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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 September 30, 2002 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: __
As of September 30, 2002, there were 1,104,783 shares of common stock, no par
value, outstanding.
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SONOMAWEST HOLDINGS, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at September 30, 2002 and
June 30, 2002 .................................................... 3
Condensed Consolidated Statements of Earnings - Three months
ended September 30, 2002 and 2001 ................................ 4
Condensed Consolidated Statement of Changes in Shareholders'
Equity - Three months ended September 30, 2002 ................... 5
Condensed Consolidated Statements of Cash Flows - Three months
ended September 30, 2002 and 2001 ................................ 6
Notes to Condensed Consolidated Financial Statements ............. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 8
Item 4. Controls and Procedures .......................................... 11
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 ...................................12
Item 4. Submission of Matters to a vote of Security Holders................12
Item 5. Other Information..................................................12
Item 6. Exhibits and Reports on Form 8-K...................................12
Signature ..................................................................13
Certifications..............................................................14
EXHIBIT INDEX.................................................................16
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SONOMAWEST HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
ASSETS 9/30/02 6/30/02
-------------------
CURRENT ASSETS: (unaudited)
Cash $ 2,156 $ 2,769
Restricted cash 600 600
Accounts receivable, less allowances for
uncollectible accounts of $7 and $9 in
fiscal 2003 and 2002, respectively 135 118
Other receivables 20 20
Prepaid income taxes 75 75
Prepaid expenses and other assets 103 121
Current deferred income taxes, net 284 335
-------------------
Total current assets 3,373 4,038
-------------------
RENTAL PROPERTY, net 1,864 1,917
-------------------
INVESTMENT, at cost 1,924 1,402
-------------------
DEFERRED TAXES 77 31
-------------------
PREPAID COMMISSIONS AND OTHER ASSETS 80 82
-------------------
Total assets $ 7,318 $ 7,470
===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 63 $ 61
Accounts payable 138 108
Unearned rents and deposits 277 282
Accrued payroll and related liabilities 197 253
Accrued expenses 307 290
Net liabilities of discontinued operations 106 219
------- -------
Total current liabilities 1,088 1,213
------- -------
LONG-TERM DEBT, net of current maturities 1,840 1,856
------- -------
Total liabilities 2,928 3,069
------- -------
SHAREHOLDERS' EQUITY:
Preferred stock: 2,500 shares authorized;
no shares outstanding -- --
Common stock: 5,000 shares authorized, no par
value; 1,105 and 1,105 shares outstanding
in fiscal 2003 and 2002, respectively 2,675 2,633
Stock subscription receivable (400) (400)
Retained earnings 2,115 2,168
-------------------
Total shareholders' equity 4,390 4,401
-------------------
Total liabilities and shareholders' equity $ 7,318 $ 7,470
===================
The accompanying notes are an integral part of these consolidated statements.
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SONOMAWEST HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2002 2001
------------------
RENTAL REVENUE $ 379 $ 351
OPERATING COSTS 461 811
------------------
OPERATING LOSS (82) (460)
INTEREST AND OTHER INCOME (EXPENSE), NET (37) (61)
------------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX (119) (521)
BENEFIT FOR INCOME TAXES 23 138
------------------
NET LOSS FROM CONTINUING OPERATIONS (96) (383)
GAIN ON SALE OF DISCONTINUED OPERATIONS, net of income taxes 43 38
------------------
NET LOSS $ (53) $ (345)
==================
WEIGHTED AVERAGE COMMON SHARES AND EQUIVALENTS:
Basic 1,105 1,024
Diluted 1,111 1,059
EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations:
Basic $ (0.09) $ (0.37)
Diluted (0.09) (0.37)
Discontinued operations:
Basic .04 0.04
Diluted .04 0.04
Net earnings (loss):
Basic (0.05) (0.34)
Diluted (0.05) (0.34)
The accompanying notes are an integral part of these consolidated statements.
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SONOMAWEST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
(AMOUNTS IN THOUSANDS)
COMMON STOCK
-------------------- STOCK TOTAL
NUMBER SUBSCRIPTIONS RETAINED SHAREHOLDERS'
OF SHARES AMOUNT RECEIVABLE EARNINGS EQUITY
-------------------------------------------------------------
BALANCE, JUNE 30, 2002 1,105 $ 2,633 $ (400) $ 2,168 $ 4,401
Net loss -- -- -- (53) (53)
Non-cash stock compensation charge -- 42 -- -- 42
-------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2002 1,105 $ 2,675 $ (400) $ 2,115 $ 4,390
=============================================================
The accompanying notes are an integral part of these consolidated statements.
