20-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
	FORM 20-F
[   ]           REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
[ X ]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011 OR
[    ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
[    ]          SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 Date of event requiring this shell company report ……………………
For the transition period from __________ to __________.
Commission File No. 001-14835
NORTHCORE TECHNOLOGIES INC. (Exact name of Registrant as specified in its charter)
Not Applicable (Translation of Registrant’s name into English)
ONTARIO, CANADA (Jurisdiction of incorporation or organization)
302 The East Mall, Suite 300 Toronto, Ontario M9B 6C7 (Address of principal executive offices)
	Securities registered or to be registered pursuant to Section 12(b) of the Act. None
	Securities registered or to be registered pursuant to Section 12(g) of the Act. Common Shares
	Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report.
226,597,702 Common Shares as of December 31, 2011
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act Yes    _____ No  ___X___

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If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.

Yes    _____ No  __X__

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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  ______

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer  [   ]          Accelerated filer [    ]          Non-accelerated filer [  X  ]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP      [    ]        International Financial Reporting Standards as issued                                         Other   [  ]

                                          by the International Accounting Standards Board       [  X  ]

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ______    Item 18

If this an annual report, indicate by check mark whether the registrant is a shell company (as determined in Rule 12b-2 of the Exchange Act).

Yes  ______    No  __X__

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NORTHCORE TECHNOLOGIES INC.

Annual Report on Form 20-F for the Fiscal Year

Ended December 31, 2011

FORWARD LOOKING STATEMENTS

From time to time, we make oral and written statements that may be considered "forward looking statements" (rather than historical facts).  We are taking advantage of the "safe-harbour" provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements we may make from time to time, including the forward-looking statements in this Annual Report.

You can identify these statements when you see words such as "may", "expect", "anticipate", "estimate", "believe", "intend", and other similar expressions.  These forward-looking statements relate, among other items, to:

· our future capital needs;

· future expectations as to profitability and operating results;

· our ability to further develop business relationships and revenues;

· our expectations about the markets for our products and services;

· acceptance of our products and services;

· competitive factors;

· our ability to maintain operating expenses;

· our ability to attract and retain employees;

· new products and technological changes;

· our ability to develop appropriate strategic alliances;

· protection of our proprietary technology;

· our ability to acquire complementary products or businesses and integrate them into our business;

· our ability to increase revenue from existing products and services;

· our ability to expand the scope of our product offering; and

· geographic expansion of our business.

We have based these forward-looking statements largely on our current plans and expectations.  Forward-looking statements are subject to risks and uncertainties, some of which are beyond our control.  Our actual results could differ materially from those described in our forward-looking statements as a result of the factors described in the “Risk Factors” included elsewhere in this Annual Report, including, among others:

· the timing of our future capital needs and our ability to raise additional capital when needed;

· increasingly longer sales cycles;

· potential fluctuations in our financial results and our difficulties in forecasting;

· volatility of the stock markets and fluctuations in the market price of our stock;

· the ability to buy and sell our shares on the Over the Counter Bulletin Board;

· our ability to compete with other companies in our industry;

· our dependence upon a limited number of customers;

· our ability to retain and attract key personnel;

· risk of significant delays in product development;

· failure to timely develop or license new technologies;

· risks relating to any requirement to correct or delay the release of products due to software bugs or errors;

· risk of system failure or interruption;

· risks associated with any further dramatic expansions and retractions in the future;

· risks associated with international operations;

· problems which may arise in connection with the acquisition or integration of new businesses, products, services, technologies or other strategic relationships;

· risks associated with protecting our intellectual property, and potentially infringing the intellectual property rights of others;

· fluctuations in currency exchanges;

· risks to holders of our common shares following any issuance of our preferred shares; and

· the ability to enforce legal claims against us or our officers or directors.

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We do not have, and do not undertake, any obligation to publicly update or revise any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise.  Because of these risks and uncertainties, the forward-looking statements and circumstances discussed in this Annual Report might not transpire.

Trademarks or trade names, which we own and are used in this Annual Report, include: DYN@MIC BUYER™, DYN@MIC SELLER™ and WORKING CAPITAL ENGINE™. Each trademark, trade name, or service mark of any other company appearing in this Annual Report belongs to its holder.

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TABLE OF CONTENTS

ITEM 1	- IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS	7
ITEM 2	- OFFER STATISTICS AND EXPECTED TIMETABLE	7
ITEM 3	- KEY INFORMATION	7
A.	Selected Financial Data	7
B.	Capitalization and Indebtedness	9
C.	Reasons For The Offer And Use Of Proceeds	9
D.	Risk Factors	9
ITEM 4	- INFORMATION ON THE COMPANY	16
A.	History and Development of the Company	17
B.	Business Overview	20
C.	Organizational Structure	30
D.	Property, Plant and Equipment	30
ITEM 4A - UNRESOLVED STAFF COMMENTS		30
ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS -
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS		30
A.	Operating Results	32
B.	Liquidity and Capital Resources	36
C.	Research and Development, Patents, and Licenses, Etc	38
D.	Trend Information	38
E.	Off-Balance Sheet Arrangements	38
F.	Tabular Disclosure of Contractual Obligations	39
ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		40
A.	Directors And Senior Management	40
B.	Compensation	43
C.	Board Practices	44
C.1. Audit Committee Information
D.	Employees	46
E.	Share Ownership	47
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		48
A.	Major Shareholders	48
B.	Related Party Transactions	48
ITEM 8 - FINANCIAL INFORMATION		48
ITEM 9 - THE OFFER AND LISTING		48
ITEM 10 - ADDITIONAL INFORMATION		51

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A.	Share Capital	51
B.	Memorandum and Articles of Association	51
C.	Material Contracts	54
D.	Exchange Controls	55
E.	Taxation	55
F.	Dividends and Paying Agents	60
G.	Statements by Experts	60
H.	Documents on Display	61
I.	Subsidiary Information	61
ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK		61
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		61
PART II		61
ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		61
ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
	AND USE OF PROCEEDS	61
ITEM 15 – CONTROLS AND PROCEDURES		61
ITEM 16 [RESERVED]		63
ITEM 16		63
A.	Audit Committee Financial Expert	63
B.	Code of Ethics	63
C.	Principal Accountant Fees and Services	63
D.	Exemptions from the Listing Standards For Audit Committees	63
E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	63
PART III		63
ITEM 17- FINANCIAL STATEMENTS		64
ITEM 18 - FINANCIAL STATEMENTS		64
ITEM 19 – EXHIBITS		64

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Unless otherwise indicated, all references in this Annual Report to “dollars” or “$” are references to Canadian dollars. Our financial statements are expressed in Canadian dollars. Except as otherwise noted, certain financial information presented in this Annual Report has been translated from Canadian dollars to U.S. dollars at an exchange rate of Cdn$0.9835 to US$1.00 (or US$1.0168 to Cdn$1.00), the noon buying rate in New York City on December 31, 2011 for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York.  These translations are not intended to suggest that Canadian dollars have been or could be converted into U.S. dollars at that or any other rate.

PART I

ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

 ITEM 3 - KEY INFORMATION

A. SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction with, and is qualified by reference to, our consolidated financial statements and the related notes, and the section "Operating and Financial Review and Prospects" included elsewhere in this Annual Report.  The consolidated statement of operations data for the years ended December 31, 2011 and 2010 and consolidated statements of financial position data as of December 31, 2011 and 2010, as set forth below, are derived from our audited consolidated financial statements and the related notes included elsewhere in this Annual Report in accordance with International Financial Reporting Standards. The consolidated statement of operations and comprehensive loss data for the years ended December 31, 2009, 2008 and 2007 and the consolidated statements of financial positions data as at December 31, 2009, 2008, and 2007 have been derived from our audited consolidated financial statements for those years in accordance with Canadian generally accepted accounting principles and reconciled to accounting principles generally accepted in the United States of America, which are not included in this Annual Report but have previously been filed with the Commission.

Basis of Presentation

The accompanying consolidated financial statements represent the first annual financial statements of the Company and its subsidiary prepared in accordance with International Financial Reporting Standards (IFRS).  The Company adopted IFRS in accordance with IFRS 1, First-time Adoption of International Reporting Standards.  The first date at which IFRS was applied was January 1, 2010.  In accordance with IFRS, the Company has:

· Provided comparative financial information;

· Applied the same accounting policies throughout all periods presented;

· Retrospectively applied all effective IFRS standards as of December 31, 2011, as required; and

· Applied certain mandatory exceptions and optional exemptions as applicable for first time IFRS adopters.

The Company’s consolidated financial statements were previously prepared in accordance with Canadian generally accepted accounting principles (“previous GAAP”).  The adoption of IFRS has not had a material impact on the Company’s operations, strategic decisions, cash flow and capital expenditures.

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Historical results are not necessarily indicative of results to be expected for any future period.

	Year Ended December 31,
	2011 (Cdn$)			2010 (Cdn$)			2009 (Cdn$)			2008 (Cdn$)			2007 (Cdn$)
	(IFRS)						(CANADIAN GAAP)
				(in thousands except for per share data)
Consolidated Statement of Operations and Comprehensive Loss Data
Revenues		785			582			759			741			1,166
Income from GE Asset Manager, LLC		69			43			-			-			-
Operating expenses:
General and administrative		1,670			1,440			1,269			1,485			1,703
Customer service and technology		726			734			738			689			762
Sales and marketing		260			188			181			117			276
Stock-based compensation		1,873			517			183			43			94
Depreciation		32			22			29			33			39
Finance costs		227			269			768			729			604
Other expenses (net)		-			487			-			-			-
Total expenses		4,788			3,657			3,168			3,096			3,478
Loss from operations		(3,934	)		(3,032	)		(2,409	)		(2,355	)		(2,312	)
Loss per share (1)		(0.020	)		(0.019	)		(0.017	)		(0.022	)		(0.025	)
Weighted average number of common shares		196,180			162,899			140,434			108,861			93,094

	As at December 31,
	2011 (Cdn$)		2010 (Cdn$)			2009 (Cdn$)			2008 (Cdn$)			2007 (Cdn$)
	(IFRS)					(CANADIAN GAAP)
	(in thousands)
Consolidated Statement of Financial Position Data (2)
Total assets		2,909		284			1,105			812			687
Total liabilities		415		1,857			1,121			3,215			2,287
Shareholders’ equity (deficiency)		2,494		(1,573	)		(16	)		(2,403	)		(1,600	)
Total liabilities and shareholders’ equity		2,909		284			1,105			812			687

(1)           For each fiscal year, the Company excluded the effect of all convertible debt, stock options and share-purchase warrants in the calculation of diluted loss per share, as their impact would have been anti-dilutive.

(2)           The Company has not paid dividend since its formation.

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EXCHANGE RATES

The following tables set forth, for the periods indicated, certain exchange rates based on the noon buying rate in New York City for cable transfers in Canadian dollars, as certified for customs purposes by the Federal Reserve Bank of New York.  Such rates are the number of U.S. dollars per one Canadian dollar and are the inverse of the rates quoted by the Federal Reserve Board of New York for Canadian Dollars per U.S. $1.00.  On February 29, 2012, the exchange rate was CAD$1.00 = US$0.9956.

	Year Ended December 31,
Rate	2011		2010		2009		2008		2007
Average during year (1)		1.0151		0.9663		0.8799		0.9297		0.9419
(1) The average rate is the average of the exchange rates on the last day of each month during the year.

Month	High during month	Low during month
September 2011	1.0191	0.9626
October 2011	1.0058	0.9430
November 2011	1.0068	0.9536
December 2011	0.9895	0.9613
January 2012	1.0014	0.9882
February 2012	1.0059	0.9950

B.CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C.REASONS FOR THE OFFER AND USE OF PROCEEDS.

Not applicable.

D.RISK FACTORS

The following is a summary of certain risks and uncertainties, which we face in our business.  This summary is not meant to be exhaustive.  These Risk Factors should be read in conjunction with other cautionary statements, which we make in this Annual Report and in our other public reports, registration statements and public announcements.

WE WILL NEED ADDITIONAL CAPITAL AND IF WE ARE UNABLE TO SECURE ADDITIONAL FINANCING WHEN WE NEED IT, WE MAY BE REQUIRED TO SIGNIFICANTLY CURTAIL OR CEASE OUR OPERATIONS

We have not yet realized profitable operations and have relied on non-operational sources of financing to fund our operations.  Since we began our operations, we have been funded primarily through the sale of securities to investors in a series of private placements, convertible debt instruments, sales of equity to, and investments from, strategic partners, gains from investments, option exercises, a rights offering and, to a limited extent, through cash flow from operations.  While our Company’s financial statements for the year-ended December 31, 2011, have been prepared on the basis of accounting principles applicable to a going concern, certain adverse conditions and events cast substantial doubt upon the validity of this assumption. Our ability to continue as a going concern will be dependent on management’s ability to successfully execute its business plan including a substantial increase in revenue as well as maintaining operating expenses at or near the same level as 2011.  We cannot provide assurance that we will be able to execute on our business plan or assure that efforts to raise additional financings would be successful.

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Management believes that continued existence beyond 2011 is dependent on its ability to increase revenue from existing products, and to expand the scope of its product offering which entails a combination of internally developed software and partnerships with third parties. Management further believes that ability to raise additional financing during 2011 is also critical for continued existence of the Company. As of December 31, 2011, we had cash on hand of approximately $1,760,000.

We do not have any committed sources of additional financing at this time and we are uncertain whether additional funding will be available when we need it on terms that will be acceptable to us. If we are not able to obtain financing when we need it, we would be unable to carry out our business plan and would have to significantly curtail or cease our operations. We have included in Note 2 to our financial statements for the year ended December 31, 2011, a discussion about our ability to continue as a going concern. Potential sources of financing include strategic relationships, public or private sales of our shares, debt, convertible securities or other arrangements. If we raise funds by selling additional shares, including common shares or other securities convertible into common shares, the ownership interests of our existing shareholders will be diluted.  If we raise funds by selling preferred shares, such shares may carry more voting rights, higher dividend payments or more favorable rights upon distribution than those for the common shares.  If we incur debt, the holders of such debt may be granted security interests in our assets.  Because of our potential long-term capital requirements, we may seek to access the public or private equity or debt markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. If we fail to obtain financing when we need it, it would have a material adverse effect on our business, financial condition, cash flows and results of operations.

WE ARE NOT PROFITABLE AND WE MAY NEVER BECOME PROFITABLE

We have accumulated losses of approximately $122.977 million as of December 31, 2011.  For the year ended December 31, 2011 our loss was $3.934 million. We have never been profitable and expect to continue to incur losses for the foreseeable future. We cannot assure you that we will earn profits or generate positive cash flows from operations in the future.

WE MAY EXPERIENCE INCREASINGLY LONGER SALES CYCLES

A significant portion of our revenue in any quarter is derived from a relatively small number of contracts.  We often experience sales cycles of six (6) to eighteen (18) months.  If the length of our sales cycles increases, our revenues may decrease and our quarterly results would be adversely affected.  In addition, our current and future expense levels are based largely on our investment plans and estimates of future revenues and are, to a large extent, fixed.  We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Any significant shortfall in revenues relative to our planned expenditures would have a material adverse effect on our business, financial condition, cash flows and results of operations.

POTENTIAL FLUCTUATIONS IN OUR FINANCIAL RESULTS MAKE FINANCIAL FORECASTING DIFFICULT

Our operating results have varied on a quarterly basis in the past and may fluctuate significantly as a result of a variety of factors, many of which are outside our control. Factors that may affect our quarterly operating results include:

· General economic conditions as well as economic conditions specific to our industry;

· Long sales cycles, which characterize our industry;

· Implementation delays, which can affect payment and recognition of revenue;

· Any decision by us to reduce prices for our solutions in response to price reductions by competitors;

· The amount and timing of operating costs and capital expenditures relating to monitoring or expanding our business, operations and infrastructure; and

· The timing of, and our ability to integrate, any future acquisition, technologies or products or any strategic investments or relationships into which we may enter.

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Due to these factors, our quarterly revenues and operating results are difficult to forecast.  We believe that period-to-period comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance. In addition, it is likely that in one or more future quarters, our operating results will fall below the expectations of securities analysts and investors.  In such event, the trading price of our common shares would almost certainly be materially adversely affected.

OUR SHARE PRICE HAS FLUCTUATED SUBSTANTIALLY AND MAY CONTINUE TO DO SO

The trading price of our common shares on The Toronto Stock Exchange and on the Nasdaq Over the Counter Bulletin Board (“OTCBB”) has fluctuated significantly in the past and could be subject to wide fluctuations in the future. The market prices for securities of technology companies have been highly volatile. These companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to their operating performance. Broad market and industry factors may materially and adversely affect the market price of our common shares, regardless of our operating performance. In addition, fluctuations in our operating results and concerns regarding our competitive position can have an adverse and unpredictable effect on the market price of our shares.

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources, which could have a material adverse effect on our business, results of operations, cash flow, financial condition and prospects. If we do not prevail in any such action, which may be brought, we could be forced to pay damages.

THE ABILITY TO BUY OR SELL OUR COMMON SHARES ON THE OTCBB MAY BE LIMITED

Our common shares trade on the OTCBB.  The OTCBB is generally considered to be a less efficient market than the Nasdaq National Market or the Nasdaq SmallCap Market on which our shares previously traded.  As a result, the ability to buy or sell our common shares on the OTCBB may be limited.  In addition, since our shares are no longer listed on the Nasdaq National Market or Nasdaq SmallCap Market, our shares may be subject to the “penny stock” regulations described below.  De-listing from the Nasdaq National Market and the Nasdaq SmallCap Market does not affect the listing of our common shares on The Toronto Stock Exchange.

OUR COMMON SHARES ARE SUBJECT TO “PENNY STOCK” REGULATIONS WHICH MAY AFFECT YOUR ABILITY TO BUY OR SELL OUR COMMON SHARES

Our shares are characterized as “penny stocks” which may severely affect market liquidity.  The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock.

Securities and Exchange Commission regulations generally define a penny stock to be an equity security that has a market price of less than US$5.00 per share, subject to certain exceptions.  The regulations require, prior to any transaction involving a penny stock, delivery of a disclosure schedule explaining the penny stock market and the risks associated therewith.  The penny stock regulations may adversely affect the market liquidity of our common shares by limiting the ability of broker/dealers to trade the shares and the ability of purchasers of our common shares to sell in the secondary market.  Certain institutions and investors will not invest in penny stocks.

THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE

The market for asset lifecycle management solutions is rapidly evolving and intensely competitive. We face significant competition in each segment of our business (asset sourcing, procurement, asset management and asset disposition).  We expect that competition will further intensify as larger existing companies expand their product lines and industry consolidation accelerates.

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Many of our competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we. We cannot be certain that we will be able to compete with them effectively. If we fail to do so, it would have a material adverse effect on our business, financial condition, cash flows and results of operations.

IMPACT OF CURRENT GLOBAL ECONOMIC CONDITIONS

Recently, global financial markets and economic conditions have been, and may continue to be, disrupted and volatile. As a result of concerns about the stability of financial markets generally and the solvency of creditors specifically, the cost of obtaining money from the credit markets generally has increased as many lenders and institutional investors have increased interest rates, enacted tighter lending standards, refused to refinance existing debt on terms similar to current debt and in some cases, ceased to provide funding to borrowers. Concerns about the current economic situation may also have the effect of tightening the equity markets making any equity based financing which we may desire to undertake difficult to obtain, or obtainable only on terms and conditions which we may find burdensome or unacceptable.  These issues, along with the current weak economic conditions have made, and may continue to make, it more difficult for us to obtain necessary funding on reasonable and competitive terms, and as a result, our ability to continue our businesses, pursue improvements, and continue future growth may be limited or curtailed.  In addition, current weak economic conditions may negatively impact our customers’ ability to obtain financing and fund their businesses.  As a result, we may incur decreases in sales, which will negatively impact our revenue.

WE DEPEND HEAVILY ON A SMALL NUMBER OF CUSTOMERS, AND IF WE LOSE ANY OF THEM OR THEY REDUCE THEIR BUSINESS WITH US, WE WOULD LOSE A SUBSTANTIAL PORTION OF OUR REVENUES

In 2011, two customers accounted for 50 percent and 31 percent, respectively (2010- one customer accounted for 75 percent of total revenues. If our relationships with any of these customers is severed or meaningfully altered, we would experience a significant decline in our performance, particularly through reduced revenues, which would have a material adverse effect on our business, financial condition, cash flows and results of operations.

WE MAY NOT BE ABLE TO RETAIN OR ATTRACT THE HIGHLY SKILLED PERSONNEL WE NEED

Our success is substantially dependent on the ability and experience of our senior management and other key personnel.  We do not have long-term employment agreements with any of our key personnel and maintain no “key person” life insurance policies.

We may need to hire new or additional personnel to respond to attrition or future growth of our business.  However, there is significant competition for qualified personnel. We cannot be certain we will be able to retain existing personnel or hire additional, qualified personnel when needed.

SIGNIFICANT DELAYS IN PRODUCT DEVELOPMENT WOULD HARM OUR REPUTATION AND RESULT IN LOSS OF REVENUE

If we experience significant product development delays, our position in the market would be harmed, and our revenues could be substantially reduced, which would adversely affect our operating results.  As a result of the complexities inherent in our software, major new product enhancements and new products often require long development and test periods before they are released.  On occasion, we have experienced delays in the scheduled release date of new or enhanced products, and we may experience delays in the future.  Delays may occur for many reasons, including an inability to hire a sufficient number of developers, discovery of bugs and errors or a failure of our current or future products to conform to industry requirements.  Any such delay, or the failure of new products or enhancements in achieving market acceptance, could materially impact our business and reputation and result in a decrease in our revenues.

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WE MAY HAVE TO EXPEND SIGNIFICANT RESOURCES TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE

Our industry is characterized by rapid technological change, changes in user and customer requirements, frequent new service or product introductions embodying new technologies and the emergence of new industry standards and practices.  Any of these could hamper our ability to compete or render our proprietary technology obsolete.  Our future success will depend, in part, on our ability to:

· Develop new proprietary technology that addresses the increasingly sophisticated and varied needs of our existing and prospective customers;

· Anticipate and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis;

· Continually improve the performance, features and reliability of our products in response to evolving market demands; and

· License leading technologies.

We may be required to make substantial expenditures to accomplish the foregoing or to modify or adapt our services or infrastructure. If we are unable to do so, it would have a material adverse effect on our business, financial condition, cash flows and results of operations.

OUR BUSINESS COULD BE SUBSTANTIALLY HARMED IF WE HAVE TO CORRECT OR DELAY THE RELEASE OF PRODUCTS DUE TO SOFTWARE BUGS OR ERRORS

We sell complex software applications and services.  Our applications may contain undetected errors or bugs when first introduced or as new versions are released.  Our software products may also contain undetected viruses.  Further, software we license from third parties and incorporate into our products may contain errors, bugs or viruses.  Errors, bugs and viruses may result in any of the following:

· Adverse customer reactions;

· Negative publicity regarding our business and our products;

· Harm to our reputation;

· Loss of or delay in market acceptance;

· Loss of revenue or required product changes;

· Diversion of development resources and increased development expenses;

· Increased service and warranty costs;

· Legal action by our customers; and

· Increased insurance costs.

SYSTEMS DEFECTS, FAILURES OR BREACHES OF SECURITY COULD CAUSE A SIGNIFICANT DISRUPTION TO OUR BUSINESS, DAMAGE OUR REPUTATION AND EXPOSE US TO LIABILITY

We host certain websites and applications for our customers.  Our systems are vulnerable to a number of factors that may cause interruptions in our ability to enable or host solutions for third parties, including, among others:

· Damage from human error, tampering and vandalism;

· Breaches of security;

· Fire and power losses;

· Telecommunications failures and capacity limitations; and

· Software or hardware defects.

Despite the precautions we have taken and plan to take, the occurrence of any of these events or other unanticipated problems could result in service interruptions, which could damage our reputation, and subject us to loss of business and significant repair costs.  Certain of our contracts require that we pay penalties or permit a

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customer to terminate the contract if we are unable to maintain minimum performance levels. Although we continue to take steps to enhance the security of our systems and ensure that appropriate back-up systems are in place, our systems are not now, nor will they ever be, fully secure.

OUR BUSINESS HAS UNDERGONE DRAMATIC EXPANSION AND RETRACTION PHASES SINCE OUR FORMATION.  WE MAY NOT BE ABLE TO MANAGE FURTHER DRAMATIC EXPANSIONS AND RETRACTIONS IN THE FUTURE

Our business has undergone dramatic expansion and retraction since our formation, which has placed significant strain on our management resources.  If we should grow or retract dramatically in the future, there may be further significant demands on our management, administrative, operating and financial resources.  In order to manage these demands effectively, we will need to expand and improve our operational, financial and management information systems and motivate, manage and retain employees.  We cannot assure you that we will be able to do so, that our management, personnel or systems will be adequate, or that we will be able to achieve levels of revenue commensurate with the resulting levels of operating expenses.

SALES TO CUSTOMERS OUTSIDE CANADA ACCOUNT FOR A SIGNIFICANT PORTION OF OUR REVENUE, WHICH EXPOSES US TO CERTAIN RISKS

While we currently operate out of Canada, many of our customers are based outside of Canada. There are risks inherent in doing business outside Canada, including:

· Differing laws and regulatory requirements;

· Political and economic risks;

· Currency and foreign exchange fluctuations and controls;

· Tariffs, customs, duties and other trade barriers;

· Longer payment cycles and problems in collecting accounts receivable;

· Potentially adverse tax consequences; and

· Any of these risks could adversely affect the success of our business;

ACQUISITIONS OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISRUPTIONS TO OUR BUSINESS AND/OR DISTRACTIONS FOR OUR MANAGEMENT

In the future, we may seek to acquire other businesses or make investments in complementary businesses or technologies. We may not be able to acquire or manage additional businesses profitably or successfully integrate any acquired businesses with our business.  Businesses that we acquire may have liabilities that we underestimate or do not discover during our pre-acquisition investigations.  Certain liabilities, even if we do not expressly assume them, may be imposed on us as the successor to the business.  Further, each acquisition may involve other special risks that could cause the acquired businesses to fail to meet our expectations.  For example:

· The acquired businesses may not achieve expected results;

· We may not be able to retain key personnel of the acquired businesses;

· We may incur substantial, unanticipated costs, delays or other operational or financial problems when we try to integrate businesses we acquire with our own;

· Our management’s attention may be diverted; or

· Our management may not be able to manage the combined entity effectively or to make acquisitions and grow our business internally at the same time.

The occurrence of one or more of these factors could have a material adverse effect on our business, financial condition, cash flows and results of operations.  In addition, we may incur debt or issue equity securities to pay for any future acquisitions or investments, which could dilute the ownership interest of our existing shareholders.

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IF WE ARE UNABLE TO SUCCESSFULLY PROTECT OUR INTELLECTUAL PROPERTY OR OBTAIN CERTAIN LICENSES, OUR COMPETITIVE POSITION MAY BE WEAKENED

Our performance and ability to compete are dependent in part on our technology.  We rely on a combination of patent, copyright, trademark and trade secret laws as well as confidentiality agreements and technical measures, to establish and protect our rights in the technology we develop. We cannot guarantee that any patents issued to us will afford meaningful protection for our technology.  Competitors may develop similar technologies which do not conflict with our patents.  Others may challenge our patents and, as a result, our patents could be narrowed or invalidated.

Our software is protected by common law copyright laws, as opposed to registration under copyright statutes.  Common law protection may be narrower than that which we could obtain under registered copyrights.  As a result, we may experience difficulty in enforcing our copyrights against certain third parties.  The source code for our proprietary software is protected as a trade secret.  Aspart of our confidentiality protection procedures, we generally enter into agreements with our employees and consultants and limit access to, and distribution of, our software, documentation and other proprietary information.  We cannot assure you that the steps we take will prevent misappropriation of our technology or that agreements entered into for that purpose will be enforceable. In order to protect our intellectual property, it may be necessary for us to sue one or more third parties.  While this has not been necessary to date, there can be no guarantee that we will not be required to do so in future to protect our rights. The laws of other countries may afford us little or no protection for our intellectual property.

We also rely on a variety of technology that we license from third parties, including our database and Internet server software, which is used to perform key functions.  These third-party technology licenses may not continue to be available to us on commercially reasonable terms, or at all. If we are unable to maintain these licenses or obtain upgrades to these licenses, we could be delayed in completing or prevented from offering some products or services.

OTHERS COULD CLAIM THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS, WHICH MAY RESULT IN COSTLY AND TIME-CONSUMING LITIGATION

Our success will also depend partly on our ability to operate without infringing upon the proprietary rights of others, as well as our ability to prevent others from infringing on our proprietary rights.  We may be required at times to take legal action in order to protect our proprietary rights.  Also, from time to time, we may receive notice from third parties claiming that we infringe their patent or other proprietary rights. In the past, a certain third party claimed that certain of our technology infringed their intellectual property rights.    The claim with the particular third party has been resolved in a prior period through a licensing arrangement.  There can be no assurances that other third parties will not make similar claims in the future.

We believe that infringement claims will increase in the technology sector as competition intensifies.  Despite our best efforts, we may be sued for infringing on the patent or other proprietary rights of others.  Such litigation is costly, and even if we prevail, the cost of such litigation could harm us.  If we do not prevail or cannot fund a complete defense, in addition to any damages we might have to pay, we could be required to stop the infringing activity or obtain a license.  We cannot be certain that any required license would be available to us on acceptable terms, or at all.  If we fail to obtain a license, or if the terms of a license are burdensome to us, this could have a material adverse effect on our business, financial condition, cash flows and results of operations.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH EXCHANGE RATE FLUCTUATIONS

The Company’s revenue from software licensing and related services and e-commerce enabling agreements is transacted in various currencies including the Canadian dollar and U.S. dollar.  As the majority of our revenues are realized in U.S. dollar and our expenses are transacted in Canadian dollar, the appreciation of the U.S. dollar against the Canadian dollar may have a favorable impact on our results.  The Company does not use derivative instruments to manage exposure to foreign exchange fluctuations. Fluctuations in the exchange rates of these currencies or the exchange rate of other currencies against the Canadian dollar could have a material adverse effect on our business, financial condition, cash flows and results of operations.

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OUR PREFERRED SHARES COULD PREVENT OR DELAY A TAKEOVER THAT SOME OR A MAJORITY OF SHAREHOLDERS CONSIDER FAVORABLE

Our Board of Directors, without any further vote of our shareholders, may issue preferred shares and determine the price, preferences, rights and restrictions of those shares.  The rights of the holders of common shares will be subject to, and may be adversely affected by, the rights of the holders of any series of preferred shares that may be issued in the future.  That means, for example, that we can issue preferred shares with more voting rights, higher dividend payments or more favorable rights upon distribution than those for our common shares.  If we issue certain types of preferred shares in the future, it may also be more difficult for a third party to acquire a majority of our outstanding voting shares and such issuance may, in certain circumstances, deter or delay mergers, tender offers or other possible transactions that may be favored by some or a majority of our shareholders.

IT MAY BE DIFFICULT FOR YOU TO ENFORCE LEGAL CLAIMS AGAINST US OR OUR OFFICERS OR DIRECTORS

We are incorporated under the laws of the Province of Ontario, Canada.  A certain number of our directors and officers are residents of Canada and substantially all of our assets and the assets of such persons are located outside the United States.  As a result, it may be difficult for holders of common shares to effect service of legal process within the United States upon those directors and officers who are not residents of the United States.  It may also be difficult to realize in the United States upon judgments of courts of the United States without enforcing such judgments in our home jurisdiction or the jurisdiction of residence of the director or officer concerned.

ITEM 4                      - INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

Northcore Technologies Inc. (“Northcore, or the “Company”) was formed pursuant to the Business Corporations Act (Ontario). The business began as Internet Liquidators Inc. (“IL Inc.”), a business corporation formed under the laws of Ontario, Canada, in September 1995 and after a series of corporate reorganizations, as described below, developed into the present Company.

In May 1996, Internet Liquidators International Inc. (“ILI Inc.”), also an Ontario company, acquired all of the shares of IL Inc. The two companies, IL Inc. and ILI Inc., were amalgamated on January 9, 1997.  By articles of amendment dated June 25 1998, the name of ILI Inc. was changed to Bid.Com International Inc.

On October 11, 2001, Bid.Com acquired substantially all of the shares of ADB Systemer ASA, a public limited liability company organized under the laws of the Kingdom of Norway. As part of the acquisition of ADB Systemer, Bid.Com completed a two for one share consolidation and changed its name to ADB Systems International Inc. (“ADB Inc.”) by articles of amendment dated October 11, 2001.

During 2002, ADB Inc. entered into a series of agreements with the Brick Warehouse Corporation (“The Brick”) whereby the parties agreed to cooperate in online retail operations that utilized the retail technology that

the Company had developed and operated under the name “Bid.Com International Inc.” in the online sale of consumer products to be supplied by The Brick. In connection with these transactions The Brick granted to the Company a secured loan and the Company completed a corporate reorganization by plan of arrangement, as described below.

           On August 20, 2002, a new Ontario company was formed called ADB Systems International Ltd. (“ADB Ltd.”), which was incorporated by certificate and Articles of Incorporation. Pursuant to a plan of arrangement approved by the shareholders of ADB Inc. on October 22, 2002 and by the Ontario Superior Court of Justice on October 24, 2002 (the “Arrangement”) the shareholders of ADB Inc. exchanged their shares of ADB Inc. for shares of ADB Ltd., as the Company was then known, on a one-for-one basis on October 31, 2002. As a result of the Arrangement, the business of ADB Inc., including all assets and liabilities of ADB Inc. (other than those related to retail activities, which remained with ADB Inc.), was transferred to the Company in the form of a return of capital. The name of ADB Inc. was subsequently changed to Bid.Com International Ltd. and on June 30, 2003, the Company exercised its option to transfer to The Brick all of the issued shares of Bid.Com International Ltd. (formerly ADB Inc.) in satisfaction of the outstanding principal amount and accrued interest on the loan then owing to The Brick.

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On June 30, 2006, in connection with the disposition of the Company’s Norwegian subsidiary ADB Systemer AS, the Company changed its name, by articles of amendment, to Northcore Technologies Inc. Effective July 18, 2006 the Company’s stock symbols were changed to NTI on the TSX and to NTLNF on the over-the-counter bulletin board (OTCBB).

The principal and registered office of the Company is located at 302 The East Mall, Suite 300 Toronto, Ontario, Canada, M9B 6C7 and our telephone number is (416) 640-0400.  Additional information on the Company can be found at www.northcore.com. The information contained on our web site is not deemed to be part of this Annual Report.

MAJOR DEVELOPMENTS

Significant product and business developments over the last three fiscal years have been as follows:

FISCAL 2011

Northcore completed a number of customer and operational activities throughout the course of 2011. These activities were designed to accelerate revenue opportunities, solidify our financial position, and strengthen our abilities to work with our customers and partners.

OPERATIONAL ACTIVITIES

· Recruited a new CEO, Chairman and two Board of Directors members to assist with corporate realignment and growth initiatives;

· Completed the acquisition of the Discount This asset base, inclusive of unique Intellectual Property, to serve as the basis for a coordinated IP strategy;

· Opened a U.S. based office in Naples, Florida to facilitate greater access to American market opportunities;

· Completed major upgrades to production information technology infrastructure, including Server Architecture, Database Management Systems and Operating Environments;

· Launched a strategic initiative with Pellegrino and Associates to position Northcore to take advantage of high growth domains with its proprietary Working Capital Engine and Dutch Auction IP portfolio;

· Closed an equity private placement, generating net proceeds of $713,000 through the issuance of common shares and warrants;

· Secured $3,574,000 in proceeds through the exercise of warrants and options by current holders; and

· Continued to strengthen our balance sheet through the conversion of all remaining secured subordinated notes into equity and repayment of notes payable.

CUSTOMER ACTIVITIES

During 2011, Northcore focused on expanding the breadth of existing customer relationships and extending the product line in order to open up new opportunities.  Results of this strategy include:

· Successful deployment of Northcore’s e-tendering technology for the Irish Government Health Services Executive’s initial online acquisition pilot, resulting in a 30 percent savings on a €30 million acquisition;

· Launch of the Home Hardware Dealer-Owners Connect website at the bi-annual Home Hardware market showcase;

· Formation of a Social Commerce Group to focus on helping corporations leverage social media to accelerate buying and selling;

· Contractual renewal of multiple long-term enterprise clients;

· Execution of new contractual agreements with customers in multiple industry segments;

· Implementation of an “Intelligent Agent” data extraction initiative for a major strategic partner; and

· Awarded of Vendor of Record status by Ontario Government.

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JOINT VENTURE WITH GE COMMERCIAL FINANCE

Throughout 2011, Northcore continued to strengthen the relationship with GE Capital and engage on a number of initiatives through its joint venture entity, GE Asset Manager, LLC.

The technology underpinnings of the associated products of Asset Seller and Asset Tracker have evolved and seen considerable success in implementations for such important customers such as the NACCO Material Handling Group and the Bobcat Company.  The year also saw accelerated forays into the mobile device space with delivery of Asset Management "Apps". During this period cornerstone client remarketing portals such as GEasset.com, nfsassetseller.com and ToroUsed.com have also continued to gain in terms of customer base and item sell-through.

