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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION** Washington, D.C. 20549

FORM 10-KSB

(Mark One)

**x******ANNUAL
  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
  
  For The Fiscal Year Ended June 30, 2003

** ̈******TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
  ACT OF 1934
  For the transition period from _________ to __________

COMMISSION FILE NUMBER000-33163

ICOWORKS INC. 
  (Name of small business issuer in its charter)

NEVADA
      
      76-0609444(State or other jurisdiction of incorporation or organization)
      
      (I.R.S. Employer Identification No.)114 West Magnolia Street, Suite 400Bellingham, WA
      
      98225(Address of principal executive offices)
      
      (Zip Code)(360) 392-3960Issuer's telephone number


Securities registered under Section 12(b) of the Exchange Act:
  None.

Securities registered under Section 12(g) of the Exchange Act:Common Stock, Par Value $0.001 per Share 
  (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. $2,447,399

State 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, or the average bid and asked price of such common
  equity, as of a specified date within the past 60 days. (See definition of affiliate
  in Rule 12b-2 of the Exchange Act.) $1,854,905, based onthe
  average of the bid and asked price of $0.34 per share as of October 17, 2003.

State the number of shares outstanding of each of the issuer's
  classes of common equity, as of the latest practicable date. 12,886,398 Shares of Common Stock as of October 15, 2003

Transitional Small Business Disclosure Format (check one):
  Yes    ** ̈**   
  No **x******

Page 1 of 37

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ICOWORKS INC. ANNUAL REPORT ON FORM 10-KSB

INDEX

|         |                                                                                                                       | PAGE | 
|-------- | --------------------------------------------------------------------------------------------------------------------- | ---- | 
|PART I   |                                                                                                                       |      | 
|         |                                                                                                                       |      | 
|Item 1.  | Description of Business.                                                                                              | 3    | 
|         |                                                                                                                       |      | 
|Item 2.  | Description of Property.                                                                                              | 19   | 
|         |                                                                                                                       |      | 
|Item 3.  | Legal Proceedings.                                                                                                    | 19   | 
|         |                                                                                                                       |      | 
|Item 4.  | Submission of Matters to a Vote of Security Holders.                                                                  | 19   | 
|         |                                                                                                                       |      | 
|PART II  |                                                                                                                       |      | 
|         |                                                                                                                       |      | 
|Item 5.  | Market for Common Equity and Related Stockholder Matters.                                                             | 20   | 
|         |                                                                                                                       |      | 
|Item 6.  | Management's Discussion and Analysis or Plan of Operation.                                                            | 21   | 
|         |                                                                                                                       |      | 
|Item 7.  | Financial Statements.                                                                                                 | 26   | 
|         |                                                                                                                       |      | 
|Item 8.  | Changes In and Disagreements With Accountants on Accounting and Financial
      Disclosure.                           | 26   | 
|         |                                                                                                                       |      | 
|Item 8A  | Controls and Procedures.                                                                                              | 27   | 
|         |                                                                                                                       |      | 
|PART III |                                                                                                                       |      | 
|         |                                                                                                                       |      | 
|Item 9.  | Directors, Executive Officers, Promoters and Control Persons; Compliance
      With Section 16(a) of the Exchange Act | 28   | 
|         |                                                                                                                       |      | 
|Item 10. | Executive Compensation                                                                                                | 30   | 
|         |                                                                                                                       |      | 
|Item 11. | Security Ownership of Certain Beneficial Owners and Management.                                                       | 33   | 
|         |                                                                                                                       |      | 
|Item 12. | Certain Relationships and Related Transactions.                                                                       | 34   | 
|         |                                                                                                                       |      | 
|Item 13. | Exhibits and Reports On Form 8-K                                                                                      | 36   | 

Page 2 of 37

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PART I

FORWARD LOOKING STATEMENTS

The information in this Annual Report on Form 10-KSB contains
  forward-looking statements within the meaning of Section 27A of the Securities
  Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
  as amended. These forward-looking statements involve risks and uncertainties,
  including statements regarding our capital needs, business strategy and expectations.
  Any statements contained herein that are not statements of historical facts
  may be deemed to be forward-looking statements. In some cases, you can identify
  forward-looking statements by terminology such as "may", "will", "should", "expect",
  "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential"
  or "continue", the negative of such terms or other comparable terminology. Actual
  events or results may differ materially. In evaluating these statements, you
  should consider various factors, including the risks outlined in this Annual
  Report on Form 10-KSB, and, from time to time, in other reports we file with
  the SEC. These factors may cause our actual results to differ materially from
  any forward-looking statement. We disclaim any obligation to publicly update
  these statements, or disclose any difference between our actual results and
  those reflected in these statements. The information constitutes forward-looking
  statements within the meaning of the Private Securities Litigation Reform Act
  of 1995.

ITEM 1.           DESCRIPTION
  OF BUSINESS.

OVERVIEW

Icoworks Inc. (formerly Paragon Polaris Strategies.com Inc.)
  (We, Icoworks or the Company) is engaged
  in the auction and asset realization business through our investment in 56%
  of the outstanding stock of Icoworks Holdings, Inc., a Nevada corporation (Icoworks
  Holdings).

Icoworks Holdings is engaged in the asset realization business
  and is a provider of a full and comprehensive range of auction, liquidation
  and appraisal services to the industrial, oilfield, commercial and office markets.
  Icoworks Holdings business operations have historically been based in
  Calgary, Alberta, Canada and have recently been expanded to include a subsidiary
  operation in Oakville, Ontario, Canada and, subsequent to the end of our fiscal
  year, Premier Auctions based in Texas and Oklahoma. Icoworks Holdings plans
  to expand its business, both through the expansion of its traditional auction,
  liquidation and appraisal services and through the acquisition of other businesses
  engaged in the asset realization business that complement Icoworks Holdings
  growth strategy. Icoworks Holdings also plans to enhance its traditional services
  by the use of technology, including the use of live internet auctions, online
  internet auctions and technology-assisted auctions, in order to expand the scope
  of potential purchasers for its asset realization business and to facilitate
  auction transactions.

Icoworks recently completed the acquisition of Premier Auctions,
  a Texas and Oklahoma based auction business specializing in the oil and gas
  industry on August 29, 2003. Icoworks Holdings has also entered into an agreement
  to acquire Santiago Classic Car Auctions, a New Mexico based auction business
  specializing in classic automobiles.

CORPORATE BACKGROUND

1.           Icoworks

Icoworks Inc. (formerly Paragon Polaris Strategies.com Inc.)
  was incorporated in the State of Nevada on May 27, 1999.

On July 1, 1999, we acquired limited rights to distribute
  and produce an oxygen enriched water product for fish farming, aquaculture,
  mariculture, poultry raising, and for treating animal waste from dairies, feedlots
  of all kinds, and for other similar uses. The rights to use this technology
  were subsequently withdrawn by agreement with the owner. We subsequently acquired
  a three year license to market and sell vitamins, minerals, nutritional supplements
  from Vitamineralherb.com Inc. We have abandoned this business.

We entered into an agreement on November 20, 2002 to merge
  with Icoworks Holdings Inc. (formerly Icoworks, Inc.) (www.icoworks.com), a
  Nevada corporation (Icoworks Holdings) that specializes in offering
  a complete

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array of industrial, oilfield and commercial appraisal, liquidation
  and auction services. Under the terms of the merger agreement, we agreed to
  issue shares of our common stock to the shareholders of Icoworks Holdings on
  a two-for-one basis. This merger agreement has terminated in accordance with
  its terms as the merger was not consummated by May 1, 2003; however we anticipate
  that we will enter into a new merger agreement to complete the acquisition of
  the remaining 44% minority interest in Icoworks Holdings. There is no assurance
  that this merger will be completed.

We completed the acquisition of a 56% interest in Icoworks
  Holdings on February 20, 2003 through the private acquisition of 3,593,199 shares
  of Icoworks Holdings from several non-U.S. shareholders. We issued 7,186,398
  shares of our common stock to acquire this interest. We plan to complete the
  merger with Icoworks Holdings as originally contemplated by the merger agreement
  in order to acquire the remaining 44% interest under a new merger agreement.
  We anticipate issuing an aggregate of 12,865,920 shares in order to complete
  the acquisition of all of the outstanding shares of Icoworks Holdings, inclusive
  of the 7,186,398 shares issued on February 20, 2003 to acquire the majority
  56% interest in Icoworks Holdings. In addition, we anticipate we will issue
  options and warrants to the current optionholders and warrantholders of Icoworks
  Holdings on a two-for-one basis if a new merger agreement is signed. The completion
  of the merger will be subject to approval by the shareholders of both the Icoworks
  and Icoworks Holdings. We anticipate proceeding with the filing of a registration
  statement with the Securities and Exchange Commission in connection with obtaining
  shareholder approval of the merger.

Our shareholders approved the change of our corporate name
  to Icoworks Inc. to reflect our acquisition of the majority interest
  in Icoworks Holdings. In connection with this name change, the name of Icoworks
  Holdings has been changed from Icoworks, Inc. to Icoworks
  Holdings Inc. Our shareholders also approved the increase to the authorized
  number of shares of common stock to 100,000,000 shares and the creation of a
  class of 10,000,000 authorized shares of preferred stock. We have filed a certificate
  of amendment to our articles of incorporation with the Nevada Secretary of State
  in order to give effect to the changes to our name and our authorized capital.

We do not have any business or subsidiaries other than our
  56% interest in Icoworks Holdings.

2.           Icoworks
  Holdings

Icoworks Holdings was incorporated as a Nevada corporation
  on February 27, 1998 under the name Miracle Living Centers, Inc.
  The corporate name was changed to TradeZap, Inc. on December 8,
  2000. The corporate name was subsequently changed to Icoworks Inc.
  on May 6, 2002 and then to Icoworks Holdings Inc. on June 19, 2003.

3.           Icoworks
  Services

Icoworks Holdings acquired all the issued and outstanding
  common shares of Bill Wigley Auction Services Ltd. effective December 1, 2001.
  Bill Wigley Auction Services Ltd. was subsequently renamed Icoworks Services
  Ltd. (Icoworks Services). Icoworks Services is an Alberta corporation
  incorporated on January 30, 1987. Icoworks Services has been in the business
  of providing auction liquidation appraisal services to the industrial, oilfield,
  commercial and office markets in Calgary, Alberta, Canada since 1987. Icoworks
  Services is the primary operating subsidiary of Icoworks in Canada. Icoworks
  Services has specific expertise in the oilfield exploration and production sector
  and is considered to be a leader in this market. Icoworks Services also participates
  in all types of industrial and commercial auctions, appraisals and liquidations.

Icoworks Services entered into a three year employment agreement
  with Mr. Bill Wigley, the former owner of Icoworks Services on the closing of
  the acquisition effective December 1, 2001. Mr. Wigley was also appointed as
  the vice president - investor auctions for Icoworks. Mr. Wigley has subsequently
  resigned from his position and is no longer one of our employees.

4.           DM
  International Appraisals and Consulting, Ltd.

Icoworks Holdings purchased DM International Appraisals and
  Consulting, Ltd. (DM International) in April 2002 from Mr. Darrell
  McGrath. DM International is an equipment appraisal company that was owned and
  operated by Mr. McGrath. Mr. McGrath has in excess of 24 years of experience
  and has thorough knowledge of oilfield equipment and other physical assets.
  The appraisal business of DM International involves offering accurate, up-

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to-date evaluations of physical assets, as well as qualified
  advice in determining the useful life of equipment or the cost to materially
  increase the value of equipment. On the closing of this acquisition, Icoworks
  Services entered into a one year employment agreement with Mr. McGrath pursuant
  to which he is paid $9,000 CDN (equal to approximately $6,840 US) per month.
  Mr. McGrath is currently the manager of oilfield services for Icoworks Services.

5.           Icoworks
  Eastern

Icoworks Eastern is an Ontario corporation incorporated on
  January 14, 2003 (Icoworks Eastern). Icoworks Eastern is 75% owned
  by Icoworks Holdings and 25% owned by Mel Blackburn.

6.           Icoworks
  Joint Ventures

Icoworks Joint Ventures Inc. is an Alberta corporation incorporated
  on May 17, 2003 (Icoworks Joint Ventures). Icoworks Joint Ventures
  is 100% owned by Icoworks Holdings but owns any assets in trust for its joint
  ventures.

7.           Icoworks
  Services US

Icoworks Services Inc. is a Nevada corporation incorporated
  on March 14, 2003 (Icoworks Services US). Icoworks Services US is
  100% owned by Icoworks Holdings and carries out the business operations of Icoworks
  Holdings in the United States.

8.           Icoworks
  US JV Inc.

Icoworks US JV Inc. (Icoworks US JV) is an Alberta
  corporation incorporated on August 1, 2003 that is 100% owned by Icoworks Holdings
  and was incorporated for the purposes of facilitating a bridge loan financing
  for Icoworks Services US. The assets of Icoworks US JV Inc. are held in trust
  for the participants of Icoworks US JV Inc. who provided the funds for the advance
  of the bridge loan facility.

9.           Premier
  Auctioneers International, Inc.

Premier Auctioneers International, Inc. (Premier Auctioneers)
  is a Delaware corporation that is 100% owned by Icoworks Holdings. Premier Auctioneers
  operates the Premier Auctions business acquired by Icoworks Holdings.

INDUSTRY BACKGROUND

Icoworks Holdings competes in the industrial and commercial
  auction, liquidation and appraisal market. According to the US National Auctioneers
  Association (the NAA), the commercial auction market in the United
  States generated in excess of $267.5 billion in gross sales in 2001. The NAA
  estimated that there is an average of 600,000 commercial auctions held each
  year in the United States, by more than 12,000 licensed auctioneers.

The industrial equipment market redistributes factory processing
  industrial plants, movable equipment, such as back hoes, excavators, trucks,
  forklifts and other construction equipment. Used equipment is sold by equipment
  manufacturers, distributors, dealers, equipment brokers, equipment rental companies
  and auctioneers. These sources account for the majority of used equipment sales;
  however, auctioneers provide the unique service of arranging for groups of buyers
  and sellers to convene and to complete transactions. The NAA estimates that
  there is approximately $1 trillion in used industrial equipment currently in
  operation and that approximately $100 billion worth of used equipment will trade
  hands annually. Of this market, the auction industry currently handles approximately
  5% of used industrial equipment sales annually.

Icoworks Holdings believes that more used equipment sales
  will occur through auctions, as a result of increased acceptance of the auction
  as a method to sell products. In addition, Icoworks Holdings believes that there
  has been a growing acceptance of auctions, especially online auctions, as a
  low cost and efficient means for matching buyers and sellers. Accordingly, Icoworks
  anticipates that the auction channel will facilitate an increasing share of
  the used equipment market in the future.

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ICOWORKS SERVICES

Icoworks Holdings provides asset realization services to its
  customers. These services primarily involve auction liquidation and appraisal
  services through Icoworks Services, Icoworks Eastern and, subsequent to our
  year end, Premier Auctions. Our plan is to increase the scope of its services
  to include bought deals and other arrangements where Icoworks Holdings would
  acquire a business interest in the assets being sold in addition to facilitating
  the sale of assets.

Auction Services

Icoworks Holdings is primarily involved in the auction business.
  Icoworks Holdings conducts auctions on behalf of its customers who desire or
  are required to sell assets. The range of asset disposition services that Icoworks
  offers in connection with its auction services includes the following:

|(a) | Sales of industrial and commercial assets in commercial and industrial
      bankruptcies on behalf of receiver managers and trustees;
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                       
|(b) | Sales of assets seized by sheriffs;                                                                                                   
|    |                                                                                                                                       
|(c) | Sales of assets repossessed by creditors under security agreements;                                                                   
|    |                                                                                                                                       
|(d) | Managed asset removal and settlement transactions;                                                                                    
|    |                                                                                                                                       
|(e) | Private treaty sales for companies;                                                                                                   
|    |                                                                                                                                       
|(f) | Sales of assets for consignors.                                                                                                       

Valuations And Appraisals

Icoworks Holdings provides valuations and appraisals in connection
  with its auction and liquidation services. The appraisal and evaluation process
  is an important step in attracting equipment for an auction or liquidation.
  Most appraisals commence when Icoworks Holdings personnel visit the location
  of the prospective customers equipment. Appraisals tend to be directed
  towards entire plants and equipment spreads available because of a bankruptcy,
  foreclosure, divestiture, abandonment or relocation process. Appraisals of individual
  or smaller groupings of equipment are usually performed for inclusion in a larger
  auction. In completing the appraisal process, Icoworks describes each item to
  be appraised in a standard format. The equipment description includes information
  such as year of manufacture, manufacturer, model, serial number, attachments
  and condition, including references to refurbishing work required to make each
  item ready for sale. Photographs are taken of as many of the items as practical.
  Icoworks Holdings appraisers then assign values to each item of equipment.
  Once this initial process is completed, Icoworks Holdings appraisers and
  management consult to arrive at a final valuation for the prospective customer.

In addition to valuations and appraisals in connection with
  auctions, Icoworks Holdings consults with financial institutions, public and
  privately held corporations, and creditor groups to provide valuations on both
  a fee for services basis and as a basis for custom proposals for prospective
  customers. Members of Icoworks Holdings have also consulted as expert witnesses
  in judicial proceedings relating to the valuation of assets.

Liquidations

Icoworks Holdings conducts retail-style liquidations for various
  clients on either a fee for service or commission basis. Customers are typically
  receiver managers, trustees in bankruptcy or private customers in the process
  of liquidating assets.

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Icoworks Specific Industry Experience

Icoworks Holdings focus is on asset realization of industrial
  and commercial equipment. Icoworks Holdings has developed specific industry
  experience in the following areas:

|(a) | INDUSTRIAL  
|--- | ------------
|    | (1)         
|    | (2)         
|    | (3)         
|    | (4)         
|    | (5)         
|    | (6)         
|    | (7)         
|    | (8)         
|    | (9)         
|    |             
|(b) | OILFIELD    
|    | (1)         
|    | (2)         
|    | (3)         
|    | (4)         
|    |             
|(c) | COMMERCIAL  
|    | (1)         
|    | (2)         
|    | (3)         
|    | (4)         
|    | (5)         
|    | (6)         
|    | (7)         
|    |             
|(d) | MINING      
|    | (1)         
|    | (2)         
|    | (3)         
|    |             
|(e) | FORESTRY    
|    | (1)         
|    | (2)         
|    | (3)         
|    |             
|(f) | CONSTRUCTION
|    | (1)         
|    | (2)         
|    | (3)         
|    | (4)         
|    | (5)         
|    |             
|(g) | LIQUIDATION 
|    | (1)         
|    | (2)         
|    | (3)         
|    | (4)         

RECENT ICOWORKS AUCTIONS

Icoworks Holdings has recently completed or agreed to conduct the following auction and liquidation sales:

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|1. | Icoworks Holdings
        Vancouver division hosted the semi-annual Wheels & Dreams
        vintage and collector car auction on September 25 to 27, 2003 at the Cloverdale
        Fairgrounds in Surrey, British Columbia;                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                               
|2. | Icoworks Eastern
        has agreed to liquidate Chem-Etch & Stamp of Canada Ltd.s inventory
        of marking devices, dies, printing inks, lasers and stamping presses valued
        at approximately $225,000;                                                                                          
|   |                                                                                                                                                                                                                                                                                                               
|3. | Icoworks Services conducted
        an auction of the equipment of M & T Wood Products on August 21, 2003
        in Mackenzie, British Columbia;                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                               
|4. | Icoworks Serices
        conducted an auction of the equipment of Anderson Sand and Gravel Ltd.
        on August 25, 2003;                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                               
|5. | Icoworks Eastern
        has agreed to auction Dexter-Lawsons entire inventory of equipment,
        cranes, rails, bus bar, jib cranes and hoists, rolling stock, inventory,
        raw materials, scrap, office equipment and related assets, valued at approximately
        $1,450,000, in October 2003.

THE ICOWORKS AUCTION PROCESS

Icoworks Holdings typically conducts auctions from its own
  facilities. Icoworks Holdings has a 24,000 square foot facility in Calgary,
  Alberta, which has historically been the center of its business operations.
  Icoworks Holdings recently opened a 12,000 square foot office, warehouse and
  auction arena in Oakville, Ontario through Icoworks Eastern to handle increased
  demand perceived by Icoworks for Ontario based auctions.

Icoworks Holdings will also carry out auctions on-site. On-site
  auctions are typically carried out for liquidation of operating plant and facilities
  auctions where the assets to be auctioned off are not mobile.

