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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 October 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
December 6, 2002 was 241,786.
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
Item 4. Controls and Procedures 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Certifications 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SUTTER HOLDING COMPANY, INC.
BALANCE SHEETS
As of October 31, 2002
(Unaudited)
For the period ended
October 31, 2002 January 31, 2002
ASSETS
Current Assets
Cash and Equivalents 28,276 1,164,000
Accounts Receivable 587,086 10,000
Other Current Assets 115,006 4,000
Fixed Assets 1,412 0
------------------- -------------------
Total Checking/Savings 731,780 1,178,000
Long Term Assets
Assets held for Investment 1,716,901 0
------------------- -------------------
TOTAL ASSETS 2,448,682 1,178,000
=================== ===================
LIABILITIES & EQUITY
Liabilities
Accounts Payable and Accrued Expenses 45,610 66,000
Long Term Liabilities 1,008,376 746,000
------------------- -------------------
Total Liabilities 1,053,986 812,000
Equity
Common Stock Issued (24) (256,000)
Accumulated Deficit (1,457,530) (9,574,000)
Additional Paid in Capital 2,852,226 10,196,000
------------------- -------------------
Total Equity 1,394,672 366,000
TOTAL LIABILITIES & EQUITY 2,448,658 1,178,000
=================== ===================
The accompanying notes to the financial statements are an integral part of these statements.
2
SUTTER HOLDING COMPANY, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Profit & Loss
For the Three Months August through October 2002
For the 3 Months For the 9 Months
Ended October 31, Ended October 31,
2002 2001 2002 2001
Revenue
Dividend/interest Income $ 198 $ - $ 578 $ 24,000
Other Income 9,164 0 38,489 0
--------------- ---------------- --------------- ----------------
Total Revenue 9,362 0 39,066 24,000
Expense
General & Administrative 31,012 108,000 170,928 185,000
Depreciation/Amortization 4,728 0 5,061 0
Interest Expense 18,209 0 29,426 0
Professional Fees 25,202 211,000 74,084 244,000
--------------- ---------------- --------------- ----------------
Total Expense 79,152 319,000 279,498 429,000
--------------- ---------------- --------------- ----------------
Net Ordinary Income (69,789) (319,000) (240,432) (405,000)
Other Income (Loss)
Income (Loss) from
Discontinued Operations 0 (2,101,000) 0 (4,580,000)
Gain (Loss) on Sale of
Assets (23,232) 0 (23,232) 0
=============== ================ =============== ================
Net Income Loss $ (93,021) $ (2,420,000) $ (263,663) $ (4,985,000)
The accompanying notes to the financial statements are an integral part of these statements.
3
SUTTER HOLDING COMPANY, INC.
STATEMENT OF CASH FLOWS
For the Nine Months Ended October 31, 2002
(Unaudited)
For the Nine Months Ended October 31,
2002 2001
OPERATING ACTIVITIES
Net Income (263,663) (405,000)
Adjustments to reconcile Net Income
to net cash provided by operations:
Account Receivable (587,086) 3,035,000
Accounts Payable and Accrued Expenses (130,684) 163,000
Net Cash Used in Discontinued Operations 0 (3,322,000)
-------------- -------------
Net cash provided by Operating Activities (981,433) (529,000)
INVESTING ACTIVITIES
Assets Acquired for Investment (1,716,901) 0
Loan Origination Fee (103,021) 0
Fixed Assets (1,994) 0
Depreciation 581 0
-------------- -------------
Net cash provided by Investing Activities (1,821,334) 0
FINANCING ACTIVITIES
Increase in Notes Payable 1,008,376 0
Common Stock Issued 898,002 32,000
Additional Paid in Capital (110,000) 0
-------------- -------------
Net cash provided by Financing Activities 1,796,378 32,000
-------------- -------------
Net cash increase for period (1,006,390) (497,000)
Cash at beginning of period 1,034,667 1,894,000
-------------- -------------
Cash at end of period 28,277 1,397,000
============== =============
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 October 31, 2002,
the results of its operations for the quarter and nine months ended October 31,
2002, and its cash flows for the nine months ended October 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.
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. The Company's current plan is to acquire
operating businesses and other assets in exchange for cash, debt or shares of
our common stock or a combination thereof.
The Third Quarter ended October 31, 2002 compared to the Third Quarter ended
October 31, 2001
Revenues
Revenues were $9,362 for the quarter ended October 31, 2002 compared zero for
the quarter ended October 31, 2001. 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 $79,152 for the quarter ended October 31, 2002 compared
to $319,000 for the quarter ended October 31, 2001, which resulted in a decrease
of 75%. This decrease is largely the result of the discontinuation of the
Company's previous business operations. Loss from discontinued operations was
zero for the quarter ended October 31, 2002, compared to $2,101,000 for the
quarter ended October 31, 2001. Net loss on disposition of assets was $23,232
for the quarter ended October 31, 2002 compared to zero for the quarter ended
October 31, 2001.
No additional meaningful comparisons can be made for the quarter ended October
31, 2002 as compared to the quarter ended October 31, 2001.
As a result of the above, the company reported a net loss of $93,021for the
quarter ended October 31, 2002 compared to a net loss of $2,420,000 for the
quarter ended October 31, 2001, a reduction of 96%.