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SONOMAWEST HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(AMOUNTS IN THOUSANDS)
2002 2001
-------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (53) $ (345)
-------------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on sale of fixed assets 7 1
Gain on sale of discontinued operations, net (43) (38)
Non-cash stock compensation charge 42 18
Depreciation and amortization expense 78 97
Changes in assets and liabilities:
Accounts receivable, net (17) (56)
Other receivables -- 41
Deferred income tax provision (benefit) 5 (111)
Prepaid commissions and other assets 2 --
Prepaid expenses and other assets 18 22
Accounts payable and accrued expenses 47 86
Accrued payroll and related liabilities (56) 330
Unearned rents and deposits (5) 53
-------------------
78 443
-------------------
Net cash provided by
continuing operations 25 98
-------------------
Net cash provided by (used in)
discontinued operations (70) 21
-------------------
Net cash provided by (used in)
operating activities (45) 119
-------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (32) (18)
Investment in MetroPCS (522) (446)
-------------------
Net cash used in investing activities (554) (464)
-------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (14) (14)
Issuance of common stock -- 2
-------------------
Net cash used for financing activities (14) (12)
-------------------
NET DECREASE IN CASH (613) (357)
CASH AT BEGINNING OF YEAR (of which $600 is restricted) 3,369 3,936
-------------------
CASH AT END OF YEAR (of which $600 is restricted) $ 2,756 $ 3,579
===================
Supplemental Cash Flow Information
2002 2001
-------------------
Interest paid $ 35 $ 37
The accompanying notes are an integral part of these consolidated statements.
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SONOMAWEST HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 2002
NOTE 1 - BASIS OF PRESENTATION
The accompanying fiscal 2003 and 2002 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 generally accepted accounting principles
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 except as discussed below. 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, 2002. The results of
operations for the three-month period ended September 30, 2002 are not
necessarily indicative of the results that will be achieved for the entire year
ending June 30, 2003.
Reclassifications - Certain previously reported amounts were reclassified to
conform to the current presentation.
NOTE 2 - INVESTMENT
The Company has made a financial commitment to make a $3 million minority
investment in the Series D preferred stock of a privately held
telecommunications company, MetroPCS, Inc., of which $1,924,000 was funded as of
September 30, 2002. The Company accounted for the investment using the cost
method. It is expected that the remaining $1,076,000 will be funded in several
installments throughout the fiscal year ending June 30, 2003. Subsequent to the
quarter ended September 30, 2002 an additional $522,200 was funded on November
7, 2002.
NOTE 3 - DISCONTINUED OPERATIONS
The gain on the sale of discontinued operations presented in the accompanying
statements of earnings for the three months ended September 30, 2002 and 2001,
respectively represent the sales of remaining discontinued inventories and fixed
assets net of related selling costs and income taxes. Remaining liabilities of
discontinued operations of $106,000 and $219,000, as of September 30, 2002 and
June 30, 2002, relate to reserves for rental repairs necessary to ready
warehouses previously used in the discontinued operations for future rentals.
All remaining inventories and fixed assets of discontinued operations are fully
reserved.
NOTE 4 - CHANGE IN ACCOUNTING POLICY
Effective July 1, 2002, the Company has elected to account for all prospective
stock options in accordance with SFAS 123, "Accounting for Stock-Based
Compensation". As a result, during the first quarter of fiscal 2003 the Company
incurred a charge against continuing operations of $42,000 related to the
issuance of 24,200 fully vested stock options to directors, officers and
specific employees of the Company.
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NOTE 5 - SUBSEQUENT EVENTS
Perma-Pak
- ---------
During October 2002 the Company sold the remaining Perma-Pak inventory and
equipment for $240,000. The Company received $175,000 in cash at the closing in
addition to a promissory note for $65,000, payable in installments of $20,000 on
or before October 25, 2002, $30,000 on or before April 4, 2003 and $15,000 on or
before July 4, 2003. Any amounts not paid when due shall thereafter bear
interest at the rate of 18% per annum or the highest rate permitted under
applicable law. As security for the payment of the promissory note, the buyer
granted the Company a security interest in and right of offset against the
Perma-Pak inventory and equipment sold and any and all accessions to,
replacements of and proceeds from the assets sold.