Icoworks Holdings services are designed to provide for
  the maximum net recovery on assets sold to its customers. Icoworks Holdings
  provides full services from an initial review and evaluation through to the
  final disposal of assets. In completing auctions, Icoworks Holdings prepares
  asset listings which provide detailed appraisals based on the in-depth market
  knowledge of Icoworks Holdings staff.

Customers

Icoworks Holdings services typically begin with an equipment
  appraisal that gives the prospective customer a reliable and credible estimate
  of the value of the appraisal equipment. Icoworks Holdings generally sells equipment
  on a commission basis whereby Icoworks Holdings receives a straight commission
  based on a percentage of the total assets sold. Icoworks Holdings is also generally
  prepared to offer its customers a choice of a straight commission, a guaranteed
  minimum return on assets or an outright purchase. The amount of a minimum guaranteed
  return on assets or the price of an outright purchase is based on the Icoworks
  Holdings appraisal of the assets to be sold and the factoring in of a necessary
  return on investment for Icoworks Holdings.

In addition to appraisal services, Icoworks Holdings coordinates
  the cleaning, repair and refurbishment of the equipment to be sold and provides
  advice to the customer on how to present equipment in order to maximize the
  customers proceeds. Following the auction, Icoworks Holdings collects
  the purchase price and disburses to the net proceeds realized from the auction
  to the customer. Icoworks Holdings provides its customers with a standardized
  settlement statement showing the sales prices, commissions and any amounts deducted
  for refurbishment or other services authorized by the customer.

Icoworks Holdings is not dependent on one or a few major customers.

Bidders

Icoworks Holdings provides an array of services to make the
  bidding and purchasing process convenient for prospective purchasers. Icoworks
  Holdings requires that customers provide free and clear title of any equipment
  to be sold in order that Icoworks Holdings can give warranties as to free and
  clear title to each buyer. Equipment offered at each auction is available for
  inspection by prospective buyers before each auction. Icoworks Holdings prepares
  a detailed item-by-item catalogue for each auction for customer convenience.
  The catalogue is delivered to each prospective buyer upon registration at the
  auction sale. Other services include information

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regarding travel arrangements, expedited check-in procedures,
  streamlined paperwork, meeting rooms, facilitating third-party financing and
  leasing, access to trucking and freight forwarding, vehicle registration and
  customs brokerage services at the auction site.

High Quality Services For Consignors And Bidders

Icoworks Holdings operations are conducted on a standardized
  basis in order to provide customers with the assurance that they will obtain
  the best return on their equipment sales and to give bidders the confidence
  that they will be given the opportunity to obtain equipment at a fair price.
  In order to achieve this objective, Icoworks Holdings has adopted fair auction
  practice standards and attempts to establish a reputation as a fair dealer.
  Auction practices used by auctioneers can vary significantly and may not consider
  the interests of buyers and sellers equally. In order to ensure confidence in
  the auction market, all Icoworks Holdings auctions are unreserved, meaning that
  there are no minimum prices, and each item is sold to the highest bidder on
  the day of the auction. By contract, each customer is prohibited from bidding
  on its own items at the auction, or in any way artificially affecting the result
  of the auction. In addition, Icoworks Holdings adheres to policies prohibiting
  its staff from artificially affecting the result of the auction by bidding on
  any items in an auction. Icoworks Holdings objective is to ensure that
  each bidder has confidence that if he or she makes the highest bid for an item,
  it will be sold to that bidder, even if that bid is less than the items
  anticipated sales price. The objective is to ensure increased customer attendance
  and an accompanying increase in value received for assets sold at Icoworks Holdings
  auctions.

ICOWORKS SOFTWARE

Incorporation of Technology into the Icoworks Holdings
  Auction Process

Icoworks Holdings has undertaken a program to integrate technology
  into its auction operations. The objectives of this technology integration are
  to: (i) increase the level of customer service that Icoworks Holdings delivers
  to customers; (ii) expand the scope of bidders that participate in each auction;
  and (iii) increase the efficiency of each auction.

Icoworks Holdings has developed proprietary software to assist
  it in managing auction data and its auction processes. Icoworks Holdings
  software includes specific electronic commerce functionality and sophisticated
  marketing tools, including the following features:

|(a) | Detailed item listings and descriptions with multiple pictures of each item;
|--- | ----------------------------------------------------------------------------
|    |                                                                             
|(b) | Advanced search engine capabilities to lead buyers to items faster;         
|    |                                                                             
|(c) | Content management;                                                         
|    |                                                                             
|(d) | Online e-commerce management;                                               
|    |                                                                             
|(e) | News and calendars;                                                         
|    |                                                                             
|(f) | Interactive online brochures;                                               
|    |                                                                             
|(g) | Inventory management;                                                       
|    |                                                                             
|(h) | Auction catalogue development software;                                     
|    |                                                                             
|(i) | Sophisticated database management tools;                                    
|    |                                                                             
|(j) | Buyer and prospect list management;                                         
|    |                                                                             
|(k) | Mailing and e-mailing campaigns;                                            
|    |                                                                             
|(l) | Broadcast fax services;                                                     
|    |                                                                             
|(m) | Internet traffic and sales analysis;                                        

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|(n) | Site usage and real-time page view analysis;  
|--- | ----------------------------------------------
|    |                                               
|(o) | Foreign languages and currencies, if required.

This software enables Icoworks Holdings to distribute auction
  data to prospective bidders with increased efficiency and breadth of distribution.
  The advantage to customers is that Icoworks Holdings is able to achieve greater
  publicity and information on each auction event.

Online Auctions

Icoworks Holdings has introduced live auctions using BidSpotter
  webcasting technologies owned by BidSpotter.com, a private company, with which
  Icoworks Holdings has no relation. Icoworks Holdings uses the BidSpotter technology
  to broadcast traditional auctions conducted by Icoworks Holdings to interested
  online bidders. The use of this live auction internet technology enables Icoworks
  Holdings to broaden the scope of bidders that are able to participate in Icoworks
  Holdings auctions. Interested online bidders who participate using the
  BidSpotter technology are able to receive a broadcast of the bidding activity
  and live audio to their computer via the Internet. Online bidders have the opportunity
  to bid against bidders situated on the auction house floor and are able to follow
  the progress of each auctioned item. The use of the live auction internet technology
  is an opportunity for Icoworks Holdings to reach bidders who may not normally
  make it to auction sites due to time constraints or travel limitations. The
  objective is to increase the potential sales price of items that Icoworks Holdings
  sells through its auction services.

Icoworks Holdings Auction Management System

Icoworks Holdings uses the Sold II Auction Management System.
  This computer system is a wireless multi-user auction management system that
  offers portability via laptop computers and point-to-point wireless data communication.
  This computer system allows Icoworks Holdings to run up to five auction rings
  simultaneously. The computer system enables Icoworks Holdings to deliver customized
  seller reports detailing items sold, prices achieved and correspondingly commissions
  charged immediately upon the closing of auction sales.

Icoworks Holdings Website

Icoworks Holdings has established a website on the internet
  at www.icoworks.com. Icoworks Holdings uses the website to enable users to view
  items to be sold at auctions to be conducted by Icoworks Holdings. The website
  also provides corporate information and is a means for Icoworks Holdings to
  market its services.

e-Bay Store

Icoworks Holdings maintains a store on the e-Bay website for
  the conduct of time limited auctions. Products offered for sale by Icoworks
  Holdings via auction on the e-Bay website may be viewed by users of the e-Bay
  website.

MARKETING STRATEGY

Icoworks Holdings marketing strategy includes the following
  elements:

1. Customer
  Evaluations Database

Icoworks Holdings maintains a database of more than 200,000
  names that has been developed from Icoworks Holdings prior business activities
  and associations. This database includes names of both customers and prospective
  bidders. The database contains key information that can be used to market Icoworks
  Holdings services, including information relating to key personnel, industry,
  current issues, auction attendance, trade association membership, buying habits,
  travel and accredited information. In addition, Icoworks Holdings maintains
  a database of equipment evaluations for past sales prices at auctions, as well
  as other sources of information. This evaluation database allows Icoworks Holdings
  to identify market trends that both facilitate accurate appraisals and allow
  Icoworks Holdings to target its marketing in response to these trends.

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The customer evaluations database is an important component
  of Icoworks Holdings marketing strategy. Icoworks Holdings uses its database
  to be able to sell its services to customers who are interested in achieving
  the broadest possible publicity for sales of their items. Once the auction process
  is underway, Icoworks Holdings can then target potential bidders and purchasers
  from its database. Icoworks Holdings can then correspond with these prospective
  bidders and provide them information regarding items to be auctioned. The objective
  of this marketing strategy is again to achieve the best possible sales market
  for the customers.

2. Items

Icoworks Holdings uses a system designed by Icoworks Holdings
  and referred to as the Ico Auction Wave System to maximize auction
  preparation, marketing and operation efficiencies. The system incorporates the
  following strategies:

|(a) | Prospective users
        and/or groups of bidders are profiled according to their buying or viewing
        habits;                                                                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                           
|(b) | Based on prospective
        user profiles, Icoworks Holdings then implements targeted marketing campaigns
        that include special catalogue views, prices, discounts, advertising and
        direct mailings;                                                      
|    |                                                                                                                                                                                                                                                                           
|(c) | Icoworks Holdings builds
        and populates product catalogues for prospective buyers. These product
        catalogues include advanced search capabilities, business analytics and
        targeting functions that integrate with data provided by outside partners.
|    |                                                                                                                                                                                                                                                                           
|(d) | Icoworks Holdings performs
        business analytics to analyze and report on product and customer behavior
        in order to target prospective buyers with the objective of maximizing
        revenue from auction sales.                                           

3.           Marketing
  of Icoworks Holdings Services

Icoworks Holdings prepares professionally designed detailed
  brochures, catalogues and mailers, complete with color pictures that are made
  available by mail and online through the Icoworks Holdings website. Icoworks
  Holdings plans to identify strategic partners and enter into strategic relationships
  in order to make potential customers aware of its services and to expand the
  scope of prospective buyers for Icoworks Holdings auctions.

PLAN OF OPERATIONS

Our business strategy is to continue to expand the asset realization
  business of Icoworks Holdings with the objective of increasing revenues and
  profitability. Icoworks Holdings strategies to achieve this business plan
  are as follows:

|1. | Icoworks Holdings intends to target and acquire regional
        auction businesses that are currently engaged in traditional industrial
        and commercial auction and liquidation services. The objective of this
        strategy is to expand the geographic scope of Icoworks Holdings
        business, to expand its customer base and to expand the scope of the prospective
        bidders for items sold by Icoworks Holdings. By pursuing this strategy,
        Icoworks Holdings plans to be able to market to a broader base of customers
        on the basis that Icoworks Holdings geographic influence and its
        database of prospective bidders will result in customers achieving higher
        prices for items to be sold.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2. | Icoworks Holdings plans to continue to integrate
        technology into its traditional auction business. Icoworks Holdings will
        focus its efforts on using technology to supplement its existing traditional
        auction business services, rather than attempting to shift traditional
        auctions into an online format. Icoworks Holdings plans to continue the
        use of live internet auctions using the BidSpotter or competing technology.
        Icoworks Holdings also plans to pursue online auctions through its e-Bay
        store. Icoworks Holdings will also consider conducting live online auctions
        that are accessible to users through its corporate website.                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3. | Icoworks Holdings plans to pursue creative financing
        strategies for financing and selling bought deals. Bought deals involve
        purchase of a group of assets from the seller at a discount to the anticipated
        selling price. The advantage of this arrangement to a seller is that the
        seller would be able to achieve immediate proceeds from the sale at a
        guaranteed amount rather than waiting for the completion of                                                                                                                                                                                                                                                                                                

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| | the auction process and being at risk to
        lower than anticipated sales price at the auction. The risk to Icoworks
        Holdings as a purchaser is that it would not be able to sell the assets
        at the price paid to the seller.In order to be able to participate in
        such ventures at a lower risk, Icoworks Holdings plans to evaluate the
        financing transactions, including limited partnerships whereby Icoworks
        Holdings andotherventure partners would fund the purchase price for a
        block of assets and share the risk associated with the sale of the assets
        on the market. This business strategy would offer greater potential returns
        for Icoworks Holdings, but at potentially greater risks than in its traditional
        auction and liquidation business where assets are sold on a fixed commission
        basis.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Icoworks Holdings has arranged for a joint
        venture arrangement to fund the acquisition of bought deals. The joint
        venture arrangement is discussed under Management Discussion and
        Analysis  Liquidity and Financial Condition. Bought deal acquisitions
        completed by Icoworks Holdings using the joint venture funds include the
        following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Our strategy is to increase sales through acquisitions with
  the objective of increasing the sales and revenue of those acquired businesses
  by making capital available to the acquired businesses allowing bids on bought
  deals or the acquisition of assets for resale. In addition, we will seek to
  expand the geographic scope of our business operations through the establishment
  of new branch offices if no viable acquisition is available. This strategy is
  reflected in our recent acquisitions of Premier Auctions and our planned acquisition
  of Santiago Classic Car Auctions, as discussed below. Our ability to implement
  this strategy is dependant on our ability to raise the necessary capital to
  carry out our plans.

ACQUISITION OF PREMIER OIL FIELD AUCTION BUSINESS

Icoworks Holdings acquired the assets of Premier Auctions
  from Network International, Inc for $1,500,000 effective August 29, 2003. Icoworks
  Holdings has operated Premier Auctions as a wholly owned subsidiary of Premier
  Auctioneers since the acquisition.

Premier Auctions is a dominant auction company in the energy
  auction sector conducting more oilfield auctions than all of its competitors.
  Premier Auctions will continue to be managed by James B. Richie, Scott Felker
  and David Long, the original founders of Premier Auctions. Premiers management
  and staff have over 300 years of auction experience and their expertise includes
  talented appraisers, set-up supervisors, ringmen, marketing experts and the
  industries top cashiers and financial staff.

Premier Auctions will be headquartered in Tulsa, Oklahoma
  and will continue operations of yards located in Odessa, Houston, San Antonio
  and Oklahoma City.

Premier Auctions operates exclusively as a commission agent
  for the consignors to their auctions. Commissions normally range from 8% to
  12% on a plus plus basis. Plus plus means that the consignor
  pays all costs associated with the auctions. Premier Auctions has three fixed
  date auctions annually; Bakersfield, CA in late May, early June, and Oklahoma
  City, OK and Odessa, TX in October. Between these fixed date auctions, Premier
  conducts 9 to 12 additional sales for individual consignors. All sales are held
  off site and equipment inspections are completed remotely and then the auction
  held by slide show (now digital) in a hotel ballroom or equivalent. Approximately
  65% of sales take place between September to December of each year.

Premier Auctions customers, whether they be buyers or
  sellers, represent every major oil company, service company, exploration company
  and related companies, together with the hundreds of independents in the oil
  and gas industry. Many times a customer may be a buyer and a seller at the same
  sale.

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Premier Auctions has completed the following auctions and liquidations since our acquisition:

|1. | Premier Auctions completed the 17thannual fall consignment sale of oilfield equipment and rolling stock
        on October 14 and 15, 2003 in Oklahoma City;                                                  
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                               
|2. | Premier Auctions completed the liquidation
        of C. Smith Drillings and Wayne City Drillings drill rigs
        and related equipment on September 25, 2003 in Grayville, Illinois; and                
|   |                                                                                                                                                                                                               
|3. | Premier Auctions completed the liquidation
        of Rock and Soil Drilling Corporations water and environmental drilling
        and construction equipment on September 25, 2003 in St. Charles, Illinois;

The Premier Auctions acquisition also includes the acquisition
  of staff who were and will continue to be involved in providing appraisals and
  valuations services. Key staff who have remained with Premier Auctions include
  the following:

James Richie began his career in the oilfield auction
  industry in 1981 at the age of 18. He has worked nearly every facet of the auctioneering
  business as his career developed. Mr. Richie has sold over four billion dollars
  at auctions over the past 22 years. He has held auctions in all 50 states as
  well as Canada, Germany, Britain and Australia. Mr. Richie was a founder of
  Premier Auctioneers in 1997, reaching sales of over $45 million before selling
  the company to Network Oil, Inc. in 2000. Mr. Richie has auctioned some of the
  largest and most prestigious auctions in the world, such as: Collector/Antique
  Car Auction in Scottsdale, AZ, Auburn, IN and Tulsa and Oklahoma City, OK. Mr.
  Richie had the unique experience of auctioning an entire community built to
  house 18,000 workers involved in the Exxon Valdez disaster.

David Long has worked within the auction industry for
  more than 20 years, most of this in the oilfield industry. Mr. Long has had
  a distinguished sales career in the Texas New Mexico area and was a principal
  partner in Premier Auctioneers before its sale to Network. He has been Regional
  Sales Manager and oversaw the operations of the Odessa facility of Premier Auctions.
  Mr. Long is known throughout the oilfield industry for his knowledge of equipment
  values, having been involved in every aspect of the appraisal business.

Scott Felker is the past President of Premier Auctioneers
  International, Inc., with over 27 years in the industry. Prior to entering the
  auction industry, Mr. Felker had several years experience directly in the oilfield
  services industry. Mr. Felker has an MBA from Hardin-Simmons University.

ACQUISITION OF CLASSIC CAR AUCTION BUSINESS

Icoworks Services US has entered into an agreement with Rocky
  Santiago to acquire the business of Santiago Sports and Classics Collectors
  Car Auctions (Santiago Classic Car Auctions) for a purchase price
  of $ 250,000. Santiago Classic Car Auctions has been successfully operated as
  a proprietorship by Mr. Santiago for over 20 years. Santiago Classic Car Auctions
  holds six auctions annually in Oklahoma City, Tulsa, Dallas and Albuquerque
  each year. These auctions feature antique classic muscle cars, street rods,
  sports cars exotic and other cars. Santiago Classic Car Auctions are leaders
  in Aston Martin and Austin Healy and sell many cars in various conditions from
  project to concours condition. We plan to rename Santiago Classic Car Auctions
  as Icoworks Collector Car Auctions Inc. upon completion of the acquisition.

COMPETITION

We compete primarily in the used industrial equipment market.
  We also complete in the used commercial and office auction equipment market.
  Each of these market segments is highly fragmented without any dominant competitor.
  Competitors include direct competitors, such as competing auction houses and
  indirect competitors, such as equipment manufacturers, rental companies, distributors
  and dealers that sell new or used products. Our direct competitors are primarily
  regional auction companies. When competing for potential purchasers of equipment,
  we compete against other auction companies, equipment manufacturers, distributors
  and dealers that sell new or used equipment, and equipment rental companies.

The principal factors in the industrial equipment market are
  reputation, customer service, commission amounts, transaction structure, real
  time information access and the ability to attract the bidders of products that
  are necessary to generate the best possible prices for products. Our inability
  to compete on any of these factors

Page 13 of 37

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with competitors in our traditional markets will impact adversely
  on our business. In addition, we will have to compete on these factors in new
  markets in the event that we expand into new geographic markets as we complete
  our business strategy. Many of our competitors have significantly greater financial
  and marketing resources and brand name recognition than we do. New competitors
  with greater financial and other resources than we do may enter the industrial,
  commercial and office equipment auction market in the future. Additionally,
  existing or future competitors may succeed in entering and establishing successful
  operations in new geographic markets prior our entry into such markets.

We will encounter competition on the online market from competitors
  that are focused on Internet auctions. In addition, new companies that have
  focused their traditional businesses on Internet auctions may expand their businesses
  to include traditional auction processes that compete with the auctions provided
  by Icoworks Holdings.

INTELLECTUAL PROPERTY

We operate under the Icoworks trade name. However,
  we have not obtained trademark protection of the Icoworks trade
  name. We use proprietary software developed by Icoworks Holdings in our auction
  operations. We rely on confidentiality and non-disclosure agreements with our
  employees and consultants in order to protect our intellectual property rights
  in this software. We cannot provide any assurance that the measures we take
  to protect intellectual property will prevent misappropriation of our technology
  or deter independent third-party development of similar technologies.

RESEARCH AND DEVELOPMENT

We have not spent any funds on research and development activities
  in either of our last two most recently completed fiscal years.

GOVERNMENT REGULATION

Our auction businesses are generally subject to extensive
  regulation, supervision, and licensing under various federal, state, provincial
  and local statutes, ordinances, and regulations. Such laws and regulations may
  require us to obtain a license or registration, or post a surety or bond as
  a precondition of doing business within the jurisdiction. In addition, applicable
  laws may require us to transact business and sell merchandise in accordance
  with specific guidelines, including the means by which we obtain our merchandise,
  advertise our auctions, conduct our bidding procedures, close transactions,
  hold client funds, and other restrictions that may vary from jurisdiction to
  jurisdiction.

