**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 March 31, 2005
or







o
    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)


**Delaware**
    **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 : **707-824-2534**







(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: o





Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act.




YES:
o  NO: x





As of May
12, 2005, there were 1,114,257 shares of common stock, no par value,
outstanding.













**SONOMAWEST
HOLDINGS, INC. AND SUBSIDIARY**




**TABLE
OF CONTENTS**





PART
      I. FINANCIAL INFORMATION
    PageItem
      1.  Condensed Consolidated Financial StatementsCondensed
      Consolidated Balance Sheets at March 31, 2005 and June 30,
      2004
    3Condensed
      Consolidated Statements of Operations - Three and Nine months ended March
      31, 2005 and 2004
    4Condensed
      Consolidated Statement of Changes in Shareholders’ Equity - Nine months
      ended March 31, 2005
    5Condensed
      Consolidated Statements of Cash Flows - Nine months ended March 31, 2005
      and 2004
    6Notes
      to Condensed Consolidated Financial Statements
    7Item
      2.  Management's Discussion and Analysis of Financial Condition
      and Results of Operations
    12Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
    17Item
      4.  Controls and Procedures
    17PART
      II. OTHER INFORMATIONItem
      1.  Legal Proceedings
    18Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
    18Item
      3.  Defaults Upon Senior Securities
    18Item
      4.  Submission of Matters to a Vote of Security
      Holders
    18Item
      5.  Other Information
    18Item
      6.  Exhibits
    18Signature
    19EXHIBIT
      INDEX
    20EXHIBITS
    21








-2-





**PART
I. FINANCIAL INFORMATION**





**Item
1. Condensed Consolidated Financial Statements**





**SONOMAWEST
HOLDINGS, INC. AND SUBSIDIARY**


**CONSOLIDATED
BALANCE SHEETS**


**(AMOUNTS
IN THOUSANDS)**





**ASSETS**
    
    March
      31, 2005
      (unaudited)
    
    June
      30, 2004CURRENT
      ASSETS:Cash
    
    $
    1,843
    
    $
    1,348Accounts
      receivable
    
    
    123
    
    
    131Other
      receivables
    
    
    8
    
    
    33Interest
      receivable - Related party
    
    
    --
    
    
    3Prepaid
      expenses and other assets
    
    
    38
    
    
    135Current
      deferred income taxes, net
    
    
    10
    
    
    77Total
      current assets
    
    
    2,022
    
    
    1,727RENTAL
      PROPERTY, net
    
    
    1,606
    
    
    1,698INVESTMENT,
      at cost
    
    
    3,001
    
    
    3,001DEFERRED
      INCOME TAXES
    
    
    500
    
    
    417PREPAID
      COMMISSIONS AND OTHER ASSETS
    
    
    128
    
    
    163Total
      assets
    
    $
    7,257
    
    $
    7,006**LIABILITIES
      AND SHAREHOLDERS’ EQUITY**CURRENT
      LIABILITIES:Current
      maturities of long-term debt
    
    $
    1,634
    
    $
    56Accounts
      payable
    
    
    145
    
    
    127Accrued
      payroll and related liabilities
    
    
    15
    
    
    33Accrued
      expenses
    
    
    81
    
    
    241Unearned
      rents and deposits
    
    
    365
    
    
    287Total
      current liabilities
    
    
    2,240
    
    
    744LONG-TERM
      DEBT, net of current maturities
    
    
    --
    
    
    1,620OTHER
      LONG-TERM LIABILITIES
    
    
    131
    
    
    131Total
      liabilities
    
    
    2,371
    
    
    2,495SHAREHOLDERS’
      EQUITY:Preferred
      stock: 2,500 shares authorized; no shares outstanding
    
    
    --
    
    
    --Common
      stock: 5,000 shares authorized, no par value; 1,114 and 1,114 shares
      outstanding in fiscal 2005 and 2004, respectively
    
    
    2,766
    
    
    2,756Stock
      subscription receivable - Related Party
    
    
    --
    
    
    (400
    )Retained
      earnings
    
    
    2,120
    
    
    2,155Total
      shareholders’ equity
    
    
    4,886
    
    
    4,511Total
      liabilities and shareholders’ equity
    
    $
    7,257
    
    $
    7,006




The
accompanying notes are an integral part of these consolidated
statements .





-3-








**SONOMAWEST
HOLDINGS, INC. AND SUBSIDIARY**


**CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS**


**FOR
THE NINE AND THREE MONTHS ENDED MARCH 31, 2005 AND 2004**


**(UNAUDITED)**


**(AMOUNTS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)**





Nine
      Months
      Ended
      March 31
    
    Three
      Months
      Ended
      March 312005
    
    2004
    
    2005
    
    2004RENTAL
      REVENUE --NET
    
    $
    1,371
    
    $
    1,176
    
    $
    463
    
    $
    366TENANT
      REIMBURSEMENTS
    
    
    333
    
    
    313
    
    
    79
    
    
    81TOTAL
      REVENUE
    
    $
    1,704
    
    $
    1,489
    
    $
    542
    
    $
    447OPERATING
      COSTS
    
    
    1,436
    
    
    1,288
    
    
    423
    
    
    429OPERATING
      COSTS -- RELATED PARTY EXPENSES
    
    
    298
    
    
    319
    
    
    68
    
    
    94TOTAL
      OPERATING COSTS
    
    
    1,734
    
    
    1,607
    
    
    491
    
    
    523OPERATING
      PROFIT (LOSS)
    
