UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 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	(I.R.S. Employer Identification No.)
Incorporation or Organization)

156 Front Street West, Suite 210, Toronto, Ontario, Canada M5J 2L6

(Address of principal Executive Offices)

(416) 252-6200

(Registrant’s Telephone Number, Including Area Code)

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 September 30, 2006, there were 114,568,086 outstanding shares of the issuer’s common stock., $0.001par value.

Transitional Small Business Disclosure Format (Check one):

Yes o No x

ACTIVECORE TECHNOLOGIES, INC.

FORM 10-QSB

TABLE OF CONTENTS

	Page
PART I FINANCIAL INFORMATION	3
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	20
ITEM 3. CONTROLS AND PROCEDURES	30
PART II OTHER INFORMATION	32
ITEM 1. LEGAL PROCEEDINGS	32
PART 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	34
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	34
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	34
ITEM 5. SUBSEQUENT EVENTS	34
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K	35
SIGNATURES	36
OFFICER’S CERTIFICATE PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002	37
OFFICER’S CERTIFICATE PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002	38
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002	39
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002	40

-2-

PART I

FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ActiveCore Technologies, Inc. As of September 30, 2006

INDEX TO FINANCIAL STATEMENTS

Page	4	Condensed Consolidated Balance Sheets as of September 30, 2006 (Unaudited) and December 31, 2005
Page	5	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2006 and 2005 (Unaudited)
Page	6	Condensed Consolidated Statement of Stockholders' Equity (Deficiency) for the Nine Months Ended September 30, 2006 (Unaudited)
Pages	7 - 8	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005 (Unaudited)
Pages	9 - 19	Notes to Condensed Consolidated Financial Statements as of September 30, 2006 (Unaudited)

-3-

ACTIVECORE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS
	September 30, 2006 (Unaudited)			December 31, 2005
CURRENT ASSETS
Cash	$	94,007		$	109,789
Accounts receivable, net		93,353			3,496,221
Taxes recoverable		131,902			128,095
Deferred consulting and financing expense		225,390			352,750
Prepaid expenses and other current assets		101,165			130,252
Due from related parties		202,510			—
Current assets from discontinued operations		—			209,326
Total Current Assets		848,327			4,426,433
CAPITAL ASSETS		148,873			335,663
OTHER ASSETS
Goodwill and other intangible assets, net		495,201			5,100,982
Deferred consulting and financing expense		17,851			125,505
Other assets from discontinued operations		—			69,343
Total Other Assets		513,052			5,295,830
TOTAL ASSETS	$	1,510,252		$	10,057,926
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Line of credit	$	1,388,698		$	1,274,486
Accounts payable		2,830,354			2,141,769
Accrued liabilities		1,146,715			1,050,872
Taxes payable		410,942			484,008
Leases payable, current portion		20,265			18,788
Long-term debt, current portion		350,484			117,576
Deferred tax liability		—			340,736
Due to related parties		169,238			11,863
Other current liabilities		—			42,794
Current liabilities from discontinued operations		—			345,929
Total Current Liabilities		6,316,696			5,828,821
LONG-TERM LIABILITIES
Long-term debt		261,007			231,939
Leases payable, long-term portion		22,698			21,485
Redeemable prefered shares		281,250			375,000
Total Long-Term Liabilities		564,955			628,424
TOTAL LIABILITIES		6,881,651			6,457,245
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY (DEFICIENCY)
Preferred stock, $.001 par value 50,000,000 shares authorized, 0 shares issued and outstanding		—			—
Common stock, $0.01 par value, 500,000,000 shares authorized, 114,568,086, and 79,242,114 shares issued and outstanding as of September 30, 2006 and December 31, 2005, respectively		1,145,680			792,422
Common stock to be issued		241,042			311,025
Additional paid-in capital		45,056,733			43,137,898
Accumulated deficit		(51,208,845	)		(40,736,105	)
Accumulated other comprehensive income (loss)		(398,144	)		312,441
Treasury stock		(25,478	)		(112,000	)
Deferred compensation		(182,387	)		(105,000	)
Total Stockholders' Equity (Deficiency)		(5,371,399	)		3,600,681
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,510,252		$	10,057,926

See accompanying notes to condensed consolidated financial statements.

-4-

ACTIVECORE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	For the Three Months Ended September 30, 2006			For the Three Months Ended September 30, 2005			For the Nine Months Ended September 30, 2006			For the Nine Months Ended September 30, 2005
REVENUES	$	572,043		$	2,708,373		$	3,609,484		$	4,665,541
COST OF SALES
Direct wages		150,415			1,593,180			2,880,495			2,850,559
Amortization of licensing agreements and other costs		68,465			121,215			184,467			224,618
Total Cost of Sales		218,880			1,714,395			3,064,962			3,075,177
GROSS PROFIT		353,163			993,978			544,522			1,590,364
OPERATING EXPENSES
Salaries and wages		343,912			515,702			1,410,242			937,411
Consulting fees		122,288			131,096			423,745			511,126
Research and development		55,000			55,000			165,000			165,000
Legal and accounting		142,229			281,182			512,941			628,745
General and administrative		993,383			289,288			1,599,569			996,239
Financial advisory fees		13,023			16,043			138,049			65,679
Depreciation & amortization of intangible assets		108,845			84,045			328,909			300,472
Total Operating Expenses		1,778,680			1,372,356			4,578,455			3,604,672
LOSS FROM OPERATIONS		(1,425,517	)		(378,378	)		(4,033,933	)		(2,014,308	)
OTHER INCOME (EXPENSE)
Gain/ (loss) on settlement of debt		110,463			(74,463	)		—			(74,463	)
Interest expense, net		(156,582	)		(74,070	)		(534,485	)		(189,974	)
Foreign exchange gain/ (loss)		2,156			31,367			(65,270	)		(5,928	)
Total Other Expense, net		(43,963	)		(117,166	)		(599,755	)		(270,365	)
LOSS FROM CONTINUING OPERATIONS		(1,469,480	)		(495,544	)		(4,633,688	)		(2,284,673	)
Loss from discontinued operations - net		(6,029,526	)		(15,165	)		(5,819,552	)		(461,466	)
Loss before income taxes		(7,499,006	)		(510,709	)		(10,453,20	)		(2,746,139	)
Income tax benefit		9,000			18,600			27,000			18,600
NET LOSS		(7,490,006	)		(492,109	)		(10,426,240	)		(2,727,539	)
Preferred stock dividends		11,250			12,500			46,500			36,092
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(7,501,256	)	$	(504,609	)	$	(10,472,7	)	$	(2,763,631	)
OTHER COMPREHENSIVE LOSS
Foreign currency translation		(57,746	)		(511,109	)		(710,585	)		(517,748	)
COMPREHENSIVE LOSS	$	(7,559,0002	)	$	(1,015,718	)	$	(11,183,325	)	$	(3,281,379	)
LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS-BASIC AND DILUTED	$	(0.02	)	$	(0.01	)	$	(0.05	)	$	(0.04	)
GAIN (LOSS) PER COMMON SHARE FROM DISCONTINUED OPERATIONS - BASIC AND DILUTED	$	(0.06	)	$	0.00		$	0.09		$	0.01
NET LOSS PER COMMON SHARE - BASIC AND DILUTED	$	(0.08	)	$	(0.01	)	$	(0.12	)	$	(0.05	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED		96,592,820			61,313,668			90,105,638			55,918,440

See accompanying notes to condensed consolidated financial statements.