Both founding partners believe that the opportunities for the venture are significant and look forward to bringing compelling offerings to a growing client base in 2012.

FISCAL 2010

Northcore completed a number of customer and operational activities throughout the course of 2010.  These activities were designed to accelerate revenue opportunities, solidify our financial position, and strengthen our abilities to work with our customers and partners.

FINANCING ACTIVITIES

· Closed an equity transaction with GEM Global Yield Fund Limited, securing net cash proceeds of $300,000.  As a result of the transaction, Northcore issued 2,191,000 common shares for the first tranche draw and 6,000,000 warrants to finalize the availability of the committed $6,000,000 equity line of credit with GEM;

· Closed the first tranche of equity private placement on December 22, 2010, securing net proceeds of $625,000 through the issuance of common shares and warrants. The second tranche closed for net proceeds of $713,000 on February 14, 2011 as a subsequent event to the year; and

· Continued to strengthen our balance sheet through the conversion of $145,000 secured subordinated notes into equity combined with $143,000 of new equity through the exercise of the associated warrants.

CUSTOMER ACTIVITIES

During 2010, Northcore focused on expanding the breadth of existing customer relationships and extending the product line in order to open up new opportunities. Results of this strategy include:

· Completed the development cycle and large scale roll out of a holistic remarketing platform to the Yale and Hyster dealer community, combining mobile computing with Asset Tracker and Asset Seller;

· Delivered and deployed a customized Asset Seller platform to Xstrata Corporation to effect the disposition of surplus mining assets;

· Initiated initial user interface design for the Group Purchasing platform subsequently named Discount This;

· Increased the volume of third party auction events in the light-duty construction equipment and utility vehicle categories, with successful value realization and improved sales cycle efficiency;

· Evidenced continued effectiveness in the remarketing of corporate aircraft and established Asset Seller as a leading platform for sales of high value asset categories by displaying showcased items in unprecedented rich detail;

· Awarded two supply arrangements with the Canadian Federal Government, qualifying Northcore for the provision of business technology services, one directly and one in partnership with Ottawa based Donna Cona Inc.;

· Completed the development of additional security modules required for Northcore’s core products to achieve US bank certification;

· Entered into a collaborative sales and marketing agreement with Revere Corporation where both parties can now serve their customers with a broader product offering; and

· Delivered a number of enhancements to a customized Asset Tracker application used by a Global Electronics Leasing corporation.

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JOINT VENTURE WITH GE COMMERCIAL FINANCE

Throughout 2010, Northcore maintained a strong focus on GE Asset Manager, our joint venture with GE Commercial Finance.  The year saw significant enhancements made to the entire portfolio of Joint Venture products, with substantial new releases of Asset Seller and Asset Tracker delivered to clients.  In addition Northcore worked closely with GE internal teams to execute tasks required to achieve Bank Certification for internal and customer facing applications.

Remarketing portals such as GEasset.com and ToroUsed.com have also experience solid results in terms of viewership and sell-through.

In specific, the joint venture has shown its efficacy in helping partners accelerate remarketing and redeployment of fixed assets in spite of a sub-optimal economic climate.  Both stakeholders remain committed to helping the venture achieve its full potential and a broader reach to GE customers.

FISCAL 2009

Northcore completed a number of customer and financing activities throughout the course of 2009.  These activities were designed to accelerate revenue opportunities, solidify our financial position, and strengthen our abilities to work with our customers and partners.

FINANCING ACTIVITIES

· Completed a series of debt to equity conversions resulting in full conversions of the original principal amounts of the Series I, J, K and M secured subordinated notes.  As a result of these conversions, the Company’s total liabilities have been reduced by 65 percent since the start of the year decreasing from $3,215,000 to $1,121,000 at the year end;

· Raised $1,320,000 of new equity through the exercise of the Series M warrants and additional proceeds of $112,000 through the exercise of compensation options; and

· Closed an equity private placement, securing net proceeds of $495,000 through the issuance of common shares and warrants;

CUSTOMER ACTIVITIES

During 2009, Northcore focused on expanding the breadth of existing customer relationships and extending the product line in order to open up new opportunities. Results of this strategy include:

· Initiated a Working Capital Engine™ marketing campaign under a new sales leader, as well as formed Southcore Technologies to market our technology products to new territories;

· Signed an agreement with NACCO Materials Handling Group (NMHG), to create a holistic remarketing platform to connect qualified buyers with used lift truck inventory from a North American network of authorized Hyster and Yale dealers;

· Completed an implementation of a next generation mobile application that would assist NMHG in streamlining their remote inspection and inventory process;

· Implemented a new media marketing platform supporting the sale of corporate aircraft.  The site delivers a new level of viewer immersion to the industry, previously only provided by world leading art galleries and museums;

· Developed a direct marketing product to support a major strategic partner in a high profile sales initiative;

· Delivered a prototype for Home Hardware Stores Limited, to provide an intranet for Home Hardware Dealers across Canada to more efficiently source assets for their business needs;

· Renewed a major application hosting contract with a key strategic partner and added an expanded scope of services; and

· Worked with a key strategic partner to deliver a new online marketing presence and supporting structures.

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JOINT VENTURE WITH GE COMMERCIAL FINANCE

Throughout 2009, Northcore continued to support GE Asset Manager, LLC, our joint venture with GE Commercial Finance.  The delivery of a cutting edge mobile application for a key GE partner, NMHG, illustrates this focus.

Working with our partners at GE, we have added new products to the portfolio. An example of this is the new media remarketing system currently being used to vend high-end corporate aircraft online. The joint venture has also supported numerous third party sales events for key GE clients, as well as managing the delivery of the associated eMarketing campaigns.
 

In summary, the joint venture continued to show its increasing value to both partners in a year of challenging economic circumstances. We believe that this value equation will remain in evidence throughout the coming year.

COMPANY’S JOINT VENTURE WITH GE COMMERCIAL FINANCE

On December 31, 2003 the Company, through its wholly owned subsidiary, entered into an Amended and Restated Operating Agreement (the “Operating Agreement”) with General Electric Capital Corporation through its business division GE Commercial Finance. This agreement was entered into in connection with the establishment of GE Asset Manager, LLC, a joint business venture in which both GE Commercial Finance and Northcore hold a 50 percent interest. The joint venture carries on business under the name GE Commercial Finance Asset Manager (“GE Asset Manager”, “GEAM”), is an integrated, web-based business enabling mid- and large-size organizations to reduce operating costs by simplifying and consolidating their asset management programs. GEAM features all-in-one capabilities designed for sourcing of new equipment, tracking and reallocation of existing assets, automated appraisal management and disposition of surplus equipment.

PRINCIPAL CAPITAL EXPENDITURES AND DIVESTITURES

For a description of principal capital expenditures and divestitures, seeITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As of February 29, 2012 we do not have any significant current capital divestitures or any current capital expenditures.

B. BUSINESS OVERVIEW

Northcore Technologies Inc. (“Northcore” or the “Company”) provides enterprise level software products and services that enable its customer to purchase, manage and dispose of capital equipment.  Utilizing award-winning, multi-patented technology, as well as powerful, holistic Social Commerce tools, Northcore’s

solutions support customers throughout the entire asset lifecycle.  Our integrated software solutions and support services are designed for organizations in the financial services, manufacturing, oil and gas, mining, and government sectors to:

· Streamline the sourcing and procurement of critical assets, while reducing purchasing costs;

· Track the location of assets to support improved asset utilization and redeployment of idle equipment;

· Manage the appraisal of used equipment more effectively, resulting in a better understanding of fair market values; and

· Accelerate the sale of surplus assets while generating higher yields.

Northcore owns 50 percent of GE Asset Manager, LLC (also referred to as “GE Asset Manager”), a joint business venture with GE Capital Corporation, through its business division GE Commercial Finance, Capital Solutions.  Together, the companies work with leading organizations around the world to help them liberate more capital value from their assets.

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Northcore’s shares trade on both the Toronto Stock Exchange (TSX: NTI) and the OTC Bulletin Board (OTCBB: NTLNF).

GEAM offers a suite of integrated, web-based solutions that are designed to help organizations gain greater control of their capital assets and implement new process efficiencies to their operational activities which we believe enables our customers to:

· Automate sourcing and tendering processes;

· Track and re-deploy assets more effectively;

· Automate equipment appraisals; and

· Efficiently market and sell surplus equipment.

We believe however, that the current economic turmoil bodes well for Northcore. In times where access to new capital is reduced, or rendered more difficult, companies are motivated to “stretch” existing capital investments by redeploying idle and surplus assets back into productive use. In addition, assets that are ultimately unneeded represent a “harvest” opportunity, if they can be liquidated efficiently. The product suite offered by Northcore and by extension our joint venture, GE Asset Manager, LLC, provides an efficient, cost effective solution to help organizations achieve these goals.

INDUSTRY BACKGROUND AND OVERVIEW

Asset management applications have existed for more than thirty years, initially through computerized maintenance management systems (CMMS), and more recently including more comprehensive and robust enterprise asset management (EAM) and enterprise resource planning (ERP) solutions.  These early systems automated daily management of assets, while more recent ERP solutions consolidated basic asset information with financial information at the corporate level. Asset Management applications, as provided by Northcore, encompass elements of both approaches, and are increasingly delivered via web-based or hosted systems.

Current asset management systems provide a number of capabilities including maintenance scheduling, materials management, electronic procurement, and asset tracking. In essence, asset management activities have evolved to integrate all aspects of an asset’s lifecycle.

There are a number of industry trends driving the demand for asset management capabilities, including the need to:

· Improve the utilization of assets;

· Comply with industry standards and requirement such as, Sarbanes-Oxley financial requirements;

· Reduce operating expenses and improve bottom-line performance; and

· Introduce new operational efficiencies.

PRODUCTS AND SERVICES

The Company offers solutions to manage all aspects of the asset lifecycle – sourcing/procurement, maintenance, materials management and disposition.  Below is a detailed description of our offerings:

Dyn@mic Buyer (TM)

An on-line sourcing solution, Dyn@mic Buyer automates tendering activities, and can be used to improve the decision-making process involved in the sourcing of goods by providing automated analysis and selection among competing supplier bids, based on a variety of pre-determined factors.

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Key features include:

· The ability for buyers to create tenders using automated tools that accelerate the purchasing process and reduce procurement costs.

· Capabilities for buyers to post and distribute their tenders on-line to qualified suppliers.

· The ability for buyers to assign values to criteria involved in the purchase decision, such as price, product availability, post-sales support and certification standards.  Buyers then weigh suppliers’ responses to tender questions for evaluation.

· Functionality that allows for the posting of detailed technical information, question and answer forums, and automatic e-mail notification of amended or new buyer-posted documents.

· Capabilities to allow for the use of sealed bid-sourcing formats enabling users to post their product or service requirements to selected vendors.  The sealed bid system differs from the request for quotation in that the vendors only have one opportunity to supply a bid.  Only after the close of the auction is the user able to view the vendor bids.

Dyn@mic Buyer is delivered to our customers via a hosted model. Fees for Dyn@mic Buyer are determined on an annual basis, depending on the number of sourcing events identified by customers. Service fees are charged separately for implementation, systems integration, training and other consulting activities. Dyn@mic Buyer can be bundled with our procurement solutions or used separately depending on customer requirements.

Dyn@mic Seller (TM)

An on-line sales solution designed to help our customers with the disposition of surplus assets and equipment.  Dyn@mic Seller integrates multiple pricing methods, such as fixed priced, top bid (auction), Dutch (declining price) and hybrids, through private-labeled websites. Dyn@mic Seller is delivered through a hosted model.

Key capabilities of the product include:

·      Traditional rising price auctions, where the highest bids win the items being sold. The rising price auction allows participants to competitively bid on available products by incrementally adjusting their bid amounts.  Our user interface allows users to easily identify current leading bidders, minimum new bids and initial bid pricing. Participants are informed of their bid status, and advised whether they have won, been outbid, approved or declined via electronic mail.

·      A patented Dutch (declining) auction format, in which a starting price is set and a limited time period is allocated for a fixed quantity of the product to be sold.  As time advances, the price drops in small increments until the asset is sold.  The declining bid auction allows participants to bid in a real-time format utilizing on-screen data which provides the time and quantity remaining as well as the falling price of the items for sale.

·      Hybrid auction formats that blend multiple pricing formats to meet a customer’s particular needs.

·      Fixed price sales where assets are sold in a catalogue or directory format.  The purchaser cannot bid on the price, but merely elects whether or not to purchase the good or service.

Our customers pay monthly hosting fees for use of Dyn@mic Seller and typically also enter into a revenue sharing arrangement with us.  Service fees for implementation, systems integration, training and other consulting activities are charged separately.

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RELATED SERVICES

In connection with our software offerings, we provide the following services to our customers:

CONSULTING

A significant number of our customers request our advice regarding their business and technical processes, often in conjunction with a scoping exercise conducted both before and after the execution of a contract.  This advice can relate to development or optimization of assorted business processes, such as sourcing or procurement activities, assisting in the development of technical specifications, and recommendations regarding internal workflow activities.

CUSTOMIZATION AND IMPLEMENTATION

Based generally upon the up-front scoping activities, we are able to customize our solutions as required to meet the customer's particular needs.  This process can vary in length depending on the degree of customization, the resources applied by the customer and the customer's business requirements.  We work closely with our customers to ensure that new features and functionality meet their expectations.  We also provide the professional services work required for the implementation of our customer solutions, including loadingof data, identification of business processes, and integration to other systems applications.

APPLICATION DEVELOPMENT

           A growing number of our customers have engaged us to develop web-based applications that support their unique asset management requirements. Typically, these application development projects become the proprietary technology of our customers and are not resold by us. We charge customers based on hourly service rates or through a fixed price format.

TRAINING

Upon completion of implementation (and often during implementation), we train customer personnel to utilize our solutions.   Training can be conducted in one-on-one or group situations. We also conduct “train the trainer” sessions.

MAINTENANCE AND SUPPORT

We provide regular software upgrades and ongoing support to our customers. Northcore provides these services for a yearly maintenance fee of 18 percent of the license fee for client/server environment or as part of its monthly hosting fees.

HOSTING

We also provide technology-hosting services to our customers. Through these services, customers gain access to Northcore's applications via the Internet through dedicated, secure websites.  Our hosting services enable customers to accelerate the deployment of technology initiatives while limiting investments in systems configuration and new hardware infrastructure.

GE ASSET MANAGER, LLC (GEAM)

GEAM IS A JOINT VENTURE BETWEEN GE COMMERCIAL FINANCE AND NORTHCORE TECHNOLOGIES INC. THAT COMBINES GE’S EQUIPMENT FINANCING AND ASSET MANAGEMENT EXPERTISE TOGETHER WITH OUR EXPERIENCE IN PROVIDING MISSION CRITICAL TECHNOLOGY SOLUTIONS FOR ASSET LIFECYCLE MANAGEMENT.

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With organizations needing to generate improved bottom-line results and comply with new financial regulatory requirements, GEAM has introduced a new suite of integrated, web-based solutions that are designed to help organizations gain greater control of their capital assets and implement new process efficiencies to their operational activities.

Our industry-proven solutions enable our customers to:

· Automate sourcing and tendering processes.

· Track and re-deploy assets more effectively;

· Automate equipment appraisals; and

· Efficiently market and sell surplus equipment.

The four key components to Asset Manager’s offerings are as follows:

Asset Buyer

Asset Buyer is a web-based solution designed for automating sourcing activities and improving purchasing decisions.  Using Asset Buyer, purchasers can determine the factors that are the most important to their procurement decisions and identify suppliers that deliver the greatest value – from the lowest price to the ability to match exact specification requirements.

Asset Buyer also streamlines the procurement process, making it easier to create and distribute tenders, select vendors and negotiate with suppliers.

With Asset Buyer, organizations can:

· Generate cost savings on sourcing activities;

· Reduce purchasing cycle times;

· Take advantage of multiple sourcing formats including request for proposals, reverse auction, and sealed bid; and

· Rank suppliers based on their ability to match buying criteria improve relations with suppliers through on-line collaborations.

Asset Tracker

Designed to allow organizations to more effectively utilize their assets, Asset Tracker is a web-based solution for keeping track of the location, details and status of capital equipment – regardless of where the equipment is being deployed.

Using a dedicated tracking site that is password protected, Asset Tracker provides users the ability to search and locate capital assets throughout their organization. Users can search for equipment in a number of ways.  Assets can be searched by business unit, function, or by specific piece of equipment category.

Once an asset is located, users can determine its status and take appropriate action.  Idle or under-utilized assets, for example, can be re-deployed, helping to increase their value to the organization and reducing capital spending on new equipment.

Assets no longer required or deemed surplus can be earmarked for disposition through traditional or on-line sales methods, such as Asset Seller (described below).

With Asset Tracker, users can:

· Search and request for capital equipment within their organization, across multiple locations or facilities;

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· Review asset details, such as equipment description, image, financial information, and contact information;

· Add new asset details by uploading data from spreadsheet applications;

· Extract asset details and generate asset management reports;

· Instantly determine the status of capital equipment;

· Transfer and re-deploy idle assets; and

· Dispose of unnecessary or surplus equipment.

Asset Appraiser

Asset Appraiser is a web-based solution that allows organizations to more effectively manage the capital equipment appraisal process. With Asset Appraiser users can create an appraisal scope, confirm appraisal data, distribute documents and data collection tools, compile appraisal results and access stored appraisals on-line in a protected environment.

Asset Appraiser allows users to:

· Automate and accelerate the appraisal process using web-based tools;

· Gain instant access to ongoing project details from anywhere in the world;

· Store asset data in a secure repository for future reference, retrieval and analysis;

· Access appraisals in a 24 x 7 environment;

· Store and review appraisals in a secure environment;

· Download spreadsheet templates into reports;

· Add attachments, such as image, text or movie files, to reports; and

· Assist with compliance with the Uniform Standards of Professional Appraisal Practice.

Asset Seller

Asset Seller facilitates instant and global access to a buying community by presenting surplus equipment or inventory on geasset.com, GE's equipment re-marketing website. Asset Seller is a proven take-to-market solution that will connect a company's equipment to a global community of qualified organizational buyers using multiple sales platforms, all developed to help maximize asset recovery value and improve cycle time.

Asset Seller brings together multiple sales platforms into one integrated on-line environment, providing flexibility, while maximizing the yield for your surplus equipment.

Asset Seller's direct sale platform features equipment showcases that are designed to promote private treaty sales. Other sales platforms available through Asset Seller include ranked sealed bid and top bid sale events that enable you to market equipment in an auction-like environment.

Utilizing GE's patent pending ranked sealed bid method, Asset Seller encourages multiple bids and retains buyer anonymity, creating competitive sales environments that generate a higher recovery for asset investment.

Asset Seller also enables organizations to feature equipment specifications, photos, videos and contact information, and allows them to coordinate off-line sales activities such as equipment inspections. Current customers of Asset Seller, through our joint venture, include The Toro Company.

THIRD PARTY BUSINESS RELATIONSHIPS

Designed to extend the value of the solutions we deliver to our customers, Northcore has fostered relationships with a number of leading technology and professional service organizations. These relationships

allow Northcore to develop world-class offerings that leverage the leading-edge technologies, proven methodologies and subject matter expertise of our business partners.

Northcore’s existing business relationships include:

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GE COMMERCIAL FINANCE

Backed by more than 65 years of operating experience, a strong credit rating, and the vast resources of its parent, General Electric Company, GE Capital offers a wide range of value-added financial products and services through a network of 28 specialized businesses in five core niches: Equipment Management, Customer Services, Specialized Financing, Mid-Market Financing and Specialty Insurance.

DONNA CONA

Donna Cona is Canada's largest Aboriginal Information and Communications Technology company. The company was incorporated in 1996, and has successfully been providing information technology and management consulting services to public sector organizations.

MOTOROLA

A global communication leader, powered by, and driving, seamless mobility. Motorola is revolutionizing broadband, embedded systems and wireless networks - bringing cutting-edge technologies into your everyday life, with style.

GEM GROUP

Global Emerging Markets Group, www.gemgroup.ch was founded in 1991. GEM is a USD 3.4 billion Swiss-based investment group having completed 285 transactions in 60 countries. The firm is an alternative investment group that manages a diverse set of investment vehicles across the world. GEM’s funds include: CITIC/GEM Fund; VC Bank/GEM Mena Fund; Kinderhook; GEM Global Yield Fund; GEM India and Banco Pine/GEM Funds.

BUSINESS CYCLES

As many of the customers of the Company and GEAM are large, multinational organizations or quasi-governmental entities, we may experience increasingly longer sales and collection cycles. Additional information on business cycle risks are set out in Item 3.D. of this Annual Report under the heading Risk Factors.

For additional information regarding business cycles, see Part I - Item 5 under the heading “OPERATING AND FINANCIAL REVIEW AND PROSPECTS – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”.

STRATEGY

Our business strategy is to expand our customer base, particularly in the financial services, manufacturing, public, and oil and gas sectors, through superior software functionality and through the industry expertise of our employees.  In particular, our strategy is comprised of the following key components:

EXPAND JOINT VENTURE WITH GE AND INCREASE OUR CUSTOMER BASE

Since the launch of GE Asset Manager, we have focused our efforts on increasing the number of joint venture customers and enhancing our portfolio of asset management technology. This focus will be a cornerstone of our efforts in 2012.

STRENGTHEN OUR POSITION AS AN ASSET MANAGEMENT SOLUTION PROVIDER AND IMPROVE OUR VISIBILITY AMONG TARGET SECTOR

While we have expanded our customer base and increased the number of users of our technology, Northcore is committed to solidifying our position as a provider of asset management solutions particularly among our target markets.

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MAINTAIN AND ENHANCE OUR TECHNOLOGY

Based on the relative pricing and functionality of our products as compared with those of our competitors, we consider our proprietary software offerings to be competitive, however it is critical that we continue to maintain and enhance our technology.

 SEEKING ACQUISITIONS AND STRATEGIC INVESTMENTS

We plan to expand by seeking technologies, products, and services that complement our existing business.  If appropriate opportunities are available, we may acquire businesses, technologies or products or enter into strategic relationships that may further diversify revenue sources and product offerings, expand our customer base or enhance our technology platform.

CUSTOMERS

We provide our solutions to customers in a variety of industries, including: financial services, manufacturing, government and oil and gas.

The revenue structures and particular services provided vary depending upon the needs of the customer and the solution concerned.  For licensed offerings we generally collect a license fee based on number of users, service fees for implementation and training, and support and maintenance fees that are collected on a recurring annual basis. For hosted offerings, we generally collect an up-front implementation fee, monthly hosting fee, and a share of revenue or transaction volumes.

The following is a representative list of some of the customers for whom we have implemented or are implementing our solutions:

Customer	Solution(s)	Industry Segment	Geographic Location
GE Capital Solutions	Asset Seller	Financial Services	US
Global Electronics Services-GE Capital Solutions	Asset Tracker	Financial Services	US
GE Infrastructure	Asset Tracker	Manufacturing	US
NACCO Materials Handling Group (NMHG)	Asset Seller & Asset Tracker	Manufacturing	US
The Toro Company	Asset Tracker	Manufacturing	US
Kraft Foods Global, Inc.	Asset Tracker	Manufacturing	US

SALES AND MARKETING

We market our solutions primarily through our direct sales force. Our sales organization is regional with personnel located in our principal offices in Toronto, Canada.

Our marketing efforts are focused on targeted marketing campaigns, rather than broad-based "awareness" campaigns. Potential customers are identified through direct contact, responses to requests for information, attendance at trade shows and through industry contacts.

The GE sales force takes the lead in the sales and marketing efforts of the Asset Manager joint venture.

We use reference customers to assist us in our marketing efforts, both through direct contact with potential customers and through site branding and case studies.  We also rely on our co-marketing partners to assist in our marketing efforts.

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TECHNOLOGY PLATFORM  

Northcore has devoted significant resources to developing its proprietary software technology. The technology platform is constructed using distributed software technologies which allow for rapid development and deployment of new software technology in order to take advantage of emerging business opportunities.

Our company's core technology platform is based on Microsoft applications, including the Windows NT operating system and a SQL server relational database, all residing on scaleable hardware. The software is constructed using an advanced proprietary XML framework and resides on an N-tier architecture. The support of open systems allows integration with a large variety of existing commercial, proprietary and legacy applications.  Other applications, which are also operational in a Microsoft NT environment, have been developed using Power Builder and are dependent on an Oracle relational database.

CUSTOMER SERVICE AND TECHNOLOGY

Based on the relative pricing and functionality of our products as compared with those of competitors, we believe that our proprietary software provides a competitive advantage, and that our future success depends, in part, on our ability to continue developing and enhancing that software.  Therefore, we have focused our customer service and technology efforts on the continued development of our proprietary software offerings.

Our ongoing software development and technology efforts are aimed at the continued “productization” of specific elements of our software, enhancing the features and functionality of our existing software components, the development of new software components, and the integration of superior third party technology into our environment.  Productization involves the development of reusable applications to reduce programming time and costs for customer implementations.

Our software development and technology expenditures were approximately $726,000, and $734,000, for the year ended December 31, 2011 and 2010, respectively, including salaries and related expenses of our personnel engaged in research and development.

Our software development and technology activities in 2011 included the ongoing development of new applications framework implemented in Microsoft.Net. The new framework will be used as the foundation of all future Web based products. There was also a substantial amount of time devoted to the extension of our integration tool set, which allows us to connect our core product suite to pre-existing customer owned third party applications.

CUSTOMER CONCENTRATION

The majority of our revenue is generated by a small number of customers as discussed above in Item 3-D Risk Factors - WE DEPEND HEAVILY ON A LIMITED NUMBER OF CUSTOMERS, AND IF WE LOSE ANY OF THEM OR THEY REDUCE THEIR BUSINESS WITH US, WE WOULD LOSE A SUBSTANTIAL PORTION OF OUR REVENUES. See also Item 5-D under the heading Credit Risk.

INTELLECTUAL PROPERTY

We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements and technical measures, to establish and protect our proprietary rights.

In March 1999 and July 2001, we received patents from the U.S. Patent and Trademark Office covering the process whereby we conduct Dutch auctions over electronic distribution channels. We have patent applications pending in Canada covering the same technology.  We also continue to explore other patent opportunities, and may have other applications pending from time to time. We do not believe, however, that our ability to obtain patents is material to our success or results.

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Our proprietary software is subject to common law copyright protection, but we do not have, and do not intend to pursue, any registered copyrights.  Common law protection may be narrower than that which we could obtain under registered copyrights.  As a result, we may experience difficulty in enforcing our copyrights against certain third party infringements.  The source code for our proprietary software is protected as a trade secret. Our major trademarks or tradenames include: Northcore™, DYN@MIC SELLER™, DYN@MIC BUYER™, WORKING CAPITAL ENGINE™ and POWERED BY Northcore™. We also claim rights in other unregistered trademarks.

Our competitive position is also dependent upon our unpatented trade secrets.  In an effort to protect our trade secrets, and as part of our confidentiality procedures, we generally enter into confidentiality and non-disclosure agreements with our employees and consultants and generally limit access to and distribution of our software, documentation and other proprietary information.  Additionally, we limit physical access to our premises, software and hardware and employ security measures to protect against damage or theft.

In 2009, the Company entered into a technology licensing agreement with a Fortune 500 company that provides Northcore with access to a portfolio of intellectually property patents over a six-year period for a minimum fee of US $260,000 over the term of the agreement.

COMPETITION

The market for each solution comprising our asset lifecycle management suite is intensely competitive.  Many of the companies we compete with have much greater financial, technical, research and development resources than we do.

To remain and become more competitive, we will need to make continued investments in product development and improve our market visibility and financial situation.

Although we offer a broad range of asset lifecycle management solutions, we face significant competition in each of the component product areas from the following companies:

· Sourcing – Ariba, Inc., Emptoris, Inc., Moai, and SAP AG;

· Procurement –Ariba, Inc., IBM, and broader ERP solution providers such as Oracle and SAP AG;

· Asset Management– Indus International Inc., Infor, IBM, Mincom Ltd., and broader ERP solution providers such as Oracle and SAP AG; and

· Sales solutions – eBay Inc.

In addition, many organizations use in-house developers to develop solutions for certain elements of the asset lifecycle.

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C. ORGANIZATIONAL STRUCTURE

The Company has the following organizational structure, which includes the subsidiaries as set out below:

CORPORATE ORGANIZATIONAL STRUCTURE

AS OF FEBRUARY 29, 2012

D. PROPERTY, PLANT AND EQUIPMENT

The table below lists the location of our facilities, which is held by us pursuant to a lease agreement, and summarizes certain information about the location.

Location	Use	Square Feet (Approximate)	Term of Lease
302 The East Mall, Suite 300 Toronto, Ontario	Executive, Administrative, Software development, Sales and Marketing	5,435	Expires Oct. 2014

We believe that we have adequate space for our current needs.  As we expand, we expect that suitable additional space will be available on commercially reasonable terms.  We do not own any real estate nor do we currently own or lease warehouse space.

ITEM 4A - UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 5- OPERATING AND FINANCIAL REVIEW AND PROSPECTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH "ITEM 3.A-SELECTED FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED ELSEWHERE IN THIS ANNUAL REPORT.  IN ADDITION TO HISTORICAL INFORMATION, THE FOLLOWING DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS.  SEE "FORWARD-LOOKING STATEMENTS".

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Overview

The Company provides a Working Capital Engine™ that helps organizations source, manage, appraise and sell their capital equipment.We refer to our product and services suite as asset lifecycle management solutions.  Our solutions can reduce sourcing and procurement costs, improve tracking and monitoring of asset performance and reduce operational downtime.

The Company operates in a single reportable operating segment, that is, the design and delivery of software solutions for use by its customers. The single reportable operating segment derives its revenues from the sale of software licenses and related services.

SELECTED ANNUAL INFORMATION

Year ended December 31,	2011	2010
	(IFRS)
Revenues	785	582
Income from GE Asset Manager, LLC	69	43
Operating expenses:
General and administrative	1,670	1,440
Customer service and technology	726	734
Sales and marketing	260	188
Stock-based compensation	1,873	517
Depreciation	32	22
Total operating expenses	4,561	2,901
Loss from operations	(3,707)	(2,276)
Finance cost:
Cash interest expense	103	154
Accretion of secured subordinated notes	124	115
Total finance costs	227	269
Other expenses
Gain on settlement of debt	-	(57)
Provision for impaired investment	-	544
Total other expenses	-	487
LOSS AND COMPREHENSIVE LOSS FOR THE YEAR	$    (3,934)	$    (3,032)
LOSS PER SHARE, BASIC AND DILUTED	$    (0.020)	$    (0.019)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED (000’s)	196,180	162,899

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RECONCILIATION OF LOSS TO OPERATIONAL EBITDA(1)

Year ended December 31,		2011	2010
	(in thousands of Canadian dollars)
Loss for the year, as per above		$    (3,934)	$    (3,032)
Reconciling items:
Stock-based compensation		1,873	517
Depreciation		32	22
Finance costs:
Cash interest expense		103	154
Accretion of secured subordinated notes		124	115
Other Items:
Professional fees (2)		235	-
Gain on settlement of debt		-	(57)
Provision for impaired investment		-	544
OPERATIONAL EBITDA		$    (1,567)	$    (1,737)

(1) Operational EBITDA is defined as the loss before interest, taxes, depreciation, stock-based compensation and other non-recurring expenses.  The Company considers Operational EBITDA to be a meaningful performance measure as it provides an approximation of operating cash flows.  Operational EBITDA should not be considered as a substitute or alternative for operating loss or loss for the year, in each case determined in accordance with IFRS.

(2) Non-recurring professional fees relates to consulting fees paid in connection with the recruitment of new senior management and Board members, as well as engaging an Intellectual Property firm to help examine the applicability of the Company’s core technology.

A. OPERATING RESULTS

FINANCIAL PERFORMANCE

Comparison of Years Ended December 31, 2011 and December 31, 2010

Overview:  The Operational EBITDA loss was $1,567,000 for 2011 as compared to $1,737,000 for 2010, an improvement in the Operational EBITDA loss of $170,000 or 10 percent.   The improvement in the Operational EBITDA loss was primarily due an increase in revenues, partially offset by an increase in sales and marketing expenses.

Our loss for the year ended December 31, 2011 was $3,934,000, an increase of $902,000 or 30 percent from the loss of $3,032,000 reported for the year ended December 31, 2010.   The increase in loss was attributable to the increase in operating expenses, partially offset by the increase in revenues and the decrease in interest expense.   The increase in operating expenses was largely due to stock-based compensation, which increased by $1,356,000 as compared to the prior year.

Revenues:  Revenues are comprised of services (application development activities, software implementation and license fees, training and consulting, product maintenance and customer support) and application hosting fees.

Revenues increased by $203,000 or 35 percent to $785,000 for the year ended December 31, 2011, as compared to $582,000 for the same period of 2010.  The growth in revenues was attributed to the higher social

commerce services revenues in connection with group purchase platform and applications implementation for our strategic partners.

General and Administrative:  General and administrative expenses include, primarily: all salaries and related expenses (including benefits and payroll taxes) other than technology staff compensation (which is included in customer service and technology expenses), and sales and marketing staff compensation (which is included in sales and marketing expenses), occupancy costs, foreign exchange gains or losses, professional fees, insurance, investor relations, regulatory filing fees, and travel and related costs.

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General and administrative expenses increased by $230,000 or 16 percent, to $1,670,000 for the year ended December 31, 2011, as compared to $1,440,000 for the year ended December 31, 2010.  The increase was attributed to higher non-cash, non-recurring professional fees in connection with the recruitment of new senior management and Board members, as well as engaging an intellectual property firm to help examine the applicability of the Company’s core technology and intellectual property portfolio in selected business domains.  The increase was partially offset by savings in the areas of investor relations and financing fees.

Customer Service and Technology:  Customer service and technology expenses consist of costs associated with acquired and internally developed software, and research and development expenses, including fees to independent contractors and salaries and related expenses of personnel engaged in these activities.

Customer service and technology expenses the year ended December 31, 2011 amounted to $726,000, relatively consistent with $734,000 for the year ended December 31, 2010.

Sales and Marketing:  Sales and marketing costs include all salaries and related expenses of sales and marketing personnel as well as business development expenses such as advertising, sales support materials, and trade show costs.

Sales and marketing costs increased by $72,000 or 38 percent, to $260,000 for the year ended December 31, 2011, as compared to $188,000 for the year ended December 31, 2010.  The increase was due to the Company engaging a sales executive in Europe during the fourth quarter of 2010 to explore new business opportunities in this region.

Stock-based Compensation:  For the year ended December 31, 2011, employee stock option expense amounted to $1,873,000, as compared to $517,000 for the year ended December 31, 2010, an increase $1,356,000.  The increase was attributed to the vesting of stock options, which were higher in 2011 due to the higher number of stock options granted to new senior management and Board members during the second quarter of 2011.

Depreciation:  Depreciation expense was $32,000 for the year ended December 31, 2011, compared to $22,000 for 2010, an increase of $10,000 or 45 percent.  The increase in depreciation was due to capital asset acquisitions totaling $92,000 during the current year.

Interest Expense:  Interest expense reflects interest incurred from debt instruments and loans.  Interest expense for the year ended December 31, 2011 was $227,000 compared to $269,000 for December 31, 2010, representing a decrease of $42,000 or 16 percent.  During 2011, cash interest expense of $103,000 and non-cash interest expense of $124,000 was incurred related to the secured subordinated notes and notes payable.  Comparatively, cash interest expense of $154,000 and non-cash interest expense of $115,000 was recorded in 2009.  The reduction in interest expense was due to the full conversions of Series L and N subordinated notes, as well as full repayment of notes payable during the current year.

GOING CONCERN

The Company has incurred negative annual cash flows from operations since inception and expects to continue to expend substantial funds to continue to develop technology, build an infrastructure to support business development efforts and expand other areas of business including the acquisition of, or strategic investments in, complementary products, businesses or technologies.  The Company’s ability to continue as a going concern will be dependent on management’s ability to successfully execute its business plan including a

substantial increase in revenue as well as maintaining operating expenses at or near the same level as 2011.  The Company cannot provide assurance that it will be able to execute on its business plan or assure that efforts to raise additional financings will be successful.

The consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern.  If the going concern assumption was not appropriate, adjustments would be necessary in the carrying value of assets and liabilities, and the reported losses and the balance sheet classification used.

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The continued existence beyond 2011 is dependent on the Company’s ability to increase revenue from existing products and services, and to expand the scope of its product offering which entails a combination of internally developed software and business ventures with third parties, and to raise additional financing.

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements in conformity with IFRS 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 date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting years.  These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future.  These estimates have been applied in a manner consistent with that in the prior periods and there are no known trends, commitments, events or uncertainties that we believe will materially affect the assumptions utilized in these consolidated financial statements.  Significant estimates made by the Company include the determination of the recoverable amount of intangible assets, the useful lives of property and equipment and other assets for depreciation purposes, amounts recorded as accrued liabilities, valuation of stock-based payments, the fair value assigned to the debt and equity components of the secured subordinated notes and the expected requirements for non-operational funding.  Actual results could differ from these estimates.