    
    (30
    )
    
    (118
    )
    
    51
    
    
    (76
    )INTEREST
      EXPENSE
    
    
    (65
    )
    
    (42
    )
    
    (24
    )
    
    (15
    )INTEREST
      INCOME
    
    
    24
    
    
    18
    
    
    10
    
    
    4OTHER
      INCOME (EXPENSE)
    
    
    21
    
    
    (3
    )
    
    2
    
    
    7INCOME
      (LOSS) BEFORE INCOME TAXES
    
    
    (50
    )
    
    (145
    )
    
    39
    
    
    (80
    )BENEFIT
      (PROVISION) FOR INCOME TAXES
    
    
    15
    
    
    34
    
    
    (18
    )
    
    32NET
      INCOME (LOSS)
    
    $
    (35
    )
    $
    (111
    )
    $
    21
    
    $
    (48
    )WEIGHTED
      AVERAGE COMMON SHARES AND EQUIVALENTS:Basic
    
    
    1,114
    
    
    1,107
    
    
    1,114
    
    
    1,112Diluted
    
    
    1,114
    
    
    1,107
    
    
    1,156
    
    
    1,112EARNINGS
      (LOSS) PER COMMON SHARE:Basic
    
    $
    (0.03
    )
    $
    (0.10
    )
    $
    0.02
    
    $
    (0.04
    )Diluted
    
    $
    (0.03
    )
    $
    (0.10
    )
    $
    0.02
    
    $
    (0.04
    )








The
accompanying notes are an integral part of these financial
statements.








-4-





**SONOMAWEST
HOLDINGS, INC. AND SUBSIDIARY**


**CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY**


**(UNAUDITED)**


**FOR
THE NINE MONTHS ENDED MARCH 31, 2005**


**(AMOUNTS
IN THOUSANDS)**




*Common
      Stock*
    
    *Stock*
    
    
    
    *Total**Number*
    
    
    
    *Subscription*
    
    *Retained*
    
    *Shareholders’**of
      Shares*
    
    *Amount*
    
    *Receivable*
    
    *Earnings*
    
    *Equity*BALANCE,
      JUNE 30, 2004
    
    
    1,114
    
    $
    2,756
    
    $
    (400
    )
    $
    2,155
    
    $
    4,511Net
      loss
    
    
    --
    
    
    --
    
    
    --
    
    
    (35
    )
    
    (35
    )Repayment
      of stock subscription receivable
    
    
    --
    
    
    --
    
    
    400
    
    
    --
    
    
    400Non-cash
      stock compensation charge
    
    
    
    
    
    10
    
    
    --
    
    
    --
    
    
    10BALANCE,
      MARCH 31, 2005
    
    
    1,114
    
    $
    2,766
    
    $
    --
    
    $
    2,120
    
    $
    4,886








The
accompanying notes are an integral part of these financial
statements.








-5-





**SONOMAWEST
HOLDINGS, INC. AND SUBSIDIARY**


**CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**FOR
THE NINE MONTHS ENDED MARCH 31, 2005 AND 2004**


**(AMOUNTS
IN THOUSANDS)**





2005
    
    2004CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
    
    $
    (35
    )
    $
    (111
    )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Loss
      on sale of fixed assets
    
    
    --
    
    
    24Non-cash
      stock compensation charge
    
    
    10
    
    
    34Depreciation
      and amortization expense
    
    
    161
    
    
    147Changes
      in assets and liabilities:Accounts
      receivable, net
    
    
    8
    
    
    39Other
      receivables
    
    
    25
    
    
    (3
    )Related
      party interest receivable
    
    
    3
    
    
    --Deferred
      income tax benefit
    
    
    (16
    )
    
    (34
    )Prepaid
      expenses and other assets
    
    
    97
    
    
    124


Prepaid
      commissions and other assets
    
    
    35
    
    
    (56
    )Accounts
      payable and accrued expenses
    
    
    (142
    )
    
    (48
    )Accrued
      payroll and related liabilities
    
    
    (18
    )
    
    (89
    )Unearned
      rents and deposits
    
    
    78
    
    
    (21
    )241
    
    
    117Net
      cash provided by operating activities
    
    
    206
    
    
    6CASH
      FLOWS FROM INVESTING ACTIVITIES:Proceeds
      from sale of fixed assets
    
    
    --
    
    
    7Capital
      expenditures
    
    
    (69
    )
    
    (223
    )Investment
      in MetroPCS
    
    
    --
    
    
    (305
    )Net
      cash used in investing activities
    
    
    (69
    )
    
    (521
    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Principal
      payments of long-term debt
    
    
    (42
    )
    
    (167
    )Proceeds
      from stock option exercise
    
    
    --
    
    
    47Proceeds
      from repayment of stock subscription receivable - Related
      Party
    
    
    400
    
    
    --Net
      cash provided (used in) financing activities
    
    
    358
    
    
    (120
    )NET
      INCREASE (DECREASE) IN CASH
    
    
    495
