1.0 EXECUTIVE SUMMARY

1.1 The Opportunity

American Steel Frame, Inc. (ASFI) has developed the most advanced light gauge steel framing system for single family homes in the industry. The company’s technologically advanced system will help to establish the firm as the premier supplier of fabricated light gauge steel framing products to residential builders in Northern California and then worldwide. This current business opportunity exists because:

• There is a growing housing crisis in California. According to the State Department of Finance, residential construction is falling well behind the needs of the population by over 140,000 houses per year.

• ASFI’s steel frames can be constructed in about one third the time it takes to build a wood frame.

• Wood prices have risen sharply in recent years as a result of logging restrictions and environmental concerns, which has resulted in builders looking for alternative materials for home construction. Steel prices have remained constant over the last decade, and ASFI’s pricing always beats wood framing prices.

• Steel is three times stronger than wood which gives it advantages with respect to seismic activity, which is critically important in Northern California.

• Currently only 3 percent of new housing starts in California use steel framing, but estimates by the steel industry have the market share growing to as high as 25 percent within the next 3 years.

• There are not enough steel framing suppliers to meet current or future market demand.

• ASFI's Board of Directors and highly qualified management team has the breadth of experience and skills and the network contacts to capitalize on this lucrative opportunity.

1.2 The Company

On August 12, 1999, ASFI was incorporated as a subchapter S corporation in the State of California. The company now represents a conglomeration of leading professionals in the home building industry, with expertise in engineering, construction, marketing, and management. The firm is adequately financed for initial operations and is currently building out its headquarters and production plant at its 25,500 square foot facility on a 3.1 acre lot in Stockton California. ASFI expects to begin fulfilling orders in February 2000.

1.3 Products and Services

ASFI will provide both fabricated steel house frames and frame construction services to home builders in Northern California. Because 80 percent of the frame fabrication is done in the plant, ASFI believes that it can produce much higher quality products. When all components have been fabricated the frame is ready for shipment and is ready for on-site assembly and construction. Four-person ASFI construction crews will then assemble the frames. Builders can rely on ASFI crews to put up city/county inspector-approved frames in about one third the time it takes to put up a wood frame. Currently, it takes carpenters and builders an average of three weeks to put up a traditional wood frame for a house; ASFI can build a house frame within four days. The company also intends to license its technology and business concept to companies throughout the United States and in Latin America and the Pacific Rim.

1.4 The Market

U.S. Census figures show that the number of housing starts in 1999 has increased by approximately 3 percent over 1998 figures. However, in California, the number of single family housing starts has increased over 18 percent to almost 150,000. This rate of increase is expected to continue through the year 2000 because it is needed to accommodate the rapidly growing population of California. Projections show the state's population reaching 40 million by 2010, and according to the State’s Department of Finance, builders must produce 250,000 new housing units per year for the next decade just to meet new demand for housing. 

In terms of international expansion, in Latin America alone, there is an estimated current demand for over 2,000,000 homes. ASFI’s light-gauge steel building system is ideal for many of the international markets. In many of the countries in Latin America and the Pacific Rim, there is a need for a product that can withstand moisture due to tropical climates. In addition, many countries need cost-effective building materials because they do not have access to wood products. ASFI believes that light gauge steel framing will rapidly become one of the primary choices of the international housing community.

1.5 Management

John McDonald, ASFI's President, has been involved in the home building industry for 35 years and has several patents important to the industry.  He has won numerous awards for his innovative efforts.  Paul Ta, Executive Vice President, has over 20 years of experience in all phases of construction, in the U.S. and globally.  Ray Grange, ASFI's Vice President of Engineering, has been a building, designer, civil engineer, architect, contractor and developer, and designed his first steel home in 1967. Mike Serpa, an award winning salesman in the California construction industry, will be contracted from the Ryness Company to be responsible for sales.  Van Churchill will head the company's Design Department.  He has worked closely with John McDonald in the steel frame business over the past decade. ASFI's Board also boasts experienced executives who will help guide the company as it grows.  P.P. Sananikone has extensive experience in international development and management consulting. He has worked on managed development projects in more than 26 countries.  Gary Ryness is founder and president of the Ryness Company, one of the largest new homes marketing organizations in the U.S. 

1.6 Financial Summary

ASFI expects to break even by June, 2000.  A pre tax net profit margin of 12.0% is anticipated in year one, 16.6% in year two and 15.8% in year three. Gross margins of 36%, 35% and 34% are projected in years one through three, respectively. The company projects net worth $1.15 million by the end of
2000, increasing to $5.18 million by the end of 2001, and $10.24 million by the end of 2002.  ASFI exhibits high liquidity, which is to be expected given that it retires its debt quickly and takes on no additional debt past year one.