In addition, we are subject to a variety of federal, provincial,
  state and local laws, rules and regulations relating to, among other things,
  the auction business, imports and exports of equipment, worker safety and the
  use, storage, discharge and disposal of environmentally sensitive materials.
  We are also subject to various local zoning requirements with regard to the
  location of our auction sites, which requirements vary from location to location.

We believe that we are currently in compliance in all material
  respects with all laws, rules, regulations and requirements that affect our
  business, and that compliance with such laws, rules, regulations and requirements
  does not impose a material impediment on our ability to continue to conduct
  our business.

EMPLOYEES

We currently have 86 full-time and part-time employees in
  total who work at the following locations:

| | Icoworks Services: | 7 full-time and 5 part-time employees in Calgary, Alberta        
| | ------------------ | -----------------------------------------------------------------
| |                    | 29 full-time and 12 part-time employees in Ontario               
| |                    | 5 full-time and 6 part-time employees in Surrey, British Columbia
| |                    |                                                                  
| | Premier Auctions:  | 17 full-time and 2 part-time employees in Texas and Oklahoma     
| |                    |                                                                  
| | Head Office:       | 3 employees in Bellingham, Washington                            

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In addition, we retain two part-time consultants who provide
  accounting and book-keeping services.

RISK FACTORS

An investment in our common stock is highly speculative and
  subject to a high degree of risk. Only those persons who can bear the risk of
  the entire loss of their investment should participate. An investor should carefully
  consider the risks described below, the other information in this Annual Report
  on Form 10-KSB and the information with our filings with the Securities and
  Exchange Commission before investing. The risks described below are not the
  only ones faced. Additional risks that we are aware of or that we currently
  believe are immaterial may become important factors that affect our business.
  If any of the following risks occur, or if others occur, our business, operating
  results and financial condition could be seriously harmed and an investor may
  lose all of their investment.

If we are not able to secure future financings, then we
  may not be able to carry out our business plan for the expansion of Icoworks
  Holdings.

Our business plan calls for the increased expansion of the
  business of Icoworks Holdings. We will be required to raise substantial funds
  in order to fund this expansion. There is no assurance that we will be able
  to raise the additional funds required. In addition, future capital financings
  may result in dilution to current holders of our common stock and may require
  the issuance of preferred stock that have rights and priority to our common
  stock. There is no assurance that financings will be available to us on terms
  that are attractive to us. In the event that we are unable to secure additional
  financing, then we may be forced to scale back the business plan of Icoworks
  Holdings and to reduce the business activities of Icoworks Holdings. These measures
  could impact on the ability of Icoworks Holdings to achieve profitability.

As the Icoworks Holdings merger is subject to approval
  of our shareholders and Icoworks Holdings, there is no assurance that this merger
  will proceed.

We plan to merge with Icoworks Holdings in order that Icoworks
  will become our 100% owned subsidiary. Upon completion of this merger, we anticipate
  issuing approximately 5,679,522 additional shares of our common stock to acquire
  the additional 44% interest in Icoworks Holdings that we do not own. In addition,
  we anticipate that we will grant options and share purchase warrants to the
  option and warrant holders of Icoworks Holdings. The issuance of these securities
  will result in dilution to the holders of our common stock. There is no assurance
  that our shareholders and Icoworks Holdings will each approve this merger. In
  addition, the merger will be subject to dissent and appraisal rights in favor
  of both our shareholders and the shareholders of Icoworks Holdings. If a substantial
  number of these shareholders exercise their dissent rights, then we may be forced
  to abandon the merger due to the high cost of purchasing the shares of the dissenting
  shareholders.

If the expansion strategy of Icoworks Holdings is not successful,
  then we may not achieve profitability.

Our business plan involves the expansion of the traditional
  markets of Icoworks Holdings, the introduction of new technology to Icoworks
  Holdings auction business and the entering into of bought deals,
  subject to our achieving the necessary financing. In the event that these expansion
  strategies are not successful in generating revenues that exceed the costs of
  the expansions, then Icoworks Holdings will not generate sufficient revenues
  for us to achieve profitability. In this event, our business and financial condition
  will be adversely impacted.

If Icoworks Holdings customers do not accept the
  introduction of new technology to the traditional auction process, then our
  profitability and the profitability of Icoworks Holdings will be adversely impacted.

Icoworks Holdings plans to continue to integrate technology
  into its traditional auction business. Examples include incorporating state
  of the art auction software, online auction participation and online auctions
  into the auction business. The objective of these strategies is to increase
  the efficiency of the Icoworks Holdings auctions by expanding the number of
  potential bidders. If the strategy is not successful, then Icoworks Holdings
  may not be able to recover its investment in these new technologies with the
  result that our business and financial condition would adversely impacted.

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If the acquisition of strategy of Icoworks Holdings is
  not successful, then our business and financial condition and the business and
  financial condition of Icoworks Holdings will be adversely impacted.

Icoworks Holdings plans on acquiring traditional auction
  businesses in order to expand the geographic scope of its business. This strategy
  is part of an overall plan to increase the number of bidders for equipment offered
  for sale by Icoworks Holdings. The acquisition of new businesses is subject
  to various risks, including the ability of Icoworks Holdings to integrate these
  new businesses into its current business, the presence of competitors in new
  markets, the ability of Icoworks Holdings to retain personnel from businesses
  that are acquired and the ability of newly acquired businesses to generate adequate
  revenues. If Icoworks Holdings is not able to successfully integrate new businesses
  into its current business, or if these new businesses are not successful independently,
  then the business and financial condition of Icoworks Holdings, and consequently
  our business and financial condition, would be adversely affected.

There is no assurance that Icoworks Holdings will be successful
  in expanding its market beyond its traditional territory.

The business of Icoworks Holdings was founded and is currently
  based in Calgary, Alberta, Canada. Icoworks Holdings base in this market
  is built on its years of experience in this market and the experience of the
  its key employees in this market. As Icoworks Holdings expands the geographic
  scope of its operations, there is no assurance that it will be able to translate
  its experience and the experience of its key employees to new markets. The business
  formula employed by Icoworks Holdings in its current markets may not prove to
  be successful in new territories due to a variety of factors, including different
  business environments, different equipment markets and the presence of competitors
  in new markets. If the business strategy used by Icoworks Holdings to date is
  not successful in new geographic markets, then the business and financial condition
  of Icoworks Holdings, and consequently our business and financial condition,
  will be adversely impacted.

If Icoworks Holdings is not successful in attracting additional
  personnel with the necessary experience, Icoworks Holdings may not be successful
  in its expansion efforts.

In order to employ its business expansion strategy, Icoworks
  Holdings will be required to hire new employees that have expertise in the auction
  industry and that are able to enable us to implement our business strategy for
  Icoworks Holdings. There is no assurance that Icoworks Holdings will be able
  to hire new employees that have the necessary experience and qualifications.
  In addition, management may have difficulty in training and retaining personnel
  in different geographic locations. There is no assurance that the persons hired
  by Icoworks Holdings will enable us to achieve the Icoworks Holdings expansion
  strategy.

If the customers and bidders of Icoworks Holdings do not
  accept new auction formats introduced by Icoworks Holdings, then the business
  and financial condition of Icoworks Holdings, and consequently our business
  and financial condition, will be adversely impacted.

Icoworks Holdings plans on introducing new technologies to
  its traditional auction process. These new technologies include online auctions,
  such as auctions on Icoworks Holdings e-Bay store, and online participation
  in live auctions, such as the services offered by Icoworks Holdings in conjunction
  with BidSpotter.com. The objective behind these new formats it to broaden the
  base of bidders that view and bid on the equipment offered by Icoworks Holdings
  on behalf of its customers. If these new formats are not accepted, then Icoworks
  Holdings may not be able to recover the cost of its time and investment in these
  new formats, with the result that the business and financial condition of Icoworks
  Holdings, and consequently our business and financial condition, may be adversely
  impacted.

If Icoworks Holdings enters into bought deals, then the
  capital of Icoworks Holdings will be at risk.

Icoworks Holdings plans to enter into bought deals whereby
  the capital of Icoworks Holdings will be placed at risk due to the requirement
  that Icoworks Holdings purchase the equipment to be auctioned. The success of
  this business venture will be largely based on the ability of Icoworks Holdings
  to successfully appraise and value equipment offered for sale, to be able to
  enter into attractive purchase agreements from customers and to resell the purchased
  equipment at prices which generate a successful return on investment for Icoworks
  Holdings. The inability of Icoworks Holdings to achieve any of these objectives
  could result in Icoworks Holdings in losing money on bought deal
  auctions. In this case, the capital of Icoworks Holdings, and consequently our
  capital,

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would be at risk. This risk is a significantly greater risk
  that the traditional auction process where Icoworks Holdings earns revenues
  on a commission basis.

If Icoworks Holdings loses any of its key employees, then
  its business and financial condition could be adversely impacted.

The success of Icoworks Holdings is largely dependent on its
  key employees, including Mr. Ian Brodie and Mr. J. Graham Douglas. In the event
  that either of these individuals leaves us for any reason, then the ability
  of Icoworks Holdings to continue the acquired businesses, to retain the business
  goodwill of Icoworks Holdings and to achieve profitable operations will be adversely
  impacted.

As Icoworks Holdings implements its business strategy,
  then its reliance on third parties will increase.

Various components of the business strategy of Icoworks Holdings
  require the outsourcing of certain services to third parties. Examples include
  the integration of computer technologies, the hosting of online auctions by
  e-Bay and the offering of online auctions by BidSpotter.com. To the extent that
  these parties are not able to deliver the services required by Icoworks Holdings,
  then the ability of Icoworks Holdings to satisfy its customers and to operate
  profitably may be adversely affected.

Competition may adversely impact on the ability of Icoworks
  Holdings to achieve profitability and to achieve its expansion strategy.

Icoworks Holdings is currently subject to competition in its
  traditional markets. Competitors include direct competitors, such as competing
  auction houses and indirect competitors, such as equipment manufacturers, rental
  companies, distributors and dealers that sell new or used products. The principal
  factors in the industrial equipment market are reputation, customer service,
  commission amounts, transaction structure, real time information access and
  the ability to attract the bidders of products that are necessary to generate
  the best possible prices for products. The inability of Icoworks Holdings to
  compete on any of these factors with competitors in its traditional markets
  will impact adversely on the business of Icoworks Holdings. In addition, Icoworks
  Holdings will have to compete on these factors in new markets in the event that
  it expands into new geographic markets as it completes its business strategy.

Icoworks Holdings will compete against competitors that have
  greater financial resources and greater customer recognition as it enters new
  markets. There is no assurance that Icoworks Holdings will be able to acquire
  market share from these competitors as it attempts to expands its geographic
  scope.

Icoworks Holdings will encounter competition on the online
  market from competitors that are focused on Internet auctions. In addition,
  new companies that have focused their traditional businesses on Internet auctions
  may expand their businesses to include traditional auction processes that compete
  with the auctions provided by Icoworks Holdings.

Icoworks Holdings has entered into joint venture agreements
  with joint venture participants and its subsidiary, Icoworks Joint Ventures
  Inc.

Under the terms of the joint venture agreement, the joint
  ventureparticipants have agreed to advance an aggregate total of $2,287,180
  to date, of which $1,243,017 had been advanced and was outstanding as of June
  30, 2003. Additional funds may be advanced by future joint venture participants.
  Icoworks Holdings has guaranteed a return of 15% per annum on the investment
  of the joint venture participants. If the bought deals purchase and resale strategy
  of the joint venture is not successful in generating cash necessary to pay the

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minimum return, then Icoworks Holdings will have to pay any
  shortfall to the joint venture participants. Failure of the joint venture to
  generate the anticipated profits will cause the business and financial condition
  of Icoworks Holdings to be adversely affected.

If any of our properties contain environmentally hazardous
  materials, we may become subject to environmental liability.

Under certain of the laws regulating the use, storage, discharge
  and disposal of environmentally sensitive materials, an owner or lessee of real
  estate may be liable for the costs of removal or remediation of certain hazardous
  or toxic substances located on or in, or emanating from, such property, as well
  as related costs of investigation and property damage. Such laws often impose
  liability without regard to whether the owner or lessee knew of, or was responsible
  for, the presence of such hazardous or toxic substances. There can be no assurance,
  however, that sites that we have acquired or lease have been operated in compliance
  with all environmental laws and regulations or that future uses or conditions
  will not result in the imposition of environmental liability upon us or expose
  us to third-party actions such as tort suits.

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ITEM 2.           DESCRIPTION
  OF PROPERTY.

Our principal executive offices are located at Suite 400,
  114 West Magnolia Street, Bellingham, WA 98225 and are comprised of 200 square
  feet of leased space. These premises are leased on a month-to-month basis.

Icoworks Services leases a 24,000 square foot facility in
  Calgary, Alberta which has historically been the center of Icoworks Holdings
  business operations. This facility is leased for a term expiring November 30,
  2003. We have given notice of our intention not to renew this lease and plan
  to locate to smaller premises upon expiry of this lease as we believe these
  premises are bigger than required for our current business purposes.

Icoworks Eastern leases a 12,000 square foot office, warehouse
  and auction arena in Oakville, Ontario. This lease is for a five-year term expiring
  February 2008.

Icoworks Services leases 2,064 square feet of premises in
  Surrey, British Columbia for our British Columbia operations.

Icoworks Holdings carries out the business of Premier Auctions,
  which was acquired subsequent to June 30, 2003 from the following facilities:

|Type of Facility | Location          | Ownership | Size       
|---------------- | ----------------- | --------- | -----------
|Yard             | Odessa, TX        | Owned     | 25 acres   
|Office           | Parker, CO        | Leased    | 600 sq ft  
|Yard             | Oklahoma City, OK | Leased    | 8.5 acres  
|Warehouse        | Oklahoma City, OK | Leased    | 5,000 sq ft
|Office           | Tulsa, OK         | Leased    | 4,600 sq ft
|Office           | San Antonio, TX   | Leased    | 1,200 sq ft

All of our current premises are adequate for our current business purposes, other than our Calgary, Alberta premises, as discussed above.

ITEM 3.           LEGAL
  PROCEEDINGS.

We currently are not a party to any material legal proceedings
  and to our knowledge, no such proceedings are threatened or contemplated.

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

No matters were submitted to our security holders for a vote
  during the fourth quarter of our fiscal year ending June 30, 2003.

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PART II

ITEM 5.           MARKET
  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common shares are quoted on the OTC Bulletin Board under
  the symbol ICOW and on the Frankfurt Stock Exchange.

The following table indicates the high and low bid prices
  of the common shares during the periods indicated:

|                                 | 2003  |  |       |  | 2002  |  |       | 
|-------------------------------- | ----- |  | ----- |  | ----- |  | ----- | 
|                                 |       |  |       |  |       |  |       | 
|                                 | High  |  | Low   |  | High  |  | Low   | 
|                                 |       |  |       |  |       |  |       | 
|First Quarter ended September 30 | $1.63 |  | $0.70 |  | $ N/A |  | $ N/A | 
|Second Quarter ended December 31 | 0.80  |  | 0.50  |  | N/A   |  | N/A   | 
|Third Quarter ended March 31     | 1.03  |  | 0.65  |  | N/A   |  | N/A   | 
|Fourth Quarter ended June 30     | 0.71  |  | 0.32  |  | 1.00  |  | 0.05  | 

The source of the high and low bid price information is Canada
  Stockwatch. The market quotations provided reflect inter-dealer prices, without
  retail mark-up, mark-down or commission and may not represent actual transactions.

Registered Holders of Our Common Stock

As of October 7, 2003, there were approximately 62 registered
  holders of record of our common stock.

Dividends

There are no restrictions in our Articles of Incorporation
  or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes,
  however, prohibit us from declaring dividends where, after giving effect to
  the distribution of the dividend:

| | (A) | we would not be able to pay our debts as they become due
      in the usual course of business; or                                                                                                                                                 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                    
| | (B) | our total assets would be less than
        the sum of our total liabilities, plus the amount that would be needed
        to satisfy the rights of shareholders who have preferential rights superior
        to those receiving the distribution.

We have neither declared nor paid any cash dividends on our
  common stock and do not anticipate paying cash dividends in the foreseeable
  future. Our current policy is to retain any earnings in order to finance the
  expansion of our operations. Our board of directors will determine future declaration
  and payment of dividends, if any, in light of the then-current conditions they
  deem relevant and in accordance with the Nevada Revised Statutes.

RECENT SALES OF UNREGISTERED SECURITIES

During our fourth quarter, we agreed to sell 30,000 of a class
  of preferred stock to be designated by us as Series A Preferred Shares to one
  investor. The Series A Preferred Shares will have the following terms:

|1. | Each Series A Preferred Share will have
        a face value of $10.00 US per share;                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|2. | The Series A Preferred Shares will be
        convertible into shares of our common stock on the basis of one share
        of our common stock (the Conversion Shares) for each $0.75
        US of Series A Preferred Shares at the option of the holder. The minimum
        amount of Series A Preferred Shares that may be converted by a holder
        will be $10,000 US;
|   |                                                                                                                                                                                                                                                                                                                                                                                    
|3. | The Series A Preferred Shares will accrue
        dividends at the rate of 10% per annum. Dividends will be paid quarterly
        at the end of each calendar quarter, commencing June 30, 2003.                                                                                                                                                                                  

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|4. | We will have the right to redeem the
        Series A Preferred Shares at any time after eighteen months from the date
        of issuance in the event that the closing price of our common stock is
        equal to or greater than $1.50 US per share for at least twenty consecutive
        trading days during the three month period prior to the date of notice
        of redemption.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                
|5. | Each holder will have the right to redeem
        the Series A Preferred Shares at any time after the date that is three
        years from the date of closing of the purchase of the Series A Preferred
        Shares.                                                                                                                                                                      

We have not yet designated the Series A Preferred Shares.
  We plan to designate the class of Series A Preferred Shares in the near future
  and deliver share certificates representing the Series A Preferred Shares to
  the investor. Sales of the Series A Preferred Shares will be completed pursuant
  to Regulation S of the Securities Act on the basis that the investor is not
  a U.S. Person, as defined under Regulation S. We received proceeds
  of $300,000 from the investor.

We issued warrants to purchase 1,531,029 shares of our common
  stock to the joint venture participants who financed the Icoworks Joint Venture
  financing facility. Each warrant is exercisable at a price of $0.71 per share.
  All warrants were issued pursuant to Regulation S of the Securities Act of 1933
  based on the representations of each investors that they are not U.S.
  Persons, as defined under Regulation S.

Other than the Series A Preferred Shares and the warrants
  to the joint venture participants, we did not complete any sales of our securities
  without registration pursuant to the Securities Act of 1933 during the fiscal
  year ended June 30, 2003 that have not been reported on our previous Quarterly
  Reports on Form 10-QSB during the year.

ITEM 6.          
  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

PRESENTATION OF FINANCIAL INFORMATION

We completed the acquisition of our 56% interest in Icoworks
  Holdings effective February 20, 2003. Under United States generally accepted
  accounting principles, our financial statements have been prepared using reverse-acquisition
  accounting principles, which result in Icoworks Holdings acquiring Icoworks
  for accounting purposes. Accordingly, Icoworks Holdings is treated as the acquirer
  for accounting purposes, even though Icoworks is the legal acquirer. Under United
  States generally accepted accounting principles, comparative figures for prior
  periods are based on the operating results of Icoworks Holdings, but the type
  of share capital and number of issued and outstanding shares continue to reflect
  those of Icoworks. Therefore, our consolidated financial statements include
  the accounts of Icoworks Holdings and its legal subsidiaries. All significant
  inter-company accounts and transactions have been eliminated on consolidation.
  Comparative figures reported in our financial statements for the year ended
  June 30, 2002 are for Icoworks Holdings only. Further adjustments were also
  required as outlined in the notes to the financial statements. We have adopted
  the June 30 year end of Icoworks Holdings to reflect the accounting treatment
  of the acquisition, rather than proceeding with our previous December 31 year
  end. Due to the fact that we own less than 100% of Icoworks Holdings, our financial
  statements account for the minority interest in Icoworks Holdings that we do
  not own.

