SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

For the fiscal year ended March 31, 2003

Commission File Number: 0-06334

BRAINWORKS VENTURES, INC.
(Name of Small Business Issuer in its Charter)

Registrant’s Telephone Number including Area Code: (770) 952-0200

Securities Registered Pursuant to Section 12(b) of the Exchange Act:

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

COMMON STOCK, PAR VALUE $0.01
(Title of Class)

        Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 |_|

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

        State issuer’s revenues for its most recent fiscal year: $40,000.

        The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold in the over-the-counter market on June 3, 2003, was approximately $1,930,426.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

        As of June 3, 2003, the Registrant had outstanding 2,271,090 shares of its common stock, par value $.01 per share.

        Transitional Small Business Issuer Disclosure format (check one):

Yes |_| No |X|

DOCUMENTS INCORPORATED BY REFERENCE

        If the following documents are incorporated by reference, briefly describe them and identify the Part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933.

None

TABLE OF CONTENTS

PART I

Overview

        Brainworks Ventures, Inc., a Nevada corporation (the “Company”), provided funding and business consulting services to early-stage technology companies by developing, investing in, acquiring or acquiring interests in, and operating such companies. The Company also sought to work with universities, corporations, research laboratories, government economic authorities and individual investors to foster the commercialization of new concepts and technologies. Effective April 1, 2003 merged with AssuranceAmerica Corporation. The purpose of the merger was to facilitate the Company’s entrance into the property and casualty insurance industry. In anticipation of the merger, Brainworks ceased its operations in 2003.

        On February 14, 2001, the Company acquired all the outstanding capital stock of eBusinessLabs, Inc., a privately-held Georgia corporation now known as Brainworks Ventures Labs, Inc. (“BVL”), for approximately 800,000 shares of the Company’s common stock. BVL seeks to develop university affiliated venture development labs designed to assist the launch of business ventures.

        On May 8, 2001, the Company acquired all the outstanding capital stock of Executive Venture Partners, Ltd., a privately held Massachusetts company (“EVP”), for 500,000 shares of the Company’s common stock. EVP provides consulting services to develop and implement corporate venturing strategies for Fortune 2,000 companies by offering advice and recommendations related to asset development and value maximization. EVP holds a non-exclusive license to use an asset commercialization methodology. This license may be revoked upon the happening of certain events specified in the Amended and Restated License Agreement between EVP and Robert H. Cawly dated March 6, 2001.

        On March 31, 2003, the Company has three wholly-owned subsidiaries: Auric Minerals Corporation, a Nevada corporation (“Auric Minerals”), EVP and BVL.

History

        The Company originally incorporated in 1969 under the laws of the state of Utah. In 1985, the Company became a Nevada corporation by merging with a Nevada corporation that was a wholly-owned subsidiary of the Company created solely for the purpose of changing the Company’s state of domicile. Prior to May 2000, the Company was principally engaged in the acquisition, exploration and development of interests in various natural resource properties, primarily through participation with other parties in natural resource joint ventures or other arrangements. During the fiscal year ended March 31, 2001, the Company sold its ownership interests in all natural resource properties held by the Company as described below.

Disposition and Termination of Interest in Natural Resource Properties

        Hillcrest Claims

        In 1981, the Company leased forty-five (45) unpatented mining claims (the “Hillcrest Claims”) covering approximately 600 acres northwest of Elko, Nevada from Hillcrest Mining Company (“Hillcrest”) under a lease the initial term of which expired on August 31, 1984. The lease granted to the Company the option to extend the lease for twenty (20) additional one-year terms by making advance royalty payments of $6,000 per year to Hillcrest. The lease further provided that the Company will pay to Hillcrest a royalty equal to fifty percent (50%) of the Company’s earnings from the property, after deducting all direct costs incurred by the Company in the development of the property, exclusive of the Company’s overhead. Pursuant to the terms of a modification to the lease which provided the Company and Hillcrest with equal interests under the lease, the Company and Hillcrest each became entitled to receive a one percent (1%) royalty interest for gold and a three percent (3%) royalty interest on other metals extracted from the Hillcrest Claims.

        In 1981, the Company subleased its interest in the Hillcrest Claims to USX, formerly known as United States Steel Corporation, under a sublease the initial term of which expired on December 31, 1983. Pursuant to the sublease, USX had the right to renew the sublease for 20 additional one-year terms by paying an advance royalty of $50,000 per year for the term of the lease or as long as there was production. USX paid the advance royalty for each year through the fiscal year ended March 31, 1998.