-5-

ACTIVECORE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006

(UNAUDITED)

	Common		Common Stock		Common Stock to be Issued						Treasury			Additional Paid-in		Accumulated			Accumulated Other Comprehensive			Deferred
	Shares		Amount		Shares			Amount			Stock			Capital		Deficit			Income (Loss)			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		—			—			—			47,500
Stock Issued upon conversion of preferred shares		4,166,667		41,667		(4,166,667	)		(291,667	)		—			250,000		—			—			—			—
Stock issued for employment and director services		6,772,500		67,725		—			—			—			574,550		—			—			(612,275	)		—
Stock issued for consulting services		3,791,521		37,915		—			—			86,522			141,785		—			—			—			236,222
Stock issued for settlement of debt		960,925		9,607		—			—			—			125,393		—			—			—			135,000
Stock to be issued for settlement of debt		,6,575,180		65,752								—			328,759		—			—			—			394,511
Stock to be issued in private placements		11,781,998		117,820		5567,613			179,184			—			412,370		—			—			—			401,300
Redemption of prefered shares		760,114		7,601		—			31,250			—			30,324		—			—			—			69,175
Prefered stock dividend		267,067		2,671		—			11,250			—			10,653		(46,500	)		—			—			(21,926	)
Deferred cost recognized		—		—		—			—			—			—		—			—			452,388			452,388
Net loss for period		—		—		—			—			—			—		(10,426,240	)		—			—			(10,426,240	)
Foreign currency translation adjustment		—		—		—			—			—			—		—			(710,585	)		—			(652,839	)
Balance, September30, 2006		114,568,088	$	1,145,680		6,574,051		$	241,042		$	(25,478	)	$	45,056,732	$	(51,208,845	)	$	(398,144	)	$	(264,887	)	$	1,772,278

See accompanying notes to condensed consolidated financial statements.

-6-

ACTIVECORE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30, 2006			For the Nine Months Ended September 30, 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(10,426,240	)	$	(2,727,539	)
Adjustments to reconcile net loss from operations to net cash used in operating activities:
Depreciation		232,850			108,113
Amortization of intangible assets		96,059			330,638
Amortization of deferred consulting fees		289,122			398,366
Deferred taxes		(340,736	)		—
Bad debt expense		—			—
Loss from disposition of discontinued operations		5,819,552			16,434
Gain on extinguishment of debt		110,463			74,463
Amortization of deferred compensation		534,888
Changes in operating assets and liabilities, net of effects of acquisitions:
Decrease in accounts receivables		2,023,565			219,989
(Increase) decrease in prepaid expenses and other current assets		29,974			(154,748	)
Decrease in other receivables		—			22,237
Increase (decrease) in accounts payable		292,337			(926,523	)
Increase (decrease) in accrued liabilities		50,454			874,020
(Decrease) increase in taxes payable		(58,120	)		111,933
(Decrease) increase in other current liabilities		(100,923	)		108,978
Discontinuned operations		232,627			—
Net Cash Used In Operating Activities		(1,214,128	)		(1,543,639	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital assets		(126,312	)		(66,154	)
Proceeds from sale of investments		226,752			250,000
Acquisition of Cratos Technology Solutions, Inc.		—			(143,249	)
Acquisition of Disclosure Plus		—			(160,000	)
Net Cash Provided By (Used In) Investing Activities		100,440			(119,403	)

-7-

ACTIVECORE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30, 2006			For the Nine Months Ended September 30, 2005
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit	$	136,224		$	1,678,184
Proceeds from loan payable		215,028			—
Proceeds from common shares to be issued		851,875			—
Advance of notes payable		—			(35,407	)
Proceeds received from related parties		(45,135	)		23,628
Preferred stock dividend		(46,500	)		(48,280	)
Proceeds from issuance of common stock		—			51,217
Payments on leases		(17,218	)		(29,081	)
Net Cash Provided By Financing Activities		1,094,274			1,6460,261
FOREIGN EXCHANGE GAIN		3,632			1,150
DECREASE IN CASH		(15,782	)		(21,364	)
CASH - BEGINNING OF PERIOD		109,789			53,736
CASH - END OF PERIOD	$	94,007		$	32,105
Non-Cash Transactions:
Issuance of common shares related to acquisition of Disclosureplus	$	—		$	176,000
Issuance of common shares related to acquisition of Cratos Technology Solutions	$	—		$	1,947,787
Issuance of common shares to vendor	$	—		$	467,779
Common shares to be issued for conversion of preferred shares	$	291,667		$	—
Issuance of common shares for employment/director services	$	539,888		$	—
Issuance of common shares for consulting services	$	266,222		$	—
Issuance of common shares for settlement of other liabilities	$	135,000		$	—
Issuance of common shares for financing services	$	47,500		$	—
Issuance of common shares for conversion of prefered shares and prefered share dividends	$	93,750		$	—
Common shares to be issued for settlement of debt	$	394,511		$	—
Note received from sale of MDI	$	161,948		$	—

See accompanying notes to condensed consolidated financial statements.

-8-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

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 "GAAP" for complete 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 and nine month periods may not be indicative of the results for the entire year. The condensed consolidated balance sheet information as of December 31, 2005 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-KSB. These interim condensed financial statements should be read in conjunction with that report.

Certain prior period amounts have been reclassified to conform to the current period's presentation.

Interim statements are subject to possible adjustments in connection with the annual audit of the Company’s accounts for the year ended 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 accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company had a net loss of $10,472,740 and incurred negative cash flows from operations of $1,140,128 for the nine months ended September 30, 2006 and has a working capital deficiency of $5,468,369 and an accumulated deficit of $51,208,845 at September 30, 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(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) was adopted in the annual period beginning January 1, 2006. The statement requires companies to adopt 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.

The Company has evaluated SFAS 123(R) and has determined that incorporating it as part of its adoption of SFAS 123(R) did not have a material impact on its condensed consolidated financial statements. The Company does not currently have a stock option plan.

FASB Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, issued in September 2006, establishes a formal framework for measuring fair value under GAAP. It defines and codifies the many definitions of fair value included among various other authoritative literature, clarifies and, in some instances, expands on the guidance for implementing fair value measurements, and increases the level of disclosure required for fair value measurements. Although SFAS No. 157 applies to and amends the provisions of existing FASB and AICPA pronouncements, it does not, of itself, require any new fair value measurements, nor does it establish valuation standards. SFAS No. 157 applies to all other accounting pronouncements requiring or permitting fair value measurements, except for; SFAS No. 123(R), share-based payment and related pronouncements, the practicability exceptions to fair value determinations allowed by various other authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9 that deal with software revenue recognition. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.

-10-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(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 (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed by dividing net income by the shares used in the calculation of basic net income per share plus the dilutive effect of common share equivalents, such as stock options, using the treasury stock method. Common share equivalents are excluded from the computation of diluted net income (loss) per share if their effect is anti-dilutive. Common share equivalents totaling 6,554,976 shares of common stock have not been included in the calculation of diluted loss per share for the periods presented as their effect would be anti-dilutive.