RESULTS OF OPERATIONS

Revenues

We earn revenues from two principal activities, namely auction
  revenues and held for sale revenues. Auction revenues are comprised of buyers
  premiums, being premiums over and above the purchase prices of items sold, and
  commissions paid by consigners of items for auctions. Held-for-sale revenues
  are comprised of revenues from items purchased and held for sale and/or liquidation.
  Revenue is recognized once the auction or sales are completed and collections
  reasonably assured. Other commissions are earned by us when we provide guarantees
  on the gross proceeds to be received from sale to a consigner. We conduct our
  sales where we temporarily acquire title to goods pending sale. We also enter
  into joint venture agreements through our subsidiary, Icoworks Joint Ventures,
  whereby goods are purchased for resale on a joint venture basis. When these
  activities are conducted on a joint venture basis, the profits are divided between
  us and the joint venture party on a negotiated basis. If the actual proceeds
  are less than cost, or less than the guaranteed price, then we may be required
  to fund any shortfall. The structure of sales varies from sector to sector as
  do the amounts of

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commissions and buyers premiums and accordingly, the
  nature of our revenues in any period will depend on the mix of sales which are
  conducted during the period.

We also earn fees charged for appraisals. Revenues from appraisals
  is recognized when work is completed and collection is reasonably assured.

Our revenues increased to $2,447,399 for the year ended June
  30, 2003, compared to $967,596 for the year ended June 30, 2002. The increase
  in revenues for the year is primarily attributable to the fact that Icoworks
  Services was acquired as a wholly owned subsidiary of Icoworks Holdings on December
  1, 2001. Accordingly, results for the year ended June 30, 2002 only reflect
  the operations of Icoworks Services for the seven month period from December
  1, 2001 to June 30, 2002.

The increase in revenues was also realized due to the territorial
  expansion of Icoworks Holdings into Eastern Canada and to British Columbia.
  This expansion includes the establishment of Icoworks Eastern and a branch office
  in Surrey, British Columbia. A portion of the increased revenues is also attributable
  to the relatively large Synsorb auction that was conducted by Icoworks Holdings
  in January 2003.

Cost of Sales

Our cost of sales increased to $1,779,154 for the year ended
  June 30, 2003 from $683,086 for the year ended June 30, 2002. Our gross margin
  was $668,245 for the year ended June 30, 2003, compared to $284,510 for the
  year ended June 30, 2002. Gross margin as a percentage of sales decreased to
  27.3% for the year ended June 30, 2003, compared to 29.4% for the year ended
  June 30, 2002. The decrease in gross margins was in part attributable to the
  initial start-up of the Icoworks Eastern operations and to the Stewart House
  publishing sale conducted by Icoworks Eastern which was much more complex and
  costly than had been anticipated.

Variations in our operating results on a quarter by quarter
  basis are explained in part due to the nature of the auction business. Our auction
  business involves large sales of items through auctions. The scheduling of these
  large auction sales will impact on the timing of revenues earned and will result
  in quarter by quarter variations in revenues and consequent operating results.

Expenses

Our operating expenses increased to $2,724,927 for the year
  ended June 30, 2003, compared to $1,382,096 for the year ended June 30, 2002.
  The large increase in operating expenses is again explained by the fact that
  the acquisition of Icoworks Services was completed on December 1, 2001 and consequently
  expenses for the year ended June 30, 2002 do not reflect the operating expenses
  of Icoworks Services for the full year.

The increase in our operating expenses reflects our acquisition
  of Icoworks Services in December 2001 and our acquisition of DM International
  in April 2002. Our operating expenses also increased due to the expansion of
  our operations into Ontario, Canada and British Columbia, Canada, from our initial
  base in Calgary, Alberta. During fiscal 2003, we formed Icoworks Eastern, our
  75% owned subsidiary, which operates in the Greater Toronto area in the Province
  of Ontario, Canada. Expenses in respect to these operations were incurred in
  the year ended June 30, 2003; however, a substantial portion of the revenues
  from this business expansion are not expected to be realized until our current
  fiscal year. The acquisition of DM International was completed in order to enable
  us to offer a wider range of services to our clients and to provide additional
  synergies for our Calgary, Alberta office and additional expertise for our expanded
  operations. We expect that our additional locations will contribute to increased
  appraisal revenue in the future as the current appraisal revenue are currently
  limited to the Alberta office. Increased operating expenses were also attributable
  to increased professional expenses associated with our becoming a reporting
  company under the Securities Exchange Act of 1934.

Our operating expenses do not reflect the operations of Premier
  Auctions as this acquisition was completed subsequent to our year ended June
  30, 2003. We anticipate that operating costs will increase during our current
  fiscal year to reflect our acquisition of these business operations.

Our increased operating expenses also reflect the impairment
  of goodwill in the amount of $296,834 which was related to the customer list
  acquired in connection with our acquisition of Icoworks Services in December
  2001. As our operations expanded it became apparent that the value of that customer
  list may not have been as much as we had originally estimated. The success in
  generating sales of the Icoworks Eastern operations, in the

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absence of a customer list was noted. In addition, the departure
  of Mr. Bill Wigley, the founder of the Alberta operations, together with his
  longstanding relations with the customers was another factor which contributed
  to the decline in value. Finally, as we expanded and with the acquisition of
  Premier Auctions, our business will be more dominated in the short term by the
  oilfield business. Although Icoworks Services had oilfield business, the Premier
  Auctions reputation and size indicated an impairment in the value of the
  Icoworks Services customer list. It was concluded that a write-down of
  the list in the fourth quarter of 2003 was appropriate.

Net Loss

Our net loss increased to $1,790,551 for the year ended June
  30, 2003, compared to $974,333 for the year ended June 30, 2002. Our increased
  loss is primarily attributable to the increases to our costs of sales which
  have resulted in decreased gross margins as a percentage of revenues from 29.4%
  to 27.3% and to increased operating expenses attributable to our expansion efforts.

LIQUIDITY AND FINANCIAL CONDITION

Cash and Working Capital

As at June 30, 2003, we had cash of $448,404 and a working
  capital deficiency of $1,562,863. Our working capital deficiency is the result
  of a number of factors including the expansion of operations and continuing
  losses. We anticipate that we will require additional funding in order to achieve
  profitable operations and to implement our plan of operations.

The amount due to joint venture and guarantees was $2,449,626
  at June 30, 2003. This amount was comprised of a liability to the investors
  of the Icoworks Joint Venture bought deal fund, as discussed below, that was
  outstanding in the amount of $1,243,017 at June 30, 2003. The balance of $1,206,609
  was comprised of amounts that we had guaranteed to receivers and consignors
  with respect to goods to be auctioned by us where we have guaranteed a minimum
  sales price to the receivers and consignors. In these arrangements, we are at
  risk as to the ultimate sales price of the goods to be sold. Accordingly, the
  goods that are the subject of these arrangements are recorded by us as inventory.
  As a result of the joint venture and guaranteed arrangements, our inventory
  increased to $2,087,581 at June 30, 2003 from $9,695 at June 30, 2002.

Cash From Operating Activities

Cash provided by operating activities was $392,114 during
  the year ended June 30, 2003, compared cash used in operating activities in
  the amount of $1,039,929 during the year ended June 30, 2002. We experienced
  an increase in inventory in the amount of $2,077,886 during this period and
  an increase in accounts payable and accrued liabilities in the amount of $717,860.

Financing Activities

Cash provided by financing activities was $40,182 for the
  year ended June 30, 2003 compared to cash provided by financing activities in
  the amount of $1,043,100 for the year ended June 30, 2002. Cash provided by
  financing activities included an offset in respect of the repayment of guarantees
  in the amount of $753,602

In our fourth quarter ended June 30, 2003, we completed a
  financing with a non-US investor for proceeds of $300,000 pursuant to which
  we have agreed to issue 30,000 shares of our preferred stock which will be designated
  as Series A preferred shares. Each Series A preferred share will be issued for
  each $10 advanced and will be convertible into shares of our common stock at
  rate of one share for each $0.75 of preferred shares converted. We received
  the funds from this financing in early April and we have applied the proceeds
  to working capital. We anticipate designating the class of Series A Preferred
  Shares and issuing the preferred shares to the investor in the near future.

We have access to a fund of capital in the amount of $2,287,180
  through the Icoworks Joint Ventures joint venture arrangement which we anticipate
  will be used to finance the acquisition of inventory and assets for resale on
  a project by project basis. These joint ventures arrangements and our obligations
  thereunder are described below under Icoworks Joint Ventures.

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We anticipate that we will require additional financing in
  the amount of $500,000 over the next twelve months in order to fund our shortfall
  in cash used in operating activities. See discussion below under Financing
  Requirements.

Icoworks Joint Ventures

Icoworks Holdings has incorporated a subsidiary, Icoworks
  Joint Ventures Inc. (Icoworks Joint Ventures), for the purpose of
  financing and selling bought deals. Icoworks Holdings and Icoworks Joint Ventures
  have entered into joint venture agreements with several initial participants.
  The purpose of the joint venture formed pursuant to the joint venture agreement
  is to purchase and resell various types of assets being liquidated in receiverships
  and bankruptcy on a bought deal basis. Assets purchased will be
  resold using the services of Icoworks Holdings. The joint venture will plan
  to generate profit by selling these assets at a higher price than the original
  purchase cost plus costs of sale. Under the joint venture agreements, Icoworks
  Holdings will carry out the purchase and sale of assets for each bought deal.
  Icoworks Joint Ventures has agreed to pay to Icoworks Holdings 3.5% of the gross
  sale price of the assets to compensate Icoworks Holdings for sale costs relating
  to the marketing, promotion and resale of the purchased assets. The gross profit,
  being the sale price of each completed sale, less acquisition costs, sale costs
  and any additional costs, will be distributed as follows:

|(1) | 65% to Icoworks Holdings, and                                                     
|--- | ----------------------------------------------------------------------------------
|(2) | 35% to be divided proportionately to each of the joint venture
      participants.

Icoworks Holdings has guaranteed a return to each joint venture
  investor of 15% per annum. The terms of the joint venture agreements are for
  a minimum of one year and a maximum of three years. Icoworks Holdings will report
  quarterly to the joint venture participants and distributions will be made on
  a quarterly basis of cash available for distribution. The joint venture participants
  will have the option to convert their investments in Icoworks Joint Ventures
  into shares of our common stock at any time within one year of their initial
  investment by the exercise of warrants granted to the participants at a price
  of $0.71 per share. To date, a total of $2,287,180 has been made available by
  participants of which $1,243,017 had been advanced and was outstanding as of
  June 30, 2003. As at June 30, 2003, we would be liable for $343,077 in each
  of the twelve month periods ended March 31, 2004 and 2005 if we are required
  to pay the participants based on our guarantee obligation.

Icoworks Joint Ventures was formed during the fourth quarter
  of fiscal 2003 and participated in four bought deals during the fourth quarter.
  Funds advanced by the joint venture participants are held in trust by Icoworks
  Joint Ventures for the joint venture participants until such time as funds are
  advanced to fund a bought-deal acquisition.

Bridge Loan Facility - Icoworks US JV Inc.

Icoworks Holdings incorporated Icoworks US JV Inc. in the
  United States for the purpose of arranging for bridge loan financing to enable
  it to acquire the assets of Premier Auctions and Santiago Classic Car Sales.
  Icoworks US JV Inc. was incorporated for the purpose of acting as a bare trustee
  for the investors who advanced the bridge loan. The borrower under the bridge
  loan was Icoworks Services US and the bridge loan has been guaranteed by Icoworks
  Holdings. The bridge loan facility is for a principal amount of $2,000,000.
  Advances under the bridge loan facility accrue interest at the rate of 3% per
  month from the date of advance. Interest accrued on the bridge loan is repayable
  on November 15, 2003 or thereafter at the demand of the lender. The principal
  amount of the bridge loan and accrued interest is repayable on or before February
  28, 2004. The bridge loan facility is secured by a promissory note, an assignment
  of proceeds from the exercise of warrants issued to the participants in the
  Icoworks Joint Venture, a guarantee and postponement of claims by Icoworks Holdings,
  a pledge of the shares of any corporation acquired and, at the request of the
  lender, a mortgage of any lands acquired. The full amount of the principal advanced
  under the bridge loan facility is convertible into shares of Icoworks at a price
  of $0.35 per share of common stock.

A total of $2,000,000 has been advanced under the bridge loan
  facility to date. Of the amount advanced, $1,500,000 was used to acquire the
  assets of Premier Auctions, $250,000 will be used to acquire Santiago Classic
  Car Sales and the balance will be used for working capital.

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Completion of Merger with Icoworks Holdings

We plan to complete the merger with Icoworks Holdings in order
  to acquire the remaining 44% interest in Icoworks Holdings that we do not currently
  own. We anticipate that the completion of this acquisition will take approximately
  six months and will cost approximately $100,000 due to the fact that we must
  file a registration statement with the United States Securities and Exchange
  Commission to register the shares to be issued to the remaining shareholders
  of Icoworks Holdings.

Financing Requirements

We will require additional financing over the next twelve
  months. We anticipate that we will require financing in the amount of approximately
  $500,000 to fund the shortfall in cash used in operating activities. In addition,
  we will require financing in the amount of $2,000,000 plus accrued interest
  in order to repay the bridge loan facility obtained through Icoworks US JV.
  This loan must be repaid on or before February 28, 2004. We also plan to pursue
  our acquisition strategy and anticipate that any future acquisitions will be
  completed using new financings that will have to be negotiated and obtained
  on a transactional basis.

Our financing requirements are in excess of our current financial
  resources. We plan to pursue equity financings involving sales of our common
  stock or convertible preferred stock in order to raise financing to fund our
  ongoing capital requirements. It is contemplated that funds we raise would be
  advanced by us to Icoworks Holdings as a loan pending the completion of the
  merger with Icoworks Holdings. We do not have any arrangements for financing
  currently in place. There is no assurance that we will be successful in raising
  the necessary financing to meet our financing requirements.

We have announced a private placement of up to 2,000,000 units
  at a price of $0.35 per unit. Each unit is to be comprised of one share of our
  common stock and one share purchase warrant. No sales of units have been completed
  to date and there is no assurance that this private placement will complete.

In the event that we are successful in achieving financing,
  we anticipate advancing funds to Icoworks Holdings to fund bought deals and
  the acquisition strategy of Icoworks Holdings as a loan pending the completion
  of the merger of Icoworks Holdings. These loans may be advanced as secured or
  unsecured loans. In the event that we advance funds to Icoworks Holdings, there
  will be no assurance that these funds will be repaid by Icoworks Holdings. If
  the business of Icoworks Holdings is not successful in generating sufficient
  funds to repay these loans, then our financial condition will be adversely affected.
  In addition, there is a risk that we will advance substantial funds to Icoworks
  Holdings and the merger of Icoworks Holdings will not proceed. In the event
  that we are unable to raise additional financing under acceptable terms, then
  we may not be able to proceed with our plan of operations or we may be required
  to scale back our plan of operations. We also anticipate that we will continue
  to incur losses until such time as we are able to generate profits from the
  business of Icoworks Holdings and its expansion strategy.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

Revenues mainly consist of auction revenues and held-for-sale
  revenues. Auction revenues are comprised of buyers premiums, being premiums
  over and above the purchase prices of items sold, and commissions paid by consignors
  of items for auction. Held for sale revenues are comprised of revenues from
  items purchased and held-for-sale and or liquidation. Revenue is recognized
  once the auction or sales are completed and collection is reasonably assured.
  Other commissions are earned when we provide guarantees on the gross proceeds
  to be received from sale to the consignor.

We conduct these sales where it, or in joint venture with
  others, temporarily acquires title to the goods. When these activities are conducted,
  the profits are divided between us and the joint venture partners on a negotiated
  basis. If the actual proceeds are less than cost, or less than the guaranteed
  price, we may be required to fund the shortfall, as discussed above.

Revenue is also earned from fees charged for appraisals and
  is recognized when the work is completed and collection is reasonably assured.

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Foreign Currency Translation

We have determined that the functional currency of certain
  of our wholly-owned and partially-owned subsidiaries is the local currency,
  the Canadian dollar. Assets and liabilities denominated in foreign currency
  are translated into U.S. dollars at the period end exchange rates. Revenue and
  expenses are translated at the rates of exchange prevailing on the dates such
  items are recognized in earnings. Related exchange gains and losses are included
  in a separate component of shareholders' equity under other comprehensive income.
  Exchange gains and losses resulting from foreign currency transactions are included
  in income for the period.

Inventory

Inventory is stated at the lower of cost or market. Cost is
  generally determined on the first-in, first-out basis.

Intangible Assets

The carrying value of intangible assets is re-evaluated for
  potential permanent impairment on an ongoing basis at the reporting unit level.
  In order to determine whether permanent impairment exists, management considers
  the Companys and its subsidiaries financial condition as well as
  expected pre-tax earnings, discounted cash flows or market related values. If
  the carrying value of intangible assets of a reporting unit exceeds the fair
  value of the reporting unit, the carrying value of intangible assets must be
  written down to fair value in the year the impairment is recognized.

ITEM 7.          
  FINANCIAL STATEMENTS.

Included with this Annual Report on Form 10-KSB are audited
  financial statements of Icoworks Inc. for the years ended June 30, 2003 and
  2002, including the following:

|1. | Independent Auditors Report of Dohan and Company, Certified
      Public Accountants;                                  
|-- | ------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                         
|2. | Consolidated Balance Sheets at June 30, 2003 and 2002.                                                                  
|   |                                                                                                                         
|3. | Consolidated Statements of Operations for the years ended
      June 30, 2003 and 2002.                                 
|   |                                                                                                                         
|4. | Consolidated Statements of Stockholders Equity (Deficiency
      in Assets) for the years ended June 30, 2003 and 2002.
|   |                                                                                                                         
|5. | Consolidated Statements of Cash Flows for the years ended
      June 30, 2003 and 2002.                                 
|   |                                                                                                                         
|6. | Notes to the Consolidated Financial Statements                                                                          

ITEM 8.          
  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE.

Disclosure regarding our change of independent accountant
  from Janet Loss, C.P.A., P.C. to Dohan and Company, Certified Public Accountants
  effective June 10, 2003, has been previously reported on our Form 8-K filed
  with the Securities and Exchange Commission on June 12, 2003.

Page 26 of 37

---

|Dohan and Company            | 7700 North Kendall Drive, 200                                                                                                                          
|---------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Certified Public Accountants | Miami, Florida   33156-7578                                                                                                                            
|A Professional Association   | Telephone      (305) 274-1366
      Facsimile        (305) 274-1368
      E-mail            
      info@uscpa.com
      Internet          www.uscpa.com

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders
  Icoworks, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets
  of Icoworks, Inc. and Subsidiaries as of June 30, 2003 and 2002, and the related
  consolidated statements of operations and comprehensive loss, stockholders equity
  (deficiency) and cash flows for the years then ended. These financial statements
  are the responsibility of the Company's management. Our responsibility is to
  express an opinion on these financial statements based on our audits.

We conducted our audits 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 audits provide
  a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  Icoworks, Inc. and Subsidiaries as of June 30, 2003 and 2002, and the results
  of their operations and their cash flows for the years then ended in conformity
  with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been
  prepared assuming that the Company will continue as a going concern. As discussed
  in Note 2, the Company has continued to incur operating losses, has used, rather
  than provided, cash from operations and has an accumulated deficit of $3,621,898.
  These factors, and others, raise substantial doubt about the Company's ability
  to continue as a going concern. The ability of the Company to continue operations
  is subject to its ability to secure additional capital to meet its obligations
  and to fund operations. Management's plans in regard to these matters are also
  described in Note 2. The financial statements do not include any adjustments
  that might result from the outcome of this uncertainty.

| | /s/ Dohan and Company, CPA.'s
| | -----------------------------

Miami, Florida
  October 16, 2003

F-1

---

|                                                                                    |   |           |  |   |         | 
|----------------------------------------------------------------------------------- | - | --------- |  | - | ------- | 
|                                                                                    |   | 2003      |  |   | 2002    | 
|                                                                                    |   |           |  |   |         | 
|                                                                                    |   |           |  |   |         | 
|ASSETS                                                                              |   |           |  |   |         | 
|                                                                                    |   |           |  |   |         | 
|Current assets                                                                      |   |           |  |   |         | 
|Cash and cash equivalents                                                           | $ | 448,404   |  | $ | 134,524 | 
|Accounts receivable, less allowance of $15,158 (2002 - $Nil)                        |   | 562,953   |  |   | 105,698 | 
|Income taxes recoverable                                                            |   | 920       |  |   | 22,788  | 
|Inventory (Note 6)                                                                  |   | 2,087,581 |  |   | 9,695   | 
|Prepaid expenses                                                                    |   | 59,734    |  |   | 5,461   | 
|Deferred bonus (Note 5)                                                             |   | -         |  |   | 56,686  | 
|Other current assets                                                                |   | 1,012     |  |   | 9,759   | 
|Deferred tax assets less valuation allowance of $1,236,107 (2002 - $732,635
      ) |   | -         |  |   | -       | 
|                                                                                    |   |           |  |   |         | 
|Total current assets                                                                |   | 3,160,604 |  |   | 344,611 | 
|                                                                                    |   |           |  |   |         | 
|Trust assets                                                                        |   | -         |  |   | 24,373  | 
|                                                                                    |   |           |  |   |         | 
|Equipment(Note 7)                                                                   |   | 98,394    |  |   | 70,740  | 
|                                                                                    |   |           |  |   |         | 
|Customer list(Note 5)                                                               |   | -         |  |   | 430,410 | 
|                                                                                    |   |           |  |   |         | 
|Deferred financing costs(Note 8)                                                    |   | 266,304   |  |   | -       | 
|                                                                                    |   |           |  |   |         | 
|Total assets                                                                        | $ | 3,525,302 |  | $ | 870,134 | 

- continued -

The accompanying notes are an integral part of these consolidated
  financial statements.

