**UNITED
STATES SECURITIES AND EXCHANGE COMMISSION**


WASHINGTON,
D.C. 20549





**FORM
10-KSB**





**x  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE**


**SECURITIES
EXCHANGE ACT OF 1934**





For the
fiscal year ended December 31, 2004.





or





**o  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE**


**SECURITIES
EXCHANGE ACT OF 1934**





For the
transition period from ____________ to ______________.





*Commission
File Number 1-16187*





**THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY**





(Exact
name of registrant as specified in its charter)





DELAWARE
    
    98-0215787(State
      or other jurisdiction of incorporation or organization)
    
    (I.R.S.
      Employer Identification No.)








**21098
BAKE PARKWAY, SUITE 100**


**LAKE
FOREST, CALIFORNIA 92630-2163**


(Address,
including zip code, of principal executive offices)





(949)
470-9534


(Registrant's
Telephone Number, Including Area Code)





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





Securities
registered under to Section 12(g) of the Exchange Act:


Common
Stock, $0.0001 par value.


(Title of
Class)





Check
whether the Registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No o





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 to Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. o





Registrant’s
revenues for its fiscal year ended December 31, 2004: $569,514.





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant 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: $3,644,344.40 (based on
the average of the high ask and low bid prices, respectively, of the
Registrant’s common stock as reported on the OTC Bulletin Board on April 8,
2005, of $1.70 per share).





As of
April 12, 2005, there were outstanding an aggregate of 8,760,221 shares of
the Registrant's Common Stock, par value $0.0001 per share.





**DOCUMENTS
INCORPORATED BY REFERENCE**





Certain
portions of the Registrant's Information Statement for its 2005 Annual Meeting
of Stockholders (the “Information Statement”), to be filed with the Securities
and Exchange Commission within 120 days after the close of the fiscal year ended
December 31, 2004, are incorporated by reference into Part III of this Annual
Report on Form 10-KSB.





Transitional
Small Business Disclosure Format (Check one): Yes o No x














**THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY**





**FORM
10-KSB**





TABLE OF
CONTENTS





PART
      IItem
      1.
    Description
      of Business
    3Item
      2.
    Description
      of Properties
    8Item
      3.
    Legal
      Proceedings
    8Item
      4.
    Submission
      of Matters to a Vote of Security Holders
    8PART
      IIItem
      5.
    Market
      for Common Equity and Related Stockholder Matters
    9Item
      6.
    Management's
      Discussion and Analysis or Plan of Operation
    10Item
      7.
    Financial
      Statements
    18Item
      8.
    Change
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
    18Item
      8A.
    Controls
      and Procedures
    19Item
      8B.
    Other
      Information
    19PART
      IIIItem
      9.
    Directors,
      Executive Officers, Promotors and Control Persons; Compliance With Section
      16(a) of the Exchange Act
    20Item
      10.
    Executive
      Compensation
    20Item
      11.
    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
    20Item
      12.
    Certain
      Relationships and Related Transactions
    20Item
      13.
    Exhibits
      and Current Reports on Form 8-K
    20Item
      14.
    Principal
      Accountant Fees and Services
    21Signatures
    22Financial
      Statements
    F-1




****


**EXPLANATORY
NOTE**





As used
in this report the terms “the Company,” “we,” “us,” “our,” or “Bluebook” refer
to The Bluebook International Holding Company (“Bluebook Holding”) and our
wholly-owned subsidiary, The Bluebook International, Inc., a Nevada corporation
(“Bluebook International”).







1











**CAUTIONARY
STATEMENT ABOUT FORWARD-LOOKING INFORMATION**





Some of
the information in this report may contain forward-looking statements. These
statements call be identified by the use of forward-looking words such as “may,”
“expect,” “anticipate,” “estimate,” “continue” or other similar words. These
statements discuss plans, goals and objectives for future operations and growth,
contain projections of results of operations or financial condition or state
other “forward-looking” information. You should understand that these
forward-looking statements are estimates reflecting our judgment, not guarantees
of future performance. They are subject to a number of assumptions, risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements. The following important
factors, in addition to those discussed in “Risk Factors” and other unforeseen
events or circumstances, could affect our future results and could cause those
results or other outcomes to differ materially from those expressed or implied
in our forward-looking statements: general economic conditions; competition; our
ability to control costs; changes within our industries; release of new and
upgraded products and services by us or our competitors; development of our
sales force; employee retention; managerial execution; legal and regulatory
issues; changes in accounting policies or practices; and successful adoption of
our products and services.





Accordingly,
you should not place undue reliance on forward-looking statements, which speak
only as of the date of this report. All subsequent written and oral
forward-looking statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by the cautionary statements contained
or referred to in this section. We do not undertake any obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date of this report or to reflect the occurrence of
unanticipated events.





2








**PART
I**





**ITEM
1. DESCRIPTION OF BUSINESS**





**GENERAL**





We
develop, market, and sell THE BLUEBOOK (book) and software solutions and
information services to the insurance and related industries. Our software
solutions and services automate, integrate, manage and quicken claims processing
and communication among participants in claims handling and underwriting
processes. Bluebook Holding conducts virtually all of its business through its
wholly owned subsidiary, Bluebook International.




Our
mailing address and executive offices are located at 21098 Bake Parkway, Suite
100, Lake Forest, California 92630-2163. Our telephone number is (949) 470-9534.
Our corporate website is www.bluebook.net. Information contained on the website
is not a part of this report.




**BACKGROUND**




Bluebook
Holding was originally incorporated as Gama Computer Corporation in Delaware on
December 18, 1997. Gama Computer Corporation was formed for the purpose of
selling web site hosting, web site domain name registration and internet
telecommunications services to Spanish speaking businesses and individuals in
the southwestern United States, Mexico and other Central and South American
countries.





Gama
Computer Corporation had not realized any revenue from its initial business plan
and had incurred a substantial working capital deficit. At that time, Gama
Computer Corporation had nominal business activities and could be considered a
“shell company.”  Gama Computer Corporation entered into an Agreement and
Plan of Merger, dated September 24, 2001 (the “Merger Agreement”) with Andrew
Hromyk, its executive officer and majority stockholders, Bluebook Acquisitions
Corp., a Nevada corporation and a wholly-owned subsidiary of Gama Computer
Corporation (“Gama Sub”), Bluebook International, Inc., a Nevada corporation
(“Target”), and Target’s stockholders, Mark A. Josipovich, Daniel T. Josipovich,
Daniel E. Josipovich and Dorothy E. Josipovich (collectively, the “Target
Stockholders”).





Target
was incorporated in Nevada on December 5, 2000, succeeding operations that began
in 1964 by Daniel E. Josipovich and Dorothy E. Josipovich, its sole proprietors,
under the trade name “The Bluebook of Cleaning, Reconstruction and Repair Costs”
and related names. Daniel E. and Dorothy E. Josipovich had sold all of the
assets of their business, including the publication known as “The Bluebook of
Cleaning, Reconstruction and Repair Costs,” a web-based version of the book
known as “The Bluebook Estimating Systems Technology,” the software technology
known as “B.E.S.T.Net” and the intellectual property, license agreements and
goodwill associated with their business to Target on September 15, 2001.





The
Merger Agreement provided for Gama Computer Corporation’s purchase from the
Target Stockholders of all of the issued and outstanding capital stock of Target
in exchange for the issuance of an aggregate of 32,700,000 shares of Gama
Computer Corporation’s authorized but unissued common stock. As a result of the
merger, Target merged with and into Gama Sub. Gama Sub survived the merger and
changed its name to The Bluebook International, Inc., the entity we refer to in
this report as “Bluebook International.” Target’s Stockholders acquired an
aggregate of 32,700,000 shares of Gama Computer Corporation’s common stock in
exchange for all of the outstanding common stock of Target and Mr. Hromyk
returned to treasury 19,200,000 shares of Gama Computer Corporation’s common
stock. The shares of Gama Computer Corporation’s common stock acquired by the
Target Stockholders represented approximately 84.4% of Gama Computer
Corporation’s common stock issued and outstanding after the consummation of the
exchange. The closing of the transaction was effective on October 1,
2001.





The
merger allowed Target to become a wholly-owned subsidiary of Gama Computer
Corporation, a publicly held shell company, without having to pursue the
traditional registration process. From and after the closing of the merger, our
principal asset became, and has continued to be, Bluebook International. On
November 6, 2001, Gama Computer Corporation changed its name to The Bluebook
International Holding Company.





**PRODUCTS
AND SERVICES**





The
principal business of the Company has been developing and selling THE BLUEBOOK
(The Bluebook of Cleaning, Reconstruction and Repair Costs) and B.E.S.T.
(Bluebook Estimating Software Technology). THE BLUEBOOK is a book and is printed
in both a desktop and pocket sized format. It contains average unit cost pricing
information for residential structures and is utilized within the insurance,
construction and related industries. In 1982, we introduced our estimating
software program B.E.S.T. which incorporates THE BLUEBOOK’s proprietary database
and allows subscribers to retrieve unit cost pricing information to calculate
repair and replacement cost estimates and to file claims
electronically.





The
Company is currently developing B.E.S.T.Net and B.E.S.T.Central, which are
web-based cost estimation and claims management software solutions that are
designed to assist in the facilitation of insurance claims information in a near
paperless environment. These products have been substantially completed and the
Company is currently constructing an enhanced interface between B.E.S.T.Central
and the tie-in with B.E.S.T.7.5





3


We
believe our software solutions will help insurers mitigate losses and assist in
the direct delivery of information to the required participants (e.g. adjusters,
contractors, inspectors, attorneys, independent experts, etc.). Our solutions
were designed to more accurately price, process and manage the underwriting and
claims process. We believe that the future market for underwriting and claims
management solutions will be lead by the providers of products that simplify the
management of this process and significantly reduce risk associated with carrier
non-compliance and underinsurance. Therefore, our initiatives are aimed at
making it easier for among others, insurers, policyholders, adjusters and
contractors to communicate and do business in a near-paperless environment.





According
to PriceWaterhouse Coopers, insurance providers recognize that web-enabling
their businesses will make it possible to deliver a faster, simpler, more
transparent customer experience at a significantly lower cost. According to a
joint survey issued by PriceWaterhouse Coopers and the Economist Intelligence
Unit, more than 150 leading insurance companies worldwide expect to increase
their spending on e-business technology by 89% per company over the next three
years.





We
believe our principal software solutions will expand the size and scope of our
target markets and enhance our revenue potential. These software solutions may
open up many new options for the utilization of our software solutions as an
installed or a remotely accessed (via the Internet) software solution.





*THE
BLUEBOOK*





Since
1964, THE BLUEBOOK has been a reference for the insurance, cleaning,
construction, reconstruction, repair and service industries. THE BLUEBOOK
contains average unit costs pricing for residential structures that is utilized
specifically within the insurance, construction and related industries. It is
printed in both a desktop and pocket sized format. THE BLUEBOOK is utilized by
professionals in the insurance repair and related industries that create cost
estimates for residential structures and light commercial structures, such as
stores that make up a strip mall that use many of the same materials that are
used in residential construction. THE BLUEBOOK is an annual publication that is
updated annually in the paper format. The retail cost of the desk edition 8.5” x
11” version is $89.95 and the retail cost of the pocket edition is $42.95. Both
products are discounted for volume purchases of greater than 5 books.





*B.E.S.T.7.5*





B.E.S.T.7.5
is a stand alone, residential and light commercial estimating software solution
for use on desktops, laptops, pen-based units and the Tablet PCs. B.E.S.T.7.5 is
scalable for multi-user environments and contains Bluebook’s proprietary
database, training tutorial and estimating engine. B.E.S.T.7.5 provides the
estimator with automated industry specific tools, such as board feet
calculators, roofing calculators, automated time and material calculators, to
estimate repair cost of damage for various residential structures and light
commercial structures, such as stores that make up a strip mall that use many of
the same materials that are used in residential construction. The cost of our
B.E.S.T.7.5 software solution can range from $1,595 to $2,495 per license with a
20% maintenance fee due annually.





*B.E.S.T.8*





The
B.E.S.T.8 product is the Company’s Internet integrated release. The plans are to
complete this product in two phases. The first phase release will include
enhancements of the estimating features of B.E.S.T.7.5 and it will allow for
claims estimates and data to be delivered via the Internet using almost any
email program. The first phase is expected to be released in the second
quarter of 2005. The second phase release is being designed to include an
enhanced and integrated web-based access and delivery system where vendors (e.g.
contractors, estimators, independent adjustors, etc.) can access the solution
via the Internet without having to install the solution on a local hard drive.
B.E.S.T.8 will use a synchronization technology to upload the estimate
information for extraction into our software solutions B.E.S.T.Central or
B.E.S.T.Net (described below). B.E.S.T.Central and B.E.S.T.Net are hosted on a
server such that vendors with access to the Internet and valid access to these
software solutions via a license through an insurance carrier, can access the
estimates provided by B.E.S.T.8. Like our B.E.S.T.7.5 software solution, the
cost of our B.E.S.T.8 software solution can range from $1,595 to $2,495 per
license with a 20% maintenance fee due annually. The delivery date of this
software solution is expected to be the second or third quarter of 2005.





The
Company is currently developing B.E.S.T.Net and B.E.S.T.Central, which are
web-based cost estimation and claims management software solutions that are
designed to assist in the facilitation of insurance claims information in a near
paperless environment. These products have been substantially completed and the
Company is currently constructing an enhanced interface between B.E.S.T.Central
and the tie-in with B.E.S.T.7.5
 
 With
respect to both our B.E.S.T.7.5 and B.E.S.T.8 products, our customers purchase
licenses to use our B.E.S.T.7 and/or B.E.S.T.8 software for one year from the
date of purchase. Each year, our customers have the option to subscribe to a
support contract whereby the Company provides product upgrades and pricing
updates, including providing the customer access to certain technology updates
to keep current with new Microsoft Windows required drivers. In addition to THE
BLUEBOOK, B.E.S.T.7.5 and B.E.S.T.8, we offer the following principal software
solutions:





*Labor
and Materials Database*





Bluebook
has built a Labor, Material and Equipment database for the cleaning, repair and
replacement of residential structures to include probable depreciation for many
thousands of types of materials. This database is built into our software
solutions and is used to estimate the cost of cleaning, repair and replacement
of a residential structure including, in most cases, the average material
depreciation.








4


*B.E.S.T.Net
and B.E.S.T.Central*





B.E.S.T.Net
delivers insurance claims electronically to adjusters and insurer selected
claims professionals. It centralizes claims information for easy access via the
web in a standard file format that can be utilized across multiple platforms.
B.E.S.T.Net integrates with B.E.S.T.Central and delivers and manages claims
information electronically via the web to claims professionals who are
authorized to do the work and finalize the claim. B.E.S.T.Net and
B.E.S.T.Central were designed to provide the insurer and the vendor (e.g.
contractor, subcontractor, estimator, independent adjuster, etc.) with the
ability to access, edit and assign insurance claims electronically in order to
reduce the amount of paper intensive processing and delays in the delivery of
information to required participants in the claims process. B.E.S.T.Net and
B.E.S.T.Central are each sold on a case by case basis and priced based on a
number factors, including the following: volume, term of commitment, service
levels required or purchased, amount of information purchased, number of
features or modules purchased, area of the country where support would be
administered, training requirements, costs of selected maintenance level
agreement, deployment and setup costs.




*InsureBASE*




InsureBASE
is an automated residential property information solution that provides
information in an automated format in all of the following four categories:
replacement cost calculation, assessment and financing history, current market
value, as well as information on comparable neighboring properties.
InsureBASE **** provides
a replacement cost for a residence within seconds, along with its current market
valuation, property characteristics, and an array of neighborhood and other
underwriting information. It uses THE BLUEBOOK data to estimate the replacement
cost of a residential structure less the cost of the land to help insurers and
homeowners calculate the replacement cost of a single family structure. By
automating the entry of data fields (e.g., number of bedrooms, bathrooms, square
feet, number of stories, etc.) as provided by First American Real Estate
Solutions, L.P., this system can calculate replacement cost for residential
properties throughout the United States. InsureBASE is delivered via the
Internet to insurers, adjusters, agents and other related insurance
professionals involved in the insurance claims and underwriting process. We
believe that this product can minimize underinsurance and reduce liability by
insuring residential properties to proper insurance levels covering the insured
in the event of a total loss. The Company completed development of InsureBASE in
November of 2004 and is currently marketing and selling the solution. InsureBASE
is sold on a case by case basis and priced based on the same factors discussed
above under B.E.S.T.Net and B.E.S.T.Central.