The Company determines the fair value stock-base compensation using the Cox-Rubinstein binomial valuation model, which requires management to make assumptions regarding the volatility rate, risk free interest rate, average share price, expect term and dividend yield.

CRITICAL ACCOUNTING POLICIES

We periodically review our financial reporting and disclosure practices and accounting policies to ensure that they provide accurate and transparent information relative to the current economic and business environment. As part of this process, we have reviewed our selection, application and communication of critical accounting policies and financial disclosures. We have determined that the critical accounting policies related to our core ongoing business activities are primarily those that relate to revenue recognition.  Other significant accounting policies are described in Note 3 to our audited annual consolidated financial statements for the year ended December 31, 2011.

REVENUE RECOGNITION

The Company’s revenues are derived from services (application development activities, software implementation and license fees, training and consulting, product maintenance and customer support), and application hosting fees.  Fees for services are billed separately from licenses of the Company’s products.

Revenue from the rendering of services is recognized when the following criteria are met:

· The amount of revenue can be measured reliably;

· The stage of completion can be measured reliably;

· The receipt of economic benefits is probable; and

· The costs incurred or to be incurred can be measured reliably.

·

Revenue from the sale of goods is recognized when the following criteria are met:

· The amount of revenue can be measured reliably;

· The risks and rewards of ownership have been transferred to the buyer;

· The receipt of economic benefits is probable; and

· The costs incurred or to be incurred can be measured reliably.

In addition to the above general principles, the Company applies the following specific revenue recognition policies:

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· Application Development Fees

Typically, development of applications for the Company’s customers are provided based on a predetermined fixed hourly rate basis.  Revenue is recognized as time is incurred throughout the development process.

· Implementation, Training and Consulting Service Fees

The Company receives revenue from implementation of its product offerings, consulting services and training services.  Customers are charged a fee based on time and expenses.  Revenue from implementation, consulting service and training fees is recognized as the services are performed or deferred until contractually defined milestones are achieved or until customer acceptance has occurred, as the case may be, for such contracts.

· Product Maintenance and Customer Support Fees

The Company receives revenue from maintaining its products and the provision of on-going support services to customers.  The maintenance and support fees are typically equal to a specified percentage of the customers’ license fee.  If associated with the fixed fee license model, the maintenance revenues received are recorded as deferred revenue and recognized on a straight-line basis over the contract period.

Services revenue from maintenance and support is recognized when the services are performed.  Maintenance and support revenues paid in advance are non-refundable and are recognized on a straight-line basis over the term of the agreement, which typically is 12 months.

· Hosting Fees

The Company earns revenue from the hosting of customer websites and applications.  Under existing hosting contracts, the Company charges customers a recurring periodic flat fee.  The fees are recognized as the hosting services are provided.

· Multiple Deliverable Revenue Arrangements

The Company also enters into transactions that represent multiple elements arrangements, which may include one or more of the following: software, application development, maintenance, hosting, and/or other professional service offerings.  These multiple element arrangements are assessed to determine whether they can be sold separately in order to determine if they can be treated as more than one unit of accounting or element for the purpose of revenue recognition.  The Company allocates the arrangement fee, in a multiple element transaction, to the separate elements based on their relative selling prices, as indicated by vendor-specific objective evidence or third-party evidence of selling price, and if both are not available, estimated selling prices are used.  The allocated portion of the arrangement which is undelivered is then deferred.

RECENT ACCOUNTING PRONOUNCEMENTS

The following accounting standards, amendments and interpretations have been issued but are not yet effective for the Company. Management is currently assessing the impact of the new standards on the Company’s accounting policies and financial statement presentation.

· IFRS 9, Financial Instruments was issued by the IASB in October 2010 and will replace IAS 39, Financial Instruments: Recognition and Measurement.  IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39.  The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9.  The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39.  IFRS 9 is effective for annual periods beginning on or after January 1, 2013.  The IASB has proposed to move the effective date of IFRS 9 to January 1, 2015.

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· IFRS 13, Fair Value Measurement was issued by the IASB in May 2011.  IFRS 13 establishes new guidance on fair value measurement and disclosure requirements for IFRSs and U.S. generally accepted accounting principles (GAAP).  The guidance, set out in IFRS 13 and an update to Topic 820 in the FASB’s Accounting Standards Codification (formerly referred to as SFAS 157), completes a major project of the boards’ joint work to improve IFRSs and US GAAP and to bring about their convergence.  The standard is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

· IAS 1, Presentation of Financial Statements was amended by the IASB in June 2011 in order to align the presentation of items in other comprehensive income with US GAAP standards. Items in other comprehensive income will be required to be presented in two categories: items that will be reclassified into profit or loss and those that will not be reclassified.  The flexibility to present a statement of comprehensive income as one statement or two separate statements of profit and loss and other comprehensive income remains unchanged.  The amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012.

B.  LIQUIDITY AND CAPITAL RESOURCES

The Company has been funded to date primarily through a series of private placements of equity and convertible debentures, option and warrant exercises, sales of equity to strategic partners and gains from investments.  Since inception, the Company has received aggregate net proceeds of $101.2 million from debt and equity financing and has realized net proceeds of $25.8 million from disposal of investments. The Company has not earned profits to date and, at December 31, 2011, has an accumulated deficit of $123 million.  The Company expects to incur losses into 2012 and there can be no assurance that it will ever achieve profitability.  Operating results have varied on a quarterly basis in the past and may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of the Company’s control.

The Company has incurred negative annual cash flows from operations since inception and expects to continue to expend substantial funds to continue to develop technology, build an infrastructure to support business development efforts and expand other areas of business including the acquisition of, or strategic investments in, complementary products, businesses or technologies.  The Company has historically relied on non-operational sources of financing to fund its operations.  The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan and to successfully repay or refinance obligations as they come due.  Management believes that it has the ability to raise additional financing.  The Company cannot provide assurance that it will be able to execute on its business plan or assure that efforts to raise additional financings would be successful.

Cash increased by $1,709,000 to $1,760,000 as at December 31, 2011 from $51,000 as at December 31, 2010.  Please refer to the Consolidated Statements of Cash Flows for details of the increase in cash balance.

Current assets of $1,987,000 exceeded current liabilities (excluding deferred revenue) of $412,000 in the current fiscal year by $1,575,000. Current assets of $238,000 were exceeded by current liabilities (excluding deferred revenue) of $1,650,000 by $1,412,000 in the prior year.  Deferred revenue has been excluded from current liabilities as it is expected to be settled by resources other than cash.

a) Operating

Cash outflows from operating activities declined to $1,890,000 in the current fiscal year compared to cash outflows from operating activities of $1,580,000 in the prior year.   The decline was due to with a decrease in non-cash working capital as per below.

Non-cash working capital resulted in outflows of $19,000 in fiscal 2011 as compared to inflows of $200,000 in fiscal 2010, a decline of $219,000, as summarized in the following table:

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	2011	2010	Change
	(in thousands of Canadian dollars)
Accounts receivable	$       (36)	$        63	$       (99)
Deposits and prepaid expenses	(4)	(1)	(3)
Accounts payable	(161)	69	(230)
Accrued liabilities	182	69	113
	$       (19)	$      200	$       219

b) Investing

Investing activities resulted in cash outflows of $209,000 during fiscal 2011, compared to cash inflows of $54,000 in 2010.  Cash outflows from investing activities were the result of the acquisition of new capital and intangible assets during year.

c) Financing

Financing activities generated net inflows of $3,808,000 in fiscal 2011, as compared to $1,367,000 in fiscal 2010.  Cash inflows during the year were generated from the issuance of equity units for $1,018,000, and the exercise of warrants and options generated proceeds of $3,377,000 and $197,000, respectively, partially offset by the repayment of notes payable of $530,000, share issuance costs of $125,000 and interest payment of $129,000.  Cash inflows during 2010 were generated from the issuance of equity units for $1,008,000, notes payable for 859,000 and the exercise of warrants and options generated proceeds of $170,000 and $4,000, respectively, partially offset by the repayment of notes payable of $465,000, share issuance costs of $129,000 and interest payment of $80,000.

FUNDING

Overview

The Company has been funded to date primarily through a series of private placements of equity and convertible debentures, option and warrant exercises, sales of equity to strategic partners and gains from investments.

Funding – 2011

On February 14, 2011, the Company completed a transaction resulting in the issuance of 10,478,000 equity units, priced at $0.08 per unit, for gross proceeds of $838,000 and net proceeds of $713,000 after deducting financing costs of $125,000.  Each unit consists of one common share and one share-purchase warrant.  Each warrant may be converted into a common share at the exercise price of $0.12 at any time prior to February 14, 2013.

In addition to the above financing costs, the Company issued 2,250,000 compensation options to the financing agent, Saratoga Finance Inc.  The options entitled the holder to purchase up to 2,250,000 equity units at a purchase price of $0.08 per unit, at any time prior to February 14, 2013.  Each equity unit consisted of one common share and one warrant.  Each warrant may be converted into a common share at an exercise price of $0.12, at any time prior to February 14, 2013.   These compensation options were exercised during 2011, resulting in gross proceeds of $180,000.

During the year ended December 31, 2011, Series I and L note holders, along with warrant holders from equity private placements in 2010 and 2011, exercised 26,260,000 common share-purchase warrants for total proceeds of $3,377,000.

Also during the year ended December 31, 2011, total proceeds of $197,000 were realized from the exercise of 1,334,000 stock options at an average exercise price of $0.15.

Funding – 2010

On December 22, 2010, the Company completed a transaction resulting in the issuance of 7,816,000 equity units, priced at $0.08 per unit, for net proceeds of $625,000.  Each unit consists of one common share and one share-purchase warrant.  Each warrant may be converted into a common share at the exercise price of $0.12 at any time prior to December 22, 2012.

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On August 9, 2010, the Company closed an equity transaction with GEM, securing gross proceeds of $383,000 and net cash proceeds of $300,000 after deducting legal fees and one half of the commitment fee of $90,000.  In connection with the transaction, the Company issued 2,191,000 common shares and 6,000,000 share-purchase warrants with an exercise price of $0.27 and an expiry date of August 9, 2013.

On June 16, 2010, the Company entered into an agreement with GEM Global Yield Fund Limited (“GEM”) for a $6,000,000 equity line of credit.  The Company will control the timing and maximum amount of any draw downs under this facility, and has the right, not the obligation, to draw down on available funds by requiring GEM to subscribe for the Company’s common shares at a 10 percent discount to the average closing price of the Company’s common shares over a 15 day trading period following the draw down notice date, provided that the Company’s share price during the notice period is greater than the floor price of $0.17 per share as defined in the agreement.  GEM will hold freely trading shares of the Company through a share lending facility provided by a current shareholder.  As part of the equity credit line transaction, the Company has agreed to issue 6,000,000 warrants to GEM. The warrants are exercisable for a period of three years from the closing notice date at an exercise price of $0.27 per share.  The warrants are not issuable until the first draw down of funds have occurred.

During the year ended December 31, 2010, Series I and L warrant holders exercised 1,083,000 warrants for total proceeds of $170,000.

Funding – 2009

On November 18, 2009, PowerOne exercised the compensation options and purchased 747,000 equity units, consisting of 747,000 common shares valued at $121,000 and 747,000 warrants valued at $72,000.  The Company recorded total proceeds of $112,000, which were attributed to share capital.

On September 30, 2009, the Company completed a transaction resulting in the issuance of 2,604,000 equity units, priced at $0.19 per unit, for net proceeds of $495,000.  Each unit consists of one common share and one-half common share purchase warrant.  Each full warrant may be converted into a common share at the exercise price of $0.25 at any time prior to September 30, 2011.

During the quarter ended March 31, 2009, the Company announced the conversion of secured subordinated notes and the additional proceeds secured from the exercise of warrants.  Series M note holders have converted $660,000 out of a total of $678,000 debentures and exercised a total of 13,200,000 common share-purchase warrants out of a possible 13,560,000 warrants, for total proceeds of $1,320,000.  As per the terms of the debenture, the remaining warrant options have expired.

As a result of this transaction, the Company issued 26,400,000 common shares, comprised of 13,200,000 common shares from the conversion of the Series M notes and 13,200,000 common shares from the exercising of the associated warrants.

During the year ended December 31, 2009, total proceeds of $42,000 were realized from the exercise of 280,000 stock options at an average exercise price of $0.15.

C.  RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Not applicable.

D.  TREND INFORMATION

FOREIGN EXCHANGE RISK

The Company’s revenue from software licensing and related services and e-commerce enabling agreements is transacted in Canadian and U.S dollar currencies.  As a portion of the Company’s revenues are realized in U.S. dollar and expenses are transacted in Canadian dollar, the appreciation of the U.S. dollar against the Canadian dollar may have a favorable impact on our results. The Company does not use derivative instruments to manage exposure to foreign exchange fluctuations. During the year ended December 31, 2011, the Company incurred foreign exchange losses in the amount of $3,000 (2010 – 24,000), which is recorded in general and administrative expenses.

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INTEREST RATE RISK

The Company has limited exposure to fluctuations in interest rates.  The Company does not use derivative instruments to reduce its exposure to interest rate risk.

CREDIT RISK

Credit risk arises from the potential that a customer will fail to meet its contractual obligations under a software licensing and related services agreement or an e-commerce enabling agreement.

The Company invests its cash in investments that are of high credit quality.  Given these high credit ratings, the Company does not expect any investees to fail to meet their obligations.

In 2011, two customers accounted for 50 percent and 31 percent, respectively (2010 – one customer accounted for 75 percent) of total revenues.  At December 31, 2011, three customers accounted for 42 percent, 18 percent and 12 percent, respectively (2010 – two customers accounted for 33 percent and 31 percent, respectively) of total accounts receivable.

VALUATION AND QUALIFYING ACCOUNTS

Description	Balance at beginning of Year	Additions		Deductions	Balance at end of Year
		Charged to costs and expenses	Charged to other Account
(in thousands of Canadians dollars)
Allowance for doubtful debts
Year 2009	$11	$58	-	$69	-
Year 2010	-	-	-	-	-
Year 2011	-	-	-	-	-

E.  OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet special purpose entities or other off-balance sheet arrangements.

F.  TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

As at December 31, 2011, the Company's contractual obligations, including payments due by periods over the next five years, are as follows:

	Total	2012	2013	2014	2015	2016
	(in thousands of Canadian dollars)
Operating leases	$    442	$    156	$    156	$    130	$        -	$        -
License agreements	150	50	50	50	-	-
	$    592	$    206	$    206	$    180	$       -	$        -

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ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.DIRECTORS AND SENIOR MANAGEMENT

The following table sets forth the name, age and position of each of the individuals who served as a director and/or an executive officer during the past year. This list includes the dates of resignation and appointment, as applicable, of individuals who resigned or were appointed directors or officers during the past year. This information is supplied based on our records and information furnished by our executive officers and directors.

Name, Age and Municipality of Residence	Director Since	Position with the Company
Anthony DeCristofaro, 58 Woodbridge, Ontario	May 31, 2011	Director and non-executive Chairman of the Board
Jim Moskos, 48, Toronto, Ontario	June 7, 1999	Director and Chief Operating Officer, since July 11, 2007 President, Technology Group from October 19, 1999 to July 11, 2007
Amit Monga, 44 Toronto, Ontario	May 31, 2011	Director and Chief Executive Officer
T. Christopher Bulger, (1)(2)(3) 53, Toronto, Ontario	May 28, 1996	Director and non-executive Chairman of the Board since October 14, 2005 to May 31, 2011 non-executive Chairman of the Audit Committee since May 31, 2011
Marvin Igelman (1)(2)(3) 49, Thornhill, Ontario	May 31, 2011	Director
Ryan Deslippe (1)(2)(3) 33, Amherstburg, Ontario	May 31, 2011	Director
Duncan G. Copeland, 54* Potomac, MD, USA	June 23, 2004	Director and Chief Executive Officer, since July 11, 2007 to May 31, 2011
Darroch Robertson (1)(3), 59* St. Thomas, Ontario	June 25, 2003	Director
John Varghese (1)(2)(3), 46* Toronto, Ontario	July 25, 2009	Director since July 29, 2009 to March 25, 2010 and from April 26, 2011 to May 31, 2011
________________________ (1)Member of the Management Resources and Compensation Committee (2)Member of the Corporate Governance Committee (3)Member of the Audit Committee * Resigned from the Board and all of its Committees effective from May 31, 2011.

The business experience of each of our current directors and executive officers for at least the last five years is as follows:

Directors

Anthony DeChristofaro, Woodbridge, Ontario

Director since May 31, 2011

Non-executive Chairman of the Board of Directors

Mr. DeCristofaro is currently CEO of Realbiz Media and brings 25 years of computer industry experience and three M&A transactions valued at more than CDN $600 million. Prior to establishing iseemedia as Chairman and CEO in 2002, which merged with Synchronica in 2010, he was President and CEO of MGI Software, which he co-founded in 1996 and was sold to Roxio in 2001. Prior to MGI, Mr. DeCristofaro was a founding board member of Delrina, which was purchased by Symantec in 1995.

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Jim Moskos, Toronto, Ontario

Director since June 7, 1999

Chief Operating Officer

Mr. Moskoshas been Chief Operating Officer of the Company since July 11, 2007. Mr. Moskos served as President of the Technology Group since from October 19, 1999 to July 11, 2007 and Vice President - Technology from September 1997 to October 19, 1999.  From September 1994 to August 1997, Mr. Moskos was Senior Technology Manager for the Canadian Department of Indian Affairs and Northern Development responsible for setting the technical direction for all aspects of application development.

Dr. Amit monga, Toronto, Ontario

Director since May 31, 2011

Chief Executive Officer

Dr. Monga is the CEO of the company and is a highly respected thought leader in business circles in North America on new technologies, software trends and business models and brings a unique background in technology and capital markets to Northcore. He currently serves on the boards of Poynt Corporation and Sprylogics International. He is a successful angel investor who has previously worked as an investment banker, venture capitalist and has founded a US based on-demand procurement software company that was acquired by a NASDAQ-listed company. Dr. Monga received his PhD in Mechanical Engineering from the University of Alberta, specializing in advanced genetic algorithms, where he currently serves as a Member of Dean's Business Advisory Council at the Alberta School of Business.

T. Christopher Bulger, Toronto, Ontario

Director since May 28, 1996

Chairman of the Audit Committee and member of the Management Resources and Compensation and Corporate Governance Committees

Mr. Bulger has been the non-executive Chairman of the Board since October 14, 2005 and a director of the Company since May 28, 1996. Mr. Bulger provides consulting to number of companies, including the role of Chief Financial Officer for Hy-Power Coatings Ltd., a company innovating insulation properties for paints and windows using nano technology to reduce energy consumption and Bio-Organic Catalyst of Canada Inc., a company offering science based organic solutions for waste management, using patented technology to remove toxins from wastewater and enhance energy production from waste. Mr. Bulger was Chairman and CEO of Megawheels Technologies Inc., (“Megawheels”) from Jan 01, 2001 to April 30, 2007, a software and solutions provider to the online classified advertising industry. From December 1999 to December 2001, Mr. Bulger was President and Chief Executive Officer of eLab Technology Ventures Inc. Mr. Bulger served as Executive Vice President of our Company from September 1998 to December 1999 and Chief Financial Officer of the Company from April 1996 to September 1998. Mr. Bulger is a CFA, holds an MBA from INSEAD, France and an HBA from The Richard Ivey School of Business, Canada.

Marvin Igelman, Thornhill, Ontario

Director since May 31, 2011

Chairman of the Corporate Governance Committee and member of the Management Resources and Compensation and Audit Committees

Mr. Igelman was founder and CEO of Unomobi, a mobile advertising and messaging firm, before the company was acquired by Poynt Corporation. Prior to Unomobi, he was President and CEO of Brandera which operated Portfolios.com a leading online B2B marketplace for the graphic arts and creative community. Mr. Igelman is considered to be an innovator in the social, mobile, media and search technology fields having authored numerous patent applications. He graduated from Osgoode Hall Law School in 1986 and was admitted to the Law Society of Upper Canada in 1988.

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Ryan Deslippe,Amherstburg, Ontario

Director since May 31, 2011

Chairman of the Management Resources and Compensation Committee and member of the Corporate Governance and Audit Committees

Mr. Deslippe co-founded Selectcore in 1999 as President and led its successful growth over the past decade to revenues in excess of CDN $100 million, ranking the company as one of the fastest growing firms in Canada between the period 2006 to 2010. At Selectcore, he led the development and launch of its Iridium MasterCard and ReCash - two industry first products in Canada. From 2003 to 2006, Mr. Deslippe also co-founded and was a director of Datazinc, a successful 6 Sigma consulting firm. He was the recipient of the 2006 Profit 100 Magazine Young President Award. Mr. Deslippe is a past Board member of various non-profit organizations.

Duncan Copeland, Washington, DC

Director from June 23, 2004 to May 31, 2011

Mr. Copeland has been our Chief Executive Officer since July 11, 2007. He has been a Director of the Company since its inception, except for the period from 2001-2004. Mr. Copeland has been a member of the faculties of the Richard Ivey School of Business, The University of Western Ontario and the Robert Emmett McDonough School of Business, Georgetown University. Mr. Copeland holds a doctorate from the Harvard Business School.

Darroch (Rick) Robertson, St. Thomas, Ontario

Director from June 25, 2003 to May 31, 2011

Chairman of the Audit Committee and member of the Management Resources and Compensation Committee

Mr. Robertson has been an Associate Professor of Business at the Richard Ivey School of Business, The University of Western Ontario, for the past twelve years.  He has served as both the Director of the MBA program and the Director of the undergraduate HBA program at the Ivey School.  Mr. Robertson was also a director and chair of the audit committee of Stackpole Limited, a TSX listed company.  Mr. Robertson has also served as an elected member of council for the Institute of Chartered Accountants of Ontario, where he was chair on the audit committee and by-laws committee. Mr. Robertson is a FCA and holds an MBA and PhD (Business) from the University of Western Ontario.

John Varghese, Toronto, Ontario

Director fromJuly 25, 2009 to March 25, 2010 & April 26 to May 31, 2011

Mr. Varghese is Chief Executive Officer and a Director of VentureLink Funds and the President and Director of the General Partner of the Manager. Mr. Varghese has over 20 years professional experience ranging from venture capital and investment banking to senior management and board of director roles in various industries. He has held COO and CFO positions at start-up organizations, as well as senior management roles within multi-national corporations including Royal Bank Capital Corporation, Midland Walwyn Capital Inc. (Merrill Lynch Canada), Dell Computer Corporation and Jim Pattison Industries Ltd. Currently Mr. Varghese is an observer or board member on numerous investee companies and University of Toronto’s Business Board of Directors, University of Toronto Asset Management Corporation and Canadian Venture Capital Association.   Mr. Varghese sits on the government relations committee of the CVCA. He is past Chairman of Ventus Energy Inc, Orion Securities Inc. and MCCI Communications Inc, all successful exits of VentureLink Funds. Mr. Varghese is a founding Board member of Bay Street Fore a Cau$e Inc. a not-for-profit corporation that supports numerous children’s charities across the GTA.  He is currently Audit Committee chair of a public entity New Sage and on the audit committee of Nexgen Financial.  Mr. Varghese is a CA. Mr. Varghese resigned from the Board and all of its Committees effective from March 25, 2010.  The Company is in the process of filling in the position.

Director’s relationship to Megawheels Technologies Inc. subject to Cease Trade Order

Mr. Bulger, the non-executive Chairman and a director of the Company, was formerly the Chairman and a director of Megawheels, which was listed on the TSX Venture exchange under the symbol "MWT", and which was issued a cease trade order on January 9, 2007 by the Ontario Securities Commission under paragraph 2 and paragraph 2.1 of subsection 127(1) and subsection 127(5) because Megawheels failed to provide continuous disclosure material of audited annual financial statements for the year ended August 31, 2006. Megawheels has undergone an orderly wind-up of operations.

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B. COMPENSATION  

Summary Compensation Table

The following table provides a summary of compensation earned during the most recently completed fiscal year by the Company’s Named Executive Officers (“NEOs”). The Company’s NEOs, as at the end of 2011, were our Chief Executive Officer, and our Chief Operating Officer.

					Awards		Payouts
	Annual Compensation					Restricted
					Options/	Shares or
				Other Annual	SARs	Restricted	LTIP	All Other
		Salary	Bonus	Compensation	Granted	Share Units	Payout	Compensation
Name And Principal Position	Year	($)	($)	($)(1)	(#)	($)	($)	($)
Amit Monga (CEO) (From June 1)	2011	105,000	Nil	Nil	2,900,000	Nil	Nil	Nil
Duncan Copeland (From January 1 to May 31)	2011	12,500	Nil	Nil	300,000	Nil	Nil	Nil
	2010	30,000	Nil	Nil	1,000,000	Nil	Nil	Nil
	2009	30,000	Nil	Nil	260,000	Nil	Nil	Nil
Jim Moskos  (COO)	2011	200,000	Nil	12,000	850,000	Nil	Nil	Nil
	2010	200,000	Nil	12,000	1,350,000	Nil	Nil	Nil
	2009	200,000	Nil	12,000	430,000	Nil	Nil	Nil

(1) The Company’s provision of automotive related expenses.

Our Company has a stock option plan (the “Plan”) which was originally adopted on May 15, 1996, and as amended most recently by shareholder approval on April 26, 2011, and currently provides that options may not be granted to purchase more than 26,550,000 common shares. The Plan provides for the issuance of stock options to directors, officers and full time employees of the Company and it subsidiaries or any other person engage to provide ongoing services to the Company, which may expire as much as 10 years from the date of grant, at prices not less than the fair market value of the common shares on the date of grant. The Management Resources and Compensation Committee of the Board of Directors, whom administer the Plan, reserves the right to attach vesting periods to stock options granted.  For options granted to senior management during the fiscal year ended December 31, 2011 see Summary Compensation Table above.

During 2011, we did not provide any pension, retirement or similar benefits to our directors and officers as a group.

Compensation of Directors

       For the 2011 financial year, directors received no cash payment as fees for meetings of the Board or Committees of the Board, which they attend, and no cash payments as fee for the signing of any resolution of directors or documents on behalf of the Company.  All directors are reimbursed for reasonable out-of-pocket travel and other expenses incurred by them in attending meetings of the Board or Committee meetings.

The Management Resources and Compensation Committee is responsible for recommendations to the Board regarding the granting of incentive stock options to directors to encourage their serving on the Board and Committees, to afford them the opportunity to be compensated properly, and to provide them with an equity stake in the Company.

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The Following table provides a summary of the option grants to outside directors during the fiscal year ended December 31, 2011, which were not included in the summary compensation table above.

STOCK OPTION GRANTS TO OUTSIDE DIRECTORS DURING THE FISCAL YEAR ENDED DECEMBER 31, 2011
Name	#Options Granted	Price CDN$	Date of Grant	Expiry Date of Option
Anthony DeCristofaro	1,200,000	$0.315	May 31, 2011	May 30, 2016
Christopher Bulger	600,000	$0.19	April 4, 2011	April 3, 2016
Marvin Igelman	1,000,000	$0.315	May 31, 2011	May 30, 2016
Ryan Deslippe	1,000,000	$0.315	May 31, 2011	May 30, 2016
Darroch Robertson	300,000	$0.19	April 4, 2011	April 3, 2016
John Varghese	300,000	$0.19	April 4, 2011	April 3, 2016

During the 2011 financial year, Mr. Bulger, Chairman of the Board, received $50,000, cash compensation for acting as Chair of the Board.

C.           BOARD PRACTICES

Our articles of incorporation currently provide for a Board of Directors consisting of not less than 3 and not more than 15 directors, to be elected annually. The Business Corporations Act (Ontario) provides that, where a minimum and maximum number of directors is provided for in the articles of a company, the directors of that company may, if empowered by special resolution of the shareholders, by a resolution determine the number of directors to be elected at each annual meeting of the shareholders.

Our Board of Directors presently consists of four directors. Under Canadian law, a majority of our Board of directors and of each of our Board Committees must be residents of Canada, subject to certain exceptions.  Each of our directors holds office until the next annual meeting of shareholders, until his successor has been elected and qualified, or his earlier resignation or removal.  Our executive officers are appointed by our Board of directors and serve at the discretion of our Board of Directors.

None of the directors have any contract or arrangement entitling them to benefits upon termination of their directorship.

The three committees of the Board are the Audit Committee, Management Resources and Compensation Committee, and the Corporate Governance Committee.

The Audit Committee, all of whose members are unrelated as defined by the TSX Corporate Governance Guidelines and Independent as defined by Nasdaq listing standards, meets with our management and our auditors on a periodic basis, before the release of quarterly results and before submission of our annual financial statements to the Board. The committee is responsible for the review and assessment of our audit practices, financial reporting and internal controls, inquiry of the auditors as to cooperation in access and disclosure by our management and the ultimate approval of our annual financial statements for submission to the Board and to the shareholders. The committee is also responsible for the appointment, compensation and oversight of the work of our auditors (including resolution of disagreements between management and our auditors regarding financial reporting).  During the year our Audit Committee consists of Darroch Robertson (Chairman), Christopher Bulger and John Varghese. Mr. Robertson and Mr. Varghese resigned from the Board and all of its Committees effective from May 31, 2011 and replaced by Marvin Igelman and Ryan Deslippe.

The Management Resources and Compensation Committee, all of whose members are unrelated as defined by the TSX Corporate Governance Guidelines and Independent as defined by Nasdaq listing standards, is responsible for recommendations to the Board regarding the appointment or removal of executive officers, reviewing the performance of the executive officers and fixing their compensation. The committee is also responsible for administering our stock option plan and ensuring that salary and benefit programs are continuously suitable for attracting, retaining and encouraging the development of knowledgeable, experienced and capable management and employees. During the year, the Management Resources and Compensation Committee of our Company consists of Christopher Bulger (Chairman), Darroch Robertson and John Varghese all of whom were directors of our Company. Mr. Robertson and Mr. Varghese resigned from the Board and all of its Committees effective from May 31, 2011 and replaced by Marvin Igelman and Ryan Deslippe.

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The Corporate Governance Committee, all of whose members are unrelated as defined by the TSX Corporate Governance Guidelines and Independent as defined by Nasdaq listing standards, oversees the implementation of our governance practices.  The committee also oversees the process for nominations to the Board and assesses the overall effectiveness of the Board. During the year, the Corporate Governance Committee consists of Christopher Bulger (Chairman) and John Varghese; both of them were directors of the Company. Mr. Varghese resigned from the Board and all of its Committees effective from May 31, 2011 and replaced by Marvin Igelman and Ryan Deslippe.

C. 1.  AUDIT COMMITTEE INFORMATION

As a reporting issuer in jurisdictions that have adopted Multilateral Instrument 52-110 Audit Committees (“MI 52-110”) the Company is required to provide disclosure with respect to its Audit Committee including the text of the Audit Committee’s Charter, composition of the Committee, and the fees paid to the external auditor.

1. The Audit Committee’s Charter

A Copy of the Audit Committee Charter adopted by the Board of Directors on April 26, 2011 is attached to this Annual Report as Exhibit 4.26.

2. Composition of the Audit Committee

Name	Relevant Education and Experience
Christopher Bulger*‡	Mr. Bulger has been the non-executive Chairman of the Board since October 14, 2005 and a director of the Company since May 28, 1996. Mr. Bulger provides consulting to number of companies, including the role of Chief Financial Officer for Hy-Power Coatings Ltd., a company innovating insulation properties for paints and windows using nano technology to reduce energy consumption and Bio-Organic Catalyst of Canada Inc., a company offering science based organic solutions for waste management, using patented technology to remove toxins from wastewater and enhance energy production from waste. Mr. Bulger was Chairman and CEO of Megawheels Technologies Inc., (“Megawheels”) from Jan 01, 2001 to April 30, 2007, software and solutions provider to the online classified advertising industry. From December 1999 to December 2001, Mr. Bulger was President and Chief Executive Officer of eLab Technology Ventures Inc. Mr. Bulger served as Executive Vice President of our Company from September 1998 to December 1999 and Chief Financial Officer of the Company from April 1996 to September 1998. Mr. Bulger is a CFA, holds an MBA from INSEAD, France and an HBA from The Richard Ivey School of Business, Canada.
Marvin Igelman*	Mr. Igelman was founder and CEO of Unomobi, a mobile advertising and messaging firm, before the company was acquired by Poynt Corporation. Prior to Unomobi, he was President and CEO of Brandera, which operated Portfolios.com a leading online B2B marketplace for the graphic arts and creative community. Mr. Igelman is considered to be an innovator in the social, mobile, media and search technology fields having authored numerous patent applications. He graduated from Osgoode Hall Law School in 1986 and was admitted to the Law Society of Upper Canada in 1988.
Ryan Deslippe*	Mr. Deslippe co-founded Selectcore in 1999 as President and led its successful growth over the past decade to revenues in excess of CDN $100 million, ranking the company as one of the fastest growing firms in Canada between the period 2006 to 2010. At Selectcore, he led the development and launch of its Iridium MasterCard and ReCash - two industry first products in Canada. From 2003 to 2006, Mr. Deslippe also co-founded and was a director of Datazinc, a successful 6 Sigma consulting firm. He was the recipient of the 2006 Profit 100 Magazine Young President Award. Mr. Deslippe is a past Board member of various non-profit organizations.

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(*) independent as such term is defined in MI 52-110

(‡) financially literate as such term is defined in MI 52-110

3. Reliance on Certain Exemptions

At no time since the commencement of the Company’s most recently completed financial year has the Company relied on the exemption in Section 2.4 of MI 52-110 (De Minimis Non-audit Services), Section 3.3(2) (Controlled Companies), Section 3.6 (Temporary Exemption for Limited and Exceptional Circumstances), or an exemption from MI 52-110, in whole or in part granted under Part 8 of MI 52-110, nor has the Company relied on Section 3.8 (Acquisition of Financial Literacy) of MI 52-110.

4. Audit Committee Oversight

Directly responsible for overseeing the work of the external auditor engaged for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the issuer, including the resolution of disagreements between management and the external auditor regarding financial reporting.  The Committee also recommends fees of the external auditors to the Board of Directors.

5. Pre-Approval Policies

Pursuant to the Audit Committee Charter Adopted by the Board of Directors on June 28, 2010, the Audit Committee is responsible for the pre-approval of all non-audit services to be provided to the Company or its subsidiary entities by the independent auditor.

D.EMPLOYEES  

The number of our employees as of February 29, 2012 is increased by one employee in Technical Services departments as compared to the number of our employees as of February 28, 2011. The break-up is as follows:

	North America
Sales and Marketing	2
Technical Services	10
Finance Legal Affairs and Admin	3
Executive	2
TOTAL	17

As of February 28, 2011 we employed a total of 16 full-time employees as follows:

	North America
Sales and Marketing	2
Technical Services	9
Finance Legal Affairs and Admin	3
Executive	2
TOTAL	16

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There has been no change in the number of employees appointed in the last year.

As of March 15, 2010 we employed a total of 17 full-time employees as follows:

	North America
Sales and Marketing	2
Technical Services	10
Finance Legal Affairs and Admin	3
Executive	2
TOTAL	17

E.    SHARE OWNERSHIP

The following table sets forth information concerning share and option ownership of each of our current directors and officers as of February 29, 2012:

Name	Number of Common Shares Owned (1)	Number of Common  Underlying Options(2) Exercisable/ Unexercisable	Range of Exercise  Prices of Options	Range of Expiration Dates of Options	Percentage of Common  Shares Beneficially Owned (3)
Christopher Bulger	1,003,229	2,403,335/116,665	$0.095 - $0.22	08/04/11 - 04/03/16	*
Jim Moskos	389,937	2,785,557/344,443	$0.095 - $0.315	08/04/11 - 05/30/16	*
Anthony DeCristofaro	-	666,666/533,334	$0.315	04/03/2016	-
Amit Monga	-	1,611,110/1,288,890	$0.315	04/03/2016	-
Marvin Igelman	-	555,555/444,445	$0.315	04/03/2016	-
Ryan Deslippe	-	555,555/444,445	$0.315	04/03/2016	-

* Represents less than 1 percent.

(1)      Represents shares owned beneficially by the named individual other than those shares, which may be acquired under our Company's option plans.  Unless otherwise noted, all persons referred to above have sole voting and sole investment power.

(2)      Includes all shares which the named individual has the right to acquire under all vested and unvested options and warrants granted to such individual under the Company's option plan.

(3)      This information is based on 226,597,702 common shares outstanding as of February 29, 2012.

ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

Kris Sammy a registered individual portfolio manager with Canaccord Wealth Management previously with Dundee Securities Corporation, beneficially owns and/or exercises control or direction over “Nil” (2010-19,613,059, and 2009-19,296,247) common shares and warrants, representing a total of ‘Nil” (2010-10.72 and 2009-10.9 percents respectively) of the February 29, 2012 and outstanding common shares of Northcore Technologies Inc. assuming full exercise of his convertible securities.

