-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MQx5NsHxzMbX08XvPLvjwUGvTqpQv32jurZ4VetnivM+3LOU9svRMjBc0f7BMqxI ZU8TTP8iIehIG8KMVuK7dQ== 0001144204-05-016882.txt : 20050523 0001144204-05-016882.hdr.sgml : 20050523 20050523165939 ACCESSION NUMBER: 0001144204-05-016882 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050523 DATE AS OF CHANGE: 20050523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUEBOOK INTERNATIONAL HOLDING CO CENTRAL INDEX KEY: 0001126577 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 980125787 STATE OF INCORPORATION: DE FISCAL YEAR END: 1104 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-31008 FILM NUMBER: 05851870 BUSINESS ADDRESS: STREET 1: 21098 BAKE PARKWAY STREET 2: SUITE 100 CITY: LAKE FOREST STATE: CA ZIP: 92630 BUSINESS PHONE: 7147313389 MAIL ADDRESS: STREET 1: 21098 BAKE PARKWAY STREET 2: SUITE 100 CITY: LAKE FOREST STATE: CA ZIP: 92630 FORMER COMPANY: FORMER CONFORMED NAME: GAMA COMPUTER CORP DATE OF NAME CHANGE: 20001018 10QSB 1 v018949_10qsb.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005 [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER ________________________________ THE BLUEBOOK INTERNATIONAL HOLDING COMPANY (Name of small business issuer in its charter) DELAWARE 98-0215787 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 21098 BAKE PARKWAY, SUITE 100 LAKE FOREST, CALIFORNIA 92630-2163 (Address of principal executive offices) Issuer's telephone Number: (949) 470-9534 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of May 19, 2005, the issuer had 8,760,221 outstanding shares of Common Stock, par value $.0001 per share. Transitional Small Business Disclosure Format (check one): Yes [_] No [X] TABLE OF CONTENTS Page ---- PART I - FINANCIAL INFORMATION Item 1. Condensed Financial Statements...................................... 1 Item 2. Management's Discussion and Analysis or Plan of Operation........... 8 Item 3. Controls and Procedures............................................. 14 PART II - OTHER INFORMATION Item 1. Legal Proceedings................................................... 15 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......... 15 Item 3. Defaults Upon Senior Securities..................................... 15 Item 4. Submission of Matters to a Vote of Security Holders................. 15 Item 5. Other Information................................................... 15 Item 6. Exhibits and Reports on Form 8-K.................................... 15 SIGNATURES.................................................................. 16 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. THE BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 2005 2004 (unaudited) ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 516,595 $ 1,534,313 Accounts receivable, net of allowance for doubtful accounts of $4,600 as of March 31, 2005 and December 31, 2004 12,059 6,417 Inventory 23,523 -- Prepaid expenses and other 44,875 34,500 ------------ ------------ Total current assets 597,052 1,575,230 ------------ ------------ PROPERTY AND EQUIPMENT, net of accumulated depreciation of $200,415 and $190,408 in 2005 and 2004, respectively 97,039 65,909 ------------ ------------ OTHER ASSETS Program development costs, net of accumulated amortization of $526,542 and $513,358, in 2005 and 2004, respectively 729,656 690,577 Intangible assets, net of accumulated amortization of $30,864 and $29,078, in 2005 and 2004, respectively 13,858 15,644 Other assets 5,296 5,296 ------------ ------------ Total other assets 748,810 711,517 ------------ ------------ TOTAL ASSETS $ 1,442,901 $ 2,352,656 ============ ============
See accompanying Notes to Condensed Consolidated Financial Statements 1 THE BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
MARCH 31, DECEMBER 31, 2005 2004 (unaudited) ------------ ------------ LIABILITIES AND CURRENT STOCKHOLDERS EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 577,985 $ 654,753 Legal fee payable 365,000 415,000 Obligation under capital lease - current portion 17,518 -- Due to stockholders and related parties 183,922 318,068 Deferred revenue 131,425 165,259 Notes payable 115,000 115,000 ------------ ------------ Total current liabilities 1,390,850 1,668,080 ------------ ------------ LONG TERM LIABILITIES Obligation under capital lease 18,588 -- COMMITMENTS & CONTINGENCIES STOCKHOLDERS' EQUITY Series B Convertible Preferred Stock, $.0001 par value; 5,000,000 shares authorized, 2,050 shares issued and outstanding -- -- Common Stock, $.0001 par value; 150,000,000 shares authorized; 8,760,221 and 8,760,221 shares issued and outstanding as of March 31, 2005 and December 31, 2004, respectively 875 875 Additional paid in capital 9,679,568 9,679,568 Accumulated deficit (9,646,979) (8,995,867) ------------ ------------ Total stockholders' equity 33,464 684,577 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,442,902 $ 2,352,657 ============ ============
