bridges.com inc.bridges.com inc. we have audited the consolidated balance sheets of bridges.com inc....

Auditor’s Report and Consolidated Financial Statements of

BRIDGES.COM INC. June 30, 2003 and November 30, 2002

Deloitte & Touche LLP P.O. Box 49279 Four Bentall Centre 2800 – 1055 Dunsmuir Street Vancouver, British Columbia

Deloitte & Touche

V7X 1P4 Tel: (604) 669 4466 Fax: (604) 685 0395 www.deloitte.ca

Auditors' Report To the Shareholders of Bridges.com Inc. We have audited the consolidated balance sheets of Bridges.com Inc. as at June 30, 2003 and November 30, 2002 and the consolidated statements of operations and deficit and cash flows for the seven month period ended June 30, 2003 and year ended November 30, 2002. 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 Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2003 and November 30, 2002 and the results of its operations and its cash flows for the seven month period ended June 30, 2003 and year ended November 30, 2002 in accordance with Canadian generally accepted accounting principles.

Chartered Accountants Vancouver, British Columbia August 1, 2003

14

Financial Statements & Notes

BRIDGES.COM INC

C o n s o l i d a t e d

Balance Sheets

June 30 November 30

2003 2002

ASSETS

Current

Cash and cash equivalents $ 2,416,227 $ 4,328,116

Accounts receivable (Note 3) 3,641,053 3,987,314

Prepaid expenses and other 346,535 656,875

6,403,815 8,972,305

Restricted cash (Note 6) 200,000 -

Property and equipment (Note 4) 6,700,471 7,928,313

$ 13,304,286 $ 16,900,618

LIABILITIES

Current

Accounts payable and accrued liabilities $ 1,745,376 $ 2,345,722

Accrued restructuring charge (Note 5) 824,682 2,330,856

Current portion of long-term debt (Note 6) 216,000 -

Current portion of capital lease obligations - 74,193

Deferred revenue (Note 2(g) and 14) 5,968,896 3,592,126

8,754,954 8,342,897

Long-term debt (Note 6) 864,000 -

9,618,954 8,342,897

COMMITMENTS (Note 7)

SHAREHOLDERS’ EQUITY

Common stock (Note 8) 17,857,264 17,857,264

Deficit (14,171,932) (9,299,543)

3,685,332 8,557,721

$ 13,304,286 $ 16,900,618

A P P R O V E D B Y T H E B O A R D

John C. Simmons, Director Terry M. Holland, Director

See Accompanying Notes to the Consolidated Financial Statements.

15

2003 Annual Report

BRIDGES.COM INC


Statements of Operations and Deficit

Seven Months Ended Year Ended

June 30 November 30

2003 2002

REVENUE $ 4,815,682 $ 18,533,185

COSTS OF REVENUE 3,100,601 6,031,521

GROSS MARGIN 1,715,081 12,501,664

EXPENSES

Sales and marketing 3,261,896 7,429,412

Research and development 63,670 326,386

General and administrative 1,357,843 3,236,322

4,683,409 10,992,120

(LOSS) EARNINGS BEFORE RESTRUCTURING CHARGE, IMPAIRMENT

OF PROPERTY AND EQUIPMENT AND GOODWILL, AMORTIZATION,

FOREIGN CURRENCY EXCHANGE AND OTHER (LOSS) INCOME

AND INCOME TAXES (2,968,328) 1,509,544

Restructuring charge - (3,142,021)

Amortization of property and equipment (741,940) (1,083,429)

Impairment of property and equipment (781,734) -

Amortization of intangibles - (806,010)

Foreign exchange and other (loss) income (392,736) 75,687

LOSS BEFORE INCOME TAXES (4,884,738) (3,446,229)

Income tax (recovery) expense (Note 10) (12,349) 565,156

LOSS BEFORE IMPAIRMENT OF GOODWILL (4,872,389) (4,011,385)

Impairment of goodwill - (2,235,114)

NET LOSS $ (4,872,389) $ (6,246,499)

DEFICIT, BEGINNING OF PERIOD $ (9,299,543) $ (2,312,455)

