<PAGE>
FORM 10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1999
Commission file No. __________
AMERICAN CARD TECHNOLOGY, INC.
(Name of small business issuer as specified in its charter)
Delaware 06-1403123
(State of incorporation) (IRS Employer Identification No.)
1355 Terrell Mill Road, Building 1462, Suite 200, Marietta, Georgia 30067
(Address of principal executive offices including zip code)
Issuer's telephone number: (770) 951-2284
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes _X_ No__
The number of issuer's shares of Common Stock outstanding as of
June 30, 1999 was 3,901,136
Transitional Small Business Disclosure Form (check one): Yes __ No _X_
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
American Card Technology, Inc.
(a development stage company)
Balance Sheet
Assets
<TABLE>
<CAPTION>
Unaudited
June 30,1999 December 31,1998
------------- ----------------
<S> <C> <C>
Current
Cash $ 113,740 $ 137,130
Accounts receivable 31,581 169,505
Inventory 33,690 151,703
Prepaid expenses and other current assets 37,641 10,533
----------- -------
Total current assets 216,652 468,871
Equipment, net 94,871 93,681
Other assets:
Software development costs, net 75,565 113,348
Deferred registration and debt costs 662,717 662,717
Other 7,820 7,820
----------- -----------
$ 1,057,625 $ 1,346,437
----------- -----------
Liabilities and Stockholders' Deficit
<S> <C> <C>
Current:
Accounts payable $ 659,702 $ 806,439
Accrued interest expense 634,676 525,984
Accrued salary and benefits 864,811 727,164
Other accrued expenses 67,000 52,000
Deferred revenue - 196,547
Notes payable to banks 700,000 600,000
---------- ----------
Total current liabilities 2,926,189 2,908,134
Notes payable to stockholders 309,361 309,361
Bridge financing notes payable 925,000 925,000
Notes payable 1,605,000 780,000
---------- ----------
Total liabilities 5,765,550 4,922,495
---------- ----------
Commitments and contingencies - -
Stockholders' deficit :
Preferred stock, $.001 par value -
shares authorized 1,000,000; none issued
Common stock, $.001 par value -
shares authorized 20,000,000;
issued and outstanding 3,901,136 3,901 3,901
Additional paid-in capital 5,352,925 5,352,925
Accumulated deficit during
the development stage (10,064,751) (8,932,884)
---------- ----------
Total stockholders' deficit (4,707,925) (3,576,058)
---------- ----------
$ 1,057,625 $ 1,346,437
---------- ----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
American Card Technology, Inc.
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
Unaudited
Three Months Ended
-----------------------------
June 30,1999 June 30,1998
------------- -------------
<S> <C> <C>
Revenues $ 273,409 $ 33,703
Costs of sales 181,180 43,372
---------- ----------
Gross profit (loss) 92,229 (9,669)
---------- ----------
Expenses
General and administrative 348,475 312,185
Write -off of license fee - -
Research development 168,237 149,000
Interest and financing costs, net 88,978 665,589
---------- ----------
605,690 1,126,774
---------- ----------
Net loss $ (513,461) $ (1,136,443)
---------- ----------
Basic and diluted loss per share $ (0.13) $ (0.29)
Weighted average number
of shares outstanding 3,901,136 3,901,136
See accompanying notes to financial statements.
</TABLE>
<PAGE>
American Card Technology, Inc.
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
Unaudited
Unaudited Period from
Six Months Ended June 21,1994
----------------------------- (inception) to
June 30,1999 June 30,1998 June 30, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Revenues $ 325,827 $ 93,292 $ 756,337
Costs of sales 217,770 117,879 652,864
---------- ---------- ----------
Gross profit (loss) 108,057 (24,587) 103,473
---------- ---------- ----------
Expenses
General and administrative 768,934 966,888 5,576,827
Write -off of license fee - - 168,000
Research development 304,859 323,000 1,567,154
Interest and financing costs,net 166,131 1,149,432 3,118,743
---------- ---------- ----------
1,239,924 2,439,320 10,430,724
---------- ---------- ----------
Net loss $ (1,131.867) $ (2,463,907) $ (10,327,251)
---------- ---------- ----------
Basic and diluted loss per share $ (0.29) $ (0.63)
Weighted average number
of shares outstanding 3,901,136 3,929,836
See accompanying notes to financial statements.