See accompanying Notes to Condensed Consolidated Financial Statements 2 THE BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2005 2005 2004 (restated) ------------ ------------ SALES, net $ 169,725 $ 217,559 ------------ ------------ OPERATING EXPENSES Selling, general and administrative expenses 788,504 341,055 Program and Development Costs -- 97,729 Depreciation and amortization expenses 24,977 69,480 ------------ ------------ Total Operating Expenses 813,481 508,264 ------------ ------------ LOSS FROM OPERATIONS 643,756 290,705 OTHER EXPENSE Interest expense 6,556 6,796 ------------ ------------ LOSS BEFORE INCOME TAXES (650,312) (297,501) INCOME TAX EXPENSE 800 800 ------------ ------------ NET LOSS $ (651,112) $ (298,301) ============ ============ Weighted average number of shares of common stock outstanding, basic and diluted 8,760,221 1,436,671 ============ ============ Loss per share, basic and diluted $ (0.07) $ (0.21) ============ ============
See accompanying Notes to Condensed Consolidated Financial Statements 3 THE BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2005 2005 2004 (restated) ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (651,112) $ (298,301) Adjustment to reconcile net loss to net cash used in operating activities Depreciation and amortization 24,977 69,480 Changes in operating assets and liabilities: Increase in Accounts receivable (5,642) (238) Increase in Inventory (23,523) -- Increase in Prepaid expenses and other (10,375) (1,500) (Decrease) increase in Accounts payable and accrued expenses (76,768) 137,004 Decrease in Legal fee payable (50,000) -- (Decrease) increase in Due to stockholders and related party (134,146) 143,450 Decrease in Deferred revenue (33,834) (72,664) ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (960,423) (22,769) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (2,536) -- Program development costs (52,264) (34,147) ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (54,800) (34,147) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Payment of obligation under capital lease (2,495) -- Note payable due to related parties, net of repayment -- 40,000 ------------ ------------ NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (2,495) 40,000 ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (1,017,718) (16,916) CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 1,534,313 44,831 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 516,595 $ 27,915 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 4,056 $ 6,796 ============ ============ Taxes $ 5,002 $ -- ============ ============ Non-cash Investing and Financing Activities Acquisition of equipment through capital lease obligation $ 38,600 $ -- ============ ============
See accompanying Notes to Condensed Consolidated Financial Statements 4 THE BLUEBOOK INTERNATIONAL HOLDING COMPANY AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2005 1. BASIS OF PRESENTATION The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management of The Bluebook International Holding Company (Bluebook or the Company), contains all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at March 31, 2005, the results of operations, and cash flows for the three months ended March 31, 2005 and 2004. The balance sheet as of December 31, 2004 is derived from the Company's audited financial statements. Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as filed with the Securities and Exchange Commission on April 15, 2005. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts 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 reporting period. Actual results could differ from those estimates. The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2005. 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 $651,112 and a negative cash flow from operations of $960,423 for the three months ended March 31, 2005 and has a net working capital deficiency of $793,798 and an accumulated deficit of $9,646,979. These factors raise substantial doubt about the Company's ability to continue as a going concern. Without realization of additional capital or debt, 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's operating cash flows for the three months ended March 31, 2005 were funded primarily through operations and cash existing at December 31, 2004. The Company believes it has sufficient cash to meet its immediate working capital requirements while additional operations and development funds are sought from loans from officers or principal stockholders of the Company, third party financing and further reducing overhead relating to software solutions now finished in development. The Company has recently taken steps to improve liquidity, including seeking additional funding and deferment of a portion of its Chief Operating Officer's salary and certain consulting fees paid to a related party. If it is not successful in raising additional capital, it will further reduce operating expenses through headcount reductions in restructurings and modify its business model and strategy to accommodate licensing of its technology and databases. Further, the Company would continue sales of THE BLUEBOOK and B.E.S.T. software solutions and newer InsureBASE and Insured to Value software solutions. The Company does not expect any significant impact on its sales of THE BLUEBOOK, B.E.S.T. 7.5 and InsureBASE software solutions from such restructurings; however, they may adversely affect the development of any new software solutions. 