*Insure
To Value*




Insure to
Value uses the same software and Bluebook database as InsureBASE, however, it
does not include the automation of data fields. Insure to Value can generate a
replacement cost, however, the general property information, (e.g. number of
bedrooms, bathrooms, square feet, number of stories, etc.) has to be entered
manually by the user. Every time a customer uses Insure to Valve, they incur a
transaction fee that can range from $9.95 to $19.95.




*B.E.S.T.
HIU (Home Inspection Underwriting)*




HIU is a
solution that was developed to incorporate the functionality required by
insurers to easily monitor and manage, through the use of mobile devices, the
inspection process in the field from the office, as well as the underwriting
process in the office (including the automated Replacement Cost Calculations
delivered from InsureBASE) from the field. HIU is a comprehensive,
automated solution that was designed to assign, dispatch and deliver electronic
inspection information to and from the field utilizing various mobile devices.
HIU is sold on a case by case basis and priced on the same factors discussed
above under B.E.S.T.Net and B.E.S.T.Central.








**STRATEGIC
PARTNERS**





We work
with the industry-leading companies described below to facilitate the
development and marketing strategy of our technologies, products and services.
To our knowledge, with respect to each of our partners, we are currently the
only partner they have that provides software solutions for underwriting, claims
facilitation, management, auditing and estimating.





*Microsoft*





We are
part of a Microsoft initiative in the financial services industry called the
Insurance Value Chain, or IVC. We are also a Microsoft Certified Partner which
requires the company to have qualified personnel with certain credentials from
Microsoft in the installation, use and training of their solutions. The IVC is
being marketed and promoted through Microsoft and its community of partners that
work today with the insurance industry. The IVC was developed by Microsoft as
part of a plan to deliver integrated insurance solutions to the insurance
industry. The IVC technologies intend to deliver scalable, enterprise-level,
ready software solutions that significantly reduce the time it takes to
implement solutions in the insurance industry thereby producing faster return on
insurer investment and provide alternative solutions for existing in-place
technology that often limits modernization. Other partners of the value chain
include: EDS, Avenade, Hewlett Packard and other Microsoft partners and invited
participants that play an active role in the deployment, implementation,
integration and support of IVC partner products and services. We are the only
company in the IVC to provide software solutions for underwriting, claims
facilitation, management, auditing and estimating. We entered into a royalty
license and distribution agreement with Microsoft pursuant to which we may
integrate and redistribute Microsoft products with our solutions.





5


*Hewlett-Packard*





We have
an agreement with Compaq (which was subsequently acquired by Hewlett-Packard,
Inc.), to jointly promote our B.E.S.T.Net and B.E.S.T.Central software solutions
on Compaq’s technology and services. Compaq promotes our products to its
insurance customers through its existing insurance related sales, marketing and
distribution channels. Compaq can also provide assistance with deployment,
implementation, integration and support.





*Basis100*





Basis100
Corporation (acquired by the First American Real Estate Solutions, L.P.) and
Bluebook jointly launched InsureBASE in late 2003, a software solution that
integrates with Bluebook’s replacement cost calculator and Basis100’s automated
property valuation technology, or AVM. Basis100 is a software solutions provider
for the financial services industry. By combining technologies, this scalable
underwriting analytical tool can assist with mitigating risks associated with
determining and maintaining accurate replacement cost values for residential
purposes.





*Intuit*





Our
B.E.S.T.7.5 field estimating software integrates with Intuit’s Quickbooks
accounting software program. We are one of Intuit’s partners in the construction
and insurance industries.





**SERVER
CAPACITY**





Our
software solutions are mostly internet based and provide customers with the
ability to access and process information over the internet. To ensure that our
server capacity is sufficient to handle the flow of traffic that is generated
with the sales of our software solutions, prior to deployment of any new client
contracts, we analyze the necessary bandwidth and hardware needed to properly
deploy the new client and its user base. We add the appropriate amount of
hardware and bandwidth for each new customer prior to deploying. In this way, we
have the proper amount of equipment and bandwidth for successful deployments.





**DISTRIBUTION**





We market
and sell THE BLUEBOOK and B.E.S.T.7.5 products primarily through the mail,
conventions and the Internet using the interactive sales tool on Microsoft’s
terminal services solution. We market and sell to vendors in the insurance,
construction and related markets (e.g. independent adjusters, appraisers,
inspectors and repair service providers) and others that may be involved in the
restoration, repair or replacement of a residential structure, including
contents replacement, business interruption, additional living expenses and
temporary housing. We target these clients via mail lists purchased by the
Company or provided by insurance carriers, clients and customers. Microsoft’s
terminal services solution, the Windows Terminal Server, enhances our ability to
demonstrate the capabilities of our software solutions without actual
installation of the software solutions. When users run an application on the
Windows Terminal Server, the application execution takes place on our server,
and only keyboard, mouse and display information is transmitted over the
network.





B.E.S.T.Central
and B.E.S.T.Net will be sold by direct, on-site demonstrations or by authorized
partners and resellers, which include any persons or entities, such as book
stores or industry specific retailers, who agree to sell our products.
Permission for on-site demonstrations come with an invitation from the potential
client either by phone or on-site. If the client grants permission for an
on-site demonstration or a live demonstration via the internet, the sales
representative provides a web site address where the potential client can view
the software. The process for the delivery of these software solutions usually
requires a demonstration and a response to a Request for Proposal. A Request for
Proposal is a questionnaire that a potential client or managing organization
provides to a select group of vendors questioning each vendor as to the specific
capabilities of such vendor’s solution(s) and whether such solution(s) provide
the capabilities the client requires. Potential clients may also require a Proof
of Concept, which entails the use of the solution by a much smaller group of
potential client users such that the users can test the solution and validate
its capabilities or shortfalls.





Independent
vendors such as policyholders, contractors and sub-contractors who desire to
utilize B.E.S.T.Central and B.E.S.T.Net to electronically receive assignments,
will be able to purchase a compatible license to B.E.S.T.Central or use a portal
connection or an integrated version of the installed B.E.S.T.8 software.
Customers of B.E.S.T.Central and B.E.S.T.Net may also elect to send assignments
via email to independent vendors who do not purchase a compatible license to use
the software. Currently users that have an Internet connection receive software
updates and upgrades over the Internet using an “automatic update” feature
included in the software. Users who do not have an Internet connection, or do
not wish to receive updates via the Internet, receive updates quarterly by
delivery of a compact diskette as long as they remain on the upgrade plan. We
plan to continue to sell and deliver software updates and upgrades using the
Internet or by delivery of a compact diskette.





THE
BLUEBOOK and our software solutions are sold throughout the United States and
Canada. The Company has built thousands of variance tables that cover most
cities across the United States and Canada, each containing a multitude of data
elements that have been researched over the past forty years. Through the use of
these variance tables, we are able to extract pricing information that accounts
for the locality differences in repair and supply cost.





6


**CUSTOMERS**





Our
existing base of users of THE BLUEBOOK includes thousands of insurance
companies, contractors and service providers. We continue our sales of THE
BLUEBOOK and also have several hundred installations of our B.E.S.T.7.5
estimating software solution. We have two customers of InsureBASE and expect to
demonstrate, test and sell B.E.S.T.Net and B.E.S.T.Central to our existing and
new client base through direct sales and our strategic partners.





We expect
these arrangements to lead to licensing of our software solutions. We are in
discussions or have signed proof of concept agreements with several insurance
carriers and providers for the use of InsureBASE, B.E.S.T.7.5, B.E.S.T.Net or
B.E.S.T.Central products. Currently we are not dependent on one or a few major
customers.





**DEVELOPMENT
OF PRODUCTS** ****





The
industry in which we compete is subject to rapid technological developments,
evolving industry standards, changes in customer requirements and new product
introductions. As a result, our success depends, in part, on our ability to
continue to enhance our existing software solutions and to develop and introduce
new software solutions that improve performance and reduce total costs
associated with the insurance claim process. We have invested significantly in
product development. We continue to enhance and extend our products and to
increase the efficiency, performance and management capabilities of our data,
estimating, underwriting and claims management solutions.





The
Company has built thousands of variance tables that cover most cities across the
United States and Canada containing a multitude of data elements that have been
researched over the past forty years. The Company has automated access to many
of the data elements. Information for other data elements are gathered from
phone research and feedback from our users.





For the
year ended December 31, 2004, we invested approximately $563,000 in development
of our products, respectively. Funds for these investments came from revenues
from operations, loans from officers and investors and private placements of our
common stock. These costs were primarily for the development of our B.E.S.T.7.5,
B.E.S.T.8, B.E.S.T.Net, B.E.S.T.Central and InsureBASE products. We expect to
maintain our high level of investment in development of products. Once the
development of B.E.S.T.Net and B.E.S.T.Central is complete, we expect our
development costs to decrease.





**COMPETITION**





We
believe our primary competition for our software solutions is from Xactware,
Inc., Marshall & Swift and Simsol Software, Inc. Our primary competition for
THE BLUEBOOK is from RS Means Engineering and the Craftsman Book Company.





As the
market for our products evolves, additional technologies may become available
for estimating, underwriting, and claims management and processing. Software
companies, insurance companies or other companies may develop competitive
products. To the extent that these products provide the ability to integrate
information from, among other participants, the agent, insurer, administrator,
vendor and supplier into the end-to-end process, they may compete with our
current and future products. We believe the competitive factors in this market
include product performance and features, product reliability, price, ability to
meet delivery schedules, customer support and technical support.





Although
we have an advantage over our competitors by having access to our proprietary
data and processes, some of
our competitors have significantly greater human and financial resources. As a
result, these competitors could adopt more aggressive pricing policies and
devote greater resources to the development, promotion and sale of their
products. These advantages could allow them to respond more quickly to changes
in customer and market requirements. In addition, some of our competitors may be
able to leverage their existing relationships to discourage these customers from
purchasing additional products from us. These competitors may also be able to
persuade our customers to replace our products with their products. Increased
competition may result in reduced product prices, lower gross margins, reduced
profitability and reduced market share. There can also be no assurance that we
will be able to compete successfully against current or future competitors or
that current or future competitive pressures will not materially harm our
business. See “Management’s Discussion and Analysis or Plan of Operation - Risk
Factors.”





**INTELLECTUAL
PROPERTY AND ROYALTIES**





We rely
on a combination of trademarks, copyrights and trade secrets that we have used,
in some cases, for over forty years. We also rely on confidentiality agreements
and other contractual restrictions with employees and third parties to establish
and protect our proprietary rights. Despite these precautions, the measures we
undertake may not prevent infringement of our proprietary technology and data.
These measures may not preclude competitors from independently developing
products with functionality or features similar to our products. We currently do
not hold any patents for our software products.





We may
receive in the future notice of claims of infringement of other parties’
proprietary rights. Infringement or other claims could be asserted against us in
the future, and it is possible that past or future assertions could harm our
operations and financial condition. Any such claims, with or without merit,
could be time-consuming, result in costly litigation and diversion of technical
and management personnel, cause delays in the development and release of our
products, or require us to develop non-infringing technology or enter into
royalty or licensing arrangements. Such royalty or licensing arrangements may
require us to license back our technology or may not be available on terms
acceptable to us, or at all. For these reasons, infringement claims could
materially harm our business. See “Management’s Discussion and Analysis or Plan
of Operation - Risk Factors.”





7


As part
of the Amended and Restated Asset Purchase and Sale Agreement, dated September
15, 2001, we are obligated to pay a royalty to Daniel E. Josipovich and Dorothy
E. Josipovich, co-founders of our business, in the amount of 6% of net revenue,
defined as the aggregate of all gross revenues, sales, and receipts of whatever
nature or kind received by us, less any returns, rebates, discounts, allowances
rejections and credits, and less the actual out-of-pocket costs and expenses
incurred, other than depreciation, reserves, taxes, interest and extraordinary
expenses. The royalty is to be paid in perpetuity. As of December 31, 2004,
under the above definition, we had negative net revenue, therefore no royalty
expenses were accrued.





Bluebook
for Adjusters & Contractors, DeeJay Adjusting and Bluebook of Cleaning,
Reconstruction and Repair Costs (including logos) are our trademarks. We further
claim trademarks for B.E.S.T., B.E.S.T.Net, Insure to Value, InsureBASE and
B.E.S.T.Central. We also own the following copyrights:





—
    Adjuster/Contractor
      Bluebook Southern California Edition, (C) 1979;





—
    “New”
      Bluebook for Adjusters & Contractors, (C) 1981;





—
    The
      Bluebook for Agents, Adjusters and Contractors, (C) 1981, 1984;





—
    Bluebook
      Estimating Systems Technology, (C) 1982;





—
    The
      Bluebook of Cleaning, Reconstruction and Repair Costs, (C) 1989, 1997,
      1999; and





—
    The
      Bluebook of Cleaning, Reconstruction and Repair Costs, Pocket Editions,
      (C) 1989, 1999, 2000, 2001, 2002, 2003 and 2004.





**EMPLOYEES**





As of
April 12, 2005, we had nine full-time employees. We currently do not have
any part-time employees. No employees are represented by a labor union. We have
not experienced any work stoppages and consider our relations with employees to
be good. Competition for technical employees in the software industry continues
to be significant. We believe that our success depends, in part, on our ability
to hire, assimilate and retain qualified personnel. We cannot assure you that we
will continue to be successful at hiring, assimilating and retaining employees
in the future.





**ITEM
2. DESCRIPTION OF PROPERTY**





Our
principal administrative, sales and marketing, customer support, and research
and development facilities are located in approximately 3,732 square feet of
leased office space in Lake Forest, California. We lease this office space from
Cal-West Industrial Properties, LLC, a California limited liability company. In
September 2004, we entered into a new lease agreement for this office space. The
lease will expire in September 2005 at which time it may be extended for renewal
in successive one year terms. The monthly base rent for our current facility for
year one is $4,441.08, and thereafter, we must pay as additional rent, our
proportionate shares of expenses and taxes, initially estimated to be $1,418.16
per month.





We do not
have any policies with respect to investments in real estate or interests in
real estate, real estate mortgages or securities of or interests in persons
primarily engaged in real estate activities.





**ITEM
3. LEGAL PROCEEDINGS**





As of
April 12, 2005, we are not subject to any pending legal proceedings that would
be deemed material to our business. From time to time, we may be subject to
certain routine litigation that is incidental to our business.




On
February 3, 2003, Bluebook was named a defendant in Morris Diamond, et al. v.
The Bluebook International Holding Company, New York Supreme Court, Monroe
County Case No. 1204/03. The Diamond case was recently settled by the Company
and the plaintiffs. In the Diamond case, plaintiffs alleged that Bluebook
wrongfully withheld the issuance and delivery of plaintiffs’ shares of Bluebook
common stock, thereby damaging plaintiffs in the loss of the value of their
Bluebook stock. On November 10, 2004, the Company and the plaintiffs entered
into a settlement agreement pursuant to which all parties agreed to a general
release of their claims and the Company agreed to pay $64,120 and issue 3,000
shares of common stock to certain of the plaintiffs.




On April
24, 2003, Cotelligent, Inc. filed a demand for arbitration against Bluebook in
Case No. 731310018503 ARC, asserting a claim for breach of contract arising out
of a consulting services agreement between Cotelligent and Bluebook. Bluebook
filed cross-claims on May 29, 2003. Effective as of May 3, 2004, Bluebook and
Cotelligent agreed to a mutual settlement of the entire arbitration pursuant to
a Settlement Agreement. Under the terms of the Settlement Agreement, Cotelligent
converted all of its approximately 5.3 million shares of Bluebook Series C
Preferred Stock into shares of Bluebook common stock on a one-for-one basis.
These shares represent 265,835 shares of the Company’s common stock, which
amount has been retroactively stated to reflect the 1 for 20 reverse stock split
declared on November 17, 2004. In addition, Cotelligent agreed to deliver source
code developed by Cotelligent for Bluebook pursuant to the consulting services
agreement.







