<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-6683
SONOMA INTERNATIONAL
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
NEVADA 94-0880052
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3000 LEXINGTON FINANCIAL CENTER 40507
LEXINGTON, KY. (Zip Code)
(Address of principal executive offices)
</TABLE>
(606) 281-0000
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 June 30, 1997, there were 2,300,000 shares of the issuer's common stock,
par value $0.001, outstanding.
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<PAGE> 2
PART I FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 1996
and September 30, 1997 (unaudited) 2
Consolidated Statements of Operations for the three months
ended September 30, 1996 and 1997 (unaudited) and the nine months
ended September 30, 1996 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 11
</TABLE>
1
<PAGE> 3
SONOMA INTERNATIONAL AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and September 30, 1997
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 104,353 $ 18,111
Escrow funds 88,400 178,781
Receivables:
Trade (net of allowance for doubtful accounts
of $3,876 for each year) 54,492 85,297
Other 27,008 101,493
Inventory 85,668 120,924
Prepaid expenses 17,651 128,403
--------------- ---------------
Total current assets 377,572 633,009
--------------- ---------------
PROPERTY AND EQUIPMENT
Buildings and improvements 2,599,885 2,460,691
Land 3,150,000 3,150,000
Land improvements 293,831 296,395
Docks and floating buildings 8,220,250 8,225,863
Boats and improvements 2,116,453 2,081,125
Furnishings, fixtures and equipment 1,692,566 1,848,915
Computers under capital lease 193,171 194,615
Fuel tanks and containment buildings 151,132 151,132
Vehicles 22,482 22,753
Construction in progress 140,178 408,949
--------------- ---------------
18,579,948 18,840,438
Less accumulated depreciation and amortization 4,537,677 5,008,912
--------------- ---------------
Net property and equipment 14,042,271 13,831,526
--------------- ---------------
OTHER ASSETS
Deferred loan fees, net of accumulated amortization
of $77,593 and $141,855 322,858 255,094
Goodwill, net of accumulated amortization of
$184,250 and $198,069 1,006,310 992,491
Deferred offering costs 336,632 578,852
--------------- ---------------
Total other assets 1,665,800 1,826,437
--------------- ---------------
TOTAL ASSETS $ 16,085,643 $ 16,290,972
=============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 4
SONOMA INTERNATIONAL AND SUBSIDIARIES
Consolidated Balance Sheets - Continued
December 31, 1996 and September 30, 1997
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt (including $4,052,778
$4,262,587 to related parties) $ 4,395,941 $ 4,683,325
Accounts payable 453,522 554,241
Accrued interest (including $57,240 and
$243,709 to related parties) 150,733 322,225
Accrued liabilities 299,802 657,980
Security deposits 49,319 45,494
Deferred revenue 696,622 330,901
Payable to related party 53,200 --
--------------- ---------------
Total current liabilities 6,099,139 6,594,166
--------------- ---------------
LONG-TERM LIABILITIES
Long-term debt, less current maturities (including $114,830
in 1996 due to related parties) 10,263,786 9,925,252
--------------- ---------------
Total long-term liabilities 10,263,786 9,925,252
--------------- ---------------
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value, authorized, 20,000,000,
issued and outstanding shares, 2,300,000
and 1,369,025 2,300 2,300
Additional paid-in capital 1,392,346 1,392,346
Accumulated deficit (1,671,928) (1,623,092)
--------------- ---------------
Total stockholders' deficit (277,282) (228,446)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 16,085,643 $ 16,290,972
=============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 5
SONOMA INTERNATIONAL AND SUBSIDIARIES
Consolidated Statements of Operations
Three months and nine months ended September 30, 1996 and 1997
<TABLE>
<CAPTION>
Three months Nine months
ended ended
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Slip fees $ 335,943 $ 672,829 $ 929,990 $ 1,320,139
Boat rental 546,664 523,805 694,093 644,728
Lodge 373,821 182,080 619,728 630,562
Fuel 379,375 859,930 529,671 1,842,162
Convenience store and merchandise 233,139 186,552 342,757 298,741
Restaurant 217,790 248,166 341,547 365,993
Other 46,643 (2,639) 83,316 90,898
------------ ------------ ------------ ------------
Total revenues 2,133,375 2,670,723 3,541,102 5,193,223
