UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




**FORM
      10-KSB**




ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15 (D)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934




**For
      the Fiscal Year Ended December 31, 2005**




Commission
      File No. 000-30486




**ActiveCore
      Technologies, Inc.**


(Exact
      Name of Registrant as specified in its charter)




**NEVADA**
            
            **65-6998896**(State
                or other jurisdiction of Incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)




**156
      Front Street West, Suite 210,**


**Toronto,
      Ontario M5J 2L6 Canada**


(Address
      of principal executive offices)




**(416)
      252-6200**


(Registrant’s
      telephone number)




**Securities
      registered pursuant to section 12(g) of the Act:**


**Common
      Stock, $0.001 Par Value**    **500,000,000
      shares authorized**







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




Yes
                x
            No
                o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B, which is not contained in this form, and if no disclosure will
      be contained, to the best of Registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB.x




State
      issuer’s revenues for its most recent fiscal year:  **$7,417,874**




State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date with the past 60 days: As at March 21, 2006 there were 59,615,540
      shares held by shareholders who were non-affiliates of the company. The average
      bid and ask price was $0.14 per share resulting in a market value of $8,346,176
      for the non-affiliate shares.




**APPLICABLE
      ONLY TO CORPORATE REGISTRANTS**




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date:


**80,573,635**  **shares
      of common stock, $.01 par value, were outstanding** **on
      March 21, 2006**




**DOCUMENTS
      INCORPORATED BY REFERENCE**




**None**





**PART
      I**






**Item
      1. Description Of Business**




ActiveCore
      Technologies, Inc. (“ActiveCore” or the “Company”) is a Nevada registered
      company with its head office in Toronto, Ontario and operations in Canada and
      the United States. The Company operates within the enterprise software and
      services market. The specific sector within the market has been described as
      “Smart Enterprise Suites” by the Gartner Group. The Company believes that this
      sector also includes “integrated corporate messaging”. Simply put, our products
      and services for the enterprise software market provide data integration and
      application modernization while our products and services in the corporate
      messaging sector use the integrated data to reach out to stakeholders and
      customers of our clients. We market our products and services under a number
      of
      trading names ActiveCore Technologies, Cratos Technology Solutions, MDI
      Solutions, DisclosurePlus and ActiveCast.





The
      Company develops, sells and implements its own and third party software and
      provides outsourced integration and IT services for corporate customers.
      Software and services provided by the Company enable our customers to quickly
      integrate, and extend, the functionality of their current systems and data
      bases. This allows our clients to reach new or existing markets in new ways,
      or
      to improve internal and external processes. ActiveCore is actively searching
      for
      potential acquisition candidates to expand its client base or to expand the
      range of products and services that the Company can offer within the context
      of
      the Smart Enterprise Suite. To that end we made two acquisitions during 2005,
      namely DisclosurePlus Limited and Cratos Technology Solutions Inc., both of which
      are
      Canadian based.





**PRODUCTS:
      Enabling the Smart Enterprise**





**ActiveCAST
      Branded Portal**




ActiveCAST
      is a group of portal-enabled communication products that provide corporate
      messaging capabilities to deliver dedicated messages to an organization's
      customers, partners, employees and other stakeholders, in the mode preferred
      by
      the recipient, including: fax, email, SMS, MMS, voice, video etc.




ActiveCast
      can be "white-labeled", enabling a Company to provide ActiveCast’s portal
      communication service, with their own corporate identity and Company branding,
      to their customers, without the need to provide an infrastructure for
      hosting.





The
      ActiveCAST group of products include:





**FaxCAST**


FaxCAST
      broadcasting is an invaluable delivery method for sending time sensitive
      information quickly to thousands of locations simultaneously. It is one of
      the
      most convenient and reliable methods of communication today. Outsourcing your
      fax communications to ActiveCore combines the best of fax technology with portal
      value-added services such as reporting on success rates etc.




**EmailCAST**


EmailCAST
      is a powerful communications tool. Activecore offers the most robust email
      solutions available for high-volume distribution including interactive features
      and support for high quality graphics.




**VoiceCAST**


VoiceCAST
      offers personalization, easy call back methods and comprehensive reporting,
      creating a formula for success. ActiveCore offers a highly effective and
      efficient way to reach your target audiences using voice technologies.




**VideoCAST**


VideoCAST
      merges the simplicity and convenience of regular email with the power of video,
      without the recipient having to download any attachments, or install any special
      software.





1


**ActiveLink:**





ActiveLink,
      “Integrates, Enables and Extends” independent applications at the data base
      level within organizations. ActiveLink plays the central role in ActiveCore’s
      Smart Enterprise Suite integration strategy. ActiveLink is a unique and
      innovative software product and platform for integrating multiple data bases
      and
      systems by creating java-based software “services” that allow an organization’s
      data, application and network resources to communicate with each other. These
      services use XML compliant data structures to exchange information from
      disparate data sources, regardless of their origin or structural differences.
      The chief benefit and the reason that we have designated ActiveLink as our
      core
      product is its pivotal role in “Legacy System Investment Protection”. That is,
      integration and enablement of legacy systems and data empowers organizations
      to
      leverage their current investment in technology, extend their services, and
      operate in an effective manner by optimizing and opening up business processes
      that touch customers, partners and employees. Several industry specific
      interfaces/connectors have been added to facilitate integration with industry
      standard tools/software - including Medical, Manufacturing, and Financial
      Services.





MD
      (Medical) Link connects independent health care applications within your
      enterprise. By displaying your data sources and processes as a visual solution,
      MD Link enables information exchange between legacy applications and commercial
      software. Built using JavaTM technology, MD Link is powerful and portable - your
      solutions can be created and executed on any computing platform.


MD
      Link
      consists of the Design Studio - a graphical development environment for linking
      together Events, Tasks and Resources - and the Runtime Server, which executes
      your integration solution as a dynamic server process. Deploying your solution
      is as easy as copying a file from your development workstation to your
      production server.




**Migration
      Toolkit**





The
      Migration Toolkit consists of a series of tools to migrate legacy systems to
      Windows, UNIX or Linux. These tools are used to convert application code to
      C#,
      Visual Basic, .NET forms, XML or Java. The “engine” analyzes the original/source
      input for structure, language, and functionality. And the “formatter” generates
      the appropriate output - leaving the business logic 100% unchanged. The specific
      tools include:





(1)Westi
      to CICS





Westi
      is
      a TP monitor that was a product of Westinghouse; we have developed automated
      tools to convert Westi based code into CICS/Cobol code. This tool converts
      Westi
      screens to CICS/BMS screens or .NET Forms and Westi code/commands within
      programs to CICS Commands. The tool supports all versions of Westi, CICS and
      COBOL.





(2)
      DPS
      to CICS/BMS





DPS
      is
      the Display Processing System for Unisys, we have an automated process that
      converts DPS screens to BMS -Basic Mapping Support- screens. The tool migrates
      the DPS screens into a CICS/BMS format and converts the screen commands within
      the programs to the appropriate CICS commands. The screen format and
      presentation remain unchanged.





(3)
      Assembler to COBOL





The
      tool
      converts your existing Assembler programs to Cobol programs. The tool generates
      structured COBOL code based on the provided Assembler program. The resulting
      COBOL code is very readable, maintainable and it performs exactly the same
      as
      the original assembler program.


The
      tool
      allows for “customization”, so the generated Cobol programs can conform to
      company specific coding standards. The tool supports all COBOL versions -
      including MicroFocus Cobol.





2


(4)
      VSAM
      to SQL Generator





This
      tool
      converts VSAM files into SQL-based databases/tables. The tool support for
      multiple copy books (redefines), occurs clauses and all field formats within
      the
      same VSAM file. The tools also generates the SQL I/O modules/code required
      for
      migrating from Mainframe based VSAM to Relational database tables. The tool
      supports all versions of VSAM and SQL.





(5)
      Oracle forms to .NET





The
      tool
      converts legacy Oracle Forms to a Microsoft .NET based application. The Oracle
      Form screens are converted to .NET Forms. The transformation generates GUI
      screens. The tool supports both 1-1 screen mapping and screen consolidation.
      Customization is also available to add calendar features to date fields, add
      pull-down menus for limited input fields, highlighting required fields and
      field
      protection based on security levels. The result is a user-friendly screen that
      utilizes Windows functionality.





(6)
      COBOL
      to C#





This
      tool
      complements the Forms to .NET process, where COBOL programs are converted to
      C#,
      JAVA or XML. The COBOL code functionality, logic, business rules and format
      are
      retained in the conversion to the target language/output. The resulting program
      is very maintainable and readable. The tool inserts the required logic for
      the
      program to function in the Windows or Linux environment. The tool supports
      all
      versions of COBOL - and can be used to convert to Windows or Linux.




**3rd
      Party Products:**





**AppConnector:**





AppConnector
      was developed as a desktop integration tool and provides a simple and
      easy-to-use mechanism for integrators and users to bring together various
      business applications that currently run on user’s desktops. This is done across
      all applications, regardless of where they are ultimately hosted; mainframe,
      mid-range, UNIX, Personal Computer, Internet, Linux etc. AppConnector changes
      the way workers collaborate and operate by providing an economical and
      innovative way of sharing information and electronic content in daily business
      activities and processes.





AppConnector
      features include flexibility, scalability and affordability. We believe that
      these fundamentals make it a basic tool for business application developers,
      providing a functional and benefit-rich connection with their customers, their
      suppliers and each other. Users of AppConnector are able to translate
      application efficiencies from sharing information into real savings in cost,
      time and labor.





**DocConnector**





Document
      and Content Management (DCM) technologies have changed from being a horizontally
      focused set of technologies designed to solve a general business problem, to
      a
      set of technologies that play a support role to meeting the overall goal of
      the
      business. DCM purchase decisions are now based on the additional functionality
      they can add to Enterprise Applications. One of the top criteria used in
      searches for solutions to managing information is the ability to seamlessly
      ‘add-on’ to current applications. This new philosophy allows for easy migration
      to a new process due to the need only to teach the added functionality of an
      application as opposed to training personnel on an entirely new application.





DocConnector
      provides the ability to add DCM functionality to any current application without
      the need to apply additional resources to implement and utilize the
      functionality of DocConnector. In general, DocConnector provides an “engine” to
      manage structured and unstructured information behind any
      application.





The
      power
      of DocConnector lies in its extensibility and in its quick and easy integration
      tools that give users a full ‘document management system’. DocConnector creates
      on access point for an organization’s information management needs





3


**DynaPortal**





DynaPortal
      is a third generation portal application for creating and maintaining community
      intranets, extranets and portal websites and benefits from a modular approach.
      Some 35 e-business applications can be added to extremely low cost entry
      configurations of Publisher or Enterprise (self-publishing at the user
      interface). The administrative interface makes the intuitive software easy
      to
      use for the non technical and, with the extension of the Dynabiz self-publishing
      satellite website software, by increased sharing of the portal modules, this
      has
      provided for the market needs of Portals with child Portlets. The turnkey portal
      can be deployed in hours, and with a choice of purchase or lease licensing.





The
      modular approach allows organizations to choose applications to suit their
      needs
      and to extend their reach by adding further applications, as required. The
      simple, clear and intuitive administrative interface allows administrators,
      with
      no technical knowledge, to control the portal and add content at will. Portals
      can be customized for ‘the look and feel’ to match corporate style and
      requirements.





The
      critical features of DynaPortal within the Smart Enterprise Suite offered by
      ActiveCore are:





·
            e-Business
                ROI is maximized by minimizing content administration and operations
                costs;


·
            Full-featured
                and ready to go today - right
                "off-the-shelf";


·
            Low
                Total Cost of Ownership - Low start up and training costs with continuing
                low operating costs;


·
            Distributed
                management saves time and money by minimizing administrative
                labor;


·
            Users
                can easily self-publish, increasing site participation, content,
                and value
                to users;


·
            Date
                sensitive content is automatically removed from the
                site.


·
            A
                versatile collaborative management tool that can be used to handle
                a wide
                variety of information.





**Micro
      Focus**





Microfocus
      is a product that is used by large organizations running legacy applications
      on
      IBM mainframes to ‘Lift and Shift’ their software code to significantly lower
      the total cost of operation for both individual applications and complete
      systems. ”Lift and Shift’ is considered the most attractive approach to
      migration by many companies because it allows them to use their existing
      CICS/code and run it within the Windows environment. In essence without changing
      current programming a company is able to take advantage of the features and
      functionality offered by Windows. With ‘Lift and Shift’ application
      knowledge is maintained, there’s reduced development cost, increased system
      agility, a lower migration risk and lower ongoing hardware and software costs.
      CRATOS Technology Solutions is a Certified Services and Migration Partner of
      MicroFocus - and is also a MicroFocus software reseller.





Micro
      Focus StudioTM is a collection of development software products which are used in
      a highly-productive, Microsoft Windows environment to Leverage and Extend legacy
      applications, regardless of the platform that is used to deploy them. Micro
      Focus StudioTM development software is also used to Lift and ShiftTM legacy
      applications from mainframes to more cost-effective contemporary
      platforms.





The
      Micro
      Focus ServerTM group of products is comprised of Micro Focus' deployment software
      used by customers to integrate their legacy applications with contemporary
      architectures and Web services frameworks, such as .NET, J2EE and XML. These
      products give customers the power to maximise their investments in legacy
      applications.




**SERVICES:**





Services
      performed by Activecore consist of technology based and personnel based
      offerings. “ActiveCast” and “DisclosurePlus” are product based service bureau
      facilities while our integration group performs manpower based
      services.





4


**Technology
      Based Services:**





**ActiveCAST:**





ActiveCast
      is a group of communication products that operate as a portal to provide the
      market with mass corporate messaging capabilities. ActiveCAST’s web-based
      service delivers dedicated messages to an organization's customers, partners,
      employees and other stakeholders, in the mode preferred by the recipient.
      Whether clients use fax, voice, e-mail, SMS, or MMS to communicate with targeted
      receivers ActiveCAST provides organizations with a simple-to-use, yet robust
      delivery system.





**DisclosurePlus:**





DISCLOSUREPLUS
      is a Tier-One Investor Relations Website Solution that combines best practices
      in design, technology and corporate disclosure with a fully compliant content
      architecture and communications approach. DisclosurePlus provides corporations
      with a fully integrated online communications package that is simple and quick
      to implement, easy to maintain and update, and equipped with a robust suite
      of
      advanced functionality. Positioned as a cost-effective solution it provides
      safety for the corporation through a best practices approach to compliance
      in
      governance, disclosure and investor communications.




**Whistleblower**




Whistleblower
      IR is a Website Solution that has been built and designed in conjunction with
      Canadian (MI 52-110) and U.S. (Sarbanes-Oxley) regulations to facilitate
      reporting incidents of corporate misconduct.




This
      service can be used to make a report on companies. All reports will be instantly
      submitted to the designated members of the Audit Committee who are responsible
      for investigating and dealing with such complaints. All reports will be treated
      as completely confidential unless otherwise requested by you. Once you have
      completed the submission of your report, you will be given a confidential user
      ID and Password for you to follow the progress of your report and for you to
      update or supplement the information provided in the initial
      report.


**Market
      For Software Sales And Services**





In
      today’s competitive job market, it is a challenge to find and retain
      professionals with the highly specialized skills and experience required for
      integration of various systems used by large clients. With technology rapidly
      changing, there is significant effort, time, and financial investment required
      to keep staff up-to-date especially when full-time interfacing resources
      employed by clients are often not fully and/or consistently utilized.





Vendor
      applications are often not “turn-key ready” for interfacing to existing and
      future applications within various industries. Professional integration services
      can ensure timely project completion of application implementations. Integration
      solutions partner’s typically bring extensive industry experience to localized
      environments, likely expediting resolutions to common integration
      issues.





ActiveCore
      believes that the market for large scale enterprise wide software has slowed
      considerably over the past few years in favor of vendors of less expensive
      but
      highly effective software integration tools and products that enable
      organizations to expand existing systems that have already paid for themselves.
      To that end, ActiveCore Technologies has identified healthcare, manufacturing
      and financial services as target markets in which it intends to focus its sales
      efforts. ActiveCore Technologies believes that most large companies and
      healthcare facilities have a strong and continuing need for smart enterprise
      suite software products.




**Outlook
      for Smart Enterprise Enablement Products - Competition**




The
      growth proliferation of various communication mechanisms and protocols such
      as
      Internet, Extranets, Intranets, Voice Casting, VPN’s, VOIP, WiFi, Mobile
      telephone, SMS and MMS messaging, texting, telefax, and desktop faxing has
      created a great need for organizations to securely open up their internal
      networks and operational systems so that various parties can communicate with
      and between employees and customers. The growth in communication protocols
      has
      led organizations to become compelled, by customer and client demand, to deal
      with the mobile and web enabled society that exists in the developed world.
      Whether as an extension of the retail store front, as an on line enquiry
      service, as a secure mobile data capture environment for customer billing,
      or as
      an automated mechanism for the dissemination of news and customer/client
      information, we believe that more and more organizations see the need to link
      their operational infrastructure to these communication vehicles. Preparing
      and
      facilitating an organization’s ability to interact, both in capturing and
      delivering information from and to its employees and customers, is driving
      rapid
      growth in the business of linking back office systems to the outside
      world.





5


ActiveCore
      competes within the global market for integration services, communication,
      middleware, mobile and web enabled software applications. These applications
      are
      developed for all types of devices including handheld and other portable
      devices, mobile phones, PDA’s, “mainframe” computers and client server/networked
      installations. The market for these products and services is evolving rapidly
      and is highly competitive. Competitors include many of the world’s largest
      software and services companies including (i) Microsoft, Oracle, IBM,
      PeopleSoft, all major data base developers (ii) the community of developers
      that
      has developed products for the palm operating system; (iii) the community of
      developers that has emerged since the introduction of Linux, Sun, and other
      non-windows operating system platforms; (iv) the host of developers and
      integrators that are developing and implementing enterprise applications on
      other communications devices including computers, telephones, fax machines
      and
      voice mail, and (iv) such companies as Plumtree, Xpedite, J2 Global and Vignette
      who have portal and communication solutions that rely heavily on importing
      or
      exporting data and use communication technologies to solve business issues.
      Nearly all of ActiveCore Technology’s competitors or potential competitors have
      significantly greater financial, technical and marketing resources than we
      do.
      These competitors may be able to respond more rapidly than us to new or emerging
      technologies or changes in customer requirements. They may also devote greater
      resources to the development, promotion and sale of their products than
      ActiveCore does.





ActiveCore
      believes that systems integrators with products that enable communication and
      exchange data with the world beyond internal systems are in the best position
      to
      market software to their existing clients. Therefore we do not intend to compete
      directly against any of the larger software creators and marketing companies
      in
      the promotion of software in and of itself, rather we intend to market to our
      growing list of clients to which we provide outsourced data integration and
      network services in order to create niche solutions that solve specific business
      problems.




**Employees
      and Consultants**




ActiveCore
      currently has 40 employees and 53 consultants based in Canada and the
      USA .
      None of
      ActiveCore Technology’s employees are covered by any collective bargaining
      agreement.




**Item
      2. Description Of Property**




ActiveCore’s
      principal executive office is located at 156 Front Street West, Suite 201,
      Toronto, Ontario, Canada where it leases approximately 6,550 sq ft of office
      space at a cost of approximately $13,500 per month. The Company also leases
      a
      facility in Oakville, Ontario consisting of approximately 16,000 sq ft at a
      cost
      of $22,667 per month. The Oakville facility lease was acquired through the
      acquisition of Cratos which occurred on May 1, 2005, and hence the rent for
      this
      facility is included in the Company’s consolidated statement of operations from
      the date of acquisition onwards.




**Item
      3. Legal Proceedings**




**TPG
      Corporation**




On
      March
      17, 2000, the Company entered into a consulting agreement with TPG Capital
      Corporation regarding an inactive reporting shell company that the Company
      acquired. The consulting agreement provides that one year after the execution
      of
      the agreement, (“reset date”), 350,000 common shares issued by the Company under
      the agreement would be increased or decreased based upon the average closing
      bid
      for the Company’s stock 30 days prior to the reset date, so the value of the
      350,000 shares will equal $500,000.





6


In
      December, 2005 an arbitrator determined that the Company was obligated to pay
      TPG Capital Corporation $448,000 to be issued in either common stock which
      must
      be registered by June, 2006 or in cash. The Company recorded an expense of
      this
      amount in its consolidated statement of operations for the year ended December
      31, 2005 and such amount is included in accrued liabilities at December 31,
      2005.






**Orchestral
      Corporation**




On
      June
      13, 2002, the Company canceled its “Power Audit” software distribution agreement
      with Orchestral (the “licensor”). In November 2002, the licensor commenced a
      proceeding in Ontario, Canada against the Company which was discontinued while
      the parties discussed a settlement. That proceeding alleged that the Company
      had
      infringed upon the copyright that the licensor maintained, and further that
      the
      Company had breached the distribution contract claiming damages of CAD
      $4,000,000. The licensor also claimed punitive and exemplary damages in the
      amount of CAD $1,000,000. When a settlement was not concluded, Orchestral
      commenced a second, identical action in August, 2003. The Company retained
      legal
      counsel to defend itself on the basis that there is no merit to the case and
      even if there was merit, the time frame in which to bring an action under the
      distribution agreement has expired. The Company has not yet determined if it
      will counter-sue for return of all proceeds paid to Orchestral during the period
      of time between 1999 and 2001.





Compulsory
      mediation has occurred in the second lawsuit. The next step would normally
      be
“examination for discovery” then on to a trial. Instead of proceeding with the
      prosecution of its second lawsuit, Orchestral commenced an Application before
      the Ontario courts to enforce a settlement which it alleges was reached with
      the
      Company during the negotiations between its first and second lawsuits. The
      court
      ordered that a settlement was enforceable and that $226,824 was owed by the
      Company to the licensor. The Company appealed this decision and in January
      2006
      the initial judgement was upheld. A liability of $226,824 has been recorded
      on
      the Company’s consolidated balance sheet for the settlement claim.




**Cesar
      Correia and InfoLink Technologies Ltd.**




From
      December 2003 to April 2004, the Company was engaged in discussions with certain
      major shareholders of Infolink Technologies Limited with regard to the potential
      acquisition of Infolink Technologies Ltd., a public company listed on the
      Toronto Stock Exchange venture board under the symbol “IFL”. During the course
      of discussions, an offer to purchase was rebuffed by Cesar Correia, the former
      Chairman of the Board, President and CEO, and 34% shareholder of Infolink.
      At
      the time, Mr. Correia was told that the Company would purchase another
      competitor to Infolink, C Comm Network Corporation. In May of 2004, the Company
      purchased C Comm. In July of 2004, an unrelated minority shareholder of Infolink
      commenced an action in Ontario alleging that Mr. Correia has mismanaged Infolink
      and amongst other things that he had inappropriately obtained funds from
      Infolink and converted them to his own purposes. The day prior to the court
      hearing with regard to the minority shareholder action against Infolink,
      Infolink Technology commenced a proceeding in the same Ontario court against
      the
      Company alleging unfair competition as a result of an alleged improper
      acquisition of confidential information from Infolink and numerous other causes
      of action. The Company has not yet had to file a defence to any of Infolink’s
      claims against the Company. Meanwhile, the court appointed a monitor and
      investigator to look into the allegations against Mr. Correia. The court
      appointed monitor and investigator issued an interim report in October 2004
      which found that several of the allegations against Mr. Correia were
      substantiated. Mr. Correia was removed from the position of Chairman, President
      and CEO of Infolink and is now an employee of Infolink. The Company believes
      that Infolink as a corporate entity will not proceed with any action against
      the
      Company as the Company believes that the action was commenced as a defensive
      move by Mr. Correia and now that he has been removed from management of Infolink
      there is little basis for the action to continue.




7


**Item
      4. Submission Of Matters To A Vote Of Security Holders**




None




**PART
      II**






**Item
      5. Market for Common Equity And Related Stockholder
      Matters**




**Market
      Price Of And Dividends On The Registrant’s Common Equity And Other Stockholder
      Matters**




ActiveCore’s
      common stock is traded on the Over-the-Counter Bulletin Board under the symbol
      “ATVE”. The following table sets forth, for the periods indicated, the high and
      low bid prices of a share of common stock for the last two years.




