UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

Washington,D.C. 20549

 

 

FORM10QSB

 

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OFTHE SECURITIES EXCHANGE ACT OF 1934

 

[] TRANSITION REPORT PURSUANT TO SECTION 13 OR

15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

 

Forthe Quarterly period ended June 30, 2004

 

Commissionfile number 000-30085

 

HESPERIAHOLDING, INC.

 

(Exactname of small business issuer as specified in its charter)

 

| **Nevada**
** 88-04553327**
(State      or other jurisdiction of   
 (I.R.S.      Employer
incorporation      or organization)   
 Identification      Number)
     
**9780      E. Avenue**
**Hesperia,      California**
** 92345**
(Address      of Principal Executive Offices)   
 (Zip      Code)** 

(760)244-8787**
(Issuer'stelephone number)

 

Checkwhether the issuer (1) filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the last 12 months (or forsuch 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 _____

 

Thenumber of shares of Common Stock, $0.001 par value, outstanding on July 31, 2004was 11,810,617 shares.

TransitionalSmall Business Disclosure Format (check one):

Yes______ No    X    

ITEM1. FINANCIAL STATEMENTS

 
**HesperiaHolding, Inc.

CondensedConsolidated Balance Sheets**
 

     
(Unaudited)

June      30, 2004
(Audited)

December      31, 2003**ASSETS
Current      assets:
Cash      and cash equivalents
$      -
$      -
Accounts      Receivable, net of allowance for doubtful accounts of $46,786 and $9,311      at June 30, 2004 and December 31, 2003, respectively
 

555,374
 

339,897
Inventory      (Note F)
204,168
163,007
Other      receivable
5,010
-
Due      from Employees (Note E)
-
650
Total      current assets
764,552
503,554
 

Property      and equipment, net of accumulated depreciation of $202,775 and $166,337 at      June 30, 2004 and December 31, 2003, respectively
 

292,129
 

173,065
 

 

$      1,056,681
$      676,619
 
**LIABILITIES      AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
Current      liabilities:
Cash      disbursed in excess of available funds
$      279,299
$      219,856
Accounts      payable and accrued liabilities
1,055,430
653,418
Deferred      revenue (Note A)
375,406
190,678
Notes      payable, current portion (Note C)
11,352
56,450
Notes      payable to related parties, current portion (Note C and E)
93,419
-
Advances      from related parties (Note E)
94,069
-
Total      current liabilities
1,908,975
1,120,402
 

Long-term      liabilities:
Advances      from related parties (Note E)
-
235,825
Notes      payable, long-term portion (note C)
42,494
-
Notes      payable to related parties, long-term portion (Note C and E)
298,700
-
Total      long-term liabilities
341,194
235,825
  

(Deficiency      in) Stockholders Equity:
Preferred      stock, par value; $.001; authorized 5,000,000 shares; none issued and      outstanding at June 30, 2004 and December 31, 2003 (Note D)
 

-
 

-
Common      stock, par value; $.001, authorized 20,000,000 shares; 11,810,617 and      11,510,845 shares issued and outstanding at June 30,2004 and December 31,      2003, respectively (Note D)
 

11,811
 

11,511
Additional      paid-in capital
841,391
568,815
Accumulated      deficit
(2,046,690)
(1,259,934)
Total      (deficiency in) stockholders' equity
(1,193,488)
(679,608)
Total      liabilities and (deficiency in) stockholders' equity
$      1,056,681
$      676,619
 

Seeaccompanying notes to the unaudited condensed consolidated financialinformation.
**HesperiaHolding, Inc.

CondensedConsolidated Statements of Operations

(Unaudited)**
 

For      the three months ended June 30,
For      the six months ended June 30,
2004
2003
2004
2003
 

Revenues:
Sales,      net
$      3,126,550
$      2,354,436
$      5,367,786
$      4,059,322
 

Cost      of goods sold
2,668,944
1,725,797
4,505,996
2,958,659
 

Gross      profit
457,606
628,639
861,790
1,100,663
 

Operating      expenses:
Selling,      general and administrative
805,928
752,541
1,598,833
1,076,991
Depreciation
22,086
26,052
40,938
39,166
Total      operating expenses
828,014
778,593
1,639,771
1,116,157
 

(Loss)      from operations
(370,408)
(149,954)
(777,981)
(15,494)
 

Other      income (expense):
Debt      forgiveness
-
31,224
-
31,224
Interest      income (expense), net
(6,552)
(19,092)
(8,775)
(19,078)
Total      other income (expense)
(6,552)
12,132
(8,775)
12,146
 

Net      (loss) before provision for income taxes
(376,960)
(137,822)
(786,756)
(3,348)
 

Provision      for income taxes
-
-
-
-
 

Net      (loss)
$      (376,960)
$      (137,822)
$      (786,756)
$      (3,348)
 

Loss      per share (basic and fully diluted)
$      (0.03)
$      (0.01)
$      (0.07)
$      (0.00)
 

Basic      and diluted weighted average number of shares outstanding
 

11,789,353
 

10,485,625
 

11,670,928
 

10,430,828** **
Seeaccompanying notes to the unaudited condensed consolidated financialinformation.
**HesperiaHolding, Inc.

CondensedConsolidated Statements of Cash Flows

(Unaudited)

 **
For      the six months ended June 30,
2004
2003**Cash      flow from operating activities:
Net      loss from operations
$      (786,756)
$      (3,348)
Adjustments      to reconcile net loss to cash provided by (used in) operations:
Depreciation
40,938
39,166
Common      stock issued in exchange for services rendered
218,160
214,000
Common      stock issued in connection with reverse merger
-
50,000
Expenses      paid by Company's principal shareholders
-
73,637
(Increase)/decrease      in accounts receivable
(215,477)
(314,226)
(Increase)/decrease      in other assets
(4,360)
22,745
(Increase)/decrease      in inventories
(41,161)
(2,890)
Increase/(decrease)      in cash disbursed in excess of available fund
59,443
84,564
Increase/(decrease)      in deferred revenue
184,728
-
Increase/(decrease)      in accounts payable and accrued liabilities
456,727
72,584
Net      cash provided by (used in) operations
(87,758)
236,232
 
**Cash      flows from investing activities:
Capital      expenditures
(106,155)
(49,884)
Net      cash (used in) investing activities
(106,155)
(49,884)
 