COST OF REVENUES
Slip 45,818 43,534 102,356 116,187
Boat rental 101,062 91,433 245,247 170,453
Lodge 88,485 89,307 191,867 185,261
Fuel 256,020 586,859 356,606 1,276,922
Convenience store and merchandise 171,005 147,251 267,691 234,217
Restaurant 156,283 194,344 267,162 293,236
Other 32,681 93,475 72,449 177,928
------------ ------------ ------------ ------------
Total cost of revenues 851,354 1,246,203 1,503,378 2,454,204
GROSS PROFIT 1,282,021 1,424,520 2,037,724 2,739,019
SELLING, GENERAL AND ADMINISTRATIVE (including
related party amounts for management and
guarantee fees of $64,284 and $80,386) for
the three and nine months ended September 30, 1996
and -0- for the three and nine months ended
September 30, 1997 428,266 445,644 995,146 1,173,055
AMORTIZATION OF GOODWILL 17,192 39,804 55,774 73,299
DEPRECIATION AND AMORTIZATION 122,174 119,719 325,060 450,587
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 714,389 819,353 661,744 1,042,078
INTEREST EXPENSE (including interest to related
parties of $71,720, $91,582, $219,754 and $240,652) 268,425 342,086 736,738 993,242
------------ ------------ ------------ ------------
NET LOSS BEFORE EXTRAORDINARY ITEMS 445,964 477,267 (74,994) 48,836
EXTRAORDINARY ITEMS
Gain on extinguishment of debt,
net of income tax of $0 -- -- 2,518,487 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 445,964 $ 477,267 $ 2,443,493 $ 48,836
============ ============ ============ ============
Net income (loss) per common share before
extraordinary items $ (0.33) $ 0.21 $ (0.05) $ 0.02
------------ ------------ ------------ ------------
Net income (loss) per common share $ (0.33) $ 0.21 $ 1.78 $ 0.02
------------ ------------ ------------ ------------
Weighted average shares outstanding 1,369,025 2,300,000 1,369,025 2,300,000
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 6
SONOMA INTERNATIONAL AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,443,493 $ 48,836
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of fixed assets 325,060 450,587
Amortization of goodwill 55,774 73,299
Amortization of deferred gain on sale leaseback (75,800) --
Gain on debt extinguishment (2,518,487) --
Changes in assets and liabilities (net of acquisitions):
Decrease (increase) in escrow funds (20,224) (90,381)
Decrease (increase) in trade receivables (62,280) (30,805)
Decrease (increase) in other receivables (117,707) (74,485)
Decrease (increase) in inventory (2,871) (35,256)
Decrease (increase) in prepaid expenses 7,584 (110,752)
Increase (decrease) in accounts payable 155,539 100,719
Increase (decrease) in accrued interest 242,088 171,492
Increase (decrease) in accrued liabilities 68,505 358,178
Increase (decrease) in security deposits (3,514) (3,825)
Increase (decrease) in related party loan -- (53,200)
Increase (decrease) in deferred revenue (326,808) (365,721)
Increase (decrease) in accrued guarantee fees 15,000 --
Increase (decrease) in accrued management fees 178,055 --
--------------- ---------------
Net cash provided by operating activities 363,407 438,686
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (144,263) (260,490)
--------------- ---------------
Net cash used by investing activities (144,263) (260,490)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank and related party loans 7,897,626 455,115
Repayments of borrowings (7,169,482) (403,965)
Repayments of obligation under capital lease (616,029) --
Debt financing costs and other deferred costs (327,524) (315,588)
--------------- ---------------
Net cash provided by financing activities (215,409) (264,438)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH 3,735 (86,242)
Cash at beginning of the year 9,628 104,353
--------------- ---------------
Cash at end of the year $ 13,363 $ 18,111
=============== ===============
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest $ 454,715 $ 768,913
=============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 7
SONOMA INTERNATIONAL AND SUBSIDIARIES
(A Nevada Corporation)
Notes to the Consolidated Financial Statements
Three months and nine months ended September 30, 1996 and 1997
NOTE A -- ORGANIZATION
Sonoma Quicksilver Mines, Inc., a public company, was incorporated
under the laws of the State of Nevada on September 10, 1940. The name was
subsequently changed to Sonoma International ("Sonoma"). Sonoma had several
failed business operations and since 1988 its only activity had been to search
for a company or assets to acquire.