F-2

---

|                                                                                |   |            |   |   |            |  
|------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                                                |   | 2003       |   |   | 2002       |  
|                                                                                |   |            |   |   |            |  
|Continued                                                                       |   |            |   |   |            |  
|                                                                                |   |            |   |   |            |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)                     |   |            |   |   |            |  
|                                                                                |   |            |   |   |            |  
|Current liabilities                                                             |   |            |   |   |            |  
|Bank overdraft                                                                  | $ | 74,492     |   | $ | -          |  
|Accounts payable and accrued liabilities                                        |   | 1,019,408  |   |   | 301,548    |  
|Advances payable (Note 9)                                                       |   | 129,486    |   |   | 19,982     |  
|Financial arrangements and guarantees used to acquire inventory (Note
      10) |   | 2,449,626  |   |   | -          |  
|Due to related parties (Note 11)                                                |   | 1,050,455  |   |   | 262,246    |  
|                                                                                |   |            |   |   |            |  
|Total current liabilities                                                       |   | 4,723,467  |   |   | 583,776    |  
|                                                                                |   |            |   |   |            |  
|Trust liabilities                                                               |   | -          |   |   | 24,373     |  
|                                                                                |   |            |   |   |            |  
|Preferred shares to be issued(Note 12)                                          |   | 300,000    |   |   | -          |  
|                                                                                |   |            |   |   |            |  
|Total liabilities                                                               |   | 5,023,467  |   |   | 608,149    |  
|                                                                                |   |            |   |   |            |  
|Minority interest                                                               |   | (235,476   | ) |   | -          |  
|                                                                                |   |            |   |   |            |  
|Contingent liability(Note 17)                                                   |   |            |   |   |            |  
|                                                                                |   |            |   |   |            |  
|Commitments(Note 18)                                                            |   |            |   |   |            |  
|                                                                                |   |            |   |   |            |  
|Stockholders' equity (deficiency in assets)                                     |   |            |   |   |            |  
|Capital stock (Note 13)                                                         |   |            |   |   |            |  
|Authorized                                                                      |   |            |   |   |            |  
|100,000,000 common
      shares with a par value of $ 0.001                     |   |            |   |   |            |  
|10,000,000
      preferred shares with a par value of $ 0.001                   |   |            |   |   |            |  
|Issued and outstanding                                                          |   |            |   |   |            |  
|12,886,398
      common shares (2002  12,415,800)                              |   | 12,886     |   |   | 12,416     |  
|Additional paid-in capital                                                      |   | 2,388,650  |   |   | 2,080,969  |  
|Accumulated other comprehensive loss                                            |   | (42,327    | ) |   | (53        | )
|Deficit                                                                         |   | (3,621,898 | ) |   | (1,831,347 | )
|                                                                                |   |            |   |   |            |  
|Total stockholders' equity (deficiency in assets)                               |   | (1,262,689 | ) |   | 261,985    |  
|                                                                                |   |            |   |   |            |  
|Total liabilities
      and stockholders' equity (deficiency in assets)         | $ | 3,525,302  |   | $ | 870,134    |  

The accompanying notes are an integral part of these consolidated
  financial statements.

F-3

---

|                                                                       |   |            |   |   |            |  
|---------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                                       |   | 2003       |   |   | 2002       |  
|                                                                       |   |            |   |   |            |  
|                                                                       |   |            |   |   |            |  
|SALES                                                                  | $ | 2,447,399  |   | $ | 967,596    |  
|COST OF SALES                                                          |   | 1,779,154  |   |   | 683,086    |  
|GROSS MARGIN                                                           |   | 668,245    |   |   | 284,510    |  
|                                                                       |   |            |   |   |            |  
|EXPENSES                                                               |   |            |   |   |            |  
|Advertising                                                            |   | 11,767     |   |   | 21,502     |  
|Amortization of customer list                                          |   | 133,576    |   |   | 103,892    |  
|Amortization of deferred bonus                                         |   | 56,686     |   |   | 18,895     |  
|Bank charges and interest                                              |   | 124,456    |   |   | 22,110     |  
|Business development                                                   |   | 1,825      |   |   | -          |  
|Consulting                                                             |   | 63,194     |   |   | 81,497     |  
|Depreciation                                                           |   | 22,423     |   |   | 21,628     |  
|Entertainment and promotion                                            |   | 91,082     |   |   | 43,103     |  
|Financing fees                                                         |   | 146,808    |   |   | 92,741     |  
|Investor relations                                                     |   | 122,891    |   |   | -          |  
|Impairment of customer list                                            |   | 296,834    |   |   | -          |  
|Management fees                                                        |   | 214,833    |   |   | 150,000    |  
|Office and miscellaneous                                               |   | 344,282    |   |   | 11,977     |  
|Professional fees                                                      |   | 178,251    |   |   | 152,972    |  
|Rent                                                                   |   | 290,921    |   |   | 88,081     |  
|Salaries and wages                                                     |   | 514,495    |   |   | 158,509    |  
|Telephone and utilities                                                |   | 35,169     |   |   | 33,521     |  
|Travel and related                                                     |   | 71,996     |   |   | 40,458     |  
|Website design and maintenance                                         |   | 3,498      |   |   | 341,210    |  
|                                                                       |   | 2,724,987  |   |   | 1,382,096  |  
|                                                                       |   |            |   |   |            |  
|Loss before minority interest in net loss of subsidiaries              |   | (2,056,742 | ) |   | (1,097,586 | )
|                                                                       |   |            |   |   |            |  
|Minority interest in net loss of subsidiaries                          |   | 235,476    |   |   | -          |  
|                                                                       |   |            |   |   |            |  
|Loss before other items and income taxes                               |   | (1,821,266 | ) |   | (1,097,586 | )
|                                                                       |   |            |   |   |            |  
|OTHER ITEMS                                                            |   |            |   |   |            |  
|Cancellation of contingent liability (Note 17)                         |   | -          |   |   | 63,530     |  
|Foreign exchange gain                                                  |   | -          |   |   | 2,358      |  
|Gain on sale of assets                                                 |   | 19,678     |   |   | -          |  
|Gain on settlement of accounts payable                                 |   | 6,973      |   |   | 55,000     |  
|Interest income                                                        |   | 4,064      |   |   | -          |  
|Impairment of equipment                                                |   | -          |   |   | (1,215     | )
|                                                                       |   | 30,715     |   |   | 119,673    |  
|                                                                       |   |            |   |   |            |  
|Loss before income taxes                                               |   | (1,790,551 | ) |   | (977,913   | )
|                                                                       |   |            |   |   |            |  
|Income tax recovery(Note 15)                                           |   | -          |   |   | 3,580      |  
|                                                                       |   |            |   |   |            |  
|Net loss                                                               |   | (1,790,551 | ) |   | (974,333   | )
|                                                                       |   |            |   |   |            |  
|Cumulative translation adjustment                                      |   | (42,327    | ) |   | (53        | )
|                                                                       |   |            |   |   |            |  
|Comprehensive
      loss                                               | $ | (1,832,878 | ) | $ | (974,386   | )
|                                                                       |   |            |   |   |            |  
|Basic and
      diluted net loss per share                             | $ | (0.14      | ) | $ | (0.10      | )
|                                                                       |   |            |   |   |            |  
|Weighted
      average number of shares outstanding, basic and diluted |   | 12,709,349 |   |   | 10,013,208 |  

The accompanying notes are an integral part of these consolidated financial
    statements. F-4


---

|                                                                                                |   |            |   |   |            |  
|----------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                                                                |   | 2003       |   |   | 2002       |  
|                                                                                                |   |            |   |   |            |  
|                                                                                                |   |            |   |   |            |  
|CASH FROM OPERATING ACTIVITIES                                                                  |   |            |   |   |            |  
|Net loss for the year                                                                           | $ | (1,790,551 | ) | $ | (974,333   | )
|                                                                                                |   |            |   |   |            |  
|Adjustments to reconcile net loss to net cash provided by (used in) operating
      activities: |   |            |   |   |            |  
|Accrued interest on due to related parties                                                      |   | 10,068     |   |   | 4,030      |  
|Accrued management fees due to a related party                                                  |   | 199,000    |   |   | 134,000    |  
|Amortization of customer list                                                                   |   | 133,576    |   |   | 103,892    |  
|Amortization of deferred bonus                                                                  |   | 56,686     |   |   | 18,895     |  
|Amortization of deferred financing costs                                                        |   | 39,696     |   |   | -          |  
|Cancellation of contingent liability                                                            |   | -          |   |   | (63,530    | )
|Depreciation                                                                                    |   | 22,423     |   |   | 21,628     |  
|Financing fees paid to a related party                                                          |   | 50,000     |   |   | -          |  
|Foreign exchange gain                                                                           |   | -          |   |   | (2,358     | )
|Gain on settlement of accounts payable                                                          |   | (6,973     | ) |   | (55,000    | )
|Gain on sale of equipment                                                                       |   | (15,638    | ) |   | -          |  
|Impairment of customer list                                                                     |   | 296,834    |   |   | -          |  
|Shares issued for consulting services                                                           |   | -          |   |   | 4,200      |  
|Shares issued for financing fees                                                                |   | -          |   |   | 42,200     |  
|Impairment of equipment                                                                         |   | -          |   |   | 1,215      |  
|                                                                                                |   |            |   |   |            |  
|Changes in assets and liabilities:                                                              |   |            |   |   |            |  
|Increase in accounts receivable                                                                 |   | (514,279   | ) |   | (96,169    | )
|(Increase) decrease in income taxes recoverable                                                 |   | 21,868     |   |   | (22,677    | )
|Decrease in inventory                                                                           |   | 1,106,791  |   |   | 38,580     |  
|Decrease in prepaid expenses                                                                    |   | (43,405    | ) |   | (169       | )
|Decrease in other current assets                                                                |   | 8,747      |   |   | -          |  
|Increase (decrease) in accounts payable and accrued liabilities                                 |   | 707,767    |   |   | (194,333   | )
|Increase in advances payable                                                                    |   | 109,504    |   |   | -          |  
|                                                                                                |   |            |   |   |            |  
|Net cash provided by (used in) operating activities                                             |   | 392,114    |   |   | (1,039,929 | )
|                                                                                                |   |            |   |   |            |  
|CASH FROM INVESTING ACTIVITIES                                                                  |   |            |   |   |            |  
|Cash acquired on purchase of subsidiaries                                                       |   | 49         |   |   | 276,687    |  
|Purchase of subsidiary                                                                          |   | -          |   |   | (115,000   | )
|Proceeds on sale of equipment                                                                   |   | 50,085     |   |   | -          |  
|Purchase of equipment                                                                           |   | (84,524    | ) |   | (31,603    | )
|                                                                                                |   |            |   |   |            |  
|Net cash provided by (used in) investing activities                                             |   | (34,390    | ) |   | 130,084    |  
|                                                                                                |   |            |   |   |            |  
|CASH FROM FINANCING ACTIVITIES                                                                  |   |            |   |   |            |  
|Issuance of common shares, less share issuance costs                                            |   | 88,600     |   |   | 1,294,725  |  
|Increase (decrease) in due to related parties                                                   |   | 386,633    |   |   | (251,625   | )
|Payments to financial arrangements                                                              |   | (148,420   | ) |   | -          |  
|Proceeds received from financial arrangements                                                   |   | 166,971    |   |   | -          |  
|Repayments of guarantees used to acquire inventory                                              |   | (753,602   | ) |   | -          |  
|Preferred shares to be issued                                                                   |   | 300,000    |   |   | -          |  
|                                                                                                |   |            |   |   |            |  
|Net cash provided by (used in) financing activities                                             |   | 40,182     |   |   | 1,043,100  |  

- continued -

The accompanying notes are an integral part of these consolidated
  financial statements.

F-5

---

|                                                                  |   |         |   |   |         | 
|----------------------------------------------------------------- | - | ------- | - | - | ------- | 
|                                                                  |   | 2003    |   |   | 2002    | 
|                                                                  |   |         |   |   |         | 
|Continued                                                         |   |         |   |   |         | 
|                                                                  |   |         |   |   |         | 
|Effect of foreign exchange on cash and cash equivalents           |   | (9,534  | ) |   | -       | 
|                                                                  |   |         |   |   |         | 
|Change in cash and cash equivalents during the year               |   | 388,372 |   |   | 133,255 | 
|                                                                  |   |         |   |   |         | 
|Cash and cash equivalents, beginning of year                      |   | 134,524 |   |   | 1,269   | 
|                                                                  |   |         |   |   |         | 
|Cash and
      cash equivalents, end of year                      | $ | 522,896 |   | $ | 134,524 | 
|                                                                  |   |         |   |   |         | 
|Cash and cash equivalents, end of year consists of the following: |   |         |   |   |         | 
|Cash held at banks                                                |   | 448,404 |   |   | 134,524 | 
|Bank overdraft                                                    |   | 74,492  |   |   | -       | 
|                                                                  | $ | 522,896 |   | $ | 134,524 | 
|                                                                  |   |         |   |   |         | 
|Cash paid for:                                                    |   |         |   |   |         | 
|Interest                                                          | $ | 11,395  |   | $ | 7,808   | 
|Income
      taxes                                                |   | -       |   |   | 61,964  | 
|                                                                  |   |         |   |   |         | 
|Supplemental disclosure with respect to cash flows(Note 16)       |   |         |   |   |         | 

The accompanying notes are an integral part of these consolidated
  financial statements.

F-6

---

|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|----------------------------------------------------------------------------------- | ------------ |  | - | ---------- |  | - | ---------- | - | - | ----------- | - | - | ---------- | - | - | ---------- | -
|                                                                                    | Common Stock |  |   | Additional |  |   | Cumulative |   |   |             |   |   |            |  
|                                                                                    |              |  |   |            |  |   | Paid-in    |   |   | Translation |   |   |            |   |   |            |  
|                                                                                    | Shares       |  |   | Amounts    |  |   | Capital    |   |   | Adjustment  |   |   | Deficit    |   |   | Total      |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Balance, June 30, 2001                                                              | 7,931,000    |  | $ | 7,931      |  | $ | 561,827    |   | $ | -           |   | $ | (857,014   | ) | $ | (287,256   | )
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Shares issued for cash                                                              | 3,042,000    |  |   | 3,042      |  |   | 1,517,958  |   |   | -           |   |   | -          |   |   | 1,521,000  |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Share issuance costs paid in cash                                                   | -            |  |   | -          |  |   | (226,275   | ) |   | -           |   |   | -          |   |   | (226,275   | )
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Shares issued on acquisition of Icoworks Services Ltd.                              | 1,200,000    |  |   | 1,200      |  |   | 106,302    |   |   | -           |   |   | -          |   |   | 107,502    |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Shares issued for consulting fees                                                   | 8,400        |  |   | 8          |  |   | 4,192      |   |   | -           |   |   | -          |   |   | 4,200      |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Shares issued for financing fees                                                    | 84,400       |  |   | 85         |  |   | 42,115     |   |   | -           |   |   | -          |   |   | 42,200     |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Shares issued on acquisition of DM International Appraisals & Consulting
      Ltd. | 150,000      |  |   | 150        |  |   | 74,850     |   |   | -           |   |   | -          |   |   | 75,000     |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Cumulative translation adjustment                                                   | -            |  |   | -          |  |   | -          |   |   | (53         | ) |   | -          |   |   | (53        | )
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Net loss                                                                            | -            |  |   | -          |  |   | -          |   |   | -           |   |   | (974,333   | ) |   | (974,333   | )
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Balance, June 30, 2002                                                              | 12,415,800   |  |   | 12,416     |  |   | 2,080,969  |   |   | (53         | ) |   | (1,831,347 | ) |   | 261,985    |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Shares issued for cash                                                              | 177,200      |  |   | 177        |  |   | 88,423     |   |   | -           |   |   | -          |   |   | 88,600     |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Share issuance costs paid in shares                                                 | 121,920      |  |   | 122        |  |   | (122       | ) |   | -           |   |   | -          |   |   | -          |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Shares issued on recapitalization of the Company                                    | 171,478      |  |   | 171        |  |   | (86,620    | ) |   | -           |   |   | -          |   |   | (86,449    | )
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Deferred financing charges                                                          | -            |  |   | -          |  |   | 306,000    |   |   | -           |   |   | -          |   |   | 306,000    |  
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Cumulative translation adjustment                                                   | -            |  |   | -          |  |   | -          |   |   | (42,274     | ) |   | -          |   |   | (42,274    | )
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Net loss                                                                            | -            |  |   | -          |  |   | -          |   |   | -           |   |   | (1,790,551 | ) |   | (1,790,551 | )
|                                                                                    |              |  |   |            |  |   |            |   |   |             |   |   |            |   |   |            |  
|Balance, June 30, 2003                                                              | 12,886,398   |  | $ | 12,886     |  | $ | 2,388,650  |   | $ | (42,327     | ) | $ | (3,621,898 | ) | $ | (1,262,689 | )

The accompanying notes are an integral part of these consolidated
  financial statements.

F-7

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|1. | HISTORY OF THE COMPANY
        Icoworks, Inc. (formerly Paragon Polaris Strategies.com Inc.) (the
          Company) was incorporated in the State of Nevada on May
          27, 1999. On July 1, 1999, the Company acquired limited rights to distribute
          and produce an oxygen enriched water product for fish farming, aquaculture,
          mariculture, poultry raising and for treating animal waste from dairies,
          feedlots of all kinds and for other similar uses. The rights to use
          this technology were subsequently withdrawn by agreement with the owner.
          On January 3, 2000, the Company acquired a three-year license to market
          and sell vitamins, minerals, nutritional supplements from Vitamineralherb.com
          Inc. This business was abandoned by the Company in fiscal 2002.
        On February 20, 2003, the Company acquired 56% of the issued and outstanding
          common stock of Icoworks Holdings, Inc. (Icoworks Holdings)
          consisting of 3,593,199 shares from several non-U.S. stockholders. As
          consideration, the Company issued 7,186,398 common shares to the former
          non-U.S. stockholders of Icoworks Holdings and control of the combined
          companies passed to the former non-U.S. stockholders of Icoworks Holdings.
          The Company accounted for this acquisition as a business combination
          (Note 4).
        The consolidated statements of operations, stockholders' equity (deficiency
          in assets) and cash flows of the Company prior to February 20, 2003
          are those of Icoworks Holdings. The Companys consolidated date
          of incorporation is considered to be February 27, 1998, the date of
          inception of Icoworks Holdings. Following the acquisition, the Company
          changed its name from Paragon Polaris Strategies.com Inc. to Icoworks,
          Inc.
        Icoworks Holdings is a Nevada corporation whose principal business
          activity consists of the conduct of customized auctions for corporate
          assets such as wholesale and retail inventories, used industrial equipment
          and other related goods. During the year ended June 30, 2002 and prior
          to the acquisition of the Company, Icoworks Holdings purchased all the
          issued and outstanding capital stock of two companies, Icoworks Services
          Ltd. and DM International Appraisals & Consulting Ltd. (Note 5).
          Icoworks Holdings also has two other subsidiaries, being Icoworks Eastern
          Ltd. and Icoworks Joint Venture Ltd. Icoworks Joint Venture Ltd. is
          a bare trustee corporation with no assets or liabilities which was formed
          for the sole purpose of holding assets on behalf of a number of participants.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2. | GOING CONCERN
        These consolidated financial statements have been prepared in accordance
          with generally accepted accounting principles in the United States of
          America with the assumption that the Company will be able to realize
          its assets and discharge its liabilities in the normal course of business
          rather than through a forced process of liquidation. However, certain
          conditions noted below currently exist which raise substantial doubt
          about the Company's ability to continue as a going concern. These consolidated
          financial statements do not include any adjustments to the amounts and
          classifications of assets and liabilities that might be necessary should
          the Company be unable to continue as a going concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-8

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**2.** | GOING CONCERN(contd)
        The operations of the Company have primarily been funded by the issuance
          of common stock and from advances from related parties, shareholders
          and others. Continued operations of the Company are dependent on the
          Company's ability to complete additional equity financings, obtain continued
          support from related parties or generate profitable operations in the
          future. Management's plan in this regard is to secure additional funds
          through future equity financings. Such financings may not be available
          or may not be available on reasonable terms.
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |            |   |   |            |  
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 2003       |   |   | 2002       |  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |            |   |   |            |  
|       | Net loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $ | (1,790,551 | ) | $ | (974,333   | )
|       | Accumulated deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (3,621,898 | ) |   | (1,831,347 | )
|       | Working
      capital (deficiency)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (1,562,863 | ) |   | (239,165   | )
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|**3.** | SIGNIFICANT ACCOUNTING POLICIES
        The significant accounting policies adopted by the Company are as
          follows:
        Principles of consolidation
        These consolidated financial statements include the accounts of the
          Company and its wholly-owned and majority-owned subsidiaries. All significant
          intercompany balances and transactions have been eliminated upon consolidation.
        Use of estimates
        The preparation of financial statements in accordance with generally
          accepted accounting principles in the United States of America 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 financial statements and the reported
          amount of revenues and expenses during the reporting period. Actual
          results could differ from those estimates.
        Foreign currency translation
        The Company has determined that the functional currency of certain
          of its wholly-owned and majority-owned subsidiaries is the local currency,
          the Canadian dollar. Assets and liabilities denominated in foreign currency
          are translated into U.S. dollars at the period-end exchange rates. Revenue
          and expenses are translated at the rates of exchange prevailing on the
          dates such items are recognized in earnings. Related exchange gains
          and losses are included in a separate component of shareholders' equity
          under other comprehensive loss. Exchange gains and losses resulting
          from foreign currency transactions are included in income for the period.