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





No
matters were submitted to a vote of security holders during the fourth quarter
of fiscal year 2004.








8











**PART
II**





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





*Common
Stock Prices*




Our
common stock is quoted on the OTC Bulletin Board under the symbol “BBKH.” The
following table sets forth the high and low bid information of the common stock
for the quarters indicated as quoted on the OTC Bulletin Board.




**2003**
    
    **2004(1)****High**
    
    **Low**
    
    **High**
    
    **Low**First
      Quarter
    
    $
    22.00
    
    $
    6.00
    
    $
    8.00
    
    $
    2.20Second
      Quarter
    
    $
    15.00
    
    $
    0.20
    
    $
    5.00
    
    $
    2.40Third
      Quarter
    
    $
    16.00
    
    $
    1.20
    
    $
    6.00
    
    $
    1.00Fourth
      Quarter
    
    $
    13.00
    
    $
    1.00
    
    $
    5.01
    
    $
    0.80


——————


(1) Trading
under ticker symbol BBIC through November 22, 2004 and under ticker symbol BBKH
thereafter.




The
source of the above high and low bid information is the Yahoo! Finance website
at http://finance.yahoo.com. The above quotations represent prices between
dealers without adjustments for retail markups, markdowns or commissions and may
not represent actual transactions. The stock prices above have been
retroactively stated to reflect the 1 for 20 reverse stock split declared on
November 17, 2004.




According
to the records of our transfer agent, we had 187 stockholders of record of
our common stock at April 12, 2005.




*Dividend
Policy*





We have
never declared or paid any cash dividends on our capital stock and do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. We currently expect to retain future cash flows to finance our
operations and fund the growth of our business. Any payment of future dividends
will be at the discretion of our Board of Directors and will depend upon, among
other things, our earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions in respect to the payment of dividends
and other factors that our Board of Directors deems relevant.





*Recent
Sales of Unregistered Securities*





We have
issued the following unregistered securities during the period covered by this
report.





On April
24, 2003, Cotelligent, Inc. filed a demand for arbitration against Bluebook in
Case No. 731310018503 ARC, asserting a claim for breach of contract arising out
of a consulting services agreement between Cotelligent and Bluebook. Bluebook
filed cross-claims on May 29, 2003. Effective as of May 3, 2004, Bluebook and
Cotelligent agreed to a mutual settlement of the entire arbitration pursuant to
a Settlement Agreement. Under the terms of the Settlement Agreement, Cotelligent
converted all of its approximately 5.3 million shares of Bluebook Series C
Preferred Stock into shares of Bluebook common stock on a one-for-one basis.
These shares represent 265,835 shares of the Company’s common stock, which
amount has been retroactively restated to reflect the 1 for 20 reverse stock
split declared on November 17, 2004.




In
September 2004 the Company issued a total of 57,775 shares of privately placed
common stock in settlement of debts totaling $83,930 to Peter Johnson, Peter
Davidson, Julia Sugityo, Steve Byrne, Clint Lien, Keith Klein, Lawrence Rogers
and Mike Kenney, consultants and employees of the Company who provided
consulting services relating to programming (coding), database modeling and
design, budgeting and forecasting models, internal accounting, artwork design,
creation, marketing of THE BLUEBOOK and our B.E.S.T.7.5 software, and
employee recruiting, development and review. In September 2004, the Company also
issued 10,000 shares of privately place common stock in partial settlement of a
$30,000 loan from Robert Dewar.





In
October 2004, the Company issued a total of 2,733,333 shares of common stock
upon conversion of the Company’s outstanding 2,050 shares of Series B
Convertible Preferred Stock held by Daniel E. and Dorothy E. Josipovich in the
name of The Freedom Family, LLC. Also in October of 2004, the Company
issued:





Ÿ
    354,505
      shares of common stock in settlement of $265,879 of debt owed to Mark A.
      Josipovich;





Ÿ
    477,484
      shares of common stock in settlement of $358,113 of debt owed to Daniel T.
      Josipovich;





Ÿ
    242,167
      shares of common stock in settlement of $181,625 of debt owed to Daniel E.
      Josipovich;





Ÿ
    157,560
      shares of common stock in settlement of $118,170 of debt owed to Michela
      Josipovich;




Ÿ
    126,116
      shares of common stock in settlement of $94,587 of debt owed to Brian
      Jones; and





Ÿ
    30,000
      shares of common stock in settlement of $22,500 of debt owed to Robert
      Dewar.





9


On
November 17, 2004, the Company declared a 1 for 20 reverse stock split. All
share and per share amounts have been retro-actively restated as if the reverse
split occurred as of the beginning of the period.





In
November 2004 the Company issued:




Ÿ
    418,074
      shares of common stock to Chris Albrick, a creditor of the Company, in
      settlement of debts totaling $438,978 pursuant to a Convertible Promissory
      Note issued by the Company in August 2004;





Ÿ
    10,000
      shares of common stock to Julia Sugityo in settlement of debts totaling
      $10,000 pursuant to a Share Purchase Agreement dated November 8, 2004;





Ÿ
    306,667
      shares of common stock to Century Capital Management Ltd., a consultant to
      the Company, for consulting services
rendered; and





Ÿ
    3,000
      shares of common stock to Morris Diamond et al. in connection with the
      settlement of litigation




The
Company may issue a warrant to purchase 90,000 shares of common stock at a price
of $1.40 per share to Chris Albrick, a consultant of the Company, as a bonus
payment.




All of
the common stock and warrant issuances discussed above were issued in reliance
upon the exemption from registration provided by section 4(2) of the Securities
Act of 1933 as the securities were offered in private transactions which did not
involve any public offering.





On
December 23, 2004, the Company filed a Form S-8 registration statement
registering the 306,667 shares of common stock, $0.0001 par value per share,
issued to Century Capital Management Ltd., which were offered upon the
terms and subject to the conditions set forth in the Engagement Letter, dated
October 8, 2004, between the Company and Century Capital Management Ltd.





On
November 19, 2004 the Company issued to accredited investors, pursuant to a
Securities Purchase Agreement, 2,131,033 shares of common stock of the Company
and warrants to purchase an aggregate of 426,206 shares of common stock for an
aggregate consideration of $2,237,585. The warrants issued to the accredited
investors have an exercise price of $1.31 per share and are exercisable
immediately. In addition, the Company issued a warrant to purchase 170,482
shares of common stock to the placement agent, Roth Capital Partners, LLC, for
the transactions contemplated by the Securities Purchase Agreement. The warrant
issued to the placement agent has a term of five years, has an exercise price of
$1.15 per share and is exercisable immediately. Our November 19, 2004 issuance
of 2,131,033 shares of common stock and 596,688 warrants to accredited investors
was in reliance upon the exemptions from registration provided by section 4(2)
of the Securities Act of 1933 and on Rule 506 of Regulation D promulgated
thereunder.





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





The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements and supplementary data referred to in this report.





This
discussion contains forward-looking statements that involve risks and
uncertainties. Such statements, which include statements concerning future
revenue sources and concentration, selling, general and administrative expenses,
research and development expenses, capital resources and additional financings,
are subject to risks and uncertainties, including, but not limited to, those
discussed in this report under “Risk Factors,” that could cause actual results
to differ materially from those projected. The forward-looking statements set
forth in this report are as of April 12, 2005, and we undertake no duty to
update this information. See “Cautionary Statement About Forward-Looking
Information” on page 2 of this report.





**Overview**

We
provide proprietary data, software solutions and services that help automate,
integrate, manage and quicken the underwriting and claims process. Our
underwriting solutions with integrated Bluebook data, provide for validation and
automation of structure replacement costs for quoting homeowner insurance
premiums in significantly less time than is common today. These products give
insurance writers greater automation and extend premium quoting and policy
fulfillment through new and existing channels (e.g. banks, mortgage companies,
agents, etc.) allowing them to more easily and cost efficientlyreach
consumers who need insurance.Our
claims solutions deliver paperless claims information to insurance personnel and
directly to the outside service vendors (e.g. contractors, inspectors,
adjusters, repair professionals, among others) through our integrated software
solutions. Our claims solutions provide the insurance carrier with the ability
to electronically track and manage claims from the first report through its
completion.

**Sources
of Revenue**

We
generate revenue by sales of THE BLUEBOOK handbook and software estimating
solutions. We also generate revenue each time a claim or underwriting(premium
replacement cost) transactionis
processed through our software solutions. We provide our own replacement cost
data and also integrate data provided by vendors in order to provide additional
services or automation that is often requested as part of the underwriting
process (e.g. homeowner related hazard data, credit, general public data). We
share our revenues with these vendors as well as with our larger distribution
channel partners, which reduces the percentage of revenues we collect from each
sale. We plan to increase the number of transactions that are processed through
our software solutions and data sales by integrating our software solution into
large distribution channels and insurance carrier systems.

**Outlook
for Our Business**

Our
revenue growth has been and will continue to be dependent on our ability to
increase the number of licences that are sold and transactions that are
processed through our software solutions and our ability to expand the data
services we provide to the insurance and related industries. We have recently
added six new sales professionals, signed recent contracts with insurance
carriers and completed a joint revenue and share agreement for InsureBASE with
the First American Real Estate Solutions Company (FAF:NYSE). We believe these
efforts will increase the number of transactions that are processed through our
software solutions. Our ability to continue this growth will depend on our
ability to sell our technologies and data to insurance carriers and writers,
repair professionals and larger distribution networks who resell our services.

**Operating
Expenses**

Our
personnel expenses are our largest expense and consist of salaries, commissions,
benefit plans and other payroll related costs. Our consultants and personnel
increased from 11 to 21 during the first quarter of 2005. We intend to hire
additional personnel primarily in the areas of sales and marketing,
administrative and development to support our anticipated growth and to
acquire additional market share and penetration.

**Research
and Development**

Research
and development expenses consist of salaries and other costs of employment of
our development staff as well as outside contractors. We plan to increase the
number of personnel and consultants who are working to enhance and fully
integrate our claims and underwriting software solutions in order to provide
increased deliverability and simplified access to our current technology. We
expect this increase in personnel and consultants will result in an increase in
our research and development expenses. We estimate that we will generate
meaningful revenue from our research and development efforts relating to our
claims and underwriting software solutions in the second half of
2005.
**RECENT
EVENTS**


On April
24, 2003, Cotelligent, Inc. filed a demand for arbitration against Bluebook in
Case No. 731310018503 ARC, asserting a claim for breach of contract arising out
of a consulting services agreement between Cotelligent and Bluebook. Bluebook
filed cross-claims on May 29, 2003. Effective as of May 3, 2004, Bluebook and
Cotelligent agreed to a mutual settlement of the entire arbitration pursuant to
a Settlement Agreement. Under the terms of the Settlement Agreement, Cotelligent
converted all of its approximately 5.3 million shares of Bluebook Series C
Preferred Stock into shares of Bluebook common stock on a one-for-one basis.
These shares represent 265,835 shares of the Company’s common stock, which
amount has been retroactively stated to reflect the 1 for 20 reverse stock split
declared on November 17, 2004. In addition, Cotelligent agreed to deliver source
code developed by Cotelligent for Bluebook pursuant to the consulting services
agreement.


In
September 2004 we issued a total of 57,775 shares of privately placed common
stock in settlement of debts totaling $83,930 to Peter Johnson, Peter Davidson,
Julia Sugityo, Steve Byrne, Clint Lien, Keith Klein, Lawrence Rogers and Mike
Kenney, consultants and employees of the Company who provided consulting
services relating to programming (coding), database modeling and design,
budgeting and forecasting models, internal accounting, artwork design,
creation, marketing of THE BLUEBOOK and our B.E.S.T.7.5 software, and
employee recruiting, development and review. In September 2004, we also issued
10,000 shares of privately place common stock in partial settlement of a $30,000
loan from Robert Dewar.





In
October 2004, the Company increased its number of authorized shares of common
stock from 50,000,000 to 150,000,000 shares. The Company subsequently issued
2,773,333 shares of common stock upon conversion of 2,050 shares of Series B
Convertible Preferred Stock, being all of the outstanding shares of Series B
Convertible Preferred Stock. The Company also settled $1,040,874 of debts owed
to certain members of the Company’s management and stockholders through the
issuance of 1,387,833 shares of privately placed common stock at the same
price per share as the Series B Convertible Preferred Stock conversion price
of $0.75 per share, which amount has been retroactively stated to reflect
the 1 for 20 reverse stock split declared on November 17, 2004.





10


Following
the conversion of Series B Convertible Preferred Stock and the settlement of
debts, the Company authorized a one-for-twenty reverse stock split. The reverse
stock split was effective November 17, 2004. All share and per share amounts in
this report have been adjusted to reflect the November 17, 2004 reverse stock
split unless noted.





On
November 19, 2004 the Company issued to accredited investors, pursuant to a
Securities Purchase Agreement, 2,131,033 shares of common stock of the Company
and warrants to purchase an aggregate of 426,206 shares of common stock for an
aggregate consideration of $2,237,585. The warrants issued to the accredited
investors have an exercise price of $1.31 per share and are exercisable
immediately. In addition, the Company issued a warrant to purchase 170,483
shares of common stock to the placement agent for the transactions contemplated
by the Securities Purchase Agreement. The warrant issued to the placement agent
has a term of five years and an exercise price of $1.15 per share and is
exercisable immediately.





Following
this sale, the Company issued:





Ÿ
    418,074
      shares of common stock to Chris Albrick, a creditor of the Company, in
      settlement of debts totaling $438,978 pursuant to a Convertible Promissory
      Note issued by the Company in August 2004;





Ÿ
    10,000
      shares of common stock to Julia Sugityo in settlement of debts totaling
      $10,000 pursuant to a Share Purchase Agreement dated November 8, 2004;





Ÿ
    306,667
      shares of common stock to Century Capital Management Ltd., a consultant to
      the Company, for consulting services rendered;
and





Ÿ
    3,000
      shares of common stock to Morris Diamond et al. in connection with the
      settlement of litigation.




The Company may issue a warrant to purchase 90,000 shares of common stock
at a price of $1.40 per share to Chris Albrick, a consultant of the Company, as
a bonus payment.





On
December 23, 2004, the Company filed a Form S-8 registration statement
registering the 306,667 shares of common stock, $0.0001 par value per share,
issued to Century Capital Management Ltd., which were offered upon the
terms and subject to the conditions set forth in the Engagement Letter, dated
October 8, 2004, between the Company and Century Capital Management Ltd., a
consultant to the Company.





**RESULTS
OF OPERATION**





**COMPARISON OF YEAR ENDED
DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31,
2003**




***Revenues*** . 
Our revenues are derived primarily from sales of our B.E.S.T. software products
and the Bluebook handbook. Net revenues for the year ended December 31, 2004
were $569,514, a decrease of $136,143 or 19% compared with net revenues of
$705,657 for the year ended December 31, 2003. Revenue from sales of B.E.S.T
software products was $412,680 for the fiscal year ended 2004 as compared to
$527,392 for the year ending 2003, a decrease of $114,712 or 22%. Revenue from
sales of THE BLUEBOOK handbook was $144,234 for the year ended 2004 as compared
to $166,548 for the year ended 2003, a decrease of $22,314 or 13%. These
decreases were the result of the Company’s limited cash needed for necessary
marketing and the migration of our traditional publishing and mail delivery
process to a per transaction and online product delivery.




Historically,
sales of THE BLUEBOOK handbook and our B.E.S.T. estimating software were the
principal sources of our revenues.  However, the Company expects revenues
from our new software solutions, Insure to Value, InsureBASE, B.E.S.T.Net and
B.E.S.T.Central, to become the principal sources of our total
revenue.




Although
our revenues are currently not concentrated among a relatively small number of
customers, we expect that a significant portion of our future revenues coming
from sales of our new products, Insure to Value, InsureBASE, B.E.S.T.Net and
B.E.S.T.Central, will come from a relatively smaller number of customers.
Therefore, in the future, the loss of any one significant customer, or a
decrease in the level of sales to any one significant customer, could harm our
financial condition and results of operations.