</TABLE>
<PAGE>
American Card Technology, Inc.
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Unaudited
Period from
Unaudited June 21,1994
Six months ended (inception) to
-------------------------- --------------
June 30,1999 June 30,1998 June 30,1999
<S> <C> <C> <C>
Cash flows from
operating activities:
Net loss $ (1,131,867) (2,463,907) $(10,327,251)
Adjustments to reconcile
net loss to net cash used in
operating activities:
Depreciation and
amortization 59,454 56,475 281,735
Amortization of deferred
financing costs - 36,963 312,120
Issuance of debt for
services rendered - - 72,774
Issuance of stock for
services rendered - 300,116 300,116
Issuance of stock for
loan commitment - 300,116 300,116
Notes receivable exchange
for services - - 5,000
Deferred registration
costs written off - - 352,966
Amortization of bridge
financing discount - 610,937 1,162,500
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 137,924 (74,471) (31,581)
Inventory 118,013 (40,573) (33,690)
Prepaid expenses and
other current assets (27,108) (11,400) (37,641)
Other assets - - (7,820)
Increase (decrease)
in liabilities:
Accounts payable (146,737) 222,451 659,702
Deferred revenue (196,547) - -
Accrued expenses 261,339 402,258 1,596,487
--------- -------- ----------
Total adjustments 206,338 1,802,872 4,932,784
--------- -------- ----------
Net cash used in
operating activities (925,529) (661,035) (5,394,467)
--------- --------- -----------
Cash flows from investing activities:
Capital expenditures (22,861) (12,693) (225,474)
Software development costs - - (226,696)
--------- --------- ----------
Net cash used in
investing activities (22,861) (12,693) (452,170)
--------- --------- ----------
Cash flows from financing activities:
Issuance of common stock - - 1,000
Deferred registration
costs - original - - (352,966)
Deferred registration
costs - current - (399,234) (662,718)
Deferred financing costs - (63,476) (312,120)
Borrowings on line of credit 925,000 - 2,305,000
Proceeds from the issuance
of notes to stockholders - 967,499 3,514,681
Payments on notes to stockholders - (22,500) (32,500)
Payments on bridge financing - (1,250,000) (1,250,000)
Proceeds from the issuance
of bridge financing - 1,500,000 2,750,000
------- --------- ---------
Net cash provided by
financing activities 925,000 732,289 5,960,377
------- --------- ---------
Net increase (decrease) in cash (23,390) 58,561 113,740
Cash, beginning of period 137,130 27,203 -
------- --------- ---------
Cash, end of period $113,740 $ 85,764 $ 113,740
------- --------- ---------
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 25,076 $ 118,115 $ 264,139
------- --------- --------
Income taxes $ - $ - $ -
------- --------- --------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
American Card Technology, Inc.
(a development stage company)
Notes to Financial Statements
June 30, 1999
1. Basis of Presentation
The financial statements include the accounts of American Card
Technology, Inc. (a development stage company) (the "Company") and
its majority-owned Canadian subsidiary, which was formed in June
1996 and whose results of operations have been immaterial through
June 30, 1999. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Company, a
Delaware corporation, was incorporated on June 21, 1994 to design,
develop and market high security, flexible multiple application
smart card systems.
The Company is in the development stage and its activities to date
have been limited to organizational activities including developing
a business plan, hiring personnel and developing and enhancing its
proprietary smart card technology and software, and it has only
recently commenced the limited marketing of its smart card systems.
Revenues to date, which have been received from few customers, have
been limited.
Certain stock splits were effected in 1996 and 1998 and reflected
retroactively in these financial statements.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. This basis of
accounting contemplates the recovery of the Company's assets and the
satisfaction of its liabilities in the normal course of operations.