Excess of purchase cost over carrying value of common

shares cancelled - (740,589)

DEFICIT, END OF PERIOD $ (14,171,932) $ (9,299,543)

Basic loss per share before impairment of goodwill $ (0.40) $ (0.32)

Basic loss per share $ (0.40) $ (0.49)

Weighted average number of shares used to calculate basic loss per share 12,179,303 12,668,979


16


BRIDGES.COM INC


Statements of Cash FlowsSeven Months Ended Year Ended

June 30 November 30

2003 2002

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss for the period $ (4,872,389) $ (6,246,499)

Items not affecting cash

Amortization of property and equipment 741,940 1,083,429

Impairment of property and equipment 781,734 -

Amortization of intangibles - 806,010

Non-cash portion of restructuring charge - 386,050

Impairment of goodwill - 2,235,114

Future income tax expense - 542,127

Changes in operating assets and liabilities (Note 11) 838,687 4,451,540

(2,510,028) 3,257,771

CASH FLOW FROM INVESTING ACTIVITY

Purchase of property and equipment, net of related accounts payable (254,936) (4,644,345)

(254,936) (4,644,345)

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of common shares - 55,156

Shares purchased and cancelled - (1,159,235)

Repayment of obligations under capital lease (26,925) (134,025)

Restricted cash (200,000) -

Proceeds from long-term debt 1,200,000 -

Repayment of obligations under long-term debt (120,000) -

853,075 (1,238,104)

NET CASH OUTFLOW DURING THE PERIOD (1,911,889) (2,624,678)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,328,116 6,952,794

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,416,227 $ 4,328,116

Supplemental Cash Flow Disclosure:

Interest paid $ 48,396 $ 43,443


17

2003 Annual Report

BRIDGES.COM INC

Notes to theConsolidated FinancialStatementsJune 30, 2003 and November 30, 2002

1NATURE OF OPERATIONS

The principal business activity of Bridges.com Inc. ("the Company")

is the development, marketing and delivery of career information

database products and services through the Internet and on CD-

ROM. The Company was incorporated on March 10, 1994, under

the Business Corporations Act of Alberta and was registered extra

provincially in British Columbia on December 15, 1994.

2SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance

with Canadian generally accepted accounting principles and

reflect the following significant accounting policies:

(a) Basis of presentationThese consolidated financial statements include the accounts of

the Company and its wholly-owned U.S. subsidiary, Bridges.com

Co. All significant intercompany balances and transactions are

eliminated on consolidation.

(b) EstimatesThe preparation of financial statements in conformity with

Canadian generally accepted accounting principles requires

management to make estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosures of

contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses

during the reporting period. Estimates are used, but not limited

to, the accounting for doubtful accounts, amortization,

determination of net recoverable value of assets, deferred revenue,

sales returns, taxes and contingencies.

(c) Foreign currency translationThe functional currency of the Company is the Canadian dollar.

Assets and liabilities denominated in currencies other than the

Canadian dollar are translated using the rate of exchange

prevailing at the balance sheet date. Revenue and expenses are

translated using the exchange rate prevailing on the transaction

date. Gains or losses on translation are included in operations.

(d) Cash and cash equivalentsCash and cash equivalents include highly liquid investments that

are readily convertible to cash.

(e) Property and equipmentProperty and equipment are recorded at cost less accumulated

amortization. The carrying value of property and equipment is

reviewed periodically for any impairment in value. Amortization is

provided annually using the following methods and rates:

Furniture and equipment 20% declining balance basis

Computer equipment 20% to 100% declining balance basis

Leased computer equipment 3 years straight-line basis

Online network infrastructure costs 20% to 100% declining balance basis

Leasehold improvements 20% straight-line basis

The Company reviews for the impairment of capital assets

whenever changes in circumstances indicate that the carrying

amount of an asset may not be recoverable from expected future

cash flows. During the period ended June 30, 2003, the Company

reassessed the carrying value of certain of its hardware and

software assets and deemed there to be an impairment due to

economic events and market conditions related to expected

growth and changes in the Company's product mix. The Company

has recorded an impairment charge of $781,734 related to these

assets.