September 12, 1996, Sonoma entered into an agreement (the "Agreement")
with Clear Creek Investments, LLC, a Kentucky Limited Liability Company ("Clear
Creek") and owner of the general partner of Jamestown Resort & Marina, LTD
("Jamestown"), and holders of the limited partnership interests in Jamestown.
The Agreement required the transfer and assignment to Sonoma of Jamestown's
general partner and all limited partnership interests. The Agreement, effective
on December 9, 1996, incorporates the payment of the preference payments due
(Note I) through the issuance of shares of Sonoma. In addition, the Agreement
required that Sonoma effect a one for two hundred reverse split (and increase
authorized shares to 20,000,000 (post split)), leaving 300,000 shares issued and
outstanding, and issue 1,700,000 shares to Clear Creek and affiliated and
related entities or individuals for the acquisition of Jamestown. The
consolidated financial statements including all references to the number of
shares of common stock and all per share information have been adjusted to
reflect the common stock reverse split and the revised authorized number of
shares on a retroactive basis.
October 31, 1996, Key West Conch Harbor, Inc. ("Key West"), by consent
of its shareholders, entered into an agreement (the "Agreement") with Sonoma.
The Agreement required the transfer and assignment to Sonoma of all of the
common stock of Key West in exchange for 300,000 shares of common stock of
Sonoma and a demand note for $175,000. The transaction was completed effective
December 9, 1996.
For accounting purposes, as the Jamestown Limited partners and general
partner end up with the majority of Sonoma's stock, the acquisition by Sonoma of
all of the Jamestown limited partnership interests and general partnership
interest was accounted for as a recapitalization of Jamestown with Jamestown as
the acquirer (a reverse acquisition). Accordingly, the financial statements
prior to the acquisition of Sonoma and Key West included herein are those of
Jamestown. The transaction with Key West was accounted for using the purchase
method. The results of operations of Key West and Sonoma have been included in
the consolidated statements of operations from the acquisition dates.
Jamestown was formed as a limited partnership organized under the laws
of the State of Kentucky by Jamestown Resort & Marina, Inc., the general
partner, on November 1, 1987. It owns a resort and marina facility near
Jamestown, Kentucky on Lake Cumberland.
Key West was incorporated in the State of Florida on December 23, 1993
for the purposes of acquiring, developing, and operating a marina facility in
Key West, Florida.
NOTE B -- INTERIM INFORMATION
The consolidated interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principals ("GAAP") have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements and
notes should be read in conjunction with the consolidated financial statements
and the related notes for the year ended December 31, 1996, filed with the SEC
in 1997.
In the opinion of management, the unaudited interim consolidated financial
statements of the Company contain all adjustments, consisting only of those of
a normal recurring nature, necessary to present fairly the Company's financial
position and the results of its operations and cash flows for the periods
presented. The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions. Such estimates and
assumptions affect the reported amounts of assets and liabilities, as well as
the disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
6
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is a discussion of the consolidated financial condition
and results of operations of the Company for the three months and nine months
ended September 30, 1996 and 1997. This discussion should be read in conjunction
with the consolidated financial statements of the Company. In addition, this
discussion contains forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions, including, but not limited to, the
risk factors described in Amendment No. 3 to its Form SB-2. Should one or more
of these risks or uncertainties materialize, or should the underlying
assumptions prove to be incorrect, actual results may vary materially from those
described herein.