**Cash      flows from financing activities:
Repayments      of line of credit
-
(54,427)
Proceeds      from (repayments of) related party advances
94,069
(13,400)
Repayments      of notes payable
(56,450)
(137,358)
Proceeds      from notes payable to related parties, net of repayments
156,294
-
Proceeds      from sale of common stock, net of costs and fees
-
30,000
Net      cash provided by (used in) financing activities
193,913
(175,185)
 
**Net      increase in cash and cash equivalents
-
11,163
Cash      and cash equivalents at beginning of the period
-
28,608
Cash      and cash equivalents at end of the period
$      -
$      39,771
 

Supplemental      Disclosure of Cash Flows Information:
Cash      paid during the period for interest
$      6,563
$      -
Expenses      paid by Company's principal stockholders
-
73,637
Cash      paid during the period for income taxes
-
-
Common      stock issued in exchange for services rendered
218,160
214,000
Common      stock issued in exchange for accrued service fees
54,715
-
Notes      payable issued in connection with purchase of property and equipment
58,513
-
Repayment      of notes payable in connection with purchase of property and equipment
(4,667)
-
Acquisition      of Saveyoutime.com, Inc: (Note B)
Assets      acquired
$      -
$      -
Liabilities      assumed
-
-
Organization      costs
-
(50,000)
Common      stock retained in reverse merger
-
50,000
Net      cash paid for acquisition
$      -
$      -
 

Seeaccompanying notes to the unaudited condensed consolidated financialinformation.
**HESPERIAHOLDING, INC

NOTESTO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

JUNE30, 2004

(UNAUDITED)

 

NOTEA - SUMMARY OF ACCOUNTING POLICIES**
 

General

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and with theinstructions to Form 10-QSB. Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements.

 

Inthe opinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation have been included.Accordingly, the results from operations for the six-month period ended June 30,2004 are not necessarily indicative of the results that may be expected for theyear ended December 31, 2004. The unaudited condensed consolidated financialstatements should be read in conjunction with the consolidated December 31, 2003financial statements and footnotes thereto included in the Company's SEC Form10-KSB.

 

Businessand Basis of Presentation

HesperiaHolding, Inc. (the "Company") was formed on March 3, 2000 under thelaws of the State of Nevada. Hesperia Holding, Inc. is engaged in the businessof manufacturing and distributing trusses for residential home builders. OnApril 10, 2003, the Company entered into an Agreement and Plan of Merger("Agreement") with Saveyoutime.com, Inc. ("Saveyoutime.com"),an inactive publicly registered shell corporation with no significant assets oroperations organized under the laws of Nevada. As a result of the acquisition,Hesperia Holding Inc. is the surviving entity and Saveyoutime.com is theacquiring entity. As a part of the merger, saveyoutime.com changed its name toHesperia Holding, Inc. (see Note B). The consolidated financial statementsinclude the accounts of the Company, and its wholly-owned subsidiaries, HesperiaTruss, Inc. ("Truss") and Pahrump Valley Truss, Inc. ("PVI").Significant intercompany transactions have been eliminated in consolidation.

 

Reclassifications

Certainreclassifications have been made in prior year's financial statements toconform to classifications used in the current year.
* *
RevenueRecognition

Forrevenue from product sales, the Company recognizes revenue in accordance withSEC Staff Accounting Bulletin No. 101, "Revenue Recognition in FinancialStatements" ("SAB 101"). SAB 101 requires that four basiccriteria must be met before revenue can be recognized: (1) persuasive evidenceof an arrangement exists; (2) delivery has occurred; (3) the selling price isfixed and determinable; and (4) collectibility is reasonably assured.Determination of criteria (3) and (4) are based on management's judgmentsregarding the fixed nature of the selling prices of the products delivered andthe collectibility of those amounts. Provisions for discounts and rebates tocustomers, estimated returns and allowances, and other adjustments are providedfor in the same period the related sales are recorded.

 

OnDecember 17, 2003, the SEC staff released Staff Accounting Bulletin (SAB)No. 104, Revenue Recognition.  The staff updated and revised the existingrevenue recognition in Topic 13, Revenue Recognition, to make its interpretiveguidance consistent with current accounting guidance, principally EITF Issue No.00-21, "Revenue Arrangements with Multiple Deliverables."  Also,SAB 104 incorporates portions of the Revenue Recognition in Financial Statements- Frequently Asked Questions and Answers document that the SEC staffconsidered relevant and rescinds the remainder. The company's revenuerecognition policies are consistent with this guidance; therefore, this guidancedid not have an immediate impact on the company's financial statements.
**HESPERIAHOLDING, INC

NOTESTO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

JUNE30, 2004

(UNAUDITED)

 

NOTEA - SUMMARY OF ACCOUNTING POLICIES (Continued)**
 

RevenueRecognition (Continued)

TheCompany defers any revenue for which the product has not been delivered or issubject to refund until such time that the Company and the customer jointlydetermine that the product has been delivered or no refund will be required.Payments received in advance are deferred until the trusses are built andshipped to customers. Deferred revenues as of June 30, 2004 and December 31,2003 are $375,406 and $190,678, respectively.
* *
StockBased Compensation

InDecember 2002, the FASB issued SFAS No. 148, "Accounting forStock-Based Compensation-Transition and Disclosure-an amendment of SFAS 123."This statement amends SFAS No. 123, "Accounting for Stock-BasedCompensation," to provide alternative methods of transition for a voluntarychange to the fair value based method of accounting for stock-based employeecompensation. In addition, this statement amends the disclosure requirements ofSFAS No. 123 to require prominent disclosures in both annual and interimfinancial statements about the method of accounting for stock-based employeecompensation and the effect of the method used on reported results. The Companyhas chosen to continue to account for stock-based compensation using theintrinsic value method prescribed in APB Opinion No. 25 and relatedinterpretations. Accordingly, compensation expense for stock options is measuredas the excess, if any, of the fair market value of the Company's stock at thedate of the grant over the exercise price of the related option. The Company hasadopted the annual disclosure provisions of SFAS No. 148 in its financialreports for the year ended December 31, 2003 and will adopt the interimdisclosure provisions for its financial reports for the subsequent periods. TheCompany does not have any awards of stock-based employee compensation issued andoutstanding at June 30, 2004.

 
**NOTEB - BUSINESS COMBINATION AND CORPORATE RESTRUCTURE**
 

OnApril 10, 2003, the Company completed an Agreement and Plan of Merger("Agreement") with Saveyoutime.com, Inc. ("Saveyoutime.com"),an inactive publicly registered shell corporation with no significant assets oroperations organized under the laws of the State of Nevada. As a result of theacquisition, there was a change in control of the public entity. As part of themerger, Saveyoutime.com changed its name to Hesperia Holding, Inc.