***Operating
Expenses*** . 
Selling, general and administrative expenses for the year ended December 31,
2004 were $2,291,691, a decrease of $115,137 or 5% compared to $2,406,828 for
the year ended December 31, 2003. Selling, general and administrative expenses
consist primarily of salaries and related expenses for personnel engaged in
marketing and sales, corporate executives, professional fees, corporate legal
expenses, other corporate expenses and facilities expenses. We believe that
continued investment in sales and marketing is critical to the success of our
strategy to expand relationships with our strategic partners and existing base
of users of our products, including insurance companies, contractors and service
providers to the insurance and related industries. We currently anticipate that
selling, general and administrative expenses in fiscal year 2005 will increase.




Depreciation
and amortization was $140,702 for the year ended December 31, 2004, a decrease
of $107,218 or 43% compared to $247,920 for the year ended December 31,
2003.  The decrease was primarily due to a change in the estimated useful
life of our B.E.S.T.7.5 product. Previously,
the net book value of B.E.S.T.7.5  pertaining to the data base was
amortized over 24 months and the net book value of B.E.S.T.7.5  pertaining
to the technology was amortized over 9 months. In December 2004, the Company
decided to change the estimated life of B.E.S.T. 7.5  such that as of
January 1, 2004, the net book value of B.E.S.T.7.5  pertaining to the data
base is amortized over 30 months and the net book value of B.E.S.T.7.5 
pertaining to the technology is amortized over 15 months. In 2005,
we expect our depreciation and amortization to increase as a result of
amortization of our software products B.E.S.T.Net and B.E.S.T.Central, which we
anticipate will start their depreciable life in the second quarter of
2005.




***Net
Loss*** . 
We had a net loss of $1,985,185 for the year ended December 31, 2004, compared
to a net loss of $1,963,771 for the year ended December 31, 2003. The increase
in net loss is primarily attributable to decreased sales.







**LIQUIDITY
AND CAPITAL RESOURCES**





As of
December 31, 2004, we had cash of $1,534,313, a net working capital deficiency
of $92,850 and an accumulated deficit of $9.0 million. We have no material
commitments for capital expenditures as of December 31, 2004. Our cash
requirements for the next twelve months are expected to be approximately $2
million.





As of
April 12, 2005, following the Company’s debt settlements and the private
placement in the fourth quarter of 2004, our total indebtedness was
approximately $1.4 million.





Our 2 005
operations and investment activities have been funded primarily through sales
and cash existing at December 31, 2004. Our 2004 operations and investment
activities were funded primarily through sales, loans from related and
non-related parties, proceeds from our November 2004 private placement and
cash existing at December 31, 2003.





Net cash
used in operating activities during the years ended December 31, 2004
and 2003 were $831,050 and $1,120,154, respectively. This decrease in net cash
used in operating activities was primarily due to an increase in accounts
payable and due to stockholders and related party.





Net cash
used in investing activities was $187,753 for the year ended December 31, 2004
and $465,788 for the same period in 2003. The decrease in cash used for
investing activities was primarily due to the completion of software solutions
and the reduction in development of new software solutions.





11


Net cash
provided from financing activities was $2,508,285 for the year ended December
31, 2004 and $102,000 for the same period in 2003. The increase in cash provided
from financing activities was primarily due to issuance of stocks, net of
commission of $1,902,585 and additional borrowings in the amount of $605,700
during the year ended December 31, 2004. In November, 2004, we converted
$490,700 of such borrowings into 491,409 shares of common stock. We did not
use any proceeds from our November 2004 issuance of privately placed common
stock and warrants to discharge such borrowings.





The
Company has a net loss from operations of $1,985,185 and a negative cash flow
from operations of $831,050 for the year ended December 31, 2004, and has a
working capital deficiency of $92,850 and an accumulated deficit of $8,995,867
as of December 31, 2004. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Without realization of
additional capital, it would be unlikely for the Company to continue as a going
concern.
  The
Company will incur additional software development costs associated with
implementation and deployment of its software and additional improvements and
enhancements to its technology during the course of its business.
 The
Company has a net loss from operations of $1,985,185 and a negative cash flow
from operations of $831,050 for the year ended December 31, 2004, and has a
working capital deficiency of $92,850 and an accumulated deficit of $8,995,867
as of December 31, 2003. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Without realization of
additional capital, it would be unlikely for the Company to continue as a going
concern.
 
 Although
we expect the customer to reimburse costs associated with the delivery of our
software solutions, in some cases, the terms of reimbursement may be included as
part of the product per transaction fee, monthly payment, at terms extended up
to 120 days or may be included as part of the sale of the software. With respect
to our B.E.S.T.Central, B.E.S.T.Net and InsureBASE software solutions, we expect
customers to reimburse costs associated with integration of these software
solutions with the customer’s current hardware installed, software
customization, deployment of architecture plans, and outside third party
consulting services provided. In addition, we expect our customers to reimburse
integration and setup fees associated with a large scale deployment of
B.E.S.T.7.5. If we exceed our current development and sales efforts of
InsureBASE, B.E.S.T.Net and B.E.S.T.Central, or if we meet our projected sales
targets of B.E.S.T. and Insure to Value, and receive anticipated funding, we
believe we will have sufficient working capital from these sales to fund
operations going forward. However, if these sales are delayed or fall short of
our expectations, we will need to raise additional capital to meet this
shortfall. If we were not successful in raising sufficient additional working
capital, we may need to reduce operating expenses through reductions in sales
and development personnel and take other steps to restructure our operations.
Although we do not expect to incur a significant adverse impact on sales and
development of THE BLUEBOOK and estimating software solutions, current products
and services, our development of additional products and other services would
likely be adversely affected or suspended altogether from such cost reductions.





Our
primary short-term needs for capital are our product development efforts, our
sales, marketing and administrative activities, working capital associated with
increased sales of our software solutions, and capital expenditures relating to
maintaining and developing our operations. Our future liquidity and capital
requirements will depend on numerous factors, including the extent to which our
present and future software solutions gain market acceptance, the extent to
which products, solutions or technologies under development are successfully
developed, the costs and timing of expansion of sales, marketing and
manufacturing activities, the cost, the procurement and enforcement of
intellectual property rights important to our business and the results of
competition.





**OFF-BALANCE
SHEET ARRANGEMENTS** ****





The
Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company’s financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to its investors.





**COMMITMENTS
AND CONTINGENCIES**





*Concentration
of Credit Risk*





The
Company’s financial instruments that are exposed to concentrations of credit
risk consist principally of cash and receivables. The Company places its cash in
what it believes to be credit-worthy financial institutions. However, cash
balances have exceeded FDIC insured levels at various times during the year. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any significant risk in cash. The Company’s trade receivables are due
from a broad customer base and each individual receivable amount constitutes a
relatively small value.





*Consulting
Agreement*





In August
2004, the Company engaged the investment banking firm Roth Capital
Partners, LLC to act as a financial advisor and placement agent. Upon successful
placement, the Company agreed to pay up to 8% of the gross proceeds received
from the sale of securities and reimburse its out-of-pocket expenses up to
$20,000. Furthermore, upon the closing of an offering, the Company agreed to
grant the firm warrants for the purchase 170,482 shares of our common stock. The
warrants are exercisable for cash or on a cashless basis into securities similar
to those issued as part of the offering and have an exercise price of $1.15 per
share and a term of five years.




*Registration
of Shares on Form S-8*




On
December 23, 2004, the Company filed a Form S-8 registration statement
registering 306,667 shares of the Company’s common stock, $0.0001 par value per
share, which were offered upon the terms and subject to the conditions set
forth in the Engagement Letter, dated October 8, 2004, between the Company and
Century Capital Management Ltd., a consultant to the Company.




*Loan
Agreement*




On March
31, 2004, we entered into a loan agreement for $120,000, of which $115,000 was
outstanding as of December 31, 2004. The loan bears interest at the rate of 10%
per annum, and is due June 30, 2005. The loan is secured by the Company’s
accounts receivable, tax refunds, deposit accounts, and cash and cash
equivalents. If the collateral securing the loan is insufficient, the loan is
also secured by the shares of the Company’s common stock held by Mark A.
Josipovich, our Chairman of the Board, Chief Executive Officer, President, and
Treasurer. The loan requires that we comply with certain covenants,
including preserving our corporate existence, maintaining all rights and
permits, complying with all applicable laws, and maintaining our properties. The
Company was in compliance with these covenants as of April 12,
2005.





12


*Office
Lease Agreement*




In
September 2004, the Company entered into a new lease agreement for the office
space that is currently being occupied by the Company. The lease will expire in
September 2005 at which time it may be renewed in successive one year terms.




*Employment
Agreements*




In
September 2001, Bluebook International entered into employment agreements with
Mark A. Josipovich and Daniel T. Josipovich for a term of two years with an
automatic extension of successive one-year periods.




Effective
October 1, 2001, Bluebook Holding assumed these agreements and expanded the
services to include each person’s executive position. Under these agreements,
Mark A. Josipovich is employed as the Chief Executive Officer, President, and
Treasurer, and Daniel T. Josipovich is employed as the Chief Operating Officer,
each with an annual salary of $180,000, plus health insurance benefits, term
life insurance benefits and the right to participate in any future employee
stock option, retirement, profit sharing or other benefit plans offered in the
future to similarly situated employees. The employment agreements also contain
indemnification and confidentiality provisions. The agreements also provide that
we should reimburse the employee for all reasonable and necessary expenses
incurred on our behalf. In the event of termination without cause by Mark A.
Josipovich or Daniel T. Josipovich or termination with cause by us, Mark A.
Josipovich and Daniel T. Josipovich are entitled to all accrued and unpaid
compensation as of the date of termination. In the event of termination with
cause by Mark A. Josipovich or Daniel T. Josipovich or termination without cause
by us, Mark A. Josipovich or Daniel T. Josipovich are entitled to all accrued
and unpaid compensation as of the date of termination and the total amount of
annual salary from the date of termination until the end of the term of the
employment agreements.




*License
of InsureBASE software solution*




On
November 11, 2003 we signed an agreement with the Underwriters Rating Board, a
trade association of insurance companies, to license the InsureBASE software
solution. The URB account is of particular importance to us because it
demonstrated that an industry association selected our software solutions ahead
of those offered by the market leader and other competitors. The InsureBASE
solution was able to accommodate the demands of URB in that its proprietary
architecture meet the connectivity needs of at least 37 URB member insurance
companies.




On March
7, 2005 we entered into an agreement with Homesite Insurance Company pursuant to
which we granted Homesite a non-exclusive and non-transferable license to access
via the Internet the software, information and the user-guide of the InsureBASE
software solution. Homesite agreed to pay Bluebook a transactional fee for every
completed valuation. The agreement expressly provides that Bluebook and Homesite
anticipate a minimum of 100,000 transactions annually. Accordingly, Homesite
will receive a discounted transaction fee in exchange for the two-year term of
the Agreement. The term of the agreement is for two years.





*Joint
License & Revenue Share Agreement*




On March
25, 2005 entered into a Joint License and Revenue Share Agreement First American
Real Estate Solutions, L.P. Under the agreement, Bluebook will integrate its
InsureBASE product with First American’s detailed property records to bring to
the insurance, mortgage and real estate industries cost effective Estimated
Replacement Cost (or ERC) reports and values for single family residences
throughout the United States. First American granted Bluebook a non-exclusive,
non-transferable license during the term of the agreement to specified software
applications, valuation models, information, images and other services to use in
connection with Bluebook’s InsureBASE, ERC Values, ERC Reports and leadBASE
products. Bluebook granted First American a non-exclusive, non-transferable
license during the term of the agreement to sell Bluebook’s InsureBASE, ERC
Values, ERC Reports and leadBASE products. In consideration for the rights
granted under the agreement, each party must pay the greater of either: (a) a
royalty fee based on the gross revenue generated from the sales of any
Bluebook’s insureBASE, ERC Values, ERC Reports and leadBASE products which
utilize or incorporate First American’s services; or (b) the cumulative monthly
total amount of minimum transaction fees. The agreement has an initial term of
two years from March 25, 2005 and will automatically renew for additional
successive periods of twelve months unless sooner terminated.





**LEGAL
PROCEEDINGS**


****


As of
April 12, 2005, we are not subject to any pending legal proceedings that would
be deemed material to our business. From time to time, we may be subject to
certain routine litigation that is incidental to our business.




On
February 3, 2003, Bluebook was named a defendant in Morris Diamond, et al. v.
The Bluebook International Holding Company, New York Supreme Court, Monroe
County Case No. 1204/03. The Diamond case was recently settled by the Company
and the plaintiffs. In the Diamond case, plaintiffs alleged that Bluebook
wrongfully withheld the issuance and delivery of plaintiffs’ shares of Bluebook
common stock, thereby damaging plaintiffs in the loss of the value of their
Bluebook stock. On November 10, 2004, the Company and the plaintiffs entered
into a settlement agreement pursuant to which all parties agreed to a general
release of their claims and the Company agreed to pay $64,120 and issue 3,000
shares of common stock to certain of the plaintiffs.




On April
24, 2003, Cotelligent, Inc. filed a demand for arbitration against Bluebook in
Case No. 731310018503 ARC, asserting a claim for breach of contract arising out
of a consulting services agreement between Cotelligent and Bluebook. Bluebook
filed cross-claims on May 29, 2003. Effective as of May 3, 2004, Bluebook and
Cotelligent agreed to a mutual settlement of the entire arbitration pursuant to
a Settlement Agreement. Under the terms of the Settlement Agreement, Cotelligent
converted all of its approximately 5.3 million shares of Bluebook Series C
Preferred Stock into shares of Bluebook common stock on a one-for-one basis.
These shares represent 265,835 shares of the Company’s common stock. In
addition, Cotelligent agreed to deliver source code developed by Cotelligent for
Bluebook pursuant to the consulting services agreement.





13


**CRITICAL
ACCOUNTING POLICIES** ****





Our
discussion and analysis of financial condition and results of operations is
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these Consolidated Financial Statements and related disclosures
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. We evaluate, on an on-going basis, our
estimates and judgments, including those related to the useful life of the
assets and deferred revenue. We base our estimates on historical experience and
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.





The
methods, estimates and judgments we use in applying our most critical accounting
policies have a significant impact on the results that we report in our
Consolidated Financial Statements. The SEC considers an entity’s most critical
accounting policies to be those policies that are both most important to the
portrayal of a company’s financial condition and results of operations and those
that require management’s most difficult, subjective or complex judgments, often
as a result of the need to make estimates about matters that are inherently
uncertain at the time of estimation. We believe the following critical
accounting policies, among others, require significant judgments and estimates
used in the preparation of our Consolidated Financial Statements:





—
    Revenue
      recognition; and





—
    Computer
      software to be sold, leased or otherwise marketed.





Revenue
Recognition


The
Company’s revenues are from the sale of books, software, and Internet based
solutions. The book is a codification of the Company most recent information
database. Revenue is recorded when the book is shipped.
 
 The
Company licenses its software, used in making cost estimates for residential and
light construction. Revenue from the sale of software licenses is amortized over
the estimated time period until the next new version is available. Sales prices
and the amortization period of new sales revenues decrease during the software’s
life cycle. At December 31, 2004 the Company has determined the life cycle of
its current version is nearing completion and a new version will be introduced
in 2005. Revenues from these outstanding licenses will be amortized over the
next 6 months for older licenses. For licenses sold during the year, the revenue
will be amortized over the life of the older product and the life of the new
product, as substantial amount of the purchase price will be applied to a
license for the new product. When the Company discontinues the support of a
version it requires a new license fee to be paid to obtain the latest version of
the software and of their database and any updates.
 
 The
original license fee for a version includes a maintenance fee for the first
year. Maintenance includes updates to the database and updates of the software.
Based on the Company estimates of the relative fair value of the software and
maintenance including in the license, including the related cost of software
updates and database maintenance, the Company has estimated between 20% to 25%
of the first year’s license fee is allocated to the maintenance contract and
amortized over the 12 months. Purchaser of the software license can buy
maintenance and update fees for the second and future years for a fee as
determined yearly, by the company for single users and on a negotiated basis for
multi users. Generally this fee is between 20%-25% of the original license fee
and is amortized over the maintenance period, usually one
year.
 