-11-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

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. In June 2006, the Company disposed of its MDI business, which also represented a component of the Company’s business and which also constituted a discontinued operation. In August of 2006, the Company disposed of its DisclosurePLUS business which also represented a component of the Company’s business and which also constituted a discontinued operation. In July of 2006, the Company disposed of the two active Cratos “Lift and Shift” contracts due to large losses in this portion of the Cratos business and in Septembert of 2006, the Company ceased work on a large contract in the credit card side of the Cratos business due to very thin gross margins and the vendor’s practice of not paying their accounts within the contracted time frames. The practice of constant late payments by this vendor put extreme pressure on the cash flow required to sustain this portion of the Cratos business and eventually caused key members of the staff to resign, due to late and in some cases non payment of their consulting invoices, and the bank line of credit to be called, these two facts effectively crippled the “Card” portion of the Cratos business and we were unable to continue operations. The Company considers Cratos to be a discontinued operation which also represented a component of the Company’s business. The Company entered into an agreement with one of the former Cratos consultants to service the “Card” contract so that it did not default on its obligation to the client even though the client did not pay many of their outstanding invoices.

The loss on the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2006 and 2005 is summarized as follows:

	3 Months Ended September 30, 2006		3 Months Ended September 30, 2005			9 Months Ended September 30, 2006			9 Months Ended September 30, 2005
Twincentric
Loss from discontinued operations	$	—	$	1,269	)	$	—		$	(445,032	)
MDI
Gain on disposition				—			263,541			—
Gain (loss) from discontinued operations		—		46,130			(53,567	)		16,617
		—		46,130			209,974			16,617
Gain (loss) from discontinued operations net	$	—	$	(187,857	)	$	209,974		$	(188,986	)

The net loss on the Company’s consolidated statements of operations for the three and nine months ended September 30, 2005 for Twincentric is summarized as follows:

	9 Months Ended September 30, 2005			3 Months Ended September 30, 2005
Revenue	$	527,398		$	50,767
Salaries and wages		552,531			47,385
Legal and accounting		—			—
General and administrative		410,097			1,811
Interest expense		9,802			302
		972,430			49,498
Net loss	$	(445,032	)	$	1,269

-12-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

The net income (loss) on the Company’s consolidated statements of operations for the three and nine months ended September 30, 2006 and 2005 for MDI is summarized as follows:

	9 Months Ended September 30, 2006			9 Months Ended September 30, 2005		3 Months Ended September 30, 2006		3 Months Ended September 30, 2005
Revenue	$	376,716		$	642,740	$	—	$	230,144
Direct wages		256,485			379,214		—		99,612
Amortization of licensing agreements and other costs		50,000			68,750		—		22,917
Salaries and wages		97,377			96,249		—		32,880
Legal and accounting		10,776			21,388		—		5,844
General and administrative		8,948			44,588		—		8,328
Interest expense		6,789			15,934		—		14,433
		430,375			626,123		—		184,014
Net income (loss)	$	(53,659	)	$	16,617	$	—	$	46,130

The gain on disposition of MDI is comprised as follows:

Cash and note receivable consideration	$	388,700
Less:
Tangible net assets		102,242
Intangible net assets		22,917
		125,159
Gain on disposition		263,541

The net income on the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2006 and 2005 for Disclosure Plus is summarized as follows:

	9 Months Ended September 30, 2006		9 Months Ended September 30, 2005		3 Months Ended September 30, 2006		3 Months Ended September 30, 2005
Revenue	$	85,556	$	61,387	$	23,250	$	25,938
Direct wages		26,705		16,381		6,975		6,958
Amortization of licensing agreements and other costs		—		—		—		—
Salaries and wages		20,448		7,411		3,494		1,663
Legal and accounting		4,946		—		1,429		—
General and administrative		30,554		30,217		9,715		13,142
Interest expense		293		126		87		73
		82,946		54,135		21,700		21,836
Net income	$	2,610	$	7,252	$	1,550	$	4,102

The loss on disposition of Disclosure Plus is comprised as follows:

Cash	$	(5,966	)
Tangible net assets		(94,432	)
Intangible net assets		414,327
Loss on disposition	$	(313,929	)

The net income (loss) on the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2006 and 2005 for Cratos is summarized as follows:

	9 Months Ended September 30, 2006			9 Months Ended September 30, 2005		3 Months Ended September 30, 2006			3 Months Ended September 30, 2005
Revenue	$	2,798,017		$	6,011,286	$	117,996		$	2,329,289
Cost of sales		2,607,117			4,479,134		6,500			1,614,590
Operating expenses		894,134			271,473		126,719			490,824
		3,501,251			4,750,607		133,219			2,105,414
Net income (loss)	$	(703,234	)	$	1,260,679	$	(15,223	)	$	223,875

The loss on cessation of activities is comprised as follows:

Impairment of fixed assets	$	112,869
Impairment of tangible net assets		1,322,104
Impairment of intangible net assets		4,934,941
Loss on disposition	$	(6,369,914	)

NOTE 3 ACCOUNTS RECEIVABLE

The components of accounts receivable, net, as of September 30, 2006 and December 31, 2005 consist of:

	2006			2005
Trade receivables	$	146,520		$	3,597,724
Allowance for doubtful accounts		(53,167	)		(101,503	)
Accounts receivable, net	$	93,353		$	3,496,221

As of September 30, 2006 trade receivables consist primarily of customer receivables of the C COMM business. Receivables for all other businesses that have been discontinued have been written off. An ongoing attempt will be made to collect some of these receivables and in the case of the receivables related to the “Card” division of Cratos the Company is currently reviewing its legal options.

-13-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

NOTE 4 LONG-TERM DEBT

Long-term debt consists of the following:

	September 30, 2006		December 31, 2005
Short term loans (1)	$	17,188	$	21,272
Bank term loan, seven year term with monthly equal principal payments, bearing interest at the Canadian prime plus 3% (2)		138,747		152,805
Bank term loan, three year term with monthly equal principal payments, bearing interest at the Canadian prime plus 1% (3)		136,798		175,438
Term loan, two year term with equal monthly payments, bearing interest at 20% (4)		318,758		-
		611,491		349,515
Less current portion		350,484		117,576
Long term portion	$	261,007	$	231,939

(1)

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 September 30, 2006 are due on demand and bear no interest.

(2)

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 September 30, 2006 was 9%. This subsidiary’s assets have been pledged as security for this term loan.

(3)  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 September 30, 2006 was 7%. This subsidiary’s assets have been pledged as security for this term loan.

(4)   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. Also see Note 10.

-14-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

Future maturities of the Company’s debt as of September 30, 2006 are as follows for each of the twelve months periods ending September 30 of the respective years:

2007	$	350,484
2008		178,700
2009		28,220
2010		28,220
Thereafter		25,867
	$	611,491

NOTE 5 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 $169,238 and $11,863 as of September 30, 2006 and December 31 2005, respectively, and are classified as current liabilities in the accompanying condensed consolidated balance sheets.

The Company has a master services agreement in place with Global Sterling Payment Systems Ltd. (“GSPS”), a related party. This agreement provides for the Company to provide services to GSPS and its wholly owned subsidiary, ePocket Inc. During the three and nine month periods ended September 30, 2006 respectively, the Company provided services to GSPS totaling 176,883 and $202,510, and these amounts are included in revenue in the Company’s consolidated statements of operations. No services were provided by the Company to GSPS for either the three or nine month period ended September 30, 2005

With the discontinuance of the Cratos operation the MSA that was put in place to service GSPS will no longer be in effect. With the planned acquisition of GSPS to be completed by year end this would have become a mute point.

