions................... 5,000 5,000
Shares and warrants redeemed in connection with
the first bridge financing (Note 4(a))......... (193,125) (193) (262,307) -- 262,500 --
Shares and warrants issued in connection with
second bridge financing (Note 4(b))............ 115,886 116 899,884 -- -- 900,000
Issuance of shares for services rendered......... 38,625 38 300,078 -- -- 300,116
Issuance of shares for loan commitment........... 38,625 38 300,078 -- -- 300,116
Contributed shares............................... (112,300) (112) 112 -- -- --
Issuance of shares for debt...................... 112,300 112 2,470,482 -- -- 2,470,594
Net loss......................................... -- -- -- -- (3,432,708) (3,432,708)
---------- --------- ------------ ------------ ------------- -------------

BALANCE, SEPTEMBER 30, 1998 (UNAUDITED).......... 3,901,136 $ 3,901 $ 5,352,925 $ -- $ (8,363,488) $ (3,006,662)
---------- --------- ------------ ------------ ------------- -------------
---------- --------- ------------ ------------ ------------- -------------
</TABLE>

See accompanying summary of significant accounting policies and notes to
financial statements.

F-6
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED JUNE 21, 1994
SEPTEMBER 30, (INCEPTION)
------------------------ ---------------------- SEPTEMBER 30,
1996 1997 1997 1998 1998
----------- ----------- --------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss......................... $(1,224,917) $(2,512,208) $(1,858,637) $(3,432,708) $(8,625,988)
----------- ----------- --------- ----------- -------------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and
amortization................. 23,541 71,726 24,367 85,161 192,236
Amortization of deferred
financing costs.............. -- 220,417 200,711 91,703 312,120
Issuance of debt for services
rendered..................... -- -- -- -- 72,774
Issuance of stock for services
rendered..................... -- -- -- 300,078 300,078
Issuance of stock for loan
commitment................... -- -- -- 300,078 300,078
Notes receivable exchanged for
services..................... -- -- -- 5,000 5,000
Deferred registration costs
written off.................. -- 352,966 162,917 -- 352,966
Amortization of bridge
financing discount........... -- 251,563 185,938 910,937 1,162,500
Changes in assets and
liabilities:
(Increase) decrease in
assets:
Accounts receivable........ -- (6,730) -- (4,876) (11,606)
Inventory.................. (1,813) (855) (1,403) (22,565) (26,481)
Prepaid expenses and other
current assets........... 5,676 (6,558) (1,196) (1,713) (13,370)
Other assets............... (6,991) 1,390 -- (174) (7,821)
Increase (decrease) in
liabilities:
Accounts payable........... 320,810 942 30,447 310,077 708,474
Accrued expenses........... 219,391 458,850 243,954 495,845 1,247,820
----------- ----------- --------- ----------- -------------
TOTAL ADJUSTMENTS........ 560,614 1,343,711 845,735 2,469,551 4,594,768
----------- ----------- --------- ----------- -------------
NET CASH USED IN
OPERATING ACTIVITIES... (664,303) (1,168,497) (1,012,902) (963,157) (4,031,220)
----------- ----------- --------- ----------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures............. $ (23,980) $ (78,231) $ (70,943) $ (16,622) $ (177,318)
Software development costs....... (110,152) (21,936) (32,904) -- (226,696)
----------- ----------- --------- ----------- -------------
NET CASH USED IN INVESTING
ACTIVITIES..................... (134,132) (100,167) (103,847) (16,622) (404,014)
----------- ----------- --------- ----------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock......... 250 -- -- -- 1,000
Deferred registration
costs--original................ (200,711) (152,255) -- -- (352,966)
Deferred registration
costs--current................. -- (228,912) (223,681) (433,806) (662,718)
Deferred financing costs......... -- (248,644) (230,000) (63,475) (312,120)
Borrowings on line of credit..... 600,000 -- -- 200,000 800,000
Proceeds from the issuance of
notes to stockholders.......... 388,931 685,000 325,000 1,042,500 3,514,681
Payments on notes to
stockholders................... -- (10,000) -- (22,500) (32,500)
Payments on bridge financing..... -- -- -- (1,250,000) (1,250,000)
Proceeds from the issuance of
bridge financing............... -- 1,250,000 1,250,000 1,500,000 2,750,000
----------- ----------- --------- ----------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES................... 788,470 1,295,189 1,123,319 972,719 4,455,377
----------- ----------- --------- ----------- -------------
NET INCREASE (DECREASE) IN CASH.... (9,965) 26,525 6,570 (7,060) 20,143
CASH, BEGINNING OF PERIOD.......... 10,643 678 678 27,203 --
----------- ----------- --------- ----------- -------------
CASH, END OF PERIOD................ $ 678 $ 27,203 $ 7,248 $ 20,143 $ 20,143
----------- ----------- --------- ----------- -------------
----------- ----------- --------- ----------- -------------

SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest....................... $ 12,578 $ 53,076 $ 23,980 $ 147,388 $ 224,932
----------- ----------- --------- ----------- -------------
----------- ----------- --------- ----------- -------------
Income taxes................... $ -- $ -- $ -- $ -- $ --
----------- ----------- --------- ----------- -------------
----------- ----------- --------- ----------- -------------
</TABLE>

SUPPLEMENTAL NONCASH INVESTING AND FINANCING INFORMATION:

Loans totaling $500,000 were converted into capital contributions in 1995.

Notes receivable for $30,000 were obtained in 1996 in connection with the
issuance of common stock.

Loans payable of $300,000 and accrued interest of $30,000 were extinguished in
1996 with the issuance of common stock.

Loans payable of $550,000 were extinguished in 1997 with the issuance of
common stock.

Notes receivable of $25,000 were cancelled in 1998 upon forfeiture of common
stock.

Loans payable of $2,470,594 were converted into equity in 1998.

See accompanying summary of significant accounting policies and notes to
financial statements.

F-7
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)

ORGANIZATION AND BUSINESS

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 September 30, 1998. 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 immaterial.

Certain stock splits were effected in 1996 and 1998 (see Note 8) and
reflected retroactively in these financial statements.

REVENUE RECOGNITION

The Company recognizes revenue upon the shipment of products or the
performance of services.

USE OF ESTIMATES

In preparing the financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash, accounts payable, accrued expenses, short-term
notes payable to banks and the bridge financings approximate fair value because
of the short-term nature of these items. It was not considered practical to
determine the current fair value of the notes payable to stockholders and
affiliates.

EQUIPMENT

Equipment is stated at cost, less accumulated depreciation. Depreciation is
computed over the estimated useful lives (3 to 5 years) of the assets using
declining balance methods.

INCOME TAXES

The Company was an S corporation and, accordingly, income or losses were not
subject to corporate income taxes, rather the amounts of taxable income or loss
were passed through to its stockholders.

F-8
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)

INCOME TAXES (CONTINUED)
In June 1996, the Company became a C corporation. No deferred taxes resulted
from this change in tax status. Deferred tax assets and/or liabilities are
recorded for the expected future tax consequences of temporary differences
between the tax basis and financial reporting basis of assets and liabilities.
At December 31, 1997, deferred tax assets of approximately $1,200,000 relating
primarily to net operating losses of approximately $2,741,000 (and which expire
through 2012), have been offset by a valuation reserve since the utilization of
this asset cannot be determined.

SOFTWARE DEVELOPMENT COSTS

Software development costs for products and certain product enhancements are
capitalized subsequent to the establishment of their technological feasibility
(as defined in Statement of Financial Accounting Standards ("SFAS") No. 86)
based upon the existence of working models of the products which are ready for
initial customer testing. Costs incurred prior to such technological feasibility
or subsequent to a product's general release to customers are expensed as
incurred. During 1995, the technological feasibility of the Company's basic
products was established and the Company incurred and capitalized costs totaling
$226,696 through June 30, 1997. Amortization of these costs commenced on July 1,
1997 and these costs are being amortized over 3 years. Amortization expense is
included in cost of sales and for the year ended December 31, 1997 and the nine
months ended September 30, 1998 totalled $38,000 and $57,000, respectively.

DEFERRED COSTS

Costs associated with the first bridge financing described in Note 4(a) were
deferred and were amortized, commencing in January 1997, over the life of the
debt (one year).

Costs associated with the second bridge financing described in Note 4(b)
have been deferred and were amortized, commencing in February 1998, over the
anticipated life of the debt (six months).

Costs associated with an earlier planned initial public offering (totaling
$352,996) were written off in 1997 when the offering did not occur and are
included in interest and financing costs, net.

Costs associated with the Company's currently planned initial public
offering have been deferred and will be charged to equity upon the successful
closing of the offering or written off to expense if the offering is not
successful. Costs associated with the Company's planned debt offering have been
deferred and will be amortized over the life of the debt upon closing or
written-off to expense if the offering is not successful.

LOSS PER COMMON SHARE

Effective for the year ended December 31, 1997, the Company adopted SFAS No.
128, "Earnings Per Share" ("SFAS 128"). In accordance with SFAS 128, the Company
is required to provide basic and dilutive loss per common share information.

The basic loss per common share is computed by dividing the net loss
available to common shareholders by the weighted average number of common shares
outstanding.

F-9
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)

LOSS PER COMMON SHARE (CONTINUED)
Diluted loss per common share is computed by dividing the net loss available
to common shareholders, adjusted on an as-if-converted basis, by the weighted
average number of common shares outstanding plus potential dilutive securities.

For the years ended December 31, 1996 and 1997 and the nine months ended
September 30, 1997 and 1998, potential dilutive securities had an anti-dilutive
effect and, accordingly, were not included in the calculation of diluted loss
per common share. The assumed exercise of options and warrants may impact
diluted earnings per common share in future periods.

The adoption of SFAS 128 had no effect on net loss per common share for the
year ended December 31, 1996, accordingly, no restatement was necessary.

LONG-LIVED ASSETS

Long-lived assets are evaluated for impairment when events or changes in
circumstances indicate that the carrying amounts of the assets may not be
recoverable through the estimated undiscounted future cash flows from the use of
these assets. When any such impairment exists, the related assets will be
written down to their fair value. This policy is in accordance with SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of", which became effective for fiscal 1996. No write-downs have
been necessary through September 30, 1998.

STOCK-BASED COMPENSATION

The Company accounts for its stock option awards under the intrinsic value
based method of accounting prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees". Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at grant date or other measurement date over the amount the employee
must pay to acquire the stock. The Company adopted the disclosure provision of
SFAS 123, "Accounting for Stock-Based Compensation" and will disclose (beginning
in 1998, when employee options were granted) the pro forma amounts of net income
and earnings per share as if the fair value based method of accounting had been
applied.

UNAUDITED INTERIM FINANCIAL STATEMENTS

In the opinion of the Company's management, the balance sheet as of
September 30, 1998, the statements of operations and cash flows for the nine
months ended September 30, 1997 and 1998 (and the period from inception to
September 30, 1998), and the statement of stockholders' deficit for the nine
months ended September 30, 1998 contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the information set
forth therein. The results of operations for the nine months ended September 30,
1998 are not necessarily indicative of the results for the year ending December
31, 1998.

F-10
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)

1. BASIS OF PRESENTATION

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 December 31, 1997, the Company has
incurred losses totaling $5,193,280 and, at December 31, 1997, has deficiencies
in working capital and equity of $4,066,580 and $3,549,780, 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.

In 1996, the Company entered into a letter of intent with an underwriter for
a private placement of debt and equity securities and a subsequent initial
public offering of equity securities. In January 1997, a private placement was
consummated (see Note 4(a)) and the Company received gross proceeds of
$1,250,000. Certain debt was converted to equity upon consummation of this
private placement (see Note 8). The initial public offering did not occur as
originally planned, and all costs previously deferred in connection with that
offering were written off.

In February 1998, a second private placement was consummated (see Note 4(b))
and the Company utilized substantially all of the gross proceeds of $1,500,000
to redeem the debt incurred and accrued interest thereon from the January 1997
private placement. The Company is currently attempting to raise capital from
various sources including an anticipated initial public offering ("IPO") and a
debt offering. In 1997, the Company entered into a letter of intent with another
underwriter for an initial public offering of equity securities. However, there
can be no assurance that the Company will be successful in consummating its
plans, or that such plans, if consummated, will enable the Company to attain
profitable operations or continue as a going concern.

As of September 30, 1998, certain shareholders contributed to the Company
112,300 shares of the Company's common stock by way of a capital contribution.
As of the same date, a total of $2,470,594 of debt was converted to equity and a
total of 112,300 shares of the Company's common stock was issued in exchange for
this debt.

2. NOTES PAYABLE

At December 31, 1997 and September 30, 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 March 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. As of September
30, 1998, the Company has borrowed $200,000 under these lines of credit. Loans
under each of these credit lines bear interest at 10% per annum and are due

F-11
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)

2. NOTES PAYABLE (CONTINUED)

June 30, 2001. The Company has drawn down an additional $455,000 from these
lines of credit as of December 15, 1998. Certain stockholders have guaranteed
this debt.

3. NOTES PAYABLE TO STOCKHOLDERS

Notes payable to stockholders including the Director Loan Agreements
mentioned below, totaling $1,184,956 at December 31, 1997 and $309,362 at
September 30, 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. (See
"Note 8").

In February 1998, in connection with the bridge financing (see Note 4(b)),
the Company entered into Director Loan Agreements with two shareholders pursuant
to which each of the shareholders committed to loan $450,000 ($900,000 in total)
to the Company to be used for working capital and certain costs of the
anticipated IPO. In consideration for this commitment, each of the shareholders
were granted 19,313 shares of common stock of the Company and warrants to
purchase 19,313 shares of common stock at an exercise price of 85% of the market
price of the common stock on the exercise date. The Company included $300,116 in
financing costs in the period ended September 30, 1998 for these securities.
Pursuant to each Director Loan Agreement, the Company shall have the right to
draw down advances from each of the shareholders as funds are required. The
Director Loans were converted to equity as of September 30, 1998 and accrued
interests on such loans, which was at a rate of ten percent (10%) per annum,
will be due and payable in full on the earlier of (i) January 1, 2001, and (ii)
the closing of a debt offering by the Company.

