UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
  **FORM
        10-QSB**
  ANNUAL
        REPORT PURSUANT TO SECTION 13 OR 15 (D)
 OF
        THE
        SECURITIES EXCHANGE ACT OF 1934
  **For
        the Fiscal Year Ended March 31, 2006**
  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, $0.01 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
 
 State
        the
        number of shares outstanding of each of the issuer's classes of common equities
        as of the latest practicable date: as of May 23, 2006, there were 89,223,634
        outstanding shares of the issuer's common stock, par value $0.01.
  
 
 **ACTIVECORE
        TECHNOLOGIES, INC.**
 
 **FORM
        10-QSB**
 
 TABLE
        OF
        CONTENTS
 
 PagePART
                  I
              3ITEM
                  1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              3ITEM
                  2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATION
              16ITEM
                  3. CONTROLS AND PROCEDURES
              25PART
                  II
              25ITEM
                  1. LEGAL PROCEEDINGS
              25PART
                  2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDS
              26ITEM
                  3. DEFAULTS UPON SENIOR SECURITIES
              26ITEM
                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              27ITEM
                  5. OTHER INFORMATION
              27ITEM
                  6. EXHIBITS
              27Signatures
              28
  2
 
 **PART
        I**
 **FINANCIAL
        INFORMATION**
 **ITEM
        1. CONSOLIDATED FINANCIAL STATEMENTS**
 **ACTIVECORE
        TECHNOLOGIES, INC.**
 **As
        of March 31, 2006**
 
 **INDEX
        TO FINANCIAL STATEMENTS**
  Page
                  4
              Condensed
                  Consolidated Balance Sheets as of March 31, 2006 (Unaudited) and
                  December
                  31, 2005Page
                  5
              Condensed
                  Consolidated Statements Of Operations For The Three Months Ended
                  March 31,
                  2006 and 2005 (Unaudited)Page
                  6
              Condensed
                  Consolidated Statement Of Stockholders' Equity For The Three Months
                  Ended
                  March 31, 2006 (Unaudited)Pages
                  7-8
              Condensed
                  Consolidated Statements of Cash Flows For The Three Months Ended
                  March 31,
                  2006 and 2005 (Unaudited)Pages
                  9-15
              Notes
                  to Condensed Consolidated Financial Statements as of March 31,
                  2006
                  (Unaudited)
 
 
  3
 
 **ACTIVECORE
        TECHNOLOGIES, INC.**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 
 **ASSETS**
 
 **March
                  31,**
                **2006**
                **(Unaudited)**
              ****
              **December
                  31,**
                **2005**CURRENT
                  ASSETSCash
              
              $
              183,580
              
              $
              113,421Accounts
                  receivable, net
              
              
              2,684,426
              
              
              3,701,028Other
                  receivables
              
              
              128,745
              
              
              128,095Deferred
                  consulting and financing expenses
              
              
              461,382
              
              
              352,750Prepaid
                  expenses and other current assets
              
              
              137,106
              
              
              131,139Total
                  Current Assets
              
              
              3,595,239
              
              
              4,426,433CAPITAL
                  ASSETS, NET
              
              
              337,322
              
              
              336,256OTHER
                  ASSETSGoodwill
                  and other intangible assets, net
              
              
              5,069,020
              
              
              5,169,732Deferred
                  consulting and financing expenses
              
              
              122,277
              
              
              125,505Total
                  Other Assets
              
              
              5,191,297
              
              
              5,295,237TOTAL
                  ASSETS
              
              $
              9,123,858
              
              $
              10,057,926LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIESLine
                  of credit
              
              $
              1,222,300
              
              $
              1,253,474Accounts
                  payable
              
              
              2,626,285
              
              
              2,162,663Accrued
                  liabilities
              
              
              1,049,328
              
              
              1,099,979Taxes
                  payable
              
              
              515,563
              
              
              675,871Leases
                  payable, current portion
              
              
              22,271
              
              
              18,788Long-term
                  debt, current portion
              
              
              430,105
              
              
              164,524Deferred
                  tax liability
              
              
              331,736
              
              
              340,736Due
                  to related parties
              
              
              67,749
              
              
              11,863Other
                  current liabilities
              
              
              39,028
              
              
              100,923Total
                  Current Liabilities
              
              
              6,304,365
              
              
              5,828,821LONG-TERM
                  LIABILITIESLong-term
                  debt
              
              
              413,668
              
              
              231,939Leases
                  payable, long-term
              
              
              30,571
              
              
              21,485Redeemable
                  preferred shares
              
              
              312,500
              
              
              375,000Total
                  Long-Term Liabilities
              
              
              756,739
              
              
              628,424TOTAL
                  LIABILITIES
              
              
              7,061,104
              
              
              6,457,245COMMITMENTS
                  AND CONTINGENCIESSTOCKHOLDERS'
                  EQUITYCommon
                  stock, $0.01 par value, 500,000,000 shares authorized, 89,223,634
                  and79,242,114
                  outstanding as of March 31, 2006 and December 31, 2005, respectively
              