MetroPCS Investment
- -------------------
On November 7, 2002, the Company made an additional investment of $522,200 in
MetroPCS, Inc., as part of its total $3 million commitment. After this payment
the Company is committed to make an additional investment of $554,000. The
Company anticipates this investment will be made in the third quarter of fiscal
2003
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, 2002 filed on September 20, 2002, 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 quarters ending September 30,
2002 and 2001 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 unless otherwise stated.
OVERVIEW
As of September 30, 2002, 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
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telecommunications company, MetroPCS, Inc. Prior to the sale of its other
business segments, SonomaWest operated in three business segments: industrial
dried fruit ingredients, organic packaged goods and real estate. The Company
commenced a strategic reorientation upon the announcement of the proposed sale
of its apple-based industrial ingredients product line in June 1999. In August
1999 the decision was made to sell or discontinue all product lines in the
Company's industrial dried fruit ingredients business. In January 2000, the
Company decided to sell or discontinue its organic packaged goods business. As a
result of these decisions, both of these business segments are considered
discontinued operations and their operating results, results of cash flows and
net assets are reflected outside of the Company's continuing operations.
During fiscal 2001, the Company committed to a $3 million minority investment in
a telecommunications company. As of September 30, 2002, the Company had invested
$1,924,000 of its $3.0 million commitment. Subsequent to the quarter ended
September 30, 2002 an additional $522,200 was funded on November 7, 2002.
DISCONTINUED OPERATIONS
For the three months ended September 30, 2002, the Company recorded an after-tax
gain from discontinued operations of $43,000. The after-tax gain for the
three-months ended September 30, 2002 was primarily a result of the reversal of
the reserve of $74,000 for the sublease of the Company's former corporate
headquarters. This reversal was a result of the acceptance of the option by the
sublessee to extend the sublease through the original term of the lease. This
compares to an after-tax gain of $38,000 for the three months ended September
30, 2001.
RESULTS OF CONTINUING OPERATIONS
The Company's continuing line of business is its real estate management, rental
operations and an investment in MetroPCS, Inc.
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 leasable area under roof of 390,000 square
feet. As of September 30, 2002 and 2001, the Company had a total of 28 tenants.
The tenants had varying original lease terms ranging from month-to-month to six
years with options to extend the leases. As of September 30, 2002, the tenants
occupied approximately 233,000 square feet under roof or 60% of the leasable
area under roof. This compares to 229,000 square feet under roof or 59% as of
September 30, 2001. In addition to the area under roof, the Company leased
87,000 and 83,000 square feet of outside area as of September 30, 2002 and 2001,
respectively.
RENTAL REVENUE. For the three months ended September 30, 2002 rental revenue
increased $28,000 or 8% as compared to the corresponding period in the prior
year. Although the number of tenants as of September 30, 2002 and 2001 are the
same, the increase in rental revenue is attributable to increased occupancy
throughout the first three months of the 2003 fiscal year as compared to the
first three months of the 2002 fiscal year.
OPERATING COSTS. Operating costs consist of direct costs related to continuing
operations and all general corporate costs. Only direct selling, general and
administrative costs related to the discontinued packaged goods businesses were
charged to discontinued operations in the consolidated statements of operations.
For the three months ended September 30, 2002 operating costs decreased $350,000
or 43% compared to the three months ended September 30, 2001. The decrease from
fiscal 2001 was primarily due to separation costs of $362,500 related to the
termination of the Company's CEO, which were expensed during the three months
ended September 30, 2001. The Company's total
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operating costs exceeded the tenant rental revenue for the three months ended
September 30, 2002 and 2001. Cost reduction efforts to minimize all unnecessary
spending have been undertaken. 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.
INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other income (expense)
consists primarily of interest income on the Company's cash balances and
interest expense on mortgage debt and the decrease in the value of its interest
rate swap contract. For the three months ending September 30, 2002, the Company
generated $15,000 of interest income, incurred $45,000 of interest expense
(which includes a negative swap contract adjustment of $9,000) and a loss on the
abandonment of fixed assets of $7,000 compared to $36,000 of interest income,
$97,000 of interest expense (which includes a negative swap contract adjustment
of $60,000) for the corresponding period in the prior year. The decrease in
interest income is due to a reduced cash balance in fiscal 2003 and the decline
in interest rates. The decrease in interest expense of $52,000 is a result of
the large decrease in the swap contract valuation as of September 30, 2001.