Since inception the Company has been involved in
organizational activities. The Company's ultimate ability to attain
profitable operations is dependent upon obtaining additional
financing adequate to complete its development activities, and to
achieve a level of sales adequate to support its cost structure.
Through June 30, 1999, the Company has incurred losses totaling
$10,327,251 and at June 30, 1999, has deficiencies in working
capital and equity of $2,709,537 and $4,707,925, respectively. These
circumstances raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The Company filed a Registration Statement on Form SB-2 with the
Securities and Exchange Commission that was declared effective on
February 12, 1999. The public offering is being made on a "best
efforts" basis with the minimum and maximum estimated net proceeds
to the Company of $4,500,000 and $6,424,000, respectively. However, there
can be no assurance that the Company will be successful in consummating its
plans, including closing the IPO, or that such plans, if consummated, will
enable the Company to attain profitable operations or continue as a going
concern.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. The financial statements are
unaudited, but in the opinion of management, contain all
adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position, results of operations and cash flows for the
periods presented. Results of operations and cash flows for the interim
three and six month periods are not necessarily indicative of what the
results of operations and cash flows will be for an entire year.
The accompanying condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998.
2. Notes Payable
At June 30, 1999 and December 31, 1998, the Company had lines of credit with
certain banks totaling $700,000 and $600,000, respectively. The loans bear
interest at the respective banks'prime interest rates and are due on demand or
through December 1999. Borrowings of $300,000 under these lines of credit are
secured by certificates of deposit of one of the Company's stockholders held
by the banks. Another stockholder has guaranteed the balance of these loans.
In September 1998, the Company entered into additional unsecured lines of
credit with two different Offshore Trusts for $1,000,000 each. Loans under
each of these credit lines bear interest at 10% per annum and are due
June 30, 2001. During 1999, the Company entered into another unsecured
line of credit with a third Offshore Trust for $250,000. This line bears
interest at 10% and is due on June 30, 2001 or earlier to the extent that the
Company realizes gross profits (gross receipts less cost of goods sold) after
the closing of the Company's contemplated initial public offering. During the
second quarter of 1999, the Company entered into a $500,000 unsecured
line of credit with the Lilly Beter Capital Group, Ltd.( whose principal is a
director of the Company) of which $175,000 was outstanding as of June 30, 1999.
This line bears interest at 10% and is due on June 30, 2001. The Company has
drawn down an aggregate of $1,605,000 and $780,000 from these lines of credit
as of June 30, 1999 and December 31, 1998, respectively. Certain stockholders
have guaranteed this debt.
3. Notes Payable to Stockholders
Notes payable to stockholders totaling $309,361 at June 30, 1999 and
December 31, 1998, bear interest at 10% per annum and were originally
payable on demand. The due dates of these notes have been extended to the
earlier of January 1, 2001 or the closing of a subsequent debt financing.
These notes have been used to finance operations. Notes totaling $500,000
were converted to equity in 1995, notes totaling $550,000 were converted to
equity in January 1997 and notes totaling $1,895,594 were converted to
equity in September 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company was organized in June 1994 and is in the development
stage. Since inception, the Company has been engaged principally in
organizational activities, including developing a business plan,
hiring personnel and developing and enhancing its proprietary smart
card technology and software, and has only recently commenced the
limited marketing of its smart card systems. The Company's
objective is to become a leading provider of smart card systems to
government and commercial enterprises ("System Sponsors") requiring
increasingly complex, secure and cost-effective information
processing systems. The Company intends to market its products
through strategic marketing alliances and licensing or other
arrangements with systems integrators, value added resellers and
other smart card vendors. The Company anticipates that, under
certain circumstances, its smart card products will be bundled with
its strategic partners' products and services to create a complete
integrated system that can be marketed to potential System Sponsors.
The Company will also seek to provide complete smart card solutions,
on a turnkey basis, to System Sponsors by providing all of the
hardware and software elements required to implement the system.
