-----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, Txxb6OAYnnkIf0KZRzQVFL0IXnW/AHc4T9HmQPSk9iRylh+aVjmTvMQSJAVtLK0L ZlaLmkOoukHI94/oG/Sg0A== 0001144204-04-001424.txt : 20040213 0001144204-04-001424.hdr.sgml : 20040213 20040213132511 ACCESSION NUMBER: 0001144204-04-001424 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONOMAWEST HOLDINGS INC CENTRAL INDEX KEY: 0000102588 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 941069729 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01912 FILM NUMBER: 04596901 BUSINESS ADDRESS: STREET 1: 1448 INDUSTRIAL AVE CITY: SEBASTOPOL STATE: CA ZIP: 95472-4848 BUSINESS PHONE: 7078242548 MAIL ADDRESS: STREET 1: 2064 HIGHWAY 116 NORTH CITY: SEBASTOPOL STATE: CA ZIP: 95472 FORMER COMPANY: FORMER CONFORMED NAME: VACU DRY CO DATE OF NAME CHANGE: 19920703 10-Q 1 v01560_10q.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities - ----- Exchange Act of 1934. For the quarterly period ended December 31, 2003 or Transition Report Pursuant to Section 13 or 15(d) of the Securities - ----- Exchange Act of 1934. For the transition period from _________ to _________. Commission File Number 01912 SONOMAWEST HOLDINGS, INC. (Exact name of registrant as specified in its charter) CALIFORNIA 94-1069729 (State of incorporation) (IRS Employer Identification #) 2064 HIGHWAY 116 NORTH, SEBASTOPOL, CA 95472-2662 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 707-824-2001 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES: X NO: ----- ----- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act. YES: NO: X ----- ----- As of February 11, 2004, there were 1,104,783 shares of common stock, no par value, outstanding. -1- SONOMAWEST HOLDINGS, INC. AND SUBSIDIARY TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets at December 31, 2003 and June 30, 2003...................................................................3 Condensed Consolidated Statements of Operations - Three and Six months ended December 31, 2003 and 2002................................................4 Condensed Consolidated Statement of Changes in Shareholders' Equity - Six months ended December 31, 2003..............................................5 Condensed Consolidated Statements of Cash Flows - Six months ended December 31, 2003 and 2002......................................................6 Notes to Condensed Consolidated Financial Statements............................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................9 Item 4. Controls and Procedures........................................................12 PART II. OTHER INFORMATION Item 1. Legal Proceedings..............................................................12 Item 2. Changes in Securities and Use of Proceeds.....................................12 Item 3. Defaults Upon Senior Securities ...............................................13 Item 4. Submission of Matters to a vote of Security Holders............................13 Item 5. Other Information..............................................................13 Item 6. Exhibits and Reports on Form 8-K...............................................13 Signature................................................................................15 EXHIBIT INDEX................................................................................16 EXHIBITS.....................................................................................17
-2- PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SONOMAWEST HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS)
ASSETS 12/31/03 6/30/03 ------------- ------------- (Unaudited) CURRENT ASSETS: Cash $ 1,393 $ 1,939 Accounts receivable 143 136 Other receivables 23 15 Prepaid expenses and other assets 66 145 Current deferred income taxes, net 73 124 ------------- ------------- Total current assets 1,698 2,359 ------------- ------------- RENTAL PROPERTY, net 1,756 1,731 ------------- ------------- INVESTMENT, at cost 3,001 2,696 ------------- ------------- DEFERRED INCOME TAXES 312 259 ------------- ------------- PREPAID COMMISSIONS AND OTHER ASSETS 132 81 ------------- ------------- Total assets $ 6,899 $ 7,126 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 1,824 $ 1,857 Accounts payable 132 108 Accrued payroll and related liabilities 13 104 Accrued expenses 189 271 Unearned rents and deposits 271 287 ------------- ------------- Total current liabilities 2,429 2,627 OTHER LONG-TERM LIABILITIES 131 131 ------------- ------------- Total liabilities 2,560 2,758 ------------- ------------- SHAREHOLDERS' EQUITY: Preferred stock: 2,500 shares authorized; no shares outstanding - - Common stock: 5,000 shares authorized, no par value; 1,105 shares outstanding in fiscal 2004 and 2003 2,709 2,675 Stock subscription receivable (400) (400) Retained earnings 2,030 2,093 ------------- ------------- Total shareholders' equity 4,339 4,368 ------------- ------------- Total liabilities and shareholders' equity $ 6,899 $ 7,126 ============= =============