**HIGH
                BID**
            
            **LOW
                BID****2004**Quarter
                Ended March 31, 2004
            
            $
            0.30
            
            $
            0.10Quarter
                Ended June 30, 2004
            
            
            0.38
            
            
            0.13Quarter
                Ended September 30, 2004
            
            
            0.19
            
            
            0.13Quarter
                Ended December 31, 2004
            
            
            0.29
            
            
            0.14**2005**Quarter
                Ended March 31, 2005
            
            $
            0.31
            
            $
            0.12Quarter
                Ended June 30, 2005
            
            
            0.15
            
            
            0.05Quarter
                Ended September 30, 2005
            
            
            0.17
            
            
            0.04Quarter
                Ended December 31, 2005
            
            
            0.17
            
            
            0.06




**Holders
      of Common Equity**




As
      of
      March 21, 2006 there were 487 registered holders of record for our common stock.
      There were 80,573,635 shares issued of which 36,575,592 is restricted. We
      believe that there are a number of unregistered holders maintaining accounts
      at
      various brokerage houses who have not registered their shares or their shares
      are held in the name of the clearing house.




**Dividends**




ActiveCore
      did not pay any common stock dividends during calendar 2005 and has never paid
      any dividends on its common stock. ActiveCore currently expects that it will
      retain future earnings for use in the operation and expansion of its business
      and does not anticipate paying any common stock cash dividends in the
      foreseeable future. Any decision on the future payment of dividends will depend
      on our earnings and financial position at that time and such other factors
      as
      the Board of Directors deems relevant.




RISK
      FACTORS CONNECTED WITH BUSINESS OF THE COMPANY.




Investing
      in the Company involves a number of material risks facing the Company's
      business, as follows:





***Failure
      to Remain Current in Reporting Requirements Could Result in Delisting from
      the
      Over the Counter Bulletin Board.***





Companies
      trading on the Over the Counter Bulletin Board ("OTCBB"), such as the Company,
      must be reporting issuers under Section 12 of the Securities Exchange Act of
      1934, as amended, and must be current in their reports under Section 13, in
      order to maintain price quotation privileges on the OTCBB. If the Company fails
      to remain current in its reporting requirements, the company could be delisted
      from the Bulletin Board.





8


In
      addition, the National Association of Securities Dealers, Inc. that operates
      the
      OTCBB, has proposed a change to its Eligibility Rule, in a filing with the
      SEC.
      The proposed change would make those OTCBB issuers that are cited for filing
      delinquency in its Form 10-KSB's/Form 10-QSB's three times in a 24-month period
      and those OTCBB issuers removed for failure to file such reports two times
      in a
      24-month period ineligible for quotation on the OTCBB for a period of one year.
      Under this proposed rule, a company filing with the


extension
      time set forth in a Notice of Late Filing (Form 12b-25) would not be considered
      late. This rule would not apply to a company's Current Reports on Form 8-K.





As
      a
      result of these rules, the market liquidity for Company securities could be
      severely adversely affected by limiting the ability of broker-dealers to sell
      its securities and the ability of stockholders to sell their
      securities


in
      the
      secondary market.





***Failure
      to Maintain Market Makers May Affect Value of Company's
      Stock.***





If
      the
      Company is unable to maintain a National Association of Securities Dealers,
      Inc.
      member broker/dealers as market makers, the liquidity of the common stock could
      be impaired, not only in the number of shares of common stock which could be
      bought and sold, but also through possible delays in the timing of transactions,
      and lower prices for the common stock than might otherwise prevail. Furthermore,
      the lack of market makers could result in persons being unable to buy or sell
      shares of the common stock on any secondary market. There can be no assurance
      the Company will be able to maintain such market makers.





***Shares
      Eligible For Future Sale.***





Most
      of
      the shares currently held by management and others have been issued in reliance
      on the private placement exemption under the Securities Act of 1933. Such shares
      will not be available for sale in the open market without separate registration
      except in reliance upon Rule 144 under the Securities Act of 1933. In general,
      under Rule 144 a person (or persons whose shares are aggregated) who has
      beneficially owned shares acquired in a non-public transaction for at least
      one
      year, including persons who may be deemed affiliates of the Company (as that
      term is defined under that rule) would be entitled to sell within any
      three-month period a number of shares that does not exceed 1% of the then
      outstanding shares of common stock, provided that certain current public
      information is then available. If a substantial number of the shares owned
      by
      these shareholders were sold pursuant to Rule 144 or a registered offering,
      the
      market price of the common stock at that time could be adversely
      affected.




***If
      the Company’s products and services do not gain market acceptance, the Company
      may not be able to increase its revenues***




The
      Company intends to pursue its strategy of growing the capabilities of its SIM
      and CDM divisions. As is typical in the case of a rapidly evolving industry,
      demand for and market acceptance of products and services that have been
      released recently or that are planned for future release are subject to a high
      level of uncertainty. If the markets for the Company’s products and services
      fail to develop, develop more slowly than expected or become saturated with
      competitors, the Company’s business will suffer. The Company may be unable to
      successfully market its current products and services, develop new software
      products, services and enhancements to current products and services, complete
      customer installations on a timely basis, or complete products and services
      currently under development. If the Company’s products and services or
      enhancements do not achieve and sustain market acceptance, the Company’s
      business and operating results will be materially harmed.




***Current
      and future competitors could have a significant impact on the Company’s ability
      to generate future revenue and profits***




The
      markets for the Company’s products are intensely competitive, subject to rapid
      technological change and are evolving rapidly. The Company expects competition
      to increase and intensify in the future as the markets for the Company’s
      products continue to develop and as additional companies enter each of its
      markets. Numerous releases of products that compete with those of the Company
      are continually occurring and can be expected to continue in the near future.
      The Company may not be able to compete effectively with current and future
      competitors. If competitors were to engage in aggressive pricing policies with
      respect to competing products, or significant price competition was to otherwise
      develop, the Company would likely be forced to lower its prices. This could
      result in lower revenues, reduced margins, loss of customers, or loss of market
      share for the Company.




9


***Acquisitions,
      investments, joint ventures and other business initiatives may negatively affect
      the Company’s operating results***




The
      Company continues to seek out opportunities to acquire or invest in businesses,
      products and technologies that expand, complement or are otherwise related
      to
      the Company’s current business. The Company also considers from time to time,
      opportunities to engage in joint ventures or other business collaborations
      with
      third parties to address particular market segments. These activities, including
      the current year’s acquisitions, create risks such as the need to integrate and
      manage the businesses and products acquired with the business and products
      of
      the Company, additional demands on the Company’s management, resources, systems,
      procedures and controls, disruption of the Company’s ongoing business, and
      diversion of management’s attention from other business concerns. Moreover,
      these transactions could involve substantial investment of funds and/or
      technology transfers and the acquisition or disposition of product lines or
      businesses. Also, such activities could result in one-time charges and expenses
      and have the potential to either dilute existing shareholders or result in
      the
      assumption of debt. Such acquisitions, investments, joint ventures or other
      business collaborations may involve significant commitments of financial and
      other resources of the Company. Any such activity may not be successful in
      generating revenue, income or other returns to the Company, and the financial
      or
      other resources committed to such activities will not be available to the
      Company for other purposes. The Company’s inability to address these risks could
      negatively affect the Company’s operating results.




***Businesses
      acquired by the Company may have disclosure controls and procedures and internal
      controls over financial reporting that are weaker than or otherwise not in
      conformity with those of the Company***




The
      Company has a history of acquiring complementary businesses with varying levels
      of organizational size and complexity. Upon consummating an acquisition, the
      Company seeks to implement its disclosure controls and procedures and internal
      controls over financial reporting at the acquired company as promptly as
      possible. Depending upon the size and complexity of the business acquired,
      the
      implementation of the Company’s disclosure controls and procedures and internal
      controls over financial reporting at an acquired company may be a lengthy
      process. Typically the Company conducts due diligence prior to consummating
      an
      acquisition, however, the Company’s integration efforts may periodically expose
      deficiencies in the disclosure controls and procedures and internal controls
      over financial reporting of an acquired company. The Company expects that the
      process involved in completing the integration of the Company’s own disclosure
      controls and procedures and internal controls over financial reporting at an
      acquired business will sufficiently correct any identified deficiencies.
      However, if such deficiencies exist, the Company may not be in a position to
      comply with its periodic reporting requirements and the Company’s business and
      financial condition may be materially harmed.




***The
      length of the Company’s sales cycle can fluctuate significantly which could
      result in significant fluctuations in license revenue being recognized from
      quarter to quarter***




Because
      the decision by a customer to purchase the Company’s products often involves
      relatively large-scale implementation across the customer’s network or networks,
      licenses of these products may entail a significant commitment of resources
      by
      prospective customers, accompanied by the attendant risks and delays frequently
      associated with significant expenditures and lengthy sales cycle and
      implementation procedures. Given the significant investment and commitment
      of
      resources required by an organization in order to implement the Company’s
      software, the Company’s sales cycle tends to take considerable time to complete.
      Over the past year, the Company has experienced a lengthening of its sales
      cycle
      as customers include more personnel in the decision-making process and focus
      on
      more enterprise-wide licensing deals. In an economic environment of reduced
      information technology spending, it can take several months, or even quarters,
      for sales opportunities to translate into revenue. If a customer’s decision to
      license the Company’s software is delayed and the installation of the Company’s
      products in one or more customers takes longer than originally anticipated,
      the
      date on which revenue from these licenses could be recognized would be delayed.
      Such delays could cause the Company’s revenues to be lower than expected in a
      particular period.




10


***The
      Company’s products may contain defects that could harm the Company’s reputation,
      be costly to correct, delay revenues, and expose the Company to litigation***




The
      Company’s products are highly complex and sophisticated and, from time to time,
      may contain design defects or software errors that are difficult to detect
      and
      correct. Errors may be found in new software products or improvements to
      existing products after commencement of commercial shipments, or, if discovered,
      the Company may not be able to successfully correct such errors in a timely
      manner, or at all. In addition, despite tests carried out by the Company on
      all
      its products, the Company may not be able to fully simulate the environment
      in
      which its products will operate and, as a result, the Company may be unable
      to
      adequately detect design defects or software errors inherent in its products
      and
      which only become apparent when the products are installed in an end-user’s
      network. The occurrence of errors and failures in the Company’s products could
      result in loss of, or delay in market acceptance of the Company’s products, and
      alleviating such errors and failures in the Company’s products could require
      significant expenditure of capital and other resources by the Company. The
      harm
      to the Company’s reputation resulting from product errors and failures would be
      damaging to the Company. The Company regularly provides a warranty with its
      products and the financial impact of these warranty obligations may be
      significant in the future. The Company’s agreements with its strategic partners
      and end-users typically contain provisions designed to limit the Company’s
      exposure to claims, such as exclusions of all implied warranties and limitations
      on the availability of consequential or incidental damages. However, such
      provisions may not effectively protect the Company against claims and related
      liabilities and costs. Although the Company maintains errors and omissions
      insurance coverage and comprehensive liability insurance coverage, such coverage
      may not be adequate and all claims may not be covered. Accordingly, any such
      claim could negatively affect the Company’s financial condition.




***Other
      companies may claim that the Company infringes their intellectual property,
      which could result in significant costs to defend and if the Company is not
      successful could have a significant impact on the Company’s ability to generate
      future revenue and profits***




Although
      the Company does not believe that its products infringe on the rights of
      third-parties, third-parties may assert infringement claims against the Company
      in the future, and any such assertions may result in costly litigation or
      require the Company to obtain a license for the intellectual property rights
      of
      third-parties. Such licenses may not be available on reasonable terms, or at
      all. In particular, as software patents become more prevalent, it is possible
      that certain parties will claim that the Company’s products violate their
      patents. Such claims could be disruptive to the Company’s ability to generate
      revenue and may result in significantly increased costs as the Company attempts
      to license the patents or rework its products to ensure that they are not in
      violation of the claimant’s patents or dispute the claims. Any of the foregoing
      could have a significant impact on the Company’s ability to generate future
      revenue and profits.




***The
      Company’s expenses may not match anticipated revenues***




The
      Company incurs operating expenses based upon anticipated revenue trends. Since
      a
      high percentage of these expenses are relatively fixed, a delay in recognizing
      revenue from license transactions could cause significant variations in
      operating results from quarter to quarter and could result in operating losses.
      If these expenses precede, or are not subsequently followed by, increased
      revenues, the Company’s business, financial condition, or results of operations
      could be materially and adversely affected.




***The
      Company must continue to manage its growth or its operating results could be
      adversely affected***




Over
      the
      past year, the Company has experienced growth in revenues and operating
      expenses. The Company believes that continued growth in the breadth of its
      product lines and services and in the number of personnel, will be required
      in
      order to establish and maintain the Company’s competitive position. Moreover,
      the Company has grown significantly through acquisitions in the past and
      continues to review acquisition opportunities as a means of increasing the
      size
      and scope of its business. Finally, the Company has been subject to increased
      regulation, including various NASDAQ rules and the Sarbanes-Oxley Act of 2002
      (“Sarbanes”), which has necessitated a significant use of company resources to
      comply on a timely basis. The Company’s growth, coupled with the rapid evolution
      of the Company’s markets and the new heightened regulations, have placed, and
      are likely to continue to place, significant strains on its administrative
      and
      operational resources and increased demands on its internal systems, procedures
      and controls. The Company’s administrative infrastructure, systems, procedures
      and controls may not adequately support the Company’s operations or compliance
      with such regulations, and the Company’s management may not be able to achieve
      the rapid, effective execution of the product and business initiatives necessary
      to successfully penetrate the markets for the Company’s products and services
      and to successfully integrate any business acquisitions in the future to comply
      with all regulatory rules. If the Company is unable to manage growth
      effectively, or comply with such new regulations, the Company’s operating
      results will likely suffer and it may not be in a position to comply with its
      periodic reporting requirements or listing standards, which could result in
      the
      delisting of the Company from the NASDAQ.




11


***Recently
      enacted and proposed changes in securities laws and related regulations could
      result in increased costs to the Company***




Recently
      enacted and proposed changes in the laws and regulations affecting public
      companies, including the provisions of Sarbanes and recent rules enacted and
      proposed by the SEC and NASDAQ, have resulted in increased costs to the Company
      as it responds to the new requirements. The new rules also could make it more
      difficult for the Company to obtain certain types of insurance, including
      director and officer liability insurance, and the Company may be forced to
      accept reduced policy limits and coverage and/or incur substantially higher
      costs to obtain the same or similar coverage. The impact of these events could
      also make it more difficult for the Company to attract and retain qualified
      persons to serve on its Board of Directors, on committees of its Board of
      Directors, or as executive officers. The Company cannot yet estimate the amount
      of total additional costs it may incur or the timing of such costs as it
      implements these new and proposed rules.






***The
      Company’s quarterly revenues and operating results are likely to fluctuate which
      could materially impact the price of the Company’s Common Shares***




The
      Company experiences, and is likely to continue to experience, significant
      fluctuations in quarterly revenues and operating results caused by many factors,
      including changes in the demand for the Company’s products, the introduction or
      enhancement of products by the Company and its competitors, market acceptance
      of
      enhancements or products, delays in the introduction of products or enhancements
      by the Company or its competitors, customer order deferrals in anticipation
      of
      upgrades and new products, lengthening sales cycles, changes in the Company’s
      pricing policies or those of its competitors, delays involved in installing
      products with customers, the mix of distribution channels through which products
      are licensed, the mix of products and services sold, foreign currency exchange
      rates, acquisitions and general economic conditions.




A
      cancellation or deferral of even a small number of licenses or delays in
      installations of the Company’s products could have a material adverse effect on
      the Company’s results of operations in any particular quarter. Because of the
      impact of the timing of product introductions and the rapid evolution of the
      Company’s business and the markets it serves, the Company cannot predict whether
      seasonal patterns experienced in the past will continue. For these reasons,
      one
      should not rely on period-to-period comparisons of the Company’s financial
      results to forecast future performance. It is likely that the Company’s
      quarterly revenue and operating results will vary significantly in the future
      and if a shortfall in revenue occurs or if operating costs increase
      significantly, the market price of its common shares could materially decline.




***If
      the Company is not able to attract and retain top employees, the Company’s
      ability to compete may be harmed***




The
      Company’s performance is substantially dependent on the performance of its
      executive officers and key employees. The loss of the services of any of its
      executive officers or other key employees could significantly harm the Company’s
      business. The Company does not maintain “key person” life insurance policies on
      any of its employees. The Company’s success is also highly dependent on its
      continuing ability to identify, hire, train, retain and motivate highly
      qualified management, technical, sales and marketing personnel, including
      recently hired officers and other employees. Specifically, the recruitment
      of
      top research developers, along with experienced salespeople, remains critical
      to
      the Company’s success. Competition for such personnel is intense, and the
      Company may not be able to attract, integrate or retain highly qualified
      technical and managerial personnel in the future.




12


***The
      volatility of the Company’s stock price could lead to losses by shareholders***




The
      market price of the common shares has been highly volatile and subject to wide
      fluctuations. Such fluctuations in market price may continue in response to
      quarterly variations in operating results, announcements of technological
      innovations or new products by the Company or its competitors, changes in
      financial estimates by securities analysts or other events or factors. In
      addition, the financial markets have experienced significant price and volume
      fluctuations that have particularly affected the market prices of equity
      securities of many technology companies and that often have been unrelated
      to
      the operating performance of such companies or have resulted from the failure
      of
      the operating results of such companies to meet market expectations in a
      particular quarter. Broad market fluctuations or any failure of the Company’s
      operating results in a particular quarter to meet market expectations may
      adversely affect the market price of the common shares, resulting in losses
      to
      shareholders. In the past, following periods of volatility in the market price
      of a company’s securities, securities class action litigation has often been
      instituted against such a company. Due to the volatility of the Company’s stock
      price, the Company could be the target of securities litigation in the future.
      Such litigation could result in substantial costs and a diversion of
      management’s attention and resources, which would have a material adverse effect
      on the Company’s business and operating results.




***The
      Company may have exposure to greater than anticipated tax liabilities***




The
      Company is subject to income taxes and non-income taxes in a variety of
      jurisdictions and its tax structure is subject to review by both domestic and
      foreign taxation authorities. The determination of the Company’s worldwide
      provision for income taxes and other tax liabilities requires significant
      judgment. Although the Company believes its estimates are reasonable, the
      ultimate tax outcome may differ from the amounts recorded in its financial
      statements and may materially affect its financial results in the period or
      periods for which such determination is made.







**Item
      6. Management’s Discussion And Analysis Or Plan of
      Operation**




***Forward-Looking
      Statements and Associated Risks.*** *This
      Report contains forward-looking statements. Such forward-looking statements
      include statements regarding, among other things, (a) the Company’s projected
      sales and profitability, (b) the Company’s growth strategies,
      (c) anticipated trends in the Company’s industry, (d) the Company’s future
      financing plans, (e) the Company’s anticipated needs for working capital, (f)
      the benefits related to ownership of the Company’s common stock. Forward-looking
      statements, which involve assumptions and describe the Company’s future plans,
      strategies, and expectations, are generally identifiable by use of the words
      “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,”
“intend,” or “project” or the negative of these words or other variations on
      these words or comparable terminology. This information may involve known and
      unknown risks, uncertainties, and other factors that may cause the Company’s
      actual results, performance, or achievements to be materially different from
      the
      future results, performance, or achievements expressed or implied by any
      forward-looking statements. These statements may be found under “Management’s
      Discussion and Analysis or Plan of Operations” as well as in this Report
      generally. You should not place undue reliance on our forward-looking
      statements. Further, any forward-looking statement speaks only as of the date
      on
      which it is made and, except as otherwise required by law, we undertake no
      obligation to update any forward-looking statement to reflect events or
      circumstances after the date on which it is made or to reflect the occurrence
      of
      anticipated or unanticipated events or circumstances. New factors emerge from
      time to time that may cause our business not to develop as we expect, and it
      is
      not possible to predict all of them. Actual events or results may differ
      materially from those discussed in forward-looking statements as a result of
      various factors, including, without limitation, the risks outlined under
“Certain Business Risk Factors” and matters described in this Report generally.
      In light of these risks and uncertainties, there can be no assurance that the
      forward-looking statements contained in this Report will in fact occur as
      projected.*






13


**Overview**




ActiveCore
      Technologies, Inc. (“ActiveCore” or the “Company”) is a Nevada registered
      Company with its head office in Toronto, Canada, and operations in Canada and
      the United States. The Company operates within the enterprise software and
      services market in a sector which has been described by the Gartner Group as
      that group of vendors of software and services that sell and install “Smart
      Enterprise Suites” and related products. The Company has organized itself into
      two distinct divisions to deliver its products and services. The Systems
      Integration and Migration (SIM) division focuses on large projects in the
      financial services, insurance, healthcare, education and manufacturing
      industries. These projects are aimed at protecting the customer’s investment in,
      improving the functionality of, and extending the life span of their existing
      information technology systems. The acquisition of Cratos Technologies Solutions
      Inc. (“Cratos”) during the quarter ended June 30, 2005 is expected to begin to
      give this division critical mass. The Corporate Disclosure and Messaging (CDM)
      division is focused on working with these same and additional customers to
      provide them with a range of communication and information distribution based
      products that allow them to leverage existing corporate information and share
      it
      with their customers, employees and other stakeholders and facilitates their
      move towards a Smart Enterprise.




The
      Company’s products encompass application integration, application modernization,
      application migration, content management, vertical application portals, a
      corporate disclosure portal and an outbound corporate messaging portal. This
      product set gives ActiveCore the capability to deliver effective, efficient
      and
      economical integration, modernization, migration and corporate messaging
      services or complete solutions to clients seeking to enable or extend their
      existing systems to stakeholders and customers without wholesale changes to
      their systems. ActiveCore’s products are designed to enable the Company’s
      clients to extend the functions of their current systems, often called “legacy
      systems”, by using the Company’s integration, modernization and migration
      product sets that are sold and delivered by the SIM division. For organizations
      wanting to take the next step in achieving what ActiveCore terms “A Smart
      Enterprise” the Company offers its disclosure and messaging products that are
      sold and delivered by the CDM division. By concentrating on the improvement
      of
      the customers existing systems and providing an additional
      communication/messaging product layer the Company is able to offer its customers
      a cost effective way to rapidly improve the overall capability and extend the
      life of their existing information technology assets.




The
      two
      divisions of the Company have very different revenue models and it is important
      that this is clearly understood. See Note 16 to the consolidated financial
      statements for segmented information which provide more granular reporting
      by
      division so that shareholders can develop a better understanding of the
      Company’s revenue sources and how the revenue mix within the two divisions
      affects the gross profit margin at a consolidated level.




The
      SIM
      division derives its revenue from the sale of value added labor and software
      licenses. This division has repeat customers and maintenance revenue but to
      grow
      it must find new customers on a regular basis to replace revenue from completed
      projects. Projects in this division usually range from one to two years in
      length and can exceed one million dollars in value. These projects tend to
      have
      long sell cycles and are predominantly with large customers. The gross profit
      percentage of this division varies based on the mix of sales as product revenue
      tends to yield a higher margin than services revenue. The Company considers
      this
      division to be a “solutions provider”, therefore, there will always be a mix of
      both product and service revenue but normally the mix will be weighted towards
      services. In this division the Company competes with a variety of System
      Integration “SI” vendors but has the advantage of having ownership of most of
      the products it uses to develop client specific and industry specific
      solutions.




14


The
      CDM
      division of the Company derives its revenue from the sale of product based
      services and usually delivers these services via an Application Service Provider
      (ASP) model. The size of the individual sales in this division are much smaller
      than in the SIM division but the revenue generated by this division is recurring
      in nature. Contracts in this division can vary from a one time job to three
      years and the length is determined by the target customer. Customers that
      purchase the DisclosurePlus product set usually sign three year contracts that
      consist of an initial setup fee and monthly payments and once the customer
      has
      committed to use this product set they become long term customers. Customers
      that purchase the Messaging product set tend to sign shorter contracts or choose
      to use the service as required. This division has shorter sell cycles and
      employs both telephone and direct sales representatives. The contribution margin
      from this division will vary based on the mix of Messaging sales versus
      DisclosurePlus sales. DisclosurePlus sales will yield a higher margin once
      the
      division has reached a critical mass of repeat customers.




The
      Company has set up a “service bureau” operation under the product identity
“ActiveCast” to implement the Messaging ASP service whereby it offers broadcast
      services to customers on an outsourced basis using its own internal installation
      of ActiveLINK and DynaPortal. The Company is actively increasing the scope
      and
      revenue earning capacity of this operation by investing in fixed assets and
      personnel to grow the revenue and client base.




The
      Company completed the DisclosurePlus acquisition in the first quarter to add
      additional revenue opportunities to this division and to increase the amount
      of
      recurring revenue for the overall Company. The Company continues to search
      for
      potential acquisition candidates that can expand the range of products and
      services that the Company can offer within the context of the CDM division.
      In
      this area of operations, the Company competes with such companies as Infolink
      Technologies Limited in Canada, J2 Global Communications, Inc., and Xpedite
      Corporation.




The
      Company has developed a clear vision of how it intends to expand the business
      in
      the future. Expansion will be accomplished by growing the SIM and the CDM
      divisions organically as well as developing markets via strategic acquisitions
      in either division. The Company will also expand its marketing program to
      increase the “upselling” and “cross selling” opportunities which naturally exist
      between the two divisions.




