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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 July 31, 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: 001-15733
SUTTER HOLDING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2651232
(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
150 Post Street, Suite 405
(Address of principal executive offices including zip code)
(415) 788-1441
(Registrant's telephone number including area code)
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 [ ].
The number of shares of common stock, $.0001 par value, outstanding as of
September 13, 2002 was 234,742.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 2
Balance Sheets 2
Statements of Operations 3
Statements of Cash Flows 4
Notes to the Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures about Market Risk 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SUTTER HOLDING COMPANY, INC.
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
As of July 31, 2002
ASSETS:
Current Assets
Cash and Cash Equivalents 50,413
Account Receivable 6,160
Other Current Assets 5,205
Fixed Assets 1,661
-------------------------
Total Current Assets 63,439
Long Term Assets
Assets Held for Investment 1,805,478
-------------------------
TOTAL ASSETS 1,868,917
=========================
LIABILITIES
Liabilities
Accounts Payable and Accrued Expenses 277,581
Long Term Liabilities 462,023
-------------------------
TOTAL LIABILITIES 739,604
EQUITY
Preferred stock ($0.0001 par value; 1,000,000
authorized; No shares issued and outstanding
Common Stock ($0.0001 par value; 15,000,000 21
shares authorized; 224,742 issued and outstanding)
Accumulated Deficit (10,082,540)
Additional Paid in Capital 11,211,832
-------------------------
TOTAL EQUITY 1,129,313
-------------------------
TOTAL LIABILITIES & EQUITY 1,868,917
=========================
The accompanying notes to the financial statements are an integral part of these statements.
2
SUTTER HOLDING COMPANY, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
For the 3 months ended July 31, For the 6 months ended July 31,
-----------------------------------------------------------------------------
2002 2001 2002 2001
--------------- --------------- ---------------- ---------------
Revenue
Dividend/Interest Income $ 104 $ 1,000 $ 418 $ 24,000
Other Income 18,986 0 29,286 0
--------------- --------------- ---------------- ---------------
Total Revenue 19,090 1,000 29,704 24,000
Expenses
General and Administrative 21,399 14,000 139,532 79,000
Depreciation Expense 249 0 332 0
Interest Expense 11,216 0 11,216 0
Professional Fees 21,603 5,000 49,267 31,000
--------------- --------------- ---------------- ---------------
Total Expense 54,467 19,000 200,347 110,000
--------------- --------------- ---------------- ---------------
Income (Loss) from Continuing Operations (35,377) (18,000) (170,643) (86,000)
--------------- --------------- ---------------- ---------------
Income (Loss) from Discontinued Operations 0 (958,000) 0 (2,478,000)
--------------- --------------- ---------------- ---------------
Net Loss for the period ended July 31, 2002 $ (35,377) $ (976,000) $ (170,643) $ (2,564,000)
=============== =============== ================ ===============
The accompanying notes to the financial statements are an integral part of these statements.
3
SUTTER HOLDING COMPANY, INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS
For the Six Months Ended July 31, 2002
(Unaudited)
OPERATING ACTIVITIES
Net Income (170,643)
Adjustments to reconcile Net Income
to net cash provided by operations:
Dividend/Interest Income 570
Account Receivable 4,322
Prepaid Expenses (898)
Accounts Payable and Accrued Expenses (251,768)
----------------------
Net cash provided by Operating Activities (418,416)
INVESTING ACTIVITIES
Current Assets Acquired (1,805,478)
Fixed Assets (1,993)
Depreciation 332
----------------------
Net cash provided by Investing Activities (1,807,138)
FINANCING ACTIVITIES
Increase in Notes Payable 396,454
Common Stock Issued 715,910
----------------------
Net cash provided by Financing Activities 1,112,364
Net cash increase for period (1,113,190)
Cash at Beginning of Period 1,163,604
----------------------
Cash at end of period 50,414
======================
The accompanying notes to the financial statements are an integral part
of these statements.
4
SUTTER HOLDING COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. Significant Accounting Policies
The interim financial statements have been prepared by Sutter Holding
Company, Inc. ("the Company") pursuant to the rules and regulations of the
Securities and Exchange Commission applicable to quarterly reports on Form
10-Q. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. These financial statements
should be read in conjunction with the audited financial statements and related
notes and schedules included in the Company's 2001 Annual Report filed on Form
10-K dated January 31, 2002.
The unaudited financial statements reflect, in the opinion of management,
all adjustments, all of which are of a normal recurring nature, necessary to
present fairly the financial position of the Company as of July 31, 2002, the
results of its operations for the quarter and six months ended July 31, 2002,
and its cash flows for the six months ended July 31, 2002. Interim results are
not necessarily indicative of results to be expected for a full fiscal year.