Interest expense to stockholders totaled approximately $114,000, $74,000,
$47,000 and $126,000 for the years ended December 31, 1996 and 1997 and the nine
months ended September 30, 1997 and 1998, respectively.

4. BRIDGE FINANCING

(a) In January 1997, the Company received $1,020,000, net of costs of
$230,000, through a private placement of 25 units (the "1997 Units"), at a cost
of $50,000 per 1997 Unit. Each 1997 Unit consisted of: (i) an unsecured
nonnegotiable promissory note in the principal amount of $50,000, bearing
interest at the rate of 9% per annum, payable semi-annually in arrears, and
maturing on the earlier date to occur of: (a) the first anniversary of the
initial closing (the "Initial Bridge Closing") of such bridge financing; and (b)
the consummation of an IPO of the Company's securities registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended; (ii) 7,725 shares of common stock of the Company, and (iii) warrants
exercisable until the fifth anniversary of the Initial Bridge Closing to
purchase 38,625 shares of common stock (the "Bridge Warrant Shares") at an
exercise price of $2.59 per Bridge Warrant Share, subject to adjustment in
certain circumstances. A total of $262,500 of the private placement funds was
assigned to the value of the common stock and warrants, which resulted in an
effective interest rate of 30% on the notes.

F-12
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)

4. BRIDGE FINANCING (CONTINUED)
In February 1998, the Company repurchased all of the 1997 Units and paid
related accrued interest with proceeds obtained from a second private placement
bridge financing (see Note 4(b)).

(b) In February 1998 the Company received $1,490,000, net of costs of
$10,000, through a private placement of 30 units (the "1998 Units"), at a cost
of $50,000 per 1998 Unit (each a "Bridge Note"). Substantially all of the
proceeds were utilized to repurchase the 1997 Units and related accrued interest
(see Note 4(a)). Each 1998 Unit consists of: (i) an unsecured nonnegotiable
promissory note in the principal amount of $50,000, bearing interest at the rate
of 10% per annum, payable annually in arrears, and providing for a loan fee
payable upon payoff of the Bridge Note in an amount equal to $5,000 less
interest accrued during the first year through the date of payoff. The Bridge
Note shall mature on the earlier date to occur of: (a) the third anniversary of
the final closing (the "Bridge Closing") of such bridge financing; and (b) the
consummation of an IPO of the Company's securities registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended; (ii) 3,863 shares of common stock of the Company and (iii) warrants
exercisable until the sixth anniversary of the Bridge Closing to purchase 3,863
shares of common stock (the "Bridge Warrant Shares") at an exercise price of 80%
(subsequently amended to 85%) of the market price of the Company's common stock
on the exercise date per Bridge Warrant Share. A total of $900,000 of the
private placement funds was assigned to the value of the common stock and
warrants, resulting in a 160% effective rate on the debt. This $900,000 was
reflected as interest and financing cost during the period ended September 30,
1998.

Directors (one employee and two non-employees) of the Company held
$1,000,000 of the $1,500,000 Bridge Notes. As of September 30, 1998, $575,000 of
the Bridge Notes were converted to equity.

5. LICENSE AGREEMENTS

(a) In 1995, the Company acquired a license for certain technology rights.
The total cost was $296,000; $148,000 of which was paid upon signing the
agreement and $148,000 which was payable in various amounts through December 31,
1996. Subsequent to June 30, 1996, the Company paid $20,000 under the agreement.
The recoverability of this fee was in question and, in 1996, the Company
determined that it would not utilize the technology acquired in this license and
terminated the agreement and future obligations thereunder. The licensor agreed
on December 2, 1996 to waive all future obligations, including the $128,000
remaining balance of the license fee.

In 1995, the Company wrote off the portion of the license fee paid in cash
($148,000) and recorded an asset and liability for the remaining balance due
under the agreement. In 1996, the asset was written off and the liability was
reduced by $128,000. The balance ($20,000) was expensed.

(b) In March 1998, the Company entered into an agreement with a company
located in Israel to purchase an operating system to be utilized with its smart
card systems upon completion of an anticipation initial public offering. The
operating system will cost $100,000 and provides for two years of technical
support and development costs of an additional $450,000 plus royalties ranging
from $.125 to $.25 for each smart card sold by the Company that incorporates the
operating system. In addition, commencing December 1997, the Company agreed to
pay $18,000 per month for technical services related to the

F-13
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)

5. LICENSE AGREEMENTS (CONTINUED)

development of the operating system. This agreement expired on September 30,
1998. Through September 30, 1998, the Company has incurred $180,000 relating to
these technical services which are included in research and development expense.

6. RELATED PARTY TRANSACTIONS

In addition to the notes payable to stockholders (see Note 3), the Company
had an agreement to pay a fee of $1,000 per month to a company owned by the
Company's chief executive officer (who is a major stockholder). The agreement
commenced July 1, 1994 and concluded December 31, 1997, and covered accounting
and various other general and administrative services performed for the Company.
At December 31, 1997 and September 30, 1998, $42,000 and $42,000, respectively,
are payable to this affiliate for these services.

7. COMMITMENTS

LEASE

The Company rents office space in Atlanta, Georgia. Commencing December
1996, the Company entered into a new lease which provides for annual rent of
approximately $36,000 through January 31, 2000.

Rent charged to operations was approximately $17,000, $36,000, $27,000 and
$27,000 for the years ended December 31, 1996 and 1997, and the nine months
ended September 31, 1997 and 1998, respectively.

EMPLOYMENT CONTRACTS

As of September 30, 1998, the Company had entered into employment agreements
with four of its executive officers. The agreements become effective upon the
closing of the Company's IPO and provide for aggregate salaries up to $860,000
per year for a term of five years.

8. STOCKHOLDERS' DEFICIT

The Company's founders capitalized the Company in 1994 with $1,000. Certain
stockholders either individually or through trusts have loaned funds to the
Company since its incorporation. In 1995, loans totaling $500,000 were converted
to capital. In connection with the consummation in January 1997 of the private
placement for the financing, loans totaling $550,000 were converted to 169,950
shares of common stock ($3.24 per share) (see Note 3). As of September 30, 1998,
certain shareholders contributed to the Company 112,300 shares of the Company's
common stock by way of a capital contribution. As of the same date, a total of
$2,470,594 of debt was converted to equity and a total of 112,300 shares of the
Company's common stock was issued in exchange for this debt.

In January 1996, the Company sold 185,400 shares of stock for notes totaling
$30,000. The notes bear interest at 8% per annum and were payable on July 1,
1997. In 1998, 154,500 shares of stock were returned to the Company and the
related note, totaling $25,000, was forgiven. In addition, the remaining note,

F-14
<PAGE>
AMERICAN CARD TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)

8. STOCKHOLDERS' DEFICIT (CONTINUED)

totaling $5,000, was exchanged with the payee for certain services, the value of
which equaled the note receivable.

In July 1996, the Company issued 370,800 shares of common stock to retire
the $300,000 note payable to an affiliate and related accrued interest of
$30,000 ($.89 per share) (see Note 3).

On January 2, 1996, the Company effected a split of its common stock of
4.06-for-1. On December 11, 1996, the Company (i) increased its authorized
shares of common stock from 1,500 to 20,000,000; (ii) authorized 1,000,000
shares of preferred stock to be issued at the discretion of the Board of
Directors; (iii) changed the common stock from no par value to $.001 par value;
and (iv) effected a split of its common stock of 2,500-for-1. On July 9, 1998,
the Company effected a split of its common stock of 1.545-for-1. All share
amounts have been retroactively adjusted to reflect the stock splits.

In December 1996, the Company granted options to acquire 154,500 shares of
its common stock to an affiliate. The options had an exercise price of $3.24 per
share (subsequently increased to $7.77 per share), are immediately exercisable
and have a term of 10 years. The estimated fair value of these options at their
date of grant was immaterial.

In December 1996, the Company adopted the 1996 Stock Option Plan, pursuant
to which 417,150 shares of the Company's common stock may be granted to its
employees, directors and consultants. The option exercise price will be no less
than the fair value of the common stock at the date of grant. The options will
include vesting provisions and generally have ten year maturity periods. The
Company also adopted the 1996 Non-employee Director Stock Option Plan for its
non-employee directors pursuant to which 46,350 shares of common stock may be
granted. Through December 31, 1997, no options under either of these plans have
been granted.

Through September 30, 1998, the Company has issued, under the 1996 Stock
Option Plan, 158,363 options at an exercise price of $7.77 per share and 109,695
options at an exercise price of $11.00 per share, all of which vest over four
years and 19,313 options under the 1996 Non-employee Director Stock Option Plan
at an exercise price of $7.77, which vested upon issuance. The fair value of the
non-employee director options were immaterial.

In February 1998, the Company issued 38,625 shares of common stock and
warrants to purchase 77,250 shares of common stock, at an exercise price of 80%
(subsequently amended to 85%) of the market price of the common stock on the
date of exercise, to an affiliated company of the Company's general counsel in
consideration for corporate legal services rendered. The Company expensed
$300,116 in connection with this transaction which has been included in general
and administrative expenses.

F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY BY ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 21
Dividend Policy........................................................... 22
Dilution.................................................................. 22
Capitalization............................................................ 24
Selected Financial Data................................................... 25
Plan of Operation......................................................... 26
Business.................................................................. 33
Management................................................................ 44
Principal Stockholders.................................................... 50
Certain Transactions...................................................... 51
Description of Securities................................................. 55
Shares Eligible for Future Sale........................................... 58
Underwriting.............................................................. 59
Legal Matters............................................................. 60
Experts................................................................... 60
Additional Information.................................................... 60
Index to Financial Statements............................................. F-2
</TABLE>

------------------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

AMERICAN CARD
TECHNOLOGY, INC.

MINIMUM OFFERING:
454,600 SHARES OF COMMON STOCK

MAXIMUM OFFERING:
648,900 SHARES OF COMMON STOCK

---------------------

PROSPECTUS

---------------------

, 1998

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 102(b) of the Delaware General Corporation Law ("Delaware Law")
permits a provision in the certificate of incorporation of each corporation
organized thereunder eliminating or limiting, with certain exceptions, the
personal liability of a director to the corporation or its stockholders for
monetary damages for certain breaches of fiduciary duty as a director. The
Certificate of Incorporation of the Registrant eliminates the personal liability
of directors to the fullest extent permitted by Delaware Law.

Section 145 of Delaware Law ("Section 145"), in summary, empowers a Delaware
corporation, within certain limitations, to indemnify its officers, directors,
employees and agents against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by them in
connection with any nonderivative suit or proceeding, if they acted in good
faith and in a manner they reasonably believe to be in or not opposed to the
best interest of the corporation, and, with respect to a criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.

With respect to derivative actions, Section 145 permits a corporation to
indemnify its officers, directors, employees and agents against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense of settlement of such action or suit, provided such person meets the
standard of conduct described in the preceding paragraph, except that no
indemnification is permitted in respect of any claim where such person has been
found liable to the corporation, unless the Court of Chancery or the court in
which such action or suit was brought approves such indemnification and
determines that such person is fairly and reasonably entitled to be indemnified.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ( the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore, unenforceable.

The Company's Bylaws provide that the Company shall indemnify officers and
directors, and to the extent authorized by the Board of Directors, employees and
agents of the Company, to the fullest extent permitted by and in the manner
permissible under the laws of the State of Delaware. The Bylaws also permit the
Board of Directors to authorize the Company to purchase and maintain insurance
against any liability asserted against any director, officer, employee or agent
of the Company arising out of his capacity as such.

The Company intends to enter into and execute indemnity agreements with
present and future directors for indemnification to the fullest extent permitted
by law.

II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses in connection with the
sale of the Common Stock. All amounts are estimated. The Company has prepaid all
such fees.

<TABLE>
<S> <C>
SEC Filing Fee.............................................. $2,107
Blue Sky Expenses........................................... 21,340
Accounting Fees and Expenses................................ 30,000
Legal Fees and Expenses..................................... 42,500
Legal Writing (outsourced).................................. 20,000
Postage..................................................... 15,000
Printing Fees............................................... 30,000
Escrow Agent Fees........................................... 10,000
Transfer Agent Fees......................................... 10,000
Due Diligence Fees.......................................... 30,000
Underwriting Fees........................................... 25,000

TOTAL....................................................... $235,947
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant has issued securities without registration under the
Securities Act of 1933, as amended (the "Securities Act"), in the following
transactions:

In July 1996, loans to the registrant in the aggregate principal amount of
$300,000 (plus interest of $29,738) made by the President, Chief Executive
Officer and sole director of a subsidiary of the Registrant were converted,
pursuant to an agreement between the Company and such individual, into an
aggregate of 370,800 shares of Common Stock.

In December 1996, the Registrant issued to an entity owned by certain
affiliates and directors of the Registrant an option to purchase 154,500 shares
of Common Stock at an exercise price of $3.24 per share which has since been
increased to $7.77 per share and assigned to Mr. Roncari.

In connection with the Bridge Financing, in January 1997, loans in an
aggregate principal amount of $550,000 by the founders of the Registrant were
converted into an aggregate of 169,952 shares of Common Stock.

In January 1996, the Company sold 154,500 shares of Common Stock to Stephen
S. Weisglass at a price of $.16 per share. Mr. Weisglass became a director of
the Company in November 1996. In July 1997, Mr. Weisglass resigned from the
Board. His shares were subsequently transferred to Beter at the direction of the
Company, and then distributed as part of the 1998 Private Placement.

In January 1996 the Registrant sold 30,900 shares to Richard Shelton at a
price of $0.16 per share. The registrant received a note in the amount of $5,000
from Dr. Shelton. This note has been satisfied by offset against amounts owed by
the Company to Mr. Shelton for expenses incurred by Mr. Shelton as a sales
consultant to the Company.

In January 1997, pursuant to the 1997 Private Placement, the Company
completed the sale to 23 private investors (including certain officers and
directors of the Company) of 25 1997 Units. Each 1997 Unit consisted of (i) one
1997 Bridge Note; (ii) 7,725 1997 Bridge Shares; and (iii) 38,625 1997 Bridge
Warrants. The purchase price per 1997 Unit was $50,000. Such 1997 Bridge Notes,
1997 Bridge Shares and 1997 Bridge Warrants were repurchased by the Company as
part of the 1998 Private Placement.