 The
Company’s other products are Internet based services, and  prices are
determined on a case-by-case basis. This revenue is recorded for the services as
rendered.
 
 Program
Development Costs
 
 Program
development costs consists of costs to refine and test software masters, user
documentation and training manuals for software products to be sold. These
development costs encompasses most of our products but the most significant
costs unamortized at December 31, 2004 are for new Internet based products. Our
design costs have been expensed. The Company hired outside consultants to do
much of the coding and testing in the products development. Capitalized costs,
however, include only (1) external direct costs of  material
and services test and refine the software masters, and (2) payroll and
payroll-related costs for employees who are directly associated with and who
devote time to the completion of the projects coding, testing and preparation of
user information. Capitalization of such costs ceases no later than the point at
which the project is available for general release to customer. The Company will
begin amortizing the new products in 2005.
 Product
development cost are amortized using the straight-line method over the expected
life of the product (which ranges from three to five years) the Company believes
this method will best reflect the matching of amortization with revenues.
Reliable estimates of total revenue have not been made. However, the Company
expects to determine a more reliable estimate of revenue as sales begin and will
use the greater of the straight-line method or the estimated sales method for
amortization.
  Research
and development costs, and other computer software maintenance and improvement
costs related to software development are expensed as incurred.
  The
carrying value of software and program development costs is reviewed regularly
by the Company to determine if there has been an impairment loss that needs to
be recognized.





14





**RECENT
ACCOUNTING PRONOUNCEMENTS**

In May
2003, the FASB issued Statement 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 in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. SFAS 150 requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances) because that financial instrument embodies an obligation of the
issuer. SFAS 150 is effective for financial instruments entered into or modified
after May 31, 2003 and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. SFAS 150 is to be implemented by
reporting the cumulative effect of a change in accounting principle for
financial instruments created before the issuance date of SFAS 150 and still
existing at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of SFAS 150 in2003 did
not have a significant effect on the Company's financial statement presentation
or disclosures.

In
December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share Based
Payment" ("SFAS 123R"), a revision to SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS 123R supercedes Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and amends SFAS No. 95, "Statement
of Cash Flows". SFAS 123R requires that the Company measure the cost of employee
services received in exchange for equity awards based on the grant date fair
value of the awards. The cost will be recognized as compensation expense over
the vesting period of the awards. The Company is required to adopt SFAS 123R no
later than the beginning of the third quarter of 2005. Under this method, the
Company will begin recognizing compensation cost for equity-based compensation
for all new or modified grants after the date of adoption. In addition, the
Company will recognize the unvested portion of the grant date fair value of
awards issued prior to adoption based on the fair values previously calculated
for disclosure purposes over the remaining vesting period of the outstanding
options and warrants. The Company is currently evaluating the potential effect
that the adoption of SFAS 123R will have on the Company's financial statement
presentation and disclosures.

In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets,
an amendment to APB Opinion No. 29" ("SFAS 153"). SFAS 153 amends Accounting
Principles Board Opinion No. 29, "Accounting for Nonmonetary Transactions", to
require that exchanges of nonmonetary assets be measured and accounted for at
fair value, rather than at carryover basis, of the assets exchanged. Nonmonetary
exchanges that lack commercial substance are exempt from this requirement. SFAS
153 is effective for nonmonetary exchanges entered into in fiscal periods
beginning after June 15, 2005. The Company does not routinely enter into
nonmonetary exchanges. Accordingly, the Company does not expect that the
adoption of SFAS 153 will have a significant effect on the Company's financial
statement presentation or disclosures.


****


**RISK
FACTORS**





An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below, as well as other information
contained in this report, before investing in our common stock. All
material risks and uncertainties presently known to us are described below.
If any of these risks occur, our business could suffer, the market price of our
common stock could decline and you could lose all or part of your investment in
our common stock.





**Risks
Related to Our Business**





***We
have incurred losses from operations in recent years and anticipate future
losses, which may impact our ability to implement our business strategy and
adversely affect our financial condition.***





We have
incurred net losses in recent years. We anticipate that we will continue to
incur additional operating losses in the near term. These losses have resulted
principally from expenses incurred in research and development, sales and
marketing and general and administrative expenses. Even though we expect to
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis. If we cannot achieve or sustain profitability
for an interim period, we may not be able to fund our expected cash needs or
continue our operations.





***We
have a history of operating losses and may not be able to continue as a going
concern.***





We have
experienced losses since 2001, incurred negative cash flows from operations
since 2001, and, as of December 31, 2004, had an accumulated deficit of $8.9
million. Cash used in operations for the years ended December 31, 2001, 2002,
2003 and 2004 were $689,645, $173,249, $1,120,154 and $831,050, respectively. We
expect that we will continue to incur negative cash flows and require additional
cash to fund our operations and implement our business plan. The continued
development of our technology and products will require significant additional
capital investment. Our financial statements have been prepared assuming that we
will continue as a going concern. The auditor’s reports on our financial
statements state that there is substantial doubt about our ability to continue
as a going concern.





15


***We
may need additional capital and any required capital may not be available on
acceptable terms or at all. If adequate funds are not available,
we may be required to curtail our operations and reduce spending
or obtain funds on unfavorable terms, all of which would likely have a
material adverse effect on our business, financial condition and our ability to
continue as a going concern.***


**


Our cash
balance as of March 31, 2005 was approximately $538,000.





Our 2005
internal financial projections and strategic plan indicates that our available
cash, together with cash from operations and funding from our recently completed
private placement on November 19, 2004 of $2.2 million dollars may be sufficient
to fund our operations through the third quarter of 2005 without reductions in
our workforce. This plan assumes that we can control current estimated costs
relating to new hires, professional services and consulting, negotiating the
terms of existing and new debts, and the costs of ongoing operations.





However,
our actual results may differ from this plan, and we may be required to consider
alternative strategies and may need to raise additional funds through one or
more of the following: (1) sale of various products, solutions or marketing
rights; (2) licensing of technology; and (3) sale of equity and debt securities.
If we cannot raise the additional funds through these options on acceptable
terms or with the necessary timing, management could also reduce operating
expenses through reductions in sales and development personnel and take other
steps to restructure our operations to decrease our cash burn rate and extend
the currently available cash.





Additional
capital may not be available on acceptable terms, if at all. The public markets
may remain unreceptive to equity financings, and we may not be able to obtain
additional private equity financing. Furthermore, any additional equity
financing would likely be dilutive to stockholders, and additional debt
financing, if available, may include restrictive covenants which may limit our
currently planned operations and strategies. If adequate funds are not
available, we may be required to curtail our operations significantly and reduce
operating expenses through reductions in sales and development personnel, or to
obtain funds by entering into collaborative agreements or other arrangements on
unfavorable terms, all of which would likely have a material adverse effect on
our business, financial condition and our ability to continue as a going
concern.





***The
market price of our common stock has been and is likely to continue to be highly
volatile, which may affect our ability to raise capital in the future or cause
investment losses for our stockholders and result in stockholder litigation with
substantial costs, economic loss and diversion of our resources.***


**


The
securities markets have experienced significant price and volume fluctuations
and the market prices of securities of many public technology companies have in
the past been, and can in the future be expected to be, especially volatile. For
example, in 2003 our closing stock price ranged from a low of $0.20 to a high of
$22.00, in 2004 our closing stock price ranged from a low of $0.80 to a high of
$8.00, and in 2005 our closing stock price ranged from a low of $1.25 to a high
of $5.01. These stock prices have been retroactively stated to reflect the 1 for
20 reverse stock split declared on November 17, 2004. Fluctuations in the
trading price or liquidity of our common stock may adversely affect our ability
to raise capital through future equity financings. Factors that may have a
significant impact on the market price and marketability of our common stock
include:





—
    announcements
      of technological innovations or new products by us or by our competitors;




—
    our
      operating results;




—
    developments
      in our relationships with strategic partners;




—
    litigation;




—
    economic
      and other external factors; and




—
    general
      market conditions.





In the
past, following periods of volatility in the market price of a company’s
securities, securities class action litigation has often been instituted. If a
securities class action suit is filed against us, we would incur substantial
legal fees and our management’s attention and resources would be diverted from
operating our business in order to respond to the litigation.





***We
depend on key personnel for our future success. If we lose our key personnel or
are unable to attract and retain additional personnel, we may be unable to
achieve our goals.***





Our
future success is substantially dependent on the efforts of our management team,
particularly Mark A. Josipovich, our Chairman of the Board, Chief Executive
Officer, President, and Treasurer, and Daniel T. Josipovich, our Chief Operating
Officer and Director. Mark A. Josipovich has been the entrepreneural driver of
Bluebook’s strategic initiatives for the past 16 years and Daniel T Josipovich
has designed, directed and managed development of Bluebook’s products for the
past 22 years. Mark A. Josipovich and Daniel T. Josipovich may terminate their
employment at any time. The loss of the services of members of our management
may significantly delay or prevent the achievement of product development and
other business objectives.





16


Because
of the specialized technical nature of our business, we also depend
substantially on our ability to attract and retain qualified technical
personnel. There is intense competition among technology companies for qualified
personnel in the areas of our activities. If we lose the services of, or fail to
recruit additional key technical personnel, the growth of our business could be
substantially impaired. We do not maintain life insurance for any of our key
personnel.





***We
have limited resources to devote to software development and commercialization.
If we are not able to devote adequate resources to software development and
commercialization, we may not be able to develop our software solutions.***





Our
strategy is to develop software solutions addressing underwriting and claims
management. We believe that our revenue growth and profitability, if any, will
substantially depend upon our ability to:





—
    improve
      market acceptance of our current software solutions;





—
    complete
      development of new software solutions; and





—
    successfully
      introduce and commercialize new software solutions.





We have
introduced some of our software solutions only recently and some of our
solutions are still under phased deployment and development. Among our recently
introduced solutions are InsureBASE and Insured to Value. Although development
of our B.E.S.T.Net and B.E.S.T.Central solutions are substantially complete, we
are still in the process of developing an interface between B.E.S.T.Net,
B.E.S.T.Central and B.E.S.T.8. Because we have limited cash to devote to product
development and commercialization, any delay in the development of one solution
or reallocation of resources to solutions development efforts that prove
unsuccessful may delay or jeopardize the development of our other product
candidates. If we fail to develop new products and bring them to market, our
ability to generate additional revenue will decrease.





In
addition, our solutions may not achieve satisfactory market acceptance, and we
may not be able to successfully commercialize them on a timely basis, or at all.
If our products do not achieve a significant level of market acceptance, demand
for our products will not develop as expected.





***We
operate in a highly competitive industry, which could render our products
obsolete or substantially limit the volume of products that we sell. This would
limit our ability to compete and achieve profitability.***





We
believe our primary current competitors for our software solutions are Xactware,
Inc., Marshall & Swift and Simsol Software, Inc. Our primary competition for
THE BLUEBOOK is from RS Means Engineering and the Craftsman Book Company.
Additional competition could come from new entrants to the claims management
market, including software and insurance companies. To the extent that the
products from these competitors provide the ability to integrate information
from, among other participants, the agent, insurer, administrator, vendor and
supplier into the end-to-end process, they may compete with our current and
future products.





Although
we have an advantage over our competitors by having access to our proprietary
data and processes, some of our competitors have significantly greater human and
financial resources. As a result, these competitors could adopt more aggressive
pricing policies and devote greater resources to the development, promotion and
sale of their products. These advantages could allow them to respond more
quickly to changes in customer and market requirements. In addition, some of our
competitors may be able to leverage their existing relationships to discourage
these customers from purchasing additional products from us. These competitors
may also be able to persuade our customers to replace our products with their
products. Increased competition may result in reduced product prices, lower
gross margins, reduced profitability and reduced market share. We may not have
the financial resources, technical expertise or marketing, manufacturing,
distribution and support capabilities to compete successfully in the future.
There can also be no assurance that we will be able to compete successfully
against current or future competitors or that current or future competitive
pressures will not materially harm our business. Our future operating results
could be harmed as a result of competition and pricing pressures from such
competitive products.





***We
may be unable to successfully market and distribute our products and implement
our distribution strategy, which could adversely impact our ability to sell our
products and reduce our revenues.***





The
market for claims management solutions is highly fragmented. We market and sell
THE BLUEBOOK and B.E.S.T.7.5 products primarily through the mail,
conventions and the Internet using the interactive sales tool on Microsoft’s
terminal services solution. Our software solutions, B.E.S.T.Central and
B.E.S.T.Net are sold by direct, on-site demonstrations or by authorized partners
and resellers. We may not be able to successfully develop and maintain our
marketing, distribution or sales capabilities. If our marketing and distribution
strategy is unsuccessful, our ability to sell our products will be negatively
impacted and our revenues will decrease.





***We
may face costly intellectual property disputes, which may result in substantial
expense to us and significant diversion of the efforts of our technical and
management personnel.***


******


Although
we do not expect to be subject to any intellectual property disputes, we may be
subject to such claims. Our ability to compete effectively will depend in part
on our ability to develop and maintain proprietary aspects of our technology and
either to operate without infringing the proprietary rights of others or to
obtain rights to technology owned by third parties. We rely on proprietary
information and techniques to develop and maintain our competitive position.
Others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets.





17


The
defense of intellectual property suits, proceedings, and related legal and
administrative proceedings are costly, time-consuming and distracting. We may
also need to pursue litigation to protect trade secrets or know-how owned by us,
or to determine the enforceability, scope and validity of the proprietary rights
of others. Any litigation will result in substantial expense to us and
significant diversion of the efforts of our technical and management personnel.
Any adverse determination in litigation could subject us to significant
liabilities to third parties. Further, as a result of litigation or other
proceedings, we may be required to seek licenses from third parties that may not
be available on commercially reasonable terms, if at all.





***Our
principal stockholders have substantial control over our affairs, which could
delay, defer or prevent a change of control or impede a merger or consolidation,
or other business combination which our stockholders may otherwise view
favorably and which may decrease the price of our common stock.***





The
Josipovich family, collectively, beneficially owns 5,100,050 shares of common
stock, which is 58.22% of the total number of shares of common stock currently
issued and outstanding. The Josipovich family has the ability to exert
substantial influence over all matters submitted to a vote of the stockholders
of Bluebook, including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our assets. In addition,
they can dictate the management of our business and affairs. This concentration
of ownership could have the effect of delaying, deferring or preventing a change
in control or impeding a merger or consolidation, takeover or other business
combination which you, as a stockholder, may otherwise view favorably and which
may decrease the price of our common stock.





***Future
sales of our common stock that are eligible for sale by our stockholders may
decrease the price of our common stock.***





We had
8,760,221 shares of common stock outstanding on December 31, 2004. Of these
shares, 6,616,489 shares are held by directors, executive officers and
other affiliates and will be subject to volume limitations under Rule 144 under
the Securities Act. In addition, there were outstanding warrants to purchase
686,688 shares of our common stock. If our stockholders sell a large number of
shares of common stock or if we issue a large number of shares in connection
with future acquisitions or financings, the market price of our common stock
could decline significantly. In addition, the perception in the public market
that our stockholders might sell a large number of shares of common stock could
cause a decline in the market price of our common stock.





***Anti-takeover
provisions may limit the ability of another company to acquire us, which could
cause our stock price to decline.***


**


Provisions
of our certificate of incorporation and Delaware law could discourage potential
acquisition proposals and could delay or prevent a change in control of us. Our
Certificate of Incorporation provides for 5,000,000 authorized and unissued
shares of preferred stock and authorizes the Board of Directors to issue one or
more series of preferred stock and to establish the designations, powers,
preferences and rights of each series of preferred stock, in accordance with
Delaware law. The existence of authorized and unissued preferred stock may
enable the Board of Directors to render more difficult or to discourage an
attempt to obtain control of us by means of a merger, tender offer, proxy
contest or otherwise.