2. Forward Looking Statements
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements and information relating to Sutter Holding Company, Inc., formerly
known as Shochet Holdings, Inc. ("we", "us" or the "Company") that are based on
the beliefs of its management as well as assumptions made by and information
currently available to its management. When used in this Quarterly Report, the
words "anticipate," "believe", estimate", expect", "intend", "plan" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. These statements reflect management's
current view about our proposed business operations are subject to certain
risks, uncertainties and assumptions, including among others: (i) a general
economic downturn; (ii) a general lack of interest in engaging in a transaction
with a public registered company, (iii) federal or state securities laws or
regulations that have an adverse effect on trading in "penny stocks" and other
risks and uncertainties. Should any of these risks of uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described in this Quarterly Report as
anticipated, estimated or expected.
3. Subsequent Events
On September 3, 2002, the Company borrowed $600,000 from a private lender. The
terms of the loan include monthly payments of interest only at an 8% annualized
rate, with the full face amount of the loan due in four years. The loan is
convertible into common stock of the Company, with certain restrictions, at
$15.00 per share. The conversion price may be adjusted in certain
circumstances, including the issuance of more than $3 million of the Company's
common stock at a price less than $15.00 per share, or in the event of a
bankruptcy or insolvency of the Company. Any conversion is limited such that at
no time may the lender convert any amount of the loan if such conversion would
result in the ownership by the lender of more than 4.9% of the outstanding
shares of the Company. The lender also received 10,000 shares of common stock
of the Company as additional consideration for the loan.
On September 6, 2002, the Company acquired 250,000 Series B Preferred shares of
Niman Ranch, Inc. for $2.00 cash per share. The Series B Preferred shares have
a liquidation preference of $2.00 per share, and are senior to the Series A
Preferred shares and the common shares. The Series B Preferred shares also have
a warrant attached to them that essentially provides for a repricing of the
Series B Preferred shares in the event Niman Ranch issues a subsequent class of
common or preferred stock at a lower price. The Series B Preferred shares and
the Series A Preferred shares automatically convert into common stock upon the
issuance of common stock in an initial public offering at $6.00 per share or
higher.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
During August 2001, the Company discontinued substantially all of its business
operations except for the maintenance of its corporate existence and the search
for potential acquisition candidates. On March 28, 2002, the majority owner of
the Company's stock sold its 56% ownership position to Sutter Opportunity Fund
2, LLC, an affiliate of the Company's current management. The Company's current
plan is to acquire operating businesses and other assets in exchange for cash or
shares of our common stock or a combination thereof.
The Second Quarter ended July 31, 2002 compared to the Second Quarter ended July
31, 2001.
5
Revenues
Revenues were $19,090 for the quarter ended July 31, 2002 compared to $1,000 for
the quarter ended July 31, 2001, an increase of 1,809%. The increase was
attributable largely to the collection of certain receivables related to the
Company's former operations. Currently, the company is not engaged in any
revenue producing business. Pending an acquisition or some other event
consistent with the company's business plan, the company anticipates that the
majority of its near-term revenues will come from interest and dividends on cash
and securities held for investment.
Operating Expenses
Operating expenses were $54,467 for the quarter ended July 31, 2002 compared to
$19,000 for the quarter ended July 31, 2001, which resulted in an increase of
287%. This increase is largely the result of an increase in interest expense
resulting from the note payable to Sutter Opportunity Fund 2, LLC, as well as
the costs of relocating the business and its assets from Florida to California.
Loss from Discontinued Operations was zero for the quarter ended July 31, 2002,
compared to a Loss from Discontinued Operations of $958,000 for the quarter
ended July 31, 2001.
No additional meaningful comparisons can be made for the quarter ended July 31,
2002 as compared to the quarter ended July 31, 2001.
As a result of the above, the company reported a net loss of $35,377 for the
quarter ended July 31, 2002 compared to a net loss of $976,000 for the quarter
ended July 31, 2001, a decrease of 96%.
Earnings Per Share
The company lost $0.21 per basic and diluted share for the quarter ended July
31, 2002 compared to a loss of $8.60 per basic and diluted share for the quarter
ended July 31, 2001 (adjusted for the 1:20 reverse stock split effective June
13, 2002 to allow for meaningful comparison).
Weighted Average Common Shares Outstanding
The average number of common shares and common stock equivalents outstanding
used in the computation of basic and diluted losses per common share was 166,121
for the quarter ended July 31, 2002 compared to 2,245,000 for the quarter ended
July 31, 2001. The Company implemented a 1:20 reverse stock split on June 13,
2002.
The six months ended July 31, 2002 compared to the six months ended July 31,
2001
Revenues
Revenues were $29,704 for the six months ended July 31, 2002 compared to $24,000
for the six months ended July 31, 2001, an increase of 24%. The increase was
attributable to the collection of certain receivables related to the Company's
former operations. Currently, the company is not engaged in any revenue
producing business. Pending an acquisition or some other event consistent with
the company's business plan, the company anticipates that the majority of its
near-term revenues will come from interest and dividends on cash and securities
held for investment.