5 Recent financial accounting standards 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 supersedes 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 Non-monetary Assets, an amendment to APB Opinion No. 29" ("SFAS 153"). SFAS 153 amends Accounting Principles Board Opinion No. 29, "Accounting for Non-monetary Transactions", to require that exchanges of non-monetary assets be measured and accounted for at fair value, rather than at carryover basis, of the assets exchanged. Non-monetary exchanges that lack commercial substance are exempt from this requirement. SFAS 153 is effective for non-monetary exchanges entered into in fiscal periods beginning after June 15, 2005. The Company does not routinely enter into non-monetary 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. Business Activities The Company was incorporated in Delaware on December 17, 1997. Since the Company's exchange reorganization and merger, effective as of October 1, 2001, the principal business of the Company has been developing and selling THE BLUEBOOK and B.E.S.T. software solutions. 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. The Company has recently completed its development of the InsureBase and Insured to Value Solutions. These systems are designed to assist the insurance carrier in calculating premiums for homeowners insurance and identifying and verifying premiums with existing policyholders for residential properties located in the United States. The Company recently began its marketing of these solutions and has recently sold its second contract for InsureBASE and continues project work. The Company has also recently integrated its solution with Xdimentional technologies where it will be made available to as many as one thousand Insurance Agents for use. The Company continues to work with many prospects in its sales pipeline. Although the development of the Company's B.E.S.T.Net solution is substantially complete, the Company is currently working on the completion of B.E.S.T.Central and the tie-in or interface between B.E.S.T.Net and B.E.S.T.Central as well as the integration of B.E.S.T.7. into B.E.S.T.Central. 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 had a loss in the three month periods, ended March 31, 2005 and 2004, basic and diluted loss per share are the same. 6 2. RELATED PARTY TRANSACTIONS The amount due to stockholders and related parties was $183,922 as of March 31, 2005 and $318,068 as of December 31, 2004. The amount due to stockholders as of March 31, 2005 consists of accrued salaries and consulting fees payable to our President and Chief Executive Officer, Mark Josipovich, our Chief Operating Officer, Dan Josipovich, and relatives of the President and Chief Operating Officer of the Company. During the three months ended March 31, 2005 and 2004, the Company incurred consulting fees of $37,500 that were accrued to relatives of the president and chief operating officer of the Company. 3. COMMITMENTS AND CONTINGENCIES Operating lease The Company leases office space, certain office equipment and a vehicle under non-cancelable operating leases expiring through January 2006. Total rental expense for the leases for the three months ended March 31, 2005 and 2004 was $18,984 and $22,513, respectively. The 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 March 31, 2005 was $37,473. Capital lease The Company leases certain equipment under a capital lease with monthly payments of $2,094 per month, including interest at 26.75% per annum. At March 31, 2005, monthly payments under these leases aggregated $4,188. Included in property and equipment was $38,600 of equipment under a capital lease at March 31, 2005. Included in accumulated depreciation was accumulated amortization of assets under a capital lease of $1,287 at March 31, 2005. Litigation As a general matter, we are subject to various legal proceedings, claims, and litigation that arise in the normal course of our business. While the outcome of these matters is currently not determinable, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our financial position, results of operations, or cash flows. 4. NOTE PAYABLE On March 31, 2004, the Company entered into a loan agreement for $120,000, of which $115,000 was outstanding as of March 31, 2005. 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 the Company comply with certain covenants, including preserving our corporate existence, maintaining all rights and permits, complying with all applicable laws, and maintaining our properties. 5. RESTATEMENT The Company reviewed its capitalized Program Development Cost related to its B.E.S.T.Net(TM) and B.E.S.T.Central(TM) software products that were capitalized from 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 on the March 31, 2004 financial statements is as follows: 7 As previously reported Restated March 31, 2004 Program development costs $ 3,852,180 $ 579,381 Net loss $ 126,101 $ 298,301 Accumulated deficit $ 3,277,381 $ 6,624,650 Item 2. 