Overview
Although the Company was formed in 1940, it has not had material
operations since 1988. Between 1988 and 1994 the Company's directors
restructured the Company with the purpose of making the Company attractive to
potential merger or acquisition candidates. In 1994 the Company began in earnest
to search for acquisition or merger candidates which would restore Sonoma to an
operating entity and in September 1996 entered into an agreement with the
general partner of Jamestown Resort & Marina, Ltd. to acquire all the capital
stock of Jamestown Resort & Marina, Inc. and a similar agreement with the
limited partners to acquire all of the limited partnership units in return for
Common Stock. The Company also entered into a similar agreement with
stockholders of Key West Conch Harbor, Inc. in October 1996 to acquire all of
the outstanding common stock of Key West in return for Common Stock. Both the
Jamestown and Key West acquisition transactions were closed on December 9, 1996.
For accounting purposes, as the Jamestown Limited Partners and its
General Partner end up with the majority of Sonoma's stock, the acquisition by
Sonoma of all of the limited partnership interests and general partnership
interest was accounted for as a recapitalization of Jamestown with Jamestown as
the acquirer (a reverse acquisition). Accordingly, the financial statements
prior to the acquisition of Sonoma and Key West included herein are those of
Jamestown. The transaction with Key West was accounted for using the purchase
method. The results of operations of Key West and Sonoma have been included in
the consolidated statements of operations from the acquisition dates.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE THREE MONTHS
ENDED SEPTEMBER 30, 1997
Revenues
Revenues for the three months ended September 30, 1997 increased
$537,348 or 25% from the same period in 1996. On December 9, 1996, Sonoma
acquired Key West and accordingly revenues for the three months ended September
30, 1996 do not include Key West operations which total $526,037 in 1997. If Key
West revenue is excluded, Jamestown revenues increased for the three months
ended September 30, 1997 over 1996 by $11,311.
7
<PAGE> 9
Cost of Revenues
During the three months ended September 30, 1997, cost of revenues
increased $44,634 (excluding the Key West costs of revenues of $350,215).
Excluding the effect of Key West, the increase in cost of revenues was 5%. The
primary reason for the increase in 1996 cost of revenues was higher fuel and
restaurant costs. Cost of revenues as a percentage of revenues increased from
39% for the three months ended September 30, 1996 to 46% compared to the same
period in 1997. The increase is primarily the result of higher fuel costs
related to revenues at the Key West facility.
Selling, General and Administrative
Selling, general and administrative expenses increased $17,378 or 4%
over 1996 to $445,644. Included in this increase is $58,648 attributed to Key
West operations for three months ended September 30, 1997. The remaining
increase was attributed to costs at the corporate level which was offset by
decreases in other administrative costs at Jamestown.
Interest Expense
Interest expense increased from $268,425 for the three months ended
September 30, 1996 to $342,086 for the three months ended September 30, 1997.
The increase of $73,661 was due to an increase of $80,456 related to debt
assumed as a result of the Key West acquisition.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses increased $20,157 or 14% to
$159,523 for the comparable three months from 1996 to 1997. Included in this
increase are Key West depreciation and amortization expenses of $42,527. The
increase was partially offset by a decrease in depreciation of fixed assets
of Jamestown which are fully depreciated.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE
NINE MONTHS ENDED SEPTEMBER 30, 1997
Revenues
Revenues for the nine months ended September 30, 1997 increased
$1,652,121 or 47% from the same period in 1996. On December 9, 1996, Sonoma
acquired Key West and accordingly revenues for the nine months ended September
30, 1996 do not include Key West operations which total $1,641,491 in 1997. If
Key West revenue is excluded, Jamestown revenues remained consistent for the
nine months ended September 30, 1997 compared to the same period in 1996.
