CEO Audi-Bulls Interview with Chris Bulger of Northcore Technologies (OTCBB: NTLNF; TSX: NTI)

January 2010

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This is Clay Chase, your host at CEO Audi-Bulls and with us today we have Mr. Chris Bulger, Chairman of the Board for Northcore Technologies, Inc. Northcore Technologies trades on the OTC bulletin board under the ticker symbol NTLNF, and on the TSX Exchange under the symbol NTI and is currently priced at around $0.20 a share. Northcore Technologies is a provider of unique and proprietary enterprise software solutions served in an ASP, or "application service provider" environment that allows their corporate clients to more efficiently purchase, sell, track, appraise and manage large pools of capital assets across their business enterprises. Northcore Technologies is a 50% shareholder of GE Asset Manager LLC, a joint venture between the Company and GE Commercial Finance through which Northcore's solutions are provided within GE and to key customers of GE. Good afternoon Chris and welcome to CEO Audi-Bulls.

Chris Bulger: Hi Clay. Thank you for the opportunity to talk with you about Northcore.

BabyBulls: Well, great - it's a real pleasure to have you on the show today, and we're glad you could make it. Chris, let's start out today with Northcore Technologies core product, the "Working Capital Engine" platform. Can you break this product down to the basics for our listeners and give us some insight - and possibly some examples - as to how the value of these software tools is provided for your customers?

CB: Yes, sure Clay, as a start, the general category is really asset lifecycle management, and as we break our products down, the real benefit is that each product helps to liberate working capital for customers. So we start with asset buyer, and there is really four products we have: asset buyer, asset tracker, asset appraiser and asset seller - that cover the lifecycle of an asset in an organization. So we start with asset buyer - we offer a more rigorous and effective sourcing methodology so companies can save money when they're buying their assets. The second one, asset tracker - helps companies save money by tracking the utilization of existing assets and helping them redeploy underutilized assets in one area of their business where they can be better utilized in another area - before they have to spend money to try and buy new assets. The third area - asset appraiser, helps companies get a better understanding of the fair market value of these assets so it helps them to manage a more professional appraisal process, so they have more useful analytics, or information when they are trying to sell used assets. And then finally asset seller is really a way of improving the efficiency and recovery values from the sale of used equipment when it is ready for sale. So each one of these products contributes to working capital benefits for customers, and each one can work independently and they also can work together to increase the overall working capital benefits for customers.

BB: Right, so it's a way of saving money throughout the entire lifecycle of these assets.

CB: That's correct.

BB: Chris, from what we have read in some of your filings, a tremendous amount of work has gone into developing these software solutions that make up the nexus of the GE Asset Manager relationship. Can you tell us a little about the history of Northcore and more specifically the history behind the development of your suite of asset management software products?

CB: Well, we began as one of the early online auctions in the business-to-consumer sector, and with patents around the declining price auction, or a "Dutch" auction as a form of interactive commerce. And we moved into the business-to-business sector as we started to see industries that were using traditional auctions as a way of doing business and we saw a better way. So what began with the auction of cars coming off lease for companies pointed out a need for a more effective online buying tools and then between these two bookends of buying and selling assets more efficiently there were customer needs for better tracking of asset utilization and maintenance records and then that led to sort of a U.S. Congress level initiative to better support the standards for professional asset appraisal. So essentially we started with asset seller and the consumer auction, we created this dynamic buying platform and then completed the lifecycle of applications through asset tracker and asset appraiser. So each of our products is a quick to deploy hosted solution, and we interface with existing enterprise systems with companies. We're not a multimillion dollar, multiyear implementation - we are all about rapid implementation of high ROI solutions to customers in areas of asset management that enterprise systems don't offer really adequate solutions for.

BB: So a company can get set up with your system fairly quickly because it's hosted, it's not software they have to install at their own location then right?

CB: That's right, we can go through a test cycle or pilot cycle with a customer in a matter of a couple of weeks. We have lots of evidence of having a fully implemented system within a matter three months.

BB: Wow, that's very fast.

CB: So that's the order of magnitude.

BB: Chris, we think it's pretty significant that a company the size and global reach of GE Capital has established this joint venture with Northcore. Can you tell us a little bit more about that relationship?