The accompanying notes are an integral part of these financial statements. -3- SONOMAWEST HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002 (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Six Months Three Months Ended December 31 Ended December 31 2003 2002 2003 2002 ------- ------- ------- ------- RENTAL REVENUE $ 810 $ 757 $ 407 $ 378 OPERATING COSTS 852 1,061 403 600 ------- ------- ------- ------- OPERATING PROFIT (LOSS) (42) (304) 4 (222) INTEREST AND OTHER INCOME (EXPENSE), NET (23) (48) (21) (11) ------- ------- ------- ------- LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (65) (352) (17) (233) BENEFIT FOR INCOME TAXES 2 93 1 70 ------- ------- ------- ------- NET LOSS FROM CONTINUING OPERATIONS (63) (259) (16) (163) GAIN ON SALE OF DISCONTINUED OPERATIONS, net of income taxes -- 120 -- 77 ------- ------- ------- ------- NET LOSS $ (63) $ (139) $ (16) $ (86) ======= ======= ======= ======= WEIGHTED AVERAGE COMMON SHARES AND EQUIVALENTS: Basic and diluted 1,105 1,105 1,105 1,105 EARNINGS (LOSS) PER COMMON SHARE: Continuing operations Basic and diluted $ (0.06) $ (0.23) $ (0.01) $ (0.15) Discontinued operations: Basic and diluted $ -- $ 0.11 $ -- $ 0.07 Net loss: Basic and diluted $ (0.06) $ (0.13) $ (0.01) $ (0.08)
The accompanying notes are an integral part of these financial statements. -4- SONOMAWEST HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED DECEMBER 31, 2003 (AMOUNTS IN THOUSANDS)
Common Stock ----------------------- Stock Total Number Subscriptions Retained Shareholders' of Shares Amount Receivable Earnings Equity ------- ------- ------- ------- ------- BALANCE, JUNE 30, 2003 1,105 $ 2,675 $ (400) $ 2,093 $ 4,368 Net loss -- -- -- (63) (63) Non-cash stock compensation charge -- 34 -- -- 34 ------- ------- ------- ------- ------- BALANCE, DECEMBER 31, 2003 1,105 $ 2,709 $ (400) $ 2,030 $ 4,339 ======= ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements. -5- SONOMAWEST HOLDINGS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED DECEMBER 31, 2003 AND 2002 (AMOUNTS IN THOUSANDS)
2003 2002 --------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (63) $ (139) --------------------------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Loss on sale of fixed assets 24 7 Gain on sale of discontinued operations, net -- (120) Non-cash stock compensation charge 34 42 Depreciation and amortization expense 99 156 Changes in assets and liabilities: Accounts receivable, net (7) 18 Other receivables (8) (14) Deferred income tax benefit (2) (94) Prepaid income taxes -- 75 Prepaid expenses and other assets 79 64 Prepaid commissions and other assets (51) 6 Accounts payable and accrued expenses (58) 145 Accrued payroll and related liabilities (91) (93) Unearned rents and deposits (16) (8) --------------------------- 3 184 --------------------------- Net cash provided by (used in) continuing operations (60) 45 --------------------------- Net cash provided by discontinued operations -- 71 --------------------------- Net cash provided by (used in) operating activities (60) 116 --------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of fixed assets 7 -- Capital expenditures (155) (49) Investment in MetroPCS (305) (1,044) --------------------------- Net cash used in investing activities (453) (1,093) --------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (33) (30) --------------------------- Net cash used for financing activities (33) (30) --------------------------- NET DECREASE IN CASH (546) (1,007) CASH AT BEGINNING OF PERIOD (of which $600 was restricted in 2002) 1,939 3,369 --------------------------- CASH AT END OF PERIOD (of which $600 was restricted in 2002) $ 1,393 $ 2,362 =========================== Supplemental Cash Flow Information 2003 2002 --------------------------- Interest paid $ 69 $ 71 Taxes paid $ 1 $ 1
The accompanying notes are an integral part of these financial statements. -6- SONOMAWEST HOLDINGS, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED DECEMBER 31, 2003 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim statements have been prepared pursuant to the rules of the Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes these disclosures are adequate to make the information not misleading. In the opinion of management, all adjustments necessary for a fair presentation for the periods presented have been reflected and are of a normal recurring nature. These interim financial statements should be read in conjunction with the financial statements and notes thereto for each of the three years in the period ended June 30, 2003. The results of operations for the six-month period ended December 31, 2003 are not necessarily indicative of the results that will be achieved for the entire year ending June 30, 2004. RECLASSIFICATIONS Certain reclassifications have been made to the 2003 unaudited interim financial statements to conform to the current year presentation, adopted for fiscal 2004. NOTE 2 - INVESTMENT As of December 31, 2003, the Company has completely funded its $3 million minority investment in the Series D preferred stock of a privately held telecommunications company, MetroPCS, Inc. The Company accounts for the investment using the cost method. NOTE 3 - STOCK OPTIONS Effective July 1, 2002, the Company elected to account for all prospective stock options in accordance with SFAS 123, "Accounting for Stock-Based Compensation". As a result, during the first three months of fiscal 2004 the Company incurred a charge of $34,000 related to the issuance of 24,200 fully vested stock options to the directors, officers and certain employees of the Company. During the first three months of fiscal 2003 the Company incurred a charge of $42,000 related