Slip rental fee rates increased by 7% for the 1997 calendar year at
Jamestown. Additional revenues are expected in 1997 due to a change in
management's marketing strategy by focusing on attracting tour groups and
conventions during the off boating season. The largest impact of this marketing
focus will be to increase lodging rentals.
Cost of Revenues
During the nine months ended September 30, 1997, cost of revenues
decreased $4,499 (excluding the Key West costs of revenues of $955,325). Cost
of revenues as a percentage of revenues increased from 42% for the nine months
ended September 30, 1996 to 47% compared to the same period in 1997. The
increase is primarily as a result of higher fuel costs related to revenues at
the Key West facility.
8
<PAGE> 10
Selling, General and Administrative
Selling, general and administrative expenses increased $177,909 or
18% over 1996 to $1,173,055. Included in this increase are $235,141 attributed
to Key West operations for nine months ended September 30, 1997.
Interest Expense
Interest expense increased from $736,738 for the nine months ended
September 30, 1996 to $993,242 for the nine months ended September 30, 1997.
The increase of $256,594 was due to an increase of $243,718 related to debt
assumed as a result of the Key West acquisition. Interest expense is expected
to decrease to approximately $915,000 (on an annual basis) in 1997 after paying
off approximately $5,168,000 of debt with the proceeds from the Offering.
Gain on Reduction of Obligations
In January 1996 the Company refinanced its primary debt resulting in
an extraordinary gain of $2,518,486 (net of income taxes of zero).
Depreciation and Amortization
Depreciation and amortization expenses increased $143,052 or 38% to
$523,886 for the comparable nine months from 1996 to 1997. This increase was
primarily due to an increase in the amortization of deferred costs related to
the loan refinancing in January, 1996. The increase was partially offset by a
decrease in depreciation of fixed assets which are fully depreciated.
Liquidity and Capital Resources
The Company refinanced Jamestown's primary debt in January 1996 which
resulted in a reduction of indebtedness of approximately $2,518,000. The Company
believes this reduction and related decrease in interest payments has increased
cash available for operations and debt servicing.
Negative working capital at December 31, 1996 was $5,721,567 as
compared to negative working capital at September 30, 1997 of $5,961,157.
The Company believes that the net proceeds from the Offering will provide
$14,700,000 in funds. Of these proceeds, approximately $3,885,000 and
$1,007,000 will reduce the secondary debt of Jamestown and Key West,
respectively. This will result in an increase of working capital of
approximately $14,012,000. The reduction of this debt will further decrease
interest payments and will increase cash available for operations. The
remaining funds will be used to satisfy the Company's capital expansion,
working capital requirements and future acquisitions. The Company believes that
the net proceeds from the Offering and cash provided by operating activities
will be sufficient to fund its operations through 1998. During early 1997, the
construction of additional slips and other minor dock improvements were
completed by Key West.
The Company has a mortgage note amounting to $6,135,000 at September
30, 1997 on the Jamestown property with an interest rate of 4 1/4% over the
commercial paper lending rate. The mortgage matures on February 1, 2001 and
requires monthly payments of approximately $72,000 until maturity. These
payments include $8,000 per month for deposit into a property tax and capital
improvement escrow account. The Company has a mortgage note amounting to
$3,219,000 on the Key West property with an interest rate of 9%. The mortgage
matures on April 1, 2016 and requires monthly payments of approximately $30,000
during 1997. The Company has a note payable of $1,852,777 with a related party
with an interest rate of 1 1/2% over the prime lending rate, which is due on
demand, and is expected to be paid off from the offering proceeds.
9
<PAGE> 11
The Company currently does not have a line of credit.