This information is based on our records, information provided to us by directors and executive officers and a review of information, including press releases filed by our shareholders with the Ontario Securities Commission prior to February 29, 2012, and insider reports filed with the Ontario Securities Commission.  The Company’s major shareholders do not have any voting rights that differ from the rights of our other shareholders.

As at February 29, 2012the shareholders of record held 226,597,702 common shares.

WE ARE NOT AWARE OF ANY OTHER CORPORATION, FOREIGN GOVERNMENT, OR OTHER PERSON OR ENTITY THAT DIRECTLY OR INDIRECTLY OWN OR CONTROLS OUR COMPANY, SEVERALLY OR JOINTLY. WE ARE NOT AWARE OF ANY ARRANGEMENTS, WHICH MAY AT A LATER DATE RESULT IN A CHANGE IN CONTROL OF OUR COMPANY.

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B.RELATED PARTY TRANSACTIONS

During the year ended December 31, 2011, interest payments relating to the secured subordinated notes totaling $1,000 (2010 - $1,000) were made to related parties.

During the year ended December 31, 2010, interest payments relating to the secured subordinated notes totaling $1,000 (2009 - $45,000) were made to related parties. On July 9, 2010, Chris Bulger, Chairman of the Board exercised 133,000 Series I warrants at an exercise price of $0.20 per warrant, for total proceeds of $27,000.

ITEM 8 - FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS

See “Item 18 - Financial Statements” and the Consolidated Financial Statements and notes thereto accompanying this Annual Report as an exhibit 15.1. All contingencies and commitments set out in the Financial Statements have been reviewed and updated as at the date of filing this Annual Report.

LEGAL PROCEEDINGS

Neither we, nor any of our subsidiaries, is a party to, or the subject of, any material legal proceedings.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our common shares.  We currently intend to retain any future earnings for use in the operation and expansion of our business.  We do not anticipate paying any cash dividends on our common shares in the foreseeable future.

We have not issued any preferred shares. The dividend entitlement of any preferred shares issued will be determined by our Board of Directors.

SIGNIFICANT CHANGES

Except as otherwise disclosed in this report, there has been no significant change in our financial position since December 31, 2011.

ITEM 9 - THE OFFER AND LISTING

Our common shares are listed on The Toronto Stock Exchange and are quoted for trading on the OTCBB.  The Company’s stock symbols are NTI on the TSX and NTLNF on the OTCBB.

For additional information about the trading of our common shares, see Item 3-D - Risk Factors - YOUR ABILITY TO BUY OR SELL OUR COMMON SHARES ON THE OTCBB MAY BE LIMITED.

The following tables set forth the range of high and low sales prices (rounded to the nearest hundredth) as reported by The Toronto Stock Exchange and the OTCBB during the calendar years and quarters indicated.

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THE TORONTO STOCK EXCHANGE- (TSX)

	High	Low
	(Cdn $)	(Cdn $)
ANNUAL MARKET PRICES
2007 Calendar Year	0.20	0.07
2008 Calendar Year	0.15	0.04
2009 Calendar Year	0.33	0.10
2010 Calendar Year	0.25	0.07
2011 Calendar Year	0.48	0.09
QUARTERLY MARKET PRICES
2010 CALENDAR YEAR
First Quarter	0.25	0.20
Second Quarter	0.25	0.15
Third Quarter	0.22	0.15
Fourth Quarter	0.25	0.07
2011 CALENDAR YEAR
First Quarter	0.34	0.09
Second Quarter	0.48	0.14
Third Quarter	0.32	0.16
Fourth Quarter	0.20	0.11
MONTHLY MARKET PRICES
September 2011	0.26	0.16
October 2011	0.20	0.14
November 2011	0.20	0.12
December 2011	0.16	0.11
January 2012	0.14	0.08
February 2012	0.11	0.07

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OVER-THE-COUNTER BULLETIN BOARD –(OTCBB)

	High	Low
	(U.S. $)	(U.S. $)
ANNUAL MARKET PRICES
2007 Calendar Year	0.20	0.06
2007 Calendar Year	0.20	0.06
2008 Calendar Year	0.15	0.03
2009 Calendar Year	0.30	0.05
2011 Calendar Year	0.50	0.05
QUARTERLY MARKET PRICES
2010 CALENDAR YEAR
First Quarter	0.25	0.11
Second Quarter	0.24	0.10
Third Quarter	0.21	0.13
Fourth Quarter	0.15	0.07
2011 CALENDAR YEAR
First Quarter	0.33	0.08
Second Quarter	0.50	0.13
Third Quarter	0.30	0.15
Fourth Quarter	0.18	0.05
MONTHLY MARKET PRICES
September 2011	0.30	0.15
October 2011	0.18	0.11
November 2011	0.16	0.11
December 2011	0.15	0.05
January 2012	0.11	0.08
February 2012	0.08	0.06

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ITEM 10 - ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The Articles of Arrangement for the Company are on file with the Ministry of Consumer and Commercial Relations for the Province of Ontario under Ontario Corporation Number 1539169.  Our articles do not include a stated purpose.

Directors

Directors of our Company need not be shareholders.  In accordance with our by-laws and the Business Corporations Act (Ontario), a majority of our directors must be residents of Canada, subject to certain exceptions.  In addition, directors must be at least 18 years of age, of sound mind, and not bankrupt.  Neither our articles or by-laws, nor the Business Corporations Act (Ontario), impose any mandatory retirement age for directors.

A director who is a party to, or who is a director or officer of or has a material interest in any person who is a party to, a material contract or transaction or proposed material contract or transaction with our Company shall disclose to our Company the nature and extent of his interest at the time and in the manner provided by the Business Corporations Act (Ontario). The Business Corporations Act (Ontario) prohibits such a director from voting on any resolution to approve the contract or transaction unless the contract or transaction:

· Is an arrangement by way of security for money lent to or obligations undertaken by the director for the benefit of our Company or an affiliate;

· Relates primarily to his or her remuneration as a director, officer, employee or agent of our Company or an affiliate;

· Is for indemnity or insurance; or

· Is with an affiliate.

Our Board of Directors may, on behalf of our Company and without authorization of our shareholders:

· Borrow money upon the credit of our Company;

· Issue, reissue, sell or pledge bonds, debentures, notes or other evidences or indebtedness or guarantees of our Company, either secured or unsecured;

· Subject to certain disclosure requirements of the Business Corporations Act (Ontario), give, directly or indirectly, financial assistance to any person by means of a loan, a guarantee or otherwise on behalf of our Company to secure performance or any present or future indebtedness, liability or obligation of any person; and

· Mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal property of our Company, movable or immovable, including without limitation book debts, rights, powers, franchises and undertakings, to secure any bonds, debentures, notes or other evidences of indebtedness or guarantee or any other obligation of our Company.

Common Shares

Our articles authorize the issuance of an unlimited number of common shares. The holders of the common shares of our Company are entitled to receive notice of and to attend all meetings of the shareholders of our Company and have one vote for each common share held at all meetings of the shareholders of our Company, except for meetings at which only holders of another specified class or series of shares of our Company are entitled to vote separately as a class or series. Subject to the prior rights of the holders of preferred

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shares of our Company and to any other shares ranking senior to the common shares with respect to priority in the payment of dividends, the holders of common shares are entitled to receive dividends and our Company will pay dividends, as and when declared by our Board of Directors, out of moneys properly applicable to the payment of dividends, in such amount and in such form as our Board of Directors may from time to time determine, and all dividends which our Board of Directors may declare on the common shares shall be declared and paid in equal amounts per share on all common shares at the time outstanding. In the event of the dissolution, liquidation or winding-up of our Company, whether voluntary or involuntary, or any other distribution of assets of our Company among its shareholders for the purpose of winding up its affairs, subject to the prior rights of the holders of preferred shares and to any other shares ranking senior to the common shares with respect to priority in the distribution of assets upon dissolution, liquidation or winding-up, the holders of the common shares will be entitled to receive the remaining property and assets of our Company.   There are no redemption or sinking-fund provisions that attach to the common shares, nor are there any provisions that discriminate against existing or prospective holders of common shares as a result of owning a substantial number of shares.  The holders of our common shares are not liable to further capital calls by our Company.

Preferred Shares

Our articles of incorporation authorize the issuance of an unlimited number of preferred shares, in one or more series. The Ontario Business Corporations Act does not impose restrictions upon our Board of Directors issuing preferred shares of the type authorized by our articles of incorporation. Our Board of Directors may fix, before issuing, the number of preferred shares of each series, the designation, rights, privileges, restrictions and conditions attaching to the preferred shares of each series, including any voting rights, any right to receive dividends (which may be cumulative or non-cumulative and variable or fixed) or the means of determining the dividends, the dates of payment, any terms and conditions of redemption or purchase, any conversion rights, and any rights on the liquidation, dissolution or winding-up of our Company, any sinking fund or other provisions, the whole to be subject to the issue of a Certificate of Amendment setting forth the designation, rights, privileges, restrictions and conditions attaching to the preferred shares of the series. Our articles of incorporation require that preferred shares of each series must, with respect to the payment of dividends and the distribution of assets or the return of capital in the event of the liquidation, dissolution or winding-up of our Company, whether voluntary or involuntary, rank on a parity with the preferred shares of every other series and be entitled to preference over the common shares and over any other shares ranking junior to the preferred shares. The preferred shares of one series shall participate ratably with the preferred shares of every other series in respect of all dividends and similar amounts.  The holders of our preferred shares are not liable to further capital calls by our Company.  None of our preferred shares are currently issued or outstanding.

Action Necessary to Change the Rights of Shareholders

In order to change the rights of our shareholders, we would need to amend our articles of incorporation to effect the change.  Such an amendment would require the approval of holders of two-thirds of the shares cast at a duly called special meeting. If we wish to amend the rights of holders of a specific class of shares, such approval would also be required from the holders of that class. A shareholder is entitled to dissent in respect of such a resolution and, if the resolution is adopted and our Company implements such changes, demand payment of the fair value of its shares.

Meetings of Shareholders

An annual meeting of shareholders is held each year for the purpose of considering the financial statements and reports, electing directors, appointing auditors and for the transaction of other business as may be brought before the meeting. The Chief Executive, the Chairman of the Board or the Board of Directors has the power to call a special meeting of shareholders at any time. Notice of the time and place of each meeting of shareholders must be given not less than 21 days, nor more than 50 days, before the date of each meeting to each director, to the auditor and to each shareholder who at the close of business on the record date for notice is entered in the securities register as the holder of one or more shares carrying the right to vote at the meeting. Notice of a meeting of shareholders called for any other purpose other than consideration of financial statements and auditors’ report, election of directors and reappointment of the incumbent auditor, must state the nature of the business in sufficient detail to permit the shareholder to form a reasoned judgment on, and must state the text of, any special resolution or by-law to be submitted to the meeting. The only persons entitled to be present

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at a meeting of shareholders are those entitled to vote thereat, the directors of our Company, the auditor of our Company and others who although not entitled to vote are entitled or required to be present at the meeting. Any other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting. If a corporation is winding-up, the Business Corporations Act (Ontario) permits a liquidator appointed by the shareholders, during the continuance of a voluntary winding-up, to call and attend meetings of the shareholders. In circumstances where a court orders a meeting of shareholders, the court may direct how the meeting may be held, including the parties entitled, or required, to attend the meeting.

Limitations on Rights to Own Securities

There is no limitation imposed by Canadian law or by the articles or other charter documents on the right of a non-resident to hold or vote common shares or preferred shares with voting rights, other than as provided in the Investment Canada Act, as amended by the World Trade Organization Agreement Implementation Act.  The Investment Canada Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian,” as defined in the Investment Canada Act (a “non-Canadian”), unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be a net benefit to Canada.

An investment in our voting shares by a non-Canadian (other than a “World Trade Organization Investor,” as defined below) would be reviewable under the Investment Canada Act if it were an investment to acquire direct control of our Company, and the value of our assets were $5.0 million or more.  An investment in our voting shares by a World Trade Organization Investor would be reviewable under the Investment Canada Act if it were an investment to acquire direct control of our Company, and the value of our assets equaled or exceeded $209 million.  A non-Canadian, whether a World Trade Organization Investor or otherwise, would acquire control of us for purposes of the Investment Canada Act if he or she acquired a majority of our voting shares.  The acquisition of less than a majority, but at least one-third of our voting shares, would be presumed to be an acquisition of control of our Company, unless it could be established that we were not controlled in fact by the acquirer through the ownership of voting shares.  In general, an individual is a World Trade Organization Investor if he or she is a “national” of a country (other than Canada) that is a member of the World Trade Organization (“World Trade Organization Member”) or has a right of permanent residence in a World Trade Organization Member.  A corporation or other entity will be a World Trade Organization investor if it is a “World Trade Organization investor-controlled entity” pursuant to detailed rules set out in the Investment Canada Act.  The United States is a World Trade Organization Member.

Certain transactions involving our voting shares would be exempt from the Investment Canada Act, including:  (a) an acquisition of our voting shares if the acquisition were made in connection with the person’s business as a trader or dealer in securities; (b) an acquisition of control of our Company in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Canada Act; and (c) an acquisition of control of our Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of our Company, through the ownership of voting interests, remains unchanged.

Change of Control

Our authorized capital consists of an unlimited number of common shares and an unlimited number of preferred shares. The Board of Directors, without any further vote by the common shareholders, has the authority to issue preferred shares and to determine the price, preferences, rights and restrictions, including voting and dividend rights, of these shares. The rights of the holders of common shares are subject to the rights of holders of any preferred shares that the Board of Directors may issue in the future. That means, for example, that we can issue preferred shares with more voting rights, higher dividend payments or more favorable rights upon dissolution, than the common shares. If we issued certain types of preferred shares in the future, it may also be more difficult for a third-party to acquire a majority of our outstanding voting shares.

Our articles do not contain any provisions that govern the ownership threshold above which shareholder ownership must be disclosed.

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C.    Material Contracts

The following is a summary of our Company’s material contracts entered into within the last three years.

1. EQUITY PRIVATE PLACEMENT: On February 14, 2011, the Company completed a transaction resulting in the issuance of 10,478,000 equity units, priced at $0.08 per unit, for gross proceeds of $838,000 and net proceeds of $713,000 after deducting financing costs of $125,000.  Each unit consists of one common share and one share-purchase warrant.  Each warrant may be converted into a common share at the exercise price of $0.12 at any time prior to February 14, 2013.

In addition to the above financing costs, the Company issued 2,250,000 compensation options to the financing agent, Saratoga Finance Inc.  The options entitled the holder to purchase up to 2,250,000 equity units at a purchase price of $0.08 per unit, at any time prior to February 14, 2013.  Each equity unit consisted of one common share and one warrant.  Each warrant may be converted into a common share at an exercise price of $0.12, at any time prior to February 14, 2013. These compensation options were exercised during 2011, resulting in gross proceeds of $180,000.

2. CONVERSION OF NOTES AND EXERCISING OF WARRANTS: During the year ended December 31, 2011, Series I and L note holders, along with warrant holders from equity private placements in 2010 and 2011, exercised 26,260,000 common share-purchase warrants for total proceeds of $3,377,000.

3. EQUITY PRIVATE PLACEMENT: On December 22, 2010, the Company completed a transaction resulting in the issuance of 7,816,000equity units, priced at $0.08 per unit, for net proceeds of $625,000.  Each unit consists of one common share and one common share purchase warrant.  Each full warrant may be converted into a common share at the exercise price of $0.12 at any time prior to December 22, 2012. Subsequent to the year ended December 31, 2010, the Company completed a transaction resulting in the issuance of 10,478,000 equity units, priced at $0.08 per unit for net proceeds of $729,00.

4. OPERATING LOAN: On October 28, 2010, the Company received an operating loan from a private institution in the amount of $500,000.  The loan bears interest at 18.75 percent, matures in six months from the closing date and is secured by a general security agreement and common shares pledged by certain shareholders of the Company.  The balance outstanding as at December 31, 2010 is $500,000.

5. EQUITY LINE OF CREDIT: On June 16, 2010, the Company entered into an agreement with GEM Global Yield Fund Limited (“GEM”) for a $6,000,000 equity line of credit.  The Company will control the timing and maximum amount of any draw downs under this facility, and has the right, not the obligation, to draw down on available funds by requiring GEM to subscribe for the Company’s common shares at a 10 percent discount to the average closing price of the Company’s common shares over a 15 day trading period following the draw down notice date, provided that the Company’s share price during the notice period is greater than the floor price of $0.17 per share as defined in the agreement.  GEM will hold freely trading shares of the Company through a share lending facility provided by a current shareholder.  As part of the equity credit line transaction, the Company has agreed to issue 6,000,000 warrants to GEM. The warrants are exercisable for a period of three years from the closing notice date at an exercise price of $0.27 per share.  The warrants are not issuable until the first draw down of funds have occurred.

On August 9, 2010, the Company closed an equity transaction with GEM, securing gross proceeds of $383,000 and net cash proceeds of $300,000 after deducting legal fees and one half of the commitment fee of $90,000.  In connection with the transaction, the Company issued 2,191,000 common shares and 6,000,000 share-purchase warrants with an exercise price of $0.27 and an expiry date of August 9, 2013.

6. INTELLECTUAL PROPERTY: During the year ended December 31, 2009, the Company entered into a technology licensing agreement with a Fortune 500 company that provides Northcore with access to a portfolio of intellectually property patents over a six-year period for a minimum fee of US $260,000 over the term of the agreement.

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7. EQUITY PRIVATE PLACEMENT: On September 30, 2009, the Company completed a transaction resulting in the issuance of 2,604,000 equity units, priced at $0.19 per unit, for net proceeds of $495,000.  Each unit consists of one common share and one-half common share purchase warrant.  Each full warrant may be converted into a common share at the exercise price of $0.25 at any time prior to September 30, 2011.

D.           Exchange Controls

As of the date hereof, we are not aware of any law, government decree or regulation in Canada restricting the export or import of capital or affecting the remittance of dividends, interest or other payments to a non-resident holder of our common shares, other than withholding tax requirements.

E.           Taxation

The following summary describes material Canadian federal income tax consequences generally applicable to a holder of our common shares who is not a resident of Canada, and who, for purposes of the Income Tax Act (Canada), (i) holds such shares as capital property and (ii) deals at arm’s length with us.  Generally, common shares will be considered capital property to a holder provided that such holder does not hold such securities in the course of carrying on a business andhas not acquired such securities in atransaction or transactions considered to be a concern in the nature of trade which includes a transaction or transactions of the same kind and carried on in the same manner as a transaction or transactions of an ordinary trader or dealer in property of the same kind.

This summary is based upon the current provisions of the Income Tax Act and the regulations there under and on an understanding of the published administrative practices of the Canadian Customs and Revenue Agency. This summary does not take into account or anticipate any possible changes in law, or the administration thereof, whether by legislative, governmental or judicial action, except proposals for specific amendment thereto which have been publicly announced by the Canadian Minister of Finance prior to the date hereof.

This summary does not address all aspects of Canadian federal income tax law that may be relevant to shareholders based upon their particular circumstances, and does not deal with provincial, territorial or foreign income tax consequences, which might differ significantly from the consequences under Canadian federal income tax law.

Shareholders are advised to consult their tax advisors regarding the application of the Canadian federal income tax law to their particular circumstances, as well as any Canadian provincial, territorial or other tax consequences or any U.S. federal, state or local tax consequences or other foreign income tax consequences of the acquisition, ownership and disposition of our common shares.

Taxation of Dividends

A holder of a common share who is not resident in Canada for purposes of the Income Tax Act will be subject to Canadian withholding tax on dividends paid or credited, or deemed under the Income Tax Act to be paid or credited, to the holder of the common share. The rate of withholding tax under the Income Tax Act on dividends is 25 percent of the amount of the dividend. Such rate may be reduced under the provisions of an applicable international tax treaty to which Canada is a party. Under the tax treaty that Canada has entered into with the United States, the rate of Canadian withholding tax applicable in respect of dividends paid or credited by a Canadian corporation to a shareholder resident in the United States, is generally reduced to 15 percent, or 5 percent in the case of a corporate holder which owns 10 percent or more of the voting shares. A foreign tax credit for the tax withheld may be available under applicable US tax law to a US holder against U.S. federal income tax liability.  Moreover, pursuant to Article XXI of the Canada-U.S. Treaty, an exemption from

Canadian withholding tax generally is available in respect of dividends received by certain trusts, companies and other organizations whose income is exempt from tax under the laws of the United States.

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Disposition of Common Shares

A non-resident holder of a common share will not be subject to tax under the Income Tax Act in respect of a capital gain realized on the disposition of a common share unless the common share constitutes or is deemed to constitute “taxable Canadian property” as defined in the Income Tax Act. Shares of a corporation that are listed on a prescribed stock exchange (which includes shares traded on certain U.S. stock exchanges, including the Nasdaq National Market), are generally not considered to be taxable Canadian property. However, such shares are considered taxable Canadian property in the hands of a non-resident holder if, at any time during the 60-month period immediately preceding disposition by the holder, 25 percent or more of our issued shares of any class were owned by the non-resident holder together with persons with whom the non-resident did not deal at arm’s length.

An interest in or option in respect of common shares or other securities convertible into or exchangeable for common shares could constitute taxable Canadian property if the common shares that could be acquired upon the exercise of the option, the conversion or exchange rights or in which there is such interest are themselves taxable Canadian property.  Taxable Canadian property alsoincludes any common share held by a non-resident if the non-resident used the common share in carrying on a business (other than aninsurance business) in Canada, or, if the non-resident is a non-resident insurer, any common share that is its “designated insurance property” for the year. A non-resident whose common shares constitute or are deemed to constitute taxable Canadian property will realize upon the disposition or deemed disposition of a common share, a capital gain (or a capital loss) to the extent that the proceeds of disposition are greater than (or less than) the aggregate of the adjusted cost base to the holder of a common share and any reasonable costs of disposition.

One-half of any capital gain realized by a holder (a taxable capital gain) will be included in computing the holder’s income. One-half of any capital loss realized by a holder may, subject to certain restrictions applicable to holders that are corporations, normally be deducted from the holder’s taxable capital gains realized in the year of disposition, the three preceding taxation years or any subsequent taxation years, subject to detailed rules contained in the Income Tax Act.

A purchase by us of our common shares (other than a purchase of our common shares on the open market in a manner in which shares would normally be purchased by any member of the public in the open market) will give rise to a deemed dividend under the Income Tax Act equal to the difference between the amount we paid on the purchase and the paid-up capital of such shares determined in accordance with the Income Tax Act. The paid-up capital of such shares may be less than the cost of such shares to the holder. Any such dividend deemed to have been received by a non-resident holder will be subject to non-resident withholding tax as described above. The amount of any such deemed dividend will reduce the proceeds of disposition of the common share to the non-resident holder for the purpose of computing the amount of the non-resident holder’s capital gain or loss under the Income Tax Act.

Even if the common shares constitute taxable Canadian property to a non-resident holder and their disposition would give rise to a capital gain, an exemption from tax under the Income Tax Act may be available under the terms of an applicable international tax treaty to which Canada is a party. A holder resident in the United States for purposes of the Canada-U.S. Treaty will generally be exempt from Canadian tax in respect of a gain on the disposition of common shares provided that the value of the common shares is not derived principally from real property situated in Canada. Our common shares would qualify for this exemption, however Article XIII paragraph 5 of the Canada-U.S. Treaty provides that the treaty exemption does not apply where the U.S. resident holder was an individual who was a Canadian resident for 120 months during any period of 20 consecutive years preceding the time of the sale and was resident in Canada at any time during the ten years immediately preceding the sale and owned the shares at the time he/she ceased to be resident in Canada. If the exemption from such Canadian tax in respect of such gain is not available under the Canada-U.S. Treaty, a foreign tax credit may be available under applicable US tax law for U.S. federal income tax purposes. Non-residents are advised to consult their tax advisers with regard to the availability of a treaty exemption.

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U.S. Federal Income Tax Considerations

The following summary describes certain material United States federal income tax consequences arising to U.S. Holders (as defined below) from the purchase, ownership and sale of common shares. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, final, temporary and proposed United States Treasury Regulations, revenue rulings and administrative pronouncements of the Internal Revenue Service, and court decisions, all as in effect as of the date of this Annual Report and all of which are subject to change, possibly on a retroactive basis.

This summary does not address the considerations that may be applicable to any particular U.S. Holder based on such U.S. Holder's particular circumstances nor to particular classes of shareholders (including but not limited to financial institutions, broker-dealers, insurance companies, real estate investment trusts, regulated investment companies, persons who have elected mark-to-market accounting, tax-exempt organizations, persons who hold ordinary shares as part of a straddle, "hedge" or "conversion transaction" with other investments, persons who own (directly, indirectly or through attribution) 10 percent or more of our Company's outstanding voting shares, persons whose functional currency is not the U.S. dollar, persons who are not citizens or residents of the United States, foreign corporations, foreign partnerships or foreign estates or trusts, or persons who acquired their common shares pursuant to the exercise of employee stock options or rights or otherwise as compensation). Additionally, the discussion does not consider the tax treatment of persons who hold common shares through a partnership or other pass-through entity.  The summary does not discuss United States federal alternative minimum tax; foreign, state, or local taxes; nor the possible application of United States federal non-income taxes (e.g., gift or estate tax).  This summary considers only U.S. Holders that will own their common shares as capital assets.

This summary is addressed only to a holder of common shares who is (i) a citizen or resident of the United States, as defined under United States tax laws, (ii) the trust was in existence on August 20, 1996 and a corporation organized in the United States or under the laws of the United States or any state thereof, (iii) an estate, the income of which is includable in gross income for United States federal income tax purposes regardless of source, or (iv) a trust, if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) the trust has a valid election in effect under applicable United States Treasury Regulations to be treated as a U.S. person (each, a "U.S. Holder"). This summary is for general information purposes only and does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase common shares.

Each shareholder should consult with such shareholder's own tax advisor as to the particular tax consequences to such shareholder of the purchase, ownership and sale of their common shares, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.

Circular 230 Disclosure

Any tax statement made herein regarding any U.S. federal tax is not intended or written to be used, and cannot be used, by any taxpayer for purposes of avoiding any penalties.  Any such statement herein is written in connection with the marketing or promotion of the transaction to which the statement relates.  Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

Treatment of Dividend Distributions

Subject to the discussion below under "Tax Status Of The Company”, a distribution by our Company to a U.S. Holder in respect of the common shares (including the amount of any Canadian taxes withheld thereon) will generally be treated for United States federal income tax purposes as a dividend to the extent of our Company's current and accumulated earnings and profits, as determined under United States federal income tax principles. To the extent, if any, that the amount of any such distribution exceeds our Company's current and accumulated earnings and profits, as so computed, it will first reduce the U.S. Holder's tax basis in the common shares owned by him, and to the extent it exceeds such tax basis, it will be treated as capital gain from the sale of common shares.

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While it is not anticipated that our Company will pay dividends in the foreseeable future, the gross amount of any distribution from our Company received by a U.S. Holder which is treated as a dividend for United States federal income tax purposes (before reduction for any Canadian tax withheld at source) will be included in such U.S. Holder's gross income as ordinary income and generally will not qualify for the dividends received deduction applicable in certain cases to United States corporations. If you are an individual, dividends that we pay you through 2011 will be subject to tax at long-term capital gain rates, provided certain holding period and other requirements are satisfied and provided that in the year such dividends are paid, or any preceding taxable year, we are not a  controlled foreign corporation or a passive foreign investment company (as discussed below).

For United States federal income tax purposes, the amount of any dividend paid in Canadian dollars by our Company to a U.S. Holder will equal the U.S. dollar value of the amount of the dividend paid in Canadian dollars, at the exchange rate in effect on the date of the distribution, regardless of whether the Canadian dollars are actually converted into U.S. dollars at that time. Canadian dollars received by a U.S. Holder will have a tax basis equal to the U.S. dollar value thereof determined at the exchange rate on the date of the distribution. Currency exchange gain or loss, if any, recognized by a U.S. Holder on the conversion of Canadian dollars into U.S. dollars will generally be treated as U.S. source ordinary income or loss to such holder. U.S. Holders should consult their own tax advisors concerning the treatment of foreign currency gain or loss, if any, on any Canadian dollars received as a distribution.

A U.S. Holder generally will be entitled to deduct any Canadian taxes withheld from dividends in computing United States taxable income, or to credit such withheld taxes against the United States federal income tax imposed on such U.S. Holder's dividend income. No deduction for Canadian taxes may be claimed, however, by an individual (noncorporate) U.S. Holder that does not itemize deductions. The amount of foreign taxes for which a U.S. Holder may claim a credit in any year is subject to complex limitations and restrictions, which must be determined on an individual basis. Distributions with respect to common shares that are taxable as dividends will generally constitute foreign source income for purposes of the foreign tax credit limitation. The total amount of allowable foreign tax credits in any year generally cannot exceed regular U.S. tax liability for the year attributable to foreign source taxable income. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by our Company with respect to the common shares will generally constitute "passive income." Foreign income taxes exceeding a shareholder's credit limitation for the year of payment or accrual of such tax can be carried back for one taxable year and forward for ten taxable years, subject to the credit limitation applicable in each of such years.

Sale or Exchange of a Common Share

Subject to the discussion below under "Tax Status Of The Company", the sale or exchange by a U.S. Holder of a common share generally will result in the recognition of gain or loss by the U.S. Holder in an amount equal to the difference between the amount realized and the U.S. Holder's basis in the common share sold. Such gain or loss will be capital gain or loss provided that the common share is a capital asset in the hands of the holder. The gain or loss realized by an individual (non-corporate) U.S. Holder on the sale or exchange of a common share will be long-term capital gain or loss subject to a preferential rate of tax if the common share had been held for more than one year.  If the common share had been held by such individual U.S. Holder for not more than one year, such gain will be short-term capital gain. The deductibility of a capital loss recognized on the sale, exchange or other disposition of common shares is subject to limitations. A U.S. Holder that receives foreign currency upon disposition of common shares and subsequently converts the foreign currency into U.S. dollars generally will have foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. dollar. U.S. Holders should consult their own tax advisors regarding treatment of any foreign currency gain or loss on any Canadian dollars received in respect of the sale, exchange or other disposition of common shares.

Tax Status of the Company

Controlled Foreign Corporations.  A non-US company generally will be a “controlled foreign corporation” under Section 957 of the Internal Revenue Code (a “CFC”) if more than 50 percent of its total voting power or the total value of its outstanding shares is owned, directly or indirectly, by citizens or residents

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of the U.S., domestic partnerships, domestic corporations, domestic estates, or domestic trusts (each as defined in Section 7701(a)(30) of the Internal Revenue Code), each of which own, directly or indirectly, 10 percent or more of the total voting power of the outstanding shares of the company (a “10 percent Shareholder”).

If our Company is a CFC, a 10 percent Shareholder generally will be subject to current U.S. federal income tax with respect to (a) such 10 percent Shareholder’s pro rata share of the “subpart F income” (as defined in Section 952 of the Internal Revenue Code) of our Company and (b) such 10 percent Shareholder’s pro rata share of the earnings of our Company invested in “United States property” (as defined in Section 956 of the Internal Revenue Code).  In addition, under Section 1248 of the Internal Revenue Code, any gain recognized on the sale or other taxable disposition of the common shares by a U.S. Holder that was a 10 percent Shareholder at any time during the five-year period ending with such sale or other taxable disposition generally will be treated as a dividend to the extent of the “earnings and profits” of our Company that are attributable to such common shares.

The Company does not believe that it currently is a CFC.  However, there can be no assurances that our Company will not be a CFC for the current or any future taxable year.

Passive Foreign Investment Companies.  A non-U.S. company will be a passive foreign investment company if 75 percent or more of its gross income (including the pro rata share of the gross income of any company (United States or foreign) in which the company is considered to own 25 percent or more of the shares (determined by market value)) in a taxable year is passive income. Alternatively, the company will be considered to be a passive foreign investment company if at least 50 percent of the value of the company's assets (averaged over the year) (including the pro rata share of the value of the assets of any company in which the company is considered to own 25 percent or more of the shares (determined by market value)) in a taxable year are held for the production of, or produce, passive income. Passive income generally includes, among others, interest, dividends, royalties, rents and annuities.

If our Company is a passive foreign investment company for any taxable year, a U.S. Holder, in the absence of an election by such U.S. Holder to treat our Company as a "qualified electing fund" (a "QEF election"), as discussed below, would, upon certain distributions by our Company and upon disposition of the common shares at a gain, be liable to pay tax at the highest tax rate on ordinary income in effect for each period to which the income is allocated, plus interest on the tax, as if the distribution or gain had been recognized ratably over the days in the U.S. Holder's holding period for the common shares during which our Company was a passive foreign investment company. Additionally, if our Company is a passive foreign investment company, U.S. Holders who acquire shares from U.S. decedents would be denied the normally available step-up of the income tax basis for such common shares to fair market value at the date of death and instead would have a tax basis equal to the U.S. decedent's basis, if lower.

If our Company is treated as a passive foreign investment company for any taxable year, U.S. Holders should consider whether to make a QEF election for United States federal income tax purposes. If a U.S. Holder has a QEF election in effect for all taxable years that such U.S. Holder has held the common shares and our Company was a passive foreign investment company, distributions and gain will not be recognized ratably over the U.S. Holder's holding period or subject to an interest charge, gain on the sale of common shares will be characterized as capital gain and the denial of basis step-up at death described above would not apply. Instead, each such U.S. Holder is required for each taxable year that our Company is a qualified electing fund to include in income a pro rata share of the ordinary earnings of our Company as ordinary income and a pro rata share of the net capital gain of our Company as capital gain, subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge. In order to comply with the requirements of a QEF election, a U.S. Holder must receive from our Company certain information. We intend to supply U.S. Holders with the information needed to report income and gain pursuant to a QEF election in the event our Company is classified as a passive foreign investment company. The QEF election is made on a shareholder-by-shareholder basis and can be revoked only with the consent of the Internal Revenue Service.  A shareholder makes a QEF election by attaching a completed IRS Form 8621 (including the passive foreign investment company annual information statement) to a timely filed United States federal income tax return or, if not required to file United States Federal income tax return, by filing such form with the IRS Service Center listed on IRS Form 8621. Even if a QEF election is not made, a shareholder in a passive foreign investment company who is a U.S. Holder must file a completed IRS Form 8621 every year.

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As an alternative to making a QEF election, a U.S. Holder may elect to make a mark-to-market election with respect to the common shares owned by him if such stock qualifies as “marketable stock.” To qualify as “marketable stock,” the stock must be regularly traded on a qualified exchange.  Under applicable Treasury regulations, a “qualified exchange” includes a national securities exchange that is registered with the SEC or the national market system established under the Securities Exchange Act of 1934 and certain foreign securities exchanges.  Under applicable Treasury Regulations, PFIC stock traded on a qualified exchange is regularly traded on such exchange for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter.  We cannot assure U.S. Holders that our common shares will be treated as regularly traded stock on a qualified exchange. If the mark-to-market election were made, then the rules set forth above would not apply for periods covered by the election. Under such election, a U.S. Holder includes in income each year an amount equal to fair market value of the common shares owned by such U.S. Holder as of the close of the taxable year over the U.S. Holder's adjusted basis in such shares. The U.S. Holder would be entitled to a deduction for the excess, if any, of such U.S. Holder's adjusted basis in his common shares over the fair market value of such shares as of the close of the taxable year; provided, however, that such deduction would be limited to the extent of any net mark-to-market gains with respect to the common shares included by the U.S. Holder under the election for prior taxable years. The U.S. Holder's basis in his common shares is adjusted to reflect the amounts included or deducted pursuant to this election. Amounts included in income pursuant to the mark-to-market election, as well as gain on the sale or exchange of the common shares, will be treated as ordinary income. Ordinary loss treatment applies to the deductible portion of any mark-to-market loss, as well as to any loss realized on the actual sale or exchange of the common shares to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included with respect to such common shares. The mark-to-market election applies to the tax year for which the election is made and all later tax years, unless the common shares cease to be marketable or the IRS consents to the revocation of the election.

We have not determined whether our Company may have been a passive foreign investment company during 2011. There can be no assurance that our Company will not be classified as a passive foreign investment company in 2012, or thereafter, because the tests for determining passive foreign investment company status are applied annually and it is difficult to make accurate predictions of future income and assets, which are relevant to this determination. U.S. Holders who hold common shares during a period when our Company is a passive foreign investment company will be subject to the foregoing rules, even if our Company ceases to be a passive foreign investment company, subject to certain exceptions for U.S. Holders who made a QEF election or mark-to-market election. U.S. Holders are urged to consult with their own tax advisors about making a QEF election or mark-to-market election and other aspects of the passive foreign investment company rules.

Back-Up Withholding and Information Reporting

U.S. Holders generally are subject to information reporting requirements and back-up withholding with respect to dividends paid on common shares, or proceeds paid from the disposition of common shares, unless the U.S. Holder provides an IRS Form W-9 or otherwise establishes an exemption.

The amount of any back-up withholding will be allowed as a credit against a U.S. Holder’s federal income tax liability and may entitle such holder to a refund, provided that certain required information is furnished to the IRS.