 

Foraccounting purposes, Hesperia Holding, Inc. is the surviving entity andSaveyoutime.com is the acquiring entity. The transaction is accounted for usingthe purchase method of accounting. As Saveyoutime.com was an inactivecorporation with no significant operations, the Company recorded the carryoverhistorical basis of net tangible assets acquired, which did not differmaterially from their historical cost. The results of operations subsequent tothe date of merger are included in the Company's consolidated statements oflosses.

 

Effectivewith the Agreement, all but 50,000 shares previously outstanding common stock,preferred stock, options and warrants owned by Saveyoutime.com's solestockholder were returned to the Company for cancellation. The value of the50,000 shares of common stock that were retained by the Saveyoutime.comstockholder was based upon management's estimate of the fair value of HesperiaHolding, Inc.'s common stock of $1.00 per share. The Company chargedorganization costs of $50,000 to operations during the year ended December 31,2003.
**HESPERIAHOLDING, INC

NOTESTO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

JUNE30, 2004

(UNAUDITED)**
 
**NOTEB - BUSINESS COMBINATION AND CORPORATE RESTRUCTURE (Continued)**
 

Thetotal consideration paid was $50,000 and the significant components of thetransaction are as follows:

 

Common      stock retained
$      50,000
Excess      of liabilities assumed over assets acquired
-
Total      consideration paid
$      50,000** 

NOTEC - NOTES PAYABLE AND NOTES PAYABLE TO RELATED PARTIES**
 

Notespayable at June 30, 2004 and December 31, 2003 are as follows:

 

 

June      30, 2004
December      31, 2003
Notes      payable to shareholders in weekly installments of $574 including interest      at 6% per annum, unsecured; maturity date is in April 2008. (Note E)

$      102,376
 

$      -
Notes      payable to shareholders in weekly installments of $1,623 including      interest at 6% per annum, unsecured; maturity date is in April 2008. (Note      E)
 

289,743
 

-
Note      payable to former Company founder in weekly installments of $2,000; non      interest bearing; secured by interest in subsidiary; maturity date is in      June 2004
 

-
 

51,463
Note      payable in monthly installments of $514 including interest at 1.9% per      annum; secured by transportation equipment; maturity date is in January      2009
 

27,022
 

-
Note      payable in monthly installments of $510 including interest at 1.9% per      annum; secured by transportation equipment; maturity date is in January      2009
 

26,824
 

-
Note      payable in monthly installments of $375 including interest at 2.9% per      annum; secured by transportation equipment; maturity date is in July 2004.
 

-
 

2,312
Note      payable in monthly installments of $375 including interest at 7.9% per      annum; secured by transportation equipment; maturity date is in July 2004.
 

-
 

2,675
 

445,965
56,450
Less:      current portion
(104,771)
(56,450)
$      341,194
$      -
 

Aggregatematurities of long-term debt as of June 30, 2004 are as follows:

 

Year
Amount
2004
$      53,454
2005
107,834
2006
114,010
2007
120,557
2008      and after
50,110
 

$      445,965**HESPERIAHOLDING, INC

NOTESTO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

JUNE30, 2004

(UNAUDITED)**
 
**NOTED - CAPITAL STOCK

 **
TheCompany has authorized 5,000,000 shares of preferred stock, with a par value of$.001 per share. As of June 30, 2004 and December 31, 2003, the Company has nopreferred stock issued and outstanding The Company has authorized 20,000,000shares of common stock, with a par value of $.001 per share. As of June 30, 2004and December 31, 2003, the Company has 11,810,617 and 11,510,845 shares ofcommon stock issued and outstanding.

 

InJanuary 2004, the Company issued 27,272 shares of common stock to a consultantin exchange for service fees of $15,000. Valuation of common stock issued forservices was based upon the value of the services rendered, which did not differmaterially from the fair value of the Company's common stock during the periodthe services were rendered.

 

InMarch 2004, the Company issued an aggregate of 250,000 shares of common stock toconsultants in exchange for $195,285 of service fees and $54,715 of accruedservices fees. Valuation of common stock issued for services was based upon thevalue of the services rendered, which did not differ materially from the fairvalue of the Company's common stock during the period the services wererendered.

 

InJune 2004, the Company issued an aggregate of 22,500 shares of common stock toconsultants in exchange for services fees of $7,875. Valuation of common stockissued for services was based upon the value of the services rendered, which didnot differ materially from the fair value of the Company's common stock duringthe period the services were rendered.

 
**NOTEE - RELATED PARTY TRANSACTIONS

 **
TheCompany leases office spaces and manufacturing fields from its principalshareholders on a month-to-month basis in California and Nevada.

 

TheCompany has advanced funds to an employee and the outstanding balance is $650 asof December 31, 2003. The Employee repaid the amount in full to the Company asof June 30, 2004.

 

Significantshareholders of the Company have advanced funds on a non-interest bearing basisto the Company for working capital purposes. The amount of the advances atDecember 31, 2003 is $235,825. The shareholders agreed not to demand anypayments for funds personally advanced to the Company until fiscal year 2005.From January through March 2004, the shareholders advanced additional $173,000to the Company for working capital purpose. The Company repaid $2,500 to theshareholders in January 2004. On March 31, 2004, the Company entered into twoformal note agreements with the shareholders and $406,000 of outstanding balanceof advances from shareholders are converted into two promissory notes in theamount of $300,000 and $106,000. The remaining $325 of advances that was notconverted to notes payable was repaid to the shareholder in April 2004. As ofJune 30, 2004, notes payable to shareholders in connection with the twopromissory notes amounted $289,743 and $102,376, respectively (Note C).

Duringthe period ended June 30, 2004, the Company's officers and shareholders haveadvanced funds on a non-interest bearing basis to the Company for workingcapital purposes. The amount of the advances at June 30, 2004 is $94,069. Noformal repayment terms or arrangements exist.
**HESPERIAHOLDING, INC

NOTESTO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

JUNE30, 2004

(UNAUDITED)**
 
**NOTEF - INVENTORIES**
Inventoriesare stated at the lower of cost or market determined by the first-in, first-out(FIFO) method. Inventories consist of trusses available for sale to contractcustomers along with raw materials and work-in progress.