We are
also subject to the anti-takeover provisions of Section 203 of the Delaware
corporate statute, which regulates corporate acquisitions. Section 203 may
affect the ability of an “interested stockholder” to engage in certain business
combinations, including mergers, consolidation or acquisitions of additional
shares, for a period of three years following the time that the stockholder
becomes an “interested stockholder.” An “interested stockholder is defined to
include a person owning directly or indirectly 15% or more of the outstanding
voting stock of a corporation. These provisions could discourage potential
acquisition proposals and could delay or prevent a change in control
transaction. They could also have the effect of discouraging others from making
tender offers for our common stock. In addition, the Board of Directors, without
further stockholder approval, may issue additional series of preferred stock
that could have the effect of delaying, deterring or preventing a change in
control of us. The issuance of additional series of preferred stock could also
adversely affect the voting power of the holders of common stock, including the
loss of voting control to others.







**ITEM
7. FINANCIAL STATEMENTS**





Our
financial statements, including the accountant’s report, are included beginning
at page F-1 immediately following the signature page of this report.





**ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE**





None.





18


**ITEM
8A CONTROLS AND PROCEDURES**





An
evaluation as of the end of the period covered by this report was carried out
under the supervision and with the participation of our management, including
our Chief Executive Officer and Principal Accounting Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer
and Principal Accounting Officer concluded that those disclosure controls and
procedures were adequate to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act are recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms.





There was
no change in our internal controls over financial reporting during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.





**ITEM
8B. OTHER INFORMATION**





None.





19








**PART
III**





**ITEM
9. DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT**





The
information required by this Item 9 is incorporated by reference from the
information under the captions “Management,” “Election of Directors,” and
“Section 16(a) Beneficial Ownership Reporting Compliance” contained in the
Information Statement that we will file with the Securities and Exchange
Commission.





**ITEM
10. EXECUTIVE COMPENSATION**





The
information required by this Item 10 is incorporated by reference from the
information under the caption “Executive Compensation and Other Matters” in the
Information Statement that we will file with the Securities and Exchange
Commission.





**ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS**





The
information required by this Item 11 is incorporated by reference from the
information under the caption “Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters” in the Information Statement
that we will file with the Securities and Exchange Commission.





**ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





The
information required by this Item 12 is incorporated by reference from the
information under the caption “Certain Relationships and Related Transactions”
in the Information Statement that we will file with the Securities and Exchange
Commission.





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





**Exhibit**
    
    **Description
      of Document**3.1(a)(1)
    
    Certificate
      of Incorporation filed with the Delaware Secretary of State on December
      18, 1997.3.1(b)(1)
    
    Amendment
      to Certificate of Incorporation filed with the Delaware Secretary of State
      on March 10, 1999.3.1(c)(2)
    
    Amendment
      to Certificate of Incorporation filed with the Delaware Secretary of State
      on November 6, 2001.3.1(d)(3)
    
    Amendment
      to Certificate of Incorporation filed with the Delaware Secretary of State
      on December 16, 2002.3.1(e)(4)
    
    Amendment
      to Certificate of Incorporation filed with the Delaware Secretary of State
      on November 17, 2004.3.2(1)
    
    Bylaws
      of the Registrant.4.1*
    
    Form
      of Registration Rights Agreement, dated as of November 17, 2004,
      between The Bluebook International Holding Company and the investors party
      thereto.10.1(5)
    
    Agreement
      and Plan of Merger, dated as of September 24, 2001, by and among Gama
      Computer Corporation, The Bluebook International, Inc. Bluebook
      Acquisitions Corp., Bluebook’s Shareholders and Andrew Hromyk,
      incorporated by reference to the Information Statement filed with the
      Securities and Exchange Commission of October 12, 2001.10.2(2)
    
    Employment
      Agreement by and between The Bluebook International, Inc. and Mark A.
      Josipovich, dated September 27, 2001.10.3(2)
    
    Employment
      Agreement by and between The Bluebook International, Inc. and Daniel T.
      Josipovich, dated September 27, 2001.10.4*
    
    InsureBASE
      Agreement, dated November 11, 2003, between The Bluebook International,
      Inc., Underwriters Rating Board, a New York Unincorporated Association and
      URB Services Corp., a New York Corporation.10.5(6)
    
    Convertible
      Promissory Note Purchase Agreement made as of August 13, 2004 between The
      Bluebook International Holding Company and Christopher Albrick (together
      with Convertible Promissory Note)10.6(6)
    
    Engagement
      Letter dated August 19, 2004 between The Bluebook International Holding
      Company and Roth Capital Partners, LLC.10.7(4)
    
    Debt
      Settlement Agreement, dated October 14, 2004, between The Bluebook
      International Holding Company and Mark A. Josipovich.10.8(4)
    
    Debt
      Settlement Agreement, dated October 14, 2004, between The Bluebook
      International Holding Company and Daniel T. Josipovich.10.9(4)
    
    Debt
      Settlement Agreement, dated October 14, 2004, between The Bluebook
      International Holding Company and Michela Josipovich.10.10(4)
    
    Debt
      Settlement Agreement, dated October 14, 2004, between The Bluebook
      International Holding Company and Daniel E. Josipovich.10.11(4)
    
    Debt
      Settlement Agreement, dated October 14, 2004, between The Bluebook
      International Holding Company and Brian Jones.10.12(4)
    
    Engagement
      Letter, dated November 12, 2004, between The Bluebook International
      Holding Company and Century Capital Management
Ltd.
   20
  10.13(4)
    
    Form
      of Securities Purchase Agreement, dated as of November 12, 2004, between
      The Bluebook International Holding Company and the investors party
      thereto.10.14(4)
    
    Form
      of Warrant Certificate issued by The Bluebook International Holding
      Company dated as of November 17, 2004.10.15(4)
    
    Warrant
      Certificate issued by The Bluebook International Holding Company to Roth
      Capital Partners, LLC dated as of November 17, 2004.10.16(4)
    
    Lock-Up
      Agreement, dated as of November 17, 2004, between The Bluebook
      International Holding Company and certain of its
    stockholders.10.17(7)
    
    Web
      Services Agreement, dated as of March 7, 2005, between The Bluebook
      International, Inc. and Homesite Insurance Company.10.18(8)
    
    Joint
      License & Revenue Share Agreement dated as of March 25, 2005, between
      First American Real Estate Solutions, L.P. and The Bluebook International
      Inc.16.1(9)
    
    Letter
      dated as of November 7, 2002 from Good Swartz Brown & Berns addressed
      to the Securities and Exchange Commission.21.1*
    
    Subsidiaries
      of The Bluebook International Holding Company.23.1*
    
    Consent of Weinberg
      & Company, P.A.31*
    
    Certification
      pursuant to Rule 13a-14(a)/15d-14(a)32*
    
    Certification
      pursuant to Section 1350 of the Sarbanes-Oxley Act of
  2002




* Filed
herewith.


(1)
    
    Incorporated
      by reference from Bluebook's General Form for Registration of Securities
      of Small Business Issuers on Form 10-SB filed October 20,
      2002.(2)
    
    Incorporated
      by reference from Bluebook’s Annual Report on Form 10-KSB for the year
      ended December 31, 2001.(3)
    
    Incorporated
      by reference from Bluebook’s Annual Report on Form 10-KSB for the year
      ended December 31, 2002.(4)
    
    Incorporated
      by reference from Bluebook’s SB-2 Registration Statement filed with the
      Securities and Exchange on January 6, 2005.(5)
    
    Incorporated
      by reference from Bluebooks’s Information Statement filed on October 12,
      2001.(6)
    
    Incorporated
      by reference from Bluebook’s Quarterly Report on Form 10-QSB for the
      fiscal quarter ended September 30, 2004.(7)
    
    Incorporated
      by reference from Bluebook’s Report on Form 8-K/A filed with the
      Securities and Exchange Commission on April 1, 2005.(8)
    
    Incorporated
      by reference from Bluebook’s Report on Form 8-K filed with the Securities
      and Exchange Commission on March 31, 2005.(9)
    
    Incorporated
      by reference from Bluebook’s Report on Form 8-K filed with the Securities
      and Exchange Commission on November 7,
2002.


**Current
Reports on Form 8-K**





The
Company filed with the Securities and Exchange Commission: (i) a Current Report
on Form 8-K dated October 14, 2004, pursuant to Items 3.02, 5.03 and 9.01; and
(ii) a Current Report on Form 8-K dated November 17, 2004, pursuant to Items
1.01, 3.02, 5.03 and 9.01.





**ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
following table sets forth the aggregate fees for professional audit services
rendered by Weinberg
& Company, P.A. for audit
of our annual financial statements for the years ended December 31, 2004
and 2003, and fees billed for other services provided by Weinberg
& Company, P.A. for the
years ended December 31, 2004 and 2003.





**Year
      Ended****December 31,****2004**
    
    
    **2003**Audit
      Fees
    
    $
    38,573
    
    
    $
    93,154Audit-Related
      Fees
    
    
    38,444
    
    
    
    —Tax
      Fees
    
    
    —
    
    
    
    —All
      Other Fees
    
    
    1,506
    
    
    
    37,181Total
      Fees Paid
    
    $
    78,523
    
    
    $
    130,335






*Audit
Fees*
 The
aggregate fees for the annual audit of our financial statements and review of
our quarterly financial statements.


*Audit-Related
Fees*
The
aggregate fees for the auditor’s consent for use of audited financial
statements in our S-8 Registration Statement and SB-2 Registration Statement and
review of documents related to our private placement.


*Tax
Fees*
None.
**
*All
Other Fees*
The
aggregate fees for fiscal year 2003 for due diligence for a potential merger
with Cotelligent, review of Bluebook’s financial projections for use in
financing transactions, and for fiscal year 2004, assistance with various
financing arrangements.






21





**SIGNATURES**





In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report on Form 10-KSB to be signed on its behalf by the undersigned,
hereunto duly authorized.





**THE
BLUEBOOK INTERNATIONAL HOLDING**


**COMPANY**





*****Date:
      April 15, 2005*
    *By:*
    /s/ Mark A. Josipovich*Name:
      Mark A. Josipovich,
      *Title:
      Chief Executive Officer,
      *President
      and Principal
      *Accounting
      Officer****
  In
accordance with the Exchange Act, this amended report has been signed below by
the following persons on behalf of the Registrant and in the capacities listed
below on April 15, 2005.
 
 *NAME*
    
    *TITLE*/s/
      Mark A. Josipovich
    
    *Chief
      Executive Officer, President, Principal*
      *Accounting
      Officer and Chairman of the Board**Mark
      A. Josipovich*/s/
      Daniel T. Josipovich
    
    *Chief
      Operating Officer and Director**Daniel
      T. Josipovich*/s/
      David M. Campatelli
    
    *Director**David
      M. Campatelli*/s/
      Paul D. Sheriff
    
    *Director**Paul
      D. Sheriff*
 
 In
accordance with the Exchange Act, this amended report has been signed below by
the following persons on behalf of the Registrant and in the capacities listed
below on April 15, 2005.





22








REPORT OF
INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM


The Board
of Directors
 The
Bluebook International Holding Company, Inc
  We have
audited the accompanying consolidated balance sheet of The Bluebook
International Holding Company, Inc. and subsidiary (the "Company"), as of
December 31, 2004, and the consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 2004 and 2003. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
  We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated 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 consolidated 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 consolidated financial position of The Bluebook
International Holding Company, Inc. and subsidiary as of December 31, 2004, 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 financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company had a net loss of $1,985,185 and negative cash
flow from operations of $831,050 during the year ended December 31, 2004, and
had a working capital deficiency of $92,850 and an accumulated deficit of
$8,995,867 at December 31, 2004. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
 
 
 Weinberg
& Company, P.A.
 
 Boca
Raton, Florida
 March 25,
2005





F-1


THE
      BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETDECEMBER
      31, 2004
  ASSETSCURRENT
      ASSETSCash
      and cash equivalents
    
    $
    1,534,313Accounts
      receivable, net of allowance for doubtful accounts of $4,600
    
    
    6,417Prepaid
      expenses and other
    
    
    34,500Total
      current assets
    
    
    1,575,230PROPERTY
      AND EQUIPMENT, net of accumulated depreciation of 
      $189,826
    
    
    65,909Program
      development costs, net of accumulated amortization of
      $513,358
    
    
    690,577Intangible
      assets, net of accumulated amortization of 
      $29,078
    
    
    15,644Other
      assets
    
    
    5,296Total
      other assets
    
    
    711,517TOTAL
      ASSETS
    
    $
    2,352,656LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
    
    $
    654,753Legal
      fee payable
    
    
    415,000Due
      to stockholders and related parties
    
    
    318,068Deferred
      revenue
    
    
    165,259Notes
      payable
    
    
    115,000Total
      current liabilities
    
    
    1,668,080COMMITMENTS
      & CONTINGENCIESSTOCKHOLDERS'
      EQUITYSeries
      B Convertible Preferred Stock, $.0001 par value; 5,000,000 shares authorized
    
    
    —Common
      Stock, $.0001 par value; 150,000,000 shares authorized; 8,760,221
      shares issued and outstanding
    
    
    875Additional
      paid in capital
    
    
    9,679,568Accumulated
      deficit
    
    
    (8,995,867
    )Total
      stockholders' equity
    
    
    684,576TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
    
    $
    2,352,656
  
 See
accompanying Notes to Consolidated Financial Statements






F-2




THE
      BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF OPERATIONSFOR
      THE YEARS ENDED DECEMBER 31,
  2004
    
    2003(As
      restated)SALES,
      net
    
    $
    569,514
    
    $
    705,657OPERATING
      EXPENSESSelling,
      general and administrative expenses
    
    
    1,915,768
    
    
    2,003,184Product
      development costs
    
    
    375,923
    
    
    403,644Depreciation
      and amortization expenses
    
    
    140,702
    
    
    247,920Total
      Operating Expenses
    
    
    2,432,393
    
    
    2,654,748OTHER
      EXPENSEInterest
      expense
    
    
    121,506
    
    
    13,880Total
      Other Expense
    
    
    121,506
    
    
    13,880LOSS
      FROM OPERATIONS
    
    
    (1,984,385
    )
    
    (1,962,971
    )INCOME
      TAX EXPENSE
    
    
    800
    
    
    800NET
      LOSS
    
    $
    (1,985,185
    )
    $
    (1,963,771
    )Weighted
      average number of shares ofcommon
      stock outstanding, basic and diluted
    
    
    2,354,830
    
    
    1,436,671Loss
      per share, basic and diluted
    
    $
    (0.84
    )
    $
    (1.37
    )


See accompanying Notes to Consolidated Financial
Statements




F-3




THE
      BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARYCONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITYFOR
      YEAR ENDED DECEMBER 31, 2004
  COMMON
      STOCK
    
    PREFERRED
      STOCK
    
    ADDITIONALSHARES
    
    AMOUNT
    
    SHARES
    
    AMOUNT
    
    PAID
      IN CAPITAL
    
    ACCUMULATEDDEFICIT
    
    TOTALBalance,
      January 1, 2003 (as previously reported)
    
    
    1,436,671
    
    $
    144
    
    
    2,050
    
    $
    —
    
    $
    599,466
    
    $
    (1,591,151
    )
    $
    (991,541
    )Restatement
      of program development costs
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (2,771,427
    )
    
    (2,771,427
    )Balance,
      January 1, 2003 (restated)
    
    
    1,436,671
    
    
    144
    
    
    2,050
    
    
    —
    
    
    599,466
    
    
    (4,362,578
    )
    
    (3,762,968
    )Net
      loss for the year ended December 31, 2003 (restated)
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (1,963,771
    )
    
    (1,963,771
    )Balance,
      December 31, 2003 (Restated)
    
    
    1,436,671
    
    
    144
    
    
    2,050
    
    
    —
    
    
    599,466
    
    
    (6,326,349
    )
    
    (5,726,739
    )Conversion
      of Series C Preferred Stock
    
    
    265,835
    
    
    26
    
    
    
    
    
    
    
    
    4,544,653
    
    
    
    
    
    4,544,679Issuance
      of stock in settlement of accounts and notes payable
    
    
    2,190,349
    
    
    219
    
    
    
    
    
    
    
    
    1,946,017
    
    
    
    
    
    1,946,236Conversion
      of Series B Preferred Stock
    
    
    2,733,333
    
    
    273
    
    
    (2,050
    )
    
    —
    
    
    (273
    )
    