-15-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

NOTE 7 REDEEMABLE PREFERRED SHARES

The Company has outstanding series C preferred shares which are mandatorily redeemable over 16 quarters through September 30, 2008. 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 $93,750 during the nine months ended September 30, 2006, $281,250 of these Series C preferred shares remain outstanding and were yet to be redeemed. The balances were $1,500,000 as of September 30, 2006 and $1,253,474 as of December 31, 2005.

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 and annual renewals with a Canadian chartered bank. This line of credit allows for maximum borrowings 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. As of September 30, 2006, no amounts were available under the Company’s line of credit. As of September 30, 2006, the interest rate on this facility was Canadianprime plus 2.5% on the Canadian dollar balance and U.S prime rate plus 2.5% on the U.S. balance.

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

As of November 20, 2006 the bank has demanded repayment of the loan. During the month of December 2006 the Board of Directors will review a bank sponsored forebearance agreement and decide on an appropriate course of action as this loan is not guaranteed by the parent Company. This loan was called when the Cratos division could no longer service it, due to consistently late payments in the “Card” portion of the business and excessive losses in the “Lift and Shift” portion of the Cratos business.

NOTE 9 COMMITMENTS AND CONTINGENCIES

TPG Capital 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 shares issued 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 was to 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 September 30, 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.

-16-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

Orchestral commenced an Application before the Ontario courts to enforce a settlement which it alleged 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 judgment was upheld.

During the nine month period ended September 30, 2006, the Company reached a settlement with Orchestral in which it agreed to pay Orchestral the $226,824 which the court had previously ordered payable, along with interest from the date of that judgment totaling $57,224. The interest was recorded in the Company’s condensed consolidated statement of operations for the nine month period ended September 30, 2006. Additionally, Orchestral agreed to accept the Company’s common stock in consideration for settlement of this debt. The conversion price for the common stock was a 20% discount to the price of the Company’s common stock for the trailing 20 trading day prior to settlement. This settlement resulted in a loss of $110,463, which has been recorded in the Company’s consolidated statement of operations for the nine month period ended September 30, 2006. The common stock to be issued by the Company pursuant to this settlement agreement has been recorded in common stock to be issued in the Company’s condensed consolidated balance sheet at September 30, 2006. As of September 30, 2006 the common stock (6,575,180) shares has been issued and is awaiting registration.

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.

E.A.W Group Inc., Consulting and Referral Services Inc,Neale Business Consulting Inc., Andrew Wickett and Debbie Gracie-Smith

On November 15, 2006 a legal proceeding was initiated in the Ontario Superior Court by E.A.W Group Inc., Consulting and Referral Services Inc., Neale Business Consulting Inc., Andrew Wickett and Debbie Gracie-Smith. The plaintiffs (Andrew Wickett and Debbie Gracie-Smith) claim damages of 2.5 million Canadian dollars for breach of the Share Purchase Agreement and Registration Rights Agreement. The plaintiff (E.A.W Group) claims damages of $19,871.42 CAD for unpaid salary and $52,672.03 CAD for unpaid commissions. The plaintiff (Consulting and Referral Services Inc.) claims damages of $11,591.66 CAD for unpaid salary and $52,672.03 CAD for unpaid commissions. The plaintiff (Neale Business Consulting Inc.) claims damages of $24,892.00 CAD for unpaid consulting services.

The Company will vigorously defend against this proceeding on the grounds that the plaintiffs were in charge of the Cratos organization and their actions caused great harm to both Cratos and the parent Company.

The Company believes that this case has no merit. The Company will vigorously defend this action.

-17-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

NOTE 10 ACQUISITIONS

Cratos Technology Solutions, Inc.

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

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

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

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

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

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

-18-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

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

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

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.

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

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

Pro forma results ?????

The following pro forma results of operations reflect the combined results of Activecore, and Cratos for the three and six month periods ended June 30, 2006 and 2005 as if the business combination occurred at the beginning of Activecore’s year. Pro forma financial information giving effect to the acquisition of DP has not been provided on the basis that its results of operations for the relevant periods would not be material to the Company.

	Three Months Ended June 30, 2006			Three Months Ended June 30, 2005			Six Months Ended June 30, 2006			Six Months Ended June 30, 2005
Revenue	$	1,582,317		$	2,734,094		$	3,037,441		$	4,182,386
Net loss	$	(1,470,177	)	$	(1,397,710	)	$	(2,786,234	)	$	(2,157,546	)
Net loss per share, basic and diluted	$	(0.02	)	$	(0.02	)	$	(0.03	)	$	(0.04	)
Shares used in basic and diluted loss per share calculation		90,846,542			59,846,795			86,631,760			57,910,163

 These pro forma results are not necessarily indicative of what would have occurred if the acquisitions had actually been completed as of the assumed dates and for the periods presented. The proforma effects of Disclosure Plus Inc are not material to the condensed consolidated financial statements.

-19-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

NOTE 11 COMMON AND PREFERRED SHARES

Common Shares

On January 9, 2006, the Company used 1,081,521 shares of Treasury stock with a value of $86,522 to pay a third party for investor relations services.

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 September 30, 2006 $37,605 is recorded in deferred consulting and financing charges.

On March 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 3,822,500 common shares to numerous employees in exchange for employment services having a fair value of $359,775. As of September 30, 2006, $287,388 of this amount was expensed and $72,387 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 fair value of $67,200. As of September 30, 2006, $31,600 of this amount had been expensed and $35,600 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 fair value of these common shares was $125,000.

On April 3, 2006, the Company issued 1,250,000 common shares to several employees in exchange for employment services having a fair value of $147,500. As of September 30, 2006, this entire amount was included in deferred consulting and finance expense.

On April 3, 2006, the Company issued 700,000 shares to two independent directors of the Company having a fair value of $105,000. As of September 30, 2006, $60,000 of this amount had been expensed and $45,000 was included in deferred consulting and financing expense.

On April 24, 2006, the Company issued 750,000 shares to a consultant of the Company having a fair value of $82,500. As of September 30, 2006, $55,000 of this amount had been expensed and $27,500 was included in deferred consulting and financing expense.

On April 24, 2006, the Company issued 178,572 shares to the previous holders of the Company’s Class A and B preferred shares to settle some outstanding accrued dividend payments relating to the period prior to their conversion into common shares. These shares had a fair value of $10,000. This entire amount was applied to accrued interest expense on the Company’s consolidated balance sheet.

On April 24, 2006, the Company issued 1,027,181 shares to the holder of the Company’s Class C preferred shares having a fair value of $93,750. Of this amount, $69,175 related to the redemption of the preferred shares and the remaining $24,575 related to mandatory dividends required on that class of shares.

On July 10, 2006, 6,575,180 shares were issued to Orchestral Corporation in settlement of the “Power Audit” software distribution agreement. The stock had a value of $394,511.

On August 9,2006, 1,000,000 shares were issued to an employee in payment for services. The stock had a value of $30,000 which was applied to accrued liabilities on the Company’s consolidated balance sheet.

On August 9, 1,000,000 shares were issued to a supplier in payment for services. The stock had a value of $30,000 which was expensed to consulting fees.

During the third quarter, 11,781,998 shares were issued to third parties for a total value of $530,190 as part of a private placement.

For all stock issuances completed during the nine month period ended September 30, 2006, fair value was determined using the closing value of the Company’s common shares on the date the shares were approved for issuance by the Company’s board of directors.