Componentsof inventories as of June 30, 2004 and December 31, 2003 are as follows:

 

 
 

June      30, 2004
December      31, 2003
Raw      materials
$      63,645
$      71,139
Work-in      progress
75,263
9,200
Finished      goods
65,260
82,668
 

$      204,168
$      163,007
FORWARD-LOOKINGSTATEMENTS

 

Thisdocument contains "forward-looking statements" within the meaning ofthe Private Securities Litigation Reform Act of 1995. All statements other thanstatements of historical fact are "forward-looking statements" forpurposes of federal and state securities laws, including, but not limited to,any projections of earnings, revenue or other financial items; any statements ofthe plans, strategies and objections of management for future operations; anystatements concerning proposed new services or developments; any statementsregarding future economic conditions or performance; any statements or belief;and any statements of assumptions underlying any of the foregoing.

 

Forward-lookingstatements may include the words "may," "could,""will," "estimate," "intend,""continue," "believe," "expect" or"anticipate" or other similar words. These forward-looking statementspresent our estimates and assumptions only as of the date of this report. Exceptfor our ongoing securities laws, we do not intend, and undertake no obligation,to update any forward-looking statement.

 

Althoughwe believe that the expectations reflected in any of our forward-lookingstatements are reasonable, actual results could differ materially from thoseprojected or assumed in any or our forward-looking statements. Our futurefinancial condition and results of operations, as well as any forward-lookingstatements, are subject to change and inherent risks and uncertainties. Thefactors impacting these risks and uncertainties include, but are not limited to:
-  Our    current deficiency in working capital;increased    competitive pressures from existing competitors and new entrants;increases    in interest rates or our cost of borrowing or a default under any material    debt agreements;deterioration    in general or regional economic conditions;adverse    state or federal legislation or regulation that increases the costs of    compliance, or adverse findings by a regulator with respect to existing    operations;loss    of customers or sales weakness;inability    to achieve future sales levels or other operating results;the    unavailability of funds for capital expenditures; andoperational    inefficiencies in distribution or other systems.
Fora detailed description of these and other factors that could cause actualresults to differ materially from those expressed in any forward-lookingstatement, please see "Factors That May Affect Our Plan of Operation"in this document and "Risk Factors" in our Annual Report on Form10-KSB for the year ended December 31, 2003.
**Item        2. Management's Discussion and Analysis

 **
CriticalAccounting Policies

 

Thepreparation of our consolidated financial statements in conformity withaccounting principles generally accepted in the United States requires us tomake estimates and judgments that affect our reported assets, liabilities,revenues, and expenses, and the disclosure of contingent assets and liabilities.We base our estimates and judgments on historical experience and on variousother assumptions we believe to be reasonable under the circumstances. Futureevents, however, may differ markedly from our current expectations andassumptions. While there are a number of significant accounting policiesaffecting our consolidated financial statements; we believe the followingcritical accounting policies involve the most complex, difficult and subjectiveestimates and judgments:
-  stock-based    compensationrevenue    recognition
Stock-BasedCompensation

 

InDecember 2002, the FASB issued SFAS No. 148 - Accounting for Stock-BasedCompensation - Transition and Disclosure. This statement amends SFAS No. 123 -Accounting for Stock-Based Compensation, providing alternative methods ofvoluntarily transitioning to the fair market value based method of accountingfor stock based employee compensation. FAS 148 also requires disclosure of themethod used to account for stock-based employee compensation and the effect ofthe method in both the annual and interim financial statements. The provisionsof this statement related to transition methods are effective for fiscal yearsending after December 15, 2002, while provisions related to disclosurerequirements are effective in financial reports for interim periods beginningafter December 31, 2003.

 

TheCompany elected to continue to account for stock-based compensation plans usingthe intrinsic value-based method of accounting prescribed by APB No. 25,"Accounting for Stock Issued to Employees," and relatedinterpretations. Under the provisions of APB No. 25, compensation expense ismeasured at the grant date for the difference between the fair value of thestock and the exercise price.

 

RevenueRecognition

 

Forrevenue from product sales, the Company recognizes revenue in accordance withStaff Accounting Bulletin No. 104, Revenue Recognition("SAB104"), which superceded Staff Accounting Bulletin No. 101,Revenue Recognition in Financial Statements ("SAB101"). SAB 101requires that four basic criteria must be met before revenue can be recognized:(1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)the selling price is fixed and determinable; and (4) collectibility isreasonably assured. Determination of criteria (3) and (4) are based onmanagement's judgments regarding the fixed nature of the selling prices of theproducts delivered and the collectibility of those amounts. Provisions fordiscounts and rebates to customers, estimated returns and allowances, and otheradjustments are provided for in the same period the related sales are recorded.The Company defers any revenue for which the product has not been delivered oris subject to refund until such time that the Company and the customer jointlydetermine that the product has been delivered or no refund will be required.

SAB104 incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),Multiple-Deliverable Revenue Arrangements. EITF 00-21 addresses accounting forarrangements that may involve the delivery or performance of multiple products,services and/or rights to use assets. The effect of implementing EITF 00-21 onthe Company's consolidated financial position and results of operations was notsignificant.

 

TheCompany defers any revenue for which the product has not been delivered or issubject to refund until such time that the Company and the customer jointlydetermine that the product has been delivered or no refund will be required.Payments received in advance are deferred until the trusses are built andshipped to customers. Deferred revenue as of June 30, 2004 was $375,406
** 

Overview**
TheCompany entered into a merger agreement dated January 20, 2003 (the "MergerAgreement") with Hesperia Holding Corp., a California corporation. Pursuantto the terms of the Merger Agreement Hesperia Holding Corp. merged with and intothe Company on April 10, 2003.

 

Underthe terms of the Merger, the Company issued 10,415,845 shares of its commonstock to the stockholders of Hesperia Holding Corp. in exchange for 100% of theissued and outstanding common stock of Hesperia Holding Corp. The then solestockholder of the Company retained 50,000 shares of common stock and cancelled6,454,370 shares resulting in 10,465,845 being issued and outstanding.