Cash flows provided by operating activities were $363,407 in 1996,
compared to cash flow provided by operations of $438,686 in 1997. This increase
was due to a number of factors, but was significantly affected by deferral of
payment of accrued interest and other liabilities. Cash used in investing
activities of $144,263 in 1996 and $260,490 in 1997 was primarily to purchase
property and equipment and for facility expansion. The increase in 1997 was
primarily due to expansion of the Key West facility. Cash used by financing
activities was $215,409 in 1996 and $264,438 in 1997. During the nine month
ended September 30, 1996, the Company borrowed $7,897,626 from and repaid
$7,169,482 to various entities. Repayments to affiliates during the nine month
period ended September 30, 1996 amounted to $490,000. Included in the
$7,897,626 and $7,169,482 was a refinancing amount totaling $6,300,000 related
to the Jamestown debt refinancing in January 1996. In addition, the Company
repaid $616,029 of obligations under capital leases and paid $327,524 in
refinancing costs. During 1997, the Company borrowed $455,115 from and repaid
$403,965 to various other entities. The Company also paid financing and related
fees of $315,588.
Management believes that the current facilities at Jamestown and Key
West are in excellent condition and will not require substantial capital
renovations in the near term.
The Company has identified some potential acquisition candidates but
has not entered into any negotiations, nor does it currently have plans to make
any specific acquisitions. It is the intention of management to seek viable
acquisitions and in the event a candidate is identified, the Company would,
depending on the size of the target company and other factors, consider using
the proceeds from the Offering or bank borrowings.
There can be no assurance that the Offering will be successful or that
the Company's operations will ever be profitable, nor can there be any assurance
that the Company will not require additional equity or debt financing in the
near future, and if needed, it will be available on terms satisfactory to the
Company or at all.
Seasonality
Jamestown's business is seasonal in nature with the peak boating season
falling in June, July and August. These months historically have accounted for
approximately 57.5% of the yearly revenue. The impact on liquidity and capital
resources of this seasonality is reduced by incentives offered to slip customers
to pre-pay their annual fees during the fall and winter seasons when the suites,
cabins and pontoon boats are not materially used. In addition, management
believes the seasonal nature of Jamestown will be positively impacted by the
increased marketing efforts to provide off season tours and conventions.
Key West operations are impacted slightly by seasonality since boating
activity increases during the winter months due to winter vacations. However,
the majority of the business is commercial fuel sales which is not seasonal.
10
<PAGE> 12
PART II
OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The Company filed a registration with the Commission on Form SB-2 on
January 21, 1997. The Company continues to be involved in the registration
process and filed Amendment No. 2 to its Form SB-2 on April 17, 1997. The
Company recently filed Amendment No. 3 to its Form SB-2 on May 16, 1997. Sonoma
International's Amendment No. 3 to Form SB-2 as filed on May 16, 1997 is
incorporated by reference herein.
In late July 1997 Sonoma's Chief Executive Officer and President, James L.
Frye resigned to take a new position with an unrelated third party business
entity. R. Dudley Webb, Chairman of the Board, will assume the duties of Chief
Executive Officer until such time as a successor to Mr. Frye is elected by
Sonoma's Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits
27 Financial Data Schedule filed herein
B. Form 8-K
No reports on Form 8-K were filed in the quarterly period covered by this
report.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Sonoma International
Dated: November 19, 1997 By /s/ R. DUDLEY WEBB
-----------------------------------
R. Dudley Webb,
Chief Executive Officer
Dated: November 19, 1997 By /s/ PETER SACKMANN
-----------------------------------
Peter Sackmann,
Chief Financial Officer
11
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 18,111
<SECURITIES> 0
<RECEIVABLES> 85,297
<ALLOWANCES> (3,876)
<INVENTORY> 120,924
<CURRENT-ASSETS> 633,009
<PP&E> 18,840,438
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0
0
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</TABLE>