II-2
<PAGE>
Bridge Notes, 1997 Bridge Shares and 1997 Bridge Warrants were repurchased by
the Company as part of the 1998 Private Placement.

On March 15, 1995 Messrs. Roncari and Rothstein recharacterized $500,000 of
loans to the Registrant as paid in capital. This capital contribution was
allocated equally among the Original Stockholders in consideration for which
Messrs. Findley and Perl subsequently transferred 38,625 shares of common stock
to Mr. Roncari and the Rothstein Trust.

In conjunction with the closing of the 1998 Private Placement, the Company
issued 38,625 shares of Common Stock and the Chapman Option to Chapman Group
LLC, a company affiliated with Cohn & Birnbaum P.C., general counsel to the
Company. These shares and options were issued in partial consideration for
services rendered by Cohn & Birnbaum P.C. from the date of the Company's
inception through the closing of an IPO by the Company and in consideration for
the deferral of fees at different times during such same time period.

As of September 30, 1998, the 1994 Perl Trust Indenture and Messrs. Findley
and Basch contributed shares of Common Stock to the Company by way of a capital
contribution in the respective amounts of 44,920, 44,920 and 22,460.
Contemporaneously, Messrs. Rothstein and Roncari converted $1,235,000 and
$1,235,594, respectively, of Company debt to equity in exchange for 56,150
shares of Common Stock each. The converted debt consisted of a portion of their
respective loans to the Company and some of the Bridge Notes each acquired in
connection with the 1998 Private Placement.

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement / Registrant and Rockcrest Securities, LLC., Incorporated by Reference.
1.2 Underwriting Agreement / Registrant and Rockcrest Securities, L.L.C., revised.
3.1 Articles of Incorporation of Registrant, Incorporated by Reference.
3.2 By-Laws of Registrant, Incorporated by Reference.
3.2.1 Amended By-laws of Registrant, Incorporated by Reference.
4.1 Sample Certificate for Common Stock, Incorporated by Reference.
5.1 Opinion of Counsel regarding Legality, Incorporated by Reference.
5.1.1 Opinion of Counsel regarding Legality, Incorporated by Reference.
5.1.2 Opinion of Counsel regarding Legality, Dated January 11, 1999.
8.1 Opinion of BDO Seidman, LLP., Incorporated by Reference.
8.1.1 Opinion of BDO Seidman, LLP., Incorporated by Reference.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
9.1 Voting Trust Agreement for Lawrence O. Perl, Incorporated by Reference.
9.1.1 Amended, Voting Trust Agreement for Lawrence O. Perl, Incorporated by Reference.
9.2 Voting Trust Agreement for Harold Rothstein, Incorporated by Reference.
10.1 Amended Employment Agreement between the Registrant and Lawrence O. Perl, Incorporated by Reference.
10.2 Employment Agreement between the Registrant and Raymond Findley, Jr., Incorporated by Reference.
10.3 Amended Employment Agreement between the Registrant and Robert H. Dixon, Incorporated by Reference.
10.3.1 Employment Agreement between the Registrant and Frank S. Fuino, Jr., Incorporated by Reference.
10.4 Escrow Agreement, Bank of New York, Incorporated by Reference.
10.7.1 Subscription Agreement for American Card Technology, Inc., Incorporated by Reference.
10.7.2 Stock Option Agreement (warrant), Chapman Group, LLC., Incorporated by Reference.
10.7.2.1 Amended, Stock Option Agreement (warrant), Chapman Group, LLC, Incorporated by Reference.
10.7.3 Stock Option Agreement (warrant), Harold Rothstein, Incorporated by Reference.
10.7.3.1 Amended, Stock Option Agreement (warrant), Harold Rothstein, Incorporated by Reference.
10.7.4 Stock Option Agreement (warrant), Raymond Roncari, Incorporated by Reference.
10.7.4.1 Amended, Stock Option Agreement (warrant), Raymond Roncari, Incorporated by Reference.
10.8.1 Stock Option Agreement for non-employees and Amendment, Lilly Beter, Incorporated by Reference.
10.8.2 Stock Option Agreement / non-employees and Amendment, Harold Rothstein, Incorporated by Reference.
10.8.3 Stock Option Agreement / non-employees and Amendment, Raymond Roncari, Incorporated by Reference.
10.8.4 Stock Option Agreement for non-employees and Amendment, Bruce Bonadies, Incorporated by Reference.
10.8.5 Stock Option Agreement for non-employees and Amendment, Gordon Walker, Incorporated by Reference.
10.8.6 1996 Nonemployee Director's Stock Option Plan, Incorporated by Reference.
10.8.6.1 Amended, 1996 Nonemployee Director's Stock Option Plan, Incorporated by Reference.
10.8.7 1996 Stock Option Plan for Employees, Incorporated by Reference.
10.8.7.1 Amended, 1996 Stock Option Plan for Employees, Incorporated by Reference.
10.8.8 Amended Director Loan Agreement, Harold Rothstein, Incorporated by Reference.
10.8.9 Amended Director Loan Agreement, Raymond Roncari, Incorporated by Reference.
10.9.1 Amended Agreement with SoftChip Israel Ltd. and Registrant, Incorporated by Reference.
10.9.1.1 Amended, Agreement with SoftChip Israel Ltd. and Registrant, Incorporated by Reference.
10.9.1.2 Amended Technology Purchase Agreement
10.9.2 Agreement with SoftChip Technology (3000) Ltd. and Registrant, Incorporated by Reference.
10.9.2.1 Agreement with SoftChip Technology (3000) Ltd. and Registrant, revised.
10.9.3 Stock Option Agreement and Amendment, Shreveport Acquisition Corp., Incorporated by Reference.
</TABLE>

II-4

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.9.3.1 Amended, Stock Option Agreement, Amendment and second Amendment, Shreveport Acquisition Corp.,
Incorporated by Reference.
10.9.4 Amended, Stock Option Agreement for employee, Robert Dixon, Incorporated by Reference.
10.9.5 Amended, Stock Option Agreement for employee, Michael Pate, Incorporated by Reference.
10.9.6 Amended, Stock Option Agreement for employee, Robert Patten, Incorporated by Reference.
10.9.7.1 Amended, Stock Option Agreement for employee, Shawn Nixon, Incorporated by Reference.
10.9.7.2 Amended, Stock Option Agreement for employee, Jeremy Zela, Incorporated by Reference.
10.9.7.3 Stock Option Agreement for employee, Phyllis Burke, Incorporated by Reference.
10.9.8 Stock Option Agreement for employee, Robert Cartagine, Incorporated by Reference.
10.9.9 Stock Option Agreement for employee, Frank S. Fuino, Jr., Incorporated by Reference.
11.0 Loan Agreement between Registrant and Prometheus Trust, Dated October 13, 1998
12.0 Promissory Note between Registrant and Prometheus Trust, Dated October 13, 1998
13.0 Loan Agreement between Registrant and International Caribbean Trust, Ltd., Dated October 13, 1998
14.0 Promissory Note between Registrant and International Caribbean Trust, Ltd., Dated October 13, 1998
15.0 Articles of Incorporation of Animal Passports, Inc. Dated December 2, 1998
16.0 Bylaws of Animal Passports, Inc. Dated December 2, 1998
17.0 Consent of BOD, of Animal Passports Inc., acting in lieu of first meeting, Dated December 2, 1998
23.1 Consent of Independent Accountant, BDO Seidman, LLP., Incorporated by Reference.
23.1.1 Consent of Independent Accountant, BDO Seidman, LLP, Incorporated by Reference.
23.1.2 Consent of Independent Accountant, BDO Seidman, LLP., Dated January 6, 1999.
23.2 Consent of Legal Counsel, Bartz & Bartz (Opinion is filed as Exhibit 5.1), Incorporated by Reference.
23.2.1 Consent of Legal Counsel, Bartz & Bartz (Opinion is filed as Exhibit 5.1), Incorporated by Reference.
23.2.2 Consent of Legal Counsel, Bartz & Bartz (Opinion is filed as Exhibit 5.1.2) Dated January 11, 1999.
23.3 Consent of Underwriter, Rockcrest Securities L. L. C., Incorporated by Reference.
23.3.1 Consent of Underwriter, Rockcrest Securities L. L. C., Incorporated by Reference.
23.3.2 Consent of Underwriter, Rockcrest Securities L.L.C. Dated January 11, 1999.
27.0 Financial Data Schedule, Revised.
99.1 Dual Smart Card Access, Patent Number # TX 3-639-032 for ACTI, Incorporated by Reference.
99.2 Amended Rothstein personal guarantee, Incorporated by Reference.
99.3 Database Services Agreement and Addendum (Florida), Incorporated by Reference.
99.4 Falcetta, Wachtel & Knochenhauer, LLC regarding American Card Technology, Inc., Incorporated by
Reference.
</TABLE>

II-5
<PAGE>
ITEM 28. UNDERTAKINGS

The undersigned Registrant hereby undertakes to:

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:

(i) Include any prospectus required by section 10(a)(3) of the Act,

(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information set
forth in the Registration Statement, and

(iii) Include any additional or changed material information on the plan
of distribution;

(2) For determining liability under the Act, treat such post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the forgoing provisions , or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submitted to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

II-6
<PAGE>
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Boca Raton, Florida,
on January 11, 1999.

<TABLE>
<S> <C> <C>
AMERICAN CARD TECHNOLOGY, INCORPORATED

By: /s/ LAWRENCE O. PERL
-----------------------------------------
Lawrence O. Perl,
CHIEF EXECUTIVE OFFICER
</TABLE>

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement on Form SB-2 was signed by the following persons in the
capacities and on the dates stated.

<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
/s/ LAWRENCE O. PERL
- ------------------------------ Chief Executive Officer, January 11, 1999
Lawrence O. Perl Chairman of Board

/s/ RAYMOND FINDLEY, JR.
- ------------------------------ President, Chief Operating January 11, 1999
Raymond Findley, Jr. Officer, Director

/s/ FRANK S. FUINO, JR.
- ------------------------------ Chief Financial Officer January 11, 1999
Frank S. Fuino, Jr.

/s/ HAROLD ROTHSTEIN
- ------------------------------ Director January 11, 1999
Harold Rothstein

/s/ RAYMOND RONCARI
- ------------------------------ Director January 11, 1999
Raymond Roncari

/s/ LILLY BETER
- ------------------------------ Corporate Secretary, January 11, 1999
Lilly Beter Director

/s/ BRUCE R. BONADIES
- ------------------------------ Director January 11, 1999
Bruce R. Bonadies

/s/ GORDON W.WALKER
- ------------------------------ Director January 11, 1999
Gordon W. Walker
</TABLE>