Liquidity and Capital Resources
At June 30, 1999, the Company had cash on hand of $113,740, a
working capital deficit of $2,709,537 and a stockholders' deficit of
$4,707,925. The Company's primary capital requirements will be to
fund the Company's continuing smart card system development and
enhancement efforts, its sales and marketing activities and the
Company's working capital. The Company has historically financed its
capital requirements through the issuance of equity and debt
securities, contributions to capital and bank borrowings.
The Company's capital requirements have been and will continue
to be significant. The Company has been dependent on the sales of
Its securities to private investors, as well as on capital
contributions and loans from affiliates and certain financial
institutions guaranteed by certain stockholders of the Company.
During the period from inception through June 30, 1999, the Company
raised capital through such means in the estimated aggregate amount
of $7,060,000. As of June 30, 1999, the Company had lines of
credit in original principal amount aggregating $3,450,000 from
certain banks and trusts, of which $1,145,000 principal amount
remained available as of June 30, 1999.
On February 12, 1999, the Securities and Exchange Commission
declared effective the Company's registration statement on Form SB-2
relating to the offering of a minimum of 454,600 shares (and a
maximum of 648,900 shares) of common stock, at a price of $11.00 per
share (the "Offering"). The Company is dependent on and intends to
use the proceeds of the Offering to continue the implementation of
its proposed plan of operation. The Company anticipates, based on
assumptions relating to its current operations (including
assumptions regarding the Company's ability to meet its current
marketing objectives and the timing and costs associated therewith),
that the proceeds of the Offering, together with projected cash flow
from operations, will be sufficient to fund the Company's operations
and capital requirements for at least twelve months following the
closing of the minimum offering. In the event that the Company's
plans change, its assumptions change or prove to be inaccurate or
the proceeds of the Offering prove to be insufficient to fund
operations (due to unanticipated expenses, technical difficulties,
problems or otherwise), the Company would be required to seek
additional financing sooner than currently anticipated. There can
be no assurance that the Offering will close or that the proceeds of
the Offering will be sufficient to permit the Company to
successfully further develop and commercialize the Company's smart
card technology or that any assumptions relating to the Company's
operations will prove to be accurate. In addition, any
implementation of the Company's business plans subsequent to the
twelve month period following the Offering may require proceeds
greater than the proceeds of the Offering or otherwise currently
available to the Company. There can be no assurance that additional
financing will be available to the Company on commercially
reasonable terms, or at all. Further, if the closing of the
Offering is delayed, the Company may not have sufficient capital to
fund operations and the anticipated expenses of the Offering. Any
inability to obtain additional financing when needed may have a
material adverse effect on the Company, including requiring the
Company to curtail its activities and possibly causing the Company
to cease its operations. The Company's accountants have included an
explanatory paragraph in their report on the December 31, 1998
financial statements expressing substantial doubt about the Company
continuing in business.
Results of Operations
Revenues were $273,409 and $325,827 for the three and six month periods ended
June 30, 1999 as compared to $33,703 and $93,292 for the three and six month
periods ended June 30, 1998, representing an increase of 711% and 251% for the
respective three and six month periods. The Company recognizes revenue upon the
shipment of products or the performance of services. The sales cycle will vary
by customer and could extend for periods of up to twelve months, depending upon,
among other things, the time required for development, testing, and
installation. During April 1999, the Company completed a significant project
which resulted in recognition during the second quarter of 1999 of $196,547 of
Deferred Revenue.
For the second quarter ended June 30, 1999, general and administrative
expenses were $348,475 as compared to $312,185 for the second quarter of 1998,
an increase of 12% reflecting higher costs associated with the increased level
of sales. For the six months ended June 30, 1999, general and administrative
expenses were $768,934 as compared to $966,888 for the comparable period last
year. The decrease of $197,954 is primarily due to the following items. During
the first quarter of fiscal year 1998, the Company issued shares of common
stock and warrants to an affiliate of the Company's general counsel in
consideration for services rendered. The Company expensed $300,000 in
connection with this transaction and is included in general and administrative
expenses. This reduction was offset by an increase in payroll and other costs
of approximately $43,546 and receipt of a credit of $58,500 for previously
incurred costs of professional services.