              
              892,238
              
              
              792,422Common
                  stock to be issued
              
              
              117,108
              
              
              311,025Additional
                  paid-in capital
              
              
              43,893,974
              
              
              43,137,898Accumulated
                  deficit
              
              
              (42,052,162
              )
              
              (40,736,105
              )Accumulated
                  other comprehensive income (loss)
              
              
              (436,845
              )
              
              312,441Treasury
                  stock
              
              
              (25,478
              )
              
              (112,000
              )Deferred
                  compensation
              
              
              (326,081
              )
              
              (105,000
              )Total
                  Stockholders' Equity
              
              
              2,062,754
              
              
              3,600,681TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              9,123,858
              
              $
              10,057,926
 
 See
        accompanying notes to condensed consolidated financial
        statements.
  4
 
 **ACTIVECORE
        TECHNOLOGIES, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**
 
 For
                  the Three
                Months
                  Ended
                March
                  31, 2006
              
              For
                  the Three
                Months
                  Ended
                March
                  31, 2005REVENUES
              
              $
              1,654,031
              
              $
              376,308COST
                  OF SALESDirect
                  wages
              
              
              1,411,623
              
              
              141,262Amortization
                  of licensing agreements and other costs
              
              
              56,992
              
              
              104,372Total
                  Cost of Sales
              
              
              1,468,615
              
              
              245,634GROSS
                  PROFIT
              
              
              185,416
              
              
              130,674OPERATING
                  EXPENSESSalaries
                  and wages
              
              
              555,433
              
              
              193,090Consulting
                  fees
              
              
              144,703
              
              
              158,949Research
                  and development
              
              
              55,000
              
              
              55,000Legal
                  and accounting
              
              
              190,090
              
              
              68,579General
                  and administrative
              
              
              253,313
              
              
              329,745Financial
                  advisory fees
              
              
              18,803
              
              
              28,639Amortization
                  and depreciation
              
              
              109,882
              
              
              29,719Total
                  Operating Expenses
              
              
              1,327,224
              
              
              863,721LOSS
                  FROM OPERATIONS
              
              
              (1,141,808
              )
              
              (733,047
              )OTHER
                  EXPENSEInterest
                  expense
              
              
              (148,603
              )
              
              (68,615
              )Foreign
                  exchange loss
              
              
              (34,646
              )
              
              (33,740
              )Total
                  Other Expense
              
              
              (183,249
              )
              
              (102,355
              )LOSS
                  FROM CONTINUING OPERATIONS
              
              
              (1,325,057
              )
              
              (835,402
              )Discontinued
                  OperationsLoss
                  from discontinued operations
              
              
              —
              
              
              (118,780
              )Net
                  loss before income taxes
              
              
              (1,325,057
              )
              
              (954,182
              )Income
                  tax recovery
              
              
              9,000
              
              
              —NET
                  LOSS
              
              $
              (1,316,057
              )
              $
              (954,182
              )Preferred
                  stock dividend
              
              
              35,250
              
              
              11,092NET
                  LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
              
              $
              (1,351,307
              )
              $
              (965,274
              )LOSS
                  PER COMMON SHARE FROM CONTINUING
              
              $
              (0.02
              )
              $
              (0.02
              )OPERATIONS-BASIC
                  AND DILUTEDLOSS
                  PER COMMON SHARE FROM DISCONTINUEDOPERATIONS
                  - BASIC AND DILUTED
              
              $
              (0.00
              )
              $
              (0.00
              )NET
                  LOSS PER COMMON SHARE - BASIC AND DILUTED
              
              $
              (0.02
              )
              $
              (0.02
              )WEIGHTED
                  AVERAGE NUMBER OF SHARES OUTSTANDING -BASIC
                  AND DILUTED
              
              
              80,683,165
              
              
              46,999,267
  See
        accompanying notes to condensed consolidated financial
        statements.
  5
 
 **ACTIVECORE
        TECHNOLOGIES, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006**
 (UNAUDITED)
 **Common
                    Stock to be Issued / (Returned)****Common
                    Shares**
                
                **Common
                    Stock Amount**
                
                **Shares**
                
                **Amount**
                
                **Treasury
                    Stock**
                
                **Additional
                    Paid-in Capital**
                
                **Accumulated
                    Deficit**
                
                **Other
                    Comprehensive Income (Loss)**
                
                **Deferred
                    Compensation**
                
                **Total****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**Stock
                    issued for financing services
                
                
                250,000
                
                
                2,500
                
                
                
                
                
                
                
                
                
                
                
                45,000
                
                
                
                
                
                
                
                
                
                
                
                47,500Stock
                    issued upon conversion of preferred shares
                
                
                4,166,667
                
                
                41,667
                
                
                (4,166,667
                )
                