to the issuance of 24,200 fully vested stock options to the directors, officers and certain employees of the Company. Prior to July 1, 2002, the Company accounted for stock-based compensation plans in accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," under which compensation cost was recorded as the difference between the fair value and the exercise price at the date of grant, and was recorded on a straight-line basis over the vesting period of the underlying options. Prior to July 1, 2002, the Company had adopted the disclosure only provisions of Statement of Financial Standards ("SFAS") No. 123, "Accounting for Stock Based Compensation". The Company continues to account for stock options granted prior to July 1, 2002 in accordance with APB 25; and thus, continues to apply the disclosure only provisions of SFAS 123 to such options. No compensation expense has been recognized in the six months ended December 31, 2003 pursuant to stock options issued prior to July 1, 2002 as the option terms are fixed and the exercise price equals the market price of the underlying stock on the date of grant for all options granted by the Company. -7- Had compensation cost for the stock options granted prior to July 1, 2002 been determined based upon the fair value at grant dates for awards under those plans consistent with the method prescribed by SFAS 123, the net loss would have been increased to the pro forma amounts indicated below: For the six months ended December 31, 2003 2002 ---- ---- (in thousands, except per share amounts) - ---------------------------------------------- ------------- ----------------- Net Loss, as reported $(63) $(139) - ---------------------------------------------- ------------- ----------------- Add back: Actual Stock Compensation $ 33 $ 38 Expense--Net of taxes - ---------------------------------------------- ------------- ----------------- Less: Pro-forma Stock Compensation $(36) $ (43) Charge--Net of taxes - ---------------------------------------------- ------------- ----------------- Pro-forma Net Loss $(66) $(144) - ---------------------------------------------- ------------- ----------------- Loss Per Share: - ---------------------------------------------- ------------- ----------------- Basic and diluted - as reported $(0.06) $(0.13) - ---------------------------------------------- ------------- ----------------- Basic and diluted - pro-forma $(0.06) $(0.13) - ---------------------------------------------- ------------- ----------------- The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, with the following weighted-average assumptions used for the 2003 and 2002 grants, respectively: weighted average risk-free interest rates of 3.54 and 4.78 percent; expected dividend yield of 0 percent; expected life of four years for the Plan options; and expected volatility of 22.00 and 25.83 percent. For options granted during the six months ended December 31, 2003 and 2002, the weighted average fair values as of the grant date were $ 1.39 and $1.73, respectively. -8- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SonomaWest Holdings, Inc. (the "Company" or "Registrant") is including the following cautionary statement in this Quarterly Report to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company. The statements contained in this Report that are not historical facts are "forward-looking statements" (as such term is defined in Section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934), which can be identified by the use of forward-looking terminology such as "estimated," "projects," "anticipated," "expects," "intends," "believes," or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, although actual results may differ materially from those described in any such forward-looking statements. All written and oral forward-looking statements made in connection with this Report which are attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the "Certain Factors" as set forth in our Annual Report for the fiscal year ended June 30, 2003 filed on September 12, 2003, and other cautionary statements set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations". There can be no assurance that management's expectations, beliefs or projections will be achieved or accomplished, and the Company expressly disclaims any obligation to update any forward-looking statements. The financial statements herein presented for the three and six months ending December 31, 2003 and 2002 reflect all the adjustments that in the opinion of management are necessary for the fair presentation of the financial position and results of operations for the periods then ended. All adjustments during the periods presented are of a normal recurring nature. CRITICAL ACCOUNTING POLICIES The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates and assumptions. The Company believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. The most critical accounting policies were determined to be those related to: valuation of the Company's investment in MetroPCS and the valuation allowances on deferred tax assets. Valuation of investment in MetroPCS The investment in MetroPCS is accounted for using the cost method. The Company continues to monitor the financial condition, cash flow, operational performance and other relevant information about MetroPCS, to evaluate the fair