Research and development expenses were $168,237 and $304,859 for the three and
six month periods ended June 30, 1999 compared to 149,000 and 323,000 for the
respective periods last year. The increase for the second quarter compared to
last year is due to higher payroll costs while the decrease in year to date
expenses is due to a reduction in fees paid to an outside contractor.
For the second quarter ended June 30, 1999, interest and financing
expenses were $88,978 as compared to $655,589 for the second quarter of 1998.
The decrease of $566,611 is primarily due to a $550,000 charge incurred last
year relating to amortization of original issue discount costs associated with
the Company's 1998 Bridge financing. For the six months ended June 30, 1999
and June 30, 1998, interest and financing costs were $166,131 and $1,149,432,
respectively. The decrease of $983,301 is primarily due to the aforementioned
$550,000 and the following items. During the first quarter of 1998,
the Company amortized $23,000 of deferred financing costs and $61,000 of
original issue discount costs related to its bridge loans. No such
costs were incurred during 1999. Also, during the first quarter of last year,
$300,000 was charged to interest expense relating to shares of common
stock issued in consideration for a loan commitment.
Forward-Looking Statements
This quarterly report contains forward-looking statements
about the business, financial condition, and prospects of the
Company and other forward-looking statements within the meaning of
Section 27a of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended, that reflect
assumptions made by management and management's beliefs based on
information currently available to it. When used in this quarterly
report, words such as "believes," "expects," "intends," "plans,"
"anticipates," "estimates" and similar expressions are intended to
identify forward-looking statements, although there may be certain
forward-looking statements not accompanied by such expressions. The
Company can give no assurance that the expectations indicated by
such forward-looking statements will be realized. If any of
management's assumptions should prove incorrect, or if any of the
risks and uncertainties underlying such expectations should
materialize, the Company's actual results may differ materially from
those indicated by the forward-looking statements as a result of
many factors, including the risk factors set forth in the Company's
annual report on Form 10-KSB filed with the Securities and Exchange
Commission on April 14, 1999, as well as those set forth herein.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding
(and none of its property is the subject of any pending legal
proceeding).
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 12, 1999, the Securities and Exchange Commission
declared effective the Company's registration statement on Form SB-2
relating to the offering of a minimum of 454,600 shares (and a
maximum of 648,900 shares) of common stock, at a price of $11.00 per
share. The offering has not yet closed.
ITEM 5. OTHER INFORMATION
By amendments dated as of June 15, 1999, the Company has set forth in its
Technology Purchase Agreement with SoftChip Israel, Ltd., and (ii) the com-
mencement date of its Technical Services Agreement with SoftChip Technologies
(3000) Ltd. through the earlier of the date of the closing of the Company's
initial public offering or September 15, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The exhibits set forth in the Exhibit Index on the page immediately
preceding the exhibits are filed herewith as a part of this report.
b. Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
six month period ended June 30, 1999.
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN CARD TECHNOLOGY, INC.
By: /S/ LAWRENCE O. PERL
--------------------
Lawrence O. Perl,
Chief Executive Officer
By: /S/ FRANK S. FUINO, JR.
-----------------------
Frank S. Fuino, Jr.