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 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 that could cause actual results to differ materially from those projected. 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 and provider data, provide for validation and automation of structure replacement costs for quoting and validating homeowner insurance premiums in significantly less time and costs 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.). This allows them to more easily and cost efficiently reach consumers who need insurance and maintain accurate premiums for those who are already insured. 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) transaction is 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). When outside data sources are utilized, we are obligated to 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 direct to insurance carrier and agency management systems. Outlook for Our Business Our revenue growth has been and will continue to be dependent on our ability to increase the number of licenses that are sold and transactions that are processed through our software solutions and our ability to expand the data solutions and services we provide to the insurance, banking and mortgage industries. 8 We have recently added six new sales and marketing professionals, signed and resigned recent contracts with insurance carriers, integrated our solutions with a widely used agency management solution, and completed a joint revenue and share agreement for InsureBASE with the First American Real Estate Solutions Company (FAF: NYSE) further validating the InsureBASE product line. In addition, we have automated much of our data aggregation process through the development of DataCentral. This product allows us to significantly reduce the amount of manual effort and costs typically associated with collecting and maintaining the property replacement database by automating many of the processes. We enhanced the size of the InsureBASE property database to nearly 70 million accessible records by combining Bluebook data with access to external data providers through our solutions. We continue to work with several other national data providers and distributors for joint distribution opportunities within the insurance, mortgage and banking industries. We believe this strategy of centralizing, automating and bringing online the full capabilities of our data and integrating it with our InsureBASE, Insure to Value and claim solutions will greatly expand our markets and significantly lower our total cost of delivery. We believe our Internet deliverable and accessible solutions will allow customers easier and more immediate access to replacement cost information. We believe our online solutions will increase recurring revenue numbers as we provide clients the means to maintain current property replacement cost values consistent with economic change. Our ability to continue this growth will depend on our ability to sell our technologies and data to insurance carriers, banking, mortgage and repair professionals including larger distribution networks and joint license partners who are expected to 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. For the quarter ending March 31, 2005, we expensed all development costs as improvements to existing technology. Program Development Costs Program development costs consist of salaries and other costs of employment of our development staff as well as outside contractors. No expenses were incurred in the first quarter ended March 31, 2005. 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 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. Results of Operation Comparison of three months ended March 31, 2005 to three months ended March 31, 2004 Revenues. Our revenues are derived primarily from sales of our B.E.S.T. software products and the Bluebook handbook. Net revenues for the three months ended March 31, 2005 were $169,725, a decrease of $47,834 or 22% compared with net revenues of $217,559 for the three months ended March 31, 2004. Revenue from sales of THE BLUEBOOK handbook were $58,698 for the three months ended March 31, 2005 as compared to $37,671 for the three months ended March 31, 2004, an increase of $21,027 or 56%. Revenue from sales of the B.E.S.T software products were $65,295 for the three months ended March 31, 2005 as compared to $92,898 for the three months ended March 31, 2004, a decrease of $27,603 or 29%. This decrease was a result of customers waiting for the new B.E.S.T. 7.5 version software released in the second quarter of 2005. Total transaction volume including paid, pilot programs and demo accounts for prospective customers, rose to over 52,000 for the first quarter from 9,860 for the quarter ending December 31, 2004. Net revenues increased $49,143 or 40% from the fourth quarter ended December 31, 2004 to the first quarter ended March 31, 2005. 9 Historically, sales of THE BLUEBOOK handbook and our B.E.S.T. estimating software were the principal sources of our revenues. However, we expect 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 three months ended March 31, 2005 were $788,504, an increase of $447,449 or 131% compared to $341,055 for the three months ended March 31, 2004. 