                (291,667
                )
                
                
                
                
                250,000
                
                
                
                
                
                
                
                
                
                
                
                (0
                )Stock
                    issued for employment services
                
                
                3,822,500
                
                
                38,225
                
                
                
                
                
                
                
                
                
                
                
                321,550
                
                
                
                
                
                
                
                
                (359,775
                )
                
                -Stock
                    issued for consulting services
                
                
                960,000
                
                
                9,600
                
                
                
                
                
                
                
                
                86,522
                
                
                57,600
                
                
                
                
                
                
                
                
                
                
                
                153,722Stock
                    issued for settlement of debt
                
                
                782,353
                
                
                7,824
                
                
                
                
                
                
                
                
                
                
                
                117,176
                
                
                
                
                
                
                
                
                
                
                
                125,000Redemption
                    of preferred shares
                
                
                
                
                
                
                
                
                
                
                
                62,500
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                62,500Preferred
                    stock dividend
                
                
                
                
                
                
                
                
                
                
                
                35,250
                
                
                
                
                
                (35,250
                )
                
                
                
                
                
                
                
                
                
                
                -Amortization
                    of deferred compensation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                138,694
                
                
                138,694Net
                    loss for period
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,316,057
                )
                
                
                
                
                
                
                
                (1,316,057
                )Foreign
                    currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (749,286
                )
                
                
                
                
                (749,286
                )**Balance,
                    March 31, 2006**
                
                
                **89,223,634**
                
                
                **892,238**
                
                
                **1,006,438**
                
                
                **117,108**
                
                
                **(25,478**
                **)**
                
                **43,893,974**
                
                
                **(42,052,162**
                **)**
                
                **(436,845**
                **)**
                ****
                **(326,081**
                **)**
                
                **2,062,754**
  See
        accompanying notes to condensed consolidated financial statements.
  6


**ACTIVECORE
      TECHNOLOGIES, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**





**For
                the Three**
              **Months
                Ended**
              **March
                31, 2006**
            ****
            **For
                the Three**
              **Months
                Ended**
              **March
                31, 2005**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (1,316,057
            )
            $
            (954,182
            )Adjustments
                to reconcile net loss to net cashused
                in operating activities:Depreciation
            
            
            45,407
            
            
            31,232Amortization
                of intangible assets
            
            
            96,059
            
            
            100,250Amortization
                of deferred consulting and finance fees
            
            
            138,694
            
            
            105,012Deferred
                taxes
            
            
            (9,000
            )
            
            —Changes
                in operating assets and liabilities net of acquisition:Decrease
                (increase) in receivables
            
            
            810,188
            
            
            (96,003
            )Increase
                in prepaid expenses and other current assets
            
            
            (38,277
            )
            
            (39,654
            )Increase
                in accounts payable
            
            
            473,374
            
            
            12,690(Decrease)
                increase in accrued liabilities
            
            
            (244,507
            )
            
            222,058(Decrease)
                increase in taxes payable
            
            
            (213,075
            )
            
            52,522(Decrease)
                increase in other current liabilities
            
            
            (93,555
            )
            
            289,216Net
                Cash Used In Operating Activities
            
            
            (350,749
            )
            
            (276,859
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of capital assets
            
            
            (28,293
            )
            
            (3,472
            )Acquisition
                of Disclosure Plus
            
            
            —
            
            
            (60,600
            )Net
                Cash Used In Investing Activities
            
            
            (28,293
            )
            
            (64,072
            )




See
      accompanying notes to condensed consolidated
      financial statements.




7


**ACTIVECORE
      TECHNOLOGIES, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**





**For
                the Three**
            ****
            **For
                the Three****Months Ended**
            ****
            **Months
                Ended****March
                31, 2006**
            
            **March
                31, 2005**CASH
                FLOWS FROM FINANCING ACTIVITIES:Repayments
                of line of credit
            
            
            (30,174
            )
            
            —Proceeds
                from loan payable
            
            
            429,000
            
            
            —Advance
                of notes payable
            
            
            —
            
            
            27,261Proceeds
                received from related parties
            
            
            55,886
            
            
            99,600Repayments
                made to related parties
            
            
            —
            
            
            (65,253
            )Proceeds
                from bank overdraft
            
            
            —
            
            
            100,576Preferred
                stock dividend
            
            
            —
            
            
            (11,092
            )Proceeds
                from preferred shares subscription
            
            
            —
            
            
            150,000Payment
                on leases
            
            
            (5,511
            )
            
            (7,354
            )Net
                Cash Provided By Financing Activities
            
            
            449,201
            
            
            293,738FOREIGN
                EXCHANGE GAIN
            
            
            —
            
            
            1,150NET
                INCREASE (DECREASE) IN CASH FOR THE PERIOD
            
            
            70,159
            
            
            (46,043
            )CASH
                - BEGINNING OF PERIOD
            
            
            113,421
            
            
            53,736CASH
                - END OF PERIOD
            
            $
            183,580
            
            $
            7,693Non-Cash
                Transactions (Also see Note 3):Isuance
                of shares related to acquisition of Disclosureplus
            