(f) Goodwill At the end of the fourth quarter of fiscal 2002, following the

decision to restructure the Company, and due to economic events

and circumstances relating to expected growth and changes in the

family of products, the Company recognized an impairment of the

remaining goodwill amounting to $2,235,114 (Note 5).

(g) Revenue recognitionThe Company generates revenue through two sources: (1)

information database product revenues and (2) service revenues

as follows:

(1) Information database product revenues are generated from the

licensing of the right to use the Company's information database

directly to end users.

Revenues from information database products are earned under

three types of arrangements: (1) delivery of a CD information

database; (2) online subscription services and database access

provided over the licence period; and (3) both provision of CD

information database and online subscription services.

As of December 1, 2002, the Company recognizes revenue from all

subscription products on a fully ratable basis over the term of the

contract, typically one year. This is the result of the commissioning

of the Company's new technical infrastructure which will give all

subscribers access to on-going and topical information via the

Internet. Revenue from non-subscription products will continue to

be recognized upon delivery of the CD-ROM where persuasive

evidence of an arrangement exists, collection is probable, and the

fee is fixed or determinable.

(2) Service revenues are generated from consulting services

related to the implementation of information database products.

18


Revenues from these services are recognized upon substantial

completion of service, provided the fee is fixed or determinable,

and collection is reasonably assured.

Revenues that have been prepaid or invoiced but do not yet

qualify for recognition under the Company's policies are reflected

as deferred revenues. The Company has a high rate of

resubscription for products licensed annually. Renewal sales are

invoiced on receipt of a customer's purchase order or other form

of customer commitment. When the invoice predates the

subscription renewal date, related invoiced revenue is fully

deferred and becomes recognized on a fully ratable basis only

once the subscription renewal date is passed. The Company

experiences few subscription cancellations (Note 3 and 14).

(h) Research and developmentThe Company expenses research and development costs as

incurred unless they meet certain criteria for deferral and

amortization.

(i) Income taxesFuture income taxes relate to the expected future tax

consequences of differences between the carrying amount of

balance sheet items and their corresponding tax values. Future tax

assets, if any, are recognized only to the extent that, in the opinion

of management, it is more likely than not that the future income

tax assets will be realized.

Future income tax assets and liabilities are adjusted for the effects

of changes in tax laws and rates on the date of enactment or

substantive enactment.

(j) Loss per common shareBasic loss per common share has been computed by dividing loss

applicable to common shareholders by the weighted average

number of shares of common stock outstanding during the

respective periods.

(k) Share-based compensation plansCommencing December 1, 2002, the Company has adopted the

new recommendations of the CICA for share-based compensation.

The new recommendations require that a fair value be determined

for options at the date of grant and that such fair value be

recognized in the financial statements. In respect of share options

awarded to employees, it is permissible to use either the fair value

based method or intrinsic value based method; however, if the

intrinsic based method is used, pro forma disclosure is required so

as to show what the effect would have been had the fair value

based method been applied.

The Company applies the intrinsic based method of accounting

for share-based compensation awards granted to employees.

Accordingly, no compensation cost is recorded in the financial

statements related to its share options plans and the requisite pro

forma disclosures have been made using the fair value method

(Note 8 (e)).

(l) Comparative figures and year endCertain of the prior year's comparative figures have been

reclassified to conform with current period's presentation.

Subsequent to November 30, 2002, the Company changed its fiscal

reporting period from a fiscal year ended November 30, to a fiscal

year ended June 30, to align better with its customer buying

patterns.

3ACCOUNTS RECEIVABLE

Accounts receivable consists of:June 30 November 30

2003 2002Trade accounts receivable $ 3,127,864 $ 3,999,581Miscellaneous 216,373 184,472Relocation loans to employees 396,816 -

3,741,053 4,184,053Allowance for doubtful accounts (100,000) (196,739)

$ 3,641,053 $ 3,987,314

As at June 30, 2003, $2,079,000 of pre-billed revenue was included

in both trade accounts receivable and deferred revenue

(November 30, 2002, $428,000).