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 had unusually high expenses this quarter for costs associated with new hires, infrastructure costs and increased legal and accounting fees associated with required investment related SEC filings. 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. As our business plan calls for additional personnel and execution of additional marketing and sales programs, we currently anticipate that selling, general and administrative expenses in fiscal year 2005 will increase. Depreciation and amortization was $24,977 for the three months ended March 31, 2005, a decrease of $44,503 or 64% compared to $69,480 for the three months ended March 31, 2004. The decrease was primarily due to a change in the estimated useful life of our B.E.S.T.7 product and some assets have been fully depreciated. Previously, the net book value of B.E.S.T.7 pertaining to the database was amortized over 24 months and the net book value of B.E.S.T.7 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 such that as of January 1, 2004, the net book value of B.E.S.T.7 pertaining to the database is amortized over 30 months and the net book value of B.E.S.T.7 pertaining to the technology is amortized over 15 months. For the remainder of 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 $651,112 for the three months ended March 31, 2005, compared to a net loss of $298,301 for the three months ended March 31, 2004. The increase in net loss is primarily attributable to increased selling, general and administrative expenses. Liquidity and Capital Resources As of March 31, 2005, we had cash of $516,595, a net working capital deficiency of $793,798, and an accumulated deficit of $9,646,979. We have no material commitments for capital expenditures as of March 31, 2005. However, we plan to actively seek additional funding in order to meet our business plan. Our cash requirements for the next twelve months are expected to be approximately $2.59million. We intend to seek outside debt and/or equity financing to supplement anticipated cash from operations. We do not currently have any commitments for such financing and there is no assurance that we will be successful in obtaining such funds. Any funds received will primarily be utilized for selling and general administrative expenses and ramping required hardware infrastructure in connection with new customer acquisition. We plan to continue to invest in the development of our products and services in the normal course of business. Upon further funding, the company also plans to hire three new additional experienced sales and administrative executives in the first half of the third quarter and two management executives in the first half of quarter four. We also plan to reduce some company debt obligations. 10 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 2005 operations and investment activities have been funded primarily through sales and existing cash. Our 2004 operations and investment activities were funded primarily through sales and loans from related and non-related parties. Net cash used in operating activities during the three months ended March 31, 2005 and 2004 were $960,423 and $22,769, respectively. The increase in net cash used in operating activities was primarily due to an increase in selling, general and administrative expenses and repayment of amounts due to stockholders and related parties. Net cash used in investing activities was $54,800 for the three months ended March 31, 2005 and $34,147 for the three months ended March 31, 2004. The increase in cash used for investing activities was primarily due to cash spent in program development. Net cash used in financing activities was $2,495 for the three months ended March 31, 2005 and net cash provided by financing activities was $40,000 for the three months ended March 31, 2004. We had a net loss from operations of $651,112 and a negative cash flow from operations of $960,423 for the three months ended March 31, 2005, and had a working capital deficiency of $793,798 and an accumulated deficit of $9,646,979 as of March 31, 2005. 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. 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 and funding to fund operations going forward. However, if these sales are delayed or fall short of our expectations or if we do not receive such funding, we will need to raise additional capital to meet this shortfall. If we are 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. 11 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. Loan Agreement On March 31, 2004, we entered into a loan agreement for $120,000, of which $115,000 was outstanding as of March 31, 2005. 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 May 19, 2005. License of InsureBASE software solution 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. Joint License & Revenue Share Agreement On March 25, 2005 we entered into a Joint License and Revenue Share Agreement with 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 of 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. 