II-7
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -----------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 Underwriting Agreement / Registrant and Rockcrest Securities, LLC., Incorporated by Reference.
1.2 Underwriting Agreement / Registrant and Rockcrest Securities, L.L.C., revised.
3.1 Articles of Incorporation of Registrant, Incorporated by Reference.
3.2 By-Laws of Registrant, Incorporated by Reference.
3.2.1 Amended By-laws of Registrant, Incorporated by Reference.
4.1 Sample Certificate for Common Stock, Incorporated by Reference.
5.1 Opinion of Counsel regarding Legality, Incorporated by Reference.
5.1.1 Opinion of Counsel regarding Legality, Incorporated by Reference.
5.1.2 Opinion of Counsel regarding Legality, Dated January 11, 1999.
8.1 Opinion of BDO Seidman, LLP., Incorporated by Reference.
8.1.1 Opinion of BDO Seidman, LLP., Incorporated by Reference.
9.1 Voting Trust Agreement for Lawrence O. Perl, Incorporated by Reference.
9.1.1 Amended, Voting Trust Agreement for Lawrence O. Perl, Incorporated by Reference.
9.2 Voting Trust Agreement for Harold Rothstein, Incorporated by Reference.
10.1 Amended Employment Agreement between the Registrant and Lawrence O. Perl, Incorporated by
Reference.
10.2 Employment Agreement between the Registrant and Raymond Findley, Jr., Incorporated by
Reference.
10.3 Amended Employment Agreement between the Registrant and Robert H. Dixon, Incorporated by
Reference.
10.3.1 Employment Agreement between the Registrant and Frank S. Fuino, Jr., Incorporated by Reference.
10.4 Escrow Agreement, Bank of New York, Incorporated by Reference.
10.7.1 Subscription Agreement for American Card Technology, Inc., Incorporated by Reference.
10.7.2 Stock Option Agreement (warrant), Chapman Group, LLC., Incorporated by Reference.
10.7.2.1 Amended, Stock Option Agreement (warrant), Chapman Group, LLC, Incorporated by Reference.
10.7.3 Stock Option Agreement (warrant), Harold Rothstein, Incorporated by Reference.
10.7.3.1 Amended, Stock Option Agreement (warrant), Harold Rothstein, Incorporated by Reference.
10.7.4 Stock Option Agreement (warrant), Raymond Roncari, Incorporated by Reference.
10.7.4.1 Amended, Stock Option Agreement (warrant), Raymond Roncari, Incorporated by Reference.
10.8.1 Stock Option Agreement for non-employees and Amendment, Lilly Beter, Incorporated by Reference.
10.8.2 Stock Option Agreement/non-employees and Amendment, Harold Rothstein, Incorporated by
Reference.
10.8.3 Stock Option Agreement/non-employees and Amendment, Raymond Roncari, Incorporated by Reference.
10.8.4 Stock Option Agreement for non-employees and Amendment, Bruce Bonadies, Incorporated by
Reference.
10.8.5 Stock Option Agreement for non-employees and Amendment, Gordon Walker, Incorporated by
Reference.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -----------------------------------------------------------------------------------------------
<S> <C> <C>
10.8.6 1996 Nonemployee Director's Stock Option Plan, Incorporated by Reference.
10.8.6.1 Amended, 1996 Nonemployee Director's Stock Option Plan, Incorporated by Reference.
10.8.7 1996 Stock Option Plan for Employees, Incorporated by Reference.
10.8.7.1 Amended, 1996 Stock Option Plan for Employees, Incorporated by Reference.
10.8.8 Amended Director Loan Agreement, Harold Rothstein, Incorporated by Reference.
10.8.9 Amended Director Loan Agreement, Raymond Roncari, Incorporated by Reference.
10.9.1 Amended Agreement with SoftChip Israel Ltd. and Registrant, Incorporated by Reference.
10.9.1.1 Amended, Agreement with SoftChip Israel Ltd. and Registrant, Incorporated by Reference.
10.9.1.2 Amended Technology Purchase Agreement
10.9.2 Agreement with SoftChip Technology (3000) Ltd. and Registrant, Incorporated by Reference.
10.9.2.1 Agreement with SoftChip Technology (3000) Ltd. and Registrant, revised.
10.9.3 Stock Option Agreement and Amendment, Shreveport Acquisition Corp., Incorporated by Reference.
10.9.3.1 Amended, Stock Option Agreement, Amendment and second Amendment, Shreveport Acquisition Corp.,
Incorporated by Reference.
10.9.4 Amended, Stock Option Agreement for employee, Robert Dixon, Incorporated by Reference.
10.9.5 Amended, Stock Option Agreement for employee, Michael Pate, Incorporated by Reference.
10.9.6 Amended, Stock Option Agreement for employee, Robert Patten, Incorporated by Reference.
10.9.7.1 Amended, Stock Option Agreement for employee, Shawn Nixon, Incorporated by Reference.
10.9.7.2 Amended, Stock Option Agreement for employee, Jeremy Zela, Incorporated by Reference.
10.9.7.3 Stock Option Agreement for employee, Phyllis Burke, Incorporated by Reference.
10.9.8 Stock Option Agreement for employee, Robert Cartagine, Incorporated by Reference.
10.9.9 Stock Option Agreement for employee, Frank S. Fuino, Jr., Incorporated by Reference.
11.0 Loan Agreement between Registrant and Prometheus Trust, Dated October 13, 1998
12.0 Promissory Note between Registrant and Prometheus Trust, Dated October 13, 1998
13.0 Loan Agreement between Registrant and International Caribbean Trust, Ltd., Dated October 13,
1998
14.0 Promissory Note between Registrant and International Caribbean Trust, Ltd., Dated October 13,
1998
15.0 Articles of Incorporation of Animal Passports, Inc. Dated December 2, 1998
16.0 Bylaws of Animal Passports, Inc. Dated December 2, 1998
17.0 Consent of BOD, of Animal Passports Inc., acting in lieu of first meeting, Dated December 2,
1998
23.1 Consent of Independent Accountant, BDO Seidman, LLP., Incorporated by Reference.
23.1.1 Consent of Independent Accountant, BDO Seidman, LLP, Incorporated by Reference.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -----------------------------------------------------------------------------------------------
<S> <C> <C>
23.1.2 Consent of Independent Accountant, BDO Seidman, LLP., Dated January 6, 1999.
23.2 Consent of Legal Counsel, Bartz & Bartz (Opinion is filed as Exhibit 5.1), Incorporated by
Reference.
23.2.1 Consent of Legal Counsel, Bartz & Bartz (Opinion is filed as Exhibit 5.1), Incorporated by
Reference.
23.2.2 Consent of Legal Counsel, Bartz & Bartz (Opinion is filed as Exhibit 5.1.2) Dated January 11,
1999.
23.3 Consent of Underwriter, Rockcrest Securities L. L. C., Incorporated by Reference.
23.3.1 Consent of Underwriter, Rockcrest Securities L. L. C., Incorporated by Reference.
23.3.2 Consent of Underwriter, Rockcrest Securities L.L.C. Dated January 11, 1999.
27.0 Financial Data Schedule, Revised.
99.1 Dual Smart Card Access, Patent Number # TX 3-639-032 for ACTI, Incorporated by Reference.
99.2 Amended Rothstein personal guarantee, Incorporated by Reference.
99.3 Database Services Agreement and Addendum (Florida), Incorporated by Reference.
99.4 Falcetta, Wachtel & Knochenhauer, LLC regarding American Card Technology, Inc., Incorporated by
Reference.
</TABLE>

<PAGE>

ROCKCREST SECURITIES L.L.C.

3811 TURTLE CREEK BOULEVARD, SUITE 520
DALLAS, TEXAS 75219

James S. Harris member NASD
Principal and SIPC

AMERICAN CARD TECHNOLOGY, INC.

REVISED UNDERWRITING AGREEMENT
FOR REGULATION SB-2 OFFERING
"PUBLIC OFFERING"

November 20, 1998

American Card Technology, Inc.
1355 Terrell Mill Road
Building 1462, Suite 200
Marietta, GA. 30067

Ladies and Gentlemen:

American Card Technology, Inc a Delaware corporation, including all of
its subsidiaries, (the "Company"), of Marietta, GA. hereby confirms its
agreement with Rockcrest Securities, L.L.C. and/or other members of the
Underwriting Group (the "Underwriter") as follows:

I. Description Of Securities

The Company's authorized and outstanding capitalization when the offering of the
securities contemplated hereby (the "Offering") is permitted to commence and at
the date of breaking of escrow and distribution of funds raised by the
Underwriter to the Company pursuant to the terms and conditions stated in the
prospectus prepared in connection with this Offering (the "Prospectus"), which
is the date of closing the offering, (the "Closing Date"), will be set forth in
the Prospectus included therein. The Company proposes to issue and sell to
qualified investors an aggregate of up to 648,900 shares of its authorized $.001
U.S. par value common stock (the "Stock") at a price of $11.00 U.S. per share on
the terms as set forth in the Prospectus. The total aggregate shares shall not
exceed 20% of the equity of the Company at the time of the effective date. All
checks for purchase of securities in this Offering shall be made payable to The
Bank of New York, the bank escrow agent chosen by the Company, and the
Underwriter shall transmit such checks directly to such escrow agent by noon of
the next business day after receipt.
<PAGE>

UNDERWRITING AGREEMENT
ACTI
Page 2 of 24

II. Representations And Warrants of the Company

In order to induce the Underwriter to enter into this Agreement, the
Company hereby represents and warrants to and agrees with the Underwriter as
follows:

2.01. Registration Statement/Prospectus.
A registration statement on Form SB-2, (File No. ___________) (the
"Registration Statement") as amended, with respect to the shares, including the
related Prospectus, copies of which have heretofore been delivered by the
Company to the Underwriter, has been prepared by the Company in conformity with
(i) the requirements of the Securities Act of 1933, as amended (the "Act"); (ii)
the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "SEC"); and (iii) the laws and regulations of any other
state or jurisdiction in which such Registration Statement or Prospectus is
filed; said Registration Statement will be filed with the Commission under the
Act; one or more amendments to said Registration Statement, copies of which have
heretofore been delivered to the Underwriter, has or have heretofore been filed;
and the Company may file on or prior to the effective date additional amendments
to said Registration Statement, including the final Prospectus, with copies
delivered promptly to the Underwriter.

As used in this Agreement, the term Registration Statement refers to and
means said Registration Statement on Form SB-2, and all amendments thereto,
including the Prospectus with all exhibits and financial statements, as it
becomes effective; the term "Prospectus" refers to and means the Prospectus
included in the Registration Statement when it becomes effective; and the term
"Preliminary Prospectus" refers to and means any Prospectus included in said
Registration Statement before it becomes effective. The terms "effective date"
and "effective" refer to the date the SEC declares the Registration Statement
effective pursuant to Section 8 of the Act.

2.02. Accuracy Of Offering Documents and Prospectus.
The SEC has not issued any order preventing or suspending the use of any
Prospectus with respect to the Stock, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Act and the
applicable Rules and Regulations thereunder and to the best of the Company's
knowledge has not included at the time of filing or at the time of submission to
the Underwriter any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein not misleading. When the
Registration Statement becomes effective and on the Closing Date, the
Registration Statement and Prospectus and any further amendments or supplements
thereto will contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations for the purposes of the
proposed SB-2 Offering, and all statements of material fact contained in the
Registration Statement and Prospectus will be true and correct, and neither the
Registration Statement nor the Prospectus will include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
the Company does not make any representations or warranties as to information
contained in or omitted from the Registration Statement or the Prospectus in
reliance upon written information furnished on behalf of the Underwriter
specifically for use therein.
<PAGE>

UNDERWRITING AGREEMENT
ACTI
Page 3 of 24

2.03. Financial Statements.
The financial statements of the Company together with related schedules and
notes as set forth in the Registration Statement and Prospectus will present
fairly the financial position of the Company and, where applicable, the results
of its operations and cash flows at the respective dates and for the respective
periods for which they apply; such financial statements have been prepared in
accordance with generally accepted principles of accounting consistently applied
throughout the periods concerned except as otherwise stated therein.

2.04. Independent Public Accountant.
The Public Accountant, which has, if required, certified or shall certify
all financial statements as part of the Registration Statement and Prospectus is
an independent certified public accountant within the meaning of the Act and the
Rules and Regulations.

2.05. No Material Adverse Change.
Except as may be reflected in or contemplated by the Registration Statement
or Prospectus, as the same may be amended, subsequent to the dates as of which
information is given in the Prospectus, and prior to the Closing Date, (i) there
shall not be any material adverse change in the condition, financial or
otherwise, of the Company or in its business taken as a whole; (ii) there shall
not have been any material transaction entered into by the Company other than
transactions in the ordinary course of business; (iii) the Company shall not
have incurred any material obligations, contingent or otherwise, which are not
disclosed in the Prospectus; (iv) there shall not have been nor will there be
any change in the capital stock or long term debt (except current payments) of
the Company; and (v) the Company has not and will not have paid or declared any
dividends or other distributions on its common stock.

2.06. No Defaults.
The Company is not in any material default which has not been waived in the
performance of any obligation, agreement or condition contained in any
debenture, note or other evidence of indebtedness or any indenture or loan
agreement of the Company. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or bylaws of the Company, any note,
indenture, mortgage, deed of trust, or other agreement or instrument to which
the Company is a party or by which it or any of its property is bound, or any
existing law, order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality, agency or body, arbitration tribunal
or court, domestic or foreign, having jurisdiction over the Company or its
property. The consent, approval, authorization, or order of any court or
governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the Act or under the blue sky or securities laws of any state or
jurisdiction.

2.07. Incorporation And Standing.
The Company is and at the Effective Date will be duly incorporated and
validly existing in good standing as a corporation, under the laws of the State
of Delaware with authorized and outstanding capital stock as set forth in the
Registration Statement and Prospectus, and with full
<PAGE>

UNDERWRITING AGREEMENT
ACTI
Page 4 of 24

power and authority to own its property and conduct its business, present and
proposed, as described in the Registration Statement and Prospectus; the Company
has full power and authority to enter into this Agreement; and the Company is
duly qualified and in good standing as a foreign corporation in each
jurisdiction in which it owns or leases real property or transacts business
requiring such qualification. The Company has no subsidiaries other than as
disclosed in the Registration Statement and Prospectus.

2.08. Legality Of Outstanding Stock.
The outstanding common stock of the Company has been duly and validly
authorized, issued and is fully paid and nonassessable and will confirm to all
statements with regard thereto contained in the Registration Statement and
Prospectus. No sales of securities have been made by the Company in violation of
the registration provisions of the Securities Act of 1933.

2.09. Legality Of Stock.
The Stock has been duly and validly authorized and, when issued and
delivered against payment therefor as provided in this Agreement, will be
validly issued, fully paid and nonassessable. The Stock, upon issuance, will not
be subject to the preemptive rights of any shareholders of the Company. The
Stock will conform to all statements with regard thereto in the Registration
Statement and Prospectus.

2.10. Prior Sales.
No securities of the Company, or of a predecessor of the Company, have been
sold except as set forth in the Prospectus.

2.11. Litigation.
Except as set forth in the Registration Statement and Prospectus, there is
no action, suit or proceeding before any court or governmental agency, authority
or body pending or to the knowledge of the company threatened which might result
in judgments against the Company not adequately covered by insurance or which
collectively might result in any material adverse change in the condition
(financial or otherwise), the business or the prospects of the Company, or would
materially affect the properties or assets of the Company.

2.12. Finder.
The Company knows of no outstanding claim for services in the nature of a
finder's fee or origination fee with respect to the sale of the Stock hereunder
resulting from its acts for which the Underwriter may be responsible.

2.13. Exhibits.
There will be no contracts or other documents which are required to be
filed as exhibits to the Registration Statement or Prospectus by the Act or by
the Rules and Regulations which will not be so filed and each contract to which
the Company is a party and to which reference is made in the Prospectus has been
duly and validly executed, is in full force and effect in all material respects
in accordance with their respective terms, and none of such contracts have been
assigned by the Company, and the Company knows of no present situation or
condition or fact which would prevent compliance with the terms of such
contracts, as annexed to date. Except for amendments or modifications of such
contracts in the ordinary course of business, the Company

<PAGE>

UNDERWRITING AGREEMENT
ACTI
Page 5 of 24

has no intention of exercising any right which it may have to cancel any of its
obligations under any of such contracts, and has no knowledge that any other
party to any of such contracts has any intention not to render full performance
under such contracts.

2.14. Tax Returns.
The Company, where applicable, has filed all federal and state tax returns
which it is required to file and has paid all taxes shown on such returns and on
all assessments it has received to the extent such taxes have become due. All
taxes with respect to which the Company is obligated have been paid or adequate
accruals have been set up to cover any such unpaid taxes.

2.15. Property.
Except as otherwise set forth in or contemplated by the Registration
Statement and Prospectus, the Company has good title, free and clear of all
liens, encumbrances and defects, except liens for current taxes not due and
payable, to all property and assets which are described in the Registration
Statement and the Prospectus as being owned by the Company, subject only to such
exceptions and qualifications as will be described in the Prospectus or which
are not material and do not adversely affect the present or prospective business
of the Company.

2.16. Authority.
The execution and delivery by the Company of this Agreement has been duly
authorized by all necessary corporate action and this Agreement is the valid,
binding and legally enforceable obligation of the Company.