-20-

ACTIVECORE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2006 

(Unaudited)

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 7) agreed to settle the outstanding loan of $500,000 into Series C convertible preferred shares. The terms of the Series C preferred stock require the Company to redeem the preferred shares over 16 quarters, commencing on December 31, 2004. The Company shall have the option of paying the quarterly redemptions in the form of cash or common shares. Also the preferred shares will have a 12% annual dividend rate payable quarterly based on the number of preferred shares outstanding at the end of the quarter. As of June 30, 2006 the Company has an obligation to issue common shares with a value of $31,250 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.

The Company completed a series of private placements from May 10, 2006 through June 8, 2006.  The total amount raised through these placements was $401,300.  Total consideration due by the Company in exchange for these private placements is 8,917,778 common shares as well as 2,972,593 warrants to purchase common shares of the Company.  The common shares are expected to be issued in the quarter ending September 30, 2006.  The warrants all have a one-year term, with an exercise price of $0.06.

-21-

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. During the quarter ended September 30, 2006 the Company took the strategic decision to re-brand itself and become a pure play in the Electronic Payment Technology Industry. As part of this decision the Company entered into a Letter of Intent during the second quarter to acquire GSPS/ePocket and plans to close this acquisition in the fourth quarter of 2006. This was the first major step in achieving the Company’s planned re-branding and shifted the Company’s focus to the “Electonic Payment Technology Market”. During the second quarter the Company divested of the MDI subsidiary and in the third quarter the Company has continued to execute its new strategy by divesting itself of the DisclosurePlus subsidiary, ceasing the operation of the Cratos subsidiary and signing a Letter of Intent to divest itself of the C COMM Network subsidiary. By the end of the fourth quarter of 2006 the Company will have divested of all the subsidiaries that formed the “Smart Enterprise Suites” business. The Company the Systems Integration and Migration (SIM) division and the Corporate Disclosure and Messaging (CDM) division it will retain two core products that were developed by those former divisions (ActiveCAST and ActiveLINK).

The Company’s products now encompass an outbound corporate marketing portal (ActiveCAST), an application and data integration engine (ActiveLINK) and a variety of payment products including the ePocket Digital Coins product set and other payment products that will be introduced over time. The Company will offer ActiveCAST as a Marketing product and/or service to its Merchants that use its Payment Technology products and will use the ActiveLINK product to simplify the implementation of new Merchants and integration to the Merchants existing systems. This rich product set gives ActiveCore the ability to sell and deliver either a full ASP solution or a Licensing solution based on the needs and capabilities of the Customer. ActiveCore’s products are designed to enable the Company’s clients to extend the functions of their current payment systems ,by using the Company’s product sets to offer a cost effective Micro Payment solution, Loyalty programs and a ePocket has developed the technology which delivers true electronic cash to the world for the first time, making purchases over the Internet completely secure and anonymous. ePocket enables banks to provide their customers with the ability to withdraw electronic cash in any currency from their regular deposit accounts, and send this electronic cash to merchants or other consumers in order to make payments. Cash created electronically is just like cash, except there are no coins, bills, or plastic cards. Just like cash, electronic cash does not require the identification of a payer. This provides privacy for consumers, and eliminates fraud and identity theft, making ePocket the most cost-effective payment solution for Internet commerce. ePocket payments cost merchants less than any other payment technologies and this extraordinary cost effectiveness enables merchants to profitably accept very small payments of just one or two dollars. In contrast to other payment schemes, consumers do not have to open additional accounts with a payment intermediary. Consumers do not have to give up any identity or credit information in order to accomplish a payment. This makes ePocket payments completely secure and provides complete privacy for consumers.

-22-

Recent Developments

During the quarter ended September 30, 2006, the Company signed a letter of intent to acquire all of the issued and outstanding ordinary shares of Global Sterling Payments Systems Ltd. (“GSPS”), a private U.K. company and a related party, in exchange for 100,000,000 common shares of the Company. The Company already owns a small minority interest of GSPS. GSPS is the parent company of ePocket, a wholly owned subsidiary. This acquisition is expected to close during the Company’s quarter ending December 31, 2006.

In anticipation of closing the GSPS acquisition, the Company made the determination that it would divest itself of its MDI business, which was no longer deemed to be strategic given the fact that the Company was in the process of rebranding itself as a pure-play payment organization. Consequently, the Company sold the business towards the end of the quarter ended June 30, 2006, for cash consideration of $388,700.

In anticipation of closing the GSPS acquisition, the Company made the determination that it would divest itself of its DisclosurePLUS business, which was no longer deemed to be strategic given the fact that the Company was in the process of re-branding itself as a pure-play payment organization. Consequently, the Company sold the business towards the end of August 2006, for debt forgiveness of $94,534.

In anticipation of closing the GSPS acquisition, the Company made the determination that it would divest itself of its “Lift andShift” business, which was no longer deemed to be strategic given the fact that the Company was in the process of re-branding itself as a pure-play payment organization. Consequently, the Company sold two active projects at the beginning of the 3rd quarter ended September 30, 2006, for debt forgiveness of $916,087.

In August of 2006 the Company was unable to collect receivables from a large client even though it had completed the work and was unable to pay a number of consultants who subsequently quit causing irreparable harm to the card payment portion of the Cratos business. In September the Company had to discontinue the Cratos business and has written off $1,512,742 in accounts receivable The Company is currently seeking legal advice with regards to the Cratos situation.

-23-

Critical Accounting Policies

Significant Accounting Policies and Critical Accounting Estimates

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

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

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

The Company recognizes revenue for software sales in accordance with Statement of Position ("SOP") 97-2 "Software Revenue Recognition", as amended by SOP 98-9 "Modification of SOP 97-2 Software Revenue Recognition with respect to Certain Transactions." SOP 97-2 provides guidance on applying generally accepted accounting principles in recognizing revenue on software transactions. SOP 98-9 deals with the determination of vendor specific objective evidence ("VSOE") of fair value in multiple element arrangements, such as maintenance agreements sold in 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.

-24-

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.

-25-

Results of Operations

Results of Operations for the Three and Nine Month Periods Ended September 30, 2006 Compared to the Same Periods Ended September 30, 2005

Overview

During the quarter ended September 30, 2006, the Company recorded revenues of $0.6 million, and a loss from continuing operations of million. These amounts compare to revenue of $2.7 million during the quarter ended September 30, 2005, when a loss from continuing operations of $0.5 million was incurred. During the nine month period ended September 30, 2006, the Company recorded revenues of $3.6 million, and a loss from continuing operations of $4.6 million. These amounts compare to revenue of $4.7 million during the nine month period ended September 30, 2005, when a loss from continuing operations of 2.3 million was incurred. The most significant change from 2005 to 2006 from a revenue perspective was the fact that the Company sold the MDI business in the second quarter quarter of 2006, sold the DisclosurePLUS business in the third quarter of 2006, sold two Cratos “Lift and Shift” projects to a third party and discontinued operating the Cratos GE Money contract during the quarter ended September , 2006. During this third quarter of 2006, the Company had no revenue from MDI, two months of revenue from DisclosurePLUS and one month of revenue from Cratos. As a result, the 2006 third quarter revenue has decreased substantially. Earlier this year the Company made several announcements regarding its change in direction and anticipated a decline in revenue from this decision. It is expected that revenue will continue to decline until the new Payment Technology direction begins to generate new revenue streams.