The
      Company continues to hold a minority interest in ePocket, an organization
      currently completing a major round of funding that will allow it to enter the
      “electronic payment” market with a revolutionary product. The Company maintains
      strong business relationships with both companies. The Company envisions
      significant benefits from the Cratos acquisition as the relationship and
      synergies between ePocket and ActiveCore become more developed in the upcoming
      quarters.




**Market
      Positioning Summary**




**The
      Company’s “Smart Enterprise Suite”**




The
      Company provides organizations of all sizes with the capability to integrate,
      enable, and extend their “legacy systems” to connect to and communicate with
      their customers, employees and stakeholders. Therefore, the Company’s products
      and services facilitate the creation of the “Smart Enterprise”.




The
      Company’s products encompass application integration, application modernization,
      application migration, content management, vertical application portals, a
      corporate disclosure portal and an outbound corporate messaging portal. In
      addition the Company delivers its DisclosurePlus and ActiveCast product sets
      via
      an “Application Service Provider” (ASP) model using a Company hosted corporate
      messaging service bureau. The Company’s products can be sold individually or as
      a combination to form customized solutions based on the customers’ most
      immediate need. This approach allows the customer to deal with information
      technology problems in a tactical manner and can often alleviate customer
      capital expenditure restrictions.




15


ActiveLINK
      is the Company’s core application integration product and is used to create
      solutions that integrate disparate databases and applications, creating a hub
      through which legacy system functionality can be enabled and extended. The
      other
      products owned by the Company are ActiveCast, DisclosurePlus and MD LINK. In
      addition the Company sells and services third party products that complete
      its
“Smart Enterprise Suite”. These include DynaPortal, Caravel, and Micro
      Focus.




ActiveCore
      normally sells its products and services to companies that want to improve
      their
      existing “legacy systems”, however, the Company has also identified three other
      target markets: software resellers, independent software vendors and system
      integrators.




MDI
      Solutions sells a vertically optimized version of ActiveLINK known as MD LINK
      to
      health care facilities to support their systems integration needs. The MDI
      group
      also sells consulting support services for other integration products resulting
      in recurring income from support contracts. The MDI acquisition provided the
      Company with the knowledge to vertically enhance ActiveLINK and create MD
      LINK.




ActiveCast,
      the Company’s corporate messaging software product is sold to companies that
      want to extract data from internal “legacy systems” and use it for outbound
      messaging. These opportunities have short sales cycles resulting in rapid cash
      flow and recurring revenue from organizations sending information to dedicated
      lists. This product is also directly marketed to all companies that need to
      communicate “stand alone” information to their customers, employees and
      stakeholders. The C Comm acquisition provided the base product from which
      ActiveCast evolved.




DisclosurePlus
      provides corporations with a standard methodology for reporting and distributing
      information related to public disclosure required by public companies. This
      division is adding additional products to their offering to expand the
      functionality available within the DisclosurePlus product.




Cratos
      is
      a technology solution provider that focuses on payment solutions for the
      financial services industry and on the migration of mainframe systems to a
      Microsoft environment. Its expertise in various payment technologies is well
      known globally as evidenced by its blue chip customers. Cratos uses the Micro
      Focus product set to perform system migrations for large customers and they
      have
      a well trained consulting group that manages and delivers complex payment
      integration projects. There is an opportunity to introduce several of the
      Company owned products into Cratos projects.




**Recent
      Developments**




In
      the
      MDI Solutions group, further progress has been made in the development of the
      MD
      LINK product and the Company recently released version 4.1 during 2005. During
      the last few months, the Company has secured and shipped several orders for
      the
      new version of MD LINK. The Company expects the number of MD Link product sales
      to rise during 2006 and this is a direct result of the new product features
      and
      the marketing efforts of this group in 2004 and early 2005.




In
      the
      Company’s ActiveCore and ActiveCast business lines, the Company is continuing to
      obtain additional clients. On the ActiveCast side of operations, the Company
      is
      also adding additional sales personnel to accelerate the rollout of the
      Company’s innovative messaging portal product. This division has generated new
      revenue in the first quarter and continues to improve the margins on this
      business. We expect revenues from this division to continue to increase
      throughout the remainder of 2005. For the year ended December 31, 2005, the
      Company made relatively large investments in equipment and new staff in this
      area of the business.




16


**Acquisitions
      and Reorganizations**




The
      Company maintains an active interest in acquisitions and the reorganization
      of
      its component parts to better service clients. The Company has undertaken an
      internal restructuring to facilitate better customer service, increased sales
      and reduced costs. Investment in its existing operations augmented by growth
      through acquisitions is a key goal of management as is the effective use of
      capital to drive acceptable returns on investment. The following paragraphs
      briefly describe recent acquisitions and reorganizations that have
      occurred.






***Acquisition
      of Disc*** ***losurePlus***




Prior
      to
      being acquired by the Company, DisclosurePlus operated as a private company
      developing its intellectual property and test marketed its product to several
      clients before agreeing to be acquired by ActiveCore.




On
      February 25, 2005, the Company entered into a purchase and sale agreement with
      the shareholders of DisclosurePlus whereby the Company paid 1,200,000 shares
      of
      the Company’s common stock representing $264,000 plus $125,000 in cash for a
      total value of $389,000 for 100% of the DisclosurePlus common shares. In
      connection with this acquisition the Company also entered into management
      contracts with Gord Sutton and Dean Peloso.




DisclosurePlus
      offers a unique set of products to the public company market. These products
      are
      offered as an ASP model and are targeted at public companies that want to
      provide better disclosure of corporate information to their shareholders,
      customers and other stakeholders. This division will also add press release
      dissemination to the product set later this year which is expected to have
      a
      positive impact on revenue opportunities.






***Acquisition
      of Cratos*** ***Technology
      Solutions***




Prior
      to
      being acquired by the Company, Cratos operated as a private company providing
      technical consulting services and mainframe migration to companies in the
      financial services sector in many countries.




During
      the quarter ended June 30, 2005, the Company entered into a purchase and sale
      agreement with the shareholders of Cratos Solutions whereby the Company paid
      9,021,030 shares of the Company’s common stock in addition to cash and debt
      consideration of $159,120 representing total consideration of $2.1 million
      in
      exchange for 100% of the shares of Cratos. In conjunction with this acquisition
      the Company also paid CAD $470,000 of debt owed to SQL Tech. by Cratos along
      with 3,921,633 common shares of ActiveCore. The Company also arranged a bank
      credit facility to help finance Cratos’ debt that was personally secured by the
      senior managers of ActiveCore.




Cratos
      is
      a service based company that specializes in providing project management and
      delivery to large companies in the financial service, education and insurance
      market place.




17


***Twincentric,
      Limited***





On
      August
      13, 2005, the Company entered into an agreement to sell its wholly owned U.K.
      subsidiary, Twincentric Limited (“Twincentric”) to Tony McGurk. Mr. McGurk was
      the majority shareholder of Twincentric at the time it was acquired during
      2004
      by the Company, and he had continued to operate the Twincentric business since
      that time. Consideration received by the Company was 1,400,000 of its common
      shares. These common shares represented the same shares originally issued by
      the
      Company to Mr. McGurk in the transaction which resulted in the Company
      originally acquiring Twincentric.






**Critical
      Accounting Policies**




*Significant
      Accounting Policies and Critical Accounting Estimates*




The
      Company’s Consolidated Financial Statements are prepared in accordance with U.S.
      GAAP. The preparation of the Consolidated Financial Statements in accordance
      with U.S. GAAP necessarily requires the Company to make estimates and judgments
      that affect the reported amounts of assets, liabilities, revenues and expenses,
      and related disclosure of contingent assets and liabilities. On an on-going
      basis, the Company evaluates its estimates, including those related to revenues,
      bad debts, investments, intangible assets, income taxes, contingencies and
      litigation. The Company bases its estimates on historical experience and on
      various other assumptions that are believed at the time to be reasonable under
      the circumstances. Under different assumptions or conditions, the actual results
      will differ, potentially materially, from those previously estimated. Many
      of
      the conditions impacting these assumptions and estimates are outside of the
      Company’s control.




The
      Company believes the following critical accounting policies affect its more
      significant judgments and estimates used in the preparation of its Consolidated
      Financial Statements.




*Revenue:* A
      significant portion of all of the Company's net sales are derived from
      commercial software development and sales activities, which are subject to
      increasing competition, rapid technological change and evolving customer
      preferences, often resulting in the frequent introduction of new products and
      short product lifecycles. Accordingly, the Company's profitability and growth
      prospects depend upon its ability to continually acquire, develop and market
      new, commercially successful software products and obtain adequate financing.
      If
      the Company is unable to continue to acquire, develop and market commercially
      successful software products, its operating results and financial condition
      could be materially adversely affected in the near future.





The
      Company recognizes revenue for software sales in accordance with Statement
      of
      Position ("SOP") 97-2 "Software Revenue Recognition", as amended by SOP 98-9
      "Modification of SOP 97-2 Software Revenue Recognition with respect to Certain
      Transactions." SOP 97-2 provides guidance on applying generally accepted
      accounting principles in recognizing revenue on software transactions. SOP
      98-9
      deals with the determination of vendor specific objective evidence ("VSOE")
      of
      fair value in multiple element arrangements, such as maintenance agreements
      soldin conjunction with software packages. For 2005 and 2004 the Company does
      not have any multi-element arrangements that would require it to establish
      VSOE
      for each element, nor does the Company have any sales activity that requires
      the
      contract method of accounting. The Company's software transactions generally
      include only one element, the software under license. The Company recognizes
      revenue when the price is fixed and determinable, there is persuasive evidence
      of an arrangement, the fulfillment of its obligations under any such
      arrangement, and determination that collection is probable. Accordingly, revenue
      is recognized when the license or title and all risks of loss are transferred
      to
      the customer, which is generally upon receipt by customer.





18


The
      Company's payment arrangements with its customers provide primarily multi month
      terms unless the purchase price is relatively low. As a result of the
      multi-month terms, an imputed interest cost accounting for the net present
      value
      of the terms was deducted in determining the amount of revenue and receivable
      recognized.





The
      Company recognizes revenue in the period in which the service is performed
      and
      collection is reasonably assured.




*Allowance
      for Doubtful Accounts.* The
      Company maintains allowances for doubtful accounts for estimated losses
      resulting from the inability of its customers to make required payments. The
      Company performs ongoing credit evaluations of its customer’s financial
      condition and if the financial condition of the Company’s customers were to
      deteriorate, resulting in an impairment of their ability to make payments,
      additional allowances would likely be required. Actual collections could differ
      materially from our estimates.




*Income
      Taxes.* The
      Company has currently recorded a full valuation allowance against all of its
      deferred income tax assets as management believes it is more likely than not
      that all of the deferred income tax assets will not be realized. In making
      this
      determination, management has considered factors such as the reversal of
      deferred income tax liabilities, projected taxable income, the character of
      the
      income tax asset and tax planning strategies. A change to these factors could
      impact the estimated valuation allowance and income tax expense.




*Litigation.* The
      Company is a party, from time to time, in legal proceedings. In these cases,
      management assesses the likelihood that a loss will result, as well as the
      amount of such loss and the financial statements provide for the Company’s best
      estimate of such losses. To the extent that any of these legal proceedings
      are
      resolved and result in the Company being required to pay an amount in excess
      of
      what has been provided for in the financial statements, the Company would be
      required to record, against earnings, the excess at that time. If the resolution
      resulted in a gain to the Company, or a loss less than that provided for, such
      gain is recognized when received or receivable.




*Valuation
      of Intangible Assets.* The
      Company has a history of acquiring other businesses, and expects that this
      trend
      will likely continue in the future. As part of the completion of any business
      combination, the Company is required to value any intangible assets acquired
      at
      the date of acquisition. This valuation is inherently subjective, and
      necessarily involves judgments and estimates regarding future cash flows and
      other operational variables of the entity acquired. However, there can be no
      assurance that the judgments and estimates made at the date of acquisition
      will
      reflect future performance of the acquired entity. If management makes judgments
      or estimates that differ from actual circumstances, the Company may be required
      to write-off certain of its intangible assets. Similarly, in accordance with
      SFAS No. 142 *Goodwill
      and Other Intangible Assets* ,
      the
      Company is required to annually test the value of its goodwill as well as its
      acquired intangible assets. This testing requires management to make estimates
      of the market value of its various operating segments. Changes in estimates
      could result in different conclusions for the value of goodwill. The Company
      performs its annual impairment testing on its goodwill at December
      31 st of each
      year, provided that circumstances don’t arise during the year that would
      necessitate an earlier evaluation.





***Recent
      Accounting Pronouncements***





In
      December 2004 the FASB issued SFAS No. 123 (revised 2004), Shares - Based
      Payment, (“SFAS No. 123 R”), which amends, “Accounting for Stock Based
      Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued
      to
      Employees. SFAS No. 123 (R) requires compensation expense to be recognized
      for
      all share based payments made to employees based on the fair value of the award
      at the date of grant, eliminating the intrinsic value alternative allowed by
      SFAS No. 123. Generally, the approach to determining fair value under the
      original pronouncement has not changed. However, there are revisions to the
      accounting guidelines established, such as accounting for forfeitures that
      will
      change our accounting for stock-based awards in the future.





19


SFAS
      No.
      123 (R) must be adopted in the annual period beginning after June 15, 2005,
      for
      non small business issuers, and after December 15, 2005 for small business
      issuers. The statement allows companies to adopt its provision using either
      of
      the following transition alternatives:




(i)
      The
      modified prospective method, which results in the recognition of compensation
      expense using SFAS 123(R) for all share-based awards granted after the effective
      date and the recognition of compensation expense using SFAS 123 for all
      previously granted share - based awards that remain unvested at the effective
      date; or




(ii)
      The
      modified retrospective method, which results in applying the modified
      prospective method and restating prior periods by recognizing the financial
      statement impact of share-based payments in a matter consistent with the pro
      forma disclosure requirements of SFAS No. 123. The modified retrospective method
      may be applied to all prior periods presented or previously reported interim
      periods of the year of adoption.




The
      Company has determined that the impact that the new standard is expected to
      have
      on its consolidated financial statements will not be material.





In
      March
      2005, the Securities and Exchange Commission (“SEC”) released SEC Staff
      Accounting Bulletin No. 107, *Share-Based
      Payment* (“SAB
      107”). SAB 107 provides the SEC staff position regarding the application of SFAS
      123R. SAB 107 contains interpretive guidance related to the interaction between
      SFAS 123R and certain SEC rules and regulations, as well as provides the staff’s
      views regarding the valuation of share-based payment arrangements for public
      companies. SAB 107 also highlights the importance of disclosures made related
      to
      the accounting for share-based payment transactions. The Company has evaluated
      SAB 107 and has determined that incorporating it as part of its adoption of
      SFAS
      123R will not have a material impact on its consolidated financial
      statements.





In
      May
      2005, the FASB issued SFAS No. 154, *Accounting
      Changes and Error Corrections* (“SFAS 154”)
      which supersedes APB Opinion No. 20, *Accounting
      Changes* and
      SFAS
      No. 3, *Reporting
      Accounting Changes in Interim Financial Statements.* SFAS
      154
      changes the requirements for the accounting for and reporting of changes in
      accounting principle. The statement requires the retroactive application to
      prior periods’ financial statements of changes in accounting principles, unless
      it is impracticable to determine either the period specific effects or the
      cumulative effect of the change. SFAS 154 does not change the guidance for
      reporting the correction of an error in previously issued financial statements
      or the change in an accounting estimate. SFAS 154 is effective for accounting
      changes and corrections of errors made in fiscal years beginning after December
      15, 2005. The Company does not expect the adoption of SFAS 154 to have a
      material impact on its consolidated results of operations and financial
      condition.




20


**Results
      Of Operations**




***Twelve
      Months Ended December 31, 2005 Compared With The Twelve Months Ended December
      31, 2004***




***Overview***




During
      the year ended December 31, 2005, the Company recorded revenues of $7.4 million,
      and a loss from continuing operations of $2.8 million. These amounts compare
      to
      revenue of $3.6 million during the previous year ended December 31, 2004, when
      a
      loss from continuing operations of $0.6 million was incurred. The increase
      in
      revenue from the prior year was the result of several factors. Firstly, as
      the
      Company began consolidating the results of Cratos effective May 1, 2005, during
      the year ended December 31, 2005 the Company consolidated eight months of
      operations which were not present in the 2004 results. As Cratos was a fairly
      sizable acquisition for the Company, this acquisition had a significant impact
      on revenue. Additionally however, organic growth was generated by the Company’s
      CDM division, as both the Company’s ActiveCast businesses demonstrated a
      significant percentage increase in revenue as compared with the prior year.




Although
      the Company’s loss from continuing operations was significantly higher in 2005
      than it was in 2004, this loss was incurred in the first half of the year.
      The
      Company’s loss from operations was also $2.2 million through the first 6 months
      of 2005, and as a result the Company’s profitability was much improved in the
      second half of 2005.




**Revenues**






**Year
                  ended December 31****2005**
              **2004**
              **%
                  Change****7,417,874**
              **3,630,150**
              **104%**




During
      the year ended December 31, 2005 the Company generated $7.4 million in revenue
      from the sale of products and services versus $3.6 million in revenue during
      the
      year ended December 31, 2004. From a revenue source perspective, the vast
      majority of the revenue recorded in both 2005 and 2004 was service related,
      while product related revenue represented only a small percentage of the total.
      During 2005, the majority of the Company’s revenue was generated from services
      work and product installation performed by the Company’s SIM division (see note
      16 to the notes to the Financial Statements for segmented information).
      Specifically, the Cratos acquisition was completed during the year ended June
      30, 2005, and the Company has consolidated Cratos’ operations in its
      consolidated financial statements beginning May 1, 2005. Over the 8 month period
      during which Cratos’ results of operations have been consolidated with the
      Company, Cratos has generated approximately $5.2 million of revenue. Also of
      note is the fact that during the year ended December 31, 2005 Cratos signed
      a
      master services agreement with ePocket to become its exclusive implementation
      partner for software installations. As of December 31, 2005, only nominal
      amounts of revenue have been earned under this agreement, though the Company
      is
      optimistic that beginning in the first year of 2006, more significant amounts
      of
      revenue will be earned under this agreement. As a result, the Company expects
      revenues in its SIM division to continue to increase as the ePocket business
      becomes commercialized.




21


The
      Company has also seen revenue growth over the past year from its CDM division
      -
      a division that did not formally exist until mid-2004 when the Company completed
      a small acquisition of C-Comm Networks. Since that time, the Company has added
      to that business through significant investments of both capital and personnel,
      and that business has now been rebranded as the ActiveCast. It appears these
      investments are beginning to pay off. Although this division’s total revenues
      remain small relative the overall corporate totals, they are growing very
      quickly in percentage terms. Specifically, revenues in the CDM business grew
      over 300% from the year ended December 31, 2004 to the year ended December
      31,
      2005. As the CDM division has a relatively fixed expense base, once that
      division crosses break-even the profitability margins have the potential to
      be
      very strong. Incremental revenues recorded once the division achieves break-even
      are expected to be in the 40-50% range. It is the Company’s expectation that
      this growth will continue to the point that the division will acheive break-even
      in 2006.




The
      acquisition of DisclosurePlus in the first quarter of 2005 also provided the
      Company with a new revenue stream that it did not have during 2004. Revenue
      for
      this division remains quite small, but customer opportunities remain very
      encouraging and the Company feels that this division is still two to three
      years
      away from generating more substantial amounts of revenue. At the current time,
      this division continues to round out its product offering. During the year
      ended
      December 31, 2005 DisclosurePlus announced the introduction of two new products
      - Whistleblower and SedarPush.




As
      evidenced by the above, the Company has undergone a major transformation over
      the past 12 months due to the acquisitions that it has made. The integration
      of
      these acquisitions is progressing well and represents the main reason for the
      additional revenue generated during both the year ended December 31, 2005.




**Cost
      of Sales**




**Year
                ended December 31****2005**
            **2004**
            **%
                Change****4,824,840**
            **989,825**
            **387%**




Cost
      of
      sales for the year ended December 31, 2005 were $4.8 million, which consisted
      primarily of direct wages paid to consulting services staff of $4.5 million,
      and
      amortization of software licensing agreements and other direct costs of $0.3
      million. These amounts are significantly higher than during 2004 when the
      Company’s cost of sales for the year totaled $1.0 million which was principally
      comprised of direct wages for consulting staff. The vast majority of the
      increase in cost of sales in 2005 as compared to 2004 relates the recent
      addition of Cratos. Cratos is a services business, and the majority of their
      operating expenses relate to compensation costs paid to its consultants. This
      differs substantially from 2004 when the Company generated most of its revenue
      through software licensing agreements. As the cost of sale on software licenses
      is much lower than that for services revenue, the Company’s gross margin has
      decreased significantly from 2004 to 2005. Specifically, the year ended December
      31, 2005 had a gross margin of $2.6 million, or 35%, versus a gross margin
      of
      $2.6 million, or 73% during the year ended December 31, 2004. The gross margin
      percentages reflect the addition of the Cratos acquisition which has brought
      with it significant revenue growth but given the nature of that business does
      so
      at a lower gross margin. The Company expects that its gross profit percentage
      will begin to increase in future periods as the Company’s CDM revenue continues
      to increase, and as that division becomes a more substantial component of the
      Company’s overall revenue mix.




22


**Operating
      Expenses**




Total
      operating expenses for the year ended December 31, 2005 were $5.1 million versus
      $3.3 million during the year ended December 31, 2004. After these expenses,
      the
      Company recognized a loss from operations of $2.5 million in the year ended
      December 31, 2005 versus a loss from operations of $0.7 million during the
      year
      ended December 31, 2004.




The
      recent significant investments which the Company has made in both acquired
      and
      organically developed businesses are reflected in the above noted operating
      expense totals. Although these investments have resulted in larger operating
      losses than have been incurred in the prior year, management has determined
      that
      these investments were required in order to lay the foundation for the Company’s
      two operating divisions - SIM and CDM - to develop successfully.




The
      largest components of operating expenses for the first three years of 2005
      year
      were salaries and wages, consulting fees, legal and accounting and other general
      and administration expenses. These expenses are discussed below.




**Salaries
      and Wages**




**Year
                ended December 31****2005**
            **2004**
            **%
                Change****1,627,400**
            **1,222,727**
            **33%**







Salaries
      and wages in 2005 represent the cost of administration and sales and marketing
      staff except for certain contractors who are shown as consulting costs. For
      the
      year ended December 31, 2005, salaries and wages were $1.6 million as compared
      with $1.2 million during the year ended December 31, 2004, representing an
      increase of 33%. Most of the increase in the year ended December 31, 2005 as
      compared to 2004 reflects the additions made to the CDM business in terms of
      personnel. As mentioned previously, the Company acquired C-Comm Networks in
      mid-2004 to become the foundation for its messaging business, although the
      Company has continued to invest in this part of the business since that time.
      As
      the Company does not anticipate adding significant costs in this area in the
      immediate future, it is the Company’s expectation that salaries and wages should
      remain fairly constant over the first part of 2006.




23


**Consulting
      fees**




**Year
                ended December 31****2005**
            **2004**
            **%
                Change****445,039**
            **439,413**
            **1%**







For
      the
      year ended December 31, 2005, consulting fees increased 1% to $445,039 from
      $439,413 during the year ended December 31, 2004 Most of the increase in
      consulting fees paid during the year ended December 31, 2005, as compared with
      the same period in 2004 relates to the amortization of deferred consulting
      costs
      which relate to assistance in securing certain financing transactions. The
      related costs are being amortized over the period which the financing will
      be in
      place. Additionally, the Company incurred certain one-time termination costs
      to
      exit a consulting contract which the Company determined was no longer producing
      acceptable returns to the organization.




**Legal
      and Accounting**




**Year
                ended December 31****2005**
            **2004**
            **%
                Change****1,049,188**
            **459,962**
            **128%**







For
      the
      year ended December 31, 2005, legal and accounting expenses increased 128%
      to
      $1.0 million from $0.5 million during the year ended December 31, 2004. Legal
      and accounting expense includes legal costs associated with using third party
      lawyers to act on behalf of the Company in current legal matters. Additionally,
      the Company has incurred significant legal costs over the past year in an
      attempt to gain control over Infolink. During the year ended December 31, 2005
      the Company incurred approximately $0.2 million in fees relating to the Infolink
      transaction. Going forward, the Company does not expect legal cost to continue
      at this rate and should be able to experience a decline in this area. Most
      of
      the increase in legal and accounting expense in 2005 as compared with 2004
      relates to the fact that the Company recorded an expense of $454,000 relating
      to
      an award made by the arbitrator in the Cassidy lawsuit (see note 13 to the
      audited consolidated financial statements). Accounting costs include audit
      fees
      and related costs as well as costs incurred to complete periodic regulatory
      filings and these expenses comprise the balance of this expense.