 
**Resultsof Operations for the Three and Six Months Ended June 30, 2004 and June 30,2003.**
 

Three      Months Ended June 30, 2004
Three      Months Ended June 30, 2003
Six      Months Ended June 30, 2004
Six      Months Ended June 30, 2003
Revenues
$      3,126,550
$      2,354,436
$      5,367,786
$      4,059,322
 

 

 

 

 

Cost      of Goods Sold
(2,668,944)
(1,725,797)
(4,505,996)
(2,958,659)
 

 

 

 

 

Operating      Expenses
(828,014)
(778,593)
(1,639,771)
(1,116,157)
Interest      Forgiveness from Stockholder
 

-
 

31,224
 

-
 

31,224
Other      Income
11
53
318
67
Other      Expense
(6,563)
(19,145)
(9,093)
(19,145)
Net      Income (Loss)
$      (376,960)
$      (137,822)
$      (786,456)
$      (3,348)** 

Revenues

 **      Three Months Ended June 30, 2004          Three Months Ended June 30, 2003    **Increase/(decrease)**      $          %    
For      the three months ended June 30:
 

 

 

 

Revenue
$      3,126,550
$      2,354,436
$      772,114
33%
 

Revenuesfor the three months ended June 30, 2004 were $3,126,550 compared to revenues of$2,354,436 in the three months ended June 30, 2003. This resulted in an increasein revenues of $772,114, or 33%, from $2,354,436 in the same period one yearago. The increase in revenues was due to increased market activity with homebuilding coupled with price increases due to higher material costs.Additionally, the Company established a second production yard in Nevada in May,2004 adding to the revenue base.

 
      Six Months Ended June 30, 2004          Six Months Ended June 30, 2003    **Increase/(decrease)**      $          %    
For      the six months ended June 30:
 

 

 

 

Revenue
$      5,367,786
$      4,059,322
$      1,308,464
32%
 

Revenuesfor the six months ended June 30, 2004 were $5,367,786 compared to revenues of$4,059,322 in the six months ended June 30, 2003. This resulted in an increasein revenues of $1,308,464, or 32%, from $4,059,322 in the same period one yearago. Revenues have increased due to expansion of business volume and increase inproduction with the added facility in Nevada coupled with general overall priceincreases on construction materials.

 

**Costof goods sold/Gross profit percentage of revenue**

 
      Three Months Ended June 30, 2004          Three Months Ended June 30, 2003    **Increase/(decrease)**      $          %    
For      the three months ended June 30:
 

 

 

 

Cost      of goods sold
$      2,668,944
$      1,725,797
$      943,147
55%
 

 

 

 

 

Gross      profit % of revenue
15%
27%
 

 

 

Costof goods sold for the three months ended June 30, 2004 was $2,668,944, anincrease of $943,147, or 55%, from $1,725,797 for the three months ended June30, 2003. The increase in the cost of goods sold is due primarily from a 32%increase in semi-annual sales as compared to prior year combined with highermaterial and labor cost factors; specifically, steel and workers compensationinsurance.

 

Grossprofit as a percentage of revenue decreased from 27% for the three months endedJune 30, 2003 to 15% for the three months ended June 30, 2004. The reduction ingross profit margin is the resulting effects of the higher material and workerscompensation insurance costs contained within the increase of the cost of goodssold.
      Six Months Ended June 30, 2004          Six Months Ended June 30, 2003    **Increase/(decrease)**      $          %    
For      the six months ended June 30:
 

 

 

 

Cost      of goods sold
$      4,505,996
$      2,958,659
$      1,547,337
52%
 

 

 

 

 

Gross      profit % of revenue
16%
27%
 

 

 

Costof goods sold for the six months ended June 30, 2004 was $4,505,996, an increaseof $1,547,337, or 52%, from $2,958,659 for the six months ended June 30, 2003.The increase in the cost of goods sold is due primarily from a 32% increase insemi-annual sales as compared to prior year combined with higher material andlabor cost factors; specifically, steel and workers compensation insurance.

 

Grossprofit as a percentage of revenue decreased from 27% for the six months endedJune 30, 2003 to 16% for the six months ended June 30, 2004. The reduction ingross profit margin was due to a higher workers compensation insurance costs anda significant increase in material costs as contained within the cost of goodssold.

 

**Selling,General and Administrative expenses**

 
      Three Months Ended June 30, 2004          Three Months Ended June 30, 2003    **Increase/(decrease)**      $          %    
For      the three months ended June 30:
 

 

 

 

Selling,      General & Administrative expenses
 $      805,928

 $      752,541

 $      53,387

 7%

 

Generaland administrative expenses were $805,928 for the three months ended June 30,2004 versus $752,541 for the three months ended June 30, 2003, which resulted inan increase of $53,387 or 7%. Overall, General and administrative expensesdecreased as a percentage of sales from 32% for the three months ended June 30,2003 to 26% for the comparative period in 2004 reflecting managements costcontainment efforts for the quarter ended June 30, 2004.

 
      Six Months Ended June 30, 2004          Six Months Ended June 30, 2003    **Increase/(decrease)**      $          %    
For      the six months ended Jun 30:
 

 

 

 

Selling,      General & Administrative expenses
 $      1,598,833

 $      1,076,991

 $      521,842

 48%

 

Generaland administrative expenses were $1,598,833 for the six months ended June 30,2004 versus $1,076,991 for the six months ended June 30, 2003, which resulted inan increase of $521,842 or 48%. The increase in selling and administrativeexpenses was primarily due to the increase in the Company adding additionaloperational and administrative personnel, legal and other professionalassistance incurred in the first three months of 2004. Stock based compensationpaid to consultants and professionals reflective in the Selling, General &Administrative expense for the six months ended June 30, 2004 amounted to$272,875 or 52% of the increase.

**NetLoss**

 
      Three Months Ended June 30, 2004          Three Months Ended June 30, 2003    **Increase/(decrease)**      $          %    
For      the three months ended Jun 30:
 

 

 

 

Net      loss
$      (376,960)
$      (137,822)
$      (239,138)
174%
 

Thenet loss for the three months ended June 30, 2004 was $376,960, versus a netloss of $137,822 for the three months ended June 30, 2003, a change in net lossof $239,138 or 174%. A significant part of the increase in the net loss overlast year was due to the increased material and labor related costs as reflectedin the cost of goods sold and the added selling and administration cost incurredin the first quarter of 2004.

 
      Six Months Ended June 30, 2004          Six Months Ended June 30, 2003    **Increase/(decrease)**      $    
 

 

 

For      the six months ended Jun 30:
 

 

 

Net      loss
$      (786,756)
$      (3,348)
$      (783,408)
 

Thenet loss for the six months ended June 30, 2004 was $786,756, versus a net lossof $3,348 for the six months ended June 30, 2003, a change in net loss of$783,408. The significant parts of the net loss was due primarily to theincrease in material and labor related costs over last year as reflected in thecost of goods sold and the added selling and administration cost incurred in thefirst quarter of 2004.

 

**Liquidityand Capital Resources at June 30, 2004 Compared with December 31, 2003.**

 

Thefollowing table summarizes total assets, accumulated deficit and stockholders'equity.