CB: Sure, we started with GE in the online auction of cars coming off lease. And that evolved into our building and hosting GE Asset.com, which now sells assets across some many asset categories ranging from forklifts to large tractor-trailers and now most recently to corporate jet aircraft. We have worked hard with GE to build a center of excellence with them by combining their domain expertise in asset management with our technology solutions, so what's happened is after GE's internal success they began to offer these business tools to their key customers, and they've gone on to establish asset management really as one of their six core competencies across their organization for supporting their strategy for long term growth. So all of that essentially is manifested in GE Asset Manager as our 50-50 joint venture with GE wherein big picture, it's their brand marketing customer base and it's our technology and implementation.

BB: That's fantastic. Some of the subscribers on your online solution platform are very large corporations, multinationals such as TORO, the agricultural equipment manufacturer; Hyster the fork lift group; and Kraft . . . can you tell us a little about why these customers are on board, and the type of benefits they realize by utilizing Northcore's working capital and asset management solutions?

CB: Well if I start with the selling of used assets, the old way of disposing of assets through third parties resulted in less than fair market value realization for companies, and so that was the challenge - and now in the case of GEasset.com they have many thousands of qualified buyers that can view all the information they need to make a purchase decision about an asset without a middleman. Now the result is a more efficient method for buyers to evaluate the purchase of used equipment before they buy new. And for the seller they realize closer to fair market value for the assets they sell. From a financial company's perspective, this is a mitigation of residual value risk, and leasing transactions. If you are lowering the risk in a transaction you're able to be more competitive in leasing rates going forward. So that's some of the benefits that have surrounded our asset selling application. And if we move from selling and move back a bit to tracking applications - Kraft Foods is one of our very early customers with asset tracker, and after a successful deployment in North America they've expanded now throughout their global enterprise and now they're able to track the utilization of assets so if whenever there's a need for new equipment at any one location they can officially search their whole organization for underutilized assets around the world and then transfer these assets to where they can be more fully used. So now they're able to redeploy used assets, underutilized used assets before they go through evaluation of a purchasing new equipment decision. So it's a pretty compelling ROI that they're experiencing, and obviously a wonderful reference account for us going forward. If we look at our other products, GE now has mandated the use of our appraiser. This tool makes it more efficient to manage appraisals across multiple locations, it ensures that everyone is maintaining a very high level of standardization of the information. So this is a very high caliber of due diligence in supporting financial transactions and then we overlay that with a management lens so that the clients really benefit from data analytics on their history of a portfolio of past appraisals. So for example if an organization is coming in with a hundred million dollars worth of a trucking fleet that needs appraisal, here is a very effective tool to manage those types of large-scale appraisals. And then for a dynamic buyer, this has been used to automate requests for tenders for everything from hospital equipment to business furniture to even the bulk purchase of legal services. You're able now to automate the issuing of tenders, and request for proposals. You can engage suppliers in reverse auctions to drive down the price of services, you can automate the scoring of proposals coming in, and of increasing importance now is that the purchase process has complete transparency - so it is absolutely fair, in a fair tendering process for all suppliers and in fact it makes it more efficient for suppliers to bid. From a big picture perspective, companies are often realizing savings of 10% level on their purchases using much more modern and flexible buying methodologies.

BB: Well it sounds like you are really providing a lot of value and some fantastic savings to your clients, and that really leads me to my next question Chris, right to the heart of matter. How does Northcore make money?

CB: Well we are a technology licensing company, and so our basic business model is providing annual hosting services. So we are paid generally an annual technology licensing fee for customers, and we have system consulting revenues that result as well. Sometimes there is some upfront configuration, but what we're seeing more of is the use of our platform for strategic purposes. For example, when GE purchased a Citycaps transaction portfolio we did a special consulting project using asset tracker to gather data from the acquisition and migrate this data into GE and essentially integrate the legacy systems of the acquisition with GE. We went from start to finish and it was only three months in terms of our ability to go from a standing start to provide them with this level of strategic support for an acquisition. So that gives you another illustration as to the robustness of the core platform and how we can rapidly customize it in a given opportunity, and that generates system consulting revenues for us. We did a similar thing for GE with Comdisco when that ended up being folded into the GE Global Electronic Solutions - and so we have a systems consulting service as well but our core opportunity for revenue growth is in the sale of our products now. The four products: asset buyer, tracker, appraiser and seller, that's where we see the real scale of the business.