24


**General
      and Administrative**




**Year
                ended December 31****2005**
            **2004**
            **%
                Change****1,243,618**
            **819,540**
            **52%**







For
      the
      year ended December 31, 2005, general and administrative expenses increased
      52%
      to $1.2 million from $0.8 million during the year ended December 31, 2004.
      The
      large increase in general and administrative expenses from 2004 to 2005 is
      related partially to the Company’s 2005 acquisitions which resulted in a larger
      infrastructure. General and administrative expenses include amounts spent to
      operate the Company’s various facilities, including rent, office expenses,
      insurance, and communications, as well as travel expenses. During the year
      ended
      December 31, 2005, the Company incurred certain expenses which it does not
      expect to incur in future periods. Specifically, the Company incurred bad debts
      of approximately $228,000, almost all of which relates to one large customer
      who
      went bankrupt. The Company does not have a history of experiencing bad debts
      and
      as a result, the Company does not view this occurrence as being indicative
      of
      expected future expenses. Additionally, during 2005, the Company incurred
      one-time expenses relating to restructuring certain elements of is management
      team totaling approximately $150,000.




**Other
      Income/Expenses**




**Year
                ended December 31****2005**
            **2004**
            **%
                Change****Gain
                on settlement of debt**
            **76,636**
            **2,000**
            **3,732%****Loss
                on Sale of Investment**
            **(78,093)**
            **—**
            **100%****Interest
                Expense**
            **(320,327)**
            **(196,858)**
            **63%****Other
                income (loss)**
            **(40,818)**
            **174,326**
            **(123%)**







25


During
      the year ended December 31, 2005 the Company realized a gain on settlement
      of
      debt of $76,636. This amount relates to debts of the Company where the
      underlying debtor agreed to convert into common shares at a premium to the
      market price at the time. This amount was offset slightly by the fair value
      of
      warrants issued during that period to parties to whom the Company was previously
      indebted to and who agreed to convert their debt to common shares of the
      Company. As part of these transactions, the Company issued these parties
      warrants to purchase common shares of the Company which expire in September
      2006.




During
      the year ended December 31, 2005, the Company received common shares in
      Silverbirch Studios as consideration for the sale of that business in 2004
      (see
      note 2). The Company disposed of these shares during 2005. The loss realized
      on
      this transaction represents the difference between the market price at the
      date
      the consideration was received and the price that the Company ultimately was
      able to realize the common shares for.




In
      the
      year ended December 31, 2005, the Company expended $320,327 in financial
      interest which was significantly higher than the $196,858 expensed in the year
      ended December 31, 2004. The increase in interest expense in 2005 as compared
      with 2004 is a result of interest incurred on a loan from a Canadian chartered
      bank along with interest incurred in relation to several short-term loans the
      Company entered into towards the end of 2004 and into 2005.




Other
      income represented a loss of $40,818 for the year ended December 31, 2005 and
      represented income of $174,326 for the year ended December 31, 2004. These
      balances are primarily the result of the fluctuations of the U.S. dollar
      relative to the U.K. pound and the Canadian dollar. Going forward, given the
      disposition of Twincentric, the Company will not continue to be significantly
      exposed to fluctuations of the U.K. pound.




**Discontinued
      Operations**




In
      the
      year ended December 31, 2005, the Company recorded a loss from discontinued
      operations of $11,908 which is comprised of a gain on the disposition of
      Silverbirch Studios of $450,558 net of a loss relating to the discontinued
      operations of Twincentric of $462,466. As there had been concern about the
      realizability of the Silverbirch consideration, the gain on Silverbirch’s
      disposition was not recognized until the consideration was received, which
      was
      in 2005. See note 2 to these consolidated financial statements. The loss
      relating to Twincentric is comprised of a gain of $13,109 on the disposition
      of
      Twincentric net of a loss from Twincentric’s operations during the year of
      $475,575. Given that Twincentric had been incurring substantial losses in the
      period prior to its disposition, the Company expects that its disposition will
      have a positive impact on operating cash flows on a forward looking
      basis.




For
      the
      year ended December 31, 2004, the Company incurred a loss from operations of
      SilverBirch of $132,419 along with a loss from operations of Twincentric of
      $8,878 such that the total loss from discontinued operations was $141,297.




From
      a
      cash flow perspective, the Company believes that this disposition of these
      two
      businesses will have a positive impact on cash flows in the future. Both
      businesses, and Twincentric in particular, incurred significant uses of
      operating cash flows, and therefore their dispositions will result in improved
      operating cash flows in the future. Neither Twincentric nor Silverbirch had
      material cash flows from either investing or financing activities.




26


**Liquidity
      and Capital Resources**




At
      December 31, 2005, the Company’s need for cash included satisfying $5,828,821 of
      current liabilities. The Company’s ability to continue as a going concern is
      dependent on its ability to raise additional funding through expansion of its
      current bank facility, an equity injection, a convertible loan and increased
      sales revenue. The Company anticipates that its cash needs over the next 12
      months will consist of $2,500,000 for general working capital. The Company
      expects that this amount will be raised through a combination of private
      placements and short-term borrowings provided by management and other related
      parties. At December 31, 2005, the Company had $113,421 of cash on hand. In
      addition, certain shareholders have also supported the Company by deferring
      the
      timing of certain payments from time-to-time or converting shareholders loans
      into equity. While there is no legal commitment for them to do so, the Company
      believes that certain shareholders will continue to support the Company in
      a
      similar manner.




The
      failure of the Company to obtain additional debt and equity funding will have
      a
      material adverse effect on the Company’s business and may force the Company to
      reorganize, reduce its investment in, or otherwise divest of one or more of
      the
      Company’s operations, or to reduce the cost of all operations to a lower level
      of expenditure thereby reducing the Company’s expected revenues and net income
      in 2006.




**Going
      Concern**




The
      Company’s Consolidated Financial Statements have been prepared on the basis that
      the Company is a going concern, which contemplates the realization of assets
      and
      the satisfaction of liabilities in the normal course of business. The Company
      incurred a net loss of $2,844,103 and a negative cash flow from operations
      of
      $1,480,840 for the year ended December 31, 2005. The Company also has a working
      capital deficiency of $1,402,388 and an accumulated deficit of $40,736,105
      at
      December 31, 2005. There is substantial doubt that the Company will continue
      as
      a going concern and will likely still incur a going concern note as at December
      31, 2006. The Consolidated Financial Statements do not include any adjustments
      that might result from the outcome of this uncertainty. Management’s plan to
      continue operations is to raise additional debt or equity capital until such
      time as the Company is able to generate sufficient operating revenues through
      its new acquisitions.




**Consolidated
      Statement of Cash Flows**




Cash
      on
      the consolidated balance sheet increased from $53,351 in the period ended
      December 31, 2004 to $113,421 at December 31, 2005.




**Net
      Cash From Operating Activities**




Net
      cash
      used in operating activities were $1,480,840 and $1,569,242 in the years ended
      December 31, 2005 and 2004, respectively. During the year ended December 31,
      2005, the Company actually used less cash through its operations than it did
      in
      2004 despite a larger loss incurred in 2004. This is a result of the fact that
      in 2004 the Company had a $2.3 million use of cash through an increase in its
      accounts receivable which had a significant impact on the year’s operational
      cash flows. During 2005, the Company had significantly more non-cash charges
      in
      its net loss than it did in 2004, and additionally had several working capital
      items such as accrued liabilities, taxes payable and other current liabilities
      provide significant sources of cash from operations.




27


**Net
      Cash From Investing Activities**




Net
      cash
      provided by investing activities during 2005 was $232,985. This amount included
      proceeds received from the Company’s sale of its investment in ePocket Inc. of
      $250,000, along with cash received from the sale of Silverbirch of $102,000
      and
      proceeds from the sale of an investment of $270,465. These included the
      acquisition of both Cratos and DisclosurePlus for total cash consideration
      of
      $303,249, as well as $86,231 of purchases of capital assets. In 2004, the
      Company’s use of cash from investing activities of $293,719 was almost
      exclusively comprised of capital asset purchases.






**Net
      Cash From Financing Activities**




Net
      cash
      provided by financing activities of $1,306,775 during 2005 was primarily
      comprised of $1,235,908 relating to net proceeds resulting from a new line
      of
      credit which the Company established during 2005 with a Canadian chartered
      bank.
      In 2004 the Company realized $2,143,714 in financing activities and this amount
      included $717,868 proceeds from debt, $510,000 proceeds from an equity financing
      line, $350,000 proceeds from the issuance of preferred shares, $555,463 received
      from related parties, and $194,749 of proceeds from bank overdraft.






**Contractual
      Obligations And Commercial Commitments**




The
      following chart sets forth ActiveCore’s contractual obligations and commercial
      commitments and the time frames for which such commitments and obligations
      come
      due.




**Payments
                Due by Period****Total**Contractual
                Obligations
            
            Total
            
            Less
                than
              1
                Year
            
            2-3
                years
            
            4-5
                Years
            
            After
              5
                YearsDebt
            
            
            396,463
            
            
            164,524
            
            
            155,538
            
            
            49,558
            
            
            26,843Facility
                Obligations
            
            
            1,943,525
            
            
            386,477
            
            
            766,670
            
            
            594,768
            
            
            195,610Leases
                Payable
            
            
            40,273
            
            
            18,788
            
            
            21,485Total
                Contractual Cash Obligations
            
            $
            2,380,261
            
            $
            569,789
            
            $
            943,693
            
            $
            644,326
            
            $
            222,453





28


**Item
      7. Financial Statements**


F
          -
          1





**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




PAGE
            F-3
            REPORTS
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMSPAGE
            F-5
            CONSOLIDATED
                BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2004PAGE
            F-6
            CONSOLIDATED
                STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED
                DECEMBER 31, 2005 AND 2004PAGE
            F-8
            CONSOLIDATED
                STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER
                31, 2005 AND 2004PAGES
            F-9
            CONSOLIDATED
                STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2005 AND
                2004PAGES
            F-11
            NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER
                31, 2005
                AND 2004


F
          -
          2


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








To
      the
      Board of Directors and shareholders of:


ActiveCore
      Technologies, Inc. (formerly IVP Technology Corporation) and
      Subsidiaries





We
      have
      audited the accompanying consolidated balance sheet of ActiveCore Technologies,
      Inc. (formerly IVP Technology Corporation) and Subsidiaries (the “Company”) as
      of December 31, 2005, and the related consolidated statements of operations,
      changes in stockholders’ equity, and cash flows for the year then ended. These
      consolidated financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. An audit
      includes examining on a test basis, evidence supporting the amounts and
      disclosures in the consolidated 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 audit provides a reasonable basis for our
      opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of ActiveCore
      Technologies, Inc. (formerly IVP Technology Corporation) and subsidiaries as
      of
      December 31, 2005 and the consolidated results of their operations, and
      their cash flows for the year then ended, in conformity with accounting
      principles generally accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As described in Note 1, to the
      consolidated financial statements, the Company has a net loss of $2,844,103
      and
      a negative cash flow from operations of $1,480,840 for the year ended December
      31, 2005 and has a working capital deficiency of $1,402,388 and an accumulated
      deficit of $40,736,105 at December 31, 2005. These matters raise substantial
      doubt about its ability to continue as a going concern. Management’s plans in
      regard to these matters are also described in Note 1. The consolidated financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.











WEINBERG
      & COMPANY, P.A.





Boca
      Raton, Florida


March
      17,
      2006





F
          -
          3




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








To
      the
      Board of Directors and shareholders of:


ActiveCore
      Technologies, Inc. (formerly IVP Technology Corporation) and
      subsidiaries





We
      have
      audited the accompanying consolidated balance sheet of ActiveCore Technologies,
      Inc. (formerly IVP Technology Corporation) and Subsidiaries (the “Company”) as
      of December 31, 2004, and the related consolidated statements of operations
      and
      comprehensive loss, changes in stockholders’ equity, and cash flows for the year
      then ended. These consolidated financial statements are the responsibility
      of
      the Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal controls over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements, assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audit provides a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of ActiveCore
      Technologies, Inc. (formerly IVP Technology Corporation) and Subsidiaries as
      of
      December 31, 2004, and the consolidated results of their operations, and
      their cash flows for the year then ended, in conformity with accounting
      principles generally accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As described in Note 1 to the
      consolidated financial statements, the Company has a net loss of $790,156 and
      a
      negative cash flow from operations of $1,569,242 for the year ended December
      31,
      2004, and has a working capital deficiency of $802,142 as at December 31, 2004.
      These matters raise substantial doubt about its ability to continue as a going
      concern. Management’s plans in regard to these matters are also described in
      Note 1. The consolidated financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.








BDO
      Dunwoody, LLP


Toronto,
      Ontario


April
      20,
      2005, except for note 2, which is as of April 4, 2006





F
          -
          4


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**




**ASSETS**December
                31, 2005
            
            December
                31, 2004**CURRENT
                ASSETS**Cash
            
            $
            113,421
            
            $
            53,351Accounts
                receivable, net (note 4)
            
            
            3,701,028
            
            
            2,390,549Other
                receivables
            
            
            128,095
            
            
            20,992Deferred
                consulting and financing expense
            
            
            352,750
            
            
            —Prepaid
                expenses and other current assets
            
            
            131,139
            
            
            143,213Current
                assets from discontinued operations (note 2)
            
            
            —
            
            
            318,171Total
                Current Assets
            
            
            4,426,433
            
            
            2,926,276**CAPITAL
                ASSETS, NET (NOTE 5)**
            
            
            336,256
            
            
            306,282**OTHER
                ASSETS**Goodwill
                and other intangible assets, net (note 6)
            
            
            5,169,732
            
            
            868,894Investments
                at cost (note 7)
            
            
            —
            
            
            262,648Deferred
                financing expense
            
            
            125,505
            
            
            175,009Deferred
                equity line commitment fees
            
            
            —
            
            
            16,092Other
                assets from discontinued operations (note 2)
            
            
            —
            
            
            933,425Total
                Other Assets
            
            
            5,295,237
            
            
            2,256,068**TOTAL
                ASSETS**
            
            $
            10,057,926
            
            $
            5,488,626**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Line
                of credit (note 12)
            
            $
            1,253,474
            
            $
            17,566Accounts
                payable
            
            
            2,162,663
            
            
            702,672Accrued
                liabilities
            
            
            1,099,979
            
            
            354,077Taxes
                payable (note 10)
            
            
            675,871
            
            
            957,011Leases
                payable, current portion
            
            
            18,788
            
            
            22,093Debt,
                current portion (note 8)
            
            
            164,524
            
            
            857,161Deferred
                tax liability
            
            
            340,736
            
            
            —Due
                to related parties (note 9)
            
            
            11,863
            
            
            113,744Other
                current liabilities
            
            
            100,923
            
            
            27,247Current
                liabilities of discontinued operations (note 2)
            
            
            —
            
            
            676,847Total
                Current Liabilities
            
            
            5,828,821
            
            
            3,728,418**LONG-TERM
                LIABILITIES**Long-term
                debt (note 8)
            
            
            231,939
            
            
            491,622Leases
                payable, long-term
            
            
            21,485
            
            
            30,447Redeemable
                preferred shares (note 11)
            
            
            375,000
            
            
            —Total
                Long-Term Liabilities
            
            
            628,424
            
            
            522,069**TOTAL
                LIABILITIES**
            
            
            6,457,245
            
            
            4,250,487**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS’
                EQUITY**Preferred
                stock, $.001 par value, 50,000,000 shares authorizedPreferred
                Stock issued and outstanding (note 14)Series
                A, 0 and 8,333,333 shares as of December 31, 2005 and 2004 respectively
                (aggregate liquidation at $250,000 and $0 respectively)
            
            
            —
            
            
            8,333Series
                B, 0 and 4,169,667 shares as of December 31, 2005 and 2004 respectively
                (aggregate liquidation at $250,000 and $0
                respectively)
            
            
            —
            
            
            4,168Common
                stock, $0.01 par value, 500,000,000 shares authorized, 79,242,114
                and
                46,711,708 shares issued and outstanding at December 31,2004 and
                2003,
                respectively
            
            
            792,422
            
            
            467,117Common
                stock to be issued (returned), 5,173,105 and (252,725) shares as
                of
                December 31, 2005 and 2004 respectively (note 14)
            
            
            311,025
            
            
            (68,783
            )Additional
                paid-in capital
            
            
            43,137,898
            
            
            39,137,498Accumulated
                deficit
            
            
            (40,736,105
            )
            
            (37,892,002
            )Treasury
                stock
            
            
            (112,000
            )
            
            —-Accumulated
                other comprehensive loss
            
            
            312,441
            
            
            (256,204
            )Subscription
                receivable - preferred
            
            
            —
            
            
            (150,000
            )Deferred
                compensation
            
            
            (105,000
            )
            
            (11,988
            )Total
                Stockholders' Equity
            
            
            3,600,681
            
            
            1,238,139**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            10.057,926
            
            $
            5,488,626





See
      accompanying notes to consolidated financial statements.


F
          -
          5




**ACTIVECORE
          TECHNOLOGIES, INC.**
 **CONSOLIDATED
          STATEMENTS OF OPERATIONS** AND COMPREHENSIVE
          LOSS
 **FOR
          THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




2005
              
              2004**REVENUES**
              
              $
              7,417,874
              
              $
              3,630,150**COST
                  OF SALES**Direct
                  wages
              
              
              4,487,766
              
              
              835,242Amortization
                  of licensing agreements and other costs
              
              
              337,074
              
              
              154,583Total
                  Cost of Sales
              
              
              4,824,840
              
              
              989,825**GROSS
                  PROFIT**
              
              
              2,593,034
              
              
              2,640,325**OPERATING
                  EXPENSES**Salaries
                  and wages
              
              
              1,627,400
              
              
              1,222,727Consulting
                  fees
              
              
              445,039
              
              
              439,413Research
                  and development
              
              
              220,000
              
              
              141,063Legal
                  and accounting
              
              
              1,049,188
              
              
              459,962General
                  and administrative
              
              
              1,243,618
              
              
              819,540Financial
                  advisory fees
              
              
              65,958
              
              
              30,967Amortization
                  and depreciation
              
              
              490,832
              
              
              192,450Total
                  Operating Expenses
              
              
              5,142,035
              
              
              3,306,122**LOSS
                  FROM OPERATIONS**
              
              
              (2,549,001
              )
              
              (665,797
              )**OTHER
                  INCOME (EXPENSE)**Gain
                  on settlement of debt
              
              
              76,636
              
              
              2,000Loss
                  on sale of investment (note 2)
              
              
              (78,093
              )
              
              —Interest
                  income
              
              
              51,808
              
              
              37,470Interest
                  expense
              
              
              (320,327
              )
              
              (196,858
              )Other
                  income (loss)
              
              
              (40,818
              )
              
              174,326Total
                  Other Income (Expense)
              
              
              (310,794
              )
              
              16,938**LOSS
                  FROM CONTINUING OPERATIONS BEFORE INCOME TAXES**
              
              
              (2,859,795
              )
              
              (648,859
              )Income
                  taxes
              
              
              (27,600
              )
              
              —**LOSS
                  FROM CONTINUING OPERATIONS**
              
              
              (2,832,195
              )
              
              (648,859
              )**Discontinued
                  Operations: (See note 2):**Gain
                  (loss) from disposal of discontinued operations
              
              
              463,667
              
              
              (132,419
              )Loss
                  from discontinued operations
              
              
              (475,575
              )
              
              (8,878
              )Loss
                  from discontinued operations, net
              
              
              (11,908
              )
              
              (141,297
              )**NET
                  LOSS**
              
              $
              (2,844,103
              )
              $
              (790,156
              )Preferred
                  share dividend
              
              
              (36,092
              )
              
              (7,300
              )Benefit
                  received from conversion of preferred shares (see note 14)
              
              
              208,333
              
              
              **—****NET
                  LOSS AVAILABLE TO COMMON SHAREHOLDERS**
              
              $
              (2,671,862
              )
              $
              (797,456
              )**OTHER
                  COMPREHENSIVE GAIN (LOSS)**Foreign
                  currency translation gain (loss)
              
              
              568,645
              
              
              (97,618
              )**COMPREHENSIVE
                  LOSS**
              
              $
              (2,275,458
              )
              $
              (887,774
              )**WEIGHTED
                  AVERAGE NUMBER OF SHARES OUTSTANDING -**
                **BASIC
                  AND DILUTED**
              
              
              59,566,928
              
              
              41,133,879
  See
          accompanying notes to consolidated financial statements.
 F
            -
            6
 **ACTIVECORE
            TECHNOLOGIES, INC.**
 **CONSOLIDATED
            STATEMENTS OF OPERATIONS** AND COMPREHENSIVE
            LOSS
 **FOR
            THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
 2005
              
              2004**LOSS
                  PER COMMON SHARE FROM CONTINUING OPERATIONS -**
                **BASIC
                  AND DILUTED**
              
              $
              (0.04
              )
              $
              (0.02
              )**LOSS
                  PER COMMON SHARE FROM DISPOSAL OF DISCONTINUED**
                **OPERATIONS
                  - BASIC AND DILUTED**
              
              $
              (0.00
              )
              $
              (0.00
              )**LOSS
                  PER COMMON SHARE FROM DISCONTINUED OPERATIONS -**
                **BASIC
                  AND DILUTED**
              
              $
              (0.00
              )
              $
              (0.00
              )**NET
                  LOSS PER COMMON SHARE ATTRIBUTABLE TO COMMON**
                **SHAREHOLDERS
                  - BASIC AND DILUTED**
              
              $
              (0.04
              )
              $
              (0.02
              )





See
        accompanying notes to consolidated financial statements.