F.           Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

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H.           Documents on Display

We have filed this Annual Report on Form 20-F with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Statements made in this Annual Report as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to this Annual Report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.

We are subject to the informational requirements of the Exchange Act and file reports and other information with the Securities and Exchange Commission.  Reports and other information which we file with the Securities and Exchange Commission, including this Annual Report on Form 20-F, may be inspected and copied at the public reference facilities of the Securities and Exchange Commission at:

100F Street, N.E

Washington D.C.  20549

You can also obtain copies of this material by mail from the Public Reference Section of the Securities and Exchange Commission, 100F Street, N.E., Washington, D.C. 20549, at prescribed rates.  Additionally, copies of this material may also be obtained from the Securities and Exchange Commission’s Internet site at http://www.sec.gov.  The Commission’s telephone number is 1-800-SEC-0330.

I. Subsidiary Information

Not applicable.

ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK  

Not applicable.

ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13 - DEFAULT, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15 – CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

The Company has evaluated, under the supervision and with the participation of the management, including our Chief Executive Officer and our Chief Operating Officer, our disclosure controls and procedures as of December 31, 2011 pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on this evaluation, these Officers have concluded that Company’s disclosure controls and procedures as of such date were effective to provide reasonable assurance that information required to be disclosed by the

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Company in this report we file or submit under the Securities Exchange Act of 1934, as amended, (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Operating Officer, as appropriate to allow timely decisions regarding required disclosure.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the Chief Executive Officer and Chief Operating Officer, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the

        transactions and dispositions of the assets of the Company;

·     Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

·      Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the design and operating effectiveness of the Company’s internal control over financial reporting as of December 31, 2011.  In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on this assessment, management believes that, as of December 31, 2011, the Company’s internal control over financial reporting was effective.

Management is aware that there is a lack of segregation of duties due to the small number of employees dealing with general, administrative and financial matters.  However, management has decided that considering the employees involved and the compensating control procedures in place, including substantive periodic review of financial statements by the Audit Committee to ensure that internal controls over financial reporting and disclosure controls and procedures are effective, the risks associated with segregation are insignificant and the potential benefits of adding employees to more clearly segregate duties do not justify the expenses associated with such increase.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no changes in the Company's internal controls over financial reporting during the year ended December 31, 2011, that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

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ITEM 16 – [RESERVED]

ITEM 16A – AUDIT COMMITTEE FINANCIAL EXPERT

The Company’s Board of Directors has determined that it has at least one audit committee financial expert serving on its audit committee.  The Board of Directors has determined that Christopher Bulger is audit committee financial expert.

ITEM 16B – CODE OF ETHICS

The Company has adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees. The Code of Business Conduct and Ethics is attached as an exhibit to this report. We did not amend, modify or grant any waiver from any provision of our Code of Business Conduct and Ethics during the last fiscal year.

ITEM 16C – PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees billed for each of the last two fiscal years for professional services rendered by our auditors for the audit of our annual financial statements and other services.

FEES OF AUDITORS

The aggregate audit fees billed by Collins Barrow Toronto LLP, for the years ended December 31, 2011, and 2010, are set out in the table below:

Year	Audit Fees(1)	Tax Fees(2)
2011	$98,000	$3,300
2009	$57,000	$3,000

(1) Audit fees represent costs associated with the audit of the Company’s annual consolidated financial statements including review of securities filings and review of the Company’s interim consolidated financial statements.

(2) Tax fees represent costs associated with the preparation of the Company’s annual tax filings, tax planning and advice.

Before the Company’s auditor is engaged by the Company to render audit or non-audit services, the engagement is approved by the Audit Committee.  Audit and non-audit services provided by the Company’s auditor were pre-approved by the Audit Committee pursuant to the Audit Committee’s pre-approval policy.

ITEM 16D – EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E – PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

During the last fiscal year, there were no purchases by or on behalf of the Company or any affiliated purchaser of any class of the Company’s equity securities registered under Section 12 of the Securities Exchange Act.

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PART III

ITEM 17- FINANCIAL STATEMENTS

Not applicable.

ITEM 18 - FINANCIAL STATEMENTS

See the Index to Consolidated Financial Statements accompanying this report as an exhibit 15.1.

ITEM 19 - EXHIBITS

Exhibits filed as part of this Annual Report.

1.1 Articles of Arrangement of the Company filed with the Ontario Ministry of Consumer and Business Services on October 31, 2002.(1)

1.2 By-laws of the Company.(2)

2.1 Form of Convertible Secured Note.(6)

  2.2 Registration Rights Agreement, dated as of June 16, 2000, between Bid.Com International and Acqua Wellington Value Fund Ltd.(4)

2.3 Form of Warrant issued or issuable upon exercise of Convertible Secured Notes.(6)

4.1 Salary Protection Letter, dated February 12, 1997, between the Company and Jeffrey Lymburner.(3)

4.2 Option Agreement dated February 19, 2001 between Bid.Com International Inc. and Wendell Willick.(5)

4.3 Amendment to Option Agreement dated May 2, 2001 between Bid.Com International Inc. and Wendell Willick.(5)

4.4 Board Support Agreement, dated as of September 7, 2001 between Bid.Com International Inc. and ADB Systemer ASA.(5)

4.5 Board Representation Agreement, dated as of September 7, 2001 between Bid.Com International Inc. and LimeRock Partners LLC, Jan Pedersen, Sandnes Investering, Rogaland Investering, AIG Private Bank Ltd. and Karstein Gjersvik.(5)

4.6 Employment Agreement, dated as of September 18, 2001 between Bid.Com International Inc. and Jan Pedersen.(5)

4.7 Subscription Agreement, dated as of April 25, 2002, between ADB Systems International Inc. and Stonestreet Limited Partnership.(5)

4.8 Arrangement Agreement, dated as of August 23, 2002, between ADB Systems International Inc. and ADB Systems International Ltd.(1)

4.9 General Conveyance and Assumption Agreement, dated August 23, 2002, between ADB Systems International Inc. and ADB Systems International Ltd.(2)

4.10 Loan Agreement, dated August 23, 2002, and Loan Agreement Amending Agreement entered into as of August 30, 2002 among The Brick Warehouse Corporation, ADB Systems International Inc. and ADB Systems International Ltd.(6)

4.11 Form of Supply Services and Licensing Agreement, dated August 23, 2002, among The Brick Warehouse Corporation, ADB Systems International Inc., and ADB Systems International Ltd.(6)

4.12 Form of General Security Agreement, dated as of April 30, 2002, between ADB Systems International Inc. and each of Stonestreet Limited Partnership and Greenwich Growth Fund Ltd.(6)

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4.13 Form of Subscription Agreement, dated August 30, 2002, between ADB Systems International Inc. and Stonestreet Limited Partnership.(6)

4.14 Form of Subscription Agreement, dated August 30, 2002, between ADB Systems International Inc. and Greenwich Growth Fund Ltd.(6)

4.15 Co-operation Agreement made as of August 23, 2002 between ADB Systems International Inc., ADB Systems International Ltd. and The Brick Warehouse Corporation.(6)

4.16 Agency Agreement dated June 15, 2004 between ADB Systems International Ltd. and First Associates Investments Inc.(7)

4.17 General Security Agreement dated as of May 19, 2004 between ADB Systems International Ltd. and Stonestreet Limited Partnership.(7)

4.18 Form of Subscription Agreement between ADB Systems International Ltd. and First Associates Investments Inc.(7)

4.19 Subscription Agreement dated May 19, 2004 between ADB Systems International Ltd. and Stonestreet Limited Partnership.(7)

4.20 Formof Subscription Agreement for Equity Private Placement(8)

4.21 Form of Subscription Agreement for Series I Convertible Secured Debenture. (11)

4.22 Form of Series I Convertible Secured Debenture.(11)

4.23 Form of Subscription Agreement for Series J Convertible Secured Debenture. (11)

4.24 Form of Series J Convertible Secured Debenture. (11)

4.25 Share Purchase Agreement between ADB Systems International Ltd. and ADB Systemer Holding as, dated May 18, 2006. (9)

4.26 The Audit Committee’s Charter*

4.27 Form of Subscription Agreement for June 15, 2007 Equity Private Placement

4.28 Form of Subscription Agreement for Series K Convertible Secured Debenture

4.29 Form of Series K Convertible Secured Debenture

4.30 Form of Subscription Agreement for Series L Convertible Secured Debenture

4.31 Form of Subscription Agreement for Series M Convertible Secured Debenture

4.32 Form of Subscription Agreement for Series N Convertible Secured Debenture

8.1          List of Subsidiaries*

11.1 Code of Business Conduct and Ethics of Northcore Technologies Inc.(10)

12.1 CEO Certification.*

12.2 Chief Operating Officer.*

13.1 Certification pursuant to 18 U.S.C. Section 1350.*

13.2 Certification pursuant to 18 U.S.C. Section 1350.*

14.1 Report of Independent Registered Public Accounting Firm*

14.2 Schedule of Valuation and Qualifying Accounts*

15.1 Consolidated Financial Statements for the year ended Dec. 31, 2011*

15.2 Form of Subscription Agreement of the Equity Private Placement Closed on Dec.22, 2010

15.3 Form of Subscription Agreement of the Equity Private Placement Closed on Feb.14, 2011*

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*                      Filed herewith

(1) Incorporated by reference from Exhibit 1 to the Company’s Current Report on Form 6-K, Filing No. 1 for the Month of November 2002, filed with the Securities and Exchange Commission on November 5, 2002.

(2) Incorporated by reference from Exhibit 1.2 of Amendment No. 1 to the Company’s Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on March 30, 1999.

(3) Incorporated by reference from Exhibit 3.27 of Amendment No. 1 to the Company’s Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on March 30, 1999.

(4) Incorporated by reference from the Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 23, 2001.

(5) Incorporated by reference from the Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 17, 2002.

(6) Incorporated by reference from Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 20, 2003.

(7) Incorporated by reference from Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on June 30, 2004.

(8) Incorporated by reference from Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on June 30, 2005.

(9) Incorporated by reference from Exhibit 99.6 to the Company’s Filing No. 1 for the Month of May on Form 6-K, File No. 001-14835 filed with the Securities and Exchange Commission on May 31, 2006.

(10) Incorporated by reference from Exhibit 99.6 to the Company’s Filing No. 1 for the Month of March on Form 6-K, File No. 001-14835 filed with the Securities and Exchange Commission on March 30, 2007.

(11) Incorporated by reference from Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on June 25, 2007.

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

NORTHCORE TECHNOLOGIES INC.

 By: “Amit Monga”

Name:  Amit Monga

Title:    Chief Executive Officer

Dated: March 30, 2012                                                                         By:  “Tam Nguyen”  

  Name:  Tam Nguyen

            Title:   Chief Financial Officer

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EX-4.26

EXHIBIT 4.26

NORTHCORE TECHNOLOGIES INC.

(the “Company”)

AUDIT COMMITTEE CHARTER

Originally Adopted by the Board of Directors on May 18, 2005

Organization

There shall be a committee of the Board of Directors (the “Board”) to be known as the Audit Committee (the “Committee”).  The Committee shall be composed of at least three directors and any vacancies shall be filled as soon as practicable.

All of the members of the Committee must be “independent”1 as such term is defined in Multilateral Instrument 52-110 “Audit Committees” (the “Instrument”) (or exempt therefrom), and free of any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee.

All members of the Committee should have a working familiarity with basic finance and accounting practices and be “financially literate”2 as such term is defined in the Instrument.

The Committee members and the Committee chairman shall be appointed by the Board and members of the Committee shall hold office until the next annual meeting of the shareholders or until they cease to be directors of the Company.  Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board on the recommendation of the Committee, and shall be filled by the Board if membership of the Committee falls below three directors.  If the Chair of the Committee is absent from any meeting, the Committee shall select one of the other members of the Committee to preside at the meeting.

The Chair of the Committee shall be responsible for:

(i) developing and setting the agenda for Committee meetings; and

(ii) determining the time, place and frequency of Committee meetings.

Any member of the Committee or the external auditor may call a meeting of the Committee.

The quorum for a meeting of the Committee is a majority of the members. With the exemption of the foregoing quorum requirement, the Committee may determine its own procedures.

 

1 Meaning of Independence pursuant to s. 1.4 of the Instrument –  A member of an audit committee is independent if the member has no direct or indirect material relationship with the issuer and subject to subsections 1.4(2) through (8) of the Instrument.

 

2 Meaning of Financial Literacy pursuant to s. 1.5 of the Instrument - An individual is financially literate if he or she has the ability to read and understand a set of financial statements that presents a breadth and level of complexity of accounting issues that are general comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements.

Notice of the time and place of every meeting shall be given in writing, verbally, by facsimile or by phone to each member of the Committee, the Chairman of the Board, the Chief Executive Officer of the Company and the Chief Financial Officer of the Company, at least 48 hours prior to the time fixed for the meeting.  The notice period may be waived by all members of the Committee. The external auditor of the Company shall be given notice of every meeting of the Committee, and, at the expense of the Company, shall be entitled to attend and be heard thereat. If requested by a member of the Committee, the external auditor shall attend every meeting of the Committee held during the term of office of the external auditor.

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Statement of Policy

The Committee shall provide assistance to the Board in fulfilling their responsibility to the shareholders, potential shareholders and the investment community relating to:

(i) corporate accounting;

(ii)  reporting practices of the Company;

(iii)  the quality and integrity of the financial reports of the Company;

(iv) the Company’s compliance with legal and regulatory requirements, as they relate to the Company’s financial statements;

(v) the qualifications, independence and performance of the external auditor;

(vi) internal controls and disclosure controls;

(v) the performance of the Company’s internal audit function; and

(vi) performing the additional duties set out in this Charter or otherwise delegated to the Committee by the Board.

In so doing, it is the responsibility of the Committee to maintain free and open means of communications between and among the auditors, the directors and the financial management of the Company.

Authority and Responsibilities

In carrying out its responsibilities, the Committee believes its policies and procedures should remain flexible, in order to best react to changing conditions and to ensure that the corporate accounting and reporting practices of the Company are in accordance with all applicable requirements and are of the highest quality.  The duties and responsibilities of the members of the Committee are in addition to those of a member of the Board.

The Company’s external auditor is required to report directly to the Committee.

In carrying out these responsibilities, the audit committee will:

1. General. Provide an open avenue of communication among the directors, auditors and financial management of the Company.

The Committee has the authority:

(i) to engage independent counsel and other advisors as it determines necessary to carry out its duties,

(ii) to set and pay the compensation for any advisors employed by the audit committee, and

(iii) to communicate directly with the internal and external auditors.

69

2. Committee Charter.Review and update the Committee’s charter annually.

3. Auditor Selection. Review and recommend to the Board the auditors to be selected to be nominated for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the Company and review and recommend the compensation of the independent auditor.

4. Auditor Oversight.  Be directly responsible for overseeing the work of the external auditor engaged for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the issuer, including the resolution of disagreements between management and the external auditor regarding financial reporting.

5. Review of Audit. Meet with the auditors, the Board and financial management of the Company to review the scope of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion thereof, review such audit, including any comments or recommendations of the auditors.

6. Appointment of CFO. Review and concur in the appointment, replacement, reassignment, or dismissal of the Chief Financial Officer (the “CFO”) and any other key financial executives involved in the financial reporting process.

7. Auditor Independence. Confirm and assure the independence of the auditors.

8. Review Financial Reporting and Accounting Standards. Review with the auditors, the competitiveness and suitability of the financial and accounting personnel and the adequacy and effectiveness of the financial reporting and accounting standards and controls of the Company, and elicit any recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures are desirable.  Particular emphasis should be given to the adequacy of such internal controls to expose any payments, transactions, or procedures that might be deemed illegal or otherwise improper.   The Committee is also responsible for reviewing the Company’s accounting policy note to ensure completeness and acceptability with GAAP as part of the approval of the financial statements.

9. Internal Audit Function. Review the applicability of an internal audit function of the Company including the independence and authority of its reporting obligations, the proposed audit plans for the coming year and the coordination of such plans with the auditors.

10. Pre-approval of Non-audit Services. Be responsible for the pre-approval of all non-audit services to be provided to the Company or its subsidiary entities by the independent auditor.

11. Review Annual Financial Statements. Review the annual financial statements and MD&A contained in the annual report to shareholders with management and the auditors to determine that the auditors are satisfied with the disclosure and content of the financial statements to be presented to the shareholders. Upon review, recommend the annual financial statements and MD&A for approval by the Board.  Any changes in accounting principles should be reviewed.

12. Review Interim Financials. Review with management and the CFO the interim financial reports and MD&A and recommend that such reports and MD&A be approved by the Board before they are filed with the OSC, SEC or other regulators.

13. Risk and Uncertainty.  The Committee is responsible for reviewing, as part of its approval of the financial statements, uncertainty notes and disclosures, and MD&A disclosures.

70

14. Press Releases and MD&A. Prior to release, review with management and, where necessary, recommend for approval by the Board any press releases and MD&A that disclose annual or interim financial results or that contain other significant financial information.

The Committee is responsible for being satisfied that adequate procedures are in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements, other than the public disclosure referred to in the preceding paragraph, and must periodically assess the adequacy of those procedures.

15. Review Related Party and Conflicts of Interest. Review with management and the independent auditor significant risks or exposures and assess the steps management has taken to minimize such risk to the Company.  This includes a review of related party transactions and conflict of interest transactions and the public disclosure of such transactions, if required.

16. Review of Accounting and Financial Disclosure Policies. Provide sufficient opportunity for the auditors to meet with the members of the audit committee without members of management present.  Among the items to be discussed in these meetings are the auditors’ evaluation of the Company’s accounting policies and the clarity of the financial information and disclosure practices adopted by the Company, and the cooperation that the auditors received during the course of the audit.

17. Audit Resources. Review accounting and financial human resources and succession planning and audit efforts of the Company to assure completeness of coverage, reduction of redundant efforts and the effective use of audit resources.

18. Committee Minutes. Appoint a secretary to the Committee who need not be a director or officer of the Company and will submit the minutes of all meetings of the audit committee to, or discuss the matters discussed at each committee meeting with, the Board.

19. Committee Reports. Report the Committee’s actions to the Board, including recommendations that the Committee may deem appropriate.

20. Review Internal Controls. Be responsible for reviewing the plan and scope of the annual audit with respect to planned reliance and testing of controls, and for reviewing major points contained in the auditor’s management letter resulting from control evaluation and testing.  The Committee is also responsible for receiving reports from management when significant control deviations occur.

The Committee will also establish and review the Company’s procedures for the:

·         Receipt, retention and treatment of complaints regarding accounting, financial disclosure, internal controls or auditing matters; and

·         Confidential, anonymous submission by employees regarding questionable accounting auditing and financial reporting and disclosure matters.

21. Hiring Policies.  Be responsible for reviewing and approving the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Company.

22. Authority to Investigate. Investigate any matter brought to its attention within the scope of its duties, with the power to retain outside counsel, accountants and others for this purpose if, in its judgment, that is appropriate.

71

23. Review of Expense Accounts and Perquisites. Review policies and procedures with respect to expense accounts and perquisites, including their use of Company assets and address the results of any review of these areas with the CFO.

24. Legal and Regulatory Matters. Review legal and regulatory matters that may have a material impact on the Company’s financial statements and on its compliance policies programs and procedures, including compliance with tax and financial reporting laws and regulations, if and when issues arise.

25. Committee Letter for Annual Report. Prepare a letter for inclusion in the annual report that describes the Committee’s composition and responsibilities, and how they were discharged.

26. Other Functions and Powers. The Committee will perform such other functions and exercise such other powers as are assigned by the Company’s charter or bylaws, or the Board or are prescribed from time to time for the audit committee of a reporting company in Parts 2 and 4 of the Instrument and other relevant legislation.

72

EX-8.1

EXHIBIT 8.1

LIST OF SUBSIDIARIES

Unless otherwise indicated, Northcore Technologies Inc. (“Northcore”), or one of its subsidiaries, owns 100 percent, except as otherwise noted, of the outstanding capital stock of the following companies:

Name of Subsidiary	Country of Incorporation
ADB Systems USA, Inc.	USA (Delaware)
GE Asset Manager, LLC(1)	USA (Delaware)

___________________

(1)    Northcore owns 50 percent of the membership interest of GE Asset Manager, LLC.

73

EX-12.1

EXHIBIT 12.1

Certification

I, Amit Monga, certify that:

1.  I have reviewed this annual report on Form 20-F of Northcore Technologies Inc.

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

Dated:  March 30, 2012	“Amit Monga”
	Amit Monga
	Chief Executive Officer

74

EX-12.2

EXHIBIT 12.2

Certification

I, Tam Nguyen, certify that:

1.  I have reviewed this annual report on Form 20-F of Northcore Technologies Inc.

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

Dated:  March 30, 2012	“Tam Nguyen”
	Tam Nguyen
	Chief Financial Officer

75

EX-13.1

EXHIBIT 13.1

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, being the Chief Executive Officer of Northcore Technologies Inc. (the “Company”) hereby certifies that to the best of my knowledge:

(1) The Annual Report on Form 20-F of the Company for the fiscal year ended December 31, 2011 (the “Report”) which this certification accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended.

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as at, and for the fiscal year ended on, December 31, 2011.

              A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated:  March 30, 2012	“Amit Monga”
	Amit Monga
	Chief Executive Officer

This certification is being furnished solely to accompany this Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise, and is not to be incorporated by reference into any filing of the Company unless such incorporation is expressly referenced within.

76

EX-13.2

EXHIBIT 13.2

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, being the Chief Financial Officer of Northcore Technologies Inc. (the “Company”) hereby certifies that to the best of my knowledge:

(1) The Annual Report on Form 20-F of the Company for the fiscal year ended December 31, 2011 (the “Report”) which this certification accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended.

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as at, and for the fiscal year ended on, December 31, 2011.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated:  March 30, 2012	“Tam Nguyen”
	Tam Nguyen
	Chief Financial Officer

This certification is being furnished solely to accompany this Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise, and is not to be incorporated by reference into any filing of the Company unless such incorporation is expressly referenced within.

EX-14.1

EXHIBIT 14.1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Northcore Technologies Inc.

Under date of March 20, 2012, we reported on the consolidated statement of financial position of Northcore Technologies Inc. as of December 31, 2011, December 31, 2010 and January 1, 2010  and the related consolidated statement of operations and comprehensive loss, shareholders’ equity and cash flows for the years ended December 31, 2011 and December 31, 2010, as included in the annual report on Form 20-F. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in Exhibit 14.2. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audit.

In our opinion, the financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

Chartered Accountants, Licensed Public Accountants

Toronto, Canada

March 30, 2012

EX-14.2

EXHIBITS 14.2

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEAR ENDED DECEMBER 31, 2011

Description	Balance at beginning of Year	Additions		Deductions	Balance at end of Year
		Charged to costs and expenses	Charged to other Account
(in thousands of Canadian dollars)
Allowance for doubtful debts
Year 2009	$11	$58	-	$69	-
Year 2010	-	-	-	-	-
Year 2011	-	-	-	-	-

79

EX-15.1

EXHIBIT 15.1

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Consolidated Financial Statements for the years ended December 31, 2011, and 2010

Management’s Report	81
Report of Independent Registered Public Accounting Firm	82
Consolidated Statement of Financial Position as at December 31, 2011 and 2010 and January 1, 2010	83
Consolidated Statements of Operations and Comprehensive loss for the years ended December 31, 2011 and 2010	84
Consolidated Statements of Deficit for the years ended December 31, 2011 and 2010	85
Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010	86
Notes to Consolidated Financial Statements	87

80

MANAGEMENT’S REPORT

March 20, 2012

Preparation of the consolidated financial statements accompanying this annual report and the presentation of all other information in this report is the responsibility of management.  The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and reflect management’s best estimates and judgments.  All other financial information in the report is consistent with that contained in the consolidated financial statements.  The Company maintains appropriate systems of internal control, policies and procedures which provide management with reasonable assurance that assets are safeguarded and that financial records are reliable and form a proper basis for preparation of financial statements.

The Board of Directors ensures that management fulfills its responsibilities for financial reporting and internal control through an Audit Committee which is composed of non-executive directors. The Audit Committee reviewed the consolidated financial statements with management and external auditors and recommended their approval by the Board of Directors.  The consolidated financial statements have been audited by Collins Barrow Toronto LLP, Chartered Accountants.  Their report stating the scope of their audit and their opinion on the consolidated financial statements is presented below.

Amit Monga     CEO     Tam Nguyen CFO 

81

INDEPENDENT AUDITORS' REPORT

To the Shareholders of Northcore Technologies Inc.

We have audited the accompanying consolidated financial statements of Northcore Technologies Inc., and its subsidiary, which comprise the consolidated statements of financial position as at December 31, 2011 and 2010 and January 1, 2010 and the consolidated statements of operations and comprehensive loss, changes in shareholders’ equity and cash flows for the years ended December 31, 2011 and 2010 and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting oversight Board. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Northcore Technologies Inc., and its subsidiary, as at December 31, 2011 and 2010 and January 1, 2010, and its financial performance and its cash flows for the years ended December 31, 2011 and 2010 in accordance with International Financial Reporting Standards.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 2 in the consolidated financial statements which describes the material uncertainties that may cast significant doubt about Northcore Technologies Inc.'s, and its subsidiary, ability to continue as a going concern.

Licensed Public Accountants

Chartered Accountants

March 20, 2012

Toronto, Ontario

82

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 As at December 31, 2011, December 31, 2010 and January 1, 2010

(in thousands of Canadian dollars)

	December 31, 2011			December 31, 2010			January 1, 2010
				(Note 20)			(Note 20)
ASSETS
CURRENT
Cash	$	1,760		$	51		$	210
Accounts receivable		187			151			214
Deposits and prepaid expenses		40			36			35
		1,987			238			459
INVESTMENT IN GE ASSET MANAGER, LLC (Note 4)		24			15			31
INVESTMENT IN SOUTHCORE (Note 4)		-			-			544
CAPITAL ASSETS (Note 5)		91			31			47
INTANGIBLE ASSETS (Note 6)		807			-			-
	$	2,909		$	284		$	1,081
LIABILITIES
CURRENT
Accounts payable	$	239		$	400		$	331
Accrued liabilities		173			219			161
Deferred revenue		3			3			3
Notes payable (Note 7)		-			530			156
Current portion of secured subordinated notes (Note 8)		-			501			-
		415			1,653			651
SECURED SUBORDINATED NOTES (Note 8)		-			204			658
		415			1,857			1,309
SHAREHOLDERS’ EQUITY (DEFICIENCY)
Share capital (Note 10)		117,359			110,767			110,240
Contributed surplus		3,586			3,462			3,071
Warrants (Note 11)		836			834			490
Stock options (Note 12)		3,690			1,949			1,435
Conversion feature on secured subordinated notes (Note 8)		-			458			547
Deficit		(122,977	)		(119,043	)		(116,011	)
		2,494			(1,573	)		(228	)
	$	2,909		$	284		$	1,081

Going concern (Note 2)

Commitments and contingencies (Note 16)

Subsequent event (Note 19)

  Amit Monga                                               Director               Christopher Bulger  Director

83

See accompanying notes to consolidated financial statements.

84

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the years ended December 31, 2011 and 2010

(in thousands of Canadian dollars, except per share amounts)

	2011			2010
				(Note 20)
Revenues (Note 13)	$	785		$	582
Other income:
Income from GE Asset Manager, LLC (Note 4)		69			43
Operating expenses:
General and administrative		1,670			1,440
Customer service and technology		726			734
Sales and marketing		260			188
Stock-based compensation (Note 12 (b))		1,873			517
Depreciation		32			22
Total operating expenses		4,561			2,901
Loss from operations		(3,707	)		(2,276	)
Finance costs:
Cash interest expense (Note 8)		103			154
Accretion of secured subordinated notes (Note 8)		124			115
Total finance costs		227			269
Other expenses:
Gain on settlement of debt (Note 7 (c))		-			(57	)
Provision for impaired investment (Note 4)		-			544
Total other expenses		-			487
LOSS AND COMPREHENSIVE LOSS FOR THE YEAR	$	(3,934	)	$	(3,032	)
LOSS PER SHARE, BASIC AND DILUTED	$	(0.020	)	$	(0.019	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED (000’s)		196,180			162,899

SUPPLEMENTAL DISCLOSURE OF OPERATING EXPENSES – See Note 17 (b)

See accompanying notes to consolidated financial statements

85

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY As at December 31, 2011 and 2010 (in thousands of Canadian dollars)
	Share Capital			ContributedSurplus		Warrants			Stock Options			Other Options		Conversion Feature on Secured Notes			Deficit			Total
Opening balance - January 1, 2010      (Note 20)	$	110,240		$	3,071	$	490		$	1,435		$	-	$	547		$	(116,011	)	$	(228	)
Changes:
Conversion of notes		117			-		41			-			-		(89	)		-			69
Equity private placement		461			-		164			-			-		-			-			625
Equity line of credit		(308	)		-		562			-			-		-			-			254
Exercise of warrants		202			-		(32	)		-			-		-			-			170
Expiry of warrants		-			391		(391	)		-			-		-			-			-
Payment of interest		48			-		-			-			-		-			-			48
Exercise of stock options		7			-		-			(3	)		-		-			-			4
Stock-based compensation		-			-		-			517			-		-			-			517
Loss for the period		-			-		-			-			-		-			(3,032	)		(3,032	)
Closing balance – December 31, 2010 (Note 20)	$	110,767		$	3,462	$	834		$	1,949		$	-	$	458		$	(119,043	)	$	(1,573	)

	Share Capital		ContributedSurplus		Warrants			Stock Options			Other Options			Conversion Feature on Secured Notes			Deficit			Total
Opening balance - January 1, 2011	$	110,767	$	3,462	$	834		$	1,949		$	-		$	458		$	(119,043	)	$	(1,573	)
Changes:
Conversion of notes		1,081		-		207			-			-			(458	)		-			830
Equity private placement		456		-		149			-			108			-			-			713
Acquisition of intellectual properties		630		-		-			-			-			-			-			630
Warrants issued for debt settlement		-		-		200			-			-			-			-			200
Exercise of warrants		3,854		-		(477	)		-			-			-			-			3,377
Exercise of compensation options		241		-		47			-			(108	)		-			-			180
Expiry of warrants		-		124		(124	)		-			-			-			-			-
Payment of interest		1		-		-			-			-			-			-			1
Exercise of stock options		329		-		-			(132	)		-			-			-			197
Stock-based compensation		-		-		-			1,873			-			-			-			1,873
Loss for the period		-		-		-			-			-			-			(3,934	)		(3,934	)
Closing balance – December 31, 2011	$	117,359	$	3,586	$	836		$	3,690		$	-		$	-		$	(122,977	)	$	2,494

See accompanying notes to consolidated financial statements.

86

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2011 and 2010

(in thousands of Canadian dollars)

	2011			2010
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES				(Note 20)
OPERATING
Loss for the year	$	(3,934	)	$	(3,032	)
Adjustments for:
Income from GE Asset Manager, LLC (Note 4)		(69	)		(43	)
Stock-based compensation		1,873			517
Depreciation		32			22
Cash interest expense		103			154
Accretion of secured subordinated notes		124			115
Gain on settlement of debt (Note 7 (c))		-			(57	)
Provision for impaired investment (Note 4)		-			544
		(1,871	)		(1,780	)
Changes in non-cash operating working capital (Note 17)		(19	)		200
		(1,890	)		(1,580	)
INVESTING
Cash distribution from investment in GE Asset Manager, LLC (Note 4)		60			60
Purchase of capital assets		(92	)		(6	)
Acquisition of intangible assets (Note 6)		(177	)		-
		(209	)		54
FINANCING
Repayment of notes payable (Note 7)		(530	)		(465	)
Proceeds from issuance of notes payable (Note 7)		-			859
Issuance of equity and compensation units (Note 10)		1,018			1,008
Share issuance costs (Note 10 (d))		(125	)		(129	)
Warrants exercised (Note 11 (c))		3,377			170
Options exercised (Notes 12 (c))		197			4
Interest paid		(129	)		(80	)
		3,808			1,367
NET CASH INFLOW (OUTFLOW) DURING THE YEAR		1,709			(159	)
CASH, BEGINNING OF YEAR		51			210
CASH, END OF YEAR	$	1,760		$	51

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES – See Note 17 (a)

See accompanying notes to consolidated financial statements.

87

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

1. DESCRIPTION OF BUSINESS

Northcore Technologies Inc. (“Northcore” or the “Company”) provides enterprise level software products and services that enable its customers to purchase, manage and dispose of capital equipment. Utilizing award-winning, multi-patented technology, as well as powerful, holistic Social Commerce tools, Northcore's solutions support customers throughout the entire asset lifecycle.

Northcore owns 50 percent of GE Asset Manager, LLC (also referred to as “GE Asset Manager”), a joint business venture with GE Capital Corporation, through its business division GE Commercial Finance, Capital Solutions (“GE Commercial Finance”).

Northcore’s shares trade on both the Toronto Stock Exchange (TSX: NTI) and the OTC Bulletin Board (OTCBB: NTLNF).  The principal and registered office of the Company is located at 302 The East Mall, Suite 300, Toronto, Ontario, Canada, M9B 6C7.

2. GOING CONCERN

While the accompanying consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, certain adverse conditions and events cast substantial doubt upon the validity of this assumption.  Financial statements are required to be prepared on a going concern basis unless management either intends to liquidate the Company or cease trading or has no realistic alternative but to do so within the foreseeable future.  The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of operations.  The Company has not yet realized profitable operations and has relied on non-operational sources of financing to fund operations.  The Company’s ability to continue as a going concern will be dependent on management’s ability to successfully execute its business plan including a substantial increase in revenue as well as maintaining operating expenses at or near the same level as 2011.  The Company cannot provide assurance that it will be able to execute on its business plan or assure that efforts to raise additional financings will be successful.

These consolidated financial statements do not include adjustments or disclosures that may result from the Company’s inability to continue as a going concern.  If the going concern assumption was not appropriate for these consolidated financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, and the reported losses and the balance sheet classifications used.

The continued existence beyond 2011 is dependent on the Company’s ability to increase revenue from existing products and services, and to expand the scope of its product offering which entails a combination of internally developed software and business ventures with third parties, and to raise additional financing.

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements represent the first annual financial statements of the Company and its subsidiary prepared in accordance with International Financial Reporting Standards (IFRS).  The Company adopted IFRS in accordance with IFRS 1, First-time Adoption of International Reporting Standards.  The first date at which IFRS was applied was January 1, 2010.  In accordance with IFRS, the Company has:

· Provided comparative financial information;

· Applied the same accounting policies throughout all periods presented;

· Retrospectively applied all effective IFRS standards as of December 31, 2011, as required; and

· Applied certain mandatory exceptions and optional exemptions as applicable for first time IFRS adopters.

88

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

These consolidated financial statements have been prepared on a historical cost basis other than certain financial assets measured at fair value.  These statements were authorized for issuance by the Board of Directors of the Company on March 20, 2012.

The Company’s consolidated financial statements were previously prepared in accordance with Canadian generally accepted accounting principles (“previous GAAP”).  The adoption of IFRS has not had a material impact on the Company’s operations, strategic decisions, cash flow and capital expenditures.

A summary of the significant changes to Northcore's accounting policies is disclosed in Note 20 along with reconciliations presenting the impact of the transition to IFRS for the Consolidated Statements of Financial Position as at January 1, 2010 and December 31, 2010, the Consolidated Statements of Operations and Comprehensive Loss and the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2010.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, ADB USA Inc.  Investments in associates and interests in joint ventures are accounted for using the equity method.  Intercompany balances and transactions are eliminated on consolidation.

Foreign Currencies

The Consolidated financial statements are presented in Canadian dollars, which is the Company’s functional and presentation currency.  The functional currency of the Company’s foreign subsidiary is the Canadian dollar.  The Company translates monetary assets and liabilities at the exchange rates in effect on the balance sheet date.  Non-monetary assets are translated at historic exchange rates.  Revenue and expense amounts are translated using the average monthly exchange rates except depreciation of capital assets, which is translated at historic exchange rates.  Gains and losses from foreign exchange translations are included in the statement of operations.

Assets and liabilities of entities with functional currencies other than Canadian dollars are translated at the period end rates of exchange, and the results of their operations are translated at average rates of exchange for the period.  The resulting translation adjustments are included in accumulated other comprehensive income in shareholders’ equity.

Investments

On May 12, 2011, the IASB issued the new standard, IFRS 11, Joint Arrangements.  The effective date for this standard is January 1, 2013, with early adoption permitted.  This standard requires investments in joint ventures to be accounted using the equity method in accordance with IAS 28, Investments in Associates.

Prior to January 1, 2010, the consolidated financial statements of the Company reflected the Company’s pro rata share of the joint venture’s assets, liabilities, and results of operations in accordance with the proportionate consolidation method of accounting.  On January 1, 2010, the Company early adopted IFRS 11, Joint Arrangements and IFRS 12, Disclosure of Interests in Other Entities, and accounted for the investment using the equity method of accounting in accordance with IAS 28 (as amended), Investments in Associates.  As a result of the early adoption, assets, liabilities, income and expense accounts have been restated to reflect the investment using the equity method of accounting since its inception (See Note 20).  Additionally, as required under IFRS 11, the Company was required to early adopt IFRS 10 and IFRS 12, IAS 27 (as amended) and IAS 28 (as amended).