            
            —
            
            $
            176,000Issuance
                of shares for consulting services to be rendered
            
            
            —
            
            $
            120,000Issuance
                of shares for interest on term loan
            
            $
            43,542
            
            
            —Issuance
                of shares for redemption of preferred shares
            
            $
            291,667
            
            
            —Issuance
                of shares for employment services
            
            $
            359,775
            
            
            —Issuance
                of shares for consulting services
            
            $
            153,722
            
            
            —Issuance
                of shares for settlement of liabilities
            
            $
            125,000
            
            
            —Issuance
                of shares for financing services
            
            $
            47,500
            
            
            —Shares
                to be issued for conversion of preferred shares
            
            $
            62,500
            
            
            —




See
      accompanying notes to condensed consolidated
      financial statements.




8


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 (UNAUDITED)




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





**Basis
      of Presentation and Going Concern**





The
      accompanying unaudited interim condensed consolidated financial statements
      have
      been prepared pursuant to the rules and regulations for reporting on Form
      10-QSB. Accordingly, certain information and disclosures required by generally
      accepted accounting principles for complete consolidated financial statements
      are not included herein. The interim statements should be read in conjunction
      with the financial statements and notes thereto included in the Company's latest
      Annual Report on Form 10-KSB. The results for the three months may not be
      indicative of the results for the entire year.





Interim
      statements are subject to possible adjustments in connection with the annual
      audit of the Company's accounts for 2006. In the Company's opinion all
      adjustments necessary for a fair presentation of these interim statements have
      been included and are of a normal and recurring nature.





The
      condensed 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 condensed consolidated financial statements have been prepared
      assuming that the Company will continue as a going concern. The Company had
      a
      net loss of $1,316,057 and a negative cash flows from operations of $350,749
      for
      the three months ended March 31, 2006 and has a working capital deficiency
      of
      $2,709,126 and an accumulated deficit of $42,052,162 at March 31, 2006. These
      matters raise substantial doubt about its ability to continue as a going
      concern. The condensed  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.




9


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 (UNAUDITED)


**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION - (Continued)**





**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.




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. Adoption of this new standard did not have
      a
      material impact on the Company’s consolidated financial statements.





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 adoption of SFAS 154 did not have a material impact on the
      Company’s consolidated results of operations and financial
      condition.




10


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 (UNAUDITED)


***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, other receivables accounts payable, due to related parties,
      accrued liabilities, taxes payable and other current liabilities 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.





***Net
      Loss Per Share***


Basic
      net
      income (loss) per share is computed by dividing net income (loss) by the
      weighted average number of common shares outstanding during the period. Diluted
      earnings per share is 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
      (loss) 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 March 31, 2006 as their effect would
      be
      anti-dilutive.





**NOTE
      2 - DISCONTINUED OPERATIONS**





During
      2005, the Company disposed of Twincentric Limited, which was one of the
      components of its business which constituted a discontinued operation. The
      loss
      on the Company’s condensed consolidated statements of operations for the quarter
      ended March 31, 2006 and 2005 is summarized as follows:




**2006**
            ****
            **2005**Loss
                from discontinued operations
            
            $
            —
            
            $
            (118,780
            )




The
      loss
      from discontinued operations incurred during the quarter ended March 31, 2005
      was comprised as follows:




Revenue
            
            $
            146,700Salaries
                and wages
            
            
            (180,005
            )General
                and administrative
            
            
            (67,966
            )Legal
                and accounting
            
            
            (9,996
            )Amortization
            
            
            (1,513
            )Interest
                expense
            
            
            (6,000
            )Loss
                from discontinued operations
            
            $
            (118,780
            )




11


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 (UNAUDITED)


**NOTE
        3** - **ACQUISITIONS**
 
 ***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 an 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. Pro Forma financial information giving effect to the
        acquisition of DP has not been presented on the basis that it is not
        material.
 
 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




**NOTE 4
      - ACCOUNTS RECEIVABLE**





The
      components of accounts receivable, net, as of March 31, 2006 and December 31,
      2005 consist of:





**2006**
            
            **2005**Trade
                receivables
            
            $
            2,743,024
            
            $
            3,802,531Allowance
                for doubtful accounts
            
            
            (58,598
            )
            
            (101,503
            )Accounts
                receivable, net
            
            $
            2,684,426
            
            $
            3,701,028






Included
      in accounts receivable at March 31, 2006 were amounts due from three customers
      whose balances individually represented in excess of 10% of the Company’s net
      accounts receivable. These three customers cumulatively represented 55% of
      the
      Company’s net accounts receivable balance (2005 - 39%).