F
          -
          7




**ACTIVECORE
        TECHNOLOGIES, INC.**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


**Preferred
                    Stock**
                
                
                
                
                
                **Common****Stock
                    to be**
                  **Issued
                    / (Returned)****Shares
                    Series A**
                
                **Amount
                    Series A**
                
                **Shares
                    Series B**
                
                **Amount
                    Series B**
                
                **Common
                    Shares**
                
                **Common
                    Stock Amount**
                
                **Shares**
                **Amount**
                
                **Treasury
                    Stock**
                
                **Additional
                    Paid-in Capital**
                
                **Accumulated
                    Deficit**
                
                **Other
                    Comprehensive Income (Loss)**
                
                **Subscription
                    Receivable Preferred
                    Stock**
                
                **Deferred
                    Compensation**
                
                **Total****Balance,
                    December 31, 2003**
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                28,620,770
                
                
                286,207
                
                
                1,727,273
                
                380,000
                
                
                
                
                
                36,382,766
                
                
                (37,094,546
                )
                
                (158,586
                )
                
                —
                
                
                (48,976
                )
                
                (253,135
                )Stock
                    issued for services
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,815,000
                
                
                18,150
                
                
                —
                
                —
                
                
                —
                
                
                296,100
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                314,250Stock
                    Issued for compensation
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,130,000
                
                
                11,300
                
                
                —
                
                —
                
                
                —
                
                
                199,700
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                211,000Stock
                    issued for stockholder debt
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                6,603,627
                
                
                66,036
                
                
                (1,727,273
                )
                (380,000
                )
                
                —
                
                
                924,288
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                610,324Stock
                    Issued for debt repayment
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                4,343,866
                
                
                43,439
                
                
                —
                
                —
                
                
                —
                
                
                699,921
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                743,360Stock
                    issued for payment of accrued liability
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                266,600
                
                
                2,667
                
                
                —
                
                —
                
                
                —
                
                
                55,333
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                58,000Stock
                    Issued for acquisitions
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                4,631,845
                
                
                46,318
                
                
                —
                
                —
                
                
                —
                
                
                794,891
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                841,209Cancellation
                    of treasury stock
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (1,100,000
                )
                
                (11,000
                )
                
                —
                
                —
                
                
                —
                
                
                (759,000
                )
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (770,000
                )Purchase
                    price adjustment on acquisition by stock
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                
                
                
                (194,175
                )
                (60,000
                )
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (60,000
                )Series
                    A Preferred Issued for cash
                
                
                8,333,333
                
                
                8,333
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                241,667
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                250,000Series
                    B Preferred Issued for Subscription
                    Receivable
                
                
                —
                
                
                —
                
                
                4,167,667
                
                
                4,168
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                245,832
                
                
                —
                
                
                —
                
                
                (150,000
                )
                
                —
                
                
                100,000Stock
                    issued for cash
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                400,000
                
                
                4,000
                
                
                —
                
                —
                
                
                —
                
                
                56,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                60,000Unpaid
                    Subscription
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (58,550
                )
                (8,783
                )
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (8,783
                )Deferred
                    cost recognized
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                36,988
                
                
                36,988Net Loss
                    for period
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                (790,156
                )
                
                —
                
                
                —
                
                
                —
                
                
                (790,156
                )Series
                    A Preferred Dividend
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                (7,300
                )
                
                —
                
                
                —
                
                
                —
                
                
                (7,300
                )Cumulative
                    translation adjustment
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (97,618
                )
                
                —
                
                
                —
                
                
                (97,618
                )Comprehensive
                    Loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                0**Balance,
                    December 31, 2004**
                
                
                **8,333,333**
                
                **$**
                **8,333**
                
                
                **4,167,667**
                
                **$**
                **4,168**
                
                
                **46,711,708**
                
                **$**
                **467,117**
                
                
                **(252,725**
                **$**
                **(68,783**
                **)**
                **$**
                —
                
                **$**
                **39,137,498**
                
                **$**
                **(37,892,002**
                **)**
                **$**
                **(256,204**
                **)**
                **$**
                **(150,000**
                **)**
                **$**
                **(11,988**
                **)**
                
                **1,238,139**0Stock
                    issued for employment services
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                750,000
                
                
                7,500
                
                
                —
                
                —
                
                
                —
                
                
                105,000
                
                
                —
                
                
                —
                
                
                —
                
                
                (75,000
                )
                
                37,500Stock
                    issued for director fees
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                480,000
                
                
                4,800
                
                
                —
                
                —
                
                
                —
                
                
                139,200
                
                
                —
                
                
                —
                
                
                —
                
                
                (120,000
                )
                
                24,000Stock
                    issued for consulting services
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                975,000
                
                
                9,750
                
                
                —
                
                —
                
                
                —
                
                
                114,750
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                124,500Stock
                    issued for financing services
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                5,000,000
                
                
                50,000
                
                
                —
                
                —
                
                
                —
                
                
                480,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                530,000Stock
                    issued
                  forsettlement
                  ofdebt
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                9,080,285
                
                
                90,803
                
                
                1,259,163
                
                88,141
                
                
                
                
                
                795,848
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                974,792Warrants
                    issued in conjunction with debt conversion
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                74,463
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                74,463Stock
                    issued for redemption of preference shares
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                2,052,448
                
                
                20,524
                
                
                —
                
                —
                
                
                —
                
                
                133,668
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                154,192Stock
                    issued for beneficial owner roundup on reverse
                    split
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                50,010
                
                
                500
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                500Stock
                    consideration received through sale of
                    Twincentric
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                (112,000
                )
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (112,000
                )Stock
                    issued for acquisition
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,200,000
                
                
                12,000
                
                
                —
                
                —
                
                
                —
                
                
                252,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                264,000Stock
                    issued on Cratos acquisition
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                9,021,030
                
                
                90,210
                
                
                —
                
                —
                
                
                —
                
                
                1,857,577
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,947,787Stock
                    issued to vendor
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                3,921,633
                
                
                39,217
                
                
                —
                
                —
                
                
                —
                
                
                363,152
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                402,369Conversion
                    of preferred shares
                
                
                (8,333,333
                )
                
                (8,333
                )
                
                (4,167,667
                )
                
                (4,168
                )
                
                —
                
                
                —
                
                
                4,166,667
                
                291,667
                
                
                —
                
                
                (279,166
                )
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                0Deferred
                    cost recognized
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                101,988
                
                
                101,988Preferred
                    stock subscription received
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                150,000
                
                
                —
                
                
                150,000Net
                    loss for period
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                (2,844,103
                )
                
                —
                
                
                —
                
                
                —
                
                
                (2,844,103
                )Preferred
                    stock dividend
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                (36,092
                )
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (36,092
                )Cumulative
                    translation adjustment
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                568,645
                
                
                —
                
                
                —
                
                
                568,645**Balance,
                    December 31, 2005**
                
                
                —
                
                **$**
                —
                
                
                —
                
                **$**
                —
                
                
                **79,242,114**
                
                **$**
                **792,422**
                
                
                **5,173,105**
                **$**
                **311,025**
                
                **$**
                **(112,000**
                **)**
                **$**
                **43,137,898**
                
                **$**
                **(40,736,105**
                **)**
                **$**
                **312,441**
                
                **$**
                —
                
                **$**
                **(105,000**
                **)**
                
                **3,600,681**
  See
        accompanying notes to these Consolidated Financials Statements
  F
            -
            8
 **TECHNOLOGIES,
        INC.**


**CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




2005
            
            2004**CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (2,844,103
            )
            $
            (790,156
            )Adjustments
                to reconcile net loss from continuing operations to net cash used
                in
                operating activities:Depreciation
            
            
            142,186
            
            
            95,031Gain
                on sales of discontinued operations
            
            
            (463,667
            )
            
            --Loss
                on sale of investment
            
            
            78,093
            
            
            --Gain
                on settlement of debt
            
            
            (76,636
            )
            
            --Bad
                debt expense
            
            
            228,607
            
            
            2,059Interest
                paid with stock
            
            
            -
            
            
            85,159Amortization
                of intangible assets
            
            
            594,858
            
            
            208,670Amortization
                of commitment fees
            
            
            -
            
            
            96,576Amortization
                of consulting contracts and other deferred charges
            
            
            244,382
            
            
            351,238Stock
                issued for services and compensation
            
            
            303,688
            
            
            211,000Changes
                in operating assets and liabilities, net of effects of
                acquisitions:Decrease
                (increase) in receivables
            
            
            69,649
            
            
            (2,348,578
            )Decrease
                (increase) in prepaid expenses and other current assets
            
            
            (190,865
            )
            
            56,030Decrease
                in accounts payable
            
            
            (781,940
            )
            
            (35,333
            )Increase
                in accrued liabilities
            
            
            900,866
            
            
            15,475Increase
                in taxes payable
            
            
            157,630
            
            
            515,959Increase
                in other current liabilities
            
            
            130,466
            
            
            19,518Increase
                (decrease) in deferred consulting fees
            
            
            3,708
            
            
            (51,890
            )Decrease
                in other receivables
            
            
            22,238
            
            
            --Net
                cash used in operating activities
            
            
            (1,480,840
            )
            
            (1,569,242
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Purchase
                of capital assets
            
            
            (86,231
            )
            
            (281,071
            )Proceeds
                from sale of investment in ePocket, Inc.
            
            
            250,000
            
            
            --Proceeds
                from Silverbirch’s discontinued operations
            
            
            102,000
            
            
            --Proceeds
                from sale of investment
            
            
            270,465Acquisition
                of Cratos Technologies Solutions Inc.
            
            
            (178,249
            )
            
            --Acquisition
                of DisclosurePlus
            
            
            (125,000
            )
            
            --Acquisition
              Costs
            
            
            --
            
            
            (12,648
            )Net
                cash provided by (used in) investing activities
            
            
            232,985
            
            
            (293,719
            )





See
      accompanying notes to consolidated financial statements.


F
          - 9


**ACTIVECORE
      TECHNOLOGIES, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**







2005
            
            2004**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from line of credit
            
            
            2,572,718
            
            
            —Repayments
                on line of credit
            
            
            (1,336,810
            )
            
            —Proceeds
                from debt
            
            
            —
            
            
            717,868Repayment
                of debt, net
            
            
            (187,261
            )Proceeds
                from equity line
            
            
            —
            
            
            510,000Payment
                on notes payable
            
            
            —
            
            
            (226,101
            )Payment
                of convertible debentures
            
            
            —
            
            
            —Proceeds
                from bank overdraft
            
            
            129,744
            
            
            194,749Proceeds
                from issuance of restricted common shares
            
            
            —
            
            
            51,217Proceeds
                from issuance of preferred shares
            
            
            —
            
            
            350,000Proceeds
                from preferred share subscription
            
            
            150,000
            
            
            —Proceeds
                from related parties
            
            
            76,296
            
            
            555,463Payments
                to related parties
            
            
            (65,253
            )Payments
                from capital leases
            
            
            (32,659
            )
            
            (9,482
            )Net
                cash provided by financing activities
            
            
            1,306,775
            
            
            2,143,714EFFECT
                OF FOREIGN CURRENCY TRANSLATION ON CASH
            
            
            1,150
            
            
            (227,402
            )**NET
                INCREASE IN CASH**
            
            
            60,070
            
            
            53,351**CASH -
                BEGINNING OF YEAR**
            
            
            53,351
            
            
            —**CASH
                - END OF YEAR**
            
            $
            113,421
            
            $
            53,351**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid for interest
            
            $
            169,770
            
            $
            —Cash
                paid for income taxes
            
            $
            —
            
            $
            —Equipment
                purchased under capital leases
            
            $
            16,703
            
            $
            28,475Common
                stock issued to satisfy common stock to be issued
            
            $
            —
            
            $
            380,000Issuance
                of shares relating to acquisitions and investment (see note 3 for
                details
                of the assets acquired and
              liabilities
                assumed for the Company’s acquisitions)
            
            $
            2,211,787
            
            $
            841,209Common
                stock issued relating to financing services
            
            $
            530,000
            
            $
            —Common
                stock Issued to vendor
            
            $
            402,369
            
            $
            —Common
                stock Issued to redeem mandatorily redeemable preferred
                shares
            
            $
            154,192
            
            $
            —Common
                stock issued relating to employment services
            
            $
            112,500
            
            $
            —Common
                stock issued for consulting services and director fees
            
            $
            268,500
            
            $
            211,000Common
                stock issued for payment of debt and accrued interest
                thereon
            
            $
            886,651
            
            $
            791,360Common
                stock issued for payment of amounts due to related parties
            
            $
            —
            
            $
            610,324Common
                stock issued to acquire other income producing assets
            
            $
            —
            
            $
            314,250Common
                stock to be issued for payment of debt and accrued
                interest
            
            $
            88,141
            
            $
            —Treasury
                stock acquired in sale of Twincentric
            
            $
            112,000
            
            $
            —Stock
                received as consideration for Silverbirch disposition
            
            $
            348,558
            
            $
            —








See
      accompanying notes to consolidated financial statements.


F
          - 10


**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


**NOTE
      1**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




***Description
      of Business***


ActiveCore
      Technologies, Inc. (“ActiveCore” or the “Company”) is a Nevada registered
      Company with its head office in Toronto, Canada, and operations in Canada and
      the United States. The Company has organized itself into two distinct divisions
      to deliver its products and services. The Systems Integration and Migration
      (SIM) division focuses on large projects in the financial services, insurance,
      healthcare, education and manufacturing industries. The Corporate Disclosure
      and
      Messaging (CDM) division is focused on working with these same and additional
      customers to provide them with a range of communication and information
      distribution based products that allow them to leverage existing corporate
      information and share it with their customers, employees and other stakeholders
      and facilitates their move towards a Smart Enterprise.




***Principles
      of Consolidation***


The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries. All significant inter-company transactions and
      balances have been eliminated upon consolidation.




***Basis
      of Presentation and Going Concern***


The
      consolidated financial statements are expressed in United States dollars and
      have been prepared in accordance with accounting principles generally accepted
      in the United States of America.




Our
      independent auditors have issued a going concern opinion on our consolidated
      financial statements that raise substantial doubt about our ability to continue
      as a going concern.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. The Company has a net loss of
      $2,844,103 and a negative cash flow from operations of $1,480,840 for the year
      ended December 31, 2005 and has a working capital deficiency of $1,402,388
      and
      an accumulated deficit of $40,736,105 at December 31, 2005. These matters raise
      substantial doubt about its ability to continue as a going concern. The
      consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.





The
      Company’s ability to continue as a going concern is dependent on its ability to
      raise additional debt and equity financing and to implement its business plan
      to
      market and sell its various enterprise software and services. At the current
      time, management anticipates that it will be able to address its need for
      financing through the execution of private placements of the Company’s shares to
      both related and unrelated parties.




The
      consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.




During
      the year ended December 31, 2005, the Company completed a reverse share split
      on
      a 10:1 basis. All numbers contained in this Annual Report on Form 10-KSB have
      given effect to this reverse share split.




***Business
      Combinations and Acquisitions***


The
      Company accounts for acquisitions of companies in accordance with Financial
      Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards
      (“SFAS”) No. 141, “Business Combinations” (“SFAS 141”). The Company allocates
      the purchase price of an acquired business, on a preliminary basis, to the
      identified assets and liabilities acquired based on their estimated fair values
      at the dates of acquisition. All remaining amounts are allocated to goodwill.
      The purchase price allocations are considered preliminary until the Company
      has
      obtained the necessary information to complete its allocation. While the time
      required to obtain the necessary information varies with the circumstances
      of
      each specific acquisition, the period for finalizing purchase price allocations
      do not exceed one year from the date of acquisition. Adjustments to the
      allocation of the purchase price may decrease the amounts allocated to goodwill
      which may result in higher depreciation or amortization expense in future
      periods. The value of shares issued in connection with an acquisition is based
      on the average market price of the Company’s common stock during the five day
      period consisting of two days before, and after the day the terms of the
      acquisition were agreed upon and announced.




F
          - 11


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


***Reclassifications***


Certain
      reclassifications have been made to previously reported amounts to conform
      to
      the current year’s presentation.




***Foreign
      Currency Transactions***


Assets
      and liabilities of foreign subsidiaries, whose functional currency is the local
      currency, are translated at year-end exchange rates. Income and expense items
      are translated at the average rates of exchange prevailing during the year.
      The
      adjustments resulting from translating the financial statements of such foreign
      subsidiaries are recorded as a component of accumulated other comprehensive
      income (loss) in stockholders’ equity. Foreign currency transaction gains or
      losses are reported in results of operations.




***Comprehensive
      Income (Loss)***


Comprehensive
      income (loss) represents the change in net assets of a business enterprise
      during a period from transactions and other events and circumstances from
      non-owner sources. Comprehensive income (loss) of the Company includes net
      income adjusted for the change in foreign currency translation
      adjustments.




***Use
      of Estimates***


The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and the disclosure of
      contingent assets and liabilities at the dates of the financial statements
      and
      the reported amounts of revenues and expenses during the reporting periods.
      Actual amounts could differ significantly from these estimates.




***Fair
      Value of Financial Instruments***


The
      fair
      value of a financial instrument is the amount at which the instrument could
      be
      exchanged in a current transaction between willing parties other than in a
      forced sale or liquidation.




The
      carrying amounts of the Company’s financial
      instruments, including cash, accounts receivable, accounts payable, debt, other
      receivables, prepaids, due to related parties, accrued liabilities, taxes
      payable and other current
      laibilities approximate fair value because of their short maturities. The
      carrying amount of the Company’s lines of credit approximates fair value because
      the interest rates of the lines of credit are based on floating rates identified
      by reference to market rates. The carrying amounts of the Company’s loans and
      notes payable approximate the fair value of such instruments based upon
      management’s best estimate of interest rates that would be available to the
      Company for similar debt obligations.


F
          - 12


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




***Concentration
      Of Credit Risk***


The
      Company maintains its cash in bank deposit accounts, which, at times, may exceed
      federally insured limits. The Company has not experienced any losses in such
      accounts and believes it is not exposed to any significant credit risk on cash
      and cash equivalents.




***Allowances
      for Doubtful Accounts*** ****


The
      Company makes judgments as to the ability to collect outstanding receivables
      and
      provide allowances for the portion of receivables when collection becomes
      doubtful. Provisions are made based upon a specific review of all significant
      outstanding invoices. For those invoices not specifically reviewed, provisions
      are provided at differing rates, based upon the age of the receivable. In
      determining these percentages, the Company analyzes historical collection
      experience and current economic trends. If the historical data used to calculate
      the allowance provided for doubtful accounts does not reflect the future ability
      to collect outstanding receivables, additional provisions for doubtful accounts
      may be needed and the future results of operations could be materially
      affected.




***Capital
      Assets***


Office
      equipment, furniture and fixtures are depreciated using the straight-line method
      over their estimated lives ranging from five to seven years. Computer equipment
      and software are depreciated using the straight-line method over two to three
      years. Leasehold improvements are depreciated using a straight-line basis over
      the lesser of the life or term of the lease. The cost of additions and
      betterments are capitalized, and repairs and maintenance costs are charged
      to
      operations in the periods incurred. When depreciable assets are retired or
      sold,
      the cost and related allowances for depreciation are removed from the accounts
      and the gain or loss is recognized. All capital assets are recorded at cost
      less
      accumulated depreciation.




***Capitalized
      Software Development Costs***


The
      Company capitalizes internal software development costs, as well as other
      content costs, subsequent to establishing technological feasibility of a title.
      Capitalized software development costs represent the costs associated with
      the
      internal development of the Company’s publishing products. Amortization of such
      costs as a component of cost of sales is recorded on a product by product basis
      based on the greater of the proportion of current year sales to total of current
      and estimated future sales for the title or the straight-line method over the
      remaining estimated useful life of the title. The Company continually evaluates
      the recoverability of capitalized software costs and will charge to cost of
      sales any amounts that are deemed unrecoverable or for projects that it will
      abandon. Development costs incurred prior to establishing technological
      feasibility are expensed in the period incurred. No software development costs
      were capitalized during either 2004 or 2005.





***Impairment
      of long-lived assets***


The
      Company accounts for the impairment and disposition of long-lived assets in
      accordance with FASB SFAS No. 144, “Accounting for Impairment or Disposal of
      Long-Lived Assets” (“SFAS 144”). The Company tests long-lived assets or asset
      groups, such as capital assets and definite lived intangible assets, for
      recoverability when events or changes in circumstances indicate that their
      carrying amount may not be recoverable. Circumstances which could trigger a
      review include, but are not limited to: significant adverse changes in the
      business climate or legal factors; current period cash flow or operating losses
      combined with a history of losses or a forecast of continuing losses associated
      with the use of the asset; and a current expectation that the asset will more
      likely than not be sold or disposed of before the end of its estimated useful
      life.




F
          - 13





**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**






Recoverability
      is assessed based on comparing the carrying amount of the asset to the aggregate
      pre-tax undiscounted cash flows expected to result from the use and eventual
      disposal of the asset or asset group. An impairment is recognized when the
      carrying amount is not recoverable and exceeds the fair value of the asset
      or
      asset group. The impairment loss, if any, is measured as the amount by which
      the
      carrying amount exceeds fair value. No impairment has been recorded by the
      Company during either 2005 or 2004.




***Acquired
      intangibles***


This
      category consists of acquired technology and contractual relationships
      associated with various acquisitions, as well as trademarks and patents.




Acquired
      technology is initially recorded at fair value based on the present value of
      the
      estimated net future income-producing capabilities of software products acquired
      on acquisitions. Acquired technology is amortized over its estimated useful
      life
      on a straight-line basis.




Contractual
      relationships represent relationships that the Company has with certain
      customers on contractual or legal rights and are considered separable. These
      contractual relationships were acquired by the Company through business
      combinations and were initially recorded at their fair value based on the
      present value of expected future cash flows. Contractual relationships are
      amortized on a straight-line basis over their useful lives.




The
      Company continually evaluates the remaining useful life of its intangible assets
      being amortized to determine whether events and circumstances warrant a revision
      to the remaining period of amortization.




***Goodwill***


FASB
      SFAS
      No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), requires that
      goodwill and other intangible assets with indefinite useful lives be tested
      for
      impairment annually or earlier if events or changes in circumstances indicate
      that the carrying amount of these assets may not be recoverable.




In
      accordance with SFAS 142, the Company does not amortize goodwill. The Company
      performed, in accordance with SFAS 142, its annual impairment analysis of
      goodwill as of October 31, 2005.




***Investments***


Equity
      investments in which the Company exercises significant influence but does not
      control and is not the primary beneficiary are accounted for using the equity
      method. Investments in which the Company is not able to exercise significant
      influence over the investee are accounted for under the cost
      method.




***Research
      and Development Costs***


Research
      and development costs internally incurred in creating computer software to
      be
      sold, licensed or otherwise marketed, are expensed as incurred unless they
      meet
      the criteria for deferral and amortization, described in FASB SFAS No. 86
“Accounting for the Costs of Corporate Software to be Sold, Released, or
      Otherwise Marketed” (“SFAS 86”). In accordance with SFAS 86, costs related to
      research, design and development of products are charged to expenses as incurred
      and capitalized between the dates that the product is considered to be
      technologically feasible and is considered to be ready for general release
      to
      customers.




F
          - 14





**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**






In
      the
      Company’s historical experience, the dates relating to the achievement of
      technological feasibility and general release of the product have substantially
      coincided. In addition, no significant costs are incurred subsequent to the
      establishment of technological feasibility. As a result the Company does not
      capitalize any research and development costs relating to internally developed
      software to be sold, licensed or otherwise marketed.




***Income
      Taxes***


Deferred
      tax assets and liabilities arise from temporary differences between the tax
      bases of assets and liabilities and their reported amounts in the consolidated
      financial statements that will result in taxable or deductible amounts in future
      years. These temporary differences are measured using enacted tax rates. A
      valuation allowance is recorded to reduce deferred tax assets to the extent
      that
      management considers it is more likely than not that a deferred tax asset will
      not be realized. In determining the valuation allowance, management considers
      factors such as the reversal of deferred income tax liabilities, projected
      taxable income, and the character of income tax assets and tax planning
      strategies. A change to these factors could impact the estimated valuation
      allowance and income tax expense.




In
      addition, the Company is subject to examinations by taxation authorities of
      the
      jurisdictions in which the Company operates in the normal course of operations.
      The Company regularly assesses the status of these examinations and the
      potential for adverse outcomes to determine the adequacy of the provision for
      income and other taxes.




***Stock-Based
      Compensation***


The
      Company accounts for stock based compensation to employees in accordance with
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees”. Under APB 25, no compensation expense is recorded when the terms of
      the award are fixed and the exercise price of the employee stock option equals
      or exceeds the fair value of the underlying stock on the date of grant. The
      Company adopted the disclosure-only provisions of No. 123, “Accounting for
      Stock-Based Compensation”. The Company has no stock options issued to employees.




The
      company accounts for its stock-based compensation issued to non-employees for
      services based on a fair value method. The Company has only issued fully vested,
      non-forfietable awards of stock for services and accordingly the compensation
      is
      measured at the market value of the stock as at the date of grant. Compensation
      expense is recognized over the length of the related contract
      period.




***Revenue
      Recognition***


A
      significant portion of all of the Company's net sales are derived from
      commercial software development and sales activities, which are subject to
      increasing competition, rapid technological change and evolving customer
      preferences, often resulting in the frequent introduction of new products and
      short product lifecycles. Accordingly, the Company's profitability and growth
      prospects depend upon its ability to continually acquire, develop and market
      new, commercially successful software products and obtain adequate financing.
      If
      the Company is unable to continue to acquire, develop and market commercially
      successful software products, its operating results and financial condition
      could be materially adversely affected in the near future .




F
          - 15





**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**






The
      Company recognizes revenue for software sales in accordance with Statement
      of
      Position ("SOP") 97-2 "Software Revenue Recognition", as amended by SOP 98-9
      "Modification of SOP 97-2 Software Revenue Recognition with respect to Certain
      Transactions." SOP 97-2 provides guidance on applying generally accepted
      accounting principles in recognizing revenue on software transactions. SOP
      98-9
      deals with the determination of vendor specific objective evidence (“VSOE”) of
      fair value in multiple element arrangements, such as maintenance agreements
      sold
      in conjunction with software packages. For the 2005 and 2004 the Company does
      not have any multi-element arrangements that would require it to establish
      VSOE
      for each element, nor does the Company have any sales activity that requires
      the
      contract method of accounting. The Company's software transactions generally
      include only one element, the commercial software under license. The Company
      recognizes revenue when the price is fixed and determinable; there is persuasive
      evidence of an arrangement, the fulfillment of its obligations under any such
      arrangement and determination that collection is probable. Accordingly, revenue
      is recognized when the license or title and all risks of loss are transferred
      to
      the customer, which is generally upon receipt by customer.




Service
      revenues consist of revenues from consulting and implementation, and integration
      services. These services are set forth in the contractual arrangements such
      that
      the total price of the customer arrangement is expected to vary as a result
      of
      the inclusion or exclusion of these services. These consulting and
      implementation services contracts are both time and materials based as well
      as
      fixed fee based. For fixed fee consulting engagements, the percentage of
      completion method is applied to these contracts that involve the provision
      of
      services relating to the design or building of complex systems. Under this
      method, the percentage of completion is calculated based on actual hours
      incurred compared to the estimated total hours for the services under the
      arrangement.




The
      Company's payment arrangements with its customers provide primarily multi-month
      terms unless the purchase price is relatively low. As a result of the
      multi-month terms an imputed interest cost accounting for the net present value
      of the terms was deducted in determining the amount of revenue and receivable
      recognized.