INCOME TAXES. The effective tax rate for the three months ended September 30,
2002 decreased to 19% from 26% as of September 30, 2001. The primary reason for
the lower effective rate as of September 30, 2002, was the impact of permanent
differences (primarily the $42,000 stock compensation charge) on a small amount
of taxable loss. Due to the uncertainty of future realization, a valuation
allowance is recorded against state net operating losses. As of June 30, 2002
the Company has carried back all of its federal losses to offset prior years
taxable income. Any federal losses incurred subsequent to the June 30, 2002 will
be carried forward to offset future taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Company had unrestricted cash of $2.2 million at September 30, 2002, and
current maturities of long-term debt of $63,000. The Company's cash balance
decreased $613,000 during the three months ended September 30, 2002, primarily
as a result of the investment of $522,200 in Metro PCS, Inc. and capital
expenditures of $32,000.
During December 2000, the Company entered into an agreement with its sole lender
to modify the terms of its lending agreement. As a result, the financial based
debt covenant was amended. The new covenant required the Company, at the end of
each fiscal year, to maintain a debt service coverage ratio at least 1.15 to 1.
Until such time as this ratio reaches 1.25 to 1, the Company was required to
maintain restricted, unencumbered cash or marketable securities of at least
$600,000. Furthermore, the terms of the loan restrict the Company from incurring
any additional indebtedness during the term of the loan. As of August 15, 2001,
the Company and the bank agreed to a Restated and Amended Addendum ("Addendum")
to this agreement. This Addendum amended and restated the provisions of the
agreement stated above. The new Addendum requires that the Company, at the end
of each fiscal year, maintain a debt service coverage ratio of at least 1.05 to
1. It still requires that until such time as this ratio reaches 1.25 to 1, the
Company is required to maintain restricted, unencumbered cash or marketable
securities of at least $600,000. In addition to the lien on the Real Property
(South Property only) it grants the bank a lien on a money market account, in
the amount of $90,000. Management is confident that in the future it can remain
in compliance with this new debt service coverage ratio. The $90,000 Money
Market account balance is part of, not an addition to, the restricted
unencumbered cash balance of $600,000. As of June 30, 2002, the Company's debt
service ratio was 1.18 to 1. Consequently, $600,000 is classified as restricted
cash on the accompanying balance sheet. As of September 30, 2002, the Company's
debt service coverage ratio was 1.56 to 1.
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The Company has committed itself to a $3 million minority investment in the
Series D preferred stock of a privately held telecommunications company,
MetroPCS, Inc. As of September 30, 2002, the Company had invested $1,924,000 of
its $3 million commitment. The Company has accounted for the investment using
the cost method. It is expected that the remaining $1,076,000 will be funded in
several installments throughout the fiscal year ending June 30, 2003. Subsequent
to the quarter ended September 30, 2002 an additional $522,200 was funded on
November 7, 2002.
On July 17, 2001 the Company entered into a separation agreement in principle,
which was thereafter executed, with its President and Chief Executive Officer,
Mr. Gary L. Hess ("Mr. Hess") replacing Mr. Hess' existing employment agreement.
Pursuant to the separation agreement, Mr. Hess continued as President and Chief
Executive Officer, first on a full-time basis and then on a part-time basis,
through October 31, 2001. Effective September 2001, the Company began paying
separation payments to Mr. Hess in the amount of $12,500 monthly for 29 months,
replacing all payment obligations under his prior employment agreement. The
Company's obligation under this agreement of $362,500 was recorded in operating
expenses in the first quarter of fiscal 2002. As of September 30, 2002, the
remaining obligation under this agreement is $200,000. Mr. Hess has been
designated as the Company's exclusive sales representative in its efforts to
sell any and all remaining Perma-Pak finished goods inventory and other
Perma-Pak property (inventory and property related to discontinued operations)
and will receive commissions as such sales occur. As part of the separation
agreement, Mr. Hess was given until January 29, 2002 to decide whether to extend
the period in which he was eligible to exercise the stock options previously
granted to him. On January 28, 2002, Mr. Hess elected to exercise his option to
purchase 80,000 shares of his total outstanding options of 89,474 shares. Mr.
Hess elected to extend the termination date on his option to purchase the
remaining 9,474 shares, through the last date of the severance period (January
31, 2004). As part of the separation agreement the Company agreed to loan Mr.