Equity method investees are entities over which the Company has significant influence, but not control.  Generally, the Company has a shareholding of between 20 percent and 50 percent of the voting rights in its equity method investees.  Investments in equity method investees are accounted for using the equity method as follows:

· Investments are initially recognized at cost;

· The Company’s share of post-acquisition profits or losses is recognized in the income statement and is adjusted against the carrying amount of the investments;

· When the Company’s share of losses equals or exceeds its interest in the investee, the Company does not recognize further losses, unless it has incurred obligations or made payments on behalf of the investee; and

· Gains and losses on transactions between the Company and its equity method investees are eliminated to the extent of the Company’s interest in these entities.

89

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

Capital Assets and Depreciation

Capital assets are recorded at cost less accumulated depreciation.  Depreciation is calculated on a straight-line basis in amounts sufficient to amortize the cost of capital assets over their estimated useful lives as follows:

Computer hardware                                           3 years

Computer software                                            1 year or life of the license

Furniture and fixtures                                        5 years

Leasehold improvements                                  Shorter of useful life or life of the lease

Intangible Assets

Upon acquisition, identifiable intangible assets are recorded at fair value and are carried at cost less accumulated amortization.  Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives as follows:

Intellectual Properties                                                10 years

Residual values and useful lives are reviewed at the end of each reporting period and adjusted if appropriate.

Research and Product Development Costs

The Company incurs costs associated with the design and development of new products.  Expenditures during the research phase are expensed as incurred.  Expenditures during the development phase are capitalized if the Company can demonstrate each of the following criteria are met: i) the technical feasibility of completing the intangible asset so that it will be available for use or sale, ii) its intention to complete the intangible asset and use or sell it, iii) its ability to use or sell the intangible asset, iv) how the intangible asset will generate probable future economic benefits, v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and vi) its ability to measure reliably the expenditure attributable to the intangible asset during its development; otherwise they are expensed as incurred.  To date, no product development costs have been capitalized.

The costs of software internally developed for client applications through e-commerce enabling agreements and software licensing are expensed as incurred.  The costs associated with maintaining computer software programs are also recognized as an expense as incurred.

Impairment

Impairments are recorded when the recoverable amount of assets are less than their carrying amounts.  The recoverable amount is the higher of an asset’s fair value less cost to sell or its value in use.  Impairment losses, other than those relating to goodwill, are evaluated for potential reversals when events or changes in circumstances warrant such consideration.

The carrying values of capital and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

The carrying values of non-financial assets with finite lives, such as computer hardware and software, are assessed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.  In addition, long-lived assets that are not amortized, such as equity investments, are subject to an annual impairment assessment.  For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

90

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

Stock-Based Compensation

The Company has a stock option plan for directors, officers and employees.  Each tranche in an award is considered a separate award with its own vesting period and grant date fair value.  The estimated fair value of each tranche is measured at the date of the grant using the Cox-Rubinstein binomial valuation model.  Compensation expense is recognized over the tranche’s vesting period, based on the number of awards expected to vest, with the offset credited to stock options.  Performance based options are expensed upon achievement of specific criteria.  The number of awards expected to vest is reviewed quarterly, with any impact being recognized immediately.  When options are exercised, the amount received is credited to share capital and the fair value attributed to these options is transferred from stock options to share capital.

For equity-settled share-based payment transactions, the Company measures the goods and services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably, in which cases, the Company measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instrument granted.

Financial Instruments with Separate Components

The secured subordinated notes are segregated into their debt and equity components at the date of issue.  The fair value of the debt component was calculated using market rates at the time the financial instrument was issued.  The remaining component, representing the value ascribed to the convertible feature, has been included in equity.  The difference between the face value and the ascribed value of the debt, is accreted to the original face value of the secured subordinated notes over the respective terms of the notes and charged to the consolidated statements of comprehensive income and loss as interest expense based on the effective interest method.

Financial Instruments

Financial instruments are classified into one of these five categories: financial assets or liabilities at fair value through profit or loss (FVTPL); held-to-maturity; loans and receivables; available-for-sale financial assets; or financial liabilities measured at amortized cost.  All financial instruments, including derivatives, are measured in the balance sheet at fair value except for loans and receivables, held-to-maturity investments and other financial liabilities, which are measured at amortized cost using the effective interest rate method.  Subsequent measurement and changes in fair value will depend on their initial classification, as follows: financial assets or liabilities at FVTPL are measured at fair value and changes in fair value are recognized in net income; available-for-sale financial instruments are measured at fair value with changes in fair value recorded in other comprehensive income until the investment is de-recognized or impaired at which time the amounts would be recorded in net income.

Transaction costs associated with FVTPL financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

All financial liabilities are recognized initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs.  Financial liabilities are classified as other financial liabilities, and are subsequently measured at amortized cost using the effective interest rate method.

The Company designated its accounts receivable as loans and receivables, which are measured at amortized cost.  Accounts payable, accrued liabilities, notes payable and secured subordinated notes are classified as financial liabilities measured at amortized cost.  Cash is designed as FVTPL.  The Company had neither available-for-sale, nor held-to-maturity instruments during the years ended December 31, 2011 and 2010.

The Company had no “other comprehensive income or loss” transactions during the years ended December 31, 2011 and 2010 and no opening or closing balances for accumulated other comprehensive income or loss.

Revenue Recognition

The Company’s revenues are derived from services (application development activities, software implementation and license fees, training and consulting, product maintenance and customer support) and application hosting fees.  Fees for services are billed separately from licenses of the Company’s products.

Revenue from the rendering of services is recognized when the following criteria are met:

91

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

· The amount of revenue can be measured reliably;

· The stage of completion can be measured reliably;

· The receipt of economic benefits is probable; and

· The costs incurred or to be incurred can be measured reliably.

Revenue from the sale of goods is recognized when the following criteria are met:

· The amount of revenue can be measured reliably;

· The risks and rewards of ownership have been transferred to the buyer;

· The receipt of economic benefits is probable; and

· The costs incurred or to be incurred can be measured reliably.

In addition to the above general principles, the Company applies the following specific revenue recognition policies:

·Application Development Fees

Typically, development of applications for the Company’s customers are provided based on a predetermined fixed hourly rate basis.  Revenue is recognized as time is incurred throughout the development process.

·Implementation, Training and Consulting Service Fees

The Company receives revenue from implementation of its product offerings, consulting services and training services.  Customers are charged a fee based on time and expenses.  Revenue from implementation, consulting service and training fees is recognized as the services are performed or deferred until contractually defined milestones are achieved or until customer acceptance has occurred, as the case may be, for such contracts.

·Product Maintenance and Customer Support Fees

The Company receives revenue from maintaining its products and the provision of on-going support services to customers.  The maintenance and support fees are typically equal to a specified percentage of the customers’ license fee.  If associated with the fixed fee license model, the maintenance revenues received are recorded as deferred revenue and recognized on a straight-line basis over the contract period.

Services revenue from maintenance and support is recognized when the services are performed.  Maintenance and support revenues paid in advance are non-refundable and are recognized on a straight-line basis over the term of the agreement, which typically is 12 months.

·Hosting Fees

The Company earns revenue from the hosting of customer websites and applications.  Under existing hosting contracts, the Company charges customers a recurring periodic flat fee.  The fees are recognized as the hosting services are provided.

·Multiple Deliverable Revenue Arrangements

The Company also enters into transactions that represent multiple elements arrangements, which may include one or more of the following: software, application development, maintenance, hosting, and/or other professional service offerings.  These multiple element arrangements are assessed to determine whether they can be sold separately in order to determine if they can be treated as more than one unit of accounting or element for the purpose of revenue recognition.  The Company allocates the arrangement fee, in a multiple element transaction, to the separate elements based on their relative selling prices, as indicated by vendor-specific objective evidence or third-party evidence of selling price, and if both are not available, estimated selling prices are used.  The allocated portion of the arrangement which is undelivered is then deferred.

Loss Per Share

For all years presented, all stock options, convertible debentures and warrants are anti-dilutive, therefore diluted loss per share is equal to basic loss per share.  The basic loss per share calculation is based on the weighted average number of shares outstanding during the year.

92

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

Income Taxes

The Company accounts for income taxes in accordance with the asset and liability method.  The determination of deferred tax assets and liabilities is based on differences between the financial statement and income tax bases of assets and liabilities, using substantively enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets are recorded to recognize tax benefits only to the extent that, based on available evidence, it is probable that they will be realized.

Use of Significant Accounting Estimates

The preparation of consolidated financial statements in conformity with IFRS 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 date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting years.  These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future.  These estimates have been applied in a manner consistent with that in the prior periods and there are no known trends, commitments, events or uncertainties that we believe will materially affect the assumptions utilized in these consolidated financial statements.  Significant estimates made by the Company include the determination of the recoverable amount of intangible assets, the useful lives of property and equipment and other assets for depreciation purposes, amounts recorded as accrued liabilities, valuation of stock-based payments, the fair value assigned to the debt and equity components of the secured subordinated notes and the expected requirements for non-operational funding.  Actual results could differ from these estimates.

The Company determines the fair value stock-base compensation using the Cox-Rubinstein binomial valuation model, which requires management to make assumptions regarding the volatility rate, risk free interest rate, average share price, expect term and dividend yield.

RECENT ACCOUNTING PRONOUNCEMENTS

The following accounting standards, amendments and interpretations have been issued but are not yet effective for the Company. Management is currently assessing the impact of the new standards on the Company’s accounting policies and financial statement presentation.

· IFRS 9, Financial Instruments was issued by the IASB in October 2010 and will replace IAS 39, Financial Instruments: Recognition and Measurement.  IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39.  The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9.  The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39.  IFRS 9 is effective for annual periods beginning on or after January 1, 2013.  The IASB has proposed to move the effective date of IFRS 9 to January 1, 2015.

· IFRS 13, Fair Value Measurement was issued by the IASB in May 2011.  IFRS 13 establishes new guidance on fair value measurement and disclosure requirements for IFRSs and U.S. generally accepted accounting principles (GAAP).  The guidance, set out in IFRS 13 and an update to Topic 820 in the FASB’s Accounting Standards Codification (formerly referred to as SFAS 157), completes a major project of the boards’ joint work to improve IFRSs and US GAAP and to bring about their convergence.  The standard is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

· IAS 1, Presentation of Financial Statements was amended by the IASB in June 2011 in order to align the presentation of items in other comprehensive income with US GAAP standards. Items in other comprehensive income will be required to be presented in two categories: items that will be reclassified into profit or loss and those that will not be reclassified.  The flexibility to present a statement of comprehensive income as one statement or two separate statements of profit and loss

and other comprehensive income remains unchanged.  The amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012.

93

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

4. INVESTMENTS

GE Asset Manager, LLC

On September 23, 2003 the Company established a joint venture with GE Commercial Finance, with each entity holding a 50 percent interest in the joint venture.  The joint venture was formed as a Delaware Limited Liability Company and operates under the name of GE Asset Manager, LLC (“GEAM”).  The principal office of GEAM is located at 44 Old Ridgebury Road, Danbury, Connecticut.  The joint business venture develops and markets asset management technology to customers in a broad range of industries.

During the year ended December 31, 2011, the Company’s share of income from GEAM and cash distributions were $69,000 (2010 - $43,000) and $60,000 (2010 - $60,000), respectively.

The following is a summary of the statement of financial position as at December 31, 2011, December 31, 2010 and January 31, 2010, and the statement of operations and cash flows of GEAM, LLC for the years ended December 31, 2011 and 2010.

GE ASSET MANAGER, LLC	December 31, 2011		December 31, 2010		January 1, 2010
		(in thousands)
Statement of Financial Position
Assets     Cash		$          91		$          80	$          30
Accounts receivable		13		14	30
Total assets		$        104		$          94	60
Liabilities and Equity
Accounts payable		-		9	-
Deferred revenue		55		56	-
Equity		49		29	60
Total liabilities and equity		$        104		$          94	$           60
Statement of Operations
Operating revenue		$        147		$        104
Operating expenses		(9)		(18)
Net income		$        138		$          86
Statement of Cash Flows
Operating activities		$          11		$          50
Investing activities		-		-
Financing activities		-		-
Net cash inflow		$          11		$          50

Southcore Technologies Limited (“Southcore”)

During the year ended December 31, 2009, the Company entered into a strategic partnership with Pan Pacific Ltd. through the shared ownership of Southcore.  Northcore issued 7,500,000 common shares from treasury to Pan Pacific in exchange for a 40 percent interest in Southcore.  The shares were to be delivered in two tranches of 3,750,000 shares each.  The first tranche was delivered on the closing date of the transaction on June 24, 2009.  The second tranche was to be delivered upon the achievement of certain performance criteria.

The investment was recorded using the equity method of accounting.  The fair value of the first tranche in the

amount of $544,000 was calculated as 3,750,000 shares multiplied by the closing trading price of the Company’s common shares on the Toronto Stock Exchange (“TSX”) immediately preceding the closing date.  The contingent 3,750,000 shares were to be issued to Pan Pacific and recorded as an addition to the investment upon the satisfaction of performance criteria as specified in the agreement.  There were no significant operations in Southcore or gain or loss from equity investment recorded during the period from inception to December 31, 2010.

94

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

During the year ended December 31, 2010, the Company wrote off the investment in Southcore as the Company determined that there was an other than temporary decline in the value of the investment.  The contingent shares were cancelled and the investment in Southcore was wound-up during the year ended December 31, 2010.

5. CAPITAL ASSETS

The following summarizes the change in carrying values of capital assets:

	Computer Hardware	Computer Software	Furniture  and Fixtures		Leasehold Improvements		Total
	(in thousands)
Cost:
January 1, 2010	$        133	$        15		$           -	$          27	$       175
Additions	6	-		-	-	6
December 31, 2010	$        139	$        15		$           -	$          27	$       181
Additions	38	-		11	43	92
December 31, 2011	$        177	$        15		$        11	$          70	$       273
Accumulated depreciation:
January 1, 2010	$        100	$          1		$           -	$          27	$       128
Depreciation for the year	14	8		-	-	22
December 31, 2010	$        114	$          9		$           -	$          27	$       150
Amortization for the year	20	6		1	5	32
December 31, 2011	$        134	$        15		$          1	$          32	$       182
Carrying amount:
January 1, 2010	$          33	$        14		$           -	$              -	$         47
December 31, 2010	$          25	$          6		$           -	$              -	$         31
December 31, 2011	$          43	$           -		$        10	$           38	$         91

6. INTANGIBLE ASSETS

On December 28, 2011, the Company acquired all the Intellectual Property of Discount This Holdings Limited (“Discount This”), commonly known as the “Discount This Group Purchase Platform”.  In consideration of this asset acquisition, the purchase price of approximately $630,000 was satisfied by the issuance of 4,500,000 common shares of Northcore at $0.14 per share.  In addition, direct acquisition costs in the amount of $177,000, comprised of consulting, legal and filing fees, were capitalized upon this close of the transaction.

Management has determined the useful life of the Discount This Group Purchase Platform to be 10 years.  No amortization has been taken as at December 31, 2011, as the platform is still in the development phase and not ready for its intended use.  The Company intends to allocate additional resources to enhance and add additional functionality to the platform prior to licensing it to third parties.

95

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

In addition, if the Intellectual Property is sold or licensed to a third party within the two year period following the Closing Date, Discount This will be entitled to an additional cash payment of 10 percent of the associated proceeds.

7. NOTES PAYABLE

a) The Series H notes payable matured on December 31, 2009 and were secured as per the Series H security terms; however, the final installment had not been remitted and the Company was in negotiation with the debt holders over the timing of the final settlement amount of $30,000.

During the year ended December 31, 2010, the Company paid $3,000 and accrued additional interest in the amount of $3,000.  The balance outstanding as at December 31, 2010 was $30,000.

During the year ended December 31, 2011, the Company paid this balance in full.

b) On October 28, 2010, the Company received an operating loan from a private institution in the amount of $500,000.  The loan bore interest at 18.75 percent, matured in six months from the closing date and was secured by a general security agreement and common shares pledged by certain shareholders of the Company.  The balance outstanding as at December 31, 2010 was $500,000.

During the year ended December 31, 2011, the Company paid this balance in full.

During the year ended December 31, 2010, the Company received operating loans from private investors in the amount of $359,000.  The loans were unsecured, bore interest at 12 percent and were due on demand.  The Company repaid the loans in full totaling $376,000, which included accrued interest in the amount of $17,000.

c) The Series G notes payable matured on December 31, 2009 and were secured as per the Series G security terms; however, the final installment had not been remitted and the Company was in negotiation with the debt holders over the timing of the final settlement amount of $126,000.

During the year ended December 31, 2010, the Company reached a settlement agreement with the Series G debt holders by paying $86,000 in full settlement of the outstanding balance of $143,000, which included accrued interest of $17,000 recorded in 2010.  As a result of this transaction, the Company recorded a gain on debt settlement of notes payable of $57,000.

8. SECURED SUBORDINATED NOTES

a) The following summarizes the face and carrying values of the secured subordinated notes.

Secured Subordinated Notes	December 31, 2011		December 31, 2010		January 1, 2010
	Face Value	Carrying Value	Face Value	Carrying Value	Face Value	Carrying Value
	(in thousands)
Series N (Note 8 (b))	$            -	$            -	$       600	$       501	$       600	$       423
Series L (Note 8 (c))	-	-	360	204	525	235
Closing balance	$            -	$            -	$       960	$       705	$    1,105	$       658
Current portion of notes	$            -	$            -	$       600	$       501	$            -	$            -
Long-term portion of notes	$            -	$            -	$       360	$       204	$    1,105	$       658

b) During the year ended December 31, 2008, the Company issued Series N secured subordinated notes with a face value of $600,000.  The Series N notes matured on December 12, 2011, had an annual interest rate

96

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

of 10 percent and were convertible into equity units at a price of $0.10 per unit.  Interest was payable in cash upon the earlier of each quarter end, conversion, or maturity of the notes.   Each equity unit consisted of one common share and one share-purchase warrant with an exercise price of $0.15 per warrant.  The warrants expired on December 12, 2011.  Dundee Securities Corporation received a brokerage commission of four percent on a portion of the private placement.  The afore-mentioned conversion provisions were subject to a four month and one day hold period.  The Series N notes were secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

As required by IFRS, the Company separated the liability and equity components of the Series N secured subordinated notes.  The Company determined the fair value of the liability component of the Series N notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing, and has been classified as long-term debt.  The remaining component, representing the value ascribed to the conversion feature, has been included in equity.  The Company determined the fair value of the share and warrant conversion feature at the issue date of the Series N notes using the Cox-Rubinstein binomial valuation model.  Financing costs in the amount of $8,000 were allocated to the liability and equity components in proportion to the allocation of proceeds.  The resulting fair values of the liability component of the notes and the conversion features of the units, comprised of shares and attached warrants, was $360,000, $133,000 and $107,000, respectively.  The liability component will be accreted to $600,000 over the term of the Series N notes through the recording of a non-cash interest expense until such date at which the underlying notes are converted into common shares.

During the year ended December 31, 2011, $600,000 (face value) of the Series N notes (book value of $592,000) were converted into 6,000,000 equity units represented by 6,000,000 common shares valued at $131,000 and 6,000,000 warrants valued at $106,000.

c) During the year ended December 31, 2008, the Company issued Series L secured subordinated notes with a face value of $525,000.  The Series L notes mature on March 31, 2013, have an annual interest rate of 10 percent and are convertible into equity units at a price of $0.10 per unit.  Interest for the first two years is payable in shares upon the earlier of conversion or each anniversary date of the closing date.  Interest payable for the remaining term of the notes is payable in cash upon the earlier of conversion, each anniversary date of the closing date, or maturity.   Each equity unit consisted of one common share and one share-purchase warrant with an exercise price of $0.15 per warrant.  The warrants expire on the earlier of (i) March 31, 2013 and (ii) the date which is sixty days following the issuance of a notice by the Company to holders confirming that the closing price of the Company’s common shares, on the TSX was greater than or equal to $0.36 for any 10 consecutive trading days.  Dundee Securities Corporation received a brokerage commission of four percent on a portion of the private placement.  The afore-mentioned conversion provisions are subject to a four month and one day holding period.  The Series L notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

As required by IFRS, the Company separated the liability and equity components of the Series L secured subordinated notes.  The Company determined the fair value of the liability component of the Series L notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing, and has been classified as long-term debt.  The remaining component, representing the value ascribed to the conversion feature, has been included in equity.  The Company determined the fair value of the share and warrant conversion feature at the issue date of the Series L notes using the Cox-Rubinstein binomial valuation model.  Financing costs in the amount of $21,000 were allocated to the liability and equity components in proportion to the allocation of proceeds.  The resulting fair values of the liability component of the notes and the conversion features of the units, comprised of shares and attached warrants, was $190,000, $182,000 and $153,000, respectively.  The liability component will be accreted to $525,000 over the term of the Series N notes through the recording of a non-cash interest expense until such date at which the underlying notes are converted into common shares.

97

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

During the year ended December 31, 2009, $20,000 (face value) of the Series L notes (book value of $6,000) were converted into 200,000 equity units represented by 200,000 common shares valued at $8,000 and 200,000 warrants valued at $7,000.

During the year ended December 31, 2010, $145,000 (face value) of the Series L notes (book value of $68,000) were converted into 1,450,000 equity units represented by 1,450,000 common shares valued at $48,000 and 1,450,000 warrants valued at $41,000.

During the year ended December 31, 2011, $360,000 (face value) of the Series L notes (book value of $237,000) were converted into 3,600,000 equity units represented by 3,600,000 common shares valued at $120,000 and 3,600,000 warrants valued at $101,000.

d) During the year ended December 31, 2011, the Company recorded cash interest expense aggregating $103,000 (2010 - $154,000) and interest accretion of $124,000 (2010 - $115,000).

e) As at December 31, 2011, accrued liabilities include $nil (2010 - $62,000) of unpaid interest payable relating to the secured subordinated notes.

f) The following summarizes the change in the face and carrying values of the liability and equity components of the secured subordinated notes.

Secured Subordinated Notes (liability component)    2011  2010

	Face Value			Carrying Value			Face Value			Carrying Value
	(in thousands)
Opening balance	$	960		$	705		$	1,105		$	658
Accreted (non-cash) interest		-			124			-			115
Conversion of notes:
Series N (Note 8 (b))		(600	)		(592	)		-			-
Series L (Note 8 (c))		(360	)		(237	)		(145	)		(68	)
Closing balance	$	-		$	-		$	960		$	705

Conversion Features on Secured Subordinated Notes Including Conversion of Attached Warrants             2011                   2010

Common Shares Issuable	Carrying Value	Common Shares Issuable	Carrying Value
(in thousands of shares and dollars)

Opening balance	19,200		$	458		22,100		$	547
Conversion of notes:
Series N (Note 8 (b))	(12,000	)		(237	)	-			-
Series L (Note 8 (c))	(7,200	)		(221	)	(2,900	)		(89	)
Closing balance	-		$	-		19,200		$	458

9. INCOME TAXES

The Company accounts for income taxes under the asset and liability method.  Under the asset and liability method, a deferred tax asset is recorded based upon tax losses carried forward and differences in tax and accounting values in the Company’s assets and liabilities.  The tax asset is reduced to the extent that it is

98

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

probable that the asset would not be realized.  At December 31, 2011 and 2010, the Company recognized none of the temporary differences noted below.

	2011			2010
	(in thousands)
DEFERRED TAX ASSET
Tax losses carried forward	$	6,916		$	6,454
Difference in tax and accounting valuations
for capital assets and investments		76			124
		6,992			6,578
Temporary differences not recognized		(6,992	)		(6,578	)
Deferred tax asset	$	-		$	-

The provision for income taxes differs from the amount computed by applying the combined Canadian Federal and Provincial statutory income tax rate of 28 percent (2010 – 31 percent) to the loss from continuing operations before income taxes.  The sources and tax effects of the differences are indicated below.

	2011			2010
	(in thousands)
PROVISION FOR INCOME TAXES
Income taxes at statutory rate	$	(1,112	)	$	(940	)
Change in enacted rates		63			123
Non-deductible interest on subordinated notes		35			36
Stock-based compensation not deductible for tax		529			160
Write-down of investment		-			169
Expiry of tax loss carry-forwards		-			1,297
Loss carry-forwards not recognized		414			(823	)
Other		71			(22	)
Provision for income taxes	$	-		$	-

Tax loss carry-forwards at December 31, 2011 expire as follows:

Year	Amount
	(in thousands)
2014	$         3,047
2015	3,351
2026	2,588
2027	2,050
2028	1,969
2029	1,700
2030	1,741
2031	1,892
Tax loss carry-forwards that do not expire	9,294
	$       27,632

The Company has net operating loss carry-forwards of $18,338,000 that expire in years 2014 through 2031, and indefinite loss carry-forwards of $9,294,000.  The indefinite loss carry-forwards are comprised of net capital losses from continuing Canadian operations of $4,186,000 and from discontinued operations of $5,108,000, which are available to reduce future year’s capital gains.

99

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

10.      SHARE CAPITAL

a) Authorized

Unlimited number of common shares

Unlimited number of preference shares – issuable in series

b)         Outstanding Common Shares

	2011			2010
	Number		Amount	Number	Amount
	(in thousands of shares and dollars)
Opening balance	172,170		$    110,767	159,353	$    110,240
Shares issued pursuant to:
Conversion of subordinated notes (Note 8 (b) and (c))		9,600	1,081	1,450	117
Payment of interest (Note 10 (c))	6		1	232	48
Equity private placements (Note 10 (d))	10,478		456	10,007	153
Exercise of compensation options (Note 10 (d))	2,250		241	-	-
Warrants exercised  (Note 11 (c))	26,260		3,854	1,083	202
Stock options exercised (Note 12 (c))	1,334		329	45	7
Acquisition of intellectual properties (Note 6)	4,500		630	-	-
Closing balance	226,598		$    117,359	172,170	$    110,767

c) Payment of Interest

During the year ended December 31, 2011, accrued interest in the amount of $1,000 relating to Series L notes was settled through the issuance of 6,000 common shares based on an average fair value of $0.18 per share.

During the year ended December 31, 2010, accrued interest in the amount of $48,000 relating to Series L notes was settled through the issuance of 232,000 common shares based on an average fair value of $0.21 per share.

d) Equity Private Placements

On February 14, 2011, the Company completed a transaction resulting in the issuance of 10,478,000 equity units, priced at $0.08 per unit, for gross proceeds of $838,000 and net proceeds of $713,000 after deducting financing costs of $125,000.  Each equity unit consisted of one common share and one warrant.  Each warrant may be converted into a common share at an exercise price of $0.12, at any time prior to February 14, 2013.

The Company determined the fair value of the common shares and warrants at the issue date using the Cox-Rubenstein binomial valuation model.  The resultant pro rata fair values of the 10,478,000 common shares and 10,478,000 warrants, was $607,000 and $231,000, respectively.

In addition to the above financing costs, the Company issued 2,250,000 compensation options to the financing agent, Saratoga Finance Inc.  The options entitled the holder to purchase up to 2,250,000 equity units at a purchase price of $0.08 per unit, at any time prior to February 14, 2013.  Each equity unit consisted of one common share and one warrant.  Each warrant may be converted into a common share at an exercise price of $0.12, at any time prior to February 14, 2013.  Using the Cox-Rubenstein binomial valuation model, the Company has determined the fair value of these equity unit options to be $108,000 and included this amount in Other Options.  The Other Options were all exercised during the year ended December 31, 2011.

Total financing costs of $233,000 was recorded as a reduction to Share Capital and Warrants within Shareholders` Equity, in the amount of $151,000 and $82,000, respectively.

During the quarter ended September 30, 2011, proceeds of $180,000 were realized through the exercise of 2,250,000 compensation options.  As a result, the Company issued 2,250,000 common shares valued at $61,000 and 2,250,000 warrants valued at $47,000.

100

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

On December 22, 2010, the Company completed a transaction resulting in the issuance of 7,816,000 equity units, priced at $0.08 per unit, for net proceeds of $625,000.  Each unit consisted of one common share and one share-purchase warrant.  Each warrant may be converted into a common share at the exercise price of $0.12 at any time prior to December 22, 2012.

The Company determined the fair value of the common shares and warrants at the issue date using the Cox-Rubinstein binomial valuation model.  The resulting pro rata fair values of the 7,816,000 common shares and 7,816,000 warrants, was $461,000 and $164,000, respectively.

On June 16, 2010, the Company entered into an agreement with GEM Global Yield Fund Limited (“GEM”) for a $6,000,000 equity line of credit.  The Company will control the timing and maximum amount of any draw downs under this facility, and has the right, not the obligation, to draw down on available funds by requiring GEM to subscribe for the Company’s common shares at a 10 percent discount to the average closing price of the Company’s common shares over a 15 day trading period following the draw down notice date, provided that the Company’s share price during the notice period is greater than the floor price of $0.17 per share as defined in the agreement.  GEM will hold freely trading shares of the Company through a share lending facility provided by a current shareholder.  As part of the equity credit line transaction, the Company has agreed to issue 6,000,000 warrants to GEM. The warrants are exercisable for a period of three years from the closing notice date at an exercise price of $0.27 per share.  The warrants are not issuable until the first draw down of funds has occurred.

In connection with the equity line of credit, Northcore incurred direct transaction costs totaling $129,000, which consisted primarily of management fees owing to a party related to GEM and legal fees.  Any other transaction costs, which do not directly relate to the issuance of shares, are expensed in general and administrative expenses as incurred.

On August 9, 2010, the Company closed an equity transaction with GEM, securing gross proceeds of $383,000 and net cash proceeds of $300,000 after deducting legal fees and one half of the commitment fee of $90,000.  In connection with the transaction, the Company issued 2,191,000 common shares and 6,000,000 share-purchase warrants with an exercise price of $0.27 and an expiry date of August 9, 2013.

The Company determined the fair value of the warrants at the issued date using the Cox-Rubinstein binomial valuation model.  As a result of the transaction, the Company recorded $562,000 to Warrants, with an offsetting reduction to Share Capital.  In addition, the deferred transaction costs in the amount of $129,000 were recorded as a corporate transaction cost and a reduction to Share Capital.

11. WARRANTS

a) The following table summarizes the transactions within warrants.

	2011				2010
	(i)Number			(ii)Amount	(iii)Number	(iv)Amount
	(in thousands of warrants and dollars)
Opening balance	15,818			$      834	10,249	$      490
Warrants issued pursuant to:
Conversion of subordinated notes (Note 8 (b) and (c))			9,600	207	1,450	41
Equity private placements (Note 10 (d))	10,478			149	13,816	726
Exercise of compensation options (Note 10 (d))		2,250		47	-	-
Debt settlement (Note 11 (b))		2,900		200	-	-
Warrants exercised (Note 11 (c))	(26,260)			(477)	(1,083)	(32)
Warrants expired (Note 11 (d))	(3,121)			(124)	(8,614)	(391)
Closing balance	11,665			$      836	15,818	$      834

101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

b) Warrants Issued For Debt Settlement

During the year ended December 31, 2011, the Company issued 2,900,000 warrants for full settlement of recruiting fees to a third party in the amount of $200,000.  The warrants have an exercise price of $0.315 and an expiry date of June 29, 2013.  This transaction was measured at the fair value of the services received by the Company.

c) Warrants Exercised

During the year ended December 31, 2011, Series L and N note holders, along with warrant holders from equity private placements in 2010 and 2011, exercised 26,260,000 common share-purchase warrants (book value of $477,000) for total proceeds of $3,377,000.

During the year ended December 31, 2010, Series I and L note holders exercised 1,083,000 common share-purchase warrants (book value of $32,000) for total proceeds of $170,000.

d) Warrants Expired

During the year ended December 31, 2011, 3,121,000 warrants (book value of $124,000) in connection with a private placements in 2009, 2010 and 2011 expired unexercised and were accordingly cancelled.

During the year ended December 31, 2010, 8,614,000 Series I warrants (book value of $391,000) expired unexercised and were accordingly cancelled.

e) Fair Value of Warrants Issued

The Company determined the weighted average fair value of warrants issued using the Cox-Rubinstein binomial valuation model with the following assumptions on a weighted average basis:

	2011	2010
Share price	$  0.16	$  0.19
Dividend yield	-	-
Risk free interest rate	1.85%	1.68%
Volatility	103.57%	98.89%
Expected term, in years	2.00	2.43

Volatility was calculated based on historical volatility of the Company’s share price consistent with the term of the warrants issued.

12. STOCK OPTIONS

a) The following table summarizes the transactions within stock options.

	2011		2010
	(v)Number	(vi)Amount	(vii)Number	(viii)Amount
	(in thousands of warrants and dollars)
Opening balance	10,946	$   1,949	5,036	$   1,435
Granted	10,150	-	7,515	-
Exercised (Note 12 (c))	(1,334)	(132)	(45)	(3)
Cancelled	(472)	-	(1,560)	-
Stock-base compensation expense	-	1,873	-	517
Closing balance	19,290	$   3,690	10,946	$   1,949

b) Employee Stock Options

The Company has a stock option plan which provides for the issuance of stock options to employees, which may expire as much as 10 years from the date of grant, at prices not less than the fair market value of the common shares on the date of grant. A total of 26,550,000 options have been authorized by the Company’s shareholders for issuance under the stock option plan.

102

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

The Management Resources and Compensation Committee of the Board of Directors reserves the right to determine the vesting periods to stock options granted.  The options expire between 2012 and 2016.

A summary of the status of the Company’s outstanding options at December 31, 2011 is as follows:

Exercise Prices	Number of Options Outstanding    (in thousands)	Remaining Contractual Life (in years)	Number of Options Exercisable (in thousands)
$   0.10	3,434	3.7	2,867
$   0.12	1,406	1.1	1,406
$   0.19	3,440	4.3	2,220
$   0.20	4,660	3.2	4,660
$   0.32	6,350	4.4	3,528
	19,290		14,681

The aggregate exercise price for employee options outstanding at December 31, 2011 was approximately $4,079,000 (December 31, 2010 - $1,623,000, January 1, 2010 - $760,000).

During the year ended December 31, 2011, the Company granted 10,150,000 stock options to employees, officers and directors of the Company.  The options have a weighted average exercise price of $0.27 and an expiry date of five years from the date of the grant.  The weighted average grant date fair value of $0.20 per option was valued using the Cox-Rubinstein binomial valuation model based on the below assumptions.

During the year ended December 31, 2010, the Company granted 7,515,000 stock options to employees, officers and directors of the Company.  The options have a weighted average exercise price of $0.15 and an expiry date of five years from the date of the grant.  The weighted average grant date fair value of $0.09 per option was valued using the Cox-Rubinstein binomial valuation model based on the below assumptions.

The Company determined the weighted average fair value of employee stock option grants using the Cox-Rubinstein binomial valuation model with the following assumptions on a weighted average basis:

	2011	2010
Share price	$  0.27	$  0.15
Dividend yield	-	-
Risk free interest rate	2.47%	2.63%
Volatility	100.32%	89.10%
Expected term, in years	5	5

Volatility was calculated based on historical volatility of the Company’s share price consistent with the term of the options granted.

The Company records compensation expense for stock options granted to employees and directors based on the fair value method of accounting.  For the year ended December 31, 2011, the employee stock-based compensation expense was $1,873,000 (2010 - $517,000).

c) During the year ended December 31, 2011, total proceeds of $197,000 were realized from the exercise of 1,334,000 stock options (book value of $132,000) at an average exercise price of $0.15.  The average trading price at the time of exercise of these options was $0.27.

During the year ended December 31, 2010, total proceeds of $4,000 were realized from the exercise of 45,000 stock options (book value of $3,000) at an average exercise price of $0.10.  The average trading price at the time of exercise of these options was $0.22.

103

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

13. REVENUES

Revenues are comprised of the following:

	2011	2010
	(in thousands)
Services	$      543	$      317
Hosting fees	242	255
Royalty fees	-	10
	$      785	$      582

14. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS

a) Financial Instruments

The Company has classified its financial instruments as follows:

	December 31, 2011	December 31, 2010	January 31, 2010
	(in thousands)
Financial Assets:
Fair value through profit and loss
Cash	$      1,760	$           51	$         210
Loans and receivables, recorded at amortized cost
Accounts receivable	$         187	$         151	$         214
Financial Liabilities:
Financial liabilities measured at amortized cost
Accounts payable and accrued liabilities	$         412	$        619	$        492
Notes payable	-	530	156
Secured subordinated notes	-	705	658

The Company had neither available-for-sale, nor held-to-maturity financial instruments as at December 31, 2011, December 31, 2010 or January 1, 2010.

b) Financial Risk Factors

Foreign Exchange Risk

The Company’s revenue from software licensing and related services and e-commerce enabling agreements is transacted in Canadian and U.S dollar currencies.  As a portion of the Company’s revenues are realized in U.S. dollar and expenses are transacted in Canadian dollar, the appreciation of the U.S. dollar against the Canadian dollar may have a favorable impact on our results.  The Company does not use derivative instruments to manage exposure to foreign exchange fluctuations.  During the year ended December 31, 2011, the Company incurred foreign exchange losses in the amount of $3,000 (2010 - $24,000), which is recorded in general and administrative expenses.