Revenues

Three months ended September 30			Nine months ended September 30
2006	2005	% Change	2006	2005	% Change
572,043	2,708,373	(79%)	3,609,484	4,665,541	(23%)

During the three months ended September 30, 2006 the Company generated $0.6 million in revenue from the sale of products and services versus $2.7 million in revenue in the same three month period ended September 30, 2005. The decrease in revenue during 2006 was primarily a result of discontinued operations that occurred when the Company decided to pursue a new strategic direction as a Payment Technology solution provider.. For the nine month period ended September 30, 2006, total revenue was $3.6 million, which represented a 23% decrease from the $4.7 million recorded during the nine month period ended September 30, 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. The decrease in the nine month revenue in 2006 as compared to 2005 was a direct result of the change in the Company’s strategic direction, the discontinuance of the Cratos division, the divestiture of the MDI business and the divestiture of the Disclosure Plus business.

-26-

Cost of Sales

Three months ended September 30			Nine months ended September 30
2006	2005	% Change	2006	2005	% Change
218,880	1,714,395	(87%)	3,064,962	3,075,177	— %

Cost of sales for the three month period ended September 30, 2006 were $0.2 million, which consisted primarily of direct wages paid to consulting services staff, the cost of the communication facilities of the C COMM division, , and amortization of software licensing agreements. These amounts are significantly lower than fiscal 2005 when the Company’s cost of sales totaled $1.7 million which was also principally comprised of direct wages for consulting staff. The decrease in cost of sales for the three month period relates to the fact that most of the Company’s cost of sales during both periods relates to the Cratos consulting staff, and during 2005 this operation was consolidated for two month whereas in 2006 it was in the Company’s results of operations for three month and only for the consultants assigned to the GE Money contract as the majority of Cratos consultants left the Company when it sold its two active “Lift and Shift” projects. For the nine month period ended September 30, 2006, cost of sales totaled $3.1 million, which represented a small decrease from the nine month period ended September 30, 2005. denineSeptemberThe Company’s gross margin increased to 62% from 37% from the three month period ended September 30, 2005 to the three month period ended September 30, 2006. This increase was a result of the fact that during 2005 the Company’s Cratos division was working on larger projects than they have been during 2006, and those larger projects afforded the Company smaller gross margins.

Operating Expenses

Total operating expenses for the three months ended September 30, 2006 were $1.8 million as compared to $1.4 million during the three months ended September 30, 2005. Operating expenses increased for the nine month periods from $3.6 million in 2005 to $4.6 million in 2006. After these expenses, the Company recognized a loss from operations of $1.4 million in the three months ended September 30, 2006 versus a loss from operations of $0.4 million in the same quarter ended September 30, 2005. For the nine month period ended September 30, 2006, the Company incurred a loss from operations of $4.0 million as compared with a loss of $2.0 million in fiscal 2005. The increased loss in 2006 was primarily related to the Cratos division which resulted in the Company choosing to discontinue this money losing operation.

-27-

Salaries and Wages

Three months ended September 30			Nine months ended September 30
2006	2005	% Change	2006	2005	% Change
343,912	515,702	(33)%	1,410,242	937,411	50%

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 three month period ended September 30, 2006, salaries and wages were $0.3 million as compared with $0.5 million during the three month period ended September 30, 2005. For the nine month period ended September 30, 2006, the increase in salaries and wages was 50% higher. The decrease in the three month period is primarily a result of the impact of the discontinued operations of MDI, DisclosurePLUS and Cratos.. . The increase in the nine month period is a result of both the increased expenditures in the Activecast business, the impact of Cratos management salaries for seven months as well as the fact that stock compensation expense in 2006 was considerably higher than in 2005 as a result of stock compensation provided to both executive management and staff which was not provided in 2005.

Consulting fees

Three months ended September 30			Nine months ended September 30
2006	2005	% Change	2006	2005	% Change
122,288	131,096	(%)	423,745	511,126	(17%)

For the three month period ended September 30, 2006, consulting fees decreased 7% to $0.1 million from $0.1 million as compared to the three month period ended September 30, 2005. For the nine month period ended September 30, 2006, this decrease was 17% given that consulting fees for the nine month period ended September 30, 2006 were $0.4 million as compared to $0.5 million during the nine months ended September 30, 2005. Consulting expenses incurred during the three month period ended June 30, 2005 included approximately $100,000 in one-time termination costs incurred to exit a consulting contract which the Company determined was no longer producing acceptable returns to the organization. Additionally, during the nine month period ended September 30, 2005, approximately $50,000 of consulting expense relates to the amortization of deferred consulting costs which relate to assistance in securing certain financing transactions. The amortization of these costs expired later in 2005 and as a result have no comparable balance in consulting expense in 2006.

-28-

Legal and Accounting

Three months ended September 30			Nine months ended September 30
2006	2005	% Change	2006	2005	% Change
142,229	281,182	(49%)	512,941	628,745	(18)%

For the three month period ended September 30, 2006, legal and accounting expenses decreased 49% to $0.1 million from $0.3 million during the three month period ended September 30, 2005. For the nine month period ended September 30, 2006, legal and accounting expenses decreased by 18% given that legal and accounting expenses for the nine month period ended September 30, 2006 were $0.5 million as compared to $0.6 million during the nine months ended September 30, 2005. Legal and accounting expenses included legal costs associated with using third party lawyers to act on behalf of the Company in current legal matters. Additionally, the Company has incurred significant legal costs over the past year in an attempt to gain control over Infolink, in the last quarter there have been virtually no costs associated with the InfoLink case. Accounting costs include audit fees and related costs as well as costs incurred to complete periodic regulatory filings. The Company experienced a decrease in its annual audit fees from 2005 to 2006 and this accounts for the decrease in legal and accounting costs during the three month period ended September 30, 2006 as compared to the same period in 2005.

General and Administrative

Three months ended September 30			Nine months ended September 30
2006	2005	% Change	2006	2005	% Change
993,383	289,288	243%	1,599,569	996,239	61%

For the three month period ended September 30, 2006, general and administrative expenses increased 243% to $1.0 million from $0.3 million during the three month period ended September 30, 2005. For the nine month period ended September 30, 2006, general and administrative expenses increased 61%. General and administrative expenses include amounts spent to operate the Company’s various facilities, including rent, office expenses, insurance, and communications, as well as travel expenses. During both the three and nine month periods ended September 30, 2006 general and administrative expenses include a $994,222 write-off related to a receivables which the Company determined to be uncollectible.

-29-

Other Income/Expenses

	Three months ended September 30			Nine months ended September 30
	2006	2005	% Change	2006	2005	% Change
Loss on settlement of debt	(110,463)	(74,463)	48%	—	(74,463)	100%
Interest Expense	(156,582)	(74,070)	111%	(534,485)	(189,974)	181%
Foreign Exchange Loss	2,156	31,367	(69)%	(65,270)	(5,928)	008%

Also during the quarter ended September 30, 2006, the Company expended $156,582 in financial interest which was significantly higher than the $74,070 expensed in the quarter ended September 30, 2005. Interest expense for the nine month period ended September 30, 2006 totaled $534,485 as compared with $189,974 for the nine month period ended September 30, 2005. The increase in interest expense in 2006 as compared with 2005 is a result of new interest bearing facilities which the Company put into place including a loan with a Canadian chartered bank, a term loan with a private institution, as well as interest incurred in relation to certain short-term loans the Company entered into towards the end of 2005 and into 2006. In addition, the Company settled its litigation with Orchestral during the quarter ended June 2006 and agreed to pay interest costs on its outstanding liability and this resulted in a large charge in the three month period ended June 30, 2006.