**NOTE 5
      - DEBT**





Debt
      consists of the following as of March 31, 2006 and December 31,
      2005:




**2006**
            ****
            **2005**Note
                payable to SCI Healthcare Group, unsecured (1)
            
            $
            7,946
            
            $
            46,948Short
                term loans (2)
            
            
            132,995
            
            
            21,272Bank
                term loan, seven year term with monthly equal principal payments,
                bearing
                interest at the Canadian prime plus 3% (3)
            
            
            145,860
            
            
            152,805Bank
                term loan, three year term with monthly equal principal payments,
                bearing
                interest at the Canadian prime plus 1% (4)
            
            
            158,093
            
            
            175,438Term
                loan, two year term with equal monthly payments, bearingInterest
                at 20% (5)
            
            
            398,879
            
            
            —$
            843,773
            
            $
            396,463Less
                current portion
            
            
            430,105
            
            
            164,524Long
                term portion
            
            $
            413,668
            
            $
            231,939







(1)
              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. This
                  debt is unsecured.




(2)
            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 and March 31, 2006 are due on demand and bear no interest.
                This
                debt is unsecured.




(3)
            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%. This debt is secured by the assets of the Company's subsidiary
                  to whom the debt is
                  outstanding.




(4)
            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%.  This debt
                  is secured by the assets of the Company's subsidiary to whom the
                  debt is
                  outstanding.




12


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 (UNAUDITED)




(5)
            During
                    2006, the Company entered into a two year term loan with an unrelated
                    party. The loan is repayable in equal monthly payments and the
                    interest
                    rate on the loan is 20%. In conjunction with this loan, the Company
                    issued
                    the lender 250,000 common shares of the Company, and placed 5,000,000
                    common shares into escrow as security for the
                    lender.




Future
      maturities of the Company’s debt as of March 31, 2006 are as follows for each of
      the twelve months periods ending March 31 of the respective years:




2007
            
            $
            430,1052008
            
            
            296,1192009
            
            
            45,9242010
            
            
            23,653Thereafter
            
            
            47,972$
            843,773




**NOTE 6
      - 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 $67,749 and $11,863 as of March 31, 2006 and December
      31, 2005 respectively, and are classified as current liabilities in the
      accompanying condensed consolidated balance sheet.




Included
      in the Company’s accounts receivable balance are amounts due from Global
      Sterling Payments Systems Limited, a related party to the Company, totaling
      $847,002 (2005 - $647,002).




**NOTE 7
      -**  **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. These preferred shares have been
      recorded as debt on the Company’s condensed consolidated balance sheets on the
      basis that these shares are manditorily redeemable by the Company. After a
      redemption of $62,500 during the three months ended March 31, 2006, as of March
      31, 2006, $312,500 of these Series C preferred shares remain outstanding and
      were yet to be redeemed.





**NOTE 8
      -**  **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. Borrowings under
      this facility may not exceed 85% of specified receivables as defined in the
      respective credit agreement. At March 31, 2006, no amounts were available under
      the Company’s line of credit and 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.




13


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 (UNAUDITED)




**NOTE 9
      - 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
      and March 31, 2006.




**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
      in
      the Company’s condensed consolidated 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.




14


**ACTIVECORE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 (UNAUDITED)


**NOTE 10
      - COMMON AND PREFERRED SHARES**





**Common
      Shares**





On
      February 7, 2006, the Company issued 250,000 common shares to an unrelated
      party
      who provided the Company with a two-year term loan. The value of these shares,
      based on the fair value of the Company's common shares on the date this
      agreement was entered into,  was $47,500 and as of March 31, 2005 $43,542
      is recorded in deferred consulting and financing charges.





On
      February 7, 2006, the Company issued 4,166,667 common shares to the former
      holders of its entire Class A and B preferred shares. In 2005, these former
      preferred shareholders agreed with the Company to convert their preferred shares
      to common shares, and as of December 31, 2005 these shares were included in
      common stock to be issued.





On
      March
      28, 2006, the Company issued, based on the closing market price of the Company's
      common shares on the date this agreement was entered into, 3,822,500 common
      shares to numerous employees in exchange for employment services having a value
      of $359,775. As of March 31, 2006, $108,694 of this amount was expensed and
      $251,081 was included in deferred consulting and financing expense.





On
      March
      28, 2006, the Company issued 960,000 common shares to two consultants of the
      Company who will provide services during 2006. These shares have a value of
      $67,200, based on the closing market price of the Company's common shares on
      the
      date this agreement was entered into. As of March 31, 2006, $11,550 of this
      amount had been expensed and $55,650 was included in deferred consulting and
      financing expense.





On
      March
      28, 2006, the Company issued 782,353 common shares to two employees in
      consideration for unpaid wages. The value of these common shares was $125,000,
      based on the closing market price of the Company's common shares on the date
      this agreement was entered into.





