Hesperia Holding, Inc. (formerly Saveyoutime.com, Inc.) entered into a merger agreement dated January 20, 2003 with Hesperia Holding Corp., a California corporation. Pursuant to the terms of the Merger Agreement, Hesperia Holding Corp. merged with and into Hesperia Holding, Inc. on April 10, 2003.
The Merger was consummated on April 10, 2003, at which time a Certificate of Merger was filed in the State of Nevada and State of California. Under the terms of the Merger, we issued 10,415,845 shares of our common stock to the stockholders of Hesperia Holding Corp. in exchange for 100% of the issued and outstanding common stock of Hesperia Holding Corp. Our then sole stockholder retained 50,000 shares of common stock and cancelled 6,454,370 shares resulting in 10,465,845 shares being issued and outstanding.
Hesperia Holding Corp. was formed in July 2002, as a California corporation, and was a holding company for its subsidiary, Hesperia Truss, Inc., which was formed in 1996. Hesperia Truss, a prefabricated wood truss manufacturer, provides custom designed wood trusses to the residential construction market.
Products and Services
Floor Trusses. Floor trusses are used for multi-story structures, and as such are used as substitutes for floor joints. We specialize in producing floor trusses for all size projects - up to 30 feet long and 28 inches deep. While floor trusses are more cost-effective for most projects than other engineered joists, each truss is custom designed to fit its respective project to specifications. The floor trusses are open web, providing space for plumbing, electrical and ductwork.
Roof Trusses. Roof trusses are used for both single-story and multi-story structures.
Both floor and roof trusses are more cost-effective than conventional floor and roof framing. Wood trusses enable ease of handling and work, and have also become standard within the construction industry.
Operations
Our operation is set up to design, manufacture and transport floor and roof trusses. The following describes the process in which we receive orders, develop plans, manufacture and ship our goods:
1. Receive Bid Proposal - We have a dedicated salesperson continually soliciting new business from general, residential, custom and tract, as well as commercial contractors. The salesperson calls on previous customers as well as on new contractors located through the Yellow Pages and referrals. He then receives bid proposals, which are given to the engineering/bid department.
2. Accurately Develop Bid - We generally structure our bids based on the cost of lumber and the expected complexity of the manufacturing process. The engineering/drafting department receives design plans from the contractor and then gauges the amount of lumber needed to manufacture the necessary trusses. The bid proposal takes approximately one day to develop.
3. Prepare Design Schematics - We develop truss layouts using architectural blueprints supplied by contractors, building owners or framers. We use Mitek software to design the truss layout. The software then produces tangible blueprints used to manufacture the trusses in the yard. It takes approximately one day to prepare the design schematics.
4. Manufacture Trusses - Once the cutting/production department receives the blueprints it cuts the wood to the specifications on the design blueprints. The cut pieces of lumber are then brought to the production area where builders fit the different wood pieces together with metal connectors. To completely fasten the different components, the entire truss is fed through a roller machine, which presses all the metal bindings firmly to the wood. The finished trusses are then held until delivery. The number and size of orders determines the length of time to fulfill any particular contract.
5. Distribution of Trusses to Customer - All the trusses are loaded on a delivery truck and shipped to the building site.
Agreement with Home Depot
On February 8, 2005, we, through one of our operating subsidiaries, Hesperia Truss Inc, became a licensed vendor of The Home Depot Inc. Pursuant to this agreement, we became a supplier of custom-order trusses for 123 Home Depot stores in Southern California and Nevada. The 123 Home Depots will now offer custom-built trusses to customers and contractors as part of the services and products they provide. When a customer or contractor places an order for custom-built trusses through Home Depot, the Home Depot will place the order with us, and we will bill and be paid directly by the Home Depot. The agreement does not provide for a minimum order guarantee, but for trusses on an as-needed basis.
Suppliers
We are serviced by a diverse supplier base. We have ready access to alternate suppliers for each product type. The following table lists our major suppliers:
Additionally, we utilize the following suppliers:
Hesperia Wholesale Lumber Universal Forest Products Washington Pacific Weyerhaeuser Seemac, Inc.
Markets and Customers
We primarily cater to general contractors. Contractors tend to prefer using trusses because they provide a stable roof structure, and are easy to use, install and adjust to specifications. The following table outlines our primary markets and the products we provide to each market.
Market Product Service General Contractors Trusses Framing Contractors Trusses Owner Builders Trusses Resale Distributors Trusses
General Contractors - HHI sells the majority of its trusses to general contractors of custom and track residential homes as well as commercial building contractors.
Framing Contractors - Framing contractors are the second largest revenue generating market for HHI. These contractors focus only on trusses. They are subcontracted by general contractors to install only trusses for buildings.
Owner Builders - Owner builders represent 10% of HHI's revenue. These customers are individual building owners who need to redo their roof and roof structures. They come to Hesperia with specific blueprints and HHI manufactures trusses to their specifications.
Resale Distributors - Resale distributors represent the smallest market in which HHI caters. Resale distributors are large businesses that purchase prefabricated trusses from HHI for resale.
Geographic Region
We provide our trusses to the California, Southern Nevada and Arizona regions.
Customers
We have conducted a majority of our business with repeat customers. Our significant customers are indicated below:
Sales and Marketing
We do not actively market our products; rather, we rely on word-of-mouth referrals and we employ an inside sales person dedicated to developing new business.. The majority of bid proposals are received through referrals. Our inside salesperson contacts contractors through industry contacts and the phone book, as well as referrals from other contractors.
Direct Selling
Since our inception, we have established extensive personal contacts in the construction industry. We consider any individual who has direct contact with a customer via personal, phone, letter or any other mode of contact, as a salesperson. We train our employees as though they are salespeople, teaching them to always portray themselves as our representatives.
Industry Outlook/Competition
Construction Industry Structural Factors
The construction industry is cyclical, since it provides what is essentially a capital asset. Demand for both residential and nonresidential construction is affected by interest rates as well as the overall level of economic activity. The relative contribution of residential and nonresidential construction also varies over the business cycle. Barriers to entry in the industry are moderate. There are many self-employed individuals in the industry workforce, and the number of firms shows significant response to expansions and contractions in construction industry demand.
Inland Empire Outlook
The Inland Empire, usually defined as Riverside and San Bernardino Counties, is one of California's largest economies. If it were a state, its $60 billion in total personal income would rank 32nd, just behind Kansas. The Inland Empire has considerably more open space for new housing (the principle reason for its population growth) and industrial expansion.
The Inland Empire sustains over 1,000,000 jobs. This accounts for 14% of all jobs in Southern California per CA Employment Development Department. The Inland Empire, as a whole, recorded very healthy residential and nonresidential construction growth - with a 30.87% increase in new building permits from September, 2003 to 2004 per the US Census Bureau. In addition, our second market area, Nye County, Nevada was ranked second in July, 2004 by the National Association of Home Builders with a 36.5 percent growth rate for active adult home contruction. To some extent this growth represents a spillover effect of strong employment expansion in neighboring areas such as Orange and San Diego counties in California and Clark County, Nevada.
Industry Growth
In 2000 the construction growth rate was 11%. The projected construction growth rate between 2001 and 2004 is 1.1% annually, just below the GDP's 2% growth. A key factor affecting the growth rate for the next five years is interest rate activity. Overall forecasts for future interest rates assume only modest inflation, which have and may continue to lead to lower interest rates and a fairly good macroeconomic climate for construction.
Employees
We currently have 85 full time employees. Our employees are primarily at the production level followed by sales and design, administration and executive positions. Currently, there exists no organized labor agreements or union agreements between us and our employees. We believe that our relations with our employees are good.