value of this investment. This process is based primarily on information disclosed in MetroPCS' periodic filings with the Securities and Exchange Commission, following MetroPCS' recent registration under the Securities Exchange Act of 1934. If as a result of the review of this information, the Company believes its investment should be reduced to a fair value below its cost, the reduction would be charged to "loss on investments" on the consolidated statements of operations. -9- Valuation Allowance on Deferred Taxes The Company records deferred tax assets and/or liabilities based upon its estimate of the taxes payable in future years, taking into consideration any change in tax rates and other statutory provisions. The Company continues to post losses from its continuing operations. The losses have generated federal tax net operating losses ("NOLs"), some of which have been carried back to offset prior years' taxable income. As of June 30, 2002 the Company carried back all of its remaining allowable NOLs. After the carryback of the June 30, 2002 federal NOL the Company cannot carryback any more losses, and as a result all taxable losses incurred subsequent to June 30, 2002 will be carried forward to offset future taxable income. California does not allow corporations to carry back their NOLs, and corporations can only carry forward 55% of the NOLs to future years to offset net operating profits. Furthermore, the Company's state NOLs will begin to expire in fiscal 2005. As a result, the Company has established a valuation allowance against all of its state net deferred tax assets due to the uncertainty of future realization. At December 31, 2003, the Company had recorded, net deferred tax assets of $385,000, which compares to $383,000 of net deferred tax assets as of June 30, 2003. OVERVIEW The Company's business consists of its real estate management and rental operations and its minority investment in the Series D preferred stock of a privately held telecommunications company, MetroPCS, Inc. As of December 31, 2003, the Company has completely funded its $3 million minority investment in the Series D preferred stock of MetroPCS, Inc. -10- RESULTS OF CONTINUING OPERATIONS RESULTS OF OPERATIONS The Company leases warehouse, production, and office space as well as outside storage space at both of its properties. The two properties are located on 82 acres of land and have a combined leaseable area under roof of 390,000 square feet. As of December 31, 2003 the Company had a total of 27 tenants as compared to 28 tenants as of December 31, 2002. The tenants have varying original lease terms ranging from month-to-month to ten years with options to extend the leases. As of December 31, 2003, the tenants occupied approximately 232,000 square feet under roof, or 59% of the leasable area under roof. This compares to 223,000 square feet under roof, or 57% of the leasable area under roof as of December 31, 2002. In addition to the area under roof, the Company had 68,000 square feet of outside area under lease as of December 31, 2003 and 82,000 as of December 31, 2002. RENTAL REVENUE. For the six months ended December 31, 2003 rental revenue increased $53,000 or 7% as compared to the corresponding period in the prior year. The increase in rental revenue is attributable to the increase in leased square footage. For the three months ended December 31, 2003 rental revenue increased $29,000 or 8% as compared to the three months ended December 31, 2002. This increase was a result of tenants leasing additional space on a month-to-month basis. OPERATING COSTS. For the six months ended December 31, 2003 operating costs decreased $209,000 or 20% compared to the six months ended December 31, 2002. The decrease from fiscal 2003 was primarily due to the estimated loss of $173,000 that resulted from storm related damages to the North Property on December 31, 2002. The Company's total operating costs exceeded the tenant rental revenue for the six months ended December 31, 2003 and 2002. The Company continues to closely scrutinize all discretionary spending. In addition, the Company continues to actively search for additional tenant revenue to eliminate these negative operating results. While the Company and its retained broker are actively marketing the properties to prospective tenants, there can be no assurance that tenants will be found in the near term or at rates comparable with existing leases. As a result, the Company's operating results will be negatively impacted as long as the tenant rental revenue stream fails to cover existing operating costs. For the three months ended December 31, 2003 operating costs decreased $197,000 or 33%. As discussed above this decrease is primarily a result of the costs incurred in excess of the insurance deductible to the North Property ($173,000), as a result of the storm on December 31, 2002. INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other income (expense) consist primarily of interest income on the Company's cash balances, interest expense on mortgage debt and the change in the value of the Company's interest rate swap contract. For the six months ending December 31, 2003, the Company generated $14,000 of interest income, $13,000 of other income, incurred $63,000 of interest expense, recorded a loss on the sale of fixed assets of $24,000 and recorded