 

 
 

June      30, 2004
 December      31, 2003

Total      Assets
$1,056,681
$676,619
 

 

 

Accumulated      Deficit
$(2,046,690)
$(1,259,934)
 

 

 

Stockholders'      Equity (Deficit)
$(1,193,489)
$(679,608)
Whilewe have raised capital to meet our working capital and financing needs in thepast, additional financing is required in order to meet our current andprojected cash flow deficits from operations and development. As of June 30,2004, the Company had current assets of $ 764,552 and current liabilities of $1,908,975 which resulted in a working capital deficit of $ 1,144,423. As aresult of our net loss of $ 786,756, adjusted principally for an increase inaccounts payable of $ 456,727 and deferred revenues of 184,728 , our cash flowdeficit from operations was $ 87,758 during the six months ended June 30, 2004.We used $ 106,155 of cash to acquire new property and equipment during theperiod. We repaid $56,450 of previously incurred debt to a former shareholder ofthe Company during the six months ended June 30, 2004. We met our cashrequirements during the period through the receipt of $250,363 of advances andproceeds from notes payable to our officers and principal shareholders.

 

Weare seeking financing in the form of equity in order to provide necessaryworking capital for our operations and have received proposals which currentlyare under review. In addition, in July, 2004, the Company put in place$1,000,000 asset based line of credit, availablitiy of which is dependent on thelevel of the collerarized assets at any given time. Additional funding is incurrently being sought. There is no guarantee that we will be successful inraising the funds required.

 

Byadjusting our operations and development to the level of capitalization,management believes it has sufficent capital resources to meet projected cashflow deficits through the next twelve months. However, if thereafter, we are notsuccessful in generating sufficient liquidity from operations or in raisingsufficient capital resources, on terms acceptable to us, this could have amaterial adverse effect on our business, results of operations, liquidity andfinancial condition.

 

Theeffect of inflation on our revenues and operating results was not significant.The Company's operations are located in California and Nevada and there are noseasonal aspects that would have a material effect on our financial condition orresults of operations.

 

OnAugust 2, 2004 the Company announced in a press release, (filed herewith asexhibit 99-3), the completion of an asset based credit line for $1,000,000 withMercantile Capital, LP. The Company intends to utilize the credit line forworking capital to sustain the 33% annual growth rate the Company has averagedover the past 2 years. The Company has already received its first installment of$200,000 (a copy of the agreement is attached as exhibit 10-1).

 
**Off-BalanceSheet Arrangements**
 

Wedo not have any off-balance sheet arrangements that have or are reasonablylikely to have a current or future effect on our financial condition, changes infinancial condition, revenues or expenses, results or operations, liquidity,capital expenditures or capital resources that is material to investors.
**CertainRelationships and Related Transactions*** 

Facilities*
 

HesperiaHolding, Inc.'s wholly-owned subsidiary Hesperia Truss (HTI) occupies a 3,900square-foot building and warehouse on five acres in Hesperia, California. Thebuilding and land are owned by two of the Company's directors andstockholders, Mark Presgraves and Donald Shimp. The Company rents the facilityand surrounding land for $24,000 per year. In addtition, HTI leases office spacein Hesperia California for $12,600 per year.

 

HesperiaHolding, Inc.'s second wholly-owned subsidiary, Pahrump Valley Truss, Inc (PVT)leases a production facility with a two year term with payments of $54,000 peryear payable in monthly increments.
*LoansPayable/Receivable*
 

TheCompany had outstanding loans payable to Donald Shimp, Mark Presgraves, FredSmith and Steve Chaussy; the Company's current President, Secretary andTreasurer, Vice President of Investor Relations and Chief Financial Officers,respectively in the amount of $486,188 as of June 30, 2004.

 
**RISKFACTORS**
 

Muchof the information included in this quarterly report includes or is based uponestimates, projections or other "forward-looking statements". Suchforward-looking statements include any projections or estimates made by us andour management in connection with our business operations. While theseforward-looking statements, and any assumptions upon which they are based, aremade in good faith and reflect our current judgment regarding the direction ofour business, actual results will almost always vary, sometimes materially, fromany estimates, predictions, projections, assumptions or other future performancesuggested herein.

 

Suchestimates, projections or other "forward-looking statements" involvevarious risks and uncertainties as outlined below. We caution the reader thatimportant factors in some cases have affected and, in the future, couldmaterially affect actual results and cause actual results to differ materiallyfrom the results expressed in any such estimates, projections or other"forward-looking statements".

 

Ourcommon shares are considered speculative. Prospective investors should considercarefully the risk factors set out below.

 
***Weare uncertain we will be able to obtain additional capital necessary to continueour business.

 ***
Weincurred a net loss for the year ended December 31, 2003 of $677,462, and forthe six month period ended June 30, 2004 of $786,756. As a result of theselosses and negative cash flows from operations, our ability to continueoperations will be dependent upon the availability of capital from outsidesources unless and until we achieve profitability.

Wewill depend almost exclusively on outside capital to pay for the deficit in ourworking capital. Such outside capital may include the sale of additional stock,loans from our officers and directors, and/or commercial borrowing. There can beno assurance that capital will continue to be available if necessary to meetthese continuing operational costs or, if the capital is available, it will beon terms acceptable to our company. The issuances of additional equitysecurities by our company could result in a significant dilution in the equityinterests of our current stockholders. Obtaining commercial loans, assumingthose loans would be available, will increase our company's liabilities andfuture cash commitments. If we are unable to obtain financing in the amounts andon terms deemed acceptable, our business and future success may be adverselyaffected.

 
***Sinceour shares are thinly traded, and trading on the OTC Bulletin Board may besporadic because it is not an exchange, stockholders may have difficultyreselling their shares.*
 **
Ourcommon shares are currently listed for public trading on the Over-the-CounterBulletin Board. The trading price of our common shares has been subject to widefluctuations. Trading prices of our common shares may fluctuate in response to anumber of factors, many of which will be beyond our control. The stock markethas generally experienced extreme price and volume fluctuations that have oftenbeen unrelated or disproportionate to the operating performance of companieswith limited business operations. There can be no assurance that trading pricesand price earnings ratios previously experienced by our common shares will bematched or maintained. These broad market and industry factors may adverselyaffect the market price of our common shares, regardless of our operatingperformance.

 

Inthe past, following periods of volatility in the market price of a company'ssecurities, securities class-action litigation has often been instituted. Suchlitigation, if instituted, could result in substantial costs for us and adiversion of management's attention and resources.