On
      January 9, 2006, the Company used 1,081,521 shares of treasury stock with a
      value of $86,522, based on the closing market price of the Company's common
      shares on the date this agreement was entered into, to pay a third party for
      investor relations services.





The
      Company is authorized to issue 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 were included in common stock to be issued
      at
      December 31, 2005, and were subsequently issued during the quarter ended March
      31, 2006





***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
      have
      a 12% annual dividend rate payable quarterly based on the number of preferred
      shares outstanding at the end of the quarter. As of March 31, 2006 the Company
      has an obligation to issue common shares with a value of $62,500 in order to
      satisfy the terms of its Series C Preferred Stock and this amount has been
      recorded as common shares to be issued within Shareholders'
      Equity.


15




**ITEM
      2. 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.*




**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 15 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.




16





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.




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.


17


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.




**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.


18


***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.





***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.




**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.
  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. Adoption of this new standard did not have
        a
        material impact on the Company’s consolidated financial statements.
 
 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 adoption of SFAS 154 did not have a material impact on the
        Company’s consolidated results of operations and financial
        condition.




**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.


19





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.




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.




20




**Results
      of Operations**





***Three
      Months Ended March 31, 2006 Compared With the Three Months Ended March 31,
      2005***




***Overview***




During
      the quarter ended March 31, 2006, the Company recorded revenues of $1.7 million,
      and a loss from continuing operations of $1.3 million. These amounts compare
      to
      revenue of $0.4 million during the quarter ended March 31, 2005, when a loss
      from continuing operations of $0.8 million was incurred. The increase in revenue
      from the prior year was the result of several factors. Most importantly, as
      the
      Company didn’t begin consolidating the results of Cratos until May 1, 2005,
      during the period ended March 31, 2005 the Company’s results of operations did
      not include any contribution from this acquisition. As Cratos was a fairly
      sizable acquisition for the Company, this acquisition had a significant impact
      on revenue. During the quarter ended March 31, 2006, revenue from Cratos totaled
      $1.0 million and therefore this acquisition accounted for most of the increase
      from 2005 to 2006. The balance of the increase came predominately from the
      Company’s ActiveCast business, which has grown organically quite significantly
      since the same time a year ago.




The
      increased net loss of $1.3 million in 2006 as compared to $1.0 million in 2005
      was also largely related to the Cratos acquisition for a couple of reasons.
      Firstly, the first calendar quarter has historically been Cratos’ weakest and
      2006 was no exception. The $1.0 million revenue it generated during the quarter
      ended March 31, 2006 was down considerably from the $2.2 million recognized
      during the fourth quarter of 2005. In the Company’s fourth quarter ended
      December 31, 2005, many large projects were completed and which therefore had
      no
      corresponding revenue during the quarter ended March 31, 2006. The Company
      feels
      that the Cratos sales pipeline remains strong and that during the quarter ending
      June 30, 2006 that the Cratos revenue should return to levels close to those
      realized at the end of 2005.




**Revenues**




**Quarter
                ended March 31****2006**
            
            **2005**
            
            **%
                Change****1,654,031**
            
            **376,308**
            
            **340%**




During
      the quarter ended March 31, 2006 the Company generated $1.7 million in revenue
      from the sale of products and services versus $0.4 million in revenue during
      the
      quarter ended March 31, 2005. From a revenue source perspective, the vast
      majority of the revenue recorded in both 2006 and 2005 was service related,
      while product related revenue represented only a small percentage of the total.
      During 2006, 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 quarter ended
      June
      30, 2005, and the Company has consolidated Cratos’ operations in its
      consolidated financial statements beginning May 1, 2006. Therefore, in the
      quarter ended March 31, 2005 the Company’s revenue included no amounts from
      Cratos as compared to the quarter ended March 31, 2006 when the Company’s total
      of $1.7 million included $1.0 million from Cratos.




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 quarter ended March 31, 2005 to the quarter ended March
      31,
      2006.





**Cost
      of Sales**




**Quarter
                ended March 31****2006**
            
            **2005**
            
            **%
                Change****1,468,615**
            
            **245,634**
            
            **498%**




21




Cost
      of
      sales for the quarter ended March 31, 2006 were $1.5 million, which consisted
      primarily of direct wages paid to consulting services staff of $1.4 million,
      and
      amortization of software licensing agreements and other direct costs of $0.1
      million. These amounts are significantly higher than during 2005 when the
      Company’s cost of sales for the year totaled $0.2 million which was split almost
      evenly between direct wages and amortization. The vast majority of the increase
      in cost of sales in 2006 as compared to 2005 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 the Company’s business model prior to the Cratos acquisition
      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
      2005 to 2006. Specifically, the quarter ended March 31, 2006 had a gross margin
      of $.2 million, or 35%, versus a gross margin of $0.2 million, or 11% during
      the
      quarter ended March 31, 2005. The gross margin percentage realized during the
      Company’s first quarter ended March 31, 2005 was atypically low as a result of
      losses realized on certain fixed price projects. The Company believes that
      this
      lower gross margin will not be indicative of gross margins to be realized in
      future quarters, and that beginning in the quarter ending June 30, 2006 the
      Company’s gross margin will return to levels consistent with the last few
      quarter since the Cratos acquisition in the 30% - 35% range.