Interest Rate Risk

The Company has limited exposure to fluctuations in interest rates due to the Company’s debt instruments bearing fixed interest rates.  The Company does not use derivative instruments to reduce its exposure to interest rate risk.

Credit Risk

Credit risk arises from the potential that a customer will fail to meet its contractual obligations under a software licensing and related services agreement or an e-commerce enabling agreement.

104

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

The Company invests its cash in investments that are of high credit quality.  Given these high credit ratings, the Company does not expect any investees to fail to meet their obligations.

In 2011, two customers accounted for 50 percent and 31 percent, respectively (2010 – one customer accounted for 75 percent) of total revenues.  At December 31, 2011, three customers accounted for 42 percent, 18 percent and 12 percent, respectively (2010 – two customers accounted for 33 percent and 31 percent, respectively) of total accounts receivable.

The following table summarizes the aging of accounts receivable as at:

	December 31, 2011	December 31, 2010	January 31, 2010
	(in thousands)
Current	$      144	$        93	$        63
Past due (61-120 days)	36	46	91
Past due (> 120 days)	7	12	60
	$      187	$      151	$      214

The allowance for doubtful accounts recorded as at December 31, 2011 was $nil (December 31, 2010 - $nil, January 1, 2010 - $nil), as amounts past due at December 31, 2011 were subsequently collected.

Fair Value

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The Company’s financial instruments carried at fair value on the balance sheet, which consists of cash, are valued using quoted market prices (Level 1).  There were no financial instruments categorized in Level 2 (valuation techniques using observable market inputs) or Level 3 (valuation technique using non-observable market inputs) as at December 31, 2011 and 2010.

The fair value of monetary assets and liabilities approximates amounts at which they would be exchanged between knowledgeable and unrelated persons.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due.  The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due, see Going Concern (See Note 2).  The Company manages its liquidity risk by continuously monitoring forecast and actual cash flows.

15. CAPITAL DISCLOSURES

The Company’s objective when managing capital is to safeguard its accumulated capital in order to provide adequate return to shareholders by maintaining sufficient levels of funds, in order to support and further expand upon the Company’s current base of products and services.

The capital structure of the Company consists of debt, net of cash and equity comprised of issued capital, contributed surplus and deficit.  The Company manages its capital structure and makes adjustments to it, based on the level of funds required to manage its operations.  In order to achieve these objectives, the Company invests its excess capital in highly liquid financial instruments.

There was no change in the capital management in the year.

105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

16. COMMITMENTS AND CONTINGENCIES

a) Minimum payments under operating leases are as follows:

Year	Amount                           (in thousands)
2012	$        156
2013	$        156
2014	$        130

b) During the year ended December 31, 2009, the Company entered into a technology licensing agreement with a Fortune 500 company that provides Northcore with access to a portfolio of intellectual property patents over a six year period for a minimum fee of US $260,000 over the term of the agreement.  Minimum payments over the remaining term are as follows: 2012 - $50,000, 2013 - $50,000, 2014 - $50,000.

c) In connection with the acquisition of all the Intellectual Property of Discount This Holdings limited, the Company agreed to pay a 10 percent commission on all proceeds realized, if the Intellectual Property is sold or licensed to a third party within the two year period following the close date of December 28, 2011.

17. SUPPLEMENTAL INFORMATION

a) Cash Flow

The following table sets forth the changes in non-cash operating working capital items resulting from the inflow (outflow) of cash in the year.

		2011	2010
	(in thousands)
Accounts receivable		$        (36)	$         63
Deposits and prepaid expenses		(4)	(1)
Accounts payable		(161)	69
Accrued liabilities		182	69
		$        (19)	$       200

The following table summarizes the non-cash financing activities of the Company.

	2011	2010
	(in thousands)
Issuance of common shares in settlement of interest payments (Note 10 (c))	$            1	$         48
Reduction in debt from conversion of secured subordinated notes (Note 8 (f))	(829)	(68)
Reduction in conversion feature from conversion of secured subordinated notes (Note 8 (f))	(458)	(89)
Issuance of common shares for acquisition of intangible assets (Note 6)	630	-
Issuance of warrants for settlement of trade payables (Note 12 (b))	200	-

b) Employee Benefits

For the year ended December 31, 2011, employee benefits expense amounted to $1,447,000 (2010 - $1,356,000).

106

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

18. RELATED PARTY TRANSACTIONS

During the year ended December 31, 2011, interest payments relating to the secured subordinated notes totaling $1,000 (2010 - $1,000) were made to related parties.

On July 9, 2010, Chris Bulger, Chairman of the Audit Committee, exercised 133,000 Series I warrants at an exercise price of $0.20 per warrant, for total proceeds of $27,000.

Key management personnel compensation, comprised of the Company’s executive officers, is as follows:

		2011	2010
	(in thousands)
Salaries and other benefits		$         430	$         355
Stock-based compensation		741	144
		$      1,171	$      499

19. SUBSEQUENT EVENT

Subsequent to the year ended December 31, 2011, the Company entered into an agreement to acquire a software development firm..  The purchase price of $1,000,000 will be satisfied by $300,000 cash payment and $700,000 through the issuance of 7,777,777 common shares at $0.09.  The cash payment will be satisfied by $100,000 cash payment at closing with the remaining $200,000 to be paid over the next two years, subject to achieving specific performance criteria.  The financial effect of this transaction cannot be determined at this time.

20. TRANSITION TO IFRS

As discussed in Note 3, these accompanying consolidated financial statements represent the first annual financial statements of the Company and its subsidiaries prepared in accordance with International Financial Reporting Standards (IFRS).  The Company adopted IFRS in accordance with IFRS 1, First-time Adoption of International Reporting Standards.  The first date at which IFRS was applied was January 1, 2010.  Previously, the Company prepared its interim and annual consolidated financial statements in accordance with previous GAAP.

IFRS 1 requires the presentation of comparative information as at the January 1, 2010 transition date and subsequent comparative periods as well as the consistent and retrospective application of IFRS accounting policies.  To assist with the transition, the provisions of IFRS 1 allow for certain mandatory exceptions and optional exemptions for first-time adopters to alleviate the retrospective application of all IFRSs.  The Company has applied the following exemptions in its consolidated financial statements at the transition date:

· Share-Based Payments

On adoption of IFRS, an entity is not required under IFRS 2, Share-Based Payment to recognize share based payments settled before the entity’s IFRS transition date. IFRS 1 encourages, but does not require, application of its provisions to equity instruments granted on or before November 7, 2002. The Company recognized under IFRS 2 all share-based awards that were recognized under previous GAAP.

· Financial Instruments

Under previous GAAP, the Company allocates the proceeds received from the issuance of compound financial instruments based on the relative fair values of each of the components.  IAS 32, Financial Instruments - Presentation, requires that the equity component of a compound financial instrument be assigned the residual amount after deducting from the fair value of the compound financial instrument as a whole the amount separately determined for the liability component.  However, under IFRS 1, if the

liability component of the instrument has either been settled or converted prior to the date of transition, the Company elected not to split the amount recognized into the debt and equity components.

· Business Combinations

107

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

The Company has applied the business combinations exemption in IFRS 1. The Company has not restated business combinations that took place prior to the January 1, 2010 transition date.

· Estimates

IFRS 1 prohibits use of hindsight to create or revise previous estimates. The estimates the Company previously made under previous GAAP have not been revised for application of IFRS.

The following reconciliations present the adjustments made to the Company’s previous GAAP financial results of operations and financial position to comply with IFRS 1.  Reconciliations include the Company’s Consolidated Statements of Financial Position as at January 1, 2010 and December 31, 2010, the Consolidated Statements of Operations and Comprehensive Loss and the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2010.

IFRS OPENING CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at January 1, 2010 (in thousands of Canadian dollars)
				IFRS ADJUSTMENTS
	Previous GAAP			Stock-based  Compensation	Investment in GEAM, LLC	Secured Subordinated  Notes	IFRS
				(Note 20 (a))	(Note  20 (b))	(Note 20 (c))
ASSETS
Cash		$          226		$                  -	$            (16)	$                -	$            210
Accounts receivable		253		-	(39)	-	214
Deposits and prepaid expenses		35		-	-	-	35
		514		-	(55)	-	459
INVESTMENT IN GEAM, LLC		-		-	31	-	31
INVESTMENT IN SOUTHCORE		544		-	-	-	544
CAPITAL ASSETS		47		-	-	-	47
		$        1,105		$                  -	$            (24)	$                -	$         1,081
LIABILITIES
Accounts payable		$           331		$                  -	$                 -	$                -	$            331
Accrued liabilities		161		-	-	-	161
Deferred revenue		27		-	(24)	-	3
Notes payable		156		-	-	-	156
		675		-	(24)	-	651
SECURED SUBORDINATED NOTES			446	-	-	212	658
		1,121		-	(24)	212	1,309
SHAREHOLDERS’ DEFICIENCY
Share capital		110,238		-	-	2	110,240
Contributed surplus		3,071		-	-	-	3,071
Warrants		492		-	-	(2)	490
Stock options		1,425		10	-	-	1,435
Conversion feature on secured subordinated notes		779		-	-	(232)	547
Deficit		(116,021)		(10)	-	20	(116,011)
		(16)		-	-	(212)	(228)
		$        1,105		$                  -	$            (24)	$                -	$         1,081

108

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at December 31, 2010 (in thousands of Canadian dollars)
				IFRS ADJUSTMENTS
	Previous GAAP			Stock-based Compensation	Investment in GEAM, LLC	Secured Subordinated Notes	IFRS
				(Note 20 (a))	(Note  20 (b))	(Note 20 (c))
ASSETS
Cash		$            90		$                  -	$            (39)	$                 -	$              51
Accounts receivable		157		-	(6)	-	151
Deposits and prepaid expenses		36		-	-	-	36
		283		-	(45)	-	238
INVESTMENT IN GEAM, LLC		-		-	15	-	15
CAPITAL ASSETS		31		-	-	-	31
		$           314		$                  -	$            (30)	$                  -	$            284
LIABILITIES
Accounts payable		$           404		$                  -	$              (4)	$                 -	$            400
Accrued liabilities		219		-	-	-	219
Deferred revenue		29		-	(26)	-	3
Notes payable		530		-	-	-	530
Current portion of secured subordinated notes			412	-	-	89	501
		1,594		-	(30)	89	1,653
SECURED SUBORDINATED NOTES		149		-	-	55	204
		1,743		-	(30)	144	1,857
SHAREHOLDERS’ DEFICIENCY
Share capital		110,762		-	-	5	110,767
Contributed surplus		3,462		-	-	-	3,462
Warrants		839		-	-	(5)	834
Stock options		1,780		169	-	-	1,949
Conversion feature on secured subordinated notes		667		-	-	(209)	458
Deficit		(118,939)		(169)	-	65	(119,043)
		(1,429)		-		(144)	(1,573)
		$           314		$                  -	$            (30)	$                  -	$            284

109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS Twelve Months Ended December 31, 2010 (in thousands of Canadian dollars, except per share amounts)
			IFRS ADJUSTMENTS
	Previous GAAP		Stock-based Compensation	Investment in GEAM, LLC	Secured Subordinated Notes	IFRS
			(Note 20 (a))	(Note  20 (b))	(Note 20 (c))
Revenues		$           636	$                  -	$            (54)	$                   -	$            582
Other income:
Income from GEAM, LLC		-	-	43	-	(43)
Operating expenses:
General and administrative		1,451	-	(11)	-	1,440
Customer service and technology		734	-	-	-	734
Sales and marketing		188	-	-	-	188
Stock-based compensation		358	159	-	-	517
Depreciation		22	-	-	-	22
Total operating expenses		2,753	159	(11)	-	2,901
Loss from operations before the under-noted		(2,117)	(159)	-	-	(2,319)
Finance costs:
Cash interest expense		154	-	-	-	154
Accretion of secured subordinated       notes		160	-	-	(45)	115
Total finance costs		314	-	-	(45)	269
Other expenses:
Gain on settlement of debt		(57)	-	-	-	(57)
Provision for impaired investment		544	-	-	-	544
Total other expenses		487	-	-	-	487
LOSS AND COMPREHENSIVE LOSS FOR THE YEAR		$     (2,918)	$           (159)	$                 -	$                45	$         3,032
LOSS PER SHARE, BASIC AND DILUTED		$     (0.018)				$       (0.019)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED (000’s)		162,899				162,899

110

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

CONSOLIDATED STATEMENT OF CASH FLOWS

Twelve Months Ended December 31, 2010

(in thousands of Canadian dollars)

				IFRS ADJUSTMENTS
	Previous GAAP			Stock-based Compensation	Investment in GEAM, LLC	Secured Subordinated Notes	IFRS
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES				(Note 20 (a))	(Note  20 (b))	(Note 20 (c))
OPERATING
Loss for the year	$     (2,918)			$           (159)	$                 -	$              45	$       (3,032)
Items not affecting cash:
Income from GEAM, LLC	-			-	(43)	-	(43)
Stock-based compensation	358			159	-	-	517
Depreciation	22			-	-	-	22
Cash interest expense	154			-	-	-	154
Accretion of secured subordinated notes			160	-	-	(45)	115
Gain on settlement of debt	(57)			-	-	-	(57)
Provision for impaired investment	544			-	-	-	544
	(1,737)			-	(43)	-	(1,780)
Changes in non-cash operating working capital	240			-	(40)	-	200
	(1,497)			-	(83)	-	(1,580)
INVESTING
Cash distributions from investment in GEAM, LLC	-			-	60	-	60
Capital assets	(6)			-	-	-	(6)
	(6)			-	60	-	54
FINANCING
Repayment of notes payable	(465)			-	-	-	(465)
Proceeds from issuance of notes payable		859		-	-	-	859
Warrants exercised	170			-	-	-	170
Options exercised	4			-	-	-	4
Issuance of common shares and warrants	1,008			-	-	-	1,008
Share issuance costs	(129)			-	-	-	(129)
Interest paid	(80)			-	-	-	(80)
	1,367			-	-	-	1,367
NET CASH OUTFLOW DURING THE YEAR	(136)			-	(23)	-	(159)
CASH, BEGINNING OF YEAR	226			-	(16)	-	210
CASH, END OF YEAR	$            90			$                  -	$            (39)	$                  -	$              51

a) Stock-Based Compensation

The Company issues stock-based awards in the form of stock options that vest over each specified time

period. The options expire five years from the date of the grant.  Under previous GAAP, the Company recognizes the fair value of the award, determined at the time of the grant, on a straight-line basis over the respective vesting period.  Under IFRS 2 the fair value of each tranche of the award is considered to be a separate grant based on the vesting period with the fair value of each tranche determined separately and recognized as compensation expense over the term of its respective vesting period.  Accordingly, this will result in each grant being recognized in income at a faster rate than under previous GAAP.

111

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

As a result of adopting IFRS 2, January 1, 2010 opening deficit and stock options accounts have been increased by $10,000 to reflect additional vesting of stock options.  For the year ended December 31, 2010, stock options and stock-based compensation have been increased by $159,000, to reflect additional vesting of stock options.

b) Investment in GEAM, LLC

Prior to January 1, 2010, the consolidated financial statements of the Company reflect the Company’s pro rata share of the joint venture’s assets, liabilities, and results of operations in accordance with the proportionate consolidation method of accounting.

On May 12, 2011, the IASB issued the new standard, IFRS 11, Joint Arrangements.  The effective date for this standard is January 1, 2013, with early adoption permitted.  This standard requires investments in joint ventures to be accounted using the equity method in accordance with IAS 28, Investments in Associates and Joint Ventures.

The Company has elected to early adopt IFRS 11, and as a result, assets, liabilities, income and expense accounts have been restated to reflect the investment using the equity method of accounting since its inception.  This resulted in recording a balance in Investment in GEAM, LLC on January 1, 2010 and December 31, 2010 of $31,000 and $15,000, respectively.

c) Secured Subordinated Notes

Under previous GAAP, the Company allocates the proceeds received from the issuance of compound financial instruments based on the relative fair values of each of the components. IAS 32, Financial Instruments - Presentation, requires that the equity component of a compound financial instrument be assigned the residual amount after deducting from the fair value of the compound financial instrument as a whole the amount separately determined for the liability component.

As a result of adopting IAS 32, January 1, 2010 opening balances have been adjusted as follows; Deficit decreased by $20,000, Secured Subordinated Notes increased by $212,000, Share Capital increased by $2,000, Warrants decreased by $2,000, and Conversion Feature decreased by $232,000.  For the year ended December 31, 2010, ending balances have been adjusted as follows; Deficit decreased by $20,000, Interest expense decreased by $45,000, Secured Subordinated Notes increased by $144,000, Share Capital increased by $5,000, Warrants decreased by $5,000, and Conversion Feature decreased by $209,000.

112

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2011 and 2010

(in Canadian dollars)

DIRECTORS   Anthony DeCristofaro Chairman of the Board   T. Christopher Bulger Chairman of the Audit Committee   Ryan Deslippe Board Member   Marvin Igelman Board Member   Amit Monga Chief Executive Officer and Board Member   Jim Moskos Chief Operating Officer and Board Member                         CORPORATE OFFICE   Northcore Technologies Inc. 302 The East Mall, Suite 300 Toronto, Ontario M9B 6C7 1 888 287 7467     AUDITORS   Collins Barrow Toronto LLP 11 King Street, West, Suite 700 Toronto, Ontario, M5H 4C7       ADDITIONAL SHAREHOLDER INFORMATION   Website: www.northcore.com   Email: investor-relations@northcore.com   SHARES OUTSTANDING   As at December 31, 2011: 226,597,702 common shares         REGISTRAR & TRANSFER AGENT   Equity Financial Trust Company 200 University Avenue, Suite 400 Toronto, ON M5H 4H1   STOCK EXCHANGE LISTINGS   Toronto Stock Exchange (TSX)     Symbol: NTI   OTC Bulletin Board (OTCBB)  Symbol: NTLNF                             © 2012 Northcore Technologies Inc.

Northcore Technologies Inc.

113

EX-15.2

EQUITY PRIVATE PLACEMENT SUBSCRIPTION –FEB 2011

EXHIBIT 15.2

TO SUBSCRIBE, EACH SUBSCRIBER MUST RETURN THE FOLLOWING:

a.            □ Duly completed and executed Subscription Agreement

b.            □ Subscription funds by certified cheque, bank draft, money order or wire transfer

c.            □ Duly completed and executed Accredited Investor Certificate (attached as schedule “D”)

d.            □ Duly completed and executed Know-Your-Client Information (attached as schedule “E”) OR

e.             □ Duly completed and executed Permitted Client Suitability Waiver (attached as schedule “F”)

f..             □ Duly completed and executed Additional Subscription Information for Non-Individuals, if applicable

                   (attached as schedule “G”)

g.             □ Duly completed and executed Attestation as to Identity, if applicable (attached as schedule “H”)

SUBSCRIPTION AGREEMENT – SUBSCRIBERS

TO:	Northcore Technologies Inc.  (the “Corporation”)
RE:	Offering of units of the Corporation at a subscription price of $0.08 per unit. Each unit consists of one common share in the capital of the Corporation and one full common share purchase warrant with an exercise price of $0.12, exercisable into one common share in the capital of the Corporation.

Details of Subscription

The undersigned (hereinafter referred to as the "Subscriber") hereby confirms its agreement to subscribe for the number of units ("Units") of the Corporation set out below, each Unit consisting of one common share (each a "Common Share") and one full non-transferable Common Share purchase warrant (each a "Warrant"), at a price of $0.08 per Unit, in the aggregate amount as set out below opposite the headings “Number of Units” and “Purchase Price”. Each Warrant will entitle the holder to acquire one Common Share at an exercise price of $0.12 at any time prior to the earlier of (i) two (2) years from the Closing Date (as defined below); and (ii) the date that is ten (10) days following the issuance of a notice by the Corporation  to holders confirming that the closing price of the Common Shares on the Toronto Stock Exchange (“TSX”) was greater than or equal to $0.16 for 5 consecutive trading days, adjusted for any stock splits and/or share consolidations, at any time following of the issue, with such date of notice issuance at the sole discretion of  the Corporation anytime after the Common Shares on the TSX was greater than or equal to $ 0.16 for five (5) consecutive trading days.

This subscription is made upon and subject to the terms and conditions set forth in Schedule “A” attached hereto and is subject to the formal terms and conditions of the certificates representing the Common Shares and the Warrants, as the case may be.  The particulars of this offering (together with certain other material covenants and acknowledgements) are set out in Schedules “A” and “B” to this subscription agreement and certain representations and warranties to be made by the Subscriber so that the Corporation can ensure compliance with applicable securities laws are set out in Schedule “C” to this subscription agreement, all of which forms part of and is hereby incorporated as part of this subscription agreement.

Subscribers:

Complete and sign the Subscription Agreement and the Accredited Investor Certificate – Schedule “D”.

Subscribers purchasing Units of the Corporation through Saratoga Finance Inc. (and not through another registered dealer or adviser as indicated in the acknowledgement below) must complete Schedule “E” or Schedule “F” hereto.

Subscribers who are not individuals must complete Schedule “G” and attach all necessary documentation.

Subscribers, and signatories of Subscribers who are not individuals, must complete Schedule “H” if purchasing through Saratoga Finance Inc. (and not through another registered dealer or adviser as indicated in the acknowledgement below) and not physically present to be identified by Saratoga Finance Inc.

114

EQUITY PRIVATE PLACEMENT SUBSCRIPTION –FEB 2011

Please print all information (other than signatures), as applicable, in the spaces provided below.

RE: Northcore Technologies Inc. - Subscription Agreement for the Purchase of Units of the Corporation

Amount Subscribed for: $ _______________________                Numberof Units Subscribed for:_______________________

Subscriber Details ________________________________________ Name of Subscriber By:  _______________________________                Authorized Signature ________________________________________ Official Capacity or Title (if Subscriber is not an individual) ___________________________________ Name of individual whose signature appears above if different from name of Subscriber printed above	Registration Instructions(if different from name of Subscriber and address set out in the box to the left): ____________________________________________ Name ____________________________________________ In Trust For, if applicable Account Reference, if applicable _____________________________________________ _____________________________________________ _____________________________________________ Address, including postal code
__________________________________ Address of Subscriber, including province and postal code Telephone Number:___________________________________ Fax Number:________________________________________ E-mail Address:_____________________________________	Delivery Instructions (if different from name of Subscriber and address set out in the box to the left): _____________________________________________ Name _____________________________________________ Account Reference, if applicable _____________________________________________ _____________________________________________ Address, including province and postal code
If the Subscriber is an individual: Date of Birth: __________________________________ Citizenship: ____________________________________  Social Insurance Number: ________________________ _____________________________________________ Principal Business or Occupation ______________________________ Employer’s Name ___________________________________________ ___________________________________________ Employer’s Address, including province and postal code	If  the Subscriber is not an individual: Date of Incorporation/Formation:  _______________ ___________________________________________ Business or Trust Identification Number ____________________________________________ Type of Entity ____________________________________________ Principal Business of Entity

115

EQUITY PRIVATE PLACEMENT SUBSCRIPTION –FEB 2011

Disclosed Principal (please complete if purchasing as agent or trustee for a disclosed principal

Name of Principal:__________________________________

Principal’s Address:________________________________

  (Street Address)

_______________________________________________

  (City and Province)

______________________________________________________

  (Postal Code)

Acknowledgement of Adviser/Dealer:

If the Subscriber of Units is a client of a registered dealer or adviser (the “Subscriber’s Agent”) and is investing in Units of the Corporation on the advice of the Subscriber’s Agent, the Subscriber’s Agent hereby acknowledges and confirms that it has fulfilled all relevant “know-your-client” and suitability obligations that it owes to such Subscriber and all identification and investor information collection obligations under anti-money laundering and anti-terrorism financing legislation,

Name of Subscriber’s Agent (Firm Name) Signature of Subscriber’s Agent

116

EQUITY PRIVATE PLACEMENT SUBSCRIPTION –FEB 2011

The Subscriber acknowledges its consent and requests that this subscription agreement (including all schedules hereto) and all other documents evidencing or relating in any way to its purchase of Units be drawn up in the English language only.  Nous reconnaissons par les présentes avoir consenti et demandé à ce que la présente convention de souscription (et les annexes s’y rapportant) et tous les autres documents faisant foi ou se rapportant de quelque manière à notre souscription soient rédigés en anglais seulement.

IN WITNESS WHEREOF the Subscriber has executed, or caused its duly authorized representative to execute, this subscription agreement on this day of , 2011.

_____________________________		_____________________________
Signature of Subscriber (if an individual)		Name of Subscriber (if an individual)
_____________________________________	Per:	______________________________________
Name of Subscriber (if an individual)		(signature of authorized representative)
		_____________________________________
		Name and Title of Authorized Representative

ACCEPTANCE

The foregoing is acknowledged, accepted and agreed to this day  of , 2011.

Per:

117

EQUITY PRIVATE PLACEMENT SUBSCRIPTION –FEB 2011

SCHEDULE “A”

This is Schedule “A” to the subscription agreement relating to the purchase of Units of Northcore Technologies Inc.

TERMS OF THE OFFERING

1.           Offering.  The Units subscribed for hereunder form a portion of the  total sale by the Corporation of 10,477,780 Units (the “Offering”).

2.           Definitions.  In this subscription agreement and the schedules to this subscription agreement the defined terms set out in the first page of this subscription agreement or as set out in Section 1 above shall apply and unless the context otherwise requires:

“Applicable Securities Laws” means the applicable securities laws of the Province of Ontario and British Columbia and the regulations and rules made and forms prescribed thereunder, together with all applicable instruments, published policy statements, blanket orders, notices, rulings and rules of the Ontario Securities Commission and the British Columbia Securities Commission;

“Business Day” means a day other than a Saturday, Sunday or statutory or banking holiday in Toronto, Ontario;

“Closing Date” means on or about February 10, 2010 or such other date or dates as the Corporation may designate;

“Closing Time” means 10:00 a.m. (Toronto time) on the Closing Date, or such other time on the Closing Date as the Corporation may designate;

“Common Share” means one common share in the capital of the Corporation;

“Corporation’s Information Record” means any statement contained in any press release, material change report, financial statements or other document of the Corporation which has been or is publicly disseminated, whether pursuant to any Applicable Securities Laws or otherwise, prior to the Closing Time;

“Hold Period” means four months and one day from the Closing Date, and in the case of a purchaser who is an insider of the Corporation for the purposes of securities legislation in Ontario and British Columbia, means six months from the Closing Date;

“including” means including without limitation;

“material” means material in relation to the Corporation;

“material change” means any change in the business, operations, assets, liabilities, ownership or capital of the Corporation, on a consolidated basis, that would reasonably be expected to have a significant effect on the market price or value of the Common Shares and includes a decision to implement such a change made by the board of directors of the Corporation or by senior management of the Corporation who believe that confirmation of the decision by the board of directors is probable;

“material fact” means any fact that significantly affects or would reasonably be expected to have a significant effect on the market price or value of the Common Shares;

 “misrepresentation” means an untrue statement of material fact, or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made;

 “TSX” means the Toronto Stock Exchange;

“Units” means each of the 10,477,780 units being offered by the Corporation at a price of $0.08 per unit, each unit consisting of one Common Share and one full common share purchase Warrant;

“Unit Price” means $0.08 per Unit;

 “Warrant” means a Common Share purchase warrant comprising part of the Units being offered by the Corporation pursuant to this subscription agreement, Each Warrant entitles the holder to acquire one Common

118

EQUITY PRIVATE PLACEMENT SUBSCRIPTION –FEB 2011

Share at an exercise price of $0.12 at any time prior to the earlier of (i) two (2) years from the Closing Date; and (ii) the date that is ten (10) days following the issuance of a notice by the Corporation to holders confirming that the closing price of the Common Shares on the  TSX was greater than or equal to $0.16 for 5 consecutive trading days, adjusted for any stock splits and/or share consolidations, at any time following of the issue, with such date of notice issuance at the sole discretion of the Corporation anytime after the Common Shares on the TSX was greater than or equal to $ 0.16 for five (5) consecutive trading days.

“Warrant Shares” means the Common Shares issuable upon exercise of the Warrants.

3.           Currency.  All dollar amounts referred to in this subscription agreement and the schedules thereto are expressed in Canadian funds.

4.           Representations and Warranties of the Corporation.  The Corporation hereby represents and warrants for the benefit of the Subscriber as follows:

(a)      the Corporation is (and will be at the Closing Time) a reporting issuer in the Provinces of Ontario, Alberta and British Columbia, and is in compliance with all material obligations under applicable securities legislation of such jurisdictions;

(b)      the Corporation has been duly incorporated and organized and is validly subsisting under the laws of the Province of Ontario and has all requisite corporate power and authority to own its assets and to carry on its business as currently conducted;

(c)      the Corporation is conducting its business in material compliance with all applicable laws, rules and regulations of each jurisdiction in which its business is carried on and is duly licensed, registered or qualified in all jurisdictions in which it carries on business to enable its business to be carried on as now conducted and all such licences, registrations and qualifications are and will at the Closing Time be valid, subsisting and in good standing, except in respect of matters which do not and will not result in any adverse material change in respect of the Corporation, and except for the failure to be so qualified or the absence of any such license, registration or qualification which does not and will not have a material adverse effect on the business, results of operations, prospects or condition (financial or otherwise) of the Corporation and its subsidiaries, on a consolidated basis;

(d)      the Corporation has all required corporate power and authority to enter into and carry out the provisions of this subscription agreement and the transactions contemplated hereby and all necessary corporate action has been taken or will have been taken prior to the Closing Time by the Corporation to duly authorize the execution and delivery of this subscription agreement and such other agreements and instruments and the consummation of the transactions contemplated thereby and so as to validly create, issue and deliver the Common Shares and Warrants subscribed thereby and to validly create and allot for issuance the Common Shares and Warrant Shares;

(e)      the Corporation is not in default or in breach in any material respect of, and the execution and delivery of this subscription agreement by the Corporation, the performance and compliance with the terms of this subscription agreement, the issue and sale of the Common Shares and Warrant Shares will not result in any breach of, or be in conflict with or constitute a default under, or create a state of facts which, after notice or lapse of time, or both, would constitute a default either directly or indirectly under any term or provision of the constating documents, by-laws or resolutions of the Corporation or any material mortgage, note, indenture, contract, agreement, instrument, lease or other document to which any of them is a party or by which any of them is bound;

(f)      the Common Shares and the Warrant Shares, if and when issued in accordance with the terms of the Common Share and Warrant certificates, as applicable, will be validly issued and outstanding as fully paid and non-assessable;

(g)      no approval, authorization, consent or other order of, and no filing, registration or recording with, any governmental authority is required by the Corporation in connection with the execution and delivery or with the performance by the Corporation of this subscription agreement except in compliance with the rules of the TSX;

(h)      this subscription agreement and all other agreements required in connection with the issue and sale of the Units have been or will be, at or prior to the Closing Time, duly authorized, executed and delivered by the Corporation and will be valid and binding obligations of the Corporation enforceable in accordance with their respective terms (except as the enforceability thereof may be limited by (i) bankruptcy, insolvency or similar laws affecting creditors’ rights generally, (ii) general equitable principles or (iii) limitations under applicable law in respect of rights of indemnity, contribution and waiver of contribution); and

(i)      the Corporation intends that the net proceeds of the Offering will be used substantially in the manner specified in Schedule “B” hereto.

119

EQUITY PRIVATE PLACEMENT SUBSCRIPTION –FEB 2011

(j)      Forthwith after the Closing, the Corporation shall file such forms and documents as may be required under the Applicable Securities Laws relating to the Offering and any further documents as may be required by any applicable regulatory authority which, without limiting the generality of the foregoing, shall include a Report of Exempt Distribution 45-106F1 as prescribed by National Instrument 45-106-Prospectus and Registration Exemptions.

5.           Reliance upon Representations, Warranties and Covenants of the Corporation.  The Corporation further agrees that, by delivering the Common Shares and Warrants to the Subscriber, the Corporation will be representing and warranting that the representations, warranties and covenants contained in this subscription agreement are true as at the Closing Time with the same force and effect as if they had been made by the Corporation at the Closing Time.

6.           Closing of Purchase.  The Subscriber acknowledges and agrees that delivery of and payment for the Units will be completed at the offices of the Corporation or its legal counsel at 10:00 a.m. (Toronto time) on the Closing Date which will be on or about February 10, 2011, or such earlier or later date or time as may be determined by the Corporation.

7.           Payment and Delivery.  The Subscriber acknowledges and agrees to deliver to the Corporation’s office at 302 The East Mall, Suite 300, Toronto, Ontario M9B 6C7, (Attention: Corporate Controller, Fax number: (416)-640-0412), prior to the Closing Time:

(a)        his or her duly completed and executed subscription agreement (including Schedules “D”, “E”, “F”, “G” and “H”, as applicable);

(b) a certified cheque, bank draft, or wire transfer in Canadian Funds payable to SARATOGA FINANCE INC., “IN TRUST”,for the principal amount of the Units subscribed for under this subscription agreement, or payment of the same amount in such other manner as is acceptable to the Corporation; and

Wire Transfer Details:

Bank Name: Canadian Imperial Bank of Commerce, Main Branch – Commerce Court, Toronto, Ontario, M5L 1G9.

Account Number: 875-4314; Transit Number: 02; Bank Code 010 (CIBC); Swift Code: CIBCCATT

(c)        such other documents as may be required pursuant to the terms of this subscription agreement.

8.           Conditions of Closing.  If, by the Closing Time, the terms and conditions contained in this subscription agreement have been complied with to the satisfaction of the Corporation or waived by the Corporation, the Subscriber shall deliver to the Corporation a certified cheque or bank draft representing subscription funds payable against delivery by the Corporation of the Common Share and Warrant certificates and such other documentation as may be required.  This subscription is subject to acceptance by the Corporation (as described below).  Certificates endorsed by the Corporation representing the Common Shares and Warrants will be available for delivery to the Subscriber in Toronto, Ontario at the Closing Time against payment of the purchase price for the Units.  The Corporation will deliver such certificates to the address set out for delivery on page 2 of this subscription agreement promptly after the closing of its Offering.

9.           The Subscriber acknowledges and agrees that the obligations of the Corporation hereunder are also conditional on the accuracy of the representations and warranties of the Subscriber contained in this subscription agreement as of the date of this subscription agreement, and as of the Closing Time as if made at and as of the Closing Time, and the fulfillment of the following additional conditions as soon as possible and in any event not later than the Closing Time unless other arrangements acceptable to the Corporation have been made:

      (a)              the Corporation shall have received all necessary approvals and consents, including all necessary regulatory approvals and consents (including the approval of the TSX) required for the completion of the transaction contemplated by this subscription agreement;

      (b)              the representations and warranties of the Corporation contained herein being true and correct as of the Closing Time with the same force and effect as if made at and as of the Closing Time after giving effect to the transactions contemplated hereby;

      (c)              the Corporation having complied with all covenants, and satisfied all terms and conditions contained herein to be complied with and satisfied by the Corporation at or prior to the Closing;

      (d)              the Subscriber having completed this subscription agreement in full and having paid the purchase price subscribed for hereunder to the Corporation in the manner contemplated in this subscription agreement.

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10.            Acceptance or Rejection.  The Corporation will have the right to accept or reject (in whole or in part) this subscription at any time at or prior to the Closing Time, and the right is reserved to the Corporation to allot to any subscriber less than the number of Units subscribed for. If this subscription is rejected in whole, any cheques or other forms of payment delivered to the Corporation representing the amount subscribed for will be promptly returned to the Subscriber without interest or deduction. If this subscription is accepted only in part, a cheque representing any refund of that portion of the subscription which is not accepted, will be promptly delivered to the Subscriber without interest or deduction. The Subscriber acknowledges and agrees that the acceptance of this subscription agreement will be conditional upon the sale of the Units to the Subscriber being exempt from any prospectus and registration requirements of Applicable Securities Laws.  The Corporation will be deemed to have accepted this subscription agreement upon the delivery at closing of the Common Share and Warrant certificates referred to in Section 8 above in accordance with the provisions hereof.

11.           Resale Restrictions.  The Subscriber understands and acknowledges that the Common Shares and Warrant Shares will be subject to certain resale restrictions under applicable securities legislation and the Subscriber agrees that the Subscriber will not resell the Common Shares, Warrants or Warrant Shares except in accordance with the provisions of applicable securities legislation, regulatory policy and stock exchange rules.  Subscribers are advised to consult their own legal advisors in this regard. The Subscriber also acknowledges that it has been advised to consult its own legal advisors with respect to applicable resale restrictions and that it is solely responsible for complying with such restrictions (and the Corporation is not in any manner responsible for ensuring compliance by the Subscriber with such restrictions).