        In August 1997, the Company agreed to an assignment of the sublease to Great Basin Gold, Inc. and an amendment to said sublease (the “Sublease Amendment”). Under the terms of the Sublease Amendment, the Company and Hillcrest agreed to extend the sublease for up to four 20-year periods commencing on December 31, 1997, provided that the $50,000 annual advance royalty payment is paid for each year for which there are no mining operations on the leased property. For each 20-year renewal period, the annual minimum advance royalty increases $5,000 per year.

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        In October 2000, the Company sold its entire leasehold interest in the Hillcrest Claims to James Fouts, a former president of the Company, for $22,000.

        Disposition of Interest in Ivanho Property

        The Company also held a leasehold interest in 85,000 acres of property located near Elko, Nevada (the “Ivanho Property”). In October 2000, the Company sold its entire leasehold interest in the Ivanho Property to Mr. Fouts for $200,000.

        Disposition of Investment in Dynamic Oil Limited

        As of March 31, 2000, the Company held 129,600 shares of restricted common stock of Dynamic Oil Limited, an unaffiliated publicly-held British Columbia corporation (“Dynamic”) engaged in oil and gas exploration. In June 2000, the Company sold 79,600 shares of Dynamic for $107,000. In August 2000, the Company sold the remaining 50,000 shares of Dynamic for $56,000.

        Disposition of Interest in Robbie Claims

        In September 1995, the Company entered into a partnership agreement with Hi-Tech Exploration, Ltd. (“Hi-Tech”), Hillcrest, and Mr. Fouts, who then served as the Company’s president, pursuant to which the Company, Hillcrest and Mr. Fouts each purchased from Hi-Tech a twenty-five percent (25%) interest in 107 unpatented lode mining claims (the “Robbie Claims”) for the sum of $3,567. The Robbie Claims are located near Elko, Nevada, on land controlled by the Bureau of Land Management (“BLM”).

        During the fiscal year ended March 31, 2000, the parties leased the Robbie Claims to Great Basin Gold, Inc., for the sum of $4,000 per year, together with a royalty of two percent (2%) of net smelter returns and an obligation by the leaseholder to cover the annual fee payable to BLM of $100 per claim, payable by September 1 of each year. Pursuant to such lease, the Company was entitled to receive one-fourth of the annual payment and one-fourth of the net smelter returns, if any. In July 2000, the Company sold its interest in these claims to Mr. Fouts for $4,000.

Sale of Investment in La Fonda

        In addition to the natural resource investments previously held by the Company, Auric Minerals owned a minority interest in the outstanding capital stock (the “La Fonda Stock”) of Corporacion de La Fonda, Inc., a closely-held corporation that owns and operates the La Fonda Hotel in Santa Fe, New Mexico (“La Fonda”).

        During the fiscal year ended March 31, 2000, the Company sold to La Fonda a total of 800 shares of La Fonda Stock at a price of $141.00 per share, resulting in a net pre-tax gain of $103,000. In May 2000, the Company sold to La Fonda its remaining 9,200 shares of La Fonda Stock at a price of $141.00 per share for a total of $1,304,000 in cash. The Company realized a gain of approximately $1,188,000 from the sales of the La Fonda Stock.

Employees

        The Company currently has one full time employee. This employee is not represented by a labor union.

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        Effective August 31, 2002, the Company terminated its lease of 101 Marietta Street, Suite 3450, Atlanta, GA.

        As discussed in “Item 1 — Description of Business” above, the Company no longer holds interests in any natural resource properties.

        The Company is not a party to any pending legal proceedings.

        The Company did not submit any matters to a vote of security holders during the quarter ended March 31, 2003.

PART II

        The Company’s common stock is quoted on the Over-the-Counter Bulletin Board (“OTC-BB”) under the symbol “BRAV.” There is currently a very limited trading market for the Company’s common stock. The following sets forth, for the respective periods indicated, the high and low sales prices of the Company’s common stock in the over-the-counter market, as reported and summarized by the OTC-BB. Such prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions or adjustments, and may not represent actual transactions.

        On June 3, 2003, the low and high bid prices quoted by broker-dealer firms effecting transactions in the Company’s common stock were $ 0.75 and $ 1.05, respectively.