 
***Atthis stage of our business operations, even with our good faith efforts,potential investors have a high probability of losing their investment.***
 

Becausethe nature of our business is expected to change as a result of shifts in themarket price of oil and natural gas, competition, and the development of new andimproved technology, management forecasts are not necessarily indicative offuture operations and should not be relied upon as an indication of futureperformance.

 

WhileManagement believes its estimates of projected occurrences and events are withinthe timetable of its business plan, our actual results may differ substantiallyfrom those that are currently anticipated.

 
***Becauseour common stock is deemed a low-priced "Penny" stock, an investmentin our common stock should be considered high risk and subject to marketabilityrestrictions.

 ***
Sinceour common stock is a penny stock, as defined in Rule 3a51-1 under theSecurities Exchange Act, it will be more difficult for investors to liquidatetheir investment even if and when a market develops for the common stock. Untilthe trading price of the common stock rises above $5.00 per share, if ever,trading in the common stock is subject to the penny stock rules of theSecurities Exchange Act specified in rules 15g-1 through 15g-10. Those rulesrequire broker-dealers, before effecting transactions in any penny stock, to:
-  Deliver to the customer, and obtain a written receipt for, a disclosuredocument;Disclose certain price information about the stock;Disclose the amount of compensation received by the broker-dealer or anyassociated person of the broker-dealer;Send monthly statements to customers with market and price information about thepenny stock; andIn some circumstances, approve the    purchaser's account under certain standardsand deliver written statements to the customer with information specified in therules.
Consequently,the penny stock rules may restrict the ability or willingness of broker-dealersto sell the common stock and may affect the ability of holders to sell theircommon stock in the secondary market and the price at which such holders cansell any such securities. These additional procedures could also limit ourability to raise additional capital in the future.
** 
*Weneed to raise additional capital for our operating plan. Our business would beharmed if we were unable to do so on acceptable terms.***
 

Wecurrently anticipate that our existing capital resources and cash flows fromoperations will enable us to maintain our currently planned operations for theforeseeable future. However, our current operating plan entails extensive growthin our industry, requiring us to raise capital through equity or debt, whichplan may change as a result of many factors, including general economicconditions affecting the United States economy which are beyond our control. Ifwe are unable to generate cash from the sale of equity or from debt financing ormaintain positive operating cash flows and operating income in the future, wemay need additional funding. We may also choose to raise additional capital dueto market conditions or strategic considerations even if we believe that we havesufficient funds for our current or future operating plans. If additionalcapital were needed, our inability to raise capital on favorable terms wouldharm our business and financial condition. To the extent that we raiseadditional capital through the sale of equity or debt securities convertibleinto equity, the issuance of these securities could result in dilution to ourstockholders.

 
***Aprolonged economic downturn could result in reduced sales and lower revenues andprofitability.***
 

Purchasesof wood products, primarily trusses utilized in new construction, may beaffected by prolonged, negative trends in the general economy that adverselyaffect consumer spending. Any reduction in consumer confidence in general mayaffect companies in the home manufacturer process. In addition, due to ourcapital needs for growth, we are more susceptible to some of these adverseeconomic effects than are some of our competitors, which have greater financialand other resources than we do.
***Fluctuationsin Price and Supply of Raw Materials.***
 

TheCompany is dependent upon outside suppliers for all of its raw material needsand, therefore, is subject to price increases and delays in receiving suppliesof such materials. An increase in demand for raw materials could increasedelivery times for supplies and possibly further affect prices. No assurance canbe given that the Company will continue to have available necessary rawmaterials at a reasonable price or that any increases in raw material costswould not have a material adverse effect on the Company.

 
***Terrorismand the war in Iraq may have a material adverse effect on our operating results.***
 

Terroristattacks, such as the attacks that occurred in New York and Washington, D.C. onSeptember 11, 2001, and other acts of violence or war may affect the operationsof the United States securities markets, the markets in which we operate and ouroperations and profitability. Further terrorist attacks against the UnitedStates or U.S. businesses may occur. The potential near-term and long-termeffect these attacks may have for our customers, the markets for our servicesand the U.S. economy are uncertain. The consequences of any terrorist attacks,or any armed conflicts which may result, are unpredictable, and we may not beable to foresee events that could have an adverse effect on our business.

 
***Weface competition from other truss manufacturers and alternative buildingmaterials.***
 

Wecompete with other national and regional manufacturers of trusses. Some of thesecompanies are larger and have greater financial resources than us. Accordingly,these competitors may be better able to withstand changes in conditions withinthe industries in which we operate and may have significantly greater operatingand financial flexibility than we do. These competitors could take a greatershare of sales and cause us to lose business from our customers. Additionally,our products face competition from alternative materials. An increase incompetition from other truss manufacturers and alternative building materialsmay adversely impact our business and financial performance.

 
***Downturnsin the home repair and remodeling and new home construction sectors or theeconomy could negatively affect our business, operating results and the value ofthe notes.***
 

Thehome repair and remodeling and new home construction sectors may besignificantly affected by changes in economic and other conditions such as grossdomestic product levels, employment levels, demographic trends and consumerconfidence. These factors can negatively affect the demand for and pricing ofour products. More specifically, for example, demand for home repair andremodeling products may be adversely affected by material increases in interestrates and the reduced availability of financing for home improvements. Anydeterioration in these factors could have a material adverse effect on ourbusiness, financial condition and results of operations.

 
***Weare highly dependent on current management. The loss of any of our currentmanagement, whose knowledge, leadership and expertise upon which we rely, wouldharm our ability to execute our business plan.***
 

Oursuccess depends heavily upon the continued contributions of current management,whose knowledge, leadership and expertise would be difficult to replace. If wewere to lose their services, our ability to execute our business plan would beharmed and we may be forced to cease operations until such time as we could hiresuitable replacements.
***Futuresales of our common stock may result in a decrease in the market price of ourcommon stock, even if our business is doing well.***
 

Themarket price of our common stock could drop due to sales of a large number ofshares of our common stock in the market or the perception that such sales couldoccur. This could make it more difficult to raise funds through future offeringsof common stock.
** 

Trends,Risks and Uncertainties**
 

Wehave sought to identify what we believe to be the most significant risks to ourbusiness, but we cannot predict whether, or to what extent, any of such risksmay be realized nor can we guarantee that we have identified all possible risksthat might arise. Investors should carefully consider all of such risk factorsbefore making an investment decision with respect to our Common Stock.

 
**Personnel**
 

Wecurrently have 118 full time employees and part time employees. We intend tohire additional technical, operational and administrative personnel asappropriate. We do not expect a significant change in the number of full timeemployees over the next 12 months. We intend to use the services of independentconsultants and contractors to perform various professional services. We believethat this use of third-party service providers may enhance our ability tocontain general and administrative expenses.