12.           Legend.  The Subscriber acknowledges that the following legend is to be placed on the Common Shares and the Warrant certificates (and the certificates evidencing the Warrant Shares, if issued during the four month period referred to in such legend) being acquired:

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR (4) MONTHS AND ONE (1) DAY AFTER THE CLOSING DATE.

13.           No Revocation.  The Subscriber agrees that this offer is made for valuable consideration and may not be withdrawn, cancelled, terminated or revoked by the Subscriber.

14.           Indemnity.  The Subscriber agrees to indemnify and hold harmless the Corporation and its respective directors, officers, employees, agents, advisers and shareholders from and against any and all loss, liability, claim, damage and expense whatsoever (including, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation, warranty or covenant of the Subscriber contained herein or in any document furnished by the Subscriber to the Corporation in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any document furnished by the Subscriber to the Corporation in connection herewith.

15.           Modification.  Neither this subscription agreement nor any provision hereof shall be modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought.

16.           Miscellaneous.

(a)      The agreement resulting from the acceptance of this subscription agreement by the Corporation contains the whole agreement between the parties hereto in respect of the subject matter hereof and there are no warranties, representations, terms, conditions or collateral agreements, express, implied or statutory, other than as expressly set forth herein and in any amendments hereto.

(b)      All representations, warranties, agreements and covenants made or deemed to be made by the Subscriber in this subscription agreement will survive the execution and delivery, and acceptance, of this subscription agreement and the closing of the Offering.

(c)      Time shall be of the essence of this subscription agreement.

(d)      This subscription agreement and the rights and obligations of the parties hereunder will be governed by and construed according to the laws of the Province of Ontario and the laws of Canada applicable therein. Any and all disputes arising under this subscription agreement, whether as to interpretation, performance or otherwise, shall be subject to the non-exclusive jurisdiction of the courts of the province of Ontario and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such province.

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(e)      This subscription agreement may be executed in any number of counterparts, each of which when delivered, either in original or facsimile form, shall be deemed to be an original and all of which together shall constitute one and the same document.

17.           Notices.

(a)      Any notice, direction or other instrument required or permitted to be given to Corporation shall be in writing and shall be sufficiently given if delivered personally, or transmitted by facsimile tested prior to transmission to the Corporation, as follows:

(i) in the case of the Corporation to: Northcore Technologies Inc.      302 The East Mall, Suite 300     Toronto, Ontario M9B 6C7 (ii) in the case of the Subscriber, at the address specified on the face page hereof. Attention: Corporate Controller Fax:  416-640-0412

(b)      Any such notice, direction or other instrument, if delivered personally, shall be deemed to have been given and received on the day on which it was delivered, provided that if such day is not a Business Day then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day next following such day and if transmitted by fax, shall be deemed to have been given and received on the day of its transmission, provided that if such day is not a Business Day or if it is transmitted or received after the end of normal business hours then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day next following the day of such transmission.

Any party hereto may change its address for service from time to time by notice given to each of the other parties hereto in accordance with the foregoing provisions.

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SCHEDULE “B”

This is Schedule “B” to the subscription agreement relating to the purchase of Units of Northcore Technologies Inc. (the “Corporation”). Capitalized terms used but not defined in this schedule are intended to have the meanings ascribed thereto, as applicable, on the first page of this subscription agreement and sections 1 and 2 of Schedule “A” to this subscription agreement

NORTHCORE TECHNOLOGIES INC.

Summary of Proposed Terms Offering of Units

by way of Private Placement

TERM SHEET

Issuer:  Offering: Northcore Technologies Inc. ("Northcore" or the “Corporation”) 10,477,780Units to be issued by way of private placement exemptions from prospectus and registration requirements in the Province of Ontario and British Columbia, subject to the receipt of any applicable regulatory and stock exchange approvals.

Issued Price: $0.08 per Unit.

Units: Each Unit consists of One common share (a “Common Share”) and One Common Share purchase warrant (a “Warrant”). Each Warrant is exercisable into one Common Share at an exercise price of  $ 0.12, any time prior to the earlier of (i) 2 years from the Closing Date (as defined below); and (ii) the date that is ten (10) days following the issuance of a notice by Northcore to holders confirming that the closing price of the Common Shares on the TSX was greater than or equal to $ 0.16 for five (5) consecutive trading days, adjusted for any stock splits and/or share consolidations, at any time following Closing of the Issue, with such date of notice issuance at the sole discretion of Northcore anytime after the Common Shares on the TSX was greater than or equal to $ 0.16 for five (5) consecutive trading days.

Subscription: $838,222 or such other amount determined at the sole discretion of the Corporation.

Use of Proceeds: For working capital and general corporate purposes.

Hold Period: The Corporation will be a “reporting issuer” on the Closing Date, such that it is expected that the securities comprising the Units will have a restricted period of four months and one day from the Closing Date.

Commission: To Saratoga Finance Inc., an option to purchase from the Corporation up to 2,250,000 Units at a purchase price of $0.08 per Unit, at any time prior to 5:00 p.m. (Toronto time) on February 10, 2012. Each Unit consists of one fully paid common share of the Corporation (a “Common Share”) and one common share purchase warrant (the “Warrant”). Each Warrant is exercisable into one Common Share at an exercise price of  $ 0.12, any time prior to the earlier of (i) 2 years from the Closing Date (as defined below); and (ii) the date that is ten (10) days following the issuance of a notice by the Corporation to holders confirming that the closing price of the Common Shares on the TSX was greater than or equal to $ 0.16 for five (5) consecutive trading days, adjusted for any stock splits and/or share consolidations, at any time following Closing of the Issue, with such date of notice issuance at the sole discretion of the Corporation anytime after the Common Shares on the TSX was greater than or equal to $ 0.16 for five (5) consecutive trading days.

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The Corporation also agrees to pay Saratoga Finance Inc. a fee equal to 10 percent of the gross proceeds of all Units issued or sold by Saratoga Finance Inc. pursuant to this Offering, payable from available funds at the Closing.  The Corporation will also pay Saratoga Finance Inc.’s expenses associated with this Offering, to a maximum of $25,000.

Expiry Date of Warrant: Closing Date: February 10, 2012, two (2) years from the Closing Date (as defined below). On or before February 10, 2011 or such earlier or later date as the Corporation may determine.

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SCHEDULE “C”

SUBSCRIBER’S REPRESENTATIONS AND WARRANTIES

This is Schedule “C” to the subscription agreement relating to the subscription of Units of Northcore Technologies Inc. (the “Corporation”). Capitalized terms used but not defined in this schedule are intended to have the meanings ascribed thereto, as applicable, on the first page of this subscription agreement and Schedule “A” to this subscription agreement.

By executing this subscription agreement, the Subscriber represents and warrants to the Corporation which representations and warranties are true as of the date of this subscription agreement and will be true as of the Closing Date, that:

1. Representations and Warranties

(a)                      Authorization and Effectiveness.  If the Subscriber is a corporation, the Subscriber is a valid and subsisting corporation, has the necessary corporate capacity and authority to execute and deliver this subscription agreement and to observe and perform its covenants and obligations hereunder and has taken all necessary corporate action in respect thereof.  If the Subscriber is a partnership, syndicate or other form of unincorporated organization, the Subscriber has the necessary legal capacity and authority to execute and deliver this subscription agreement and to observe and perform its covenants and obligations hereunder and has obtained all necessary approvals in respect thereof.  If the Subscriber is a natural person, he or she has obtained the age of majority and is legally competent to execute this subscription agreement and to take all actions required pursuant thereto.

Whether the Subscriber is a natural person or a corporation, partnership or other entity, upon acceptance by the Corporation, this subscription agreement will constitute a legal, valid and binding contract of the Subscriber, and any beneficial purchaser for whom it is purchasing, enforceable against the Subscriber and any such beneficial purchaser in accordance with its terms.

(b)                      Residence.  The Subscriber is a resident of, or otherwise subject to, the jurisdiction referred to under “Name and Address of Subscriber” on the first page of this subscription agreement, which address is the residence or place of business of the Subscriber not created or used solely for the purpose of acquiring Units, and:

(i)                        is not (and is not purchasing Units for the account or benefit of) a U.S. Person;

(ii)                       was not offered the Units in the United States; and

(iii)                      did not execute or deliver this agreement in the United States.

(c)                      Investment Intent.  The Subscriber is acquiring Common Shares and Warrants to be held for investment only and not with a view to resale or distribution.

(d)                      Prospectus Exemptions.  The Subscriber acknowledges and agrees that:

(i) no securities commission or similar regulatory authority has reviewed or passed on the merits of the Common Shares or the Warrants;

(ii) there is no government or other insurance covering the Common Shares or Warrants;

(iii) there are risks associated with the purchase of the Common Shares and Warrants and in owning the Common Shares and Warrants;

(i)                       the sale and delivery of the Common Shares and Warrants to the Subscriber is conditional upon such sale being exempt from the requirements under Applicable Securities Laws requiring the

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filing of a prospectus in connection with the distribution of the Common Shares and Warrants.  The Subscriber acknowledges that it is aware that it is purchasing the Units pursuant to an exemption from the prospectus requirement under applicable securities legislation and, as a consequence, (i) it is restricted from using most of the civil remedies available under securities legislation; (ii) it may not receive information that would otherwise be required to be provided to it under securities legislation; and (iii) the Corporation is relieved from certain obligations that would otherwise apply under securities legislation.

(e)                      Offering Documents.  The Subscriber has not received, nor does the Subscriber need to receive, any document purporting to describe the business and affairs of the Corporation that has been prepared for delivery to and review by prospective investors so as to assist those investors to make an investment decision in respect of securities being sold in a distribution of securities of the Corporation. The Subscriber acknowledges that it has received a copy of the Relationship Disclosure Information from Saratoga Finance Inc.

(f)                      No Solicitation or Advertising.  The Subscriber acknowledges that it has not purchased the Units as a result of any general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

(g)                      No Undisclosed Information.  The Units are not being purchased by the Subscriber as a result of any material information concerning the Corporation that has not been publicly disclosed and the Subscriber’s decision to tender this offer and acquire Units has not been made as a result of any verbal or written representation as to fact or otherwise made by or on behalf of the Corporation, or any other person and is based entirely upon the currently available public information concerning the Corporation.

(h)                      Investment Suitability.  The Subscriber and any beneficial purchaser on whose behalf the Subscriber is acting hereunder have such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of the investment hereunder in Units and are able to bear the economic risk of loss of such investment. The Subscriber and any beneficial purchaser on whose behalf the Subscriber is acting hereunder acknowledge and agree that the Subscriber and such beneficial purchaser are responsible for obtaining such legal advice as the Subscriber or such beneficial purchaser considers appropriate in connection with the execution, delivery and performance by the Subscriber of this agreement and the transactions contemplated hereunder.

(i)                      Subscription Agreement.  The Subscriber has read and understands the contents of this agreement and agrees to be legally bound hereby.

(j)                      No Repurchase.  The Subscriber acknowledges that no person has made to the Subscriber any written or oral representations:

(i)                      that any person will resell or repurchase the Common Shares, Warrants or Warrant Shares;

(ii)                      that any person will refund the purchase price of the Common Shares, Warrants or Warrant Shares; or

(iii)                      as to the future price or value of the Common Shares, Warrants or Warrant Shares;

(k)                      Subject to Acceptance.  The Subscriber acknowledges that this subscription agreement is subject to acceptance and allotment by the Corporation.

(l)                      No Transfer of Common Shares or Warrant Shares in U.S.  The Subscriber acknowledges that the Common Shares and Warrant Shares may not be offered, sold or otherwise transferred to persons in the United States or to U.S. Persons and may not be exercised in the United States or by or on behalf of a U.S. Person and the Subscriber understands that certificates representing the

Common Shares and Warrant Shares issued to it will so indicate.

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(m)                      Ontario or British Columbia Subscriber. The Subscriber or any beneficial purchaser on whose behalf the Subscriber is acting hereunder is a resident of Ontario or British Columbia and the Subscriber or its disclosed principal is an “accredited investor” within the meaning of National Instrument 45-106 - Prospectus and Registration Exemptions and falls within one or more of the sub-paragraphs of the definition of “Accredited Investor” set out in Schedule “D” hereto and the Subscriber or such beneficial purchaser has concurrently executed and delivered to the Corporation a certificate in the form attached as Schedule “D” (the Subscriber having checked the applicable subparagraph(s)).

(n)                      No Breach. The execution and delivery of this subscription agreement, the performance and compliance with the terms hereof, the subscription for the Units and the completion of the transactions described herein by the Subscriber will not result in any material breach of, or be in conflict with or constitute a material default under, or create a state of facts which, after notice or lapse of time, or both, would constitute a material default under any term or provision of the constating documents, by-laws or resolutions of the Subscriber, the Applicable Securities Laws or any other laws applicable to the Subscriber, any agreement to which the Subscriber is a party, or any judgment, decree, order, statute, rule or regulation applicable to the Subscriber.

(o)                      Duly Authorized. The Subscriber is subscribing for the Units as principal for its own account and not for the benefit of any other person (within the meaning of Applicable Securities Laws) and not with a view to the resale or distribution of all or any of the Units or if it is not subscribing as principal, it acknowledges that the Corporation may be required by law to disclose to certain regulatory authorities the identity of each beneficial purchaser of the Units for whom it is acting.

(p)                      Trustee. In the case of a subscription for the Units by the Subscriber acting as trustee or agent (including, for greater certainty, a portfolio manager or comparable adviser) for a principal, the Subscriber is duly authorized to execute and deliver this subscription agreement and all other necessary documentation in connection with such subscription on behalf of each such beneficial purchaser, each of whom is subscribing as principal for its own account, not for the benefit of any other person and not with a view to the resale or distribution of the Units, and this subscription agreement has been duly authorized, executed and delivered by or on behalf of and constitutes a legal, valid and binding agreement of, such principal, and the Subscriber acknowledges that the Corporation may be required by law to disclose the identity of each beneficial purchaser for whom the Subscriber is acting.

(q)                      Principal. In the case of a subscription for the Units by the Subscriber acting as principal, this subscription agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of, the Subscriber. This subscription agreement is enforceable in accordance with its terms against the Subscriber and any beneficial purchasers on whose behalf the Subscriber is acting.

(r)                      No Agents. Other than Saratoga Finance Inc., there is no person acting or purporting to act in connection with the transactions contemplated herein who is entitled to any brokerage or finder’s fee. If any person establishes a claim that any such fee or other compensation is payable in connection with this subscription for the Units, the Subscriber covenants to indemnify and hold harmless the Corporation with respect thereto and with respect to all costs reasonably incurred in the defence thereof.

(s)                      Filing of Reports. If required by Applicable Securities Laws or the Corporation, the Subscriber will execute, deliver and file or assist the Corporation in filing such reports, undertakings and other documents with respect to the issue of the Common Shares or Warrants as may be required by any securities commission, stock exchange or other regulatory authority.

(t)                      Hold Period. The Subscriber acknowledges that no representation has been made respecting the applicable hold periods imposed by the Applicable Securities Laws or other resale restrictions applicable to the Common Shares or Warrants which restrict the ability of the Subscriber (or others for whom it is contracting hereunder) to resell such securities, that the Subscriber (or others for whom it is contracting hereunder) is solely responsible to find out what these restrictions are and the Subscriber is solely responsible (and the Corporation is not in any way responsible) for compliance with applicable resale restrictions and the Subscriber is aware that it (or beneficial purchasers for whom it is contracting hereunder) may not be able to resell such securities except in accordance with limited exemptions under the Applicable Securities Laws and other applicable laws.

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(u)                      No Reliance.  The Subscriber acknowledges that it has relied solely on publicly available information relating to the Corporation and not upon any verbal or written representation as to fact or otherwise made by or on behalf of the Corporation.

(v)                      Independent Advice.  The Subscriber acknowledges that it has been encouraged to and should obtain independent legal, income tax and investment advice with respect to its subscription for these Common Shares and Warrants and accordingly, has been independently advised as to the meanings of all terms contained herein relevant to the Subscriber for purposes of giving representations, warranties and covenants under this subscription agreement.

2. Reliance Upon Representations, Warranties and Covenants. The Subscriber acknowledges that the representations and warranties contained herein are made by the Subscriber with the intention that they may be relied upon by the Corporation in determining the Subscriber’s eligibility to purchase the Units under Applicable Securities Laws.  The Subscriber agrees that by accepting delivery of the Common Shares and Warrants on the Closing Date, the Subscriber will be representing and warranting that the foregoing representations and warranties are true and correct as at the Closing Time with the same force and effect as if they had been made by the Subscriber at the Closing Time.

3. Personal Information.  The Subscriber and (if applicable) each disclosed principal understands that the Corporation may be required to provide any one or more of the Canadian securities regulators, stock exchanges, or other regulatory agencies or the Corporation’s transfer agent with the name, residential address, telephone number and e-mail address of the Subscriber and (if applicable) any disclosed principals as well as information regarding the number, aggregate purchase price and type of Units, Warrants and/or Common Shares purchased under this subscription agreement and the identities of any beneficial purchasers of the Units, Warrants and/or Common Shares (collectively, the "Information"), and may make any other filings of the Information as the Corporation or the Corporation’s counsel deems appropriate. In addition, the Information may be used by the Corporation for the purposes of:

(a)            completing the purchase of the Units pursuant to this subscription agreement;

(b)           complying with all corporate governance and continuous disclosure requirements under applicable securities laws; and

(c)            contacting the Subscriber in its capacity as an investor.

The Subscriber and (if applicable) any disclosed principals hereby consent to and authorize the foregoing use and disclosure of such Information. Notwithstanding that the Subscriber may be purchasing the Units as agent on behalf of one or more undisclosed principals, the Subscriber agrees to provide, on request, all particulars as to the identity of such undisclosed principals as may be required by the Corporation in order to comply with the foregoing.

Each Subscriber of Units in Ontario authorizes the indirect collection of Information by the Ontario Securities Commission and confirms that it has been notified by the Corporation: (i) that the Corporation will be delivering the Information to the Ontario Securities Commission; (ii) that such Information is being collected indirectly by the Ontario Securities Commission under the authority granted to it in Applicable Securities Laws; (iii) that such Information is being collected for the purpose of the administration and enforcement of Applicable Securities Laws; and (iv) that the title, business address and business telephone number of the public official in the Province of Ontario, who can answer questions about the Ontario Securities Commission’s indirect collection of the Information as follows:

Administrative Support Clerk

Ontario Securities Commission

Suite 1903, Box 55, 20 Queen Street West

Toronto, Ontario M5H 3S8

Telephone: (416) 593-3684

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4.            Proceeds of Crime.

In order to comply with Canadian legislation aimed at the prevention of money laundering and terrorism financing, Saratoga Finance Inc. may require additional information concerning investors from time to time, and the Subscriber agrees to provide all such information.

In accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), a Subscriber must provide certain information and/or documentation as well as proof of identity and source of funds. For corporations, limited partnerships or similar entities, other than those entities specifically exempted by the applicable rules, please complete Schedule “G” and attach all necessary documentation.

In order to assist Saratoga Finance Inc. in discharging its obligations, the Subscriber represents that neither he or she, or any director, officer and beneficial owner of it (unless the entity is specifically exempted), nor any of such persons’ mother or father, child, spouse or common-law partner, spouse's or common-law partner's mother or father, or brother, sister, half-brother or half-sister, is a politically exposed foreign person. A “politically exposed foreign person” is an individual who holds or has ever held one of the following offices or positions in or on behalf of a foreign country:

· a head of state or government;

· a member of the executive council of government or member of a legislature;

· a deputy minister (or equivalent);

· an ambassador or an ambassador's attaché or counsellor;

· a military general (or higher rank);

· a president of a state owned company or bank;

· a head of a government agency;

· a judge; or

· a leader or president of a political party in a legislature.

The Subscriber will immediately notify Saratoga Finance Inc. at the following address if the status of any such person in this regard changes:

73 Richmond Street West, Suite 207

Toronto, Ontario M5H 1Z4

The Subscriber acknowledges that if, as a result of any information or other matter which comes to Saratoga Finance Inc.’s attention, any director, officer or employee of Saratoga Finance Inc., or their professional advisers, knows or suspects that an investor is engaged in money laundering, such person is required to report such information or other matter to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and such report shall not be treated as a breach of any restriction upon the disclosure of information imposed by Canadian law or otherwise.

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SCHEDULE “D”

This is Schedule “D” to the subscription agreement relating to the purchase of Units of Northcore Technologies Inc. (the “Corporation”).  Capitalized terms used but not defined in this Schedule are intended to have the meanings ascribed thereto, as applicable, on the first page of this subscription agreement and section 1 and 2 of Schedule “A” to this Subscription Agreement.

ACCREDITED INVESTOR CERTIFICATE

TO:           Northcore Technologies Inc.

In connection with the subscription for Units, the undersigned hereby represents, warrants and certifies to the Corporation that the undersigned (or each disclosed principal, if applicable) is an “accredited investor” as defined in Section 1.1 of National Instrument 45-106 – Prospectus and Registration Exemptions and is purchasing the Units as principal.

The undersigned (or each disclosed principal, if applicable) is resident in the Province of Ontario or British Columbia, is subject to the laws of the Province of Ontario or British Columbia, as applicable, and has indicated below the categories that the undersigned (or the disclosed principal) satisfies to qualify as an “accredited investor”.

The undersigned understands that the Corporation and its counsel are relying on the information contained in this certificate in order to determine whether the Corporation may sell Units to the undersigned in a manner exempt from the prospectus and registration requirements of Applicable Securities Laws.

ACCREDITED INVESTOR STATUS

The undersigned represents, warrants and certifies that it, he or she (or the disclosed principal, if applicable) is:  [initial each applicable item]:

_____	(a)	a Canadian financial institution, or a Schedule III bank;
_____	(b)	the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
_____	(c)	a subsidiary of any person referred to in paragraphs (a) to (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
_____	(d)	a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);
_____	(e)	an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada, as a representative of a person referred to in paragraph (d);
_____	(f)	the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;
_____	(g)	a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l'île de Montréal or an intermunicipal management board in Québec;
_____	(h)	any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;

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_____	(i)	a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a jurisdiction of Canada;
_____	(j)	an individual who, either alone or with a spouse, beneficially owns, directly or indirectly, financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000;
_____	(k)	an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
_____	(l)	an individual who, either alone or with a spouse, has net assets of at least $5,000,000;
_____	(m)	a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements, and that was not formed for the sole purpose of making a representation to this effect in order to qualify as an accredited investor;
_____	(n)	an investment fund that distributes or has distributed its securities only to (i)a person that is or was an accredited investor at the time of the distribution, (ii)a person that acquires or acquired securities in the circumstances referred to under sections 2.10 [Minimum Amount Investment] and 2.19 [Additional Investment in Investment Funds] of National Instrument 45-106, or (iii)a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment Fund Reinvestment] of National Instrument 45-106;
_____	(o)	an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;
_____	(p)	a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;
_____	(q)	a person acting on behalf of a fully managed account managed by that person, if that person (i)is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction, and (ii)in Ontario, is purchasing a security that is not a security of an investment fund;
_____	(r)	a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;
_____	(s)	an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) through (d) or paragraph (i) in form and function;

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_____	(t)	a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;
_____	(u)	an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser; or
_____	(v)	a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor.

For the purposes hereof, the following terms shall have the following meanings:

"Affiliate" - a person is an affiliate of another person if:

(a)                      one of them is the subsidiary of the other, or

(b)                      each of them is controlled by the same person.

"Canadian financial institution" means:

(c)                      an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act; or

(d)                      a bank named in Schedule I or II of the Bank Act (Canada), loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction in Canada.

"Control person" means any person that holds or is one of a combination of persons that holds:

(e)                      a sufficient number of any of the securities of an issuer so as to affect materially the control of the issuer, or

(f)                      more than 20% of the outstanding voting securities of an issuer except where there is evidence showing that the holding of those securities does not affect materially the control of the issuer.

"Director" means:

(g)                      a member of the board of directors of a company or an individual who performs similar functions for a company, and

(h)                      with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company.

"Eligibility Adviser" means:

(i)                      a person that is registered as an investment dealer or in an equivalent category of registration under the securities legislation of the jurisdiction of a purchaser and authorized to give advice with respect to the type of security being distributed; and

(j)                      in Saskatchewan or Manitoba, also means a lawyer who is a practising member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not:

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(i)                      have a professional, business or personal relationship with the issuer, or any of its directors, executive officers, founders of control persons; and

(ii)                      have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months.

"Executive Officer" means, for an issuer, an individual who is:

(k)                      a chair, vice-chair or president,

(l)                      a vice-president in charge of a principal business unit, division, or function including sales, finance or production,

(m)                      an officer of the issuer or any of its subsidiaries and who performs a policy-making function in respect of the issuer, or

(n)                      performing a policy-making function in respect of the issuer.

"Financial Assets" means:

(o)                      cash;

(p)                      securities; or

(q)                      a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

"Founder" means, in respect of an issuer, a person who:

(r)                      acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and

(s)                      at the time of the trade is actively involved in the business of the Issuer.

"Fully managed account" means an account for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client's express consent to a transaction.

"Investment fund" means a mutual fund or a non-redeemable investment fund;

"Mutual fund " means an issuer whose primary purpose is to invest money provided by its security holders and whose securities entitle the holder to receive on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in part of the net assets, including a separate fund or trust account, of the issuer;

"Non-redeemable Investment Fund" means an issuer:

(t)                      whose primary purpose is to invest money provided by its security holders;

(u)                      that does not invest:

(i)                      for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund, or

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(ii)                      for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund, and

(v)                      that is not a mutual fund.

"Person" includes:

(w)                      an individual;

(x)                      a corporation;

(y)                      a partnership, trust, fund and an association, syndicate, organization or other organized group of person, whether incorporated or not; and

(z)                      an individual or other person in that person's capacity as a trustee, executor, administrator, or personal or other legal representative.

"Related Liabilities" means:

(aa)                      liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or

(bb)                      liabilities that are secured by financial assets.

"Spouse" means an individual who:

(cc)                      is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual;

(dd)                      is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender; or

(ee)                      in Alberta, is an individual referred to in paragraph (a) or (b), or is in an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

"Subsidiary" means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

For purposes of the definitions of “affiliates” and “subsidiary” a person (first person) is considered to control another person (second person) if:

(ff)                      the first person, directly or indirectly, beneficially owns or exercises control or direction over securities of the second person carrying votes which, if exercised, would entitle the first person to elect a majority of the directors of the second person, unless that first person holds the voting securities only the secure an obligation;

(gg)                      the second person is a partnership, other than a limited partnership, and the first person holds more than 50% of the interests of the partnership; or

(hh)                      the second person is a limited partnership and the general partner of the limited partnership is the first person.

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EXECUTED by the Subscriber at this day of , 2011.

If a corporation, partnership or other entity:	If an individual:
__________________________________________	______________________________________________
(Print Name of Subscriber)	(Print Name)
__________________________________________	______________________________________________
(Signature of Authorized Signatory)	(Signature)
__________________________________________	______________________________________________
(Name and Position of Authorized Signatory)	(Jurisdiction of Residence)
__________________________________________	______________________________________________
(Jurisdiction of Residence)	(Print Name of Witness)
__________________________________________	______________________________________________
	(Signature of Witness)

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SCHEDULE “E”

ADDITIONAL KNOW-YOUR-CLIENT INFORMATION

To be completed and initialled by Subscriber (unless the Subscriber is a registered firm, a Canadian financial institution or a Schedule III bank, or is otherwise a permitted client that has completed Schedule “F”): The following information is collected to assist Saratoga Finance Inc. in obtaining sufficient information regarding the Subscriber’s needs, objectives, financial circumstances and risk for tolerance, to determine whether the subscription for Units is suitable for the Subscriber.

	Annual Income		Net Worth		Investable Assets
	(average past two years)				(non-RRSP)
o	Under $100,000	o	Under $100,000	o	Under $100,000
o	$100,000 - $199,999	o	$100,000 - $249,999	o	$100,000 - $249,999
o	$200,000 - $299,999	o	$250,000 - $499,999	o	$250,000 - $499,999
o	$300,000 - $499,000	o	$500,000 - $1,000,000	o	$500,000 - $1,000,000
o	Over $500,000	o	Over $1,000,000	o	Over $1,000,000

	Investment Knowledge		Other Investments Held
	(please choose only one)
o	Sophisticated	o	Bonds	o	Stocks
o	Good	o	Mutual Funds
o	Fair	o	Mortgage
o	Novice	o	Term Deposits
		o	Real Estate

	Investment Objectives		Risk Tolerance		Liquidity
o	Safety	o	None		Purchaser needs instant
o	Income	o	Money Market or Equiv.		Access to their
o	Balanced	o	Low		Investment
o	Growth	o	Medium	o	Yes
o	Growth & Income	o	High	o	No
o	Aggressive Growth	o	Aggressive

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Purchaser is an insider of a reporting issuer or other issuer whose securities are publicly traded (as those terms are defined under applicable securities laws):	o    Yes
	o    No

If Yes, provide name(s) of issuer(s):

   Initials of Purchaser: __________________

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SCHEDULE “F”

PERMITTED CLIENT SUITABILITY WAIVER

TO:                      Saratoga Finance Inc.

In connection with the purchase by the undersigned purchaser (the “Subscriber”) of units of Northcore Technologies Inc., the Subscriber (or the signatory on behalf of the Subscriber) certifies for the benefit of Saratoga Finance Inc. that the Subscriber is a permitted client within the meaning of National Instrument 31-103 – RegistrationRequirementsandExemptions(“NI31-103”), and herebywaives (i) Saratoga Finance Inc.’s obligation to determine suitability of the purchaser’s investment in Northcore Technologies Inc. inaccordancewithsection13.3ofNI31-103and(ii)exceptasspecificallyrequestedbythe purchaserfromtimetotime, Saratoga Finance Inc.’sobligationtodeliveralloftheinformationrequiredby section 14.2 of NI 31-103. Specifically, the Subscriber is:

PLEASE CHECK THE BOXOF THEAPPLICABLE CATEGORY AND INITIAL:

        (a)         a Canadian financial institution or a Schedule III bank;

  o (b) the Business Development Bank of Canada incorporated under the Business Development BankofCanadaAct(Canada);

  o (c) a subsidiary of any person or company referred to in paragraph (a) or (b), if the person or company  owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of the subsidiary;

  o (d) a person or company registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than as a scholarship plan dealer or a restricted dealer;

  o (e) a pension fund that is regulated by either the federal Office of the Superintendent of Financial Institutions  or  a  pension  commission  or similar  regulatory authority of  a  jurisdiction  of Canada or a wholly-owned subsidiary of such a pension fund;

  o (f) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (e);

  o (g) the Government of Canada or a jurisdiction of Canada, or any Crown corporation, agency or wholly-owned entity of the Government of Canada or a jurisdiction of Canada;

  o (h) any  national,  federal,  state,  provincial,  territorial  or  municipal  government  of  or  in  any foreign jurisdiction, or any agency of that government;

  o (i) a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;

  o (j) a trust company or trust corporation registered or authorized to carry on business under the TrustandLoanCompanies Act(Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a managed account managed by the trust company or trust corporation, as the case may be;

138

  o (k) a person or company acting on behalf of a managed account managed by the person or company,  if the person or company is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction;

  o (l) an investment fund if one or both of the following apply:

(i) the fund is managed by a person or company registered as an investment fund manager under the securities legislation of a jurisdiction of Canada;

(ii) the fund is advised by a person or company authorized to act as an adviser under the securities legislation of a jurisdiction of Canada;

  o (m) in respect of a dealer, a registered charity under the IncomeTaxAct(Canada) that obtains advice on the securities to be traded from an eligibility adviser, as defined in section 1.1 of NI 45-106, or an adviser registered under the securities legislation of the jurisdiction of the registered charity;

  o (n) in respect of an adviser, a registered charity under the Income Tax Act (Canada) that is advised  by an eligibility adviser, as defined in section 1.1 of NI 45-106, or an adviser registered under the securities legislation of the jurisdiction of the registered charity;

  o (o) an individual who beneficially owns financial assets, as defined in section 1.1 of NI 45-  106, having an aggregate realizable value that, before taxes but net of any related  liabilities, exceeds $5 million;

  o (p) a person or company that is entirely owned by an individual or individuals referred to in paragraph (o), who holds the beneficial ownership interest in the person or company directly or through a trust, the trustee of which is a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction;

  o (q) a person or company that is entirely owned by an individual or individuals referred to in paragraph (o), who holds the beneficial ownership interest in the person or company directly or throu 

  o (r) a person or company that distributes securities of its own issue in Canada only to persons or companies referred to in paragraphs (a) to (q);

Signature:  ___________________             Name:_______________________________________________________________________________________

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SCHEDULE “G”

[Subscribers other than Individuals]

_______________________________________________

[insert name of corporation or other entity above]

TO:                      Saratoga Finance Inc.

RE:                      Subscription for Units of Northcore Technologies Inc. (the “Corporation”)

I, _________[Name ofSignatory], of  ____________[NameofEntity](the “Entity”), do hereby certify for and on behalf of the Entity, but without personal liability, to the best of my knowledge, as follows:

1. I am the __________________________ [Title]of the Entity, and as such have knowledge of the matters certified to herein and have the power to bind the Entity;

2.           the primary business of the Entity is _______________________________________________________

3. the Entity has not taken any steps to terminate its existence, to amalgamate, to continue into any other jurisdiction  or  to  change  its  [corporate]  existence  in  any  way  and  no  proceedings  have  been commenced or threatened, or actions taken or resolutions passed that could result in the Entity ceasing to exist;

4. the Entity is not insolvent and no acts or proceedings have been taken by or against the Entity or are pending in connection with the Entity, and the Entity is not in the course of, and has not received any notice  or  other  communications,  in  each  case,  in  respect  of,  any  amalgamation,  dissolution, liquidation, insolvency, bankruptcy or reorganization involving the Entity, or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer with respect to all or any of its  assets or revenues or of any proceedings to cancel its constating certificate or declaration or to otherwise terminate its existence or of any situation which, unless remedied, would result in such cancellation or termination;

5. the Entity has not failed to file such returns, pay such taxes, or take such steps as may constitute grounds for the cancellation or forfeiture of its certificate, declaration or existence;

6. attached  to  this  certificate  are  true  copies  of  the  articles  of  incorporation,  declaration  of  trust, partnership  agreement  and/or  other  constating  documents  of  the  Entity  (plus,  in  the  case  of  a corporation, a certificate of corporate status or a record that confirms the corporation’s existence, for example, a letter or a notice of assessment for a corporation from a municipal, provincial, territorial or federal government received within the past 12 months);

7. the current [directors] [trustees] [managing partners]of the Entity and their occupations are listed below:   [InsertNamesandOccupations–attachseparate  sheet ifnecessary]

8. the names, addresses and occupations of all individuals who own or control directly or indirectly 10% or  more  of  the  [voting  shares  of  the]  Entity  are  listed  below:  [Insert Names, Addresses and Occupations–attachseparatesheet ifnecessary]

9. the names, titles and signatures of individuals who have the power to provide instructions to the Fund and the Investment Manager on behalf of the Entity are as follows:

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Name Title Signature

IN WITNESS WHEREOF I have hereunto signed my name at _____________________ [Insert City] this _______ day of _______________________, _________ [Insert Date].

X __________________________________

Name:

Title:

I have authority to bind the Entity.

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SCHEDULE “H”

[Subscribers not Physically meeting with Saratoga]

ATTESTATION AS TO IDENTITY

SCHEDULE“H

[Subscribers not Physically meeting with Saratoga]

ATTESTATION AS TO IDENTITY

In the matter of the identification of the following person for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act(Canada):

I,______________________________________________________________________[insert name] of

______________________________________________________________________ [insert address] as a

commissioner for oaths or a guarantor as noted below hereby certify that I have seen the original of the following document, and signed the legible photocopy, attached hereto: [please check applicable box]

□birth certificate; or                                               □ passport; or

□driver’s license; or                                               □ other government-issued identity document, namely

_______________________________________________________________________[describe document]; in the name of

_______________________________________________________________________[person being identified].

I further certify the following information with respect to the identity document:

a)reference number: _________________________________________                                                              

b)place of issue: ___________________________________________  (city, province or state)

c)date of expiry:____________________________________________ [document must not be expired]

I confirm that I am attesting to the identity of the person named above in my capacity as (check one):

□Commissioner for oaths                                                              □ dentist, a medical doctor or a chiropractor

□a judge, a magistrate or a lawyer                                                □ a notary (in Quebec) or a notary public

□an optometrist or a pharmacist                                                   □ a veterinarian.

□other than Québec) or engineer (Eng. in Québec);□ an accredited public accountant (APA), a chartered accountant  (CA),  a  certified  general  accountant  (CGA),  a certified management accountant (CMA), a public accountant (PA) or a registered public accountant (RPA)

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Dated:

______________________________________                                                                                                

________________________________________________

             (Signature of Commissioner or Guarantor)

[If attesting as a Commissioner, please affix Commissioner’s stamp if available.]

Name and Address of Commissioner/Guarantor

______________________________________

______________________________________

______________________________________

To be used as one of the two methods required to identify individuals who are not physically present when completingthe subscription.

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