        The Company has never declared or paid cash dividends on its common stock and currently intends to retain any future earnings for the operation and expansion of its business. Any determination to pay cash dividends on the Company’s common stock will be at the discretion of the Board of Directors of the Company (the “Board”) and will be dependent on the Company’s financial condition, results of operations, contractual restrictions, capital requirements, business prospects and such other factors as the Board deems relevant.

        At June 3, 2003, there were approximately 770 holders of record of the Company’s common stock.

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        The following table sets forth information regarding compensation plans under which the Company’s common stock is authorized for issuance as of March 31, 2003. The Company’s stockholders approved the Brainworks Ventures Inc. Stock Option Plan (the “Plan”) at the Company’s 2000 annual meeting of stockholders. The Plan is the Company’s only equity compensation plan approved by the Company’s stockholders.

        Certain statements contained in this Annual Report on Form 10-KSB are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and are thus prospective in nature. The words “believe,” “expect,” “anticipate,” “predict,” “potential,” “seek,” “continue,” “will,” “may,” “could,” “intend,” “plan,” “estimate,” and the negative thereof and other similar expressions are intended to identify forward-looking statements. Such forward-looking statements reflect management’s beliefs and assumptions and are based on information currently available to management. The forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to differ materially from those expressed or implied in such statements. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements. The Company does not assume any duty to publicly update these forward-looking statements. The Company strongly recommends that the discussion and analysis set forth below be read in conjunction with the Company’s consolidated financial statements and notes thereto contained elsewhere herein.

Overview

        The Company provided funding and business consulting services to early stage development companies by developing, investing in, acquiring or acquiring interest in and operating such companies. The Company previously made equity investments in three start-up companies. The Company also provided consulting services to commercialize new concepts and intellectual property developed by universities, research laboratories and other large commercial companies.

        During the past two years, the Company has incurred significant losses from operations and such losses are expected to continue. Due to the lack of adequate working capital and business prospects, in 2003 the Board decided to cease its operations in anticipation of executing a merger with AssuranceAmerica Corporation on April 1, 2003. The Company, which will survive the merger, will focus upon offering automobile insurance coverages through the operating subsidiaries of AssuranceAmerica Corporation. The operating subsidiaries include: AssuranceAmerica Managing General Agency, AssuranceAmerica Insurance Company, and AssetAmerica Insurance Agencies.

        Revenues

        The Company’s revenues consist of dividend and interest income, and income from consulting contracts. The company’s consulting contracts were terminated in 2002.

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        Operating Expenses

        Selling, general and administrative expenses consist primarily of consulting expenses, administrative and management personnel and related expenses, and depreciation and amortization expense.

        Results of Operations

        For the year ended March 31, 2003, the Company had revenues of $40,000, cost of revenue and selling, general and administrative expenses of $802,000, and other net expenses of $511,000, including impairment cost related to goodwill of $267,000, loss on disposal of fixed assets of $212,000 and a realized loss of $33,000 on the disposition of an investment. The Company’s operations resulted in a net loss of $1,273,000 and a net loss per common share of $0.53. For the year ended March 31, 2002, the Company had revenues of $610,000, cost of revenue and selling, general and administrative expenses of $3,739,000, and other net expenses of $1,850,000, including impairment cost related to goodwill of $1,630,000, and a realized loss of $238,000 on the disposition of an investment. The Company’s operations resulted in a net loss of $4,979,000 and a net loss per common share of $2.01.

        Management does not believe that the Company’s operations have been impacted by inflation.

Liquidity and Capital Resources

        In the year ended March 31, 2003, net cash used in operating activities was $446,000. Net cash used in operating activities includes the net loss for the year ended March 31, 2003 of $1,273,000 offset by non-cash charges related to depreciation and amortization of $33,000 amortization of deferred compensation for warrants and options issued to advisors and consultants of $375,000 and asset impairment charges of $267,000. Net cash provided by investing activities was $54,000, which is associated with the sale of equipment and investments.

        As of March 31, 2003, the Company had working capital of $(15,000).

        The Company’s consolidated financial statements (see “Index to Financial Statements” attached hereto) for the year ended March 31, 2003, together with the notes thereto, have been audited by the independent accounting firm of Miller Ray & Houser, LLP, whose opinion thereto is included herein, which is included in this Report beginning at page F-1 hereof. The Company’s consolidated financial statements for the year ended March 31, 2002, together with the notes thereto, have been audited by the independent accounting firm of Eisner, LLP, which were included in the Company’s 10-QSB for the fiscal year ending March 31, 2002.