As at June 30, 2003, the Company was owed $396,816 by two

senior employees. These loans are secured by promissory notes

and relate to bridge financing for home loans on the relocation of

the employees from Ottawa to Kelowna. Due to the short term

and nature of these loans, they do not bear interest and will be

repaid by September 30, 2003.

4PROPERTY AND EQUIPMENT

June November30, 2003 30, 2002

Accumulated Net Book Net BookCost Amortization Value Value

Furniture and equipment $ 386,553 $ 290,354 $ 96,199 $ 108,242

Computer equipment 2,395,365 1,838,482 556,883 650,428

Automobile 28,611 2,503 26,108 -

Online network infrastructure costs 8,973,513 2,999,726 5,973,787 7,107,961

Leasehold improvements 141,919 94,425 47,494 61,682

$11,925,961 $ 5,225,490 $ 6,700,471 $ 7,928,313

The net book value of assets under capital lease at June 30, 2003

totalled $nil (November 30, 2002 - $52,669), net of accumulated

amortization of $452,451 (November 30, 2002 - $399,782).

During the seven months ending June 30, 2003, certain hardware

and software assets were deemed to be impaired. These assets

included selected software and related licensing and maintenance

costs. Management determined that certain public domain and

self-built software could be used instead of the proprietary

software from external suppliers. The book value of the software

written off to the impairment charge was $392,346. The annual

19

2003 Annual Report

licence and maintenance agreement costs for this software, which

also have no future value to the Company, amounted to $79,423

and have been charged to operations.

Certain internal asset build programs were also determined to

have no commercial future value to the Company after a change

in product direction. Costs accumulated on these projects

amounting to $269,965 have been charged to operations.

5RESTRUCTURING CHARGE

Accrued AccruedRestructuring Restructuring

as at as atNovember 30, June 30,

2002 Payments 2003

Restructuring ActivitiesWorkforce reduction $ 1,832,806 $ 1,222,895 $ 609,911Excess facility costs 498,050 283,279 214,771

$ 2,330,856 $ 1,506,174 $ 824,682

During the fourth quarter of 2002, the Company recorded charges

of $3,142,021 in connection with the Company's decision to

reduce its workforce and close the Ottawa branch office. These

charges were recorded as restructure costs. The balance of accrued

restructuring charge of $824,682 at June 30, 2003 is expected to

be substantially drawn down by the end of calendar 2003.

As part of this restructuring, employee termination and related

costs of $2,237,638 for approximately 52 employees associated

with the Company's operation will be paid to employees. At June

30, 2003, $1,627,727 has been paid for these costs.

The Company accrued charges of $518,333 relating to excess

facility costs and other costs to be incurred by the Company. At

June 30, 2003, $303,562 has been paid for these costs.

In connection with its decision to reduce its workforce and close

the Ottawa branch office, the Company evaluated the ongoing

value of certain assets. Based on this evaluation, the Company

identified approximately $492,168 of capital and other assets that

were determined to be impaired. These assets were written down

by $386,050 to their estimated fair market value.

At the end of the fourth quarter of 2002, following the decision to

restructure the Company, and due to economic events and

circumstances relating to expected growth and changes in the

family of products, the Company recognized an impairment of

goodwill amounting to $2,235,114.

6LONG-TERM DEBT

On January 7, 2003, the Company negotiated and drew on a term

line of credit for $1,200,000 with the Business Development Bank

of Canada ("BDC"). This facility bears interest at 75 basis points

over the bank's floating base rate and is secured by a direct charge

against online network infrastructure assets of $1,400,000 and a

general security agreement. Funds from this facility will be used for

general working capital purposes, with the exception of $200,000,

which is to be kept on deposit with the BDC. This $200,000 has

been disclosed as restricted cash at June 30, 2003.