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
3.1 Articles of Incorporation. (1)
3.2 By-Laws. (1)
3.2.1 Amended By-laws. (1)
4.1 Sample Certificate for Common Stock. (1)
10.1 Amended Employment Agreement between the Company and
Lawrence O. Perl. (1)
10.2 Employment Agreement between the Company and Raymond Findley, Jr. (1)
10.3 Amended Employment Agreement between the Company and
Robert H. Dixon. (1)
10.3.1 Employment Agreement between the Company and Frank S. Fuino, Jr. (1)
10.4 Escrow Agreement, Bank of New York. (1)
10.4.1 Amended Escrow Agreement, Bank of New York, Dated August 24, 1999. (1)
10.4.2 Amended Escrow Agreement, Bank of New York,
Dated February 5, 1999.(1)
10.7.1 Subscription Agreement. (1)
10.7.2 Stock Option Agreement (warrant), Chapman Group, LLC. (1)
10.7.2.1 Amended, Stock Option Agreement (warrant), Chapman Group, LLC. (1)
10.7.3 Stock Option Agreement (warrant), Harold Rothstein. (1)
10.7.3.1 Amended, Stock Option Agreement (warrant), Harold Rothstein. (1)
10.7.4 Stock Option Agreement (warrant), Raymond Roncari. (1)
10.7.4.1 Amended, Stock Option Agreement (warrant), Raymond Roncari. (1)
10.8.1 Stock Option Agreement for non-employees and Amendment,
Lilly Beter. (1)
10.8.2 Stock Option Agreement/non-employees and Amendment,
Harold Rothstein. (1)
10.8.3 Stock Option Agreement/non-employees and Amendment,
Raymond Roncari. (1)
10.8.4 Stock Option Agreement for non-employees and Amendment,
Bruce Bonadies. (1)
10.8.5 Stock Option Agreement for non-employees and Amendment,
Gordon Walker. (1)
10.8.6 1996 Nonemployee Director's Stock Option Plan. (1)
10.8.6.1 Amended, 1996 Nonemployee Director's Stock Option Plan. (1)
10.8.7 1996 Stock Option Plan for Employees. (1)
10.8.7.1 Amended, 1996 Stock Option Plan for Employees. (1)
10.8.8 Amended Director Loan Agreement, Harold Rothstein. (1)
10.8.9 Amended Director Loan Agreement, Raymond Roncari. (1)
10.9.1 Amended Agreement with SoftChip Israel Ltd. and the Company. (1)
10.9.1.1 Amended, Agreement with SoftChip Israel Ltd. and the Company. (1)
10.9.1.2 Amended Technology Purchase Agreement.
10.9.2 Agreement with SoftChip Technology (3000) Ltd. and the Company. (1)
10.9.2.1 Agreement with SoftChip Technology (3000) Ltd. and the Company. (1)
10.9.3 Stock Option Agreement and Amendment, Shreveport Acquisition
Corp. (1)
10.9.3.1 Amended, Stock Option Agreement, Amendment and Second Amendment,
Shreveport Acquisition Corp. (1)
10.9.4 Amended, Stock Option Agreement for employee, Robert Dixon. (1)
10.9.5 Amended, Stock Option Agreement for employee, Michael Pate. (1)
10.9.6 Amended, Stock Option Agreement for employee, Robert Patten. (1)
10.9.7.1 Amended, Stock Option Agreement for employee, Shawn Nixon. (1)
10.9.7.2 Amended, Stock Option Agreement for employee, Jeremy Zela. (1)
10.9.7.3 Stock Option Agreement for employee, Phyllis Burke. (1)
10.9.8 Stock Option Agreement for employee, Robert Cartagine. (1)
10.9.9 Stock Option Agreement for employee, Frank S. Fuino, Jr. (1)
10.10.1 Loan Agreement between the Company and Prometheus Trust. (1)
10.10.2 Promissory Note between the Company and Prometheus Trust. (1)
10.10.3 Loan Agreement between the Company and International Caribbean
Trust, Ltd. (1)
10.10.4 Promissory Note between the Company and International Caribbean
Trust, Ltd. (1)
10.10.5 Articles of Incorporation of Animal Passports, Inc. (1)
10.10.6 Bylaws of Animal Passports, Inc. (1)
10.10.7 Consent of BOD, of Animal Passports Inc., acting in lieu of first
meeting. (1)
10.10.8 Promissory Note between the Company and Butterfly Ltd. Trust (2)
10.10.9 Loan Agreement between the Company and Butterfly Ltd. Trust (2)
10.10.10 Loan Agreement between the Company and Lilly Peter Capital Group,
Ltd.
10.10.11 Promissory Note between the Company and Lilly Peter Capital Group,
Ltd.