12 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 Our revenues are from the sale of books, software, and Internet based solutions. The book is a codification of the Company's 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 March 31, 2005, 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 amounts 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 included in the license, including the related cost of software updates and database maintenance, we have estimated between 20% to 25% of the first year's license fee is allocated to the maintenance contract and amortized over the 12 months. Purchasers 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. Our 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 consist of costs to refine and test software masters, user documentation and training manuals for software products to be sold. These development costs encompass most of our products but the most significant costs unamortized at March 31, 2005 are for new Internet based products. Our design costs have been expensed. We 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 to 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 customers. We expect to begin amortizing the new products in 2005. For the quarter ending March 31, 2005, we expensed all development as improvements to existing technology. 13 Product development cost are amortized using the straight-line method over the expected life of the product (which ranges from three to five years) we believe this method will best reflect the matching of amortization with revenues. Reliable estimates of total revenue have not been made. However, we expect 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 to determine if there has been an impairment loss that needs to be recognized. Recent Accounting Pronouncements 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 Non-monetary Transactions ", to require that exchanges of non-monetary assets be measured and accounted for at fair value, rather than at carryover basis, of the assets exchanged. Non-monetary exchanges that lack commercial substance are exempt from this requirement. SFAS 153 is effective for non-monetary exchanges entered into in fiscal periods beginning after June 15, 2005. We do not routinely enter into non-monetary exchanges. Accordingly, we do not expect that the adoption of SFAS 153 will have a significant effect on our financial statement presentation or disclosures. Item 3. Controls and Procedures. As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and principal financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934). Based upon this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. There was no change in our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 14 PART II Item 1. Legal Proceedings. We are not currently a party to, nor are any of our properties currently the subject of, any pending legal proceeding. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Item 5. Other Information. Not applicable. Item 6. Exhibits. Exhibit Number Description - -------------------------------------------------------------------------------- 10.1 Web Services Agreement entered into on March 7, 2005 by and between The Bluebook International, Inc. and Homesite Insurance Company (Incorporated by reference to the Company's Form 8-K/A filed with the Securities and Exchange Commission on April 1, 2005). 10.2 Joint License & Revenue Share Agreement effective March 25, 2005 between First American Real Estate Solutions, L.P. and The Bluebook International, Inc. (Incorporated by reference to the Company's Form 8-K filed with the Securities and Exchange Commission on March 31, 2005). 31.1 Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 15 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE BLUEBOOK INTERNATIONAL HOLDING COMPANY Dated: May 23, 2005 By: /s/ Mark A. Josipovich ----------------------------------- Mark A. Josipovich President, Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer, Treasurer and Chairman of the Board of Directors 16 EX-31.1 2 v018949_ex31-1.txt EXHIBIT 31.1 CERTIFICATION I, Mark A. Josipovich, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of The Bluebook International Holding Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer is made known to us by others, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the small business issuer's disclosure controls and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions); (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. May 23, 2005 /s/ Mark A. Josipovich - ----------------------------------- Mark A. Josipovich Chief Executive Officer and Principal Financial Officer EX-32.1 3 v018949_ex32-1.txt EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of The Bluebook International Holding Company (the "Company") on Form 10-QSB for the quarter ended March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark A. Josipovich, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. May 23, 2005 /s/ Mark A. Josipovich ------------------------------------ Mark A. Josipovich Chief Executive Officer and Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----