    
    
    
    —Issuance
      of stock in private placement
    
    
    2,131,033
    
    
    213
    
    
    
    
    
    
    
    
    1,902,372
    
    
    
    
    
    1,902,585Issuance
      of stock for legal settlement
    
    
    3,000
    
    
    —
    
    
    
    
    
    
    
    
    3,000
    
    
    
    
    
    3,000Dividend
      distribution on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684,333
    
    
    (684,333
    )
    
    —Net
      loss for the year ended December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,985,185
    )
    
    (1,985,185
    )Balance,
      December 31, 2004
    
    
    8,760,221
    
    $
    875
    
    
    -
    
    $
    -
    
    $
    9,679,568
    
    $
    (8,995,867
    )
    $
    684,576


See accompanying Notes to Consolidated Financial
Statements




F-4


THE
      BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED DECEMBER 31,


2004
    
    2003CASH
      FLOWS FROM OPERATING ACTIVITIES
    
    
    
    (As
      restated)Net
      loss
    
    $
    (1,985,185
    )
    $
    (1,963,771
    )Adjustment
      to reconcile net loss to net cash used in operating
      activitiesDepreciation
      and amortization
    
    
    140,702
    
    
    247,920Issuance
      of stock in settlement of litigation
    
    
    3,000
    
    
    —Changes
      in operating assets and liabilities:Decrease
      in Accounts receivable
    
    
    20,381
    
    
    10,133(Increase)
      decrease in Prepaid expenses and other
    
    
    (24,500
    )
    
    55,620Increase
      in Other assets
    
    
    (279
    )
    
    —Increase
      in Accounts payable and accrued expenses
    
    
    371,448
    
    
    119,817Increase
      in Due to stockholders and related party
    
    
    719,208
    
    
    480,197Decrease
      in Deferred revenue
    
    
    (75,825
    )
    
    (70,070
    )NET
      CASH USED IN OPERATING ACTIVITIES
    
    
    (831,050
    )
    
    (1,120,154
    )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
    
    
    (9,708
    )
    
    (58,747
    )Program
      development costs
    
    
    (178,045
    )
    
    (405,541
    )Purchase
      of intangible assets
    
    
    —
    
    
    (1,500
    )NET
      CASH USED IN INVESTING ACTIVITIES
    
    
    (187,753
    )
    
    (465,788
    )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from issuance of common stock
    
    
    1,902,585
    
    
    —Note
      payable, net of repayment
    
    
    542,500
    
    
    —Note
      payable due to related parties, net of repayment
    
    
    63,200
    
    
    102,000NET
      CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    2,508,285
    
    
    102,000NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    1,489,482
    
    
    (1,483,942
    )CASH
      AND CASH EQUIVALENTS, BEGINNING OF THE YEAR
    
    
    44,831
    
    
    1,528,773CASH
      AND CASH EQUIVALENTS, END OF THE YEAR
    
    $
    1,534,313
    
    $
    44,831SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
    
    $
    33,086
    
    $
    13,880Taxes
    
    
    2,734
    
    
    4,472NON
      CASH INVESTING AND FINANCING ACTIVITIES:Conversion
      of Series C Preferred Stock to Common Stock
    
    $
    4,544,679
    
    
    —Issuance
      of stock in settlement of accounts payable
    
    
    247,020
    
    
    —Issuance
      of stock in settlement of due to related parties
    
    
    1,106,516
    
    
    —Issuance
      of stock in settlement of notes payable
    
    
    427,500
    
    
    —Issuance
      of stock in settlement of notes payable to related parties
    
    
    165,200
    
    
    —Reclassification
      of accrued expenses due to stockholders
    
    
    117,688
    
    
    —Issuance
      of stock dividend
    
    
    684,333
    
    
    —


See accompanying Notes to Consolidated Financial
Statements







F-5




**THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **1.** **Summary
of significant accounting policies and business activity**
 
 Background
of the Company
  The
Bluebook International Holding Company (the "Company") was incorporated as Gama
Computer Corporation in Delaware on December 17, 1997. On January 9, 1998, the
Company merged with Gama, Inc., a Colorado corporation, and Gama Computer
Corporation became the surviving company. On September 24, 2001, Gama Computer
Corporation entered into a certain Agreement and Plan of Merger (the
“Agreement”) with (a) The Bluebook International, Inc., a Nevada corporation
(“Bluebook International”); (b) Bluebook Acquisition Corp., a Nevada
corporation, wholly owned by the Company (“Acquisitions”); (c) each of Mark A.
Josipovich, Daniel T. Josipovich, Daniel E. Josipovich and Dorothy E. Josipovich
(each, a “Bluebook Stockholder”); and (d) Andrew Hromyk. Among other things, the
Agreement provided for the Company’s purchase from the Bluebook Stockholders of
all of the issued and outstanding capital stock of Bluebook International in
exchange for the issuance of an aggregate of 32,700,000 shares of the Company’s
authorized but unissued Common Stock (the “Exchange”).
  Effective
October 1, 2001, the Company underwent a change of control in connection with
the consummation of the Exchange in which (i) Andrew Hromyk, the Company’s only
executive officer, resigned his position, and the Board of Directors appointed
Mark A. Josipovich to serve as the Company’s President, Chief Executive Officer,
Chief Financial Officer and Secretary and Daniel T. Josipovich to serve as the
Company’s Chief Operations Officer; (ii) the Company’s majority stockholder
surrendered and subsequently cancelled 19,200,000 shares and (iii) the Bluebook
Stockholders became the holders of an aggregate of 32,700,000 shares of the
Company’s Common Stock, or approximately 84.4% of the Company’s Common Stock
issued and outstanding after the consummation of the Exchange. In addition,
effective October 1, 2001, Daniel E. Josipovich and Dorothy E. Josipovich were
jointly issued 1,000 shares of Series A Convertible Preferred Stock with voting
rights in exchange for the cancellation of a related party note of $1,000,000.
Upon consummation of the Exchange, Mr. Hromyk resigned as the then-sole member
of the Company’s Board of Directors.
  At
consummation of the Exchange on October 1, 2001, the Company acquired all of the
7,083,332 issued and outstanding capital shares of Bluebook International, and
issued a total of 32,700,000 shares of Common Stock to the Bluebook
Stockholders. Immediately following the Exchange, the Company had a total of
38,733,411 shares of Common Stock issued and outstanding. As a result of the
Exchange, Bluebook International became a wholly owned subsidiary of the
Company. Immediately following the Exchange, the Company caused Acquisitions and
Bluebook International to be merged pursuant to a Certificate of Merger filed
with the California Secretary of State on October 4, 2001 (the “Merger”).
Acquisitions survived the Merger, and concurrently Acquisitions changed it name
to the Bluebook International, Inc. (the “Surviving Subsidiary”). On November 6,
2001, the Company changed its name from GAMA Computer Corporation to The
Bluebook International Holding Company. The Company intends to continue to hold
the surviving subsidiary as a wholly owned subsidiary of the Company and intends
to cause the surviving subsidiary to continue the operations of Bluebook
International, as more fully described below.
  F-6
 **THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
**** Bluebook
International was incorporated on December 5, 2000 under the laws of the State
of Nevada. On September 15, 2001, the Company purchased all of the business
assets owned by Daniel E. Josipovich and Dorothy E. Josipovich, husband and wife
(the “Sole Proprietorship”), used in the business of creating, developing and
distributing products and services related to The Bluebook of Cleaning,
Reconstruction and Repair Cost (the “Bluebook”) and Bluebook Estimating Software
Technology (“B.E.S.T.”) for over 38 years.
  Basis of
presentation
  For
accounting purposes, the transaction has been treated as a purchase acquisition
of the Company by Bluebook International and as a recapitalization of Bluebook
International. The historical financial statements prior to the acquisition are
those of sole proprietorship and became those of Bluebook International. In the
recapitalization, historical stockholders’ equity of Bluebook International
prior to the merger were retroactively restated for the equivalent number
of shares received in the merger with an offset to paid-in capital. Accumulated
deficit of the Company is reversed to paid-in capital. Basic earnings (loss) per
share prior to the merger were restated to reflect the number of equivalent
shares issued to Bluebook International stockholders. This transaction has been
included in these financial statements as if the transaction was effective as of
January 1, 2000.
  The
consolidated financial statements include the accounts of The Bluebook
International Holding Company and its wholly owned subsidiary. Intercompany
transactions and balances have been eliminated.
  Business
activity
  Until
September 15, 2001, the Company was in a development stage. After September 15,
2001 when it was acquired, the principal business of the Company has been
developing and selling The Bluebook and B.E.S.T.. The Bluebook is a book in the
form of both a desk and pocket size book containing the information of the
average unit costs attendant to the cleaning, reconstruction and repair
industries. B.E.S.T. is a software format of The Bluebook which allows
subscribers the option to retrieve The Bluebook data and calculate the cost to
clean, reconstruct or repair, then file claims electronically. Currently the
Company is developing B.E.S.T. Net TM and B.E.S.T. Central TM, web-based cost
estimation and claims management software.
  Going
Concern
 The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. However, the Company
has a net loss from operations of $1,985,185 and a negative cash flow from
operations of $831,050 for the year ended December 31, 2004, and has a working
capital deficiency of $92,850 and an accumulated deficit of $8,995,867 as of
December 31, 2004. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Without realization of additional
capital, it would be unlikely for the Company to continue as a going concern.
These financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might result from this
uncertainty.
 
 The
Company will incur additional software development costs associated with
implementation and deployment of its software and additional improvements and
enhancements to its technology during the course of its business. Although we
expect the customer to reimburse costs associated with the delivery of our
software solutions, in some cases, the terms of reimbursement may be included as
part of the product per transaction fee, monthly payment, at terms extended up
to 120 days or may be included as part of the sale of the software. With respect
to our B.E.S.T.Central, B.E.S.T.Net and InsureBASE software solutions, we expect
customers to reimburse costs associated with integration of these software
solutions with the customer’s current hardware installed, software
customization, deployment of architecture plans, and outside third party
consulting services provided. In addition, we expect our customers to reimburse
integration and setup fees associated with a large scale deployment of
B.E.S.T.7.5. If we exceed our current development and sales efforts of
InsureBASE, B.E.S.T.Net and B.E.S.T.Central, or if we meet our projected sales
targets of B.E.S.T. and Insure to Value, we believe we will have sufficient
working capital from these sales to fund operations going forward. However, if
these sales are delayed or fall short of our expectations, we will need to raise
additional capital to meet this shortfall. If we were not successful in raising
sufficient additional working capital, we may need to reduce operating expenses
through reductions in sales and development personnel and take other steps to
restructure our operations. Although we do not expect to incur a significant
adverse impact on sales and development of THE BLUEBOOK and estimating software
solutions, current products and services, our development of additional products
and other services would likely be adversely affected or suspended altogether
from such cost reductions.
 Use of
estimates
  The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reported period certain reported
amounts and disclosures. Actual results could differ from those
estimates.
   F-7
 **THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
THE YEARS ENDED DECEMBER 31, 2004 AND
2003**
 Fair
value of financial instruments
  Statement
of Financial Accounting Standards No. 107 “Disclosure about Fair Value of
Financial Instruments” requires disclosures of information about the fair value
of certain financial instruments for which it is practicable to estimate the
value. For purposes of this disclosure, the fair value of a financial instrument
is the amount at which the instrument could be exchanged in a current
transaction between willing parties other than in a forced sale of liquidation.
The Company believes that the carrying value of its cash and cash equivalents,
receivables, accounts payable and accrued liabilities and notes payable as of
December 31, 2004 approximates their respective fair values due to the demand or
short-term nature of those instruments.
  Property
and equipment
  Property
and equipment are stated at cost. Depreciation is computed using the
straight-line method of depreciation over estimated useful lives of the related
assets ranging from 3 to 7 years.
  Program
development costs
  Program
development costs consists of costs to refine and test software masters, user
documentation and training manuals for software products to be sold. These
development costs encompasses most of our products but the most significant
costs unamortized at December 31, 2004 are for new Internet based products. Our
design costs have been expensed. The Company hired outside consultants to do
much of the coding and testing in the products development. Capitalized costs,
however, include only (1) external direct costs of  material
and services test and refine the software masters, and (2) payroll and
payroll-related costs for employees who are directly associated with and who
devote time to the completion of the projects coding, testing and preparation of
user information. Capitalization of such costs ceases no later than the point at
which the project is available for general release to customer. The Company will
begin amortizing the new products in 2005.
 Product
development cost are amortized using the straight-line method over the expected
life of the product (which ranges from three to five years) the Company believes
this method will best reflect the matching of amortization with revenues.
Reliable estimates of total revenue have not been made. However, the Company
expects to determine a more reliable estimate of revenue as sales begin and will
use the greater of the straight-line method or the estimated sales method for
amortization.
  Research
and development costs, and other computer software maintenance and improvement
costs related to software development are expensed as incurred.
  The
carrying value of software and program development costs is reviewed regularly
by the Company to determine if there has been an impairment loss that needs to
be recognized.
  Intangible
assets
  Intangible
assets consist of customers list, graphic arts and other. Graphic arts and other
are amortized over the estimated useful life of 5 years. Customer list is
amortized over the estimated useful life of 10 years.
   F-8
 **THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
 Loss per
common share
  Basic
loss per share is calculated by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding during
the year. Diluted loss per share is calculated assuming the issuance of common
shares, if dilutive, resulting from the exercise of stock options and warrants.
As the Company has a loss, basic and diluted loss per share amounts are the
same.
  Revenue
recognition
  The
Company’s revenues are from the sale of books, software, and Internet based
solutions. The book is a codification of the Company most recent information
database. Revenue is recorded when the book is shipped.

The
Company licenses its software, used in making cost estimates for residential and
light construction. Revenue from the sale of software licenses is amortized over
the estimated time period until the next new version is available. Sales prices
and the amortization period of new sales revenues decrease during the software’s
life cycle. At December 31, 2004 the Company has determined the life cycle of
its current version is nearing completion and a new version will be introduced
in 2005. Revenues from these outstanding licenses will be amortized over the
next 6 months for older licenses. For licenses sold during the year, the revenue
will be amortized over the life of the older product and the life of the new
product, as substantial amount of the purchase price will be applied to a
license for the new product. When the Company discontinues the support of a
version it requires a new license fee to be paid to obtain the latest version of
the software and of their database and any updates.

The
original license fee for a version includes a maintenance fee for the first
year. Maintenance includes updates to the database and updates of the software.
Based on the Company estimates of the relative fair value of the software and
maintenance including in the license, including the related cost of software
updates and database maintenance, the Company has estimated between 20% to 25%
of the first year’s license fee is allocated to the maintenance contract and
amortized over the 12 months. Purchaser of the software license can buy
maintenance and update fees for the second and future years for a fee as
determined yearly, by the company for single users and on a negotiated basis for
multi users. Generally this fee is between 20%-25% of the original license fee
and is amortized over the maintenance period, usually one year.

The
Company’s other products are Internet based services and prices are determined
on a case-by-case basis. This revenue is recorded for the services as
rendered.
  Income
taxes
  The
Company accounts for income taxes using the liability method whereby deferred
income taxes are recognized for the tax consequences of temporary differences by
applying statutory tax rates applicable to future years to difference between
the financial statement carrying amounts and the tax bases of certain assets and
liabilities. Changes in deferred tax assets and liabilities include the impact
of any tax rate changes enacted during the year.
  Recent
financial accounting standards
  In May
2003, the FASB issued Statement 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 in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. SFAS 150 requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances) because that financial instrument embodies an obligation of the
issuer. SFAS 150 is effective for financial instruments entered into or modified
after May 31, 2003 and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. SFAS 150 is to be implemented by
reporting the cumulative effect of a change in accounting principle for
financial instruments created before the issuance date of SFAS 150 and still
existing at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of SFAS 150 in2003 did
not have a significant effect on the Company's financial statement presentation
or disclosures.
 In
December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share Based
Payment" ("SFAS 123R"), a revision to SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS 123R supercedes Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and amends SFAS No. 95, "Statement
of Cash Flows". SFAS 123R requires that the Company measure the cost of employee
services received in exchange for equity awards based on the grant date fair
value of the awards. The cost will be recognized as compensation expense over
the vesting period of the awards. The Company is required to adopt SFAS 123R no
later than the beginning of the third quarter of 2005. Under this method, the
Company will begin recognizing compensation cost for equity-based compensation
for all new or modified grants after the date of adoption. In addition, the
Company will recognize the unvested portion of the grant date fair value of
awards issued prior to adoption based on the fair values previously calculated
for disclosure purposes over the remaining vesting period of the outstanding
options and warrants. The Company is currently evaluating the potential effect
that the adoption of SFAS 123R will have on the Company's financial statement
presentation and disclosures.
 