a positive swap contract adjustment of $37,000. This compares to $29,000 of interest income, $72,000 of interest expense and a positive swap contract adjustment of $2,000 for the corresponding period in the prior year. The decrease in interest income is due to a reduced cash balance in fiscal 2004 and a decline in interest rates. As of December 1, 2003, the Company's swap contract with its Bank had terminated. The Company's Bank extended the due date of the note until March 1, 2004, but the swap contract was terminated. INCOME TAXES. The effective tax rate for the six months ended December 31, 2003 decreased to a benefit of 3% from a benefit of 9% for the six months ended December 31, 2002. Due to the uncertainty of future realization, a valuation allowance is recorded against state net operating losses. The primary reason for the lower effective rate for the six months ended December 31, 2003 was the impact of permanent differences (primarily the non-cash stock compensation charge of $34,000 in 2003 and $42,000 in 2002) on a small amount of taxable loss in addition to the valuation allowance recorded against state net operating losses. -11- LIQUIDITY AND CAPITAL RESOURCES The Company had cash of $1.4 million at December 31, 2003 and current maturities of long-term debt of $1.8 million. The Company's long-term debt was due and payable on December 1, 2003, but the Company's bank agreed to an extension to March 1, 2004. As a result, the entire debt is recorded under current maturities of long-term debt. The Company anticipates refinancing this debt with the Company's Bank and is in the final stages of this process. As of December 1, 2003, the Company's interest rate swap agreement with the Bank terminated and was not extended. As a result, as of December 31, 2003 the Company no longer has any potential liability associated with this agreement. The Company's cash balance decreased $546,000 during the six months ended December 31, 2003, as a result of the final payment on the MetroPCS investment of $305,000, capital expenditures of $155,000, principal payments on debt of $33,000 and negative cash flow from operating activities of $60,000. As of December 31, 2003, the Company has completely funded its $3 million minority investment in the Series D preferred stock of MetroPCS, Inc. The Company has accounted for the investment using the cost method. ITEM 4. CONTROLS AND PROCEDURES As of December 31, 2003, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chairman of the Board of Directors and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e)). Based upon that evaluation, the Company's Chairman of the Board of Directors and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective at a reasonable level in timely alerting them to material information relating to the Company that is required to be included in the Company's periodic filings with the Securities and Exchange Commission. There has been no change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, the Company's internal control over financial reporting. The Company's management, including the Chairman of the Board of Directors and Chief Financial Officer, do not expect that the Company's disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met due to numerous factors, ranging from errors to conscious acts of an individual, or individuals acting together. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, misstatements due to error and/or fraud may occur and not be detected. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None -12- ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Registrant's Annual Meeting of Stockholders held on October 29, 2003 the following proposals were adopted by the margins indicated:
Number of Shares ---------------------------------------------- Voted For Withheld ------------------ -------------- 1. To elect four Directors to hold office until the Annual Meeting of Stockholders to be held in 2004 or until their respective successors have been elected or appointed David J. Bugatto 1,007,700 19,844 Gary L. Hess 1,007,650 19,894 Roger S. Mertz 1,001,960 25,584 Fredric Selinger 1,017,372 10,172 Number of Shares ------------------------ Voted For Voted Against ------------------------ 3. To ratify the appointment of the accounting firm of Grant Thornton LLP as independent auditors for the fiscal year ending June 30, 2004 1,025,709 1,835
ITEM 5. OTHER INFORMATION None -13- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 3.1(1) Articles of Incorporation, as amended to date 3.2(2) Bylaws, as amended to date 10.1 Amendment to Independent Consultant Contract for Services dated December 31, 2003 between SonomaWest Holdings, Inc. and David J. Bugatto. 