F-9

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**3.** | SIGNIFICANT ACCOUNTING POLICIES(contd)
        Accounts receivable
        Accounts receivable are presented net of an allowance for doubtful
          accounts. The allowance reflects the best estimate of probable losses
          inherent in the accounts receivable balance and is determined on an
          individual basis.
        Inventory
        Inventory is stated at the lower of cost or market. Market is defined
          as net realizable value. Cost is generally determined on the first-in,
          first-out basis.
        Equipment
        Equipment is recorded at cost less accumulated depreciation. Depreciation
          is recorded on a declining balance basis at the following annual rates:
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Auction equipment                                                                                                                                                                                                                                                                                                     | 20%        | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------- | 
| | Automotive equipment                                                                                                                                                                                                                                                                                                  | 30%        | 
| | Computer equipment                                                                                                                                                                                                                                                                                                    | 30%        | 
| | Computer software                                                                                                                                                                                                                                                                                                     | 50%        | 
| | Leasehold improvements                                                                                                                                                                                                                                                                                                | Lease term | 
| | Office equipment                                                                                                                                                                                                                                                                                                      | 20%        | 
| | Sign                                                                                                                                                                                                                                                                                                                  | 20%        | 
| | Tools and equipment                                                                                                                                                                                                                                                                                                   | 20%        | 
| |                                                                                                                                                                                                                                                                                                                      
| | Intangible assets
      Intangible assets are recorded at cost and were amortized
        using the straight-line method over their estimated useful lives until
        March 2003. As at June 30, 2002, the intangible asset consists of a customer
        list with an estimated useful life of 3 years (Note 5).

F-10

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**3.** | SIGNIFICANT ACCOUNTING POLICIES(contd)
      Intangible assets(contd)
      The carrying value of intangible assets is re-evaluated
        for potential permanent impairment on a periodic basis at the reporting
        unit level. In order to determine whether permanent impairment exists,
        management considers the Companys and its subsidiaries financial
        condition as well as expected pre-tax earnings, discounted cash flows
        or market related values. If the carrying value of intangible assets of
        a reporting unit exceeds the fair value of the reporting unit, the carrying
        value of intangible assets must be written down to fair value in the year
        the impairment is recognized. At June 30, 2003, it was determined that
        the value of the customer list was impaired and consequently, the customer
        list was written-off to operations.
      Revenue recognition
      Revenues mainly consist of auction revenues and held-for-sale
        revenues. Auction revenues are comprised of buyers premiums, being premiums
        over and above the purchase prices of items sold, and commissions paid
        by consignors of items for auction. Held-for-sale revenues are comprised
        of revenues from items purchased and held-for-sale and or liquidation.
        Revenue is recognized once the auction or sales are completed and collection
        is reasonably assured. Other commissions are earned when the Company provides
        guarantees on the gross proceeds to be received from sale to the consignor.
      The Company conducts these sales where it, or in joint
        venture with others, temporarily acquires title to the goods. When these
        activities are conducted, the profits are divided between the Company
        and the joint venture partners on a negotiated basis. If the actual proceeds
        are less than cost, or less than the guaranteed price, the Company may
        be required to fund the shortfall (Note 10).
      Revenue is also earned from fees charged for appraisals
        and is recognized when the work is completed and collection is reasonably
        assured.
      Advertising
      Advertising costs are expensed as incurred. Advertising
        expense for the year ended June 30, 2003, was $287,069 (2002  $185,206).
      Income taxes
      The Company follows the liability method of accounting
        for income taxes in accordance with Statements of Financial Accounting
        Standards No. 109. Under this method, future income taxes are recognized
        for the future income tax consequences attributable to differences between
        the financial statement carrying values and their respective income tax
        bases (temporary differences). Future income tax assets and liabilities
        are measured using enacted income tax rates expected to apply to taxable
        income in the years in which temporary differences are expected to be
        recovered or settled. The effect on future income tax assets and liabilities
        of a change in tax rates is included in income in the period in which
        the change occurs. The amount of future income tax assets recognized is
        limited to the amount that is more likely than not to be realized.
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-11

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**3.** | SIGNFICANT ACCOUNTING POLICIES(contd)
        Net loss per share
        Basic net loss per share is computed by dividing the net loss for
          the period attributable to common stockholders by the weighted average
          number of shares of common stock outstanding during the period. Diluted
          net loss per share takes into consideration shares of common stock outstanding
          (computed under basic loss per share) and potentially dilutive shares
          of common stock. Diluted net loss per share is not presented separately
          from loss per share as the conversion of outstanding stock options and
          warrants into common shares would be anti-dilutive. At June 30, 2003,
          the total number of potentially dilutive shares excluded from net loss
          per share was 1,871,000 (2002  1,521,000).
        Stock-based compensation
        Statements of Financial Accounting Standards No. 123, Accounting
          for Stock-Based Compensation (SFAS 123) encourages,
          but does not require, companies to record compensation cost for stock-based
          employee compensation plans at fair value. The Company has chosen to
          account for stock-based compensation using Accounting Principles Board
          Opinion No. 25, Accounting for Stock Issued to Employees
          (APB 25). Accordingly, compensation cost for stock options
          is measured as the excess, if any, of the quoted market price of the
          Company's stock at the date of the grant over the amount an employee
          is required to pay for the stock. The Company accounts for stock-based
          compensation issued to non-employees in accordance with the provisions
          of SFAS 123 and the consensus in Emerging Issues Task Force No. 96-18,
          Accounting for Equity Instruments that are Issued to Other Than
          Employees for Acquiring or in Conjunction with Selling, Goods or Services.
        The following table illustrates the effect on net loss and net loss
          per share if the Company had applied the fair value recognition provisions
          of SFAS 123 to stock-based employee compensation.
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                        |   |            |   |   |          |  
| | ---------------------------------------------------------------------- | - | ---------- | - | - | -------- | -
| |                                                                        |   | 2003       |   |   | 2002     |  
| |                                                                        |   |            |   |   |          |  
| | Net loss, as reported                                                  | $ | (1,790,551 | ) | $ | (974,333 | )
| |                                                                        |   |            |   |   |          |  
| | Add: Total stock-based employee compensation expense
      included in |   |            |   |   |          |  
| | loss, as reported determined under APB 25, net of related tax effects  |   | -          |   |   | -        |  
| |                                                                        |   |            |   |   |          |  
| | Deduct: Total stock-based employee compensation expense                |   |            |   |   |          |  
| | determined under fair value based method for all awards,
      net of  |   |            |   |   |          |  
| | related tax effects                                                    |   | (22,535    | ) |   | -        |  
| |                                                                        |   |            |   |   |          |  
| | Pro-forma net
      loss                                               | $ | (1,813,086 | ) | $ | (974,333 | )
| |                                                                        |   |            |   |   |          |  
| | Basic and diluted
      net loss per share, as reported                | $ | (0.14      | ) | $ | (0.10    | )
| |                                                                        |   |            |   |   |          |  
| | Basic and diluted
      net loss per share, pro-forma                  | $ | (0.14      | ) | $ | (0.10    | )

F-12

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | SIGNFICANT ACCOUNTING POLICIES(contd)
        Recent accounting pronouncements
        In June 2001, the Financial Accounting Standards Board (FASB)
          approved the issuance of Statements of Financial Accounting Standards
          No. 142, Goodwill and Other Intangible Assets (SFAS
          142). SFAS 142 requires that goodwill no longer be amortized to
          earnings, but instead be reviewed for impairment. The statement is effective
          for fiscal years beginning after December 15, 2001, and is required
          to be applied at the beginning of an entity's fiscal year and to be
          applied to all goodwill and other intangible assets recognized in its
          financial statements at that date. Impairment losses for goodwill and
          indefinite-lived intangible assets that arise due to the initial application
          of this statement (resulting from a transitional impairment test) are
          to be reported as resulting from a change in accounting principle. Under
          an exception to the date at which this statement becomes effective,
          goodwill and intangible assets acquired after June 30, 2001, will be
          subject immediately to the non-amortization and amortization provisions
          of this statement.
        In June 2001, FASB issued Statements of Financial Accounting Standards
          No. 143, Accounting for Asset Retirement Obligations (SFAS
          143) that records the fair value of the liability for closure
          and removal costs associated with the legal obligations upon retirement
          or removal of any tangible long-lived assets. The initial recognition
          of the liability will be capitalized as part of the asset cost and depreciated
          over its estimated useful life. SFAS 143 is required to be adopted effective
          January 1, 2003.
        In August 2001, FASB issued Statements of Financial Accounting Standards
          No. 144, Accounting for the Impairment on Disposal of Long-lived
          Assets (SFAS 144), which supersedes Statements of
          Financial Accounting Standards No. 121, Accounting for the Impairment
          of Long-lived Assets and for Long-lived Assets to be Disposed of.
          SFAS 144 requires that long-lived assets that are to be disposed of
          by sale be measured at the lower of book value or fair value less cost
          to sell. Additionally, SFAS 144 expands the scope of discontinued operations
          to include all components of an entity with operations that (1) can
          be distinguished from the rest of the entity and (2) will be eliminated
          from the ongoing operations of the entity in a disposal transaction.
          SFAS 144 is effective for fiscal years beginning after December 15,
          2001, and, generally, its provisions are to be applied prospectively.
        In April 2002, FASB issued Statements of Financial Accounting Standards
          No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment
          of FASB Statement No. 13, and Technical Corrections (SFAS
          145). SFAS 145 eliminates the requirement that gains and losses
          from the extinguishment of debt be aggregated and, if material, classified
          as an extraordinary item, net of the related income tax effect and eliminates
          an inconsistency between the accounting for sale-leaseback transactions
          and certain lease modifications that have economic effects that are
          similar to sale-leaseback transactions. Generally, SFAS 145 is effective
          for transactions occurring after May 15, 2002.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-13

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**3.** | SIGNFICANT ACCOUNTING POLICIES(contd)
        Recent accounting pronouncements(contd)
        In June 2002, FASB issued Statements of Financial Accounting Standards
          No. 146, Accounting for Costs Associated with Exit or Disposal
          Activities (SFAS 146) that nullifies Emerging Issues
          Task Force No. 94-3, Liability Recognition for Certain Employee
          Termination Benefits and Other Costs to Exit an Activity (Including
          Certain Costs Incurred in a Restructuring) (EITF 94-3).
          SFAS 146 requires that a liability for a cost associated with an exit
          or disposal activity be recognized when the liability is incurred, whereby
          EITF 94-3 had recognized the liability at the commitment date to an
          exit plan. The provisions of this statement are effective for exit or
          disposal activities that are initiated after December 31, 2002 with
          earlier application encouraged.
        In October 2002, FASB issued Statements of Financial Accounting Standards
          No. 147, Accounting of Certain Financial Institutions  an
          amendment of FASB Statements No. 72 and 44 and FASB Interpretation No.
          9 (SFAS 147). SFAS 147 requires the application of
          the purchase method of accounting to all acquisitions of financial institutions,
          except transactions between two or more mutual enterprises. SFAS 147
          is effective for acquisitions for which the date of acquisition is on
          or after October 1, 2002.
        In December 2002, FASB issued Statements of Financial Accounting Standards
          No. 148, Accounting for Stock-Based Compensation  Transition
          and Disclosure  an amendment of FASB Statement No. 123 (SFAS
          148). SFAS 148 amends FASB Statement No. 123 to provide alternative
          methods of transition for a voluntary change to the fair value based
          method of accounting for stock-based employee compensation. In addition,
          SFAS 148 amends the disclosure requirements of FASB Statement No. 123
          to require prominent disclosures in both annual and interim financial
          statements about the method of accounting for stock-based employee compensation
          and the effect of the method used on reported results. SFAS 148 is effective
          for fiscal years ending after December 31, 2002.
        In April 2003, FASB issued Statements of Financial Accounting Standards
          No. 149 Amendment of Statement 133 on Derivative Instruments and
          Hedging Activities (SFAS 149). SFAS 149 amends and
          clarifies financial accounting and reporting for derivative instruments,
          including certain derivative instruments embedded in other contracts
          and for hedging activities under FASB Statement No. 133 Accounting
          for Derivative Instruments and Hedging Activities. SFAS 149 is
          generally effective for contracts entered into or modified after June
          30, 2003.
        In May 2003, FASB issued Statements of Financial Accounting Standards
          No. 150 Accounting for Certain Financial Instruments with Characteristics
          of both Liabilities and Equity (SFAS 150). SFAS 150
          establishes standards for how an issuer classifies and measures certain
          financial instruments with characteristics of both liabilities and equity.
          SFAS 150 is effective for financial instruments entered into or modified
          after May 31, 2003.
        Unless disclosed elsewhere in these consolidated financial statements,
          the adoption of these new pronouncements is not expected to have a material
          effect on the Company's consolidated financial position or results of
          operations.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-14

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | SIGNFICANT ACCOUNTING POLICIES(contd)
      Comparative figures(contd)
      Certain comparative figures have been reclassified to conform to the
        presentation adopted in the current year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | BUSINESS COMBINATION WITH ICOWORKS HOLDINGS
        On November 20, 2002, the Company entered into an agreement to merge
          with Icoworks Holdings. On February 20, 2003, the Company acquired a
          56% interest in Icoworks Holdings through the private acquisition of
          3,593,199 shares of Icoworks Holdings from several non-U.S. stockholders
          and, accordingly, the Company is considered to be the legal acquirer.
          As consideration, the Company issued 7,186,398 common shares to the
          former non-U.S. stockholders of Icoworks Holdings and control of the
          combined companies passed to the former non-U.S. stockholders of Icoworks
          Holdings and therefore, Icoworks Holdings is considered the accounting
          acquirer. Consequently, the consolidated statements of operations, stockholders'
          equity (deficiency in assets) and cash flows include Icoworks Holdings
          results of operations, deficit and cash flows from February 27, 1998
          (date of inception) and the Company's results of operations and cash
          flows from February 20, 2003. The issued number of shares of common
          stock is that of the Company. The acquisition was accounted for as a
          business combination. The Company plans to complete the merger with
          Icoworks Holdings as contemplated by the merger agreement. As the merger
          was not consummated by May 1, 2003, the terms of the original merger
          agreement expired. The Company intends to enter into a new merger agreement
          to complete the acquisition of the minority interest of Icoworks Holdings.
        Under the terms of the merger agreement, the Company agreed to issue
          shares of its common stock to the shareholders of Icoworks Holdings
          on a two-for-one basis. The Company anticipates issuing an aggregate
          of 12,886,398 shares in order to complete the acquisition of all of
          the outstanding shares of Icoworks Holdings, inclusive of the 7,186,398
          shares already issued by the Company. In addition, the Company will
          issue options and warrants to the current option holders and warrant
          holders of Icoworks Holdings on a two-for-one basis if the new merger
          agreement is signed.
        At the date of acquisition, the fair market value of the net assets
          of the Company was as follows:

| | Cash and cash equivalents                | $ | 49      |  
| | ---------------------------------------- | - | ------- | -
| | Accounts receivable                      |   | 2,592   |  
| | Prepaid expenses                         |   | 10,868  |  
| | Accounts payable and accrued liabilities |   | (17,066 | )
| | Due to related parties                   |   | (82,892 | )
| |                                          |   |         |  
| | Net liabilities assumed                  | $ | (86,449 | )

F-15

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**5.** | ACQUISITIONS
        Acquisition of Icoworks Services Ltd. (formerly Wigley Auction
          Ltd.)
        On December 1, 2001, Icoworks Holdings acquired all of the issued
          and outstanding common stock of Icoworks Services Ltd. (Icoworks
          Services) for consideration of $679,584, consisting of a cash
          payment of $572,082 and the issuance of 600,000 shares of common stock.
          Icoworks Holdings funded $367,805 while $115,000 was advanced by related
          parties.
        The acquisition of Icoworks Services has been accounted for using
          the purchase method and accordingly, these consolidated financial statements
          include the results of operations and cash flows of Icoworks Services
          from the date of acquisition.
        The total purchase price of $679,584 was allocated as follows:
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $ | 270,958  |  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | -
| | Marketable securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 9,373    |  
| | Accounts receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 7,723    |  
| | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 48,275   |  
| | Prepaid expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 5,292    |  
| | Due from related parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 177,677  |  
| | Property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 55,342   |  
| | Trust assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 1,270    |  
| | Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | (429,358 | )
| | Trust liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | (1,270   | )
| | Customer list                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 534,302  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |          |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $ | 679,584  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The customer list was being amortized using
        the straight-line method over its estimated useful life of three years.
        As at June 30, 2003, the customer list was written off as it was determined
        that the value was permanently impaired due to the changes in the volume
        of operations and the departure of the original owner of Icoworks Services
        combined with the successful start-up of other divisions.
      Acquisition of DM International Appraisals &
        Consulting Ltd.
      On April 1, 2002, Icoworks Holdings acquired all of
        the issued and outstanding common stock of DM International Appraisals
        & Consulting Ltd. (DM) for consideration of $75,000, consisting
        of the issuance of 75,000 shares of common stock.
      The acquisition of DM has been accounted for using the
        purchase method and accordingly, these consolidated financial statements
        include the results of operations and cash flows of DM from the date of
        acquisition.

F-16

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**5.** | ACQUISITIONS(contd)
      Acquisition of DM International Appraisals & Consulting Ltd.(contd)
      The total purchase price of $75,000 was allocated as follows:
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|   | Cash                                                                                                                                                                                                                                                                                                                                                                                                                  | $ | 5,729  |  
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------ | -
|   | Accounts receivable                                                                                                                                                                                                                                                                                                                                                                                                   |   | 1,806  |  
|   | Income taxes recoverable                                                                                                                                                                                                                                                                                                                                                                                              |   | 111    |  
|   | Property and equipment                                                                                                                                                                                                                                                                                                                                                                                                |   | 3,650  |  
|   | Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                              |   | (7,481 | )
|   | Due to related parties                                                                                                                                                                                                                                                                                                                                                                                                |   | (4,396 | )
|   | Deferred bonus                                                                                                                                                                                                                                                                                                                                                                                                        |   | 75,581 |  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                       |   |        |  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                       | $ | 75,000 |  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The deferred bonus relates
        solely to the value of the employment contract Icoworks Holdings entered
        into with the former shareholder and key executive of DM that was part
        of the terms of the acquisition. The deferred bonus was amortized commencing
        April 1, 2002 over a period of one year, being the term of the employment
        contract with the former shareholder of DM.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|6. | INVENTORY                                                                                                                                                                                                                                                                                                                                                                                                            

| |                                                                                                                                  |   |           |  |   |       | 
| | -------------------------------------------------------------------------------------------------------------------------------- | - | --------- |  | - | ----- | 
| |                                                                                                                                  |   | 2003      |  |   | 2002  | 
| |                                                                                                                                  |   |           |  |   |       | 
| | Wood products and associated equipment                                                                                           | $ | 1,615,519 |  | $ | -     | 
| | Books                                                                                                                            |   | 467,618   |  |   | -     | 
| | Miscellaneous and other goods held for
      resale                                                                              |   | 4,444     |  |   | 9,695 | 
| |                                                                                                                                  |   |           |  |   |       | 
| |                                                                                                                                  | $ | 2,087,581 |  | $ | 9,695 | 
| |                                                                                                                                 
| | Subsequent to June 30, 2003, certain associated
      equipment with a book value of $65,000 were destroyed in a fire (Note 21).