BB: Chris, you recently announced in a press release a comprehensive marketing plan for the "Working Capital Engine" product suite. Can you elaborate on that plan for our listeners - IE what you expect to see in terms of deliverables for the company, and over what time frame?

CB: Well we went forward with "Liberate your Working Capital" campaign over the last quarter, and we really did this through three channels. We have our Northcore direct channel to customers. Then we work through a targeted channel through GE as well, and the third leg is we formed a new partnership called Southcore that is looking at the Caribbean and Asian markets as areas where there's clear technology need, but we didn't have a reach there. So that's a new partnership. Where historically we were focused only on GE, now we essentially have gone on to three channels of business origination. And in these current economic times it's unfortunate for some companies, but fortunate for Northcore is that - now that funding is more difficult for companies to get as it was historically, they're now much more interested in our working capital solutions. So we're encouraged that the receptivity of our solution is more ready in this marketplace. So when you look at the addressable market, GE has 2,000 enterprise customers. There is over 6,000 companies with over $1 billion worth of fixed assets. So we've got a pretty big addressable market. We haven't got anywhere near a penetration in any of those. So what we're seeing now is a good pipeline of opportunities going into next year. We certainly expect to be announcing some marquee customers in each of the next quarters and as the caliber of customer that's endorsing our platform and becoming reference accounts becomes broader then we just see an acceleration of the pipeline. So obviously I can't give guidance in terms of specific financial forecasts - but we certainly look at 2010 as the breakout year for Northcore.

BB: With GE being a 50% owner of the GE Asset Manager platform, do you expect them to be an integral part of the marketing, so that in affect their customers will become your customers at some point?

CB: Well yes, that was the whole purpose of forming GE Asset Manager, LLC as the joint venture, so it's to take our solutions to their customers. In the background, GE is a learning by doing organization, and after GE has learned internally of the benefits of these tools, they want to share these tools with their customers. Improved asset management is good for GE and it's good for their customers. And we're very focused with them on using this as a key differentiator for them in their marketplace. For some of their key customers, our technology solution has been bundled with the renewal of some significant customers with them, because this is clearly a differentiator and a clear value ad, that no one else is providing in the industry.

BB: Good, well that gives us a real good background on some of your core products. Chris, what's next for Northcore. Do you have any other new projects on the horizon that you're working on that you can share with us at this time?

CB: Well there's a few we have on the go. The ones that probably we can talk about now is the aircraft site we did for GE and you know this is again - I want to say a high profile initiative where we are now assisting the successful sale of corporate jet aircraft online. And the way we've achieved that is we introduced a new level of technology into the selling platform that used to only be used by museums and galleries to view expensive or historic artifacts within inches of close of detail. Well, we provide this same technology now for high-valued assets. So when a buyer's looking at an aircraft they can look right down to find out whether there's dust in the carpet. The complete view of all the instrumentation panel right down to as minute detail as they require. So I think that's an exciting area for us, it's certainly been successful in our deployment with GE but as now we look for other high value asset categories, I think we're going to be seeing the use of this new level of asset disclosure in detail in some other pretty interesting product categories. So, that's one thing we look at now - leveraging the success we've had in that site enhancement.

I guess another one worth talking about is the work we've been doing with Hyster - and as you know Hyster is one of the leading lift truck organizations in the world. And we took our asset tracker platform and provided another technology enhancement - and that's the use of a ruggedized mobile device. So someone out in the field now can, if an asset comes into a dealership - they can take pictures of it, take complete conditioning reports right on the spot, and have that information uploaded into tracker - and that's combined with all the financial data that's existing in an internal accounting systems, and that now combined information is just-in-time information - everything a buyer needs to provide a seller to make a purchase decision is now available. That information can go to a dealer network, an internet of dealers so they can see other customers we have for these assets that are just coming back off-lease. So they can service those immediate client needs and then after that the assets then can move to a public site for disposition, like a GE asset.com - and this is the industries' first - we call it a holistic remarketing platform - and we're pretty excited about setting a new standard for asset remarketing with this platform.