        During the fiscal year ended March 31, 2003, there has been no disagreement with the Company’s accountants on any matter of accounting principles or practices or financial statement disclosure required to be disclosed pursuant to Item 304 of Regulation S-B.

PART III

Officers and Directors

             The table below sets forth the name, age and position of each executive officer and director of the Company:

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             Set forth below is a brief biographical description of Dr. Ratajczak and Mr. Schwartz:

             Donald Ratajczak, age 60, has served as the Chairman of the Board and Chief Executive Officer of the Company since May 2000. From May 2000 to November 2000, Dr. Ratajczak has also served as the Company’s President. From July 1973 to June 2000, he served as a professor and Director of Economic Forecasting Center at the J. Mack Robinson College of Business Administration at Georgia State University. Dr. Ratajczak also currently serves on the Board of Directors of the following organizations: Crown Crafts, Inc., a textile manufacturing company; T.B.C. Corporation, a tire distribution company, Ruby Tuesday, Inc., a food service company and Regan Holdings, an insurance marketing company. He is a consulting economist for Morgan, Keegan & Co., a broker/dealer company and a trustee for C.I.M. High Yield, a bond fund company.

             Marc J. Schwartz, age 39, has served as President of the Company since March, 2002, and as Chief Financial Officer, Secretary, Treasurer and director of the Company since May 2000. From May 2000 through March, 2002, Mr. Schwartz also served as Vice President of the Company. Since April 1998, he has served as a registered financial advisor and Vice President of Investments for Dunwoody Brokerage Services, Inc. From February 1995 to April 1998, he served as a financial consultant with Smith Barney, Inc.

There are no family relationships among any of the executive officers or directors of the Company. Each director of the Company serves as a director until his successor is elected and qualified at the Company’s next annual meeting of stockholders.

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and persons who own beneficially more than 10% of a registered class of the Company’s equity securities to file with the Securities and Exchange Commission (the “SEC”) initial reports of ownership and reports of changes in ownership of such securities of the Company. Directors, executive officers and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file.

             To the Company’s knowledge, the Section 16(a) filing requirements applicable to its directors, executive officers and greater than 10% beneficial owners were complied with during the fiscal year ended March 31, 2003.

             Compensation of Directors

             For the fiscal year ended March 31, 2003, the Company did not compensate directors for their service on the Company’s Board of Directors (the “Board”).

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Compensation of Executive Officers

             The following table sets forth the cash and non-cash compensation awarded or paid by the Company for services rendered during each of the years in the three-year period ended March 31, 2003, to its Chief Executive Officer and to its most highly compensated executive officers other than the Chief Executive Officer whose annual compensation exceeded $100,000 (the “Named Executive Officers”).

Summary Compensation Table

Option Grants in the Last Fiscal Year

             During the fiscal year ended March 31, 2003, the Company did not grant any stock options to either of the Named Executive Officers.

Year-End Option Values

             Neither of the Named Executive Officers exercised any stock options during the fiscal year ended March 31, 2003. The following table sets forth information concerning the value at March 31, 2003, of unexercised options held by each Named Executive Officer.

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        The following table sets forth, as of March 31, 2003, the beneficial ownership of the Company’s common stock by (i) each shareholder who is known by the Company to own beneficially more than 5% of the outstanding common stock, (ii) each director, (iii) each Named Executive Officer, and (iv) all officers and directors of the Company as a group:

‡ Executive Officer of the Company.
† Director of the Company.

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             The following table sets forth information regarding compensation plans under which the Company’s common stock is authorized for issuance as of March 31, 2003. The Company’s stockholders approved the BrainWorks Ventures Inc. Stock Option Plan (the “Plan”) at the Company’s 2000 annual meeting of stockholders. The Plan is the Company’s only equity compensation plan approved by the Company’s stockholders.

9

             On February 14, 2001, the Company acquired all the outstanding common stock (the “EBL Common Stock”) of eBusinessLabs, Inc., a Georgia corporation now known as BrainWorks Ventures Labs, Inc. (“EBL”), pursuant to an Agreement and Plan of Merger (the “EBL Merger Agreement”) dated as of December 29, 2000, by and among the Company, a wholly-owned subsidiary of the Company, EBL and certain stockholders of EBL, whereby EBL became a wholly-owned subsidiary of the Company (the “EBL Merger”). Pursuant to the EBL Merger Agreement, all the issued and outstanding shares of EBL Common Stock were converted into the right to receive approximately 800,000 shares of the Company’s common stock. Mr. Cayce, President of the Company at the time of the EBL Merger, owned approximately 3.4% of the issued and outstanding shares of EBL Common Stock immediately prior to the EBL Merger and, at the effective time of the EBL Merger, such shares were converted into the right to receive 27,446 shares of the Company’s common stock. Mr. Andersen, a beneficial owner of greater than 5% of the outstanding common stock of the Company, owned approximately 18.5% of the outstanding shares of EBL Common Stock immediately prior to the EBL Merger and, at the effective time of the EBL Merger, such shares were converted into the right to receive 147,692 shares of the Company’s common stock.