F-17

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7.     | EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |         | 
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2003    | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Cost    | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       | Auction equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $ | 16,977  | 
|       | Automotive equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 50,111  | 
|       | Computer equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 32,842  | 
|       | Computer software                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 25,247  | 
|       | Leasehold improvements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 13,104  | 
|       | Office equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 20,977  | 
|       | Sign                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 7,584   | 
|       | Tools and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 15,630  | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $ | 182,472 | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2002    | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Cost    | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       | Auction equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $ | 9,126   | 
|       | Automotive equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 80,638  | 
|       | Computer equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 41,344  | 
|       | Computer software                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 4,602   | 
|       | Office equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 12,985  | 
|       | Sign                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 7,605   | 
|       | Tools and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 17,719  | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $ | 174,019 | 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         | 
|**8.** | DEFERRED FINANCING COSTS
      The Company issued 1,531,029 warrants to an investor
        group that has made available to the Company funds totaling $1,087,030
        (CDN$1,600,000). These warrants are exercisable at $0.71 per warrant and
        expire on March 28, 2005. As the warrants are considered to be a separate
        financial instrument separate from the debt, the Company has reflected
        $266,304 in the consolidated balance sheets, being the fair value calculated
        using the Black-Scholes option-pricing model of $306,000, less accumulated
        amortization of $39,696.

F-18

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**8.** | DEFERRED FINANCING COSTS(contd)
      The Company used the Black-Scholes option pricing model to compute estimated
        fair value, based on the following assumptions:
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                 |               | 
| | ----------------------------------------------- | ------------- | 
| | Risk free interest rate                         | 4.0%          | 
| | Dividend yield rate                             | 0.0%          | 
| | Volatility                                      | 45%           | 
| | Weighted average
      expected life of options | 2
      years | 

|    | Subsequent to June 30, 2003, the terms of the agreements
      under which these warrants were issued were agreed to be amended (Note 21).                                                                                                                                                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                             
|9.  | ADVANCES PAYABLE
        Advances payable consist of working capital loans that have been advanced
          from time-to-time from third parties. These working capital loans are
          unsecured, non-interest bearing and have no fixed terms of repayment
          other than these working capital loans are expected to be repaid as
          cash is available.
|    |                                                                                                                                                                                                                                                                                                                                                                             
|10. | FINANCIAL ARRANGEMENTS AND GUARANTEES USED TO ACQUIRE
      INVENTORY                                                                                                                                                                                                                                                                                                       

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           |  |   |      | 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------- |  | - | ---- | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2003      |  |   | 2002 | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           |  |   |      | 
| | Financial arrangements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $ | 1,243,017 |  | $ | -    | 
| | Guarantees used to acquire inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 1,206,609 |  |   | -    | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           |  |   |      | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $ | 2,449,626 |  | $ | -    | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | a)Financial arrangements
      The Company has entered into an arrangement in which
        it has guaranteed profits to participants who provide funds to the Company
        that are to be used to guarantee minimum return to clients who wish to
        sell assets or to acquire assets outright to be held for resale. These
        participants will share in the profits from these transactions on the
        basis of 65% of the profits to the Company and 35% to the participants.
        The Company has in turn guaranteed to those participants a minimum return
        of 15% per annum on the funds advanced. Further, the Company issued warrants
        to those participants to purchase shares of restricted common stock (Note
        8) up to the value of their participation. Management believes that the
        arrangement will yield the participants sufficient return so that the
        guarantee will not result in any additional expense to the Company.

F-19

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | FINANCIAL ARRANGEMENTS AND GUARANTEES USED TO ACQUIRE INVENTORY
          (contd)
        The Company would be liable for a minimum of $343,077 (CDN$465,000)
          on guaranteed payments in each of the 12-month periods ended June 30,
          2004 and 2005 based on $2,287,180 (CDN$3,100,000) being made available
          by the participants as at June 30, 2003.
        b) Guarantees used to acquire inventory
        Guarantees arise when the Company provides a consignor with assurance
          as to the amount they will receive for consigned goods from the net
          auction proceeds. This amount is recorded as a liability and a corresponding
          amount is recorded as inventory held for resale. Similarly, when funds
          are advanced from the participants, a liability is recorded in the amount
          of the funds advanced and a corresponding entry is made to increase
          the inventory value of goods held for sale.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|11. | DUE TO RELATED PARTIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |                                                                                  |   |           |  |   |         | 
| | -------------------------------------------------------------------------------- | - | --------- |  | - | ------- | 
| |                                                                                  |   | 2003      |  |   | 2002    | 
| |                                                                                  |   |           |  |   |         | 
| | Advances due to directors, unsecured, non-interest bearing,
      no fixed terms |   |           |  |   |         | 
| | of repayment.                                                                    | $ | 195,274   |  | $ | 2,719   | 
| |                                                                                  |   |           |  |   |         | 
| | Management fees due to a company related by common ownership and a               |   |           |  |   |         | 
| | common director, unsecured, non-interest
      bearing, no fixed terms of        |   |           |  |   |         | 
| | repayment.                                                                       |   | 362,086   |  |   | 163,086 | 
| |                                                                                  |   |           |  |   |         | 
| | Advances due to a company controlled by common management,                       |   |           |  |   |         | 
| | unsecured, non-interest bearing, no
      fixed terms of repayment               |   | 111,377   |  |   | 7,246   | 
| |                                                                                  |   |           |  |   |         | 
| | Payment due to the former shareholders of Icoworks Services,
      unsecured,    |   |           |  |   |         | 
| | non-interest bearing, no fixed terms of repayment.                               |   | 132,404   |  |   | 89,815  | 
| |                                                                                  |   |           |  |   |         | 
| | Due to shareholders                                                              |   | 173,498   |  |   | -       | 
| |                                                                                  |   |           |  |   |         | 
| | Advances due to a company related by common ownership and a common               |   |           |  |   |         | 
| | director, unsecured, bearing interest
      at prime plus 1%, due on demand.     |   | 75,813    |  |   | -       | 
| |                                                                                  |   |           |  |   |         | 
| |                                                                                  | $ | 1,050,452 |  | $ | 262,246 | 

F-20

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12. | PREFERRED SHARES TO BE
        ISSUED
      During the year ended June 30, 2003, the Company entered
        into an agreement to issue 30,000 Series A preferred shares as part of
        an offering of 300,000 shares. Each Series A preferred share has a face
        value of $10.00 per share, and;                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Series A preferred shares result in a quarterly obligation to pay
          dividends of $7,500 ($30,000 annually). If converted, the Series A preferred
          shares that are to be issued would result in the issue of 40,000 shares
          of common stock.
        The obligation to issue these shares is shown as a liability on the
          consolidated balance sheet at June 30, 2003.                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|13  | COMMON STOCK
        During the year ended June 30, 2002, the Company issued 3,042,000
          units for gross proceeds of $1,521,000 and incurred share issuance costs
          of $226,475 paid in cash. Each unit consists of one share of common
          stock and one-half non-transferable share purchase warrant. Each full
          share purchase warrant entitles the holder to purchase one additional
          common share on the earlier of 36 months from the date of issuance or
          January 8, 2005 at an exercise price of $1.50 per share.
        On December 1, 2001, the Company issued 1,200,000 shares of common
          stock as part of the consideration paid to acquire Icoworks Services
          (Note 5).

F-21

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**13.** | COMMON STOCK(contd)
        On January 1, 2002, the Company issued 8,400 shares of common stock
          at a fair value of $1.00 per share for consulting services. The Company
          also issued 84,400 shares of common stock at a fair value of $1.00 per
          share to a company related by common ownership and a common director
          as a financing fee for advances received.
        On April 1, 2002, the Company issued 150,000 shares of common stock
          at a fair value of $1.00 per share to acquire DM (Note 5).
        During the year ended June 30, 2003, the Company issued 177,200 units
          for proceeds of $88,600 in private placements. Each unit consists of
          one share of common stock and one- half non-transferable share purchase
          warrant. Each full share purchase warrant entitles the holder to purchase
          one additional common share on the earlier of 36 months from the date
          of issuance or January 8, 2005 at an exercise price of $1.50 per share.
          The Company also issued 121,920 of the 301,700 shares of common stock
          to be issued to various brokers as compensation for arranging private
          placements during the year ended June 30, 2002.
        On February 20, 2003, the Company issued 7,186,398 shares of common
          stock to acquire a 56% interest in Icoworks Holdings (Note 4).
        During the year ended June 30, 2003, the Company increased the authorized
          number of shares of common stock to 100,000,000 shares and created a
          class of 10,000,000 shares of preferred stock.
        Warrants
        At June 30, 2003, Icoworks Holdings had warrants that were outstanding
          enabling holders to acquire the following shares of common stock:
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                                                                                                             |                        |  |                      |                      
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- |  | -------------------- | ---------------------
| |                                                                                                                                                                             | Number
      of Shares |  | Exercise
      Price | Expiry
      Date    
| |                                                                                                                                                                             |                        |  |                      |                      
| | Warrants                                                                                                                                                                    | 21,000                 |  | $1.50                | December 27, 2004    
| | Warrants                                                                                                                                                                    | 1,500,000              |  | $1.50                | January
      8, 2005
| |                                                                                                                                                                             |                        |  |                      |                      
| | Stock options
      At June 30, 2003, Icoworks Holdings had options that
        were outstanding enabling holders to acquire the following shares of common
        stock:

| |         |                        |  |                      |                        
| | ------- | ---------------------- |  | -------------------- | -----------------------
| |         | Number
      of Shares |  | Exercise
      Price | Expiry
      Date      
| |         |                        |  |                      |                        
| | Options | 200,000                |  | $0.75                | November 12, 2007      
| | Options | 150,000                |  | $1.50                | November
      30, 2007

F-22

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**13.** | COMMON STOCK(contd)
        Stock options(contd)
        Generally, the stock options have a life of 5 years and vest equally
          on each anniversary date over a 3 year period.
        At June 30, 2003, no stock options had vested or expired and no stock
          options were exercised or forfeited.
        The Company used the Black-Scholes option pricing model to compute
          estimated fair value, based on the following assumptions:
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                    |                | 
| | ---------------------------------------------------------------------------------- | -------------- | 
| | Risk free interest rate                                                            | 3.17% to 3.65% | 
| | Dividend yield rate                                                                | 0.0%           | 
| | Volatility                                                                         | 45%            | 
| | Weighted average
      expected life of options                                    | 3
      years  | 
| |                                                                                    |                | 
| | The estimated fair value of the options granted during the
      year was $22,535.

|        |                                                                                                                                                                                                                                             |                                                                                                                                                            
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|**14.** | RELATED PARTY TRANSACTIONS
        Unless disclosed elsewhere in these consolidated financial statements,
          the Company entered into the following transactions with related parties
          during the year ended June 30, 2003:
|        |                                                                                                                                                                                                                                             |                                                                                                                                                            
|        | a)                                                                                                                                                                                                                                          | Paid or accrued consulting expenses of $nil (2002
         $42,923) to companies related by common ownership and directors.                               
|        |                                                                                                                                                                                                                                             |                                                                                                                                                            
|        | b)                                                                                                                                                                                                                                          | Paid or accrued financing fees of $nil (2002 
        $92,741) to a company related by common ownership and a common director.                            
|        |                                                                                                                                                                                                                                             |                                                                                                                                                            
|        | c)                                                                                                                                                                                                                                          | Paid or accrued management fees of $204,000 (2002
         $150,000) to a company related by common ownership and a common
        director.              
|        |                                                                                                                                                                                                                                             |                                                                                                                                                            
|        | d)                                                                                                                                                                                                                                          | Paid or accrued management fees of $58,624 (2002  $nil) to shareholders.                                                                                  
|        |                                                                                                                                                                                                                                             |                                                                                                                                                            
|        | e)                                                                                                                                                                                                                                          | Paid or accrued rent of $167,315 (2002  $ 88,081)
        to a company controlled by employees who were previously directors of
        Icoworks Services.
|        |                                                                                                                                                                                                                                             |                                                                                                                                                            
|        | f)                                                                                                                                                                                                                                          | Received revenue of $26,993 (2002  $33,480)
        from a company controlled by employees who were previously directors of
        Icoworks Services.    
|        |                                                                                                                                                                                                                                             |                                                                                                                                                            
|        | These transactions were
        in the normal course of operations and were measured at the exchange value,
        which represented the amount of consideration established and agreed to
        by the related parties.                

F-23

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**15.** | INCOME TAXES
      A reconciliation of income taxes at statutory rates with reported taxes
        is as follows:
|------- | -----------------------------------------------------------------------------------------------------------------

| |                                                                                        |   |            |   |   |          |  
| | -------------------------------------------------------------------------------------- | - | ---------- | - | - | -------- | -
| |                                                                                        |   | 2003       |   |   | 2002     |  
| |                                                                                        |   |            |   |   |          |  
| | Loss
      before income taxes                                                         | $ | (1,790,551 | ) | $ | (977,913 | )
| |                                                                                        |   |            |   |   |          |  
| | Expected income tax recovery                                                           | $ | 608,787    |   | $ | 387,254  |  
| | Non-deductible expenses and other items                                                |   | (15,484    | ) |   | (7,401   | )
| | Unrecognized benefit of operating losses                                               |   | (593,303   | ) |   | (376,273 | )
| |                                                                                        |   |            |   |   |          |  
| | Actual
      income tax recovery                                                       | $ | -          |   | $ | 3,580    |  
| |                                                                                       
| | Significant components of the Company's future
      income tax assets are as follows:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |            |   |   |          |  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | -------- | -
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2003       |   |   | 2002     |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |            |   |   |          |  
| | Future income tax assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |            |   |   |          |  
| | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $ | 4,967      |   | $ | 7,422    |  
| | Operating losses available for future
      periods                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 1,231,140  |   |   | 725,213  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |            |   |   |          |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 1,236,107  |   |   | 732,635  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |            |   |   |          |  
| | Valuation allowance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (1,236,107 | ) |   | (732,635 | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |            |   |   |          |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $ | -          |   | $ | -        |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Company has recorded the future income
        tax benefits of approximately $3,621,000 of operating losses which may
        be applied to reduce taxable income in future years net of a valuation
        allowance of $1,236,107. 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 tax assets will not be realized. The ultimate
        realization of deferred tax assets is dependant upon the generation of
        future taxable income during the periods in which those temporary difference
        become deductible. If not utilized, these operating loss carryforwards
        will expire completely in 2023.

F-24

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16. | SUPPLEMENTAL DISCLOSURES WITH RESPECT TO
        CASH FLOWS
      The significant non-cash transactions during the year ended June 30,
        2003, consisted of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The significant non-cash transactions during
      the year ended June 30, 2002, consisted of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|17. | CONTINGENT LIABILITY
      Icoworks Services was named as a defendant in a statement
        of claim relating to the purchase of certain equipment Icoworks Services
        considered to be in poor condition. Consequently, Icoworks Services accrued
        a liability of $63,530 relating to this claim in a prior years financial
        statements. During the year ended June 30, 2002, the claim was settled
        in favor of Icoworks Services, however the plaintiff appealed the ruling.
        Management believes the appeal has no merit and, as a result, the $63,530
        contingent liability previously recorded was reversed during the year
        ended June 30, 2002.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|18. | COMMITMENTS
      Unless disclosed elsewhere in these consolidated financial
        statements, the Company has the following commitments as at June 30, 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-25

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**18.** | COMMITMENTS(contd)
|------- | --------------------
|        |                     
|        | b)                  
|        |                     
|        | c)                  
|        |                     
|        | d)                  
|        |                     
|        | e)                  
|        |                     
|        | f)                  

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2004 |  | $67,499 | 
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------- | 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2005 |  | $64,842 | 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2006 |  | $47,919 | 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2007 |  | $22,716 | 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2008 |  | $11,259 | 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|**19.** | FINANCIAL INSTRUMENTS
        The Company's financial instruments consist of cash and cash equivalents,
          marketable securities, accounts receivable, income taxes recoverable,
          bank overdraft, accounts payable and accrued liabilities, advances payable,
          due to joint venture and guarantees and due to related parties. Unless
          otherwise noted, it is management's opinion that the Company is not
          exposed to significant interest, currency or credit risks arising from
          these financial instruments. The fair value of these financial instruments
          approximates their carrying values unless otherwise noted.
        Concentrations of Credit Risk
        The Company is exposed to credit risk only with respect to cash and
          cash equivalents and uncertainties as to the timing and amount of the
          collectibility of accounts receivable. The Company mitigates cash and
          cash equivalents credit risk by maintaining the majority of its cash
          balances in reputable financial institutions in Canada. The Company
          mitigates accounts receivable credit risk through standard credit and
          reference checks and monitoring the financial condition of its customers
          to reduce risk of loss. The Company provides an allowance for doubtful
          accounts when, in their judgment, future collection is considered doubtful.

F-26


---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|20. | SEGMENT INFORMATION
        Notwithstanding that the Company may operate certain assets it acquires
          while it holds the goods for resale, the Company conducts operations
          in one reportable segment, being the conduct of customized auctions,
          in Canada.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                       
|21. | SUBSEQUENT EVENTS
        Subsequent to June 30, 2003, the Company entered into the following
          transactions:                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                       
|    | a)                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                       
|    | b)                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                       

F-27

---

|ICOWORKS,
      INC. AND SUBSIDIARIES 
      (formerly Paragon Polaris Strategies.com, Inc)
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
      (Expressed in U.S. Dollars)
      JUNE 30, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**21.** | SUBSEQUENT EVENTS(contd)
|------- | --------------------------
|        |                           
|        |                           
|        |                           
|        | c)                        
|        |                           
|        | d)                        
|        |                           
|        | e)                        
|        |                           
|        | f)                        
|        |                           
|        | g)                        
|        |                           
|        | h)                        

F-28

---

ITEM 8A.          CONTROLS
  AND PROCEDURES.

As required by Rule 13a-15 under the Securities Exchange Act
  of 1934 (the Exchange Act), we carried out an evaluation of the
  effectiveness of the design and operation of our disclosure controls and procedures
  as of June 30, 2003, being the date of our most recently completed fiscal year
  end. This evaluation was carried out under the supervision and with the participation
  of our Chief Executive Officer and Chief Financial Officer, Mr. Ian Brodie.
  Based upon that evaluation, our Chief Executive Officer and Chief Financial
  Officer concluded that our disclosure controls and procedures are effective
  in timely alerting management to material information relating to us required
  to be included in our periodic SEC filings. There have been no significant changes
  in our internal controls or in other factors that could significantly affect
  internal controls subsequent to the date we carried out our evaluation.

Disclosure controls and procedures are controls and other
  procedures that are designed to ensure that information required to be disclosed
  our reports filed or submitted under the Exchange Act is recorded, processed,
  summarized and reported, within the time periods specified in the Securities
  and Exchange Commission's rules and forms. Disclosure controls and procedures
  include, without limitation, controls and procedures designed to ensure that
  information required to be disclosed in our reports filed under the Exchange
  Act is accumulated and communicated to management, including our Chief Executive
  Officer and Chief Financial Officer, to allow timely decisions regarding required
  disclosure.

During our most recently completed fiscal year ended June
  30, 2003, there were no changes in our internal control over financial reporting
  that have materially affected, or are reasonably likely to affect, our 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 registrant's
  principal executive and principal financial officers, or persons performing
  similar functions, and effected by the registrant'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:

|(1) | Pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the assets of the registrant;                                                                                                                                                                                                     
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                  
|(2) | 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
|    |                                                                                                                                                                                                                                                                                                                                                                                  
|(3) | Provide reasonable assurance regarding
        prevention or timely detection of unauthorized acquisition, use or disposition
        of the registrant's assets that could have a material effect on the financial
        statements.                                                                                                                                          

Page 27 of 37

---

PART III

ITEM 9.          
  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
  WITH SECTION 16(a) OF THE EXCHANGE ACT.