**Operating
      Expenses**




Total
      operating expenses for the quarter ended March 31, 2006 were $1.3 million versus
      $0.9 million during the quarter ended March 31, 2005. After these expenses,
      the
      Company recognized a loss from operations of $1.1 million in the quarter ended
      March 31, 2006 versus a loss from operations of $0.7 million during the quarter
      ended March 31, 2005.




The
      largest components of operating expenses for the first three years of 2006
      year
      were salaries and wages, consulting fees, legal and accounting and other general
      and administration expenses. These expenses are discussed below.




**Salaries
      and Wages**




**Quarter
                ended March 31****2006**
            
            **2005**
            
            **%
                Change****555,433**
            
            **193,090**
            
            **188%**




Salaries
      and wages in 2006 represent the cost of administration and sales and marketing
      staff except for certain contractors who are shown as consulting costs. For
      the
      quarter ended March 31, 2006, salaries and wages were $0.6 million as compared
      with $0.2 million during the quarter ended March 31, 2005, representing an
      increase of 189%. Most of the increase in the quarter ended March 31, 2006
      as
      compared to 2005 reflects the additions made to the CDM business in terms of
      personnel which occurred throughout 2005 as well as the addition of the Cratos
      business which occurred in May, 2005. From a sequential perspective, the
      salaries and wages incurred during the quarter ended March 31, 2006 are
      consistent with those incurred during the quarter ended December 31,
      2005.





**Consulting
      fees**




**Quarter
                ended March 31****2006**
            
            **2005**
            
            **%
                Change****144,703**
            
            **158,949**
            
            **(9%)**




For
      the
      quarter ended March 31, 2006, consulting fees decreased 9% to $144,703 from
      $158,949 during the quarter ended March 31, 2005. During the quarter ended
      March
      31, 2006 most of the consulting fees incurred relate to stock compensation
      paid
      to consultants of the Company relating to agreements that are generally in
      place
      for the duration of 2006. Therefore, the Company expects that this expense
      will
      remain fairly consistent through 2006. The 2005 consulting fees also related
      almost exclusively to the recognition of deferred stock
      compensation.


22





**Legal
      and Accounting**




**Quarter
                ended March 31****2006**
            
            **2005**
            
            **%
                Change****190,090**
            
            **68,579**
            
            **177%**




For
      the
      quarter ended March 31, 2006, legal and accounting expenses increased 169%
      to
      $190,090 from $68,579 during the quarter ended March 31, 2005. Legal and
      accounting expense includes legal costs associated with using third party
      lawyers to act on behalf of the Company in current legal matters. Most of the
      increase in legal and accounting expense in 2006 as compared with 2005 relates
      to the fact that the Company recorded an expense during the quarter ended March
      31, 2006 relating to its year-end audit of 2005. The annual audit costs
      represent a more significant cost than those incurred throughout most of the
      year, and as a result the Company expects to see a slight decrease in legal
      and
      accounting fees over the next few quarters.




**General
      and Administrative**




**Quarter
                ended March 31****2006**
            
            **2005**
            
            **%
                Change****253,313**
            
            **329,745**
            
            **(23%)**




For
      the
      quarter ended March 31, 2006, general and administrative expenses decreased
      23%
      to $244,976 from $329,745 during the quarter ended March 31, 2005. The 2005
      balance included several one-time items including an unusually high bad debt
      expense and certain costs related to restructuring certain management roles
      within the Company. Of the $253,313 incurred during the quarter ended March
      31,
      2006, over $150,000 relates to the Cratos organization which was not part of
      the
      organization during the same period during 2005. In future quarter, the Company
      expects that its general and administrative expenses will remain relatively
      consistent.




**Other
      Income/Expenses**




**Quarter
                ended March 31****2006**
            
            **2005**
            
            **%
                Change****Interest
                Expense**
            **(148,603)**
            
            **(68,615)**
            
            **117%****Other
                income (loss)**
            **(34,646)**
            
            **(33,740)**
            
            **3%**




In
      the
      quarter ended March 31, 2006, the Company expended $148,603 in financial
      interest which was significantly higher than the $68,615 expensed in the year
      ended March 31, 2005. The increase in interest expense in 2006 as compared
      with
      2005 is a result of the fact that in 2006, the Company is carrying significantly
      more debt than during the same period in 2005. Specifically, the Company added
      a
      line of credit and term loan with a Canadian chartered bank during 2005, along
      with a term loan from an unrelated party in 2006.