Operating Expenses
Operating expenses were $200,347 for the six months ended July 31, 2002 compared
to $110,000 for the six months ended July 31, 2001, which resulted in an
increase of 82%. The increase was largely attributable to operating expenses of
$145,880 incurred during the first quarter of the fiscal year as the Company's
former management wound up the Company's affairs related to its former
operations. In the near-term, operating expenses can be expected to be related,
in large part, to the costs of maintaining public company status. The Company
incurred a Loss from Discontinued Operations of zero for the six months ended
July 31, 2002, compared to a Loss from Discontinued Operations of $2,478,000 for
the six months ended July 31, 2001.
No additional meaningful comparisons can be made for the six months ended July
31, 2002 as compared to the six months ended July 31, 2001.
As a result of the above, the company reported a net loss of $170,643 for the
six months ended July 31, 2002 compared to a net loss of $2,564,000 for the six
months ended July 31, 2001, a decrease of 93%.
6
Earnings Per Share
The company lost $1.25 per basic and diluted share for the six months ended July
31, 2002 compared to a loss of $22.84 per basic and diluted share for the six
months ended July 31, 2001 (adjusted for the 1:20 reverse stock split effective
June 13, 2002 to allow for meaningful comparison.)
Weighted Average Common Shares Outstanding
The average number of common shares and common stock equivalents outstanding
used in the computation of basic and diluted losses per common share was 136,810
for the six months ended July 31, 2002 compared to 2,245,000 for the six months
ended July 31, 2001. The Company implemented a 1:20 reverse stock split on June
13, 2002.
Liquidity and Capital Resources
As of July 31, 2002, the company had cash and cash equivalents equal to $50,413.
During the six months ended July 31, 2002, net cash used in operating activities
was $418,416 compared to net cash used in operating and discontinued activities
of $4,848,000 for the six months ended July 31, 2001. The primary reason for the
decrease in cash used in operating activities was the dissolution and winding-up
of all former business activities.
During the six months ended July 31, 2002, net cash used in investing activities
was $1,807,138 compared to zero used during the six months ended July 31, 2001.
The increase in cash used in investing activities was primarily due to the
Company's current strategy to acquire assets for long term investment.
Net cash provided by financing activities during the six months ended July 31,
2002 was $1,112,364 compared to net cash provided by financing activities of
$32,000 for the six months ended July 31, 2001. Cash provided by financing
activities for the current period included an increase in Notes Payable of
$396,454, and proceeds from the sale of common stock of $715,910.
Transactions with Affiliates
Assets acquired for investment during the six months ended July 31, 2002
included interests in certain oil and gas partnerships purchased for $737,095, a
judgment against Grupo Bufete S.A. de C.V., a Mexico based real estate company,
with a face value of $390,909 purchased for $175,000, and an equity interest in
HFD Investors, LLC, a California based company with loans secured by several
motel properties, purchased for $262,500. The Grupo Bufete judgment, the HFD
equity interest, and $328,719 of the oil and gas interests were purchased for
cash from Sutter Opportunity Fund, LLC, a fund managed by Sutter Capital
Management, LLC and an affiliate of the company. The other $408,376 in oil and
gas interests acquired during the quarter were purchased from Sutter Opportunity
Fund 2, LLC, also managed by Sutter Capital Management, LLC and the majority
shareholder of the company, in exchange for a two-year note bearing interest at
10%. The note requires no cash payment for two years, and Sutter Opportunity
Fund 2, LLC has the option to convert the note to common stock of the company at
the market price of the common stock, provided, however, that unless there shall
have occurred an event of default, the conversion price of the note shall not be
less than $0.25 per share nor more than $0.50 per share. Adjusting for the
reverse stock split that was implemented June 13, 2002, the conversion price of
the note was changed to not less than $5.00 per share nor more than $10.00 per
share.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
At the end of the quarter, approximately 39% of the company's total assets were
invested in oil and gas partnership interests. The company is currently
therefore exposed to risks associated with the market prices for oil and natural
gas. However, these interests were acquired largely because of the near term
cash flow they are expected to provide the company from quarterly dividends. The
company does not anticipate that its long term future business, or any
significant part of its future assets, will be related to the oil and gas
industries.
7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
99.1 Certification by Robert E. Dixon as Chief Executive Officer.
99.2 Certification by William G. Knuff, III as Chief Financial Officer.
b. Reports on Form 8-K
On April 16, 2002, the Company filed a report on Form 8-K, which is
incorporated herein by reference, disclosing a change of control.
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.
SUTTER HOLDING COMPANY, INC.
Date: September 11, 2002 By: /s/ ROBERT E. DIXON
Robert E. Dixon
Co-Chairman of the Board and
Chief Executive Officer
Date: September 11, 2002 By: /s/ WILLIAM G. KNUFF, III
William G. Knuff, III
Co-Chairman of the Board and
Chief Executive Officer
8