 
**GoingConcern

 **
Thefinancial statements included in this filing have been prepared in conformitywith generally accepted accounting principles that contemplate the continuanceof the Company as a going concern. The Company's cash position may be inadequateto pay all of the costs associated with testing, production and marketing ofproducts. Management intends to use borrowings and security sales to mitigatethe effects of its cash position, however no assurance can be given that debt orequity financing, if and when required will be available. The financialstatements do not include any adjustments relating to the recoverability andclassification of recorded assets and classification of liabilities that mightbe necessary should the Company be unable to continue existence.
** 

Item3. Controls and Procedures

 **
Wehave implemented and maintain disclosure controls and procedures which consistof: the control environment, risk assessment, control activities, informationand communication and monitoring. Our scope of internal control thereforeextends to policies, plans procedures, processes, systems, activities,initiatives, and endeavors required of a company. These controls and proceduresare designed to ensure that the information required to be disclosed in ourExchange Act reports is recorded, processed, summarized and reported within thetime periods specified in the SEC's rules.

Therehave been no significant changes (including corrective actions with regard tosignificant deficiencies or material weaknesses) in our internal controls or inother factors that could significantly affect the controls subsequent to thedate of the evaluation referenced below.

 

Within90 days prior to the date of this report, we carried out an evaluation, underthe supervision of Don Shimp, our President and Steve Chaussy, our ChiefFinancial Officer of the effectiveness of the design and operation of theCompany's disclosure controls and procedures. Based on the foregoing, Mr.Shimp and Mr. Chaussy concluded our disclosure controls and procedures wereeffective.
** 

PARTII--OTHER INFORMATION

 

Item1. Legal Proceedings**
 

None
** 

Item2. Changes in Securities**
 

OnJune 30, 2004, we issued 10,000 shares of restricted common stock to IR Plus,Inc for services that were performed under a Consulting Agreement entered intoon April 10, 2003 between the Company and IR Plus, Inc. The shares were issuedpursuant to an exemption provided by Section 4(2) of the Securities Act. (The IRPlus agreement was filed as Exhibit 10 to a Form 8-K filed on February 6, 2004).

 

OnJune 30, 2004, the Company issued 12,500 shares of restricted common stock tovarious employees as bonuses/compensation. The shares were issued pursuant to anexemption provided by Section 4(2) of the Securities Act.

 
*SubsequentEvents to quarter end.*
InJuly, 2004, The Company put in place an asset based line of credit for$1,000,000. actual borrowing available is subject to the amount of qualifiedassets at a given time.

 
**Item3. Defaults by the Company upon its Senior Securities**
 

None

 
**Item4. Submission of Matters to a Vote of Security Holders**
 

None
**Item5. Other Information**
 
**PressReleases

 **
OnMay 24, 2004 the Company announced in a press release, (filed herewith asexhibit 99-1), that the Company is moving forward with its Pahrump, Nevadaoperations. Operating under its wholly owned subsidiary, Pahrump Valley Truss,Inc.

 
*Subsequentto quarter end

 

OnJuly 21, 2004 the Company announced in a press release, (filed herewith asexhibit 99-2), the addition of Gene Cloud as Senior Vice President of Operationsfor Hesperia Holding, Inc. Mr. Cloud comes with extensive managerial andorganizational experience in the lumber and building component industries. Hisexperiences while working for Universal Forest Products, Inc will allow HesperiaHolding, Inc the opportunity to explore product diversification andmodernization of its existing lines.

 

OnAugust 2, 2004 the Company announced in a press release, (filed herewith asexhibit 99-3), the completion of an asset based credit line for $1,000,000 withMercantile Capital, LP. The Company intends to utilize the credit line forworking capital to sustain the 33% annual growth rate the Company has averagedover the past 2 years. The Company has already received its first installment of$200,000. (a copy of the agreement is attached as exhibit 10-1)

 
**ConsultingAgreements

 **
OnMay 21, 2004, the Company entered into a consulting agreement with LynbrookPartners, LLC. ("LP") LP services will be limited to introducing theCompany to Investors interested in entering in to a transaction with theCompany. LP has not, and will not be involved in the structuring of thetransaction or in the related discussions and/or negotiations between theCompany and the Investor. LP will not be involved in conducting due diligence,or in making any buy-or-sell recommendations related to the transaction.

 

OnJune 4, 2004, the Company entered into a consulting agreement with GrandBettingen. Mr. Bettingen will advise on the appropriate pricing and structurefor the capital to be raised and determine whether a private placement or mergerwould be appropriate, identify potential and appropriate investors and/ or ajoint venture/merger partner, advise and assist with respect to negotiations ofany proposed financing, sale of capital stock or other business arrangement, tocontinue to assist company in its ongoing fund raising activities including apossible buyout of the Company at some future date and/or working with theCompany to assist in public market oversight. The consulting agreement is heretoattached as exhibit 10-2
* 

Subsequentto quarter end

 

OnAugust 2, 2004, the Company entered into a letter of agreement with The InvestorRelations Group Inc. ("IRG") IRG agreed to provide the Company withinvestor relations services. These services may include overall management ofthe corporate communications program, designing a corporate fact sheet that canreadily be mass produced for distribution to brokers, analysts, and otherindustry personnel, assistance with compiling promotional materials, writing andediting news releases and other corporate materials. The letter agreement isattached hereto as exhibit 10-3.
**Item6. Exhibits and Reports of Form 8-K**
 

Exhibits

Ex10-1   

 Agreement with Mercantile Capital, LP.

Ex10-2   

 ConsultingAgreement with Grant Bettingen.

Ex10-3   

 LetterAgreement with The Investor Relations Group Inc.

Ex99-1   

 PressRelease dated May 24, 2004

Ex99-2   

 PressRelease dated July 21, 2004

Ex99-3   

 PressRelease dated August 2, 2004

Ex31   

 Certificationpursuant to Section 302 of the Sarbanes-Oxley Act

Ex32   

 Certificationpursuant to Section 906 of the Sarbanes-Oxley Act

 

(b)Form 8-K
a)None

 

Form8-K filed Subsequent to quarter end

a)None

**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 

HESPERIAHOLDING, INC.

(Registrant)

 

 

 

By:/s/Donald Shimp                                    
DonaldShimp, President

 

 

 

By:/s/Steve Chaussy                                   
SteveChaussy, Chief Financial Officer

 

 

Date:August 23, 2004************** |
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