June 302003

Term line of credit $ 1,080,000Current portion (216,000)

$ 864,000

The aggregate amount of payments required in each of the next

five years ended June 30 on the above indebtedness is as follows:

2004 216,0002005 288,0002006 288,0002007 288,000

$ 1,080,000

7COMMITMENTS

(a) Capital and operating leasesMinimum future payments under non-cancelable operating leases

for computer equipment, furniture, and office space are as follows:

Operating leasesJune 30

20032004 $ 350,7272005 139,2502006 84,1412007 30,770Total minimum lease payments $ 604,888

(b) Credit facilitiesOn December 20, 2000, the Company negotiated an operating line

of credit, subject to meeting certain covenants, with a Canadian

commercial bank to borrow up to $3,000,000, which bears interest

at market rates and is secured by a first charge and general

security agreement over all assets. As of June 30, 2003, no

amounts were outstanding under the facility. As of June 30, 2003,

the Company did not meet certain of its covenants on this facility

and is negotiating changes to such covenants with its bank.

8SHARE CAPITAL

(a) AuthorizedUnlimited common shares without par value

Unlimited preferred shares without par value

20


(b) Common shares issued and outstanding and sharepurchase loans

June 30, 2003 November 30, 2002Shares Amount Shares Amount

Balance, beginning of year 12,616,703 $17,857,264 12,792,750 $18,970,654

Shares repurchased and cancelled - - (302,413) (418,646)

Share purchase loans - - - (749,900)

Stock options exercised - - 126,366 55,15612,616,703 $17,857,264 12,616,703 $17,857,264

(c) Normal course issuer bidOn February 21, 2001, the Company announced a normal course

issuer bid. Under the terms of the bid the Company, during the 12-

month period beginning February 26, 2001, and ending February

25, 2002, was eligible to purchase on the Toronto Stock Exchange

up to a maximum of 661,713 common shares in total. As at

February 25, 2002, 661,713 shares have been purchased all of

which have been cancelled as at February 28, 2002.

On February 21, 2002, the Company announced its intentions to

initiate a second normal course issuer bid. Under the terms of the

bid the Company, during the 12-month period beginning February

26, 2002, and ending February 25, 2003, was eligible to purchase

on the Toronto Stock Exchange up to a maximum of 643,378

common shares in total. As at February 25, 2003, 90,700 shares

have been purchased and cancelled.

As at June 30, 2003, the Company planned to enter into another

bid.

(d) Share purchase incentive programDuring the year ended November 30, 2001, share purchase loans

of $749,900 were issued for the purpose of purchasing 437,400

common shares of the Company at an average purchase price of

$1.71 per share. The loans have a maximum term of five years and

bear interest at a rate of 5% per annum payable annually on

December 31. Security for the loan consists of a pledge of the

common shares acquired under the loan plus a promissory note in

an amount equal to 50% of the value of the pledged common

shares at the time the loan is called. As at June 30, 2003, the

market value of these shares was $349,920.

(e) Stock option planUnder the Company's stock option plan, the Company may grant

options to acquire common shares to directors, officers, employees

and other key personnel of the Company. Under the plan, the

exercise price of each option equals the market price of the

Company's stock on the date of grant. The maximum option term

is five years. Options granted under the plan vest one-third a year

after the grant date and one-third each subsequent year.

The Company has options outstanding under this plan as follows:

June 30, 2003 November 30, 2002Weighted- Weighted-

Average AverageCommon Exercise Common Exercise

Shares Price Shares Price

Outstanding at beginning of period 1,348,134 $ 3.71 1,357,300 $ 3.71Granted 432,250 0.69 159,800 1.16Exercised - - (126,366) 0.44Cancelled (417,734) 3.85 (42,600) 3.80

Outstanding at end of period 1,362,650 $ 2.71 1,348,134 $ 3.71

Exercisable at end of period 713,833 $ 4.10 958,266 $ 4.07

The following table summarizes information about stock options

outstanding and exercisable at June 30, 2003:

Options OutstandingWeighted

Weighted Average

Range of Weighted Average Exercise

Exercise Average Remaining Price per

Prices Exercise Price Number Contractual Number Exercisable

per share per share Outstanding Life (in years) Exercisable share

$0.65-$1.01 $0.77 601,750 4.6 19,500 $0.65$2.05-$2.85 $2.23 82,400 1.9 68,400 $2.19$3.00-$3.90 $3.72 251,000 2.7 249,267 $3.72$4.26-$4.75 $4.54 357,500 2.0 329,666 $4.58