III. Best Efforts Offering

3.01. Statement Of Best Efforts.
Due to the dynamic aspects of the market, the Underwriter makes no
guarantees as to the success of the Offering, but agrees to use its best efforts
to bring the Offering to a successful close. The Underwriter shall market the
Stock to qualified investors in the manner the Underwriter determines to be the
best method, at the Underwriter's discretion.

3.02. No Liability of Underwriter.
In the event the Underwriter is unable to sell any portion of the Stock in
this Offering, the Underwriter shall in no way be liable for such unsold
portion.

IV. Prospectus

4.01. Delivery of Registration Statement.
As required, the Company will deliver to the Underwriter without charge two
signed copies of the Registration Statement, including all financial statements
and exhibits filed therewith and any amendments or supplements thereto, and
shall deliver without charge to the Underwriter as many copies of each
Registration Statement and any amendment or supplement thereto as deemed
necessary by the Underwriter, including such financial statements, exhibits,
amendments and supplements. The signed copies of the Registration
Statement/Prospectus so
<PAGE>

UNDERWRITING AGREEMENT
ACTI
Page 6 of 24

furnished to the Underwriter will include signed copies of any and all consents
and certificates of the independent public accountant certifying to the
financial statements included in the Registration Statement and Prospectus and
signed copies of any and all consents and certificates of any other persons
whose profession gives authority to statements made by them and who are named in
the Registration Statement or Prospectus as having prepared, certified or
reviewed any part thereof.

4.02. Delivery Of Preliminary Prospectus.
The Company will deliver to the Underwriter, at the Company's expense,
prior to the effective date of the Registration Statement as many printed copies
of the Preliminary Prospectus filed with the SEC bearing the red ink statement
required by SEC Rule 501 (c) (8) as the Underwriter may require for the purposes
contemplated by this Agreement. The Company consents to the lawful use of such
documents by the Underwriter and by dealers prior to the effective date of the
Registration Statement.

4.03. Delivery Of Prospectus.
The Company will deliver, at the Company's expense, as many printed copies
of the Prospectus as the Underwriter may require for the purposes contemplated
by this Agreement and shall deliver said printed copies of the Prospectus on the
effective date and for such period of time thereafter as the Prospectus is
required by law to be delivered in connection therewith.

4.04. Further Amendments and Supplements.
If during such period of time as in the opinion of the Underwriter or its
counsel an Prospectus relating to this financing is required to be delivered
under the Act, any event occurs or any event known to the Company relating to or
affecting the Company shall occur as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact, or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading or if it
is necessary at any time after the effective date of the Registration Statement
to amend or supplement the Prospectus to comply with the Act, the Company will
forthwith notify the Underwriter thereof and prepare and file with the SEC or
other State or jurisdiction, as may be required by law in a SB-2 Offering, such
further amendment or supplement to the Registration Statement and Prospectus and
furnish and deliver to the Underwriter, all at the cost of the Company, a
reasonable number of copies of the amended or supplemented Prospectus which as
so amended or supplemented will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
Prospectus not misleading in light of the circumstance in which it is delivered
to a purchaser or prospective purchaser, and which will comply in all respects
with the Act, and in the event the Underwriter is required to deliver an
Prospectus 90 days or more after the date of the Regulation SB-2 Offering, the
Company will promptly upon request prepare such Prospectus or Prospectus as may
be necessary to permit compliance with the requirements of Section 10 of the
Act.

4.05. Use Of Prospectus.
The Company authorizes the Underwriter in connection with the distribution
of the Stock to use the Prospectus, as from time to time amended or
supplemented, in connection with the
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offering and sale of the Stock and in accordance with the applicable provisions
of the Act and the applicable Rules and Regulations and applicable state blue
sky or securities laws.

V. Covenants Of the Company

5.01. Objection of Underwriter to Amendments or Supplements.
After the date hereof, the Company will not at any time, whether before or
after the effective date of the Registration Statement, file or distribute to
any party any amendment or supplement to the Registration Statement or to the
Prospectus unless and until a copy of such amendment or supplement has been
previously furnished to the Underwriter within a reasonable time period prior to
the proposed filing or distribution thereof, or of which the Underwriter or
counsel for the Underwriter has reasonably objected to, in writing, on the
ground that such amendment or supplement is not in compliance with the Act or
the Rules and Regulations.

5.02. Company's Best Efforts to Cause Registration Statement to Become
Effective.
The Company will use its best efforts to cause the Registration Statement,
if required by the Act, and any post-effective amendment subsequently filed, to
become effective as promptly as reasonably practicable and will promptly advise
the Underwriter, and confirm such advice in writing (i) when the Registration
Statement shall have become effective and when any amendment thereto shall have
become effective and when any amendment of or supplement to the Prospectus shall
be filed with the SEC; (ii) when the SEC shall make a request or suggestion for
any amendment to the Registration Statement or the Prospectus or for additional
information and the nature and substance thereof; (iii) of the issuance by the
SEC of an order suspending the effectiveness of the Registration Statement
pursuant to Section 8 of the Act or of the initiation of any proceedings for
that purpose; (iv) of the happening of any event which in the judgment of the
Company makes any material statement in the Registration Statement or Prospectus
untrue or which requires any changes to be made in the Registration Statement or
Prospectus in order to make the statements therein not misleading; and (v) of
the refusal to qualify or the suspension of the qualification of the Stock for
offering or sale in any jurisdiction, or the institution of any proceedings for
any of such purposes. The Company will use every reasonable effort to prevent
the issuance of any such order or of any order preventing or suspending such
use, to prevent any such refusal to qualify or any such suspension, and to
obtain as soon as possible a lifting of any such order, the reversal of any such
refusal and the termination of any such suspension.

5.03. Preparation Of Amendments and Supplements.
The Company will promptly prepare and file promptly with the SEC, as
required and upon request of the Underwriter, such amendments or supplements to
the Registration Statement or Prospectus, in form satisfactory to counsel to the
Company, as may be necessary, in the opinion of the counsel to the Underwriter
and of counsel to the Company, in connection with the offering or distribution
of the Stock and will use its best efforts to cause the same to become effective
as promptly as possible.

5.04. Blue Sky Qualifications.
The Company will, when and as requested by the Underwriter, use reasonable
efforts to qualify the Stock or such part thereof as the Underwriter may
determine for sale under the so-called blue sky laws of the States of Texas,
Georgia, Colorado, Oklahoma, Oregon, Louisiana,
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Kansas, Illinois, Massachusetts, Florida, Washington, Nevada, California,
Connecticut, New York and of so many other states as the Underwriter may
reasonably request and to continue such qualification in effect so long as
required for the purposes of the distribution of the Stock; provided, however,
the Company shall not be required to make a blue sky filing in any state which
would require that shares representing so-called "cheap stock" be escrowed for
more than five years. The Blue Sky work shall be undertaken by counsel selected
by the Company and shall be at the Company's expense.

5.05. Financial Statements.
The Company, at its own expense, will prepare and give and will continue to
prepare and give such financial statements and other information to and as may
be required by the SEC or any state, regulatory agency or jurisdiction in which
the Stock may be qualified.

5.06. Reports And Financial Statements to the Underwriter.
During the period of five years from the Closing Date, the Company will
deliver to the Underwriter (i) copies of each annual report of the Company; (ii)
copies of all reports it is required to file or make available pursuant to the
Investment Company Act of 1940, as amended (the "ICA"); (iii) within 90 days
after the close of each fiscal year of the Company, a financial report of the
Company and its subsidiaries, if any, on a consolidated basis, and a similar
financial report of all unconsolidated subsidiaries, if any, all such reports to
include a balance sheet as of the end of the preceding fiscal year, an income
statement, a statement of changes in financial condition and an analysis of
investors' equity covering such fiscal year, and all to be in reasonable detail
and, if required, certified by independent public accountants for the Company;
(iv) within 45 days after the end of each quarterly fiscal period of the Company
other than the last quarterly fiscal period in any fiscal year, copies of the
consolidated income statement and statement of changes in financial condition
for that period, and the balance sheet of the Company and its subsidiaries, if
any, as of the end of that period and the income statement, statement of changes
in financial condition and balance sheet of each unconsolidated subsidiary, if
any, of the Company for that period, all subject to year-end adjustment,
certified by the principal financial or accounting officer of the Company; (v)
copies of all other statements, documents, or other information which the
Company shall mail or otherwise make available to any class of its security
holders, or if required shall file with SEC; and (vi) upon request in writing
from the Underwriter, furnish to the Underwriter such other information as may
reasonably be requested and which may be properly disclosed to the Underwriter
with reference to the property, business and affairs of the Company and its
subsidiaries, if any.

If the Company shall fail to furnish the Underwriter with financial
statements as herein provided, within the times specified herein, the
Underwriter shall have the right to have such financial statements prepared by
independent public accountants of their own choosing and the Company agrees to
furnish such independent public accountants such data and assistance and access
to such records as they may reasonably require to enable them to prepare such
statements and to pay their reasonable fees and expenses in preparing the same,
pursuant to Section 5.08. below. In the event the monies described in Section
5.08. below are not deposited the Company agrees to hold the Underwriter
harmless if the Underwriter does not enforce the above listed rights.
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5.07. Underwriter's Commission/Compensation.
Upon Closing, the Company shall pay to the Underwriter the Sales Commission
as set forth in the Prospectus. This commission shall be ten percent (10%) of
the gross proceeds from the sale of the Stock pursuant to the Offering.

5.08. Expenses Paid by the Company.
The Company and its officers have deposited with the Underwriter, upon
execution of this Agreement, a sufficient amount of money to fund all
anticipated expenses in the amount of $25,000 U.S. Rockcrest Capital
Corporation performs all due diligence investigations on behalf of the
Underwriter. The Company and/or its officers have deposited such funds to fund
all costs and expenses incident to the performance of its obligations under this
Agreement, including all expenses incident to the authorization of the Stock and
their issue and delivery to the Underwriter, any original issue taxes in
connection therewith, all transfer taxes, if any, incident to the initial sale
of the Stock to the qualified investors, the fees and expenses of the Company's
counsel and accountants, all travel costs incurred by the Underwriter's
personnel in connection with the Offering, the costs and expenses incident to
the preparation, printing and filing under the Act and with the National
Association of Securities Dealers, Inc., as necessary, of the Registration
Statement and the Prospectus and any amendments or supplements thereto, the cost
of printing, reproducing and filing, as necessary, the Registration Statement
and Prospectus and the underwriting documents, the cost of printing and
furnishing to the Underwriter copies of the Registration Statement and
Prospectus, as well as any amendments and/or supplements thereto, and the cost
of qualifying the Stock under the state securities or blue sky laws as provided
in Section 5.04. herein, including expenses and disbursements of the Underwriter
incurred in connection with such qualification, and any other expense deemed
appropriate by the Underwriter. Said monies have been deposited with the
Underwriter.

5.09. Reports To Investors.
During the period five years from the Closing Date, the Company will, as
promptly as possible, not to exceed 120 days, after each annual fiscal period
render and distribute reports to its investors which will include audited
statements of its operations and cash flows during such period and its balance
sheet as of the end of such period, as to which statements the Company's
independent certified public accountants, if required, shall have rendered an
opinion.

5.10. Section 11(a) Financials.
The Company will make generally available to its security holders and will
deliver to the Underwriter, as soon as practicable, but in no event later than
the first day of the sixteenth full calendar month following the effective date
of the Registration Statement, an earning statement (as to which no opinion need
be rendered but which will satisfy the provisions of Section 11(a) of the Act)
covering a period of at least 12 months beginning after the effective date of
the Registration Statement.

5.11. Post-Effective Availability of Prospectus.
Within the time during which the Prospectus is required to be delivered
under the Act, the Company will comply, at its own expense, with all
requirements imposed upon it by the Act, as now or hereafter amended, by the
Rules and Regulations, as from time to time may be in force,
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and by any order of SEC, so far as necessary to permit the continuance of sales
or dealings in the Stock.

5.12. Application Of Proceeds.
The Company will apply the net proceeds from the sale of the Stock
substantially in the manner set forth in the Prospectus.

5.13. Undertakings Of Certain Shareholders.
The Company will deliver to the Underwriter, prior to or simultaneously
with the execution of this Agreement an agreement executed by each officer,
director or shareholder of the Company stating that such person shall not
directly or indirectly offer or sell to qualified investors any portion of the
shares of Common Stock owned prior to the effective date of this Agreement for a
period of twelve months from the effective date of the Registration Statement
without the Underwriter's prior written consent.

5.14. Delivery Of Documents.
Prior to the funding of this Offering, the Company will deliver to the
Underwriter, at its own expense, true and correct copies of the articles of
incorporation and certificate of incorporation of the Company, and all
amendments thereto, all such copies to be certified by the Secretary of State of
the State of Delaware; true and correct copies of the bylaws of the Company and
of the minutes of all meetings of the directors and the shareholders of the
Company held prior to the Closing Date which in any way relate to the subject
matter of this Agreement; and true and correct copies of all material contracts
to which the Company is a part, other than contracts for the sale of products or
services in the normal course of business. True and correct copies of any and
all amendments to these instruments up to the Closing Date shall be provided to
the Underwriter at the expense of the Company.

5.15. Cooperation With Underwriter's Due Diligence.
At all times prior to the Closing Date, the Company will cooperate with the
Underwriter in such investigation as the Underwriter may make or cause to be
made of all the properties, business and operations of the Company in connection
with this Offering, and the Company will make available to the Underwriter, in
connection therewith, such information in its possession as the Underwriter may
reasonably request.

5.16. No Sale Period.
No offering, sale or other disposition of any common stock, equity or
long-term debt will be made within one year after the effective date of the
Prospectus, directly or indirectly, by the Company, otherwise than hereunder,
unless the Underwriter gives prior written consent.

5.17. Appointment Of Transfer Agent.
The Company has appointed The Bank of New York as transfer agent for the
Stock subject to the Closing. The Company will not change or terminate such
appointment for a period of three years from the effective date without first
obtaining the written consent of the Underwriter, which consent shall not be
unreasonably withheld.
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5.18. Compliance With Conditions Precedent.
The Company will use all reasonable efforts to comply or cause to be
complied with the conditions precedent to the several obligations of the
Underwriter in Section 8 hereof.