27.1 Financial Data Schedule.
99.1 Dual Smart Card Access, Patent Number # TX 3-639-032 for the
Company. (1)
99.2 Amended Rothstein personal guarantee. (1)
99.3 Database Services Agreement and Addendum (Florida). (1)
99.4 Falcetta, Wachtel & Knochenhauer, LLC regarding the Company. (1)
(1) Previously filed as an Exhibit to the Company's Registration
Statement on Form SB-2 (File No. 333-52169).
(2) Previously filed as an Exhibit to the Company's Form 10QSB for the
quarterly period ended March 31, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 113,740
<SECURITIES> 0
<RECEIVABLES> 31,581
<ALLOWANCES> 0
<INVENTORY> 33,690
<CURRENT-ASSETS> 216,652
<PP&E> 225,476
<DEPRECIATION> (130,605)
<TOTAL-ASSETS> 1,057,625
<CURRENT-LIABILITIES> 2,926,189
<BONDS> 0
0
0
<COMMON> 3,901
<OTHER-SE> (4,711,826)
<TOTAL-LIABILITY-AND-EQUITY> 1,057,625
<SALES> 325,827
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LOAN AGREEMENT
THIS AGREEMENT made as of the 1st day of April, 1999 by and between
AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation with its principal office
at 1355 Terrell Mill Road, Building 1462, Suite 200, Marietta, Georgia, 30067
(the "Company"), and LILLY BETER CAPITAL GROUP, LTD., a Delaware corporation,
having an office at 3925 Excelsior Boulevard, Suite 500, St. Louis Park,
Minnesota 55416 (hereinafter referred to as "Lender").
W I T N E S S E T H :
WHEREAS, the Company desires to borrow up to Five Hundred Thousand and
00/100 Dollars ($500,000.00) (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 considera-
tion 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 pro-
visions 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 Five
Hundred Thousand and 00/100 Dollars ($500,000.00). The Loans, and each of them,
shall be upon the following terms and conditions:
(a) The maximum aggregate principal amount of the Loans which Lender
may from time to time lend to the Company shall be in the amount of Five Hundred
Thousand and 00/100 Dollars ($500,000.00), and shall be evidenced by a promis-
sory 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 prin-
cipal amount of this Note, in whole or in part, at any time.
3. Default Provisions. Any one or more of the following shall constitute
an Event of Default under this Agreement and the Note:
(a) the institution of any bankruptcy proceedings against the Company
and a failure to have such proceedings dismissed within a period of sixty (60)
days;
(b) the institution of any voluntary bankruptcy proceedings by the
Company;
(c) the Company ceases to do business; or
(d) the Company dissolves or otherwise terminates its corporate
existence.
4. General Provisions.
(a) This Agreement shall survive until the Loans have been paid in
full;
(b) This Agreement is an integrated document and all terms and provi-
sions are embodied herein and shall not be varied by parol;
(c) It is the specific desire and intention of the parties that it
shall in all respects be construed under the laws of the State of Georgia;
(d) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided,
however, that the Company shall not assign, voluntarily, by operation of law or
otherwise, any of its rights hereunder without the prior written consent of
Lender and any such attempted assignment without such consent shall be null and
void.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals, as of the day and year first above written.
AMERICAN CARD TECHNOLOGY, INC.
By: /S/ LAWRENCE O. PERL
--------------------
Lawrence O. Perl
Its Chief Executive Officer
LILLY BETER CAPITAL GROUP, LTD.
By: /S/ LILLY BETER
--------------------
Lilly Beter
Its President
PROMISSORY NOTE
$500,000.00 Miami, Florida April 1, 1999
FOR VALUE RECEIVED, AMERICAN CARD TECHNOLOGY, INC., a Delaware
corporation ("Maker") promises to pay to the order of LILLY BETER CAPITAL GROUP,
LTD., a Delaware corporation ("Holder") at its chief executive office at 3925
Excelsior Boulevard, Suite 500, St. Louis Park. Minnesota 55416, 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 Five Hundred Thousand and 00/100 Dol-
lars ($500,000.00), 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 hun-
dred 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 col-
lection 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 out-
standing 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 nonpay-
ment, 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, with-
out 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
----------------------
Lawrence O. Perl
Its Chief Executive Officer