$7.00 $7.00 70,000 2.7 47,000 $7.001,362,650 713,833

During the first quarter of 2003, the Company undertook an

employee share option reset program. Under this program, non-

executive employees had the choice of surrendering their options

in exchange for new options at the ratio of one new share option

per two share options surrendered. In total, 229,100 share options

were cancelled under the program. On June 23, 2003, 85,550 share

options were issued, exercisable at $.65 per common share.

Options granted under this program have an option term of five

years and vest 20% at the grant date and 20% every six months

thereafter.

The Company applies the intrinsic value based method of

accounting for share-based compensation awards granted to

employees. Accordingly, no compensation cost is recorded in the

accounts for its share option plans. For share options granted after

November 30, 2002, disclosure of the impact of earnings and

21

2003 Annual Report

earnings per share as if the fair value-based method for the share-

based compensation had been applied is required. Such impact

would approximate the following pro forma amounts:

Seven months endedJune 30, 2003

Net loss:As reported (4,872,389)Compensatory fair value of options granted (12,220)Pro forma (4,884,609)

Basic loss per share:As reported (0.40)Pro forma (0.40)

Weighted Average Assumptions

Expected Dividends 0%

Expected Volatility 73%

Risk Free Interest Rate 2.25%

Expected Option Life in Years 3

The Black-Scholes option-pricing model was developed for use in

estimating the fair value of traded options. The option-pricing

models require the input of highly subjective assumptions

including the expected price volatility. Bridges uses expected

volatility rates, which are based on historical volatility rates

trended into future years. Changes in the subjective input

assumptions can materially affect the fair value estimate, and

therefore the existing models do not necessarily provide a reliable

single measure of the fair value of Bridges.com stock options.

9LOSS PER SHARE

Basic loss per share is calculated based on the weighted average

number of shares outstanding during the period of 12,179,303

(November 30, 2002 - 12,668,979). Contingently returnable shares,

including shares securing share purchase loans, are not considered

outstanding for the purpose of calculating the weighted average

number of shares for calculating basic loss per share.

June 30 November 302003 2002

Common shares outstanding at end of period 12,616,703 12,616,703

Adjustment for weighting - 52,276Weighted average number of

common shares outstanding 12,616,703 12,668,979Contingency returnable shares

securing shareholder loans (437,400) -12,179,303 12,668,979

During the period, options may be exercised or shares may be

repurchased and cancelled by the Company, which will result in

the number of outstanding shares fluctuating during the period.

The weighted average number of shares outstanding at the end of

the period takes these fluctuations into account in the calculation

of loss per share.

10INCOME TAXES

The Company's income tax expense for the seven-month period

ended June 30, 2003 and year ended November 30, 2002, consists

of the following:

Seven months ended Year endedJune 30 November 30

2003 2002Current tax expense $ 12,349 $ 23,029Future tax expense - 542,127

$ 12,349 $ 565,156

The reported income tax expense differs from the amount

computed applying Canadian basic statutory rate to the income

before income taxes. The reasons for this difference and the

related tax effect are as follows:


2003 2002Canadian basic statutory tax rate 37% 37%

Expected income tax recovery $ (1,807,000) $ (2,101,000)Non-deductible portion of expenses

and goodwill impairment - 454,000Capital taxes included in provision 12,349 23,029Benefit of accrued restructuring charge

not recognized 552,000 854,000Benefit of losses not tax effected 510,000 399,000Benefit of research and development

expenses recognized (384,000) -Benefit of temporary differences

not recognized 1,129,000 394,000Reversal of benefit of previously

recognized tax assets and rate reductions - 542,127$ 12,349 $ 565,156

Temporary differences and carryforwards which give rise to the

following future income tax assets and liabilities as at June 30 and

November 30 are as follows:

As at As atJune 30 November 30

2003 2002Future income tax assets

Tax loss carryforwards $ 1,390,000 $ 880,000Property and equipment 847,000 -Deferred financing fees 133,000 265,000Intangibles 1,120,000 1,185,000Accrued restructuring charge 302,000 854,000Research and development expenses 550,000 166,000

Valuation allowance for future income tax assets (4,342,00) (2,991,000)

Future income tax liabilitiesProperty and equipment - (359,000)

Net future income tax assets $ - $ -

22


As at June 30, 2003, subject to the approval of Canada Customs

and Revenue Agency, the Company has approximately $1,500,000

of scientific research and experimental development expenditures

available for unlimited carryforward and $1,500,000 of non-capital

losses which expire at various dates between 2004 and 2010, all of

which may be used to reduce future Canadian income taxes

otherwise payable. In addition, the Company has U.S. net

operating loss carryforwards of $2,300,000.

11CHANGES IN OPERATING ASSETS AND LIABILITIES

June 30 November 302003 2002

Accounts receivable $ 345,811 $ 2,624,469Prepaid expenses and other 230,919 33,494Accounts payable and accrued liabilities (608,640) (883,198)Accrued restructuring charge (1,506,173) 2,330,856Deferred revenue 2,376,770 345,919

$ 838,687 $ 4,451,540

12FINANCIAL INSTRUMENTS

(a) Fair valueThe carrying value of cash and cash equivalents, accounts

receivable and accounts payable and accrued liabilities as

reflected in the balance sheets approximates their respective fair

values as at June 30, 2003, and November 30, 2002, because of the

demand or short-term maturity of these instruments.

(b) Credit riskThe Company is subject to normal credit risk as it carries

significant accounts receivable from many customers. Bad debt

experience has not been significant. Cash and cash equivalents are

held in high quality financial instruments to mitigate exposure to

credit risk.

(c) Foreign exchange riskThe Company undertakes significant sales in United States dollars

and as such is subject to risk due to fluctuations in exchange rates.

From time to time the Company enters into forward exchange

contracts to limit its exposure to foreign exchange risk.

As at June 30, 2003, the Company had entered into a foreign

exchange contract expiring on July 23, 2003 to sell US$200,000.

The fair value of the contract at June 30, 2003 was approximately

$269,920. The settlement value of this contract at maturity is

$272,000, which would result in a foreign exchange charge of

$2,080.

13SEGMENTED INFORMATIONThe Company manages its operations in one business segment,

the development, marketing and delivery of career information

database products and services through the Internet and on CD-

ROM. All of the Company's long-lived assets are located in

Canada. The Company attributes revenue among geographical

areas based on the location of the customers involved.


2003 2002Canada 11% $ 532,470 12% $ 2,230,536United States 89% 4,283,212 88% 16,302,649

$ 4,815,682 $ 18,533,185

14CONTINUITY OF INVOICING AND DEFERRED REVENUEThe Company invoices customers at the outset of the subscription

or for non-subscription products, at the time of shipment (Note

2(g)). Revenue is recognized based on the nature of the product or

service provided. The following is a continuity schedule reconciling

annual billings to revenue recognized:


2003 2002Invoicing $ 7,192,453 $ 18,879,104Plus: opening

deferred revenue 3,592,126 3,246,207Less: ending

deferred revenue (5,968,897) (3,592,126)Revenue $ 4,815,682 $ 18,533,185

15RELATED PARTY TRANSACTIONSDuring the seven months ended June 30, 2003, the Company paid

$132,500 (year ended November 30,2002 - $165,165) in

consulting fees as sole compensation to the CEO who is also a

director of the Company. In addition, during the seven months

ended June 30, 2003, the Company incurred charges of $34,085

(year ended November 30,2002 - $1,579,330) relating to online

network infrastructure costs (computer software and hardware of

$nil (year ended November 30, 2002 - $415,693)), consulting of

$32,013 (year ended November 30, 2002 - $1,159,515) and related

expenses of $2,072 (year ended November 30, 2002 - $4,122) from

a company related by way of a director in common.

bridges.com inc.bridges.com inc. we have audited the consolidated balance sheets of bridges.com inc....

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