5.19. Filings Required.
The Company agrees to file with the SEC or any other state or jurisdiction
all reports required under the Act, the Rules and Regulations or any other
applicable law, and to provide a copy of such reports to the Underwriter,
including but not limited to the filing of Form SR with the SEC in accordance
with the provisions of Rule 463 promulgated under the Act.

5.20. Application To Moody's/ Standard & Poor's/ Dunn & Bradstreet
The Company will, within 120 days after the effective date, apply for
listing in Moody's Over-The-Counter Manual and/or Standard & Poor's and/or Dunn
& Bradstreet and shall use its best efforts to have the Company listed in such
manual. Whether the Company will apply for listing on one exchange or all three
will be decided by the Underwriter and the Company cooperatively.

5.21. Application To NASDAQ/Bulletin Board
The Company shall apply for entry of the Stock on the NASDAQ automated
quotation system and/or the Bulletin Board and shall in such event use its best
efforts to have its common stock quoted on that system.

5.22. Due Diligence Tour.
The Company has agreed to conduct a due diligence tour. The Company will
follow the direction of the Underwriter regarding the structure and the
particulars of the due diligence tour. The Company and the Underwriter will
collectively decide the disposition of the due diligence tour.

VI. Indemnification

6.01. Indemnification By Company.
The Company agree to indemnify and hold harmless the Underwriter and each
person who controls the Underwriter within the meaning of Section 15 of the Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act or any other statute
or at common law and to reimburse persons indemnified as above for any legal or
other expenses (including the cost of any investigation and preparation)
incurred by them in connection with any litigation, whether or not resulting in
any liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereto or any application or other document filed in order to qualify
the Stock under the blue sky or securities law of the states where the filings
were made, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, all as of
the date when the Registration Statement or such amendment, as the case may be,
becomes effective, or any untrue statement or alleged untrue
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statement of a material fact contained in the Registration Statement (as
amended or supplemented), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the indemnity agreement
contained in this subsection 6.01. shall not apply to amounts paid in
settlement of any such litigation if such settlements are effected without
the consent of the Company, nor shall it apply to any Underwriter or any
person controlling any Underwriter in respect of such losses, claims,
damages, liabilities or actions arising out of or based upon any such untrue
statements or made in reliance upon information within the knowledge of the
Underwriter and furnished to the Company by the Underwriter for use in
connection with the preparation of the Registration Statement and the
Prospectus or any such amendment or supplement thereto. Furthermore, in the
event the Company fails to provide all funds properly requested by the
Underwriter pursuant to this Agreement in a timely manner as determined by
the Underwriter in its sole reasonable discretion, the Company agrees to
indemnify and hold harmless the Underwriter and each person who controls the
Underwriter within the meaning of Section 15 of the Act against any and all
claims arising out of this Agreement, any breach of this Agreement by the
Company or failure by the Company to perform any authorized act under this
Agreement, subject to the indemnity restrictions contained in this Section
6.01., whether such claims are originated by the Company, its officers,
agents or assigns or by any other third party. This indemnity agreement is in
addition to any other liability which the Company may otherwise have to the
Underwriter. The Underwriter agrees that within ten days after the receipt by
the Underwriter of written notice of the commencement of any action against
them or against any person controlling them as aforesaid, in respect of which
indemnity may be sought from the Company on account of the indemnity
agreement contained in this subsection 6.01. to notify the Company in writing
of the commencement thereof. The failure of the Underwriter so to notify the
Company of any such action shall relieve the Company from any liability which
it may have to the Underwriter or any person controlling the Underwriter as
aforesaid on account of the indemnity agreement contained in this subsection
6.01., but shall not relieve the Company from any other liability which it
may have to the Underwriter or such controlling person. In case any such
action shall be brought against the Underwriter or any such controlling
person and the Unerwriter shall notify the Company of the Commencement
thereof, the Company shall be entitled to participate in (and, to the extent
that it shall wish, to direct) the defense thereof at its own expense, but
such defense shall be conducted by counsel of recognized standing and
reasonably satisfactory to the Underwriter or such controlling person or
persons, defendant or defendants in such litigation. The Company agrees to
notify the Underwriter promptly of commencement of any litigation or
proceedings against it or any of its officers or directors, of which it may
be advised, in connection with the issue and sale of any of its securities
and to furnish to the Underwriter at its request copies of all pleadings
therein and permit the Underwriter to be an observer therein and apprise the
Underwriter of all developments therein, all at the Company's expense.
Provided, however, that in no event shall the indemnification agreement
contained in this subsection 6.01. inure to the benefit of any Underwriter
(or any person controlling such Underwriter) on account of any losses,
claims, damages, liabilities or actions arising from the sale of the Stock in
this Offering to any person by such Underwriter if such losses, claims,
damages, liabilities or actions arise out of, or are based upon, an untrue
statement or omission or alleged untrue statement or omission in a
Preliminary Prospectus and if the Prospectus shall correct the untrue
statement or omission or the alleged untrue statement or omission which is
the basis of the loss, claim,

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damage, liability or action for which indemnification is sought and a copy of
the Prospectus had not been sent or given to such person at or prior to the
confirmation of such sale to him in any case where such delivery is required
by the Act, unless such failure to deliver the Prospectus was a result of
non-compliance by the Company with Sections 4.02. and 4.03. hereof. Provided,
however, the Company's obligations to indemnify hereunder shall not be
applicable to any liability to which the Underwriter is subject by reason of
willful malfeasance, bad faith or gross negligence in the performance of its
duties or by reason of willful disregard of its obligations and duties under
this Agreement. Notwithstanding anything to the contrary in this subsection
6.01. of this Agreement, no Underwriter shall be indemnified by the Company
against any liability by any such Underwriter to the Company or its
shareholders except in accordance with the guidelines set forth in Release
No. IC-11330 issued by the SEC on September 2, 1980.

6.02. Indemnification by Underwriter.
The Underwriter will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the Registration Statement and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and reasonable attorneys' fees) to which the Company or any
such director, officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any violation by the Underwriter
in the sale of such securities of any applicable state or federal law or any
rule, regulation or instruction thereunder relating to violations based on
unauthorized statements by the Underwriter or any of their representatives,
provided that such violation is not based upon any violation of such law, rule,
regulation or instruction by the party claiming indemnification or inaccurate or
misleading information furnished by the Company or its representatives,
including information furnished to the Underwriter as contemplated herein. This
indemnity agreement shall be in addition to any liability which the Underwriter
may otherwise have.

6.03. Notice Of Litigation Against Underwriter.
The Underwriter agrees to notify the Company promptly of the commencement
of any litigation or proceeding against the Underwriter or against any such
controlling person, of which it may be advised in connection with the issue and
sale of any of the securities of the Company, and to furnish to the Company at
its request copies of all pleadings therein and apprise it of all the
developments therein, all at the Underwriter's expense, and permit the Company
to be an observer therein.

VII. Effectiveness Of Contract

7.01. Date Of Effectiveness
This Agreement shall become effective immediately upon execution.The time
of the release by the Underwriter of the Stock for offering, for the purposes of
this Section VII., shall mean the time of the release by the Underwriter for
publication of the first advertisement which is subsequently published relating
to the Stock, or the time of the first delivery or mailing of copies of the
Prospectus relating to the Stock which are subsequently delivered, whichever
shall

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first occur. The Underwriter agrees to notify the Company immediately after the
Underwriter shall have taken any action, by release or otherwise, whereby this
Agreement shall have become effective. This Agreement shall, nevertheless,
become effective at such time earlier than the time specified above, after the
effective date, as the Underwriter may determine by notice to the Company.

VIII. Conditions Of Underwriter's Obligations

The Underwriter's obligations hereunder to make payment to the Company
hereunder on the Closing Date shall be subject to the terms and conditions
stated in the Prospectus, and to the accuracy of the representations and
warranties on the part of the Company herein contained, to the performance by
the Company of all its agreements herein contained, to the fulfillment of or
compliance by the Company with all covenants and conditions hereof, and to the
following additional conditions:

8.01. Effectiveness Of Offering Documents.
The Offering Documents shall have become effective on or prior to the date
stated therein.

8.02. Accuracy Of Offering Documents.
The Underwriter shall not have disclosed in writing to the Company that the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel to the Underwriter, is
material, or omits to state a fact which, in the opinion of counsel to the
Underwriter, is material and is required to be stated therein, or is necessary
to make the statements therein not misleading.

8.03. Casualty And Other Calamity.
Between the date hereof and the Closing Date, the Company shall not have
sustained any loss on account of fire, explosion, flood, accident, calamity or
any other cause, of such character as materially adversely affects its business
or property considered as an entire entity, whether or not such loss is covered
by insurance and a key principal of the Company (Lawrence O. Perl and/or Raymond
Findley) shall not have suffered any injury or disability of a nature which
would materially adversely affect his ability as a key principal of the Company.

8.04. Litigation And Other Proceedings.
Between the date hereof and the Closing Date, there shall be no litigation
instituted or threatened against the Company and there shall be no proceeding
instituted or threatened against the Company before or by any federal or state
commission, regulatory body or administrative agency or other governmental body,
domestic or foreign, wherein an unfavorable ruling, decision or finding would
materially adversely affect the business, franchises, patents, operations or
financial condition or income of the Company considered as an entity.

8.05. Lack of Material Change.
Except as contemplated herein or as set forth in the Registration Statement
and Prospectus, as such may amended, during the period subsequent to the date of
the last audited

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balance sheet included in the Registration Statement and prior to the Closing
Date, the Company (i) shall have conducted its business in the usual and
ordinary manner as the same was being conducted on the date of the last audited
balance sheet included in the Registration Statement; and (ii) shall not, except
in the ordinary course of its business, have incurred any liabilities or
obligations (direct or contingent) or disposed of any of its assets, or entered
into any material transaction or suffered or experienced any substantially
adverse change in its condition, financial or otherwise. At the Closing Date,
the capital stock and surplus accounts of the Company shall be substantially the
same as at the date of the last audited balance sheet included in the
Registration Statement, without considering the proceeds from the sale of the
Stock, other than as may be set forth in the Prospectus, and except as the
surplus reflects the result of continued losses from operations.

8.06. Opinion of Counsel.
The Company shall have furnished to the Underwriter the opinion, dated
twenty-four hours prior to the Closing Date, addressed to the Underwriter, from
the Company's counsel, to the effect that based upon their review of the
Registration Statement and Prospectus, the Company's certificate of
incorporation, bylaws, and relevant corporate proceedings, an examination of
such statutes as the Company's counsel deem necessary and such other
investigation by such counsel as it deems necessary to express such opinions:

(i) The Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of Delaware, with full corporate
power and authority to own and operate its properties and to carry on its
business as set forth in the Registration Statement and Prospectus.

(ii) The Company is qualified as a foreign corporation in the State of Georgia
and is not required to qualify or register as a foreign corporation in any other
state and there are no other jurisdictions in which the Company's ownership of
property or its conduct of business requires such qualification or registration
and where the failure to so qualify would have a material adverse effect on its
operations.

(iii) The Company has authorized and outstanding capital stock as set forth in
the Registration Statement and Prospectus; the outstanding common stock of the
Company, and the Stock, conform to the statements concerning them in the
Registration Statement and the Prospectus; the outstanding common stock of the
Company has been duly and validly issued and is fully paid and nonassessable and
contains no preemptive rights; the Stock has been duly authorized and, upon
issuance thereof and payment therefor in accordance with this Agreement, will be
duly and validly issued, fully paid and nonassessable, and will not be subject
to the preemptive rights of any shareholder of the Company.

(iv) No consents, approvals, authorizations or orders of agencies, officers or
other regulatory authorities are known to such counsel which are necessary for
the valid authorization, issue or sale of the Stock hereunder, except as
required under the Act or blue sky or state securities laws.

(v) The issuance and sale of the Stock, and the consummation of the transactions
herein contemplated and compliance with the terms of this Agreement will not, to
the best of Counsel's
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knowledge, conflict with or result in a breach of any of the terms,
conditions or provisions of or constitute a default under the certificate of
incorporation or bylaws of the Company, or any note, indenture, mortgage,
deed of trust, or other agreement or instrument to which the Company is a
party or by which the Company or any of its property is bound or any existing
law (provided this paragraph shall not relate to federal or state securities
laws), order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality, agency, body, arbitration tribunal,
or court, domestic or foreign, having jurisdiction over the Company or its
property.

(vi) The Registration Statement has become effective under the Act and, to the
best of the knowledge of such counsel after such counsel has conducted a
reasonable investigation, no order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated by the SEC under the Act, and the
Prospectus, and each amendment and supplement thereto, complies as to form in
all material respects with the requirements of the Act and the Rules and
Regulations thereunder, and after a reasonable investigation such counsel has no
reason to believe that either the Registration Statement or the Prospectus or
any such amendment or supplement contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which made (except that no opinion need be expressed as to
financial statements contained in the Registration Statement or Prospectus); and
such counsel is familiar with all contracts referred to in the Registration
Statement or Prospectus and such contracts are sufficiently summarized or
disclosed therein or filed as exhibits thereto as required, and such counsel,
after a reasonable investigation, does not know of any contracts required to be
summarized or disclosed or filed, and such counsel, after a reasonable
investigation, does not know of any legal or governmental proceedings pending or
threatened to which the Company is the subject of which is required to be
disclosed in the Registration Statement or the Prospectus which are not
disclosed and properly described therein.

(vii) This Agreement has been duly authorized and executed by the Company and is
a valid and binding agreement of the Company.

As to routine factual matters such as the issuance of stock certificates
and receipt of payment therefor, the states in which the Company transacts
business, the adoption of resolutions reflected by the Company's minute book and
the like, such counsel may rely on the certificate of an appropriate officer of
the Company. Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement as the Underwriter shall reasonably
request.