5
Earnings Per Share
The company lost $0.39 per basic and diluted share for the quarter ended October
31, 2002 compared to a loss of $21.56 per basic and diluted share for the
quarter ended October 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 238,264
for the quarter ended October 31, 2002 compared to 112,250 for the quarter ended
October 31, 2001. The Company implemented a 1:20 reverse stock split on June 13,
2002. There were actually 2,245,000 shares outstanding at October 31, 2001.
The nine months ended October 31, 2002 compared to the nine months ended October
31, 2001.
Revenues
Revenues were $39,066 for the nine months ended October 31, 2002 compared to
$24,000 for the nine months ended October 31, 2001, an increase of 63%. 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 $279,498 for the nine months ended October 31, 2002
compared to $429,000 for the nine months ended October 31, 2001, a reduction of
35%. 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 nine months ended
October 31, 2002, compared to a loss from discontinued operations of $4,580,000
for the nine months ended October 31, 2001. Net loss on disposition of assets
was $23,232 for the nine months ended October 31, 2002 compared to zero for the
nine months ended October 31, 2001.
No additional meaningful comparisons can be made for the nine months ended
October 31, 2002 as compared to the nine months ended October 31, 2001.
As a result of the above, the company reported a net loss of $263,663for the
nine months ended October 31, 2002 compared to a net loss of $4,985,000 for the
nine months ended October 31, 2001, a reduction of 95%.
Earnings Per Share
The company lost $1.51 per basic and diluted share for the nine months ended
October 31, 2002 compared to a loss of $44.41 per basic and diluted share for
the nine months ended October 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 174,643
for the nine months ended October 31, 2002 compared to 112,250 for the nine
months ended October 31, 2001. The Company implemented a 1:20 reverse stock
split on June 13, 2002. There were actually 2,245,000 shares outstanding at
October 31, 2001.
Liquidity and Capital Resources
As of October 31, 2002, the company had cash and cash equivalents equal to
$28,277.
During the nine months ended October 31, 2002, net cash used in operating
activities was $981,433 compared to net cash used in operating and discontinued
activities of $529,000 for the nine months ended October 31, 2001. The primary
reason for the increase in cash used in operating activities was the increase in
accounts payable discussed below, as well as expenses related to the
discontinuation of the company's former business operations and moving the
company's headquarters.
During the nine months ended October 31, 2002, net cash used in investing
activities was $1,821,334 compared to zero used during the nine months ended
October 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.
6
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.
On September 20, 2002, the Company sold its interests in various oil and gas
partnerships for net proceeds of $586,381, resulting in a loss on sale, net of
dividends which had been treated as a return of capital, of $115,680. The sales
proceeds were received on December 6, 2002, and are recorded as Accounts
Receivable as of October 31, 2002. The Company sold the oil and gas partnership
interests to raise cash for the potential acquisition of an operating company.
On October 7, 2002, the Company sold its former subsidiary, SSI Securities, for
$1.00. SSI Securities had a net worth of ($250,665), and the sale of SSI
Securities resulted in a gain on sale of $250,666.
During the nine months ended October 31, 2002, net cash provided by financing
activities was $1,796,378 compared to $32,000 provided by financing activities
during the nine months ended October 31, 2001. The increase in cash provided by
financing activities was due to increases in notes payable of $1,008,376 and
common stock issued for $898,002, partially offset by a decrease in
paid-in-capital of $110,000.
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 other
default under the note by 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.
Transactions with Affiliates
Assets acquired for investment during the nine months ended October 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
The Company is not currently exposed to any significant market risk. It is not
anticipated that the Company will be exposed to significant market risk until
the Company successfully acquires an operating business, if ever.
Item 4. Controls and Procedures
Within the past 90 days the Company's Chief Executive officer and Chief
Financial Officer carried out an evaluation of the effectiveness of the
Company's disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have each concluded that
those controls and procedures were effective in making known to them, on a
timely basis, the material information needed for the preparation of this Report
on Form 10-Q. There were no significant changes in the Company's internal
controls or in other factors that could significantly affect those internal
controls since the date of their evaluation nor did the Company find any
significant deficiencies and material weaknesses that would have required
corrective actions to be taken with respect to those controls.
7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 99.1 Certification of Chief Executive Officer
Exhibit 99.2 Certification of 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: December 13, 2002 By: /s/ ROBERT E. DIXON
Robert E. Dixon
Co-Chairman of the Board and
Chief Executive Officer
Date: December 13, 2002 By: /s/ WILLIAM G. KNUFF, III
William G. Knuff, III
Co-Chairman of the Board and
Chief Executive Officer
8
CERTIFICATIONS
I, Robert E. Dixon, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SUTTER
HOLDING COMPANY, 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: December 13, 2002 By: /s/ ROBERT E. DIXON
Robert E. Dixon
Co-Chairman of the Board and
Chief Executive Officer
9
I, William G. Knuff, III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SUTTER
HOLDING COMPANY, 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: December 13, 2002 By: /s/ WILLIAM G. KNUFF, III
William G. Knuff, III
Co-Chairman of the Board and
Chief Financial Officer
10