Foreign exchange gains were $2,156 and a loss of $65,270 for the three and nine month periods ended September 30, 2006 respectively as compared with $31,367 and a loss of $5,928 for the three and nine month periods ended September 30, 2005 respectively. These gains and losses are a result of the fluctuation of the U.S. dollar relative to the Canadian dollar.

Discontinued Operations

In the quarter ended September 30, 2006, the Company recorded discontinued operations with respect to its MDI business. The Company recorded a gain on the disposition of this business of $263,541. This gain was a result of the fact that the business was disposed of for cash and note receivable consideration totaling $388,700, and that these businesses had a net book value of $125,159 as of the date of disposition. During the quarter ended September 30, 2006, MDI recorded no operations. This compares to a profit of $46,130 during the quarter ended September 30, 2005. For the nine month period ended September 30, 2006, the MDI business recorded a net loss of $53,659, compared to a profit of $16,617 for the same period in 2005.

In the quarter ended September 30, 2006, the Company recorded discontinued operations with respect to its Disclosure PLUS business. The Company recorded a loss on the disposition of this business of $313,929. This loss was a result of the fact that the business was disposed of for debt owing to Dean Peloso totaling $94,534, and that this business had a net book value of $533,324 as of the date of disposition. During the quarter ended September 30, 2006, Disclosure PLUS recorded a $1,550 profit from operations. For the nine month period ended September 30, 2006, the Disclosure PLUS business recorded a net profit of $2,610 compared to a profit of $7,252 for the same period in 2005.

In the quarter ended September 30, 2006, the Company recorded discontinued operations with respect to its Cratos business. The Company recorded a loss on the business of $6,369,914. This loss was a result of the fact that two contracts from this business were disposed for debt owed, and the balance of the business collapsed when a major vendor failed to pay its accounts in a timely fashion resulting in a default in both consulting fees and the bank line of credit payments. During the quarter ended September 30, 2006, Cratos recorded a loss from operations of $15,223. This compares to a profit of $223,875 during the quarter ended September 30, 2005. For the nine month period ended September 30, 2006, the Cratos business recorded a net loss of $703,234, compared to a profit of $1,260,679 for the same period in 2005.

The Company also had discontinued operations with respect to Twincentric for the 2005 periods only. Twincentric was disposed of during the Company’s third quarter of 2005. For the three month period ended September 30, 2005, Twincentric recorded a loss from operation of $1,269, and for the nine month period ended September 30, 2005 recorded a loss of $445,032.

-30-

Liquidity and Capital Resources

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The company had a net loss of $10,426,240 and incurred negative cash flows from operations of $1,214,128 for the nine months ended September 30, 2006 and has a working capital deficiency of $5,468,369 and an accumulated deficit of $51,208,845 at September 30, 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.

At September 30, 2006, the Company’s need for cash included satisfying $6,114,186 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. Additional equity financing in particular is very important to the organization particularly if the Company is successful in acquiring GSPS, given that the Company expects that the investment required to bring the ePocket product into the marketplace will be significant. At September 30, 2006, the Company had $94,007 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.

As the Company is currently in the process of acquiring GSPS, its cash needs in the future will involve raising funds to complete this transaction, as well as raising funds to bring the ePocket product into the marketplace. The Company is currently in the process of raising additional financing, which it expects will be in the form of either common stock or a convertible debenture.

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 and beyond.

Consolidated Statement of Cash Flows

Cash on the consolidated balance sheet decreased from $109,789 at December 31, 2005 to $94,007 at September 30, 2006.

Net Cash Used in Operating Activities

For the nine months ended September 30, 2006, the net cash used in operating activities was $1,214,128 versus $1,543,639 in the nine month period ended September 30, 2005.

Net Cash Provided by Investing Activities

Net cash provided by investing activities was $100,440 for the nine month period ended September 30, 2006. This period’s use of cash is a result of capital asset purchases which were less than the proceeds received from the sale of investments.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $1,194,274 in the nine months ended September 30, 2006. The source of funds was primarily a result of the Company receiving proceeds from the issuance of shares of $851,875. In the nine month period ended September 30, 2005, the Company generated cash flows from financing activities of $1,640,261 which was primarily a result of the line of credit the company secured in order to finance Cratos as well as the issuance of preferred shares.

-31-

Certain Business Risk Factors

A significant portion of the Company’s net sales are derived from data integration services and from the 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 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 is currently reviewing its internal controls and plans to implement improved procedures over the next two quarters.

Limitations on the Effectiveness of Controls: The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls or its internal controls over financial reporting will prevent all error and all fraud. Any Control system, no matter how well conceived and managed, can provide only reasonable assurance that the objectives of the control system are met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances for fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Conclusions: The Company’s Chief Executive Officer has concluded that, subject to the limitations noted above, the Company’s disclosure controls and procedures are reasonable but definitely need improvement.

-32-

(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 September 30, 2006, the Company’s Chief Executive Officer and 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.

-33-

PART II

OTHER INFORMATION

Item 1. Legal Proceedings 

James Cassidy and TPG Corporation

In March of 2000, the Company entered into an agreement (the “TPG Agreement”) with TPG Capital Corporation (“TPG”). Under the TPG Agreement, TPG provided advice and other services to ActiveCore with respect to the acquisition of Erebus Corporation (the “Erebus Acquisition”). The Company pursued the Erebus Acquisition to, among other things, maintain its listing eligibility on the Over the Counter Bulletin Board (“OTCBB”). TPG was the sole stockholder of Erebus Corporation and the Company believes that James Cassidy was a controlling stockholder of TPG.

Under the Erebus Acquisition, the Company purchased Erebus, a non-active entity with securities registered under the Securities Exchange Act of 1934, as amended, to, among other things, retain its listing status on the OTCBB.  At that time, the Company was at risk of losing its listing eligibility under a new national Association of Securities Dealers (“NASD”) listing requirement. Loss of listing eligibility would have resulted in the Company trading in the Pink Sheets.  Management and the board of directors at that time determined that such a development would be detrimental to its stockholders and other investors. The Company consummated the Erebus Acquisition in March of 2000.

Under the TPG Agreement, the Company paid to TPG 200,000 shares of the Company’s common stock, then worth $500,000, and $200,000 in cash. In addition, the TPG Agreement contains a reset provision which obligates the Company to issue additional shares of its common stock so that the total number of shares issued to TPG under the TPG Agreement had a value of $500,000 as of the first anniversary of the effective date of the TPG Agreement. Based on the relative share prices of the Company’s common stock as of March of 2000 and March of 2001, if the Company was required to satisfy the reset provision, the Company would be required to issue to TPG an additional 3,028,378 shares of its common stock (“Reset Shares”).

The Company does not believe that TPG is entitled to the Reset Shares. Based on public records, in June of 2001, TPG and Mr. Cassidy reached a settlement agreement with the SEC with respect to securities fraud and disclosure violations alleged by the SEC in connection with transactions substantially similar to the Erebus Acquisition. Neither Mr. Cassidy nor TPG admitted or denied the allegations. A description of the settlement is contained in SEC Litigation Release No. 17023, dated June 4, 2001. Although the Company has maintained its listing status on the OTCBB, the Company has experienced significant regulatory problems in connection with the Erebus Acquisition that are related to the allegations underlying the settlement between TPG and Mr. Cassidy and the Securities and Exchange Commission. These problems have resulted in significant delays and expense to the Company.