8.07.01. Accountant's Letter.
The Underwriter shall have received, if required, a letter addressed to the
Underwriter and dated the date of this Agreement and the Closing Date,
respectively, from the independent public accountant of the Company, stating
that (i) with respect to the Company they are the independent public accountant
of the Company within the meaning of the Act and the applicable published Rules
and Regulations thereunder; (ii) in its opinion, the Company's financial
statements which the independent public accountantaudited, at all dates and for
all periods referred to and included in the Registration Statement and
Prospectus, comply in all material respects with the applicable accounting
requirements of the Act and the published Rules and

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UNDERWRITING AGREEMENT
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Regulations thereunder with respect to SB-2 offering documents; (iii) on the
basis of certain indicated procedures (but not an audit in accordance with
generally accepted accounting principles), including examinations of the
instruments of the Company set forth in the Prospectus, a reading of the latest
available interim unaudited financial statements of the Company, whether or not
appearing in the Prospectus, inquiries of the officers of the Company or other
persons responsible for its financial and accounting matters regarding the
specific items for which representations are requested below and a reading of
the minute books of the Company, nothing has come to its attention which would
cause it to believe that during the period from the last audited balance sheet
included in the Registration Statement to a specified date not more than five
days prior to the date of such letter (a) there has been any change in the
capital stock or other securities of the Company or any payment or declaration
of any dividend or other distribution in respect thereof or exchange therefor
from that shown on its audited balance sheets or in the debt of the Company from
that shown in the Registration Statement or Prospectus other than as set forth
in or contemplated by the Registration Statement or Prospectus; (b) there have
been any material decreases in net current assets or net assets as compared with
amounts shown in the last audited balance sheet included in the Prospectus so as
to make said financial statements misleading; and (c) on a basis of the
indicated procedures and discussions referred to in clause (iii) above, nothing
has come to its attention which, in its judgment, would cause the independent
public accountant to believe or indicate that the unaudited financial statements
and schedules, whether or not appearing in the Registration Statement and
Prospectus, do not present fairly the financial position and results of the
Company, for the periods indicated, in conformity with the generally accepted
accounting principles applied on a consistent basis with the audied financial
statements.

8.07.02. Conformed Copies of Accountant's Letter.
The Underwriter shall be furnished without charge, in addition to the
original signed copies, such number of signed or photostatic or conformed copies
of such letters as the Underwriter shall reasonably request.

8.08. Officers' Certificate.
The Company shall have furnished to the Underwriter a certificate by the
Company's President and chief financial officer, dated as of the Closing Date,
to the effect that, to the best of their knowledge;

(i) The representations and warranties of the Company in this Agreement are true
and correct as of the date of this Agreement and as of the Closing Date, and the
Company has complied with all the agreements and has satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date.

(ii) The Registration Statement has become effective and no order suspending the
effectiveness of the Registration Statement has been issued and to the best of
all knowledge of the respective signers after such respective signers have made
inquiry, no proceeding for that purpose has been initiated or is threatened by
the SEC.

(iii) The respective signers have carefully examined the Registration Statement
and the Prospectus and any amendments or supplements thereto, and the
Registration Statement and the

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UNDERWRITING AGREEMENT
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Prospectus and any amendments and supplements thereto contain all statements
required to be stated therein, and all statements contained therein are true and
correct, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto includes any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading and, since the effective date of
the Registration Statement, has occurred no event required to be set forth in an
amended or a supplemented Prospectus which has not been so set forth.

(iv) Except as set forth in the Registration Statement and Prospectus since the
respective dates as of which the periods for which information is given in the
Registration Statement and Prospectus and prior to the date of such
certificates, and except for anticipated continuing losses, (a) there has not
been any substantially adverse change, financial or otherwise, in the affairs or
condition of the Company, and (b) the Company has not incurred any liabilities,
direct or contingent, or entered into any transactions, otherwise than in the
ordinary course of business.

(v) Subsequent to the respective dates as of which information is given in the
Registration Statement and Prospectus, no dividends or distribution whatever
have been declared and/or paid on or with respect to the common stock of the
Company.

8.09. Tender Of Delivery of Stock.
All of the Stock being offered by the Company shall be tendered for
delivery in accordance with the terms and provisions of this Agreement.

8.10. Blue Sky Qualifications.
The Stock shall be qualified in such states as the Underwriter may
reasonably request pursuant to Section 5.04., and each such qualification shall
be in effect and not subject to any stop order or other proceeding on the
Closing Date.

8.11. Approval Of Underwriter.
All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to the
Underwriter, whose approval shall not be unreasonably withheld. The suggested
form of such documents shall be provided to the Underwriter at least one
business day before the Closing Date. If necessary, the Underwriterwill provide
a written memorandum stating which such closing documents it deems necessary for
its review. Such memorandum shall be delivered five business days before the
Closing Date to counsel for the Company.

8.12. Officers' Certificate As a Company Representative.
Any certificate signed by an officer of the Company and delivered to the
Underwriter or to counsel for the Underwriter will be deemed a representation
and warranty by the Company to the Underwriter as to the statements made
therein.

8.13. Non-Payment Of Requested Funds by Company.
All funds agreed upon by mutual written agreement between the parties, as
discussed herein, shall be paid by the Company as described in this Agreement.
In the event the Company

<PAGE>

UNDERWRITING AGREEMENT
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does not provide any and all funds as mutually agreed upon, as described in this
Agreement, the Underwriter reserves the right to cease all activity with respect
to this Offering until such funds are received from the Company. In the event
all such funds are not received within thirty days from the date such funds are
due, and no written agreement between the Company and the Underwriter as to the
payment of such requested funds is reached, the Underwriter reserves the right
to withdraw from its role in this Offering and instruct the escrow agent to
return all monies received from investors to fund the offering, at the cost of
the Company. Such withdrawal shall not be deemed a breach of this Agreement.

8.14. Requested Contracts, Information and Documents Provided.
All contracts, information and documents requested in writing by the
Underwriter from the Company, to include audited financial statements, key man
life insurance and any other liability and/or casualty insurance deemed
necessary by the Underwriter, fidelity bonds, and non-compete agreements with
officers, have been timely provided to the Underwriter as requested. The
Underwriter may request any contracts, information or documents which it
reasonably deems necessary in order to facilitate the funding of this Offering,
within its sole discretion.

IX. Termination

9.01. Termination Due to Non-Compliance.
This Agreement may be terminated by the Underwriter by written notice to
the Company in the event the Company shall have failed or been unable to comply
in any material respect with any of the terms, conditions or provisions of this
Agreement on the part of the Company to be performed, complied with or fulfilled
(including but not limited to those specified in sections 2, 3, 4, 5, and 8
hereof) within the respective times herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Underwriter in writing. The date of such termination notice shall
be the termination date of this Agreement (the "Termination Date").

This Agreement may be terminated by the Company by written notice to the
Underwriter in the event the Underwriter shall have failed or been unable to
comply in any material respect with any of the terms, conditions or provisions
of this Agreement on the part of the Underwriter to be performed, complied with
or fulfilled, within the respective times herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Company in writing. The date of such termination notice shall be
the termination date of this Agreement (the "Termination Date").

In the event this Agreement is terminated, the Underwriter shall be
reimbursed only for its actual accountable out-of-pocket expenses.

9.02. Termination Due to Due Diligence Investigations.
In the event the Underwriter's due diligence investigations lead the
Underwriter to believe any statement or fact presented by the Company, whether
oral or written, on which it relied in executing this Agreement to be false or
exaggerated, whether intentionally or unintentionally on the part of the
Company, or to believe the Offering has an unacceptable

<PAGE>

UNDERWRITING AGREEMENT
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likelihood of success or is fraudulent in any way, the Underwriter reserves the
right to terminate this Agreement immediately, and upon termination the
Underwriter shall refund any unused portion of any deposit it received from the
Company. The Underwriter shall immediately provide a written notice to the
Company notifying the Company of its termination of this Agreement and the
reasons therefor. The date of such termination notice shall be the termination
date of this Agreement (the "Termination Date").

9.03. Market Out Termination
This Agreement may be terminated by the Underwriter by notice to the
Company at any time if, in the judgment of the Underwriter, payment for and
delivery of the Stock is rendered impracticable or inadvisable because (i)
additional material governmental restrictions not in force and effect on the
date hereof shall have been imposed upon the trading in securities generally, or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange or trading in securities generally on such Exchange shall have
been suspended, or a general moratorium shall have been established by federal
or state authorities; (ii) a war or other national calamity shall have occurred;
(iii) substantial and material changes in the condition of the market (either
generally or with reference to the sale of the Stock offered hereby) beyond
normal fluctuations are such that it would be undesirable, impracticable or
inadvisable in the judgment of the Underwriter to proceed with this Agreement or
with the public offering; or (iv) of any matter materially adversely affecting
the Company. The date of such termination notice shall be the termination date
of this Agreement (the "Termination Date").

9.04. Termination Due to Misuse of Discretion, Willful Malfeasance, Bad Faith or
Gross Negligence.
This Agreement may be terminated by the Company upon written notice to the
Underwriter, in cases where the Underwriter has exercised misuse of discretion,
willful malfeasance, bad faith or gross negligence in the performance of its
duties or by reason of willful disregard of its obligations and duties under
this Agreement. The date of such termination notice shall be the termination
date of this Agreement (the "Termination Date").

9.05. Termination Due to Court Proceedings.
In the event any action or proceeding of the type referred to in
subparagraph 10.02 below shall be instituted or threatened against the
Underwriter at any time prior to the effective date hereunder, or in the event
there shall be filed by or against the Underwriter in any court pursuant to any
federal, state, local or municipal statute, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of the Underwriter's assets or if the Underwriter makes an assignment for the
benefit of creditors, the Company shall have the right, with written notice to
the Underwriter, to terminate this Agreement without any liability to the
Underwriter of any kind except for the payment of all expenses as provided
herein. The date of such termination notice shall be the termination date of
this Agreement (the "Termination Date").

9.06. Effect Of Termination Hereunder.
Any termination of this Agreement pursuant to this Section IX shall be
without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party thereto,
except that the Company shall remain obligated to pay

<PAGE>

UNDERWRITING AGREEMENT
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the costs and expenses provided to be paid by it specified in Section 5.08.; and
the Company and the Underwriter shall be obligated to pay, respectively, their
own losses, claims, damages or liabilities, joint or several, under this
Agreement. Upon such termination the Underwriter shall instruct the escrow agent
to return any and all funds received from investors to fund the offering, at the
expense of the Company.

X. Underwriter's Representations and Warranties

The Underwriter represents and warrants to and agrees with the Company that:

10.01. Registration As Broker-Dealer and Member of NASD.
The Underwriter is registered as a broker-dealer with the SEC and is
registered as a broker-dealer in all states in which it conducts business and is
a member in good standing of the National Association of Securities Dealers,
Inc.

10.02. No Pending Proceedings.
There is not now pending or threatened against the Underwriter any action
or proceeding of which it has been advised, either in any court of competent
jurisdiction, before the SEC or any state securities commission concerning its
activities as a broker or dealer, nor has the Underwriter been named as a
"cause" in any such action or proceeding.

10.03. Accountability Of Funds.
The Underwriter shall provide a written, detailed accounting of any and all
additional funds requested by the Underwriter from the Company which exceed the
initial deposit amount as described in Section V above, upon written request
from the Company received by the Underwriter within thirty days from the Closing
Date or Termination Date of this Agreement, whichever shall occur first.

10.04. Furnish Distribution Sheets.
The Underwriter undertakes to furnish the Company within thirty days after
the Closing Date with a breakdown by states of the number of shares of Stock
sold in each state in which the Stock is offered.

XI. Arbitration and Venue

11.01. Arbitration Proceedings, Statement of Venue.
Any disputes between Underwriter and the Company arising out of, or based
in any way upon, the SB-2 Offering the subject of this Agreement shall be
settled through arbitration. Any arbitration findings shall be binding upon all
parties and final. The venue for such arbitration shall be Dallas County, Texas,
and the costs and fees associated with such arbitration proceedings shall be
borne by the party incurring such costs and fees.

<PAGE>

UNDERWRITING AGREEMENT
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XII. Notice

Except as otherwise expressly provided in this Agreement:

12.01. Notice To the Company.
Whenever notice is required by the provisions of this Agreement to be given
to the Company, such notice shall be in writing addressed to the Company as
follows:

American Card Technology, Inc.
1355 Terrell Mill Road
Building 1462, Suite 200
Marietta, GA. 30067

with copy to:

Cohn & Birnbaum P.C.
Attn: Richard J. Shea
100 Pearl Street
Hartford, Connecticut 06103-4500

Law Offices of Bartes & Bartes
Attn: ______________
Southdale Office Center
6750 France Avenue South, Suite 350
Edina, Minnesota 55435

12.02. Notice To the Underwriter.
Whenever notice is required by the provisions of this Agreement to be given
to the Underwriter, such notice shall be given in writing and delivered via
United States Post Office Certified Mail, addressed to the Underwriter as
follows:

Rockcrest Securities, L.L.C.
3811 Turtle Creek Boulevard, Suite 520
Dallas, Texas 75219

XIII. Miscellaneous

13.01. Benefit.
This Agreement is made solely for the benefit of the Underwriter, the
Company, their respective officers and directors and any controlling person
referred to in Section 15 of the Act, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successor" or the term "successors and assigns" as
used in this Agreement shall not include any purchasers, as such, of any of the
Stock.

<PAGE>

UNDERWRITING AGREEMENT
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13.02. Survival.
The respective indemnities, agreements, representations, warranties,
covenants and other statements of the Company or its officers as set forth in or
made pursuant to this Agreement and the indemnity agreements of the Company and
the Underwriter contained in Section VI hereof shall survive and remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company or the Underwriter or any such officer or director thereof or any
controlling person of the Company or the Underwriter; (ii) delivery of or
payment for the Stock; (iii) the Closing Date; and (iv) any successor of the
Company and the Underwriter or any controlling person, officer or director
thereof, as the case may be, who shall be entitled to the benefits thereof.

13.03. Governing Law.
The validity, interpretation and construction of this Agreement and of each
part hereof shall be governed by the laws of the State of Texas.

13.04. Underwriter's Information.
Notwithstanding any participation by the Underwriter or its counsel in the
preparation and/or revision of the Prospectus, the statements with respect to
this Offering on the cover page of the Prospectus and under the caption
Underwriting in the Prospectus shall constitute the only written information
furnished by or on behalf of the Underwriter referred to in subsection 2.02.
hereof, in subsection 6.01. hereof and elsewhere in this Agreement.