The
      Company recognizes revenue in the period in which the service is performed
      and
      collection is reasonably assured.




***Rebate
      Accrual***


The
      Company has a significant customer associated with its SIM division for which
      it
      operates a rebate program. This program allows this customer to earn rebates
      which can be redeemed towards consulting engagements in the subsequent year.
      The
      customer earns these rebates based on remitting payment for current projects
      within a specified time period. The Company has recorded an accrual, based
      on
      its best estimate of this future liability, which has been included on its
      Consolidated Balance Sheet as an accrued liability. In determining the
      appropriate amount of this accrual at reporting dates, the Company considers
      numerous factors, including this customer’s history at both earning these
      rebates and redeeming them within the required period before they
      expire.





***Recent
      Accounting Pronouncements***


In
      December 2004 the FASB issued SFAS No. 123 (revised 2004), Shares - Based
      Payment, (“SFAS No. 123 R”), which amends, “Accounting for Stock Based
      Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued
      to
      Employees. SFAS No. 123 (R) requires compensation expense to be recognized
      for
      all share based payments made to employees based on the fair value of the award
      at the date of grant, eliminating the intrinsic value alternative allowed by
      SFAS No. 123. Generally, the approach to determining fair value under the
      original pronouncement has not changed. However, there are revisions to the
      accounting guidelines established, such as accounting for forfeitures that
      will
      change our accounting for stock-based awards in the future.





F
          - 16





**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**






SFAS
      No.
      123 (R) must be adopted in the annual period beginning after June 15,
      2005 ,
      for non
      small business issuers, and after December 15, 2005 for small business
      issuers .
      The
      statement allows companies to adopt its provision using either of the following
      transition alternatives:




(i)
      The
      modified prospective method, which results in the recognition of compensation
      expense using SFAS 123(R) for all share-based awards granted after the effective
      date and the recognition of compensation expense using SFAS 123 for all
      previously granted share - based awards that remain unvested at the effective
      date; or




(ii)
      The
      modified retrospective method, which results in applying the modified
      prospective method and restating prior periods by recognizing the financial
      statement impact of share-based payments in a matter consistent with the pro
      forma disclosure requirements of SFAS No. 123. The modified retrospective method
      may be applied to all prior periods presented or previously reported interim
      periods of the year of adoption. The Company has determined that the impact
      that
      the new standard is expected to have on its consolidated financial statements
      will not be material.





In
      March
      2005, the Securities and Exchange Commission (“SEC”) released SEC Staff
      Accounting Bulletin No. 107, *Share-Based
      Payment* (“SAB
      107”). SAB 107 provides the SEC staff position regarding the application of SFAS
      123R. SAB 107 contains interpretive guidance related to the interaction between
      SFAS 123R and certain SEC rules and regulations, as well as provides the staff’s
      views regarding the valuation of share-based payment arrangements for public
      companies. SAB 107 also highlights the importance of disclosures made related
      to
      the accounting for share-based payment transactions. The Company has evaluated
      SAB 107 and has determined that incorporating it as part of its adoption of
      SFAS
      123R will not have a material impact on its consolidated financial
      statements.





In
      May
      2005, the FASB issued SFAS No. 154, *Accounting
      Changes and Error Corrections* (“SFAS 154”)
      which supersedes APB Opinion No. 20, *Accounting
      Changes* and
      SFAS
      No. 3, *Reporting
      Accounting Changes in Interim Financial Statements.* SFAS
      154
      changes the requirements for the accounting for and reporting of changes in
      accounting principle. The statement requires the retroactive application to
      prior periods’ financial statements of changes in accounting principles, unless
      it is impracticable to determine either the period specific effects or the
      cumulative effect of the change. SFAS 154 does not change the guidance for
      reporting the correction of an error in previously issued financial statements
      or the change in an accounting estimate. SFAS 154 is effective for accounting
      changes and corrections of errors made in years beginning after December 15,
      2005. The Corporation does not expect the adoption of SFAS 154 to have a
      material impact on its consolidated results of operations and financial
      condition.














F
          - 17


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


NOTE
      2  **DISCONTINUED
      OPERATIONS**




During
      2004 and 2005, the Company disposed of two components of its business which
      constituted discontinued operations – SilverBirch Studios and Twincentric
      Limited. The loss on the Company’s consolidated statements of operations for the
      years ended December 31, 2005 and 2004 is summarized as follows:




2005
            
            2004**SilverBirch
                Studios**Gain
                on disposal
            
            $
            450,558
            
            $
            -Loss
                from discontinued operations
            
            
            -
            
            
            (132,419
            )450,558
            
            
            (132,419
            )**Twincentric
                Limited**Gain
                on disposal
            
            
            13,109
            
            
            -Loss
                from discontinued operations
            
            
            (475,575
            )
            
            (8,878
            )(462,466
            )
            
            (8,878
            )Loss
                from discontinued operations – net
            
            $
            (11,908
            )
            $
            (141,297
            )




***SilverBirch
      Studios***


Effective
      February 29, 2004, the Company entered into an agreement to sell certain assets
      and liabilities of the Company’s cellular phone game and ring tone development
      group, SilverBirch Studios, and the web portals Recessgames.com,
      Bladeofzorro.com and Silverbirchstudios.com (collectively, the “Games Division”)
      to SilverBirch Studios Inc. SilverBirch Studios Inc. is majority owned by a
      former employee and officer of the Company.





The
      purchase price initially consisted of a promissory note for $830,300 (CAD
      $1,000,000), a 4-year royalty agreement based on 2% of SilverBirch’s gross
      revenues, a 5% equity interest in SilverBirch, and a non-exclusive grant of
      the
      right to use certain of the SilverBirch technology on preferential
      terms.





Due
      to
      the fact that the recoverability of the aforementioned note was dependent upon
      the future successful operations of the division sold, management had previously
      determined that the recognition of the sales proceeds was not appropriate.
      Accordingly, the value of the note which amounted to $830,300 (CAD $1,000,000)
      was not included in the consolidated results for the year ended December 31,
      2004.





During
      the year ended December 31, 2005, SilverBirch Studios Inc. announced its
      intention to enter into a reverse take-over transaction (the “RTO”) which would
      result in it becoming a publicly traded company on the TSX Venture Exchange
      (“TSXV”). On June 30, 2005, the Company restructured the above consideration
      with SilverBirch Studios Inc. such that the original purchase consideration
      as
      described above was waived in consideration for the following:




F
          - 18


**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


(a) Silverbirch
        Studios Inc. to pay the Company CAD $125,000 (US $102,000) upon completion
        of
        the RTO.




(b) The
        Company is granted 1,750,000 common shares in the new public company that
        SilverBirch Studios Inc. reverses into.




(c) The
        Company receive 1,000,000 warrants priced at CAD $0.36 with an expiration
        date
        of April 30, 2006 upon completion of the RTO.




The
      value
      of the above consideration was $450,558 and has been recorded in the Company’s
      consolidated statement of operations during the year ended December 31, 2005
      as
      a gain on discontinued operations. The shares were valued using the most recent
      share price prior to the completion of the RTO, and the warrants were assigned
      a
      fair value of nil. Prior to the end of 2005, the Company disposed of the share
      consideration, and realized a loss of $78,093 relating to this
      disposition.





Additionally,
      the Company’s loss from discontinued operations with respect to SilverBirch
      during the year ended December 31, 2004 was comprised entirely of salaries
      and
      wages. The Company had no operations with respect to SilverBirch during 2005.




***Twincentric,
      Limited***


On
      August
      13, 2005, the Company entered into an agreement to sell its wholly owned U.K.
      subsidiary, Twincentric Limited (“Twincentric”) to an individual who was
      previously a shareholder of Twincentric prior its acquisition by ActiveCore,
      and
      who had continued to operate the Twincentric business since that time.
      Consideration received by the Company was 1,400,000 of its common shares. These
      common shares represented the same shares originally issued by the Company
      to
      the purchaser in the transaction which resulted in the Company originally
      acquiring Twincentric. Twincentric
      had been part of the Company’s SIM operating segment. For the purpose of
      calculating the gain (loss) realized on this transaction, the common shares
      received by the Company were valued at the closing share price on the date
      this
      transaction was consummated. The Company recognized a gain of $13,109 on this
      transaction, calculated as follows:





Consideration
                received
            
            $
            112,000Less:Net
                book value of Twincentric at the date of disposition
            
            
            (43,390
            )Direct
                transaction costs
            
            
            (55,501
            )Gain
                on disposition of subsidiary
            
            $
            13,109





Additionally,
      the Company incurred the following losses from discontinued operations for
      the
      years ended December 31, 2005 and 2004:




F
          - 19


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




2005
            
            2004Revenue
            
            $
            527,398
            
            $
            324,731Salaries
                and wages
            
            
            (552,531
            )
            
            (136,294
            )General
                and administrative
            
            
            (410,097
            )
            
            (155,557
            )Amortization
            
            
            (30,543
            )
            
            (32,502
            )Interest
                expense
            
            
            (9,802
            )
            
            (9,256
            )Loss
                from discontinued operations
            
            $
            (475,575
            )
            $
            (8,878
            )





As
      of
      December 31, 2004, the Company had the following assets and liabilities on
      its
      consolidated balance sheet with respect to Twincentric:





Cash
            
            $
            385Accounts
                Receivable
            
            
            317,786Total
                current assets
            
            
            318,171Capital
                assets
            
            
            6,178Intangible
                assets – customer contracts
            
            
            927,247Total
                other assets
            
            
            933,425Total
                assets
            
            
            1,251,596Bank
                indebtedness
            
            
            177,183Accounts
                payable
            
            
            252,735Accrued
                liabilities
            
            
            228,309Due
                to related partied
            
            
            18,620Total
                current liabilities
            
            
            676,847Net
                assets of discontinued operation
            
            $
            574,749








**NOTE
      3**  **ACQUISITIONS**





***Cratos
      Technology Solutions, Inc.***


In
      May,
      2005, the Company completed the acquisition of Cratos Technology Solutions
      Inc.,
      an Ontario corporation ("Cratos"), pursuant to a Share Purchase Agreement.
      Under
      the terms of the Share Purchase Agreement, the Registrant acquired from Andrew
      Wickett ("Wickett") and Debbie Gracie-Smith ("Gracie-Smith") all of the stock
      of
      Cratos in exchange for total consideration of approximately $2.1 million,
      comprised of cash, a promissory note due August 2005, and common stock of the
      Company. Cratos is a solutions-oriented organization specializing in
      international banking and financial transaction processing. The majority of
      Cratos' customers specialize in major credit card products and Loyalty-based
      products. The Company accounted for this acquisition using the purchase method
      of accounting in accordance with the provisions of SFAS No. 141, and began
      consolidating the results of Cratos from the acquisition date
      forward.





Under
      the
      terms of the Share Purchase Agreement, the Company issued 9,021,030 shares
      (the
      "Purchaser Shares") of its common stock and paid cash in the amount of $79,560,
      and issued promissory notes in the amount of $79,560. The Company valued the
      common stock issued in accordance with this transaction based on a simple
      average of the closing share price of the Company for two days prior and
      subsequent to this transaction being announced. On this basis, the common stock
      issued in connection with this transaction was valued at $1,947,787. The share
      consideration was exchanged on May 6, 2005.





F
          - 20





**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**






The
      purchase price is subject to an adjustment mechanism which will require (i)
      the
      Company to issue up to an additional 800,000 shares to the former shareholders
      of Cratos in the event Cratos exceeds certain specified profitability targets
      for the eight successive quarters following the close of this transaction.
      The
      Company will account for any additional consideration earned in the period
      in
      which such additional consideration is determined, and will be accounted for
      as
      additional goodwill.




The
      Company also issued 3,921,633 shares of its common stock to a supplier in
      consideration for discharging a pre-acquisition liability to that supplier
      as
      well as (i) the supplier entering into renewed agreements with Cratos, and
      (ii)
      the supplier terminating any existing security agreements between such party
      and
      Cratos as well as discharge any registered security and agree to subordinate
      any
      future security to that of any senior lender of the Company. These shares were
      valued using their fair market value as of the date they were delivered, and
      no
      gain or loss was recorded on this transaction.





The
      purchase price allocation set forth below represents management’s best estimate
      of the allocation of the purchase price and the fair value of net assets
      acquired. The valuation of the acquired intangible assets and the assessment
      of
      their expected useful lives are based on a assessment undertaken by management.




The
      following table summarizes the estimated fair values of the assets acquired
      and
      liabilities assumed as of the date of the Cratos acquisition:





Current
                assets
            
            $
            1,285,606Long
                term assets
            
            
            125,392Customer
                assets
            
            
            1,023,380Goodwill
            
            
            2,970,619Total
                assets acquired
            
            
            5,404,997Total
                liabilities assumed
            
            
            (3,298,090
            )Net
                assets acquired
            
            $
            2,106,907





The
      customer assets of $1,023,380 have been assigned a life of five years. The
      useful lives assigned represent management’s estimates and changes may occur
      from these estimates and these changes may be material. The Company also
      recorded a deferred tax liability of approximately
      $368,000 in respect of the temporary difference associated with this intangible
      asset.




The
      portion of the purchase price allocated to goodwill was assigned to the
      Company’s Systems Integration and modernization reporting segment. Goodwill
      recorded in this transaction in not deductible for tax purposes.




F
          - 21


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




***DisclosurePlus
      Inc.***


On
      February 25, 2005, the Company acquired all the outstanding common stock of
      DisclosurePlus Inc. (“DP”) a privately held Canadian corporation which provides
      publicly traded corporations with the foundation and tools to enhance the scope
      of corporate disclosure on-line with a standardized regulatory compliant
      web-based solution. Consideration for this acquisition represented 1,200,000
      shares of the Company’s restricted common stock valued at $264,000 in addition
      to $125,000 payable in cash. The Company also acquired intellectual property
      relating to the DP business in a concurrent transaction. The consideration
      above
      represents the total consideration for this entire acquisition. The value
      allocated to the common share consideration and was based on the weighted
      average share price of the Company’s common shares for the two trading days
      before, the day of, and the two days after the day the Company entered into
      the
      terms of the acquisition agreement. The Company accounted for this acquisition
      using the purchase method of accounting in accordance with the provisions of
      SFAS No. 141, and accordingly, DP’s operating results have been included in the
      Company’s consolidated statement of operations from February 25, 2005. The
      Company assumed net tangible liabilities of $29,000, though the transaction
      provided the Company with intellectual property, customers, and a set of
      employees who had operated this business prior to the acquisition. Goodwill
      recorded in connection with this business combination is not deductible for
      tax
      purposes.





The
      purchase price allocation set forth below represents management’s best estimate
      of the allocation of the purchase price and the fair value of net assets
      acquired. The valuation of the acquired intangible assets and the assessment
      of
      their expected useful lives are based on a n
      assessment undertaken by management.





The
      Company has accounted for the purchased goodwill in accordance with the
      provisions of SFAS 142. The entire balance of goodwill recorded on this
      transaction has been allocated to the Company’s Corporate Disclosure and
      Messaging segment.





The
      Company’s purchase price allocation recorded for the acquisition of DP is as
      follows:





Technology
                assets
            
            $
            250,000Goodwill
            
            
            168,000Total
                assets acquired
            
            
            418,000Liabilities
                assumed
            
            
            (29,000
            )Net
                assets acquired
            
            $
            389,000





**Twincentric
      Limited**




On
      June
      21, 2004, the Company acquired all the outstanding common stock of Twincentric
      Limited, a UK Corporation (“Twincentric”), for 1,556,025 shares of the Company’s
      restricted common stock valued at $379,247. The acquisition price also included
      $50,000 of acquisition expense. The Company accounted for this acquisition
      using
      the purchase method of accounting in accordance with the provisions of SFAS
      141.
      The excess of the consideration given over the fair value of net tangible assets
      acquired of $429,247 has been allocated exclusively to customer contracts.
      The
      amount of the consideration paid for the shares of Twincentric was determined
      based on an arm’s-length negotiation with the shareholders of Twincentric and on
      the weighted average share price of the Company’s common shares for the two
      trading days before, the day of, and the two days after the Company entered
      into
      the agreement. Under the agreement, the vendor had been entitled to an
      additional allocation of shares based on a percentage of the amount of revenues
      generated by Twincentric over and above its pre-acquisition sales levels. Such
      additional additional shares were never earned based on Twincentric’s revenue
      levels post-acquisition.




Twincentric
      is a data integration and migration software and services company operating
      primarily in the AS 400 and Bull Computer markets. The acquisition was made
      to
      round out the products and services that the Company could offer within the
      enterprise software and services market and to provide critical mass to the
      company’s European marketing efforts.




F
          - 22





**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**






The
      purchase price allocation recorded for the acquisition of Twincentric Limited
      was as follows:




Accounts
                receivable
            
            $
            21,845Other
                receivables and prepayments
            
            
            30,710Property
                and equipment
            
            
            26,464Customer
                contract
            
            
            974,194Total
                assets
            
            
            1,053,213Bank
                debt
            
            
            207,686Accounts
                payable
            
            
            57,827Taxes
                payable
            
            
            127,805Other
                payables
            
            
            230,648Total
                liabilities assumed
            
            
            623,966Excess
                of assets acquired over liabilities assumed
            
            
            429,247Purchase
                price
            
            
            379,247Acquisition –
                related fees and expenses
            
            
            50,000Goodwill
            
            $
            —





The
      Company disposed of Twincentric during 2005 and has determined that this
      disposition represents a discontinued operation. See Note 2 to these
      consolidated financial statements.




***C******Comm
      Network Corporation***


On
      May 6,
      2004, the Company acquired all the outstanding common stock of C Comm Network
      Corporation (“C Comm”), a privately held Canadian Corporation, for 3,075,820
      shares of the Company’s restricted common stock valued at $461,962. The value
      allocated to the common share consideration and was based on the weighted
      average share price of the Company’s common shares for the two trading days
      before, the day of, and the two days after the day the Company entered into
      the
      terms of the acquisition agreement. The total purchase price of $491,962 also
      includes $30,000 of other acquisition costs. The Company accounted for this
      acquisition using the purchase method of accounting in accordance with the
      provisions of SFAS No. 141, and accordingly, C Comm’s operating results have
      been included in the Company’s consolidated statement of operations from the
      acquisition date through to December 31, 2004. The Company acquired net tangible
      liabilities of $9,823. The excess of the consideration given over the fair
      value
      of the net assets acquired ($501,785) has been recorded as goodwill and is
      not
      deductible for tax purposes. The Company will account for the purchased goodwill
      in accordance with the provisions of SFAS 142. The amount of the consideration
      paid for the shares of C Comm was determined based on a multiple of revenues
      earned by C Comm for the two years ended September 30, 2002 and September 30,
      2003, plus revenues earned for the six months ended March 31, 2004. Under the
      agreement, the former shareholders of C Comm were entitled to an additional
      allotment of shares based on revenue growth generated by C Comm for the one
      year
      following the acquisition. No amounts were earned pursuant to this achievement
      bonus.




C
      Comm is
      a corporate message broadcasting service which employs communication media
      such
      as facsimile, voice, and e-mail to deliver messages to various organizations’
customers. This capability is critical to the Company’s ongoing vision of
      providing a fully functional smart enterprise suite of products and services.
      The Company has commenced marketing C Comm’s services under the product name
“ActiveCast”.




F
          - 23


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




The
      purchase price allocation recorded for the acquisition of C Comm is as
      follows:




Accounts
                receivable
            
            $
            17,260Capital
                assets
            
            
            6,056Total
                assets
            
            
            23,316Bank
                debt
            
            
            12,829Accrued
                liabilities
            
            
            16,751Taxes
                payable
            
            
            11,869Total
                liabilities assumed
            
            
            41,449Excess
                of liabilities assumed over assets acquired
            
            
            18,133Purchase
                price
            
            
            461,962Acquisition
                fees and expenses
            
            
            30,000Goodwill
            
            $
            510,095





*Pro
      forma results*




The
      following pro forma results of operations reflect the combined results of
      Activecore, Cratos, and C Comm Network, for the years ended December 31, 2005
      and 2004 as if the business combination occurred at the beginning of
      Activecore’s year. Pro forma financial information giving effect to the
      acquisition of DP has not been provided on the basis that its results of
      operations for the years ended December 31, 2005 and 2004 would not be material
      to the Company.





2005
            
            2004Revenue
            
            $
            9,166,461
            
            $
            8,217,900Net
                loss
            
            $
            (2,823,812
            )
            $
            (970,384
            )Net
                lossper share, basic and diluted
            
            $
            (0.04
            )
            $
            (0.02
            )Shares
                used
                in basic and diluted loss per share calculation
            
            
            63,016,741
            
            
            51,179,183




These
      pro
      forma results are not necessarily indicative of what would have occurred if
      the
      acquisitions had actually been completed as of the assumed dates and for the
      periods presented. The actual results for the year ended December 31, 2005
      include the results for Cratos beginning May 1, 2005.





**NOTE
      4**  **ACCOUNTS
      RECEIVABLE**





The
      components of accounts receivable, net, as of December 31, 2005 and 2004 consist
      of:





2005
            
            2004Trade
                receivables
            
            $
            3,802,531
            
            $
            2,490,549Imputed
                interest discount
            
            
            —
            
            
            (100,000
            )Allowance
                for doubtful accounts
            
            
            (101,503
            )
            
            —Accounts
                receivable, net
            
            $
            3,701,028
            
            $
            2,390,549






F
          - 24


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


Trade
      receivables consist primarily of vendor receivables for enterprise software
      and
      information technology services sold. An imputed interest discount of $100,000
      was included in the value of accounts receivable as of December 31, 2004
      relating to certain financed receivables.





During
      2005 and 2004, the Company recorded bad debt expense of $228,607 and $2,059,
      respectively.





**NOTE
      5**  **CAPITAL
      ASSETS**





As
      of
      December 31, 2005 and 2004, capital assets consists of:




2005
            
            2004Computer
                equipment
            
            $
            637,166
            
            $
            470,812Office
                equipment and furniture
            
            
            116,392
            
            
            87,371Computer
                software
            
            
            55,275
            
            
            33,378Leasehold
                improvements
            
            
            44,799
            
            
            41,185853,632
            
            
            632,746Less
                accumulated depreciation and amortization
            
            
            (517,376
            )
            
            (326,464
            )Capital
                assets, net
            
            $
            336,256
            
            $
            306,282





Depreciation
      and amortization expense for the years ended December 31, 2005 and 2004 amounted
      to $142,186 and $95,031, respectively.





Assets
      held under capital lease in the amount of $84,236 (2004 - $64,584) with
      accumulated depreciation in the amount of $44,250 (2004 - $22,802) are included
      in computer equipment.


F
          - 25


**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**





**NOTE
      6** **** **GOODWILL
      AND OTHER INTANGIBLE ASSETS**





Goodwill
      and other intangibles assets consist of the following as of December 31, 2005
      and 2004:





2005
            
            2004Other
                intangible assets subject to amortization:Customer
                contracts
            
            $
            1,023,380
            
            $
            -Customer
                lists
            
            
            275,000
            
            
            275,000Capitalized
                software
            
            
            115,701
            
            
            115,701Technology
            
            
            250,000
            
            
            -Licenses
            
            
            51,242
            
            
            51,2421,715,323
            
            
            441,943Less:
                Accumulated amortizationCustomer
                contracts
            
            
            (200,943
            )
            
            -Customer
                lists
            
            
            (206,250
            )
            
            (114,583
            )Capitalized
                software
            
            
            (86,778
            )
            
            (48,210
            )Technology
            
            
            (38,261
            )
            
            -Licenses
            
            
            (51,242
            )
            
            (32,259
            )Other
                intangible assets subject to amortization, net
            
            
            1,131,849
            
            
            246,891Goodwill
            
            
            4,037,883
            
            
            622,003Goodwill
                and other intangible assets, net
            
            $
            5,169,732
            
            $
            868,894








The
      changes in goodwill for the years ended December 31, 2005 and 2004 are as
      follows:




2005
            
            2004Balance,
                beginning of year
            
            $
            622,003
            
            $
            100,000Acquisitions
            
            
            3,138,619
            
            
            510,095Effect
                of foreign exchange rate fluctuation
            
            
            214,046
            
            
            71,908Purchase
                price allocation adjustments from prior acquisitions
            
            
            63,215
            
            
            (60,000
            )Balance,
                end of year
            
            $
            4,037,883
            
            $
            622,003




F
          - 26


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




The
      activity in identifiable intangible assets for the year ended December 31,
      2005
      is as follows:





Balance,
                December 31, 2004
            
            $
            246,891Plus:
                Customer assets recorded for Cratos acquisition
            
            
            1,023,380Plus:
                Technology assets recorded for DP acquisition
            
            
            250,000Less:
                Amortization for the year
            
            
            (447,858
            )Effect
                of foreign exchange rate fluctuation
            
            
            59,436Balance,
                December 31, 2005
            
            $
            1,131,849





Estimated
      future amortization of other intangible assets based on balances existing at
      December 31, 2005 is as follows:




Amount2006
            
            $
            336,3662007
            
            
            238,6912008
            
            
            238,6912009
            
            
            238,6912010
            
            
            79,410Total
            
            $
            1,131,849





**NOTE
      7**  **INVESTMENT**





On
      June
      26, 2003, the Company purchased 300,000 common shares, equal to approximately
      5%
      of the then issued share capital of ePocket, Inc. for 1,000,000 shares of the
      Company’s common stock. The shares were valued at $0.25 per share or an
      aggregate of $250,000, representing the market value at the date of issuance.
      During the year ended December 31, 2005, ePocket Inc. was acquired by Global
      Sterling Payment Services (“GSPS”), a company controlled by a director of the
      Company. As consideration for this sale, the Company received its initial
      investment amount of $250,000, as well as a 0.4% equity interest in GSPS which
      represented the same pro rate consideration as all other ePocket shareholders.