The following table sets forth the names and positions of our officers and directors as of the date hereof.

|Name       | Age | Positions with Icoworks Inc.                                           
|---------- | --- | -----------------------------------------------------------------------
|Ian Brodie | 48  | Director President, Chief Executive Officer and Chief Financial Officer

Ian Brodie.Mr. Brodie was appointed as one of our
  directors on February 12, 2003 and is our president, chief executive officer
  and chief financial officer. Mr. Brodie was appointed as our president, chief
  executive officer and chief financial officer as of June 23, 2003. Mr. Brodie
  is currently the chief financial officer and secretary and a member of the board
  of directors of Icoworks Holdings. Mr. Brodie has held these positions with
  Icoworks Holdings since April 30, 2001. From 1988 to the present, Mr. Brodie
  has been active as an independent consultant assisting companies prepare for
  the public offering of their securities. His experience includes business restructuring,
  mergers, acquisitions, and divestitures. Mr. Brodie began his career as a registered
  representative with a Canadian brokerage firm before becoming involved in corporate
  finance. Mr. Brodie is a director for Barrier Mining Ltd., a Canadian reporting
  company.

The following table sets forth the names and positions of
  the officers and directors of Icoworks Holdings as of the date hereof.

|Name              | Age | Positions with Icoworks Holdings, Inc.         
|----------------- | --- | -----------------------------------------------
|J. Graham Douglas | 55  | President and Director                         
|Ian Brodie        | 48  | Secretary, Director and Chief Financial Officer

J. Graham Douglas. Mr. Douglas is currently the president
  and a member of the board of directors of Icoworks Holdings. In 1970, Mr. Douglas
  graduated from the University of Manatoba with a Bachelors Degree in Commerce.
  Additionally, Mr. Douglas has taken courses required to receive certificates
  from the Canadian Institute of Bankers and the Mortgage Brokers Association
  and necessary to receive an Alberta Real Estate license and a Canadian Securities
  License. From 1992 through the present, Mr. Douglas has been active as a consultant
  in connection with business restructurings, mergers and acquisitions, finance
  and the public and private offering of securities. In that regard, Mr. Douglas
  has consulted with businesses in different industries, including the food and
  beverage processing, clothing, tourism, real estate, construction, telecommunications,
  mining and exploration, and heavy equipment option industries, which industries
  are international.

TERMS OF OFFICE

Our directors are elected to hold office until the next annual
  meeting of the shareholders and until their respective successors have been
  elected and qualified. Our executive officers are appointed by our board of
  directors and hold office until removed by our board of directors or until their
  successors are appointed.

Page 28 of 37

---

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

Section 16(a) of the Exchange Act requires our executive officers
  and directors, and persons who beneficially own more than ten percent of our
  equity securities, to file reports of ownership and changes in ownership with
  the Securities and Exchange Commission. Officers, directors and greater than
  ten percent shareholders are required by SEC regulation to furnish us with copies
  of all Section 16(a) forms they file. Based on our review of the copies of such
  forms received by it, we believe that during the fiscal year ended June 30,
  2003 all such filing requirements applicable to our officers and directors were
  complied with exception that reports were filed late by the following persons:

|                            |                        | Transactions Not Timely | Known Failures to File a
|--------------------------- | ---------------------- | ----------------------- | ------------------------
|Name and Principal Position | Number of Late Reports | Reported                | Required Form           
|                            |                        |                         |                         
|J. Graham Douglas,          | One                    | One                     | None                    
|President and Director of   |                        |                         |                         
|Icoworks Holdings, Inc.     |                        |                         |                         

Page 29 of 37

---

ITEM 10.          EXECUTIVE
  COMPENSATION.

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth certain compensation information
  for Mr. Ian Brodie, our chief executive officer, Mr. Graham Douglas, the president
  of Icoworks Holdings and Mr. Robert Foo, our former chief executive officer
  (together, our name executive officers) for our fiscal years ended
  June 30, 2003, 2002 and 2001.

Other than Mr. Graham Douglas, none of our executive officers
  earned total annual salary and bonus exceeding $100,000 during the fiscal year
  ended June 30, 2003. Mr. Ian Brodie and Mr. Graham Douglas are compensated through
  Antares Investments Ltd. See Item 12.  Certain Relationships and Related
  Transactions.

|SUMMARY COMPENSATION TABLE
|--------------------------
|                          
|Name                      
|Restricted Stock Awarded  
|Ian Brodie (1)            
|Graham Douglas (2)        
|Robert Foo (3)            

|(1) | Mr. Brodie is employed and compensated
        by Antares Investments Ltd., which provides management services to the
        Company. Mr. Brodie is not paid a salary by us and does not bill for his
        time spent on our business and is not compensated directly or indirectly
        by the Company, other than through Antares Investments Ltd. See Item 12.
         Certain Relationships and Related Transactions.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(2) | Mr. Douglas is employed and compensated
        by Antares Investments Ltd., which provides management services to the
        Company. Mr. Douglas is not paid a salary by us and does not bill for
        his time spent on our business and is not compensated directly or indirectly
        by us, other than through Antares Investments Ltd. See Item 12. 
        Certain Relationships and Related Transactions.       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(3) | Mr. Foo ceased to be our chief executive officer effective
      June 23, 2003.                                                                                                                                                                                                                                                                                                                                                   

Page 30 of 37

---

STOCK OPTION GRANTS

The following table sets forth information with respect to
  stock options granted to our named executive officers for our fiscal year ended
  June 30, 2003.

|OPTION/SAR GRANTS IN LAST FISCAL YEAR(INDIVIDUAL GRANTS)                                  
|------------------------------------------------------------------------------------------
|Name                                                                                      
|Ian Brodie, Director, President, Chief Executive Officer and Chief
      Financial Officer
|Graham Douglas, Director and President of Icoworks Holdings                               
|Robert Foo, Former Director and Former Chief Executive Officer                            

Page 31 of 37

---

EXERCISES OF STOCK OPTIONS AND YEAR-END OPTION VALUES

The following is a summary of the share purchase options exercised
  by our named executive officers for our fiscal year ended June 30, 2003:

|AGGREGATED OPTION/SAR EXERCISES DURING THE LASTFINANCIAL YEAR END AND FINANCIAL YEAR-END OPTION/SAR VALUES
|----------------------------------------------------------------------------------------------------------
|Name (#)                                                                                                  
|Ian Brodie, Director, President, Chief Executive
      Officer and Chief Financial Officer                
|Graham Douglas, Director and President of Icoworks
      Holdings                                         
|Robert Foo, Former Director and Former Chief Executive
      Officer                                      

LONG-TERM INCENTIVE PLANS

We do not have any long-term incentive plans, pension plans,
  or similar compensatory plans for its directors or executive officers.

COMPENSATION OF DIRECTORS

Our directors receive no fees on an annual or per meeting
  basis

EMPLOYMENT CONTRACTS

We are not party any employment contracts with any of our
  named executed officers or our other executive officers and directors. Mr. Ian
  Brodie and Mr. Graham Douglas are compensated through a management services
  agreement with Antares Investments Ltd. See Item 12.  Certain Relationships
  and Related Transactions.

Page 32 of 37

---

ITEM 11.          SECURITY
  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information concerning
  the number of shares of our common stock owned beneficially as of October 15,
  2003by: (i) each person (including any group) known to us to own more
  than five percent (5%) of any class of our voting securities, (ii) each of our
  directors and each of our named executive officers, and (iii) officers and directors
  as a group. Unless otherwise indicated, the shareholders listed possess sole
  voting and investment power with respect to the shares shown.

|Title of Class         | Name and Addressof Beneficial Owner                                                      | Number of Sharesof Common Stock | Percentage ofCommon Stock(1)
|---------------------- | ---------------------------------------------------------------------------------------- | ------------------------------- | ----------------------------
|DIRECTORS AND OFFICERS
|Common Stock           | Ian Brodie Director, President Chief Executive Officer
      and Chief Financial Officer | 3,584,398(2)                    | 27.8%                       
|Common Stock           | J. Graham Douglas, President and Director of Icoworks
      Holdings                     | 1,762,000(3)                    | 13.7%                       
|Common Stock           | All Officers and Directors as a Group (2 persons)                                        | 5,346,398                       | 41.5%                       
|5% SHAREHOLDERS       
|Common Stock           | Hollywood Holdings Ltd.                                                                  | 800,000                         | 6.3%                        
|Common Stock           | Solara Ventures                                                                          | 2,084,398                       | 16.9%                       

|(1) | Under Rule 13d-3, a beneficial owner
        of a security includes any person who, directly or indirectly, through
        any contract, arrangement, understanding, relationship, or otherwise has
        or shares: (i) voting power, which includes the power to vote, or to direct
        the voting of shares; and (ii) investment power, which includes the power
        to dispose or direct the disposition of shares. Certain shares may be
        deemed to be beneficially owned by more than one person (if, for example,
        persons share the power to vote or the power to dispose of the shares).
        In addition, shares are deemed to be beneficially owned by a person if
        the person has the right to acquire the shares (for example, upon exercise
        of an option) within 60 days of the date as of which the information is
        provided. In computing the percentage ownership of any person, the amount
        of shares outstanding is deemed to include the amount of shares beneficially
        owned by such person (and only such person) by reason of these acquisition
        rights. As a result, the percentage of outstanding shares of any person
        as shown in this table does not necessarily reflect the persons
        actual ownership or voting power with respect to the number of shares
        of common stock actually outstanding on October 15, 2003. As of October
        15, 2003, there were 12,886,398 shares of our common stock issued and
        outstanding.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | Includes 1,500,000 shares held by Mr.
        Brodie and 2,084,398 shares held by Solara Ventures. Mr. Brodie is a director
        and officer of Solara Ventures and a minority shareholder of Solara Ventures.
        Accordingly, Mr. Brodie is deemed to beneficially own shares held by Solara
        Ventures for the purposes of Rule 13d-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | Held indirectly by Mr. Douglas through Antares Investments
      Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

We are not aware of any arrangement which may result in a
  change in control in the future, other than the completion of the merger with
  Icoworks Holdings.

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ITEM 12.          CERTAIN
  RELATIONSHIPS AND RELATED TRANSACTIONS.

Except as described below, none of the following persons has
  any direct or indirect material interest in any transaction to which we were
  or are a party during the past two years, or in any proposed transaction to
  which we propose to be a party:

|(A) | any director or officer;                                                                                                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                           
|(B) | any person who beneficially owns, directly
        or indirectly, shares carrying more than 5% of the voting rights attached
        to our common stock; or                                              
|    |                                                                                                                                                                                                           
|(C) | any relative or spouse of any of the
        foregoing persons, or any relative of such spouse, who has the same house
        as such person or who is a director or officer of any parent or subsidiary.

Acquisition of Icoworks Holdings

We issued shares to the following shareholders of Icoworks
  Holdings on completion of the acquisition of the majority interest on February
  20, 2003:

|Name of Beneficial Owner | Number of Shares of CommonStock | Percentage of CompanyCommon Stock Currently Held(1)
|------------------------ | ------------------------------- | ---------------------------------------------------
|Ian Brodie               | 3,584,398(2)                    | 27.8%                                              
|Bill Wigley              | 1,200,000(3)                    | 9.3%                                               
|Hollywood Holdings Ltd.  | 800,000                         | 6.3%                                               
|Solara Ventures Inc.     | 2,084,398                       | 16.9%                                              
|J. Graham Douglas        | 1,602,000(4)                    | 12.4%                                              
|TOTAL                    | 7,186,398                       | 55.8%                                              

|(1) | Based on 12,886,398 shares of the Companys common stock
      issued and outstanding as of October 15, 2003.                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | Mr. Brodie is a director and officer
        of Solara Ventures and a minority shareholder of Solara Ventures. Accordingly,
        Mr. Brodie is deemed to beneficially own shares held by Solara Ventures
        for the purposes of Rule 13d-3. Mr. Brodie was individually issued 1,500,000
        shares of the Companys common stock. The balance of the shares deemed
        to be beneficially held by Mr. Brodie are held by Solara Ventures.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3) | Includes shares held by the spouse of Mr. Wigley.                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(4) | The shares held by Mr. Douglas are held by a private corporation
      controlled by Mr. Douglas.                                                                                                                                                                                                                                                                                                                                                         

The shares of the Companys common stock that were issued
  to the former shareholders of Icoworks listed above were issued in consideration
  of the transfer of the shares of Icoworks held by the former shareholders. The
  shares were issued to the former Icoworks shareholders on the basis of two shares
  of the Companys common stock in consideration for each one share of Icoworks
  common stock.

Antares Investments Ltd.

Icoworks Holdings is party to a consulting agreement with
  Antares Investments Ltd. (Antares) dated January 2, 2002 whereby
  the services of Ian Brodie, our president, chief executive officer and chief
  financial officer, and Graham Douglas, the president of Icoworks Holdings, are
  provided to Icoworks Holdings. We do not pay any additional amount to Mr. Brodie
  for acting as our president, chief executive officer, chief financial officer
  or as our sole director. Under the terms of the consulting agreement, Icoworks
  Holdings pays a consulting fee of $17,000 per month. The fee is based on a minimum
  of two senior staff for approximately two thirds of a normal work month. In
  addition, Icoworks Holdings reimburses Antares for out-of-pocket expenses incurred
  by Antares in the

Page 34 of 37

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performance of its duties under the consulting agreement.
  Icoworks Holdings is entitled to terminate the consulting agreement by providing
  at least sixty (60) days written notice and by paying Antares a cancellation
  payment equal to six months fees ($102,000).

Icoworks Holdings accrued consulting fees to Antares in the
  amount of $204,000 for the year ended June 30, 2003 and $150,000 for the year
  ended June 30, 2002. While the amounts payable to Antares under the consulting
  agreement have been accrued to date, they have not been paid. The accrued amounts
  payable to Antares under the consulting agreement were outstanding in the amount
  of $362,086 as of June 30, 2003 and $163,086 as of June 30, 2002.

Director Loans

Ian Brodie, our president, chief executive officer and chief
  financial officer, has advanced loans to us that have not been repaid and are
  currently outstanding in the amount of $9,485 as at June 30, 2003 and $9,485
  as at June 30, 2002. Graham Douglas, the president of Icoworks Holdings, has
  advanced loans to us that have not been repaid and are currently outstanding
  in the amount of $185,787 as at June 30, 2003 and $2,718 as at June 30, 2002.
  All advances due to Mr. Brodie and Mr. Douglas are unsecured, non-interest bearing
  and have no fixed terms of repayment.

Westin Capital, a company controlled by Mr. Brodie, has made
  advances to us to fund our operations. These advances are unsecured, bear interest
  at prime plus 1% per annum and are repayable on demand. The amount of the advance
  outstanding was $75,813 as of June 30, 2003.

Bill Wigley

Icoworks Holdings acquired Icoworks Services from Bill Wigley,
  one of our former 5% shareholders, on December 1, 2001 for consideration of
  $679,584, consisting of a cash payment of $572,082 and the issuance of 600,000
  shares of common stock of Icoworks Holdings. The common stock was subsequently
  converted into 1,200,000 shares of our common stock upon completion of our acquisition
  of a 56% interest in Icoworks Holdings. Icoworks Services entered into a three
  year employment agreement with Mr. Bill Wigley on the closing of the acquisition,
  pursuant to which Mr. Wigley was paid $8,500 CDN per month (equal to approximately
  $6,800 US per month as of October 19, 2003) plus five percent (5%) of the net
  auction revenue received by Icoworks Services in excess of $1,000,000 CDN (equal
  to approximately $750,000 US as of October 19, 2003) per annum during the term
  of his employment. Mr. Wigley was also appointed as the vice president - investor
  auctions for Icoworks Holdings. Mr. Wigley has subsequently resigned has an
  officer of Icoworks Holdings and his employment has been terminated by agreement.
  Subsequent to year end, an aggregate of 800,000 shares has been surrendered
  by Mr. Wigley to us for cancellation as a result of failure to meet performance
  milestones. As a consequence of his surrender of shares, Mr. Wigley has ceased
  to be one of our 5% shareholders.

Icoworks Services paid rent to a company controlled by Mr.
  Wigley in the amount of $162,360 for the year ended June 30, 2003 and $88,081
  for the year ended June 30, 2002. Icoworks Holdings was indebted to Mr. Wigley
  in the amount of $132,404 as at June 30, 2003 and $85,189.86 as at June 30,
  2002.

Advances Due to Companies Controlled by Management

We have obtained advances from companies controlled by management.
  These advances are unsecured, do not bear interest and have no fixed terms of
  repayment. These amounts were outstanding in the amount of $111,377 as of June
  30, 2003 and $7,246 as of June 30, 2002. These amounts included advances by
  Solara Ventures, one of our 10% shareholders, which were outstanding in the
  amount of $26,135 as of June 30, 2003 and $nil as of June 30, 2002. These amounts
  also included advances by Danco Industries Ltd. which were outstanding in the
  amount of $85,342 as at June 30, 2003. Mr. Ian Brodie is deemed to control Solara
  Ventures and Danco.

Page 35 of 37

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ITEM 13.          EXHIBITS
  AND REPORTS ON FORM 8-K.

EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B

|Exhibit
      Number |  | Description
      of Exhibit                                                                                                                                                                             
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |  |                                                                                                                                                                                                          
|3.1                  |  | Articles of Incorporation (1)                                                                                                                                                                            
|                     |  |                                                                                                                                                                                                          
|3.2                  |  | Bylaws (1)                                                                                                                                                                                               
|                     |  |                                                                                                                                                                                                          
|3.3                  |  | Certificate of Amendment to Articles of Incorporation
      (3)                                                                                                                                          
|                     |  |                                                                                                                                                                                                          
|10.1                 |  | Form of share purchase
        agreement entered into between the registrant and the individual non-US
        shareholders of Icoworks, Inc. to acquire the majority interest. (2)                      
|                     |  |                                                                                                                                                                                                          
|10.2                 |  | Management Services Agreement between Icoworks
      Holdings Inc. and Antares Investments Ltd. (4)                                                                                                      
|                     |  |                                                                                                                                                                                                          
|10.3                 |  | Release and Settlement Agreement between Icoworks
      Holdings Inc. and Network International (4)                                                                                                      
|                     |  |                                                                                                                                                                                                          
|10.4                 |  | Form of Joint Venture Agreement for Icoworks
      Joint Ventures (4)                                                                                                                                    
|                     |  |                                                                                                                                                                                                          
|31.1                 |  | Certification of Chief
        Executive Officer and Chief Financial Officer pursuant to Section 302
        of the Sarbanes-Oxley Act of 2002 (4)                                                       
|                     |  |                                                                                                                                                                                                          
|32.1                 |  | Certification of Chief
        Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
        1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002 (4)

| |     |                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------
| | (1) | Filed as an Exhibit to our Form SB-2 registration statement
      originally filed on March 16, 2000, as amended.
| | (2) | Filed as an Exhibit to our Current Report on Form 8-K filed
      on March 6, 2003.                              
| | (3) | Filed as an Exhibit to our Quarterly Report on Form 10-QSB
      on June 20, 2003.                               
| | (4) | Filed as an Exhibit to this Annual Report on Form 10-KSB                                                         
| |     |                                                                                                                  

CURRENT REPORTS ON FORM 8-K

During our fourth quarter ended June 30, 2003, we filed a
  Current Report on Form 8-K dated June 10, 2003 reporting the change to our auditor
  from Janet Loss, CPA to Dohan and Company, Certified Public Accountants and
  the change of our fiscal year end.

Page 36 of 37

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act,
  the registrant caused this report to be signed on its behalf by the undersigned,
  thereunto duly authorized.

ICOWORKS INC.

|By: | /s/
      Ian Brodie                              | 
|--- | ------------------------------------------------- | 
|    | Ian Brodie, President and Chief Executive Officer | 
|    | Director                                          | 
|    | Date:               October
      21, 2003        | 

In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

|By: | /s/
      Ian Brodie                                           | 
|--- | -------------------------------------------------------------- | 
|    | Ian Brodie, President and Chief Executive Officer              | 
|    | Chief Financial Officer                                        | 
|    | (Principal Executive Officer)                                  | 
|    | (Principal Financial Officer and Principal Accounting Officer) | 
|    | Director                                                       | 
|    | Date:               October
      21, 2003                     | 

Page 37 of 37

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