13.05. Term.
The term of this Agreement commences on the date of execution of this
Agreement and continues until the Termination Date or five years from the
Closing Date, whichever shall occur first.

13.06. Full Agreement and Counterparts.
This Agreement, which represents the full and complete agreement between
the parties and can only be modified in writing signed by both parties, may be
executed in any number of counterparts, each of which may be deemed an original
and all of which together will constitute one and the same instrument. This
Revised Underwriting Agreement shall replace all prior Underwriting Agreements
made between the parties hereto.

THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>

UNDERWRITING AGREEMENT
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Page 24 of 24

Please sign below to confirm that the foregoing correctly sets forth the
full and complete Agreement between you and Rockcrest Securities, L.L.C. as of
the date hereof.

Executed on the dates below, effective May 1, 1998.

Very truly yours,

ROCKCREST SECURITIES. L.L.C.

By: /s/ Julie K. Chambers Date: November 20, 1998
------------------------------ ---------------------
Julie K. Chambers
Its Vice President

WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE LETTER SETS FORTH THE
AGREEMENT BETWEEN THE UNDERWRITER AND US.

AMERICAN CARD TECHNOLOGY, INC.

By: /s/ Raymond Findley Date: November 20, 1998
------------------------------ ---------------------
Raymond Findley
Its President

By: /s/ Lawrence O. Perl Date: November 20, 1998
------------------------------ ---------------------
Lawrence O. Perl
Its Chief Executive Officer

<PAGE>

Securities Commissioner January 11, 1998
Securities and Exchange Commission
450 5th Street NW
Washington, DC. 20549

Dear Commissioner,

We have acted as counsel to American Card Technology, Incorporated, a
Delaware corporation, in connection with the preparation of a Regulation SB
Offering Statement (the "Offering Statement" on Form SB-2, to be filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933. The Offering Statement relates to the sale of 420,000 shares of Common
Stock, with par value of $.001 (the "Common Stock") as more particularly
described in the Offering Statement.

In connection therewith, we have examined (i) the Articles of Incorporation
and the By-Laws of American Card Technology, Incorporated; (ii) records of the
corporate proceedings of American Card Technology, Incorporated with respect to
the issuance of shares of Common Stock by American Card Technology,
Incorporated; (iii) the Offering Statement; and (iv) and such other documents as
we have deemed necessary for the expression of the opinions contained herein.

In making the foregoing examinations, we have assumed the genuineness of
all signatures and the authenticity of all documents submitted to us as
originals, and the conformity to original documents of all documents submitted
to us as certified or photo-static copies. As to questions of fact material to
this opinion, where such facts have not been independently established by us,
and as to the content and form of Articles of Incorporation, By-Laws, minutes
and resolutions and other documents or writings, we have relied to the extent we
deemed reasonably appropriate, upon representations of corporate officers or
certificates of governmental officials. We express no opinion as to compliance
with applicable state anti-fraud statutes, rules or regulations concerning the
issuance of securities.
<PAGE>

Opinion of Consul
Page 2 of 2

Based upon and subject to the foregoing and having due regard for such
legal considerations that we deem relevant, we are of the opinion (i) that the
Common Stock has been duly authorized for issuance and (ii) that upon payment
for, and issuance of, the Common Stock in accordance with the terms of the
Offering Statement, the Common stock will be validly issued and will be fully
paid and non-assessable.

Sincerely,

BARTZ & BARTZ, P.A.

/s/ R. John Bartz

R. John Bartz
Attorney at Law

<PAGE>

AMENDMENT TO TECHNOLOGY PURCHASE AGREEMENT

THIS AMENDMENT to Technology Purchase Agreement is made as of the 29th day of
October, 1998, by and between AMERICAN CARD TECHNOLOGY, INC., a Delaware
corporation ("American Card") and SOFTCHIP ISRAEL LTD., a corporation organized
under the laws of Israel ("SoftChip").

WITNESSETH:

WHEREAS, American Card and SoftChip are parties to a technology purchase
agreement dated as of March 7, 1998, as amended by Amendments, dated August 17,
1998 and October 29, 1998 (as amended the "Purchase Agreement"); and

WHEREAS, American Card will not be closing close on an initial public
offering of its securities (the "IPO") by December 15, 1998; and

WHEREAS, SoftChip is willing to extend the date by which American Card may
purchase the technology pursuant to the Purchase Agreement through March 15,
1999 or the closing of the IPO, whichever is earlier.

NOW THEREFORE, in consideration of the foregoing and the covenants
contained herein, the parties hereto agree as follows:

1. The definition of "Closing Date" in Section 1 of the Purchase Agreement is
hereby amended by deleting the reference to "December 15, 1998" and substituting
"March 15, 1999" in lieu therefor.

2. Except as amended hereby, the Purchase Agreement remains in full force and
effect and is hereby ratified and confirmed.

IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.

SIGNED, SEALED, AND DELIVERED
IN THE PRESENCE OF: AMERICAN CARD TECHNOLOGY, INC.

By: /s/ Raymond Findley
- ------------------------------ ---------------------------
Its President

- ------------------------------

SOFTCHIP ISRAEL LTD.

By: /s/ Michael Cohen
- ------------------------------ ---------------------------
Its Authorized Signatory

- ------------------------------

<PAGE>

AMENDMENT TO TECHNICAL SERVICES AGREEMENT

THIS AMENDMENT to Technical Services Agreement is made as of the ____ day
of December, 1998, by and between AMERICAN CARD TECHNOLOGY, INC., a Delaware
corporation ("American Card") and SOFTCHIP TECHNOLOGIES (3000) LTD., a
corporation organized under the laws of Israel ("SoftChip").

WITNESSETH:

WHEREAS, American Card and SoftChip are parties to a technical services
agreement dated as of March 7, 1998 (the "Services Agreement"); and

WHEREAS, American Card and SoftChip desire to designate an escrow agent as
set forth in Paragraph 2(a) of the Services Agreement; and

WHEREAS, pursuant to the Services Agreement, the term thereof is to
commence on that date which is the closing of a technology purchase agreement
between the parties dated as of March 7, 1998 and subsequently amended (as
amended, the Purchase Agreement").

NOW THEREFORE, in consideration of the foregoing and the covenants
contained herein, the parties hereto agree as follows:

1. American Card and SoftChip each hereby acknowledge and agree that the
closing of the Purchase Agreement has been extended, and therefore the
commencement of the Services Agreement is likewise extended.

2. American Card and SoftChip each hereby designate and appoint Cohn,
Birnbaum & Shea P.C., although acting as counsel for American Card, as escrow
agent (the "Escrow Agent"), and Escrow Agent hereby accepts such appointment, to
act in accordance with the terms set forth in Paragraph 2(a) of the Services
Agreement.

3. The Escrow Agent's duties are limited as set forth in Paragraph 2(a)
of the Services Agreement, and the Escrow Agent shall have no duties other than
those specifically set forth therein and in the escrow agreement to be entered
into among the parties (the "Escrow Agreement"). The Escrow Agent shall not be
obliged or required to take any action under the Services Agreement or the
Escrow Agreement other than those specifically set forth therein unless the
specific action to be taken shall be requested in writing, signed by American
Card and SoftChip.

4. The Escrow Agent shall incur no personal liability by reason of its
acting as Escrow Agent under the Services Agreement or the Escrow Agreement and
the holding of the Fee (as defined in the Services Agreement) for any delivery
or misdelivery to any person, except to the extent such action is a willful
breach of this Agreement or due to the gross negligence of the Escrow Agent.

5. In the event any dispute shall arise among the parties to the Services
Agreement of the Purchase Agreement, (i) SoftChip consents to the Escrow Agent
representing American Card in any such dispute, and (ii) the Escrow Agent shall
have the right to pay the Fee into the Superior Court of Cobb County, Georgia,
whereupon the Escrow Agent shall be relieved of any further duties, obligations,
responsibilities or liabilities under the Services Agreement and the Escrow
Agreement. If the Escrow Agent shall institute or shall be joined as a party to
any legal proceedings incident to or arising out of or resulting from the
Services Agreement or the Escrow Agreement, or by reason of serving in the
capacity
<PAGE>

as Escrow Agent under the Services Agreement or the Escrow Agreement, the Escrow
Agent shall be entitled to retain the services of counsel to represent the
Escrow Agent in such legal action or in order to analyze and interpret the
Services Agreement or the Escrow Agreement and its responsibilities thereunder.
American Card and SoftChip, jointly and severally, shall protect, defend,
indemnify and hold the Escrow Agent harmless from and against any and all
claims, expenses, obligations and liabilities, including attorneys' fees,
incurred in connection with the Services Agreement or the Escrow Agreement.

6. Except as amended hereby, the Services Agreement remains in full force
and effect and is hereby ratified and confirmed.

IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.

Signed, Sealed, and Delivered
in the Presence of: AMERICAN CARD TECHNOLOGY, INC.

By:
- ------------------------------ ----------------------------

Its
- ------------------------------

SOFTCHIP TECHNOLOGIES (3000) LTD.

By:
- ------------------------------ ----------------------------

Its
- ------------------------------

SOLELY TO EVIDENCE ITS ACCEPTANCE
AS ESCROW AGENT, ONLY WITH RESPECT
TO PARAGRAPH 2(A) OF THE SERVICES AGREEMENT:

COHN, BIRNBAUM & SHEA P.C.

By:
------------------------------
A Member of the Firm

<PAGE>

LOAN AGREEMENT

THIS AGREEMENT made as of the 13th day of October, 1998 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 PROMETHEUS TRUST, a trust organized under the laws of
Gibralter, having an office at Gibralter (hereinafter referred to as "Lender").

W I T N E S S E T H :

WHEREAS, the Company desires to borrow up to One Million and 00/100 Dollars
($1,000,000.00) (hereinafter referred to as the "Loans") from Lender, and Lender
is willing to make the Loans to the Company, on the terms and conditions and in
reliance on the representations and warranties of the Company hereinafter set
forth.

NOW, THEREFORE, in consideration of the foregoing and in further
consideration of the mutual covenants herein contained, the parties hereto agree
as follows:

1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to Lender that:

(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with all the requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted and is duly qualified and in good
standing in every jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary;

(b) The execution and delivery of this Agreement and each and every
other agreement, instrument or document required to be executed and delivered to
Lender by the Company pursuant to the terms hereof, have been duly authorized,
are each valid, legal and binding upon it and enforceable in accordance with
their respective terms;

(c) The execution and delivery of this Agreement and each and every
other agreement, instrument or document required to be executed and delivered to
Lender by the Company pursuant to the terms hereof, the consummation of the
transactions herein contemplated, the fulfillment of or compliance with the
terms and provisions hereof and of each and every other instrument, agreement or
document required to be executed and delivered to Lender by the Company pursuant
to the terms hereof, are within its powers, are not in contravention of any
provisions of its certificate of incorporation or any amendments thereto, or of
its by-laws.

2. AMOUNT AND TERMS OF LOANS. Pursuant to the terms of this Agreement
Lender may, in the exercise of its sole discretion, make Loans to the Company
upon request of the Company, which on a cumulative basis do not exceed One
Million and 00/100 Dollars ($1,000,000.00). The Loans, and each of them, shall
be upon the following terms and conditions:
<PAGE>

(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 One Million
and 00/100 Dollars ($1,000,000.00), 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 Holder 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) The outstanding principal amount owed hereunder, 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;

(d) the Company dissolves or otherwise terminates its corporate
existence.

4. GENERAL PROVISIONS.

(a) This Agreement shall survive until the Loans have been paid in
full;

(b) This Agreement is an integrated document and all terms and
provisions are embodied herein and shall not be varied by parol;

(c) It is the specific desire and intention of the parties that it
shall in all respects be construed under the laws of the State of Georgia;

(d) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided,
however, that the Company shall not assign, voluntarily, by operation of law or
otherwise, any of its rights hereunder without the prior written consent of
Lender and any such attempted assignment without such consent shall be null and
void.

2
<PAGE>

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
------------------------

Its CEO

PROMETHEUS TRUST

By: /s/ Thomas Bowman
------------------------

Its Agent of Record

<PAGE>

PROMISSORY NOTE

$1,000,000.00 Miami, Florida October 13, 1998
- -------------------------------------------------------------------------------

FOR VALUE RECEIVED, AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation
("Maker") promises to pay to the order of PROMETHEUS TRUST, a trust formed under
the laws of Gibralter ("Holder") at its chief executive office at P.O. Box 270,
Gibralter, 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 One Million and
00/100 Dollars ($1,000,000.00), 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.

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. 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").

This Note is subject in all respects to the terms and conditions of that
certain Loan Agreement dated this date between Maker and Holder, including,
without limitation, Events of Default and repayment terms set forth therein.

Maker hereof further promises to pay, in addition to said principal sum and
interest, all taxes assessed upon this Note, and all reasonable costs and
expenses, including, without limitation, attorneys' fees, incurred in the
collection of this Note.

Maker shall have the right to prepay the outstanding principal amount of
this Note, in whole or in part at any time. Any partial prepayments shall be
applied first to accrued and unpaid interest and second to the principal
outstanding under this Note.

Notwithstanding any provisions of this Note, it is the understanding and
agreement of Maker and Holder that the rate of interest to be paid by Maker to
Holder shall not exceed the highest or maximum rate of interest permissible to
be charged by a lender such as Holder to a commercial borrower such as Maker
under the laws of the State of Georgia. Any amount paid in excess of such rate
shall be considered to have been payments in reduction of principal.

Maker waives diligence, demand, presentment for payment, notice of
nonpayment, protest and notice of protest, and notice of any renewals or
extensions of this Note, and all rights under any statute of limitations, and
agrees that the time for payment of this Note may be extended at Holder's sole
discretion, without impairing Maker's liability thereon.
<PAGE>

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
----------------------
Its CEO

<PAGE>

LOAN AGREEMENT

THIS AGREEMENT made as of the 13th day of October, 1998 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 INTERNATIONAL CARIBBEAN TRUST LTD., a trust organized under
the laws of the British West Indies, having an office at P.O. Box 145,
Providenciales, Turks and Caicos Islands,, British West Indies (hereinafter
referred to as "Lender").