In March of 2005, Mr. Cassidy, as assignee of TPG’s rights under the TPG Agreement, filed a claim in the Superior Court of the District of Columbia against the Company seeking, among other things, the Reset Shares. The Company has engaged a law firm to vigorously defend it against the claim. During the quarter ended June 30, 2006 the action was withdrawn and the Company and Mr. Cassidy agreed to enter into arbitration on the matter and this is now in process with the arbitration board currently being established. No contingent liability has been allocated for any eventual loss on the action.

-34-

Pursuant to Rule 405 promulgated under the Securities Act of 1933, as amended, the Company believes that Mr. Cassidy may be deemed to be a “promoter” of the Company. The Company has no ongoing business relationship with Mr. Cassidy and he is not employed by the Company in any manner.

This case is proceeded to arbitration on August 26, 2006 and the arbitrator found in favor of Mr. Cassidy. The Company was ordered to pay Mr. Cassidy the amount of $448,000 USD payable in shares. The Company has made a provision for this settlement and will issue the appropriate number of shares to Mr. Cassidy and will register them on the next SB2 filing.

The arbitration hearing was held in the second quarter of 2006 and the arbitrator found in favor of Mr. Cassidy. The Company was ordered to pay Mr. Cassidy the amount of $448,000 USD payable in shares. The Company has made a provision for this settlement and will issue the appropriate number of shares to Mr.Casidy and will register them on the next SB2 filing.

Orchestral Corporation

Orchestral Corporation commenced a proceeding in Ontario court in January of 2003, which was subsequently placed into abeyance, then revived in August of 2003, against the Company and its Canadian subsidiary, ActiveCore Limited (formerly Springboard Technologies Inc.) to the effect that they had infringed upon the copyright that Orchestral maintained in PowerAudit and further that the Company had breached the distribution contract between Orchestral and the Company with respect to termination and non-payment of support costs with regard to the distribution of Power Audit. Orchestral has claimed punitive and exemplary damages of Canadian $4,000,000 and Canadian $1,000,000, respectively. The Company has retained counsel and is defending the action on the basis that the Company believes that there is no merit to the case and in the event that there was merit, the time frame in which to bring an action in the contract has expired.

Orchestral commenced an Application before the Ontario courts to enforce a settlement which it alleged 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 judgment was upheld.

During the six month period ended June 30, 2006, the Company reached a settlement with Orchestral in which it agreed to pay Orchestral the $226,824 which the court had previously ordered payable, along with interest from the date of that judgment totaling $57,224. The interest was recorded in the Company’s consolidated statement of operations for the six month period ended June 30, 2006. Additionally, Orchestral agreed to accept the Company’s common stock in consideration for settlement of this debt. The conversion price for the common stock was a 20% discount to price of the Company’s common stock for the trailing 20 trading day prior to settlement. This settlement resulted in a loss of $110,463, which has been recorded in the Company’s consolidated statement of operations for the six month period ended June 30, 2006. The common stock to be issued by the Company pursuant to this settlement agreement has been recorded in common stock to be issued in the Company’s consolidated balance sheet at June 30, 2006.

During the quarter ended September 30, 2006 the Company issued 6,575,180 common shares to Orchestraland will register these shares on the next SB2 filing .

Cesar Correia and InfoLink Technologies Ltd.

From December 2003 to April 2005, 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 TSX Venture Exchange 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 2005, the Company purchased C Comm. In July 2005, 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 the company and converted them to his own purposes. The day prior to the court hearing with regard to the minority shareholder action, Mr. Correia together with Infolink Technology commenced a proceeding in the same Ontario court alleging unfair competition as a result of an alleged improper acquisition of confidential information from Infolink and numerous other causes of action. 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 2005 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 with a reduced salary. 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

E.A.W Group Inc., Consulting and Referral Services Inc.,Neale Business Consulting Inc., Andrew Wickett and Debbie Gracie-Smith

On November 15, 2006 a legal proceeding was initiated in the Ontario Superior Court by E.A.W Group Inc., Consulting and Referral Services Inc., Neale Business Consulting Inc., Andrew Wickett and Debbie Gracie-Smith. The plaintiffs (Andrew Wickett and Debbie Gracie-Smith) claim damages of 2.5 million Canadian dollars for breach of the Share Purchase Agreement and Registration Rights Agreement. The plaintiff (E.A.W Group) claims damages of $19,871.42 CAD for unpaid salary and $52,672.03 CAD for unpaid commissions. The plaintiff (Consulting and Referral Services Inc.) claims damages of $11,591.66 CAD for unpaid salary and $52,672.03 CAD for unpaid commissions. The plaintiff (Neale Business Consulting Inc.) claims damages of $24,892.00 CAD for unpaid consulting services.

The Company will vigorously defend against this proceeding on the grounds that the plaintiffs were in charge of the Cratos organization and their actions caused great harm to both Cratos and the parent Company.

The Company believes that this case has no merit. The Company will vigorously defend this action.

-35-

Part 2. Unregistered Sales of Equity Securities and Use of Proceeds

On February 9, 2006, the board of directors authorized the issuance of 40,000 restricted common shares of stock from treasury to unrelated parties (Shai Stern) and an additional 40,000 restricted common shares of stock from treasury to (Seth Farbman) of Vintage Filings, LLC in order to receive long term discounted pricing for issuance of ActiveCore press releases.

On February 9, 2006, the board of directors authorized the issuance 400,000 restricted common shares of stock from treasury as board compensation to two independent members of the board. Stephen Lewis received 200,000 common shares and Steven Smith received 200,000 common shares.

Effective March 1, 2006, the Company completed a reverse split of the common shares on a 1 for 10 ratio and this resulted in the issuance from treasury of the following share amounts in respect of “round-up” for beneficial owners of the common shares: (i) to Cede & Co of 49,995 common shares; (ii) to ADP Clearing of 9 common shares; and (iii) to RBC Dominion Securities of 6 common shares.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Subsequent Events

On November 1st, 2006 the Company filed a form S8 to significantly reduce debt related to back wages, legal fees and other consulting contracts associated with the re-branding of the Company. The total number of shares issued on this S8 were 63,368,212. For more information regarding the S8, please refer to the actual S8 filing and associated press release of November 1^st, 2006 available on EDGAR.

On October 25, 2006 ActiveCore and GSPS signed a binding purchase and sale agreement that has been approved and reviewed by both Boards of Directors. This transaction is expected to close by December 31^st, 2006 with the consent of a minimum of 51% of the ActiveCore shareholders. A consent document has been prepared for circulation.

On November 20^th, 2006 the financial institution that had a line of credit in place with the Cratos division for 1.5 million dollars issued a letter to Cratos demanding payment of the loan for violation of associated covents and late payments. The Board of Directors of ActiveCore Inc. are reviewing a bank sponsored forebearance agreement and will decide on an appropriate course of action in December 2006. Note- this liability is not guaranteed by ActiveCore Inc. the Parent.

-36-

Item 6. Exhibits AND REPORT FOR FORM 8-K

(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 herewith
31.2	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 herewith
32.1	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 herewith
32.2	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

-37-

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ACTIVECORE TECHNOLOGIES, INC.
December 18, 2006	By:	/s/Peter J. Hamilton
		President and Chief Executive Officer

-36-