Also
      during 2005, the Company received an additional 4.2% equity interest in GSPS
      in
      exchange for services rendered by management of the Company to GSPS. As ePocket
      is a private company with no readily determinable market value, the Company
      has
      valued its combined 4.6% interest in GSPS at nil in the accompanying
      consolidated balance sheet at December 31, 2005.





F
          - 27




**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
  ditionally,
        the Company has determined that it can exercise significant influence over
        ePocket. This determination was made based on review of several factors,
        including the fact that 2 members of the Company’s senior management represent
        50% of the ePocket board of directors. As such, the Company is required to
        account for this investment under the equity method which entails recording,
        in
        its consolidated statement of operations, its pro rata share of ePocket’s net
        income for each reporting period. As ePocket recorded a net loss in the year
        ended December 31, 2005, no amount has been recorded for the current period.
        However, at such time that ePocket generates cumulative net income from July
        1,
        2005, the Company will begin to record its pro rata share of ePocket’s net
        income.





**NOTE** **8**  **DEBT**





Debt
      consists of the following:





2005
            
            2004Note
                payable to IBEW Local Union 105, five year term, no principal payments
                until August 2004, bearing interest at 12% (1)
            
            $
            —
            
            $
            500,000Note
                payable to SCI Healthcare Group, unsecured (2)
            
            
            46,948
            
            
            130,915Short
                term loans (3)
            
            
            21,272
            
            
            543,901Bank
                term loan, seven year term with monthly equal principal payments,
                bearing
                interest at the Canadian prime plus 3% (4)
            
            
            152,805
            
            
            173,967Bank
                term loan, three year term with monthly equal principal payments,
                bearing
                interest at the Canadian prime plus 1% (5)
            
            
            175,438
            
            
            —396,463
            
            
            1,348,783Less
                current portion
            
            
            164,524
            
            
            857,161Long
                term portion
            
            $
            231,939
            
            $
            491,622





F
          - 28


**ACTIVECORE
      TECHNOLOGIES, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**





(1)
            On
                July 31, 2003, the Company's wholly owned Canadian subsidiary ActiveCore
                Technologies Limited, received a $500,000 term loan from the International
                Brotherhood of Electrical Workers union in Hamilton, Ontario, Canada.
                Under the terms of the agreement, the first year accrued interest
                at the
                rate of 12% and the principal was repayable over a five-year term
                with no
                principal nor interest payments required during the first 12 months,
                principal payments were to be amortized over the remaining 48 months
                of
                the loan. The loan was convertible into common stock of the Company
                at the
                rate of 4.5 shares for every one dollar of the loan balance, excluding
                interest, remaining at the time of conversion. As additional consideration
                for the loan, the Company issued warrants to the lender for the purchase
                of 50,000 shares of common stock at a purchase price of $0.312 per
                share
                which expired on July 31, 2004. The fair value assigned to the warrants
                amounted to $0. The Company estimated the fair value of the warrant
                at the
                grant date by using the Black-Scholes option-pricing model with the
                following weighted average assumptions used for this grant; no dividend
                yield for all years; expected volatility of 9.3%; risk-free interest
                rate
                of 1.12%, and an expected life of 1 year. The loan was collateralized
                by
                substantially all of the assets of the subsidiary of the Company.
                During
                the year ended December 31, 2004 the Company and the union agreed
                to
                exchange the outstanding loan into mandatorily redeemable convertible
                preferred shares (series C) in exchange for the note payable and
                the
                release of its security over ActiveCore Technologies Limited. The
                series C
                shares were issued during 2005 (see note 11).




(2)
            The
                promissory note relating to the acquisition of SCI Healthcare Group
                bears
                interest at 10%. SCI Healthcare is acting as a billing and collection
                agent for the Company with respect to a specific customer in the
                healthcare industry. Amounts collected by SCI Healthcare are not
                remitted
                back to the Company but rather serve to reduce this promissory note.
                Following the repayment of this promissory note, amounts received
                from
                this specific customer will be remitted to the
                Company.




(3)
            During
                2004 and 2005, various related parties loaned the Company, on a short
                term
                basis, funds to assist with working capital. Certain of these loans
                were
                converted into equity during 2005. The balances outstanding at December
                31, 2005 are due on demand and bear no
                interest.




(4)
            On
                August 17, 2004 one of the Company’s Canadian subsidiaries obtained a term
                loan with a Canadian Chartered Bank in the amount of (CAD) $220,000.
                Under
                the terms of the agreement, the loan is repayable over a seven year
                term
                with principal and interest payments due monthly. Interest on the
                borrowings is the bank’s prime rate plus 3%, which as of December 31, 2005
                was 7.4%.




(5)
            During
                2005 one of the Company’s Canadian subsidiaries obtained a term loan with
                a Canadian Chartered Bank in the amount of (CAD) $250,000. Under
                the terms
                of the agreement, the loan is repayable over a three year term with
                principal and interest payments due monthly. Interest on the borrowings
                is
                at prime plus 1% which as of December 31, 2005 was 5.4%.






F
          - 29


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




Future
      maturities of the Company’s debt as of December 31, 2005 are as
      follows:




2006
            
            $
            164,5242007
            
            
            98,0462008
            
            
            57,4922009
            
            
            24,7792010
            
            
            24,779Thereafter
            
            
            26,843$
            396,463






**NOTE
      9**  **DUE
      TO RELATED PARTIES**




The
      Company’s officers and directors have loaned various amounts to the Company and
      its subsidiaries to meet operating cash flow requirements. The amounts due
      to
      related parties are non-interest bearing and have no specific repayment terms. The
      balances due them were $11,863 and $113,744 as of December 31, 2005 and 2004,
      respectively, and are classified as current liabilities in the accompanying
      consolidated balance sheets.





**NOTE
      10** **** **TAXES
      PAYABLE**





The
      Company operates in two tax jurisdictions. Its income is therefore subject
      to
      different rates of tax and losses incurred in one jurisdiction cannot be used
      to
      offset income taxes payable in another.





The
      loss
      from continuing operations before income taxes consisted of the following:




2005
            
            2004Domestic
                income (loss)
            
            $
            (611,567
            )
            $
            1,130,345Foreign
                loss
            
            
            (2,248,228
            )
            
            (1,779,204
            )Loss
                before income taxes
            
            $
            (2,859,795
            )
            $
            (648,859
            )





A
      reconciliation of the combined U.S. federal income tax rate with the Company’s
      effective income tax rate is as follows:





2005
            
            2004Expected
                statutory rate
            
            
            35
            %
            
            35
            %Expected
                tax benefit from continuing operations
            
            $
            (1,000,928
            )
            $
            (227,101
            )Effect
                of permanent differences
            
            
            7,830
            
            
            5,830Effect
                of foreign tax rate differences
            
            
            (6,726
            )
            
            (12,434
            )Change
                in valuation allowance
            
            
            999,825
            
            
            233,705Other
                items
            
            
            (27,600
            )
            
            —$
            (27,600
            )
            $
            —






F
          - 30


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
  Theprovision (benefit) for income taxes from continuing operations consisted
        of the
        following:





2005
            
            2004DomesticCurrent
                income taxes
            
            $
            —
            
            $
            —Deferred
                income taxes
            
            
            (27,600
            )
            
            —(27,600
            )
            
            —ForeignCurrent
                income taxes
            
            $
            —
            
            $
            —Deferred
                income taxes
            
            
            —
            
            
            ——
            
            
            —Income
                tax benefit from continuing operations
            
            $
            (27,600
            )
            $
            —








The
      Company has approximately $14.6 million of domestic non-capital loss
      carryforwards which expire between 2018 and 2025. The Company also has
      approximately $5.7 million of foreign non-capital loss carry-forwards which
      expire between 2007 and 2013.





The
      primary temporary differences which gave rise to net deferred tax assets at
      December 31, 2005 and 2004 are:





2005
            
            2004**Deferred
                tax assets**Non-capital
                loss carry-forwards
            
            $
            7,282,255
            
            $
            7,104,994Depreciation
                and amortization
            
            
            54,820
            
            
            22,954Total
                deferred tax asset
            
            
            7,337,075
            
            
            7,127,948Valuation
                allowance
            
            
            (7,337,075
            )
            
            (7,127,948
            )—
            
            
            —**Deferred
                tax liabilities**Acquired
                intangibles
            
            
            340,736
            
            
            —**Net
                deferred tax liability**
            
            $
            340,736
            
            $
            —








The
      Company believes that sufficient uncertainty exists regarding the realization
      of
      all of its deferred tax assets such that a full valuation allowance is required.




F
          - 31


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
  **NOTE
        11**  **REDEEMABLE
        PREFERRED SHARES**





The
      Company has outstanding series C preferred shares which are mandatorily
      redeemable over 16 quarters. The initial value of these shares was $500,000,
      and
      the quarterly redemption values are $31,250 (see note 14). These preferred
      shares have been recorded as debt on the Company’s consolidated balance sheet on
      the basis that these shares are manditorily redeemable by the Company. As of
      December 31, 2005, $125,000 of these Series C preferred shares had been
      redeemed.





**NOTE
      12**  **LINE
      OF CREDIT**





In
      conjunction with the close of the Cratos acquisition, in May 2005 the Company
      secured a line of credit with a one year term with annual renewals with a
      Canadian chartered bank. This line of credit allows for maximum borrowings
      under
      it of $1.5 million CAD and bears interest at the rate of prime plus 1%. Security
      for this facility is comprised of a general security agreement over all of
      the
      assets of the Company’s subsidiary which entered into this facility, as well as
      personal guarantees by two of the Company’s senior executives. See note 14 to
      these consolidated financial statements for details regarding the compensation
      earned by these two executives in respect of their guarantees. Borrowings under
      this facility may not exceed 85% of specified receivables as defined in the
      respective credit agreement. As of December 31, 2005, no amounts were available
      under the Company’s line of credit. As of December 31, 2005, the interest rate
      on this facility was 6%.





Included
      in the line of credit are several overdraft facilities maintained by certain
      subsidiaries of the Company.





**NOTE
      13**  **COMMITMENTS
      AND CONTINGENCIES**




**TPG
      Corporation**




On
      March
      17, 2000, the Company entered into a consulting agreement with TPG Capital
      Corporation regarding an inactive reporting shell company that the Company
      acquired. The consulting agreement provides that one year after the execution
      of
      the agreement, (“reset date”), 350,000 common shares issued by the Company under
      the agreement would be increased or decreased based upon the average closing
      bid
      for the Company’s stock 30 days prior to the reset date, so the value of the
      350,000 shares will equal $500,000.




In
      December, 2005 an arbitrator determined that the Company was obligated to pay
      TPG Capital Corporation $448,000 to be issued in either common stock which
      must
      be registered by June, 2006 or in cash. The Company recorded an expense of
      this
      amount in its consolidated statement of operations for the year ended December
      31, 2005 and such amount is included in accrued liabilities at December 31,
      2005.




**Orchestral
      Corporation**




On
      June
      13, 2002, the Company canceled its “Power Audit” software distribution agreement
      with Orchestral (the “licensor”). In November 2002, the licensor commenced a
      proceeding in Ontario, Canada against the Company which was discontinued while
      the parties discussed a settlement. That proceeding alleged that the Company
      had
      infringed upon the copyright that the licensor maintained, and further that
      the
      Company had breached the distribution contract claiming damages of CAD
      $4,000,000. The licensor also claimed punitive and exemplary damages in the
      amount of CAD $1,000,000. When a settlement was not concluded, Orchestral
      commenced a second, identical action in August, 2003. The Company retained
      legal
      counsel to defend itself on the basis that there is no merit to the case and
      even if there was merit, the time frame in which to bring an action under the
      distribution agreement has expired. The Company has not yet determined if it
      will counter-sue for return of all proceeds paid to Orchestral during the period
      of time between 1999 and 2001.





F
          - 32


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


Compulsory
      mediation has occurred in the second lawsuit. The next step would normally
      be
“examination for discovery” then on to a trial. Instead of proceeding with the
      prosecution of its second lawsuit, Orchestral commenced an Application before
      the Ontario courts to enforce a settlement which it alleges was reached with
      the
      Company during the negotiations between its first and second lawsuits. The
      court
      ordered that a settlement was enforceable and that $226,824 was owed by the
      Company to the licensor. The Company appealed this decision and in January
      2006
      the initial judgement was upheld. A liability of $226,824 has been recorded
      in
      the Company’s financial statements for the settlement claim.




**Cesar
      Correia and InfoLink Technologies Ltd.**




From
      December 2003 to April 2004, the Company was engaged in discussions with certain
      major shareholders of Infolink Technologies Limited with regard to the potential
      acquisition of Infolink Technologies Ltd., a public company listed on the
      Toronto Stock Exchange venture board under the symbol “IFL”. During the course
      of discussions, an offer to purchase was rebuffed by Cesar Correia, the former
      Chairman of the Board, President and CEO, and 34% shareholder of Infolink.
      At
      the time, Mr. Correia was told that the Company would purchase another
      competitor to Infolink, C Comm Network Corporation. In May of 2004, the Company
      purchased C Comm. In July of 2004, an unrelated minority shareholder of Infolink
      commenced an action in Ontario alleging that Mr. Correia has mismanaged Infolink
      and amongst other things that he had inappropriately obtained funds from
      Infolink and converted them to his own purposes. The day prior to the court
      hearing with regard to the minority shareholder action against Infolink,
      Infolink Technology commenced a proceeding in the same Ontario court against
      the
      Company alleging unfair competition as a result of an alleged improper
      acquisition of confidential information from Infolink and numerous other causes
      of action. The Company has not yet had to file a defence to any of Infolink’s
      claims against the Company. Meanwhile, the court appointed a monitor and
      investigator to look into the allegations against Mr. Correia. The court
      appointed monitor and investigator issued an interim report in October 2004
      which found that several of the allegations against Mr. Correia were
      substantiated. Mr. Correia was removed from the position of Chairman, President
      and CEO of Infolink and is now an employee of Infolink. The Company believes
      that Infolink as a corporate entity will not proceed with any action against
      the
      Company as the Company believes that the action was commenced as a defensive
      move by Mr. Correia and now that he has been removed from management of Infolink
      there is little basis for the action to continue.




***Obligations***


The
      Company has lease agreements for two facilities in Canada. Rent expense for
      the
      continued use of the facilities totaled $269,023 and $127,901 in 2005 and 2004
      respectively. The lease agreements expire between 2006 and 2011.




The
      Company’s minimum lease payments for these facility leases along with its other
      capital leases are:




2006
            
            $
            405,2652007
            
            
            387,0552008
            
            
            401,1002009
            
            
            333,9582010
            
            
            260,810Thereafter
            
            
            195,610Total
            
            $
            1,983,798




F
          - 33


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


**NOTE
      14**  **COMMON
      AND PREFERRED SHARES**





**Common
      Shares**





**2005**





On
      February 9, 2005, the Company issued 400,000 restricted shares of common stock
      to two directors as Director’s fee. The fair value of these shares, based on the
      market value on the date they were issued was $120,000. The Company issued
      80,000 shares of restricted common stock to two outside parties to pay for
      director services rendered to the Company. The Company has recorded, in its
      Consolidated Statement of Operations, an expense of $24,000 representing the
      fair market value of these shares on of the date they were issued.





During
      the year ended December 31, 2005, the Company issued 3,921,633 common shares
      to
      a vendor of one of the Company’s wholly-owned subsidiaries in order to settle a
      debt for services rendered prior to that subsidiary being acquired by the
      Company. The fair value of these common shares, based on the market value on
      the
      date they were issued was $402,369.





During
      the year ended December 31, 2005, the Company issued 50,010 restricted shares
      of
      common stock for beneficial owner round up as a result of the reverse stock
      split on March 1, 2005 (see note 1).





On
      September 23, 2005, the Company issued 3,334,980 shares of common stock to
      a
      member of senior management. Of this amount, 1,084,980 common shares related
      to
      amounts advanced by this individual to the Company, 2,000,000 common shares
      relate to services provided by that individual to personally guarantee certain
      indebtedness of the Company over the next two years and 250,000 common shares
      related to employment services. The fair value of these common shares, based
      on
      the market value on the date they were approved by the Company’s board of
      directors, was $108,098, $220,000, and $37,500 respectively. Of the $220,000
      relating to the personal guarantee, $55,000 was expensed during 2005. Of the
      remaining $165,000, $110,000 is included in deferred consulting and financing
      expense and the remaining $55,000 is included in deferred financing
      expense.





On
      September 23, 2005, the Company issued 4,750,000 shares of common stock to
      another member of senior management. Of this amount, 2,500,000 common shares
      related to amounts advanced by this individual to the Company, 2,000,000 common
      shares relate to services provided by that individual to personally guarantee
      certain indebtedness of the Company over the next two years and 250,000 common
      shares related to employment services. The fair value of these common shares,
      based on the market value on the date they were approved by the Company’s board
      of directors, was $250,000, $220,000, and $37,500 respectively. Of the $220,000
      relating to the personal guarantee, $55,000 was expensed during 2005. Of the
      remaining $165,000, $110,000 is included in deferred consulting and financing
      expense and the remaining $55,000 is included in deferred financing
      expense.





On
      September 23, 2005, the Company issued 1,000,000 common shares to an unrelated
      party in exchange for provided financial consulting services over the next
      year
      to assist the Company in obtaining further financing. The fair value of these
      common shares, based on their market value on the date this agreement was
      entered into, was $90,000. Of this amount, $22,500 was expensed during 2005
      and
      the remaining $67,500 is included in deferred consulting and financing
      expense.





F
          - 34


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


On
      September 23, 2005, the Company issued 850,500 common shares to two unrelated
      parties as settlement for previously provided professional services. The fair
      value of these common shares, based on the market value on the date they were
      approved by the Company’s board of directors, was $85,050.





On
      September 23, 2005, the Company issued 975,000 common shares to two unrelated
      parties in exchange for services to be provided. The fair value of these common
      shares, based on their market value on the date this agreement was entered
      into,
      was $124,500. Of this amount, $59,250 was expensed during 2005 and the remaining
      $65,250 is included in deferred consulting and financing expense.





On
      September 23, 2005, the Company issued 3,787,619 common shares to various
      unrelated parties who agreed to convert various loans and advances made to
      the
      Company. The fair value of these common shares, based on the market value on
      the
      date they were approved by the Company’s board of directors, was
      $378,762.





On
      September 23, 2005, the Company issued 250,000 common shares to one member
      of
      its senior management team in consideration for employment services rendered.
      The fair value of these common shares, based on the market value on the date
      they were approved by the Company’s board of directors, was
      $37,500.





On
      September 23, 2005, the Company issued 1,720,026 common shares to the holder
      of
      its Series C preferred shares. Of this amount, 257,370 common shares related
      to
      interest and penalties relating to late payment and 1,462,656 relate to the
      mandatory redemption of those Series C shares for common shares.





On
      September 23, 2005, the Company issued 285,186 common shares in the amount
      of
      $39,926 to the holder of its Series A and B Preferred Shares in respect of
      dividends due to that holder under the terms of those preference
      shares.





On
      December 6, 2005, the Company issued 272,000 common shares having a fair value
      of $27,200 to a related party in consideration for having converted indebtedness
      owed to that party by the Company.





On
      December 6, 2005, the Company issued 332,422 common shares having a fair value
      of $45,250 to the holder of its Series C preferred shares. Of this amount,
      43,359 common shares related to interest and penalties relating to late payment
      and 289,063 relate to the mandatory redemption of those Series C shares for
      common shares.





On
      December 9, 2005, the Company issued 300,000 common shares having a fair value
      of $27,000 to an unrelated party in consideration for having provided the
      Company with a short-term loan.





All
      amounts issued during year ended December 31, 2005 were valued based on the
      closing market price of the Company’s common stock on the date which the Company
      committed itself to the respective transaction.




F
          - 35


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


**2004**





During
      the twelve months ended December 31, 2004, the Company issued 3,513,303 shares
      of common stock to Cornell Capital Partners in exchange for $584,180 under
      the
      Equity Line of Credit Agreement. Of the amount, $226,911 was applied against
      the
      original 2002 $1,000,000 promissory note payable and $398,989 was used to repay
      three separate notes that were issued in January of 2004 to Cornell Capital
      Partners. Also, $47,268 was applied against interest due on the original
      $1,000,000 promissory note payable. The values assigned to the common stock
      ranged from $0.12 to $0.29 per share, representing the closing market value
      on
      the dates of issue.




Pursuant
      to an agreement reached between a long-term debt holder and the Company, the
      board of directors approved the issuance of 355,952 restricted shares of common
      stock aggregating $88,988 for the settlement of the principal and accrued
      interest through February 23, 2004. The shares were valued at $0.25 per share
      based on the closing market price of the common stock on the settlement date.




During
      the twelve months ended December 31, 2004, the Company issued 1,130,000
      restricted shares to various employees as performance related bonuses or signing
      inducements. The values assigned to the common stock ranged from $0.12 to $0.28
      per share or an aggregate of $211,000, representing the closing market value
      of
      the Company’s common stock on the dates of issue.




During
      the twelve months ended December 31, 2004, the Company issued 6,603,627
      restricted shares of common stock to two directors and an officer of the Company
      in lieu of cash to satisfy shareholder loans, expenses paid on behalf of the
      Company and accrued salaries included in the amounts due to related parties
      in
      the accompanying condensed consolidated balance sheets. The values assigned
      to
      the common stock ranged from $0.12 to $0.24 per share, or an aggregate of
      $990,324 representing the market value on the dates of grant.




On
      January 26, 2004, the Company entered into a 12 month consulting contract with
      1582579 Ontario Limited, an unrelated party, to assist in locating and
      negotiating several prospective merger candidates primarily to enable the
      creation of an outbound messaging and communications service to work with the
      Company’s ActiveLink product as a data service bureau and enterprise portal
      interface. On February 20, 2004 the Company issued 500,000 restricted shares
      to
      1582579 Ontario Limited. These shares were valued at $0.24 per share, or an
      aggregate of $120,000 representing the market value on the date of the
      grant.




On
      February 20, 2004, pursuant to an agreement reached between a trade creditor
      and
      the Company, the board of directors approved the issuance of 200,000 restricted
      shares of common stock aggregating $48,000 for settlement of a $50,000
      liability. These shares were issued on February 20, 2004 and were valued at
      $0.24 per share based on the closing market price of the common stock on the
      issuance date.




On
      May 6,
      2004, the Company acquired all the outstanding common stock of C Comm Network
      Corporation for consideration of 3,075,820 shares of the Company’s restricted
      common stock valued at $461,962.




On
      June
      21, 2004, the Company acquired all the outstanding common stock of Twincentric
      Limited of the UK for consideration of 1,556,025 common shares valued at
      $379,247.




On
      July
      12, 2004, the board of directors authorized the issuance of 66,600 restricted
      shares of common stock for the purchase of a limited source code license for
      certain software for a value of $10,000. The software is to be used by C Comm
      Network Corporation. These shares were issued on September 29,
      2004.




F
          - 36


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


On
      July
      12, 2004, the board of directors authorized the sale of 400,000 restricted
      common shares of stock to unrelated parties in exchange for $60,000. The
      restricted share agreement grants the purchaser one warrant for each share
      at a
      purchase price of $0.18 which expired on November 30, 2005.




On
      July
      12, 2004, the board of directors authorized the issuance of 1,600,000 restricted
      shares in relation to a one way call agreement (“option”) to acquire 8,000,000
      shares of Infolink Technologies Ltd. On July 31, 2004, the Company signed an
      irrevocable one way call agreement which has not yet been exercised with a
      consultant to acquire 8,000,000 shares of Infolink. The 1,600,000 restricted
      common shares have been issued at a price of $0.15 for a value of $240,000
      but
      held in safekeeping pending the potential completion of the call agreement.
      As
      the shares are held in safekeeping the share subscription and the value of
      the
      offsetting Infolink shares has not been shown on the balance sheet nor has
      the
      1,600,000 shares been shown as outstanding in the Company’s outstanding shares
      as included herein.