 In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets,
an amendment to APB Opinion No. 29" ("SFAS 153"). SFAS 153 amends Accounting
Principles Board Opinion No. 29, "Accounting for Nonmonetary Transactions", to
require that exchanges of nonmonetary assets be measured and accounted for at
fair value, rather than at carryover basis, of the assets exchanged. Nonmonetary
exchanges that lack commercial substance are exempt from this requirement. SFAS
153 is effective for nonmonetary exchanges entered into in fiscal periods
beginning after June 15, 2005. The Company does not routinely enter into
nonmonetary exchanges. Accordingly, the Company does not expect that the
adoption of SFAS 153 will have a significant effect on the Company's financial
statement presentation or disclosures.
  F-9
 
 **THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
  Dependency
on key management
  The
future success or failure of the Company is dependent primarily upon the efforts
of Mark A. Josipovich and Daniel T. Josipovich, two of the Company’s principal
founders. The Company has insurance covering such officers’ liability and term
life insurance. The Company has entered into two-year employment contracts with
the key officers of the Company (see note 9).
  Concentration
of credit risk
  The
Company’s financial instruments that are exposed to concentrations of credit
risk consist principally of cash and receivables. The Company places its cash in
what it believes to be credit-worthy financial institutions. However, cash
balances have exceeded FDIC insured levels at various times during the year. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any significant risk in cash. The Company’s trade receivables are due
from a broad customer base and each individual receivable amount constitutes a
relatively small value.
 
 Reclassifications
 
 Certain amounts from the prior years have been
reclassified to conform with current year presentation.
  **2.    
Restatement**
  The
Company reviewed its capitalized Program Development Cost related to
its BestNetTM and BestCentralTM software products that were capitalized
during 2002 to 2004. The Company determined that some of these costs previously
capitalized did not meet the requirements for capitalization as they were
incurred before the software product had reached technological feasibility as
required by S.F.A.S. No. 86, as the prototype was not tested until February
2003. This fact was not known at the time of capitalization, and upon
a closer review, the changes have been accounted for as a restatement
of the prior periods. The effect of this restatement in 2003 and prior
consolidated financial statements is as follows:
As
      previously reported
      December
      31, 2002
    
    Restated
    
    As
      previously reported
      December
      31, 2003
    
    RestatedProgram
      development costs
    
    $
    3,156,856
    
    $
    385,431
    
    $
    3,777,200
    
    $
    602,130Net
      loss
    
    
    1,003,938
    
    
    3,775,365
    
    
    1,560,129
    
    
    1,963,771Accumulated
      deficit
    
    
    1,591,151
    
    
    4,362,578
    
    
    3,151,280
    
    
    6,326,349

F-11
**THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
**3.    
Property and equipment**

Property
and equipment consists of the following as of December 31,
2004:
2004Furniture
    $
    43,714Office
      equipment
    
    212,021255,735Less
      accumulated depreciation
    
    189,826$
    65,909

Depreciation
expense charged to operations in 2004 and 2003 was $41,280 and $49,657,
respectively.

**4.****Program
development costs**

Program
development costs consist of the following as of December 31,
2004:
2004Developed
      software
    $
    620,349Software
      in development
    
    583,5861,203,935Less
      accumulated amortization
    
    513,358$
    690,577

Amortization
of program development costs charged to operations in 2004 and 2003 was $89,599
and $188,841 respectively. As of December 31, 2004, program development costs
consist primarily of the Company’s investments in B.E.S.T.7.5, B.E.S.TNet and
B.E.S.T.Central. B.E.S.T.Net and B.E.S.T.Central which are expected to be
placed in service during 2005. The following is a schedule by years of future
minimum amortization of programming costs as of December 31, 2004:

**Year
      Ending December 31,**
    
    **Amount**2005
    
    $
    148,0402006
    
    
    177,7962007
    
    
    145,8962008
    
    
    145,8962009
    
    
    72,948Total
    
    $
    690,576
****
F-12
****THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003****
**5.     **Intangible
assets****
Intangible
assets consist of the following as of December 31, 2004 and
2003:

2004Graphic
      arts & other
    
    $
    39,712Customer
      list
    
    
    5,01044,722Less
      accumulated amortization
    
    
    29,078$
    15,644

Amortization
of intangibles charged to operations in 2004 and 2003 was $9,241 and $9,405,
respectively. The following is a schedule by years of future minimum
amortization of intangible assets as of December 31, 2004:

**Year
      Ending December 31,**
    
    **Amount**2005
    
    $
    7,0452006
    
    
    5,5482007
    
    
    1,0982008
    
    
    5012009
      and after
    
    
    1,452Total
    
    $
    15,644

**6.****Capital
Stock Transactions**

On April
24, 2003, Cotelligent, Inc. filed a demand for arbitration against Bluebook in
Case No. 731310018503 ARC, asserting a claim for breach of contract arising out
of a consulting services agreement between Cotelligent and Bluebook. Bluebook
filed cross-claims on May 29, 2003. Effective as of May 3, 2004, Bluebook and
Cotelligent agreed to a mutual settlement of the entire arbitration pursuant to
a Settlement Agreement. Under the terms of the Settlement Agreement, Cotelligent
converted all of its approximately 5.3 million shares of Bluebook Series C
Preferred Stock into shares of Bluebook common stock on a one-for-one basis.
These shares represent 265,835 shares of the Company’s common stock, which
amount has been retroactively restated to reflect the 1 for 20 reverse stock
split declared on November 17, 2004.
In
September 2004, the Company issued 57,775 Rule 144 shares of the Company’s
common stock as settlement of $83,930 debt to certain consultants and employees.
In September 2004 the Company issued 10,000 Rule 144 shares of the Company’s
common stock as a partial payment to a $30,000 loan from a related party (See
Note 8). The Company also issued 3,000 Rule 144 shares of common stock in
connection with the settlement of outstanding litigation.

In
October 2004, the Company increased its number of authorized shares of common
stock from 50,000,000 to 150,000,000 shares.

During
2004, the Company issued 2,773,333 shares of common stock upon conversion
of 2,050 shares of Series B Convertible Preferred Stock, being all of the
outstanding shares of Series B Convertible Preferred Stock. The preferred shares
were converted to common stock at a discount of 25% of the market price at the
date of conversion, resulting in a $684,333 beneficial conversion feature, which
has been reflected as a dividend distribution in the accompanying financial
statements.

During
2004, the Company also settled $1,040,874 of debts owed to certain members
of the Company's management and stockholders through the issuance of 1,387,833
shares of Rule 144 common stock. The shares were issued at a discount of 25% of
the market price at the date of conversion, resulting in an additional of
compensation expense of  $364,954, which has been reflected in the
accompanying financial statements.


F-13
**THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
On
November 17, 2004, the Company effected a one-for-twenty reverse stock split.
All share and per share amounts have been retro-actively restated as if the
reverse split occurred as of the beginning of the period.

On
November 19, 2004, the Company issued to accredited investors, pursuant to a
Securities Purchase Agreement, 2,131,033 shares of common stock of the Company
and warrants to purchase an aggregate of 426,206 shares of common stock for an
aggregate consideration of $1,902,585. The warrants issued to the accredited
investors have an exercise price of $1.31 per share and are exercisable
immediately. In addition, the Company issued a warrant to purchase 170,482
shares of common stock to the placement agent for the transactions contemplated
by the Securities Purchase Agreement. The warrant issued to the placement agent
has a term of five years and an exercise price of $1.15 per share and is
exercisable immediately. As of December 31, 2004 none of these warrants were
exercised.

Following
this sale, the Company issued a total of 418,074 shares of common stock to a
creditor of the Company in settlement of debts totaling $438,978 pursuant to a
Convertible Promissory Note issued by the Company in August 2004; issued a total
of 10,000 shares of common stock to another creditor of the Company in
settlement of debts totaling $10,000 pursuant to a Share Purchase Agreement
dated November 8, 2004; and issued a total of 306,667 shares of common stock to
a consultant to the Company for consulting services rendered.

**7.    
Income taxes**

As of
December 31, 2004, the Company had Federal net operating loss carryforwards of
approximately $6,500,000 expiring in various years through 2024, which can be
used to offset future taxable income, if any. No deferred asset benefit for
these operating losses has been recognized in the financial statements due to
the uncertainty as to their realizability in future periods

Due to
the restrictions imposed by the Internal Revenue Code regarding substantial
changes in ownership of companies with loss carryforwards, the utilization of a
portion of the Company's federal net operating loss carryforwards may be limited
as a result of changes in stock ownership in prior fiscal years.

The
Company’s net deferred tax assets (using a federal corporate income rate of 34%)
consist of the following at December 31, 2004:
2004

Benefit
      of operating loss carryforward
    
    $
    2,210,000Increase
      in valuation allowance
    
    
    (2,210,000
    )Net
      deferred tax asset
    
    $
    —


F-14
**THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
As a
result of the Company's significant operating loss carryforward and the
corresponding valuation allowance, no income tax expense (benefit) has been
recorded at December 31, 2004 and 2003. The provision for income taxes using the
statutory federal income tax rate as compared to the Company's effective tax
rate is summarized below:

December
      31,2004
    
    2003Tax
      expense (benefit) at statutory rate
    
    
    (34
    %)
    
    (34
    %)Adjustments
      to change in valuation allowance
    
    
    34
    %
    
    34
    %—
    
    
    —
****
**8.    
Related party transactions**

The
amount due to stockholders and related parties consists of accrued salaries and
consulting fees payable to our president and chief executive officer, Mark
Josipovich, our chief operating officer, Daniel T. Josipovich, and relatives of
the president and chief operating officer of the Company.

Effective
as of January 1, 2002, Bluebook International entered into a consulting
agreement with Daniel E. Josipovich, father of the Company’s executive officers
Mark A. Josipovich and Daniel T. Josipovich, for a term of two years with an
automatic extension of successive two-year periods. Aggregate fees paid or
payable to Daniel E. Josipovich, for consulting services and related expenses
during the years ended December 31, 2004 and 2003, were $150,000 and $150,000,
respectively. The Company believes that the services rendered by Daniel E.
Josipovich, were on terms no more favorable than those with unrelated
parties.

As part
of the Amended and Restated Asset Purchase and Sale Agreement, dated September
15, 2001, the Company is obligated to pay a royalty to Daniel E. and Dorothy
Josipovich in the amount of 6% of net revenue, defined as the aggregate of all
gross revenues, sales, and receipts of whatever nature or kind received by the
Company, less any returns, rebates, discounts, allowances, rejections and
credits, and less the actual out-of-pocket costs and expenses incurred, except
depreciation, reserves, taxes, interest and extraordinary expenses. As of
December 31, 2004 and 2003, under the above definition, the Company has negative
net revenue; therefore no royalty expenses were accrued.

During
2004 the Company issued 2,773,333 shares of common stock upon conversion of
2,050 shares of Series B Convertible Preferred Stock. The Company also settled
$1,040,874 of debts owed to certain members of the Company's management and
stockholders through the issuance of 1,387,833 shares of Rule 144 common stock.
The difference between the market price at the date of the conversion and the
conversion price for the debt settlement of $364,953 was reflected as
compensation costs in the accompanying statement of operations, while the
Series B conversion was recorded as a dividend distribution of $684,333 in the
accompanying statement of stockholder's equity.

F-15

**THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
**9.  Commitments
and contingencies**

Operating
leases

The
Company leases office space and certain office equipment under non-cancelable
operating leases expiring through January 2007. Total rental expense for the
leases for the years ended December 31, 2004 and 2003 was $41,093 and $64,440,
respectively. The following is a schedule by years of future minimum rental
payments required under the operating leases that have initial or remaining
non-cancelable lease terms in excess of one year as of December 31,
2004.
**Year
      Ending December 31,**
    
    **Amount**2005
    
    $
    79,2622006
    
    
    25,3632007
    
    
    2,094Total
    
    $
    106,719

Employment
agreements

In
September 2001, Bluebook International entered into employment agreements with
Mark A. Josipovich and Daniel T. Josipovich for a term of two years with an
automatic extension of successive one-year periods. Effective October 1, 2001
the Company assumed these agreements and expanded the services to include each
person’s executive position. Under these agreements, Mark A. Josipovich is
employed as the Chief Executive Officer, President, and Secretary, and Daniel T.
Josipovich is employed as the Chief Operating Officer, each with an annual
salary of $180,000, plus health insurance benefits, term life insurance benefits
and the right to participate in any future employee stock option, retirement,
profit sharing or other benefit plans offered in the future to similarly
situated employees. The employment agreements also contain indemnification and
confidentiality provisions. The agreements also provide that we should reimburse
the employee for all reasonable and necessary expenses incurred on our behalf.
In the event of termination without cause by Mark A. Josipovich or Daniel T.
Josipovich or termination with cause by us, the Mark A. Josipovich and Daniel T.
Josipovich are entitled to all accrued and unpaid compensation as of the date of
termination. In the event of termination with cause by Mark A. Josipovich or
Daniel T. Josipovich or termination without cause by us, Mark A. Josipovich or
Daniel T. Josipovich are entitled to all accrued and unpaid compensation as of
the date of termination and total amount of annual salary from the date of
termination until the end of the term of the employment agreements.


Litigation

As of
April 12, 2005, we are not subject to any pending legal proceedings that would
be deemed material to our business. From time to time, we may be subject to
certain routine litigation that is incidental to our business.

On
February 3, 2003, Bluebook was named a defendant in Morris Diamond, et al. v.
The Bluebook International Holding Company, New York Supreme Court, Monroe
County Case No. 1204/03. The Diamond case was recently settled by the Company
and the plaintiffs. In the Diamond case, plaintiffs alleged that Bluebook
wrongfully withheld the issuance and delivery of plaintiffs’ shares of Bluebook
common stock, thereby damaging plaintiffs in the loss of the value of their
Bluebook stock. On November 10, 2004, the Company and the plaintiffs entered
into a settlement agreement pursuant to which all parties agreed to a general
release of their claims and the Company agreed to pay $64,120 and issue 3,000
shares of common stock to certain of the plaintiffs.

On April
24, 2003, Cotelligent, Inc. filed a demand for arbitration against Bluebook in
Case No. 731310018503 ARC, asserting a claim for breach of contract arising out
of a consulting services agreement between Cotelligent and Bluebook. Bluebook
filed cross-claims on May 29, 2003. Effective as of May 3, 2004, Bluebook and
Cotelligent agreed to a mutual settlement of the entire arbitration pursuant to
a Settlement Agreement. Under the terms of the Settlement Agreement, Cotelligent
converted all of its approximately 5.3 million shares of Bluebook Series C
Preferred Stock into shares of Bluebook common stock on a one-for-one basis.
These shares represent 265,835 shares of the Company’s common stock, which
amount has been retroactively restated to reflect the 1 for 20 reverse stock
split declared on November 17, 2004. In addition, Cotelligent agreed to deliver
source code developed by Cotelligent for Bluebook pursuant to the consulting
services agreement.

F-16
****THE
BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY**
**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2004 AND
2003****
****
**10.  Legal
fee payable**

On
January 19, 2005, the Company entered into an agreement to settle certain
outstanding legal costs for $415,000. Upon settlement, the Company paid
$50,000, with the remainder payable commencing May 19, 2005 in monthly
installments of $5,000 until the obligation has been paid in full. However, upon
the next equity financing event equal to at least $3 million, the Company shall
pay $300,000 within five business days of the closing of the transaction and
receipt of the proceeds. Should the Company raise less than $3 million, the
Company shall pay ten percent of the proceeds of the transactions.


F-17