31.1 Chairman of the Board Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Chief Financial Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 32.1 Chairman of the Board Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. + 32.2 Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. + ________________ (1) Incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 2000. (2) Incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1992. * Filed herewith. + Furnished herewith. b. Reports on Form 8-K The Company furnished to the SEC one report on Form 8-K during the three months ended December 31, 2003 on October 3, 2003 for the purpose of reporting under Item 9 thereof the mailing of a letter by the Chairman of the Board to the Company's shareholders in connection with the Company's Annual Meeting of Shareholders. -14- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 12, 2004 /s/ Thomas R. Eakin - -------------------------------------------- Thomas R. Eakin, Chief Financial Officer -15- EXHIBIT INDEX Exhibit No. Document Description ----------- -------------------- 10.1 Amendment to Independent Consultant Contract for Services dated December 31, 2003 between SonomaWest Holdings, Inc. and David J. Bugatto 31.1 Chairman of the Board Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Chief Financial Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 32.1 Chairman of the Board Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. + 32.2 Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. + * Filed herewith + Furnished herewith -16- EX-10.1 3 v01560_ex10-1.txt AMENDMENT TO INDEPENDENT CONSULTANT CONTRACT FOR SERVICES This Amendment to Independent Consultant Contract for Services (this "Amendment") dated as of December 31, 2003, is made by and between SONOMAWEST HOLDINGS, INC., a California corporation ("Client"), and DAVID J. BUGATTO ("Consultant") for the purpose of amending certain provisions of that Independent Consultant Contract for Services dated as of July 17, 2001 between the Client and Consultant (the "Contract"). RECITALS WHEREAS, the parties hereto desire to amend the Contract in certain respects and except as set forth herein, the Contract shall remain unchanged. NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties agree as follows: AGREEMENT SECTION A. TERM AND TERMINATION. The termination date of December 31, 2003 set forth in Section 5(a)(iii) of the Contract is hereby deleted and replaced with June 30, 2004. All later references to the term in the Contract shall hereinafter refer to this amount. SECTION B. EFFECT OF AMENDMENT. Except to the extent the Contract is modified by this Amendment, the remaining terms and conditions of the Contract shall remain unmodified and in full force and effect. In the event of conflict, between the terms and conditions of the Contract and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall prevail and control. SECTION C. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed by its officers thereunto duly authorized as of the first date written above. /s/ David J. Bugatto SONOMAWEST HOLDINGS, INC., - ---------------------------------- a California corporation David J. Bugatto By: /s/ Roger S. Mertz ---------------------------- Name: Roger S. Mertz Title: Chairman of the Board EX-31.1 4 v01560_ex31-1.txt Exhibit 31.1 I, Roger S. Mertz, certify that: 1. I have reviewed this report on Form 10-Q of SonomaWest Holdings, Inc.; 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 registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers 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 registrant 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures 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; (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting. Date: February 12, 2004 /s/ Roger S. Mertz - ---------------------------------- Roger S. Mertz Chairman of the Board -1- EX-31.2 5 v01560_ex31-2.txt Exhibit 31.2 I, Thomas R. Eakin, certify that: 1. I have reviewed this report on Form 10-Q of SonomaWest Holdings, Inc.; 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 registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers 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 registrant 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures 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; (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting. Date: February 12, 2004 /s/ Thomas R. Eakin - --------------------------------- Thomas R. Eakin Chief Financial Officer -1- EX-32.1 6 v01560_ex32-1.txt Exhibit 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (A) AND (B) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), the undersigned officer of SonomaWest Holdings, Inc., a California corporation (the "Company"), does hereby certify that: The Quarterly Report on Form 10-Q for the quarter ended December 31, 2003 (the "Form 10-Q") of the Company fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 12, 2004 /s/ Roger S. Mertz --------------------- Roger S. Mertz Chairman of the Board A signed original of this written statement required by Section 906 has been provided to SonomaWest Holdings, Inc. and will be retained by SonomaWest Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -1- EX-32.2 7 v01560_ex32-2.txt Exhibit 32.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (A) AND (B) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), the undersigned officer of SonomaWest Holdings, Inc., a California corporation (the "Company"), does hereby certify that: The Quarterly Report on Form 10-Q for the quarter ended December 31, 2003 (the "Form 10-Q") of the Company fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: : February 12, 2004 /s/ Thomas R. Eakin ----------------------- Thomas R. Eakin Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to SonomaWest Holdings, Inc. and will be retained by SonomaWest Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -1- -----END PRIVACY-ENHANCED MESSAGE-----