Hess up to $447,370 to allow Mr. Hess to exercise the aforementioned options.
Mr. Hess elected to borrow $400,000 to exercise 80,000 stock options at $5 per
share. The note dated January 28, 2002 in the amount of $400,000, bears interest
at the Applicable Federal Rate (AFR) for loans of three years or less on the
date of the note (the AFR at January 28, 2002 was 2.73%), payable quarterly. The
Note is payable in full on August 1, 2004. The Note is full recourse and
specifically secured by the stock certificates and evidenced in the form of a
loan and security agreement. As a result of the extension of the option to
purchase the remaining 9,474 shares, the Company incurred a non-cash stock
compensation charge in the third quarter ended March 31, 2002 of $22,501.
On September 4, 2001, the Company authorized the waiver of the provision of Mr.
Craig R. Stapleton's (a shareholder and former director) stock options,
providing for the termination of the options 90 days following termination of
service to the Company. Consequently, the period in which Mr. Stapleton is
entitled to exercise his option to purchase 10,000 shares was extended, and a
one-time non-cash compensation charge of $18,000 was recorded in September 2001.
Effective July 1, 2002, the Company has elected to account for all prospective
stock options in accordance with SFAS 123, "Accounting for Stock-Based
Compensation". As a result, during the first quarter of fiscal 2003 the Company
incurred a charge against continuing operations of $42,000 related to the
issuance of 24,200 fully vested stock options to the directors, officers and
specific employees of the Company.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, 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 and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Company's Chairman of the Board and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material
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information relating to the Company that is required to be included in the
Company's periodic filings with the Securities and Exchange Commission. There
have been no significant changes in the Company's internal controls or, to the
Company's knowledge, in other factors that could significantly affect those
internal controls subsequent to the date the Company carried out its evaluation,
and there have been no corrective actions with respect to significant
deficiencies and material weaknesses.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION
None
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
10.9(3) Consulting Agreement dated July 1, 2002 between
SonomaWest Holdings, Inc. and Thomas R. Eakin, d.b.a.
Eakin Consulting.
99.1 Certification Pursuant to Section 906 of Sarbanes-Oxley
Act of 2002
99.2 Certification Pursuant to Section 906 of 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.
(3) Incorporated by reference to the registrant's Annual Report
on Form 10-K for the fiscal year ended June 30, 2002.
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b. Reports on Form 8-K
The Company filed three reports on Form 8-K during the quarter ended
September 30, 2002. The first report filed on July 10, 2002 was filed
for the purpose of disclosing under Item 4 thereof the dismissal of
Arthur Andersen LLP and engagement of Grant Thornton LLP as the
Company's independent auditors. The second report filed on September
6, 2002 was filed for the purpose of disclosing under Item 5 thereof
the engagement of Continental Stock Transfer & Trust Company as the
Company's transfer agent. The third report filed on September 24, 2002
was filed for the purpose of filing under Item 9 thereof officer
certifications for the Company's Annual Report for the fiscal year
ended June 30, 2002 pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
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: November 14, 2002
/s/ Thomas R. Eakin
- ---------------------------
Thomas R. Eakin, Chief Financial Officer
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CERTIFICATIONS
- --------------
I, Roger S. Mertz, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SonomaWest
Holdings, Inc.;
2. Based on my knowledge, this quarterly 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
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Roger S. Mertz
----------------------------------
Roger S. Mertz
Chairman of the Board of Directors
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CERTIFICATIONS
- --------------
I, Thomas R. Eakin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SonomaWest
Holdings, Inc.;
2. Based on my knowledge, this quarterly 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
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Thomas R. Eakin
----------------------------------
Thomas R. Eakin
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DOCUMENT DESCRIPTION
- ----------- --------------------
3.1(1) Articles of Incorporation, as amended to date
3.2(2) Bylaws, as amended to date
10.9(3) Consulting Agreement dated July 1, 2002 between
SonomaWest Holdings, Inc. and Thomas R. Eakin, d.b.a.
Eakin Consulting.
99.1 Certification Pursuant to Section 906 of Sarbanes-Oxley
Act of 2002
99.2 Certification Pursuant to Section 906 of 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.
(3) Incorporated by reference to the registrant's Annual Report
on Form 10-K for the fiscal year ended June 30, 2002.
-16-