So with a marquee installation underway, and we expect to have that done in Q1 next year, that's now the product we hope is going to get a lot of attention. And then finally the other one that we talked about during the start of the discussion - our Dutch auction roots. We have patents arround that area, and it's a very efficient economic model to move commodities, particularly ones that are perishable. And as we're now revisiting that, in particular with our partners at Southcore, there seems to be a fare bit of interest in bringing that product back, particularly in the China marketplace. So we're looking at some very interesting new markets that bring back our patented technologies. So those would be the three big areas I'd say that we see on the horizon that we're going to be addressing next year.

BB: Well it sounds like you are going to be real busy with some of those initiatives and they sound like they are going to be very exciting to add value to an engine that you've already built - move that into new channels and realize some new profit centers with some of your core technology. Chris, can you share with our listeners why you feel that Northcore Technologies represents a compelling investment opportunity at this time?

CB: Well, I come back to what's the underlying business model, and the thing that has always attracted me to Northcore is really we're building annuity revenue streams. Each customer is essentially a long-term customer for us, so it's not that we have to keep selling X number of products to go out the door every month, each client layers on a previous client in terms of revenue. So I view this as building annuity revenue streams in the business with new customers. And I look at that type of recurring revenue stream on top of a stable cost base. In order to handle the scale of customers it doesn't require a scale of technology. This is a little bit of our background of when we were in the consumer auction business years ago, our platform is robust - and we are using small levels of capacity for it in the business-to-business marketplace, so we have an opportunity of the revenues that do increase and are not going to have a corresponding level of variable cost associated with them. That creates this strong underlying economic model.

So when I look at that and we start scaling from less than 10 customers that we have today, to any sort of level of market penetration, we talk about our 2,000 GE customers, and 6,000 other customers of large asset holders around the world - it doesn't take a lot of market penetration, you know . . .low single digits that creates some very attractive recurring cash flows for the Company. Which we believe is going to be a good opportunity for investors. And if you step back and just in the GE side, what's 50% of GE Asset Manager as a brand worth? When you look at the opportunity and their customer base, and their brand . . . and we combine that with some other pretty well known global brands we that hope to be bringing on next year, I think investors are going to start to see some exciting momentum for this Company.

BB: That sounds exciting. Chris, where can our listeners get more information about Northcore Technologies?

CB: Well we use our website as many do as the host for initial information - www.northcore.com - and we have product brochures that can be downloaded from there. We're quick to respond to people that want to contact us, through our sales group. And that's probably the most efficient way to gain more information about Northcore.

BB: Well Chris, it looks like the Company has built a very solid foundation and client base around the GE Asset Manager relationship that's geared well for rapid revenue growth at a low incremental cost. Which we see as a winning combination in the business services sector as well. And now that you have that system optimized and are ready to bring on additional customers, it doesn't look like it's going to real difficult for you to continue to grow the business. We certainly look forward to having you back on in the future to update us on Northcore's progress in furthering these value drivers to grow your customer base and build shareholder value, and in the meantime we'll be keeping all of our members up to date on Northcore Technologies with babybulls.com posts and news alerts that track your progress. Again, Northcore Technologies trades on the OTC bulletin board under the ticker symbol N-T-L-N-F and on the Toronto Stock Exchange under the ticker symbol N-T-I. Additional information, including full data on each of the "Working Capital Engine" modules as well as management backgrounds and company press releases is available on the Company's website which Chris just gave out, we will give it out again - www.northcore.com. - In addition a full profile of Northcore Technologies is available at www.babybulls.com. This CEO Audi-Bulls interview will be available as a streaming audio archive on Northcore Technologies profile page on babybulls.com.

Chris, as always it was a pleasure talking with you today, and on behalf of our subscribers I would like to thank you again for coming on and telling us about the current operations and market expansion plans that are happening right now at Northcore Technologies.

CB: Thank you very much Clay, it was a pleasure talking with you.

BB: Your welcome, and we look forward to talking with you soon. This is Clay Chase signing off for CEO Audi-Bulls. I would like to thank everyone listening for stopping in today and getting the latest update on Northcore Technologies. We look forward to having you all back for the next edition of CEO Audi-Bulls. Until then, wishing you all a prosperous day in the markets!