On
      July
      12, 2004, the board of directors authorized the issuance of 15,000 restricted
      common shares valued at $2,250 in consideration of a consulting contract for
      investment relations to an unrelated party.




Also
      on
      September 8, 2004, the board of directors authorized the issuance of 100,000
      restricted common shares of stock valued at $12,000 to an employee which shares
      were earned during 2005.




On
      September 8, 2004, the board of directors authorized the issuance of 1,200,000
      restricted common shares of stock valued at $180,000 to an unrelated party
      to
      perform consulting services including identifying and sourcing acquisition
      candidates. These shares were earned during 2005.




On
      September 30, 2004, the Board of Directors authorized the issuance of 474,612
      restricted common shares to the International Brotherhood of Electrical workers
      in payment of accrued interest of $70,192 to September 30, 2004 on the $500,000
      term debt previously held against one of the Company’s Canadian subsidiaries.
      The debt was subsequently converted into 500,000 series C preferred shares
      which
      were issued during 2005.




**Preferred
      Shares**





The
      Company has issued three series of preferred shares:




***Series
      A and B***


On
      September 14, 2004, the board of directors authorized the issuance of 8,333,333
      Series A and 4,167,667 Series B preferred shares which had a purchase price
      of
      $0.03 and $0.06, respectively totaling $500,000. With respect to the Series
      A
      shares, the Company may force conversion if the trading price of the Company’s
      common shares exceeds $2.00 for 30 days. With regard to the Series B shares,
      the
      Company may force conversion if the trading price of the Company’s common shares
      exceeds $4.00 for 30 days. These shares have a right of redemption whereby
      if the stock is not converted within 5 years, the Company, at its option, shall
      have the right to redeem all outstanding but unconverted shares of series A
      (same for B) Preferred Stock held by such person by paying to the holder thereof
      $0.30 (for B, $0.60) per share plus all accrued but unpaid dividends thereon,
      if
      any. These shares are not manditorily redeemable. The preferred shareholders
      will be paid a dividend at the rate of 10% per annum. On December 21, 2005
      the
      Company reached an agreement with the holders of the Series A and B shares
      to
      convert their entire holdings of these classes of shares into common shares
      of
      the Company. The conversion price in this transaction was higher than the market
      price of the Company’s commons shares on the conversion agreement date.
      Specifically, the carrying value of the preferred shares prior to conversion
      exceeded the fair value of the common stock consideration by $208,333. As a
      result, and consistent with Emerging Issues Task Force Topic D-42. The Effect
      on
      the Calculation of Earnings per Share for the Redemption or Induced Conversion
      of Preferred Stock, the Company has added back this excess in determining net
      loss available to common shareholders in its consolidated statement of
      operations. Additionally, the Company has recorded this excess as an increase
      to
      additional paid-in capital in its consolidated balance sheet, consistent with
      the guidance provided in Staff Accounting Bulletin 5 T. In order to satisfy
      this
      conversion agreement, subsequent to December 31, 2005 the Company issued common
      shares to the former shareholders of the Series A and B preferred shares
      totaling 4,166,667. These shares have been included in common stock to be issued
      at December 31, 2005.




F
          - 37


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
  ***Series
        C***


In
      2004,
      the Company and the International Brotherhood of Electrical Worker’s Union (See
      Note 8) agreed to settle the outstanding loan of $500,000 into Series C
      convertible preferred shares. The terms of the Series C preferred stock require
      the Company to redeem the preferred shares over 16 quarters, commencing on
      December 31, 2004. The Company shall have the option of paying the quarterly
      redemptions in the form of cash or common shares. Also the preferred shares
      will
      have a 12% annual dividend rate payable quarterly based on the number of
      preferred shares outstanding at the end of the quarter (see note 11).





**NOTE
      15**  **WARRANTS**





The
      Company’s Board of Directors has granted warrants to non-employees of the
      Company. The following is a summary of activity under these warrant
      provision.





Non-Employee
                Options and Warrants
            
            Weighted
                Average Exercise PriceWarrants
                outstanding at December 31, 2003
            
            
            88,000
            
            $
            1.47Expired
            
            
            (51,500
            )
            
            0.45Granted
            
            
            400,000
            
            
            0.18Warrants
                outstanding at December 31, 2004
            
            
            436,500
            
            
            0.42Granted
            
            
            3,545,883
            
            
            0.14Expired
            
            
            (400,000
            )
            
            0.18Warrants
                outstanding at December 31, 2005
            
            
            3,582,383
            
            $
            0.17





During
      the year ended December 31, 2005, the Company granted 3,545,883 warrants to
      parties to whom the Company was previously indebted to and who, during this
      period, agreed to settle their debt to common shares of the Company. These
      warrants were issued at a 40% premium to the market price of the Company’s
      common stock as of the date of the settlement. These warrants expire in
      September, 2006. The Company used Black-Scholes to value these warrants using
      the following assumptions: dividend yield – nil; risk-free interest rate
      3%; volatility – 80%; expected life – 1 year. The fair value of these
      warrants was charged to the Company’s Consolidated Statement of Operations as a
      loss on extinguishment of debt during the year ended December 31,
      2005.





F
          - 38


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


On
      September 29, 2004, the Company sold 400,000 restricted shares of common stock
      to unrelated parties in exchange for $60,000. The restricted share agreement
      grants the purchaser one warrant for each share at a purchase price of 0.18
      and
      expired on November 30, 2005





As
      of
      December 31, 2005 all warrants were fully vested and exercisable.








**NOTE
      16** **** **SEGMENTED
      INFORMATION**





The
      Company has two reportable segments: Systems
      Integration and Modernization (“SIM”) and Corporate Disclosure and Messaging
      (“CDM”). The Company evaluates operating segment performance based on revenues
      and direct operating expenses of the segment.




Prior
      to
      the quarter ended June 30, 2005, the Company operated in only one operating
      segment - the delivery of software products and services. Consequently, segment
      operating results have only been provided for the six months ended December
      31,
      2005, and segment assets have been provided only as of December 31, 2005. Prior
      year comparatives have not been provided because the acquisition of Cratos
      created these segments.





A
      reconciliation of the totals reported for the operating segments to the
      applicable line items in the consolidated financial statements for the six
      months ended December 31, 2005 is as follows:


Six
                Months Ended December 31, 2005SIM
            
            CDM
            
            TotalRevenue
            
            $
            4,306,997
            
            $
            677,098
            
            $
            4,984,095Operating
                Costs
            
            
            3,167,825
            
            
            903,851
            
            
            4,071,676Depreciation
                and amortization
            
            
            415,192
            
            
            92,884
            
            
            508,076Contribution
                Margin
            
            
            723,980
            
            
            (319,637
            )
            
            404,343Less:
                Corporate expenses
            
            
            
            
            
            
            
            
            (880,914
            )Less:
                Interest, other expense and taxes
            
            
            
            
            
            
            
            
            (42,101
            )Less:
                Discontinued Operations
            
            
            
            
            
            
            
            
            (90,001
            )Net
                loss for the period
            
            
            
            
            
            
            
            $
            (608,673
            )Segment
                assets at December 31, 2005
            
            $
            8,560,183
            
            $
            1,497,743
            
            $
            10,057,926






F
          - 39


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




**NOTE
      17**  **NET
      LOSS PER SHARE**






Basic
      earnings per share are computed by dividing net income by the weighted average
      number of common shares outstanding during the period. Diluted earnings per
      share are computed by dividing net income by the shares used in the calculation
      of basic net income per share plus the dilutive effect of common share
      equivalents, such as stock options, using the treasury stock method. common
      share equivalents are excluded from the computation of diluted net income per
      share if their effect is anti-dilutive. Common share equivalents totaling
      3,582,383 shares of common stock have not been included in the calculation
      of
      diluted loss per share at December 31, 2005 as their effect would be
      anti-dilutive.





**NOTE
      18**  **SUBSEQUENT
      EVENTS**





Subsequent
      to December 31, 2005 and through March 17, 2006, the Company entered into the
      following transactions:




The
      Company issued 1,081,521 shares with a fair value of $86,522 in exchange for
      investor relations services to be provided to the Company.




The
      Company entered into a 24 month term loan for $429,000 ($500,000 CAD) with
      an
      unrelated party. In conjunction with this term loan, the Company issued 250,000
      common shares with a fair value of $37,500 to the lender.







F
          - 40






**Item
      8. Changes In And Disagreements With Accountants On Accounting And Financial
      Disclosure**




BDO
      Dunwoody, LLP (“BDO”), Toronto, Ontario audited the Company’s consolidated
      financial statements for the year ended December 31, 2004. In January 2006,
      BDO
      resigned as the Company’s independent accountants. The report BDO on the
      Company’s consolidated financial statements as of and for the year ended
      December 31, 2004 did not contain an adverse opinion or disclaimer of opinion
      and was not qualified or modified as to audit scope or accounting principle.
      The
      audit report did express substantial doubt about the Company’s ability to
      continue as a going concern.




In
      connection with their audit for the year ended December 31, 2004 and for the
      interim period through the filing date of this report, there were no
      disagreements with BDO on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedure, which
      disagreements if not resolved to the satisfaction of BDO would have caused
      them
      to make reference thereto in their report on the financial statements for such
      year.




In
      January 2006, the Board of Directors approved the engagement of Weinberg &
Company, P.A. (“Weinberg”), Boca Raton, Florida to act as the Company’s new
      independent accountants to audit the Company’s consolidated financial statements
      for the year ended December 31, 2005. During the year ended December 31, 2004
      and through January 2006, the Company did not consult with Weinberg regarding
      either (i) the application of accounting principles to a specified transaction,
      either completed or proposed; or the type of audit opinion that might be
      rendered on the Company’s consolidated financial statements; or (ii) any matter
      that was either the subject of a disagreement, as contemplated by Item
      304(a)(1)(iv) of Regulation S-B.





For
      the
      year ended December 31, 2005 and the through the filing date of this report,
      there have been no disagreements with Weinberg on any matter of accounting
      principles or practices, financial statement disclosure or auditing scope or
      procedure, which disagreements if not resolved to Weinberg’s satisfaction would
      have caused them to make reference to the subject matter of the disagreement
      in
      connection with their report.





**Item
      8A. Controls and Procedures**





**(A)
      Evaluation of Disclosure Controls and Procedures**





As
      of the
      end of the period covered by this report, the Company carried out an evaluation,
      under the supervision and with the participation of the Company's Chief
      Executive Officer and acting Chief Financial Officer of the effectiveness of
      the
      design and operation of the Company’s disclosure controls and procedures. The
      Company’s disclosure controls and procedures are designed to provide a
      reasonable level of assurance of achieving the Company's disclosure control
      objectives. The Company’s Chief Executive Officer and acting Chief Financial
      Officer has concluded that the Company's disclosure controls and procedures
      are
      effective based on at this reasonable assurance level as of the period
      covered.





**(B)
      Changes in Internal Controls over Financial Reporting**





In
      connection with the evaluation of the Company's internal controls during the
      Company's fourth quarter ended December 31, 2005, the Company's Chief Executive
      Officer and acting Chief Financial Officer has determined that there are no
      changes to the Company's internal controls over financial reporting that has
      materially affected, or is reasonably likely to materially effect, the Company's
      internal controls over financial reporting.





.


29




**PART
      III**





**Item
      9. Directors and Officers of the Registrant**





As
      of
      March 24, 2006, the directors and executive officers of Activecore Technologies,
      Inc. their age, positions in ActiveCore the dates of their initial election
      or
      appointment as directors or executive officers, and the expiration of the terms
      are as follows:


**NAME**
              
              **AGE**
              
              **POSITION**
              
              **PERIOD
                  SERVED**Peter
                  Hamilton
              
              58
              
              President
                  and CEO, Director
              
              Nov
                  2001 to PresentStephen
                  Smith
              
              66
              
              Director
              
              Nov
                  2001 to PresentStephen
                  Lewis
              
              51
              
              Director
              
              June
                  2002 to PresentEfrem
                  Ainsley
              
              34
              
              Chief
                  Financial Officer
              
              July
                  2005 to PresentAndrew
                  Wickett
              
              41
              
              President
              
              January
                  2006 to PresentDebbie
                  Gracie-Smith
              
              48
              
              Chief
                  Operating Officer
              
              January
                  2006 to PresentGeorge
                  Theodore
              
              40
              
              Senior
                  VP, Business Development
              
              June
                  2004 to Present




*Peter
      Hamilton* ,
      has
      been a Director since November 2001 and oversees product development,
      distribution activities and sales for ActiveCore. In 1999, Mr. Hamilton
      co-founded Springboard Technology Solutions Inc. where he served as Vice
      President of Sales and Consulting. Prior to his position with Springboard,
      Mr.
      Hamilton co-founded and served as Chairman and CEO of Lava Systems Inc., a
      multinational software company that provided document management, imaging and
      work flow software services, based in Toronto, Chicago, London, and Australia.
      During this time, Mr. Hamilton was responsible for overseeing Lava's expansion
      of its operations into Europe, Australia, U.S. and Canada and developed business
      partners in South America, South Africa, the Middle East and Scandinavia and
      assisted Lava in obtaining a listing on the Toronto Stock Exchange. Prior to
      this, Mr. Hamilton served as Senior VP of Operations for SoftKey Software
      International, a publicly traded company on the New York Stock Exchange. Mr.
      Hamilton was responsible for SoftKey's day-to-day operations, including
      manufacturing, product distribution, information systems, finance, customer
      support, technical support and product data management and marketing.





*Stephen
      Smith* has
      served as a Director since November 2001 and has over 30 years experience in
      planning, directing and managing major projects in such diverse fields as radar
      system development, electronic intelligence system design, installation and
      operation, ship design and acquisition and Document Management System
      development and applied solutions. Mr. Smith has served as Vice-President
      Operations for CDI Marine, the nation’s largest marine engineering firm and has
      held the positions of Director of Engineering, Vice-President and President
      of
      ROH, a diverse professional services company specializing in DMS solutions,
      web
      site development and applications and a broad range of support for the US Navy
      ship acquisition program.





*Stephen
      Lewis* has
      served as a Director since July 2003. Mr. Lewis has extensive financial,
      corporate governance and legal experience in large corporate environments and
      in
      fast growing entrepreneurial settings. Mr. Lewis is a seasoned executive and
      was
      CFO of the Lehndorff Group of companies from 1976 to 1994. The Lehndorff Group
      was a North American/European real estate investment and property management
      organization with assets and offices located across Canada and into the United
      States. Over a number of years Lewis rose within the organization to become
      executive vice president and chief financial officer, responsible for all facets
      of the group’s finance, accounting, administration, M.I.S and human resources.
      Mr. Lewis was also a member of the board of directors of numerous Lehndorff
      management companies and acted as chief liaison between management and the
      independent boards and committees that made up the Lehndorff Group. Mr. Lewis
      sold his franchise operations in 2002 and is currently acting in a consulting
      capacity on a number of different business ventures. Mr. Lewis is currently
      the
      President of the board of directors of the Children’s Aid Society of Toronto
      (“CAST”), one of the largest child welfare organizations in the World.





30


*Efrem
      Ainsley* has over
      13 years of experience as a finance professional in the technology sector,
      with
      a focus on leading the financial reporting, corporate finance and compliance
      function for public companies.  Prior to joining ActiveCore, Efrem was
      Vice-President, Corporate Controller with Open Text Corporation, one of Canada’s
      largest and most profitable software companies whose shares trade on both the
      Nasdaq and TSX.  While at Open Text, Efrem helped lead the organization in
      external reporting, mergers and acquisitions, corporate finance, Sarbanes-Oxley
      compliance, investor relations, and tax and treasury management. Prior to
      joining Open Text, Efrem was Director of Finance for Cyberplex Inc, a public
      company and one of North America's leading technology consulting firms, where
      he
      led the day-to-day financial operations and external reporting requirements
      for
      the company.  Efrem is a chartered accountant and began his career for a
      Big 5 accounting firm.





*George
      Theodore* is a
      serial entrepreneur with well over twenty years experience in sales, marketing
      and public relations. For nine years (1995 -2003) Mr. Theodore was Chairman
      and
      Chief Operating Officer of Infolink Technologies, (IFL) a TSX listed company.
      Prior to co-founding Infolink Mr. Theodore was founder of Exposad Cinema
      Productions (1990-1994). Exposad Cinema Productions was a successful marketing
      production company that first pioneered on screen and point of purchase
      advertising distribution through Cineplex Odeon Theatres throughout Canada
      and
      the United States. Prior to founding Exposad Cinema Productions, Mr. Theodore
      was principal in NCC systems (1986-1990) a company that under contract with
      Canada’s largest retail grocery chains, Atlantic Pacific Group, Dominion,
      A&P, Food City, IGA food stores. Pioneered the utilization of point of sale
      generated couponing systems which incorporated Psychographic consumer marketing.
      Mr. Theodore has been featured in Canadian Business Magazine (98), The Globe
      and
      Mail (98) MacLean’s Magazine (98), Marketing Magazine (98) Investor Relations
      Magazine (01), Mr. Theodore has also been a guest speaker on the Bay Street
      Minute (ROB TV) (CTV) television (Global) television, (02), Yahoo FM Radio
      (02),
      The Wall Street Reporter.com (02).





*Andrew
      Wickett* was
      promoted to President of ActiveCore as of January 1 st 2006.
      Prior to joining ActiveCore, he was CEO of CRATOS Technology Solutions
      Incorporated, which was acquired by A ctiveCore
      in May 1 st ,
      2005.
      Andrew was a co-founder of Cratos in 1999 and grew the company to a staff of
      over 60 people. Prior to starting Cratos, Andrew was Vice President of
      Architecture for American Express International and responsible for the rollout
      of new Card systems in all international markets including Canada, UK, Germany,
      France, Italy, Spain, Australia, New Zealand, Brazil, Mexico, Japan, Thailand,
      Singapore and Taiwan. Starting with a team of 6 people in 1997, he was
      responsible for developing and executing the AMEX International card system
      strategy. When he left AMEX, he was managing a team of over 200 people and
      an
      annual Budget of 40 million US$. His department generated profits exceeding
      10
      million US$ annually. Prior
      to
      American Express, Andrew held several positions in large Canadian Financial
      institutions including Director of Credit Card Systems for Canadian Imperial
      Bank of Commerce and Head of Credit Card Systems for Toronto-Dominion
      Bank.





**ITEM
      10. EXECUTIVE COMPENSATION**





The
      following table sets forth, for the year ended December 31, 2005, 2004, and
      2003
      certain information regarding the compensation earned by ActiveCore’s Chief
      Executive Officer and each of the Company’s most highly compensated executive
      officers whose aggregate annual salary and bonus for 2005 or 2004 exceeds
      $100,000, (the "Named Executive Officers"), with respect to services rendered
      by
      such persons to the Company and its subsidiaries.




31


Annual
                    Compensation
                Long-Term
                    CompensationName
                    and Principal Position
                Year
                Salary
                Bonus
                Other
                    Accrued Compensation
                Restricted
                    Stock Awards in US$
                Options
                  /SARs
                LTIP
                    Payouts
                All
                    other CompensationPeter
                    Hamilton
                  President
                    & CEO, Director
                2005
                $169,6812004
                $92,4172003
                $72,000
                —
                —
                —
                —
                —
                —J.
                    Stephen Smith,
                  Director
                2005
                —2004
                —2003
                —Stephen
                    Lewis, Director
                2005
                —2004
                —2003
                —
                —
                —
                —
                —
                —
                —Efrem
                    Ainsley, Chief Financial Officer*
                2005
                $102,000George
                    Theodore, Senior Vice President, Business Develop.
                2005
                $169,6812004
                69,313Andrew
                    Wickett, President**
                2005
                $86,667Debbie
                    Gracie-Smith, Chief Operating Officer**
                2005
                $86,667




*
      Efrem
      Ainsley joined ActiveCore Technologies June 27, 2005.


**
      Andrew
      Wickett and Debbie Gracie-Smith joined ActiveCore Technologies on May 1, 2005
      in
      conjunction with the acquisition of Cratos.




32




**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT**





The
      table
      below sets forth information with respect of the beneficial ownership as of
      March 21, 2006 for any person who is known to ActiveCore Technologies’ to be the
      beneficial owner of more than 5% of ActiveCore's common stock.





**Security
                Ownership of Management****Title
                of Class**
            **Name
                and Address of Beneficial Owner**
            **Amount
                and Nature of Beneficial Ownership**
            **Percentage
                of Class**Common
            Peter
                J. Hamilton
              c/o
                156 Front Street West, Suite 210,
              Toronto,
                Ontario, M5J 2L6
            4,750,000
              Direct
            6.1%Common
            Stephen
                J. Smith
              c/o
                156 Front Street West, Suite 210,
              Toronto,
                Ontario, M5J 2L6
            500,000
              Direct
            0.6%Common
            Stephen
                Lewis
              c/o
                156 Front Street West, Suite 210,
              Toronto,
                Ontario, M5J 2L6
            400,000
              Direct
            0.5%Common
            Efrem
                Ainsley
              c/o
                156 Front Street West, Suite 210,
              Toronto,
                Ontario, M5J 2L6
            250,000
              Direct
            0.3%Common
            George
                Theodore,
              c/o
                156 Front Street West, Suite 210,
              Toronto,
                Ontario, M5J 2L6
            4,834,980
              Direct
            6.2%Common
            Andrew
                Wickett
              c/o
                156 Front Street West, Suite 210,
              Toronto,
                Ontario, M5J 2L6
            4,460,515
              Direct
            5.7%Common
            Debbie
                Gracie-Smith
              c/o
                156 Front Street West, Suite 210,
              Toronto,
                Ontario, M5J 2L6
            4,460,515
              Direct
            5.7%Common
            All
                Officers And Directors As A Group
            19,431,010
              Direct
            24.80%








(1)
      Applicable percentage of ownership is based on 78,337,492 shares of common
      stock
      outstanding as of March 21, 2006 for each stockholder. Beneficial ownership
      is
      determined in accordance within the rules of the Commission and generally
      includes voting of investment power with respect to securities. Shares of common
      stock subject to securities exercisable or convertible into shares of common
      stock that are currently exercisable or exercisable within 60 days of April
      18,
      2005 are deemed to be beneficially owned by the person holding such options
      for
      the purpose of computing the percentage of ownership
      of such persons, but are not treated as outstanding for the purpose of computing
      the percentage ownership of any other person.





33





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





During
      the past two (2) years, ActiveCore has not entered into a commercial transaction
      with a value in excess of $60,000 with a director, officer, or beneficial owner
      of 5% or more of IVP's Common Stock.





ActiveCore
      did not give anything of value to, or receive anything of value from, any
      promoter during year 2004 or 2003.





**PART
      IV**





**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





**(1)
      Audit Fees**




The
      aggregate fees billed for each of the last two years for professional services
      rendered by the principal accountant for our audit of annual financial
      statements and review of financial statements included in our form 10-KSBs
      and
      10-QSBs, or services that are normally provided by the accountant in connection
      with statutory and regulatory filings or engagements for those years
      were:





Year
            
            Fees
                Paid
            
            Principal
                Auditor2005
            
            $
            100,000
            
            
            Weinberg
                & Company, P.A.2005
            
            $
            135,990
            
            
            BDO
                Dunwoody2004
            
            $
            122,125
            
            
            BDO
                Dunwoody








**(2)
      All Other Fees**





The
      aggregate fees billed in each of the last two years for the products and
      services provided by the principal accountant, other than the services reported
      in paragraph (1) was:





Year
            
            Fees
                Paid
            
            Principal
                Auditor2005
            
            $
            0
            
            
            Weinberg
                & Company, P.A.2004
            
            $
            0
            
            
            Weinberg
                & Company, P.A.





Other
      than the fees set forth in (1) and (2) above, we have not expended any amounts
      on any other audit, audit-related or tax fees.




**(3)
      AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES.**





The
      audit
      committee is mandated to approve the financial statements of the Company with
      respect to quarterly and annual statements.






34




**Item
      13. Exhibits, Lists And Reports On Form-8K**




**(a)
      Exhibits:**




**Exhibit
                No.**
            
            **Description**
            
            **Location**31.1
            
            Certification
                by Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
            
            Provided
                herewith31.2
            
            Certification
                by Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
            
            Provided
                herewith32.1
            
            Certification
                by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith32.2
            
            Certification
                by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith













35







**SIGNATURES**




Pursuant
      to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
      of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




**Registrant:****ActiveCore
                Technologies, Inc.***/s/*
            April
                12, 2006By:Peter
                J. HamiltonChief
                Executive Officer













36