Other
      income represented a loss of $34,646 for the quarter ended March 31, 2006 and
      represented a loss of $33,740 for the quarter ended March 31, 2005. These
      balances are primarily the result of the fluctuations of the U.S. dollar
      relative to the Canadian dollar.




**Discontinued
      Operations**




During
      the quarter ended March 31, 2005, the Company incurred a loss from discontinued
      operations relating to Twincentric of $118,780. Twincentric had consistent
      incurred losses from the time it was acquired in 2004 and the decision was
      made
      by the Company to divest of this investment in August 2005 when it was
      ultimately disposed of.


23




**Liquidity
      and Capital Resources**




At
      March
      31, 2006, the Company’s need for cash included satisfying $6,304,365 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 March 31, 2006,
      the Company had $183,580 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 Condensed 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 $1,316,057 and a negative cash flow from
      operations of $350,749 for the quarter ended March 31, 2006. The Company also
      has a working capital deficiency of $2,709,126 and an accumulated deficit of
      $42,052,162 at March 31, 2006. There is substantial doubt that the Company
      will
      continue as a going concern and will likely still incur a going concern note
      as
      of December 31, 2006. The Condensed 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 $113,421 in the period ended
      December 31, 2005 to $183,580 at March 31, 2006.




**Net
      Cash From Operating Activities**




Net
      cash
      used in operating activities were $350,749 and $276,859 in the quarters ended
      March 31, 2006 and 2005, respectively. During the quarter ended March 31, 2006,
      the Company generated over $800,000 from collections of accounts receivable
      which almost offset its net loss of $1,316,057. The remaining working capital
      items effectively offset one another. In the quarter ended March 31, 2005,
      the
      Company incurred a net loss of $954,182 which was largely offset by a $222,058
      use of cash relating to accrued liabilities and a $289,216 use of cash relating
      to other current liabilities.




**Net
      Cash From Investing Activities**




Net
      cash
      provided by investing activities during the quarter ended March 31, 2006 was
      $28,293 which related entirely to the purchase of capital assets. In the quarter
      ended March 31, 2005, the company spent $3,472 on the purchase of capital assets
      as well as $60,600 relating to the acquisition of DisclosurePlus such that
      the
      Company used a total of $64,072 on investing activities.





**Net
      Cash From Financing Activities**




Net
      cash
      provided by financing activities of $449,201 during the quarter ended March
      31,
      2006 was primarily comprised of $429,000 relating to net proceeds resulting
      from
      a new term loan secured by the Company. In the quarter ended March 31, 2005
      the
      Company generated $293,738 from financing activities. The most significant
      sources of cash were $150,000 relating to proceeds from a preferred share
      subscription, $99,600 relating to proceeds advanced from related parties, and
      $100,576 proceeds received from bank overdraft. These amounts were partially
      offset by some uses of cash through financing activities, the most significant
      of which was a use of cash of $65,253 relating to repayments made to related
      party advances.


24





**Certain
      Business Risk Factors**





A
      significant portion of the Company's net sales are derived data integration
      services and from sale of enterprise software, 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
      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 disclosure of
      contingent assets and liabilities at the dates of the financial statements
      and
      the reported amounts of revenues and expenses during the reported periods.
      The
      most significant estimates and assumptions relate to the recoverability of
      capitalized software development costs and other intangibles, realization of
      deferred income taxes, and doubtful accounts. Actual amounts could differ
      significantly from these estimates.





**ITEM
      3. CONTROLS AND PROCEDURES**





(A)
      Evaluation of Disclosure Controls and Procedures





As
      of the
      end of the period covered by this Quarterly Report on Form 10-QSB, 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 (as defined in Rules 13a - 15(e) promulgated under the Securities
      Exchange Act of 1934, as amended. 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 have concluded that the Company's
      disclosure controls and procedures are effective 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 quarter ended March 31, 2006, the Company's Chief Executive Officer
      and Acting Chief Financial Officer have 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.





**PART
      II**





**OTHER
      INFORMATION**





**ITEM
      1. 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.




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 March 31,
      2006.


25





**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
      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.





**PART
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





On
      February 7, 2006, the Company issued 250,000 common shares to an unrelated
      party
      who provided the Company with a two-year term loan. The value of these shares
      was $47,500 and as of March 31, 2005 $43,542 is recorded in deferred consulting
      and financing charges.





On
      February 7, 2006, the Company issued 4,166,667 common shares to the former
      holders of its entire Class A and B preferred shares. In 2005, these former
      preferred shareholders agreed with the Company to convert their preferred shares
      to common shares, and as of December 31, 2005 these shares were included in
      common stock to be issued.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None.


26





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.





**ITEM
      5. OTHER INFORMATION**





None.


**ITEM
      6. EXHIBITS**


**(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








27




**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/ Peter
              J.
              Hamilton
            
            
            June
                  1, 2006By:Peter
                J. Hamilton
              Chief
                Executive Officer




28