             On May 8, 2001, the Company acquired all the outstanding common stock (the “EVP Common Stock”) of Executive Venture Partners, LTD., a Massachusetts company (“EVP”), pursuant to an Agreement and Plan of Merger (the “EVP Merger Agreement”) dated as of May 8, 2001, by and among the Company, a wholly-owned subsidiary of the Company, EVP and all the stockholders of EVP, whereby EVP became a wholly-owned subsidiary of the Company (the “EVP Merger”). Pursuant to the EVP Merger Agreement, all the outstanding shares of EVP Common Stock were converted into the right to receive 500,000 shares of the Company’s common stock.

             The holders of approximately 78% of the outstanding EVP Common Stock immediately prior to the EVP Merger were, at the time the EVP Merger was consummated, officers or directors of the Company or beneficial owners of greater than 5% of the outstanding common stock of the Company. Specifically, Dr. Ratajczak, Mr. Cayce and Kirk Reiss, who were, at the time the EVP Merger was consummated, each directors of the Company and the Chief Executive Officer, President and a senior advisor to the Company, respectively, owned approximately 20%, 20% and 2%, respectively, of the outstanding EVP Common Stock immediately prior to the EVP Merger. At the effective time of the EVP Merger, Dr. Ratajczak and Messrs. Cayce and Reiss became entitled to receive 100,000, 100,000 and 10,000 shares of the Company’s common stock, respectively. Mr. Andersen, a beneficial owner of greater than 5% of the Company’s outstanding common stock, owned approximately 8% of the outstanding EVP Common Stock immediately prior to the EVP Merger and, at the effective time of the EVP Merger, became entitled to receive 40,000 shares of the Company’s common stock.

             No reports filed on Form 8-K for fiscal year ended March 31, 2003.

             During the quarter ended March 31, 2002, the Company did not file any Current Reports on Form 8-K.

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SIGNATURES

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

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Index to Financial Statements

Report of Independent Public Accountants

To the Board of Directors and Stockholders of
Brainworks Ventures, Inc. and Subsidiaries

We have audited the consolidated balance sheet of Brainworks Ventures, Inc. and subsidiaries as of March 31, 2003, and the related consolidated statements of operations, changes in stockholder’s equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of Brainworks Ventures, Inc. and subsidiaries as of March 31, 2002, were audited by other auditors whose report dated June 12, 2002, on those statements included an explanatory paragraph describing conditions that raised substantial doubt about the Company’s ability to continue as a going concern.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Brainworks Ventures, Inc. and subsidiaries as of March 31, 2003 and the results of its consolidated operations and its consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Atlanta, Georgia
May 7, 2003

F-1

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2003 and 2002

See accompanying notes and report of independent public accountants.

F-2

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

For the Years Ended March 31, 2003 and 2002

See accompanying notes and report of independent public accountants.

F-3

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended March 31, 2003 and 2002

See accompanying notes and report of independent public accountants.

F-4

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Years Ended March 31, 2003 and 2002

See accompanying notes and report of independent public accountants.

F-5

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2003 and 2002

F-6

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

F-7

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

F-8

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Depreciation and amortization expense on fixed assets for the years ended March 31, 2003 and 2002 was $33,000 and $87,000, respectively.

F-9

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

F-10

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

F-11

Following is a summary of options and warrants outstanding as of March 31, 2003:

F-12

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

The net increase in the valuation allowance for deferred tax assets in 2003 was $271,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

At March 31, 2003, the Company has net operating loss carry forwards for U.S. federal and state income tax purposes of approximately $3,033,000 which expire in varying amounts beginning in the year 2020. Utilization of the net operating losses carried forward will be limited under Section 382 of the Internal Revenue Code as the Company experienced an ownership change greater than 50%. Accordingly, certain net operating losses may not be realizable in future years due to this limitation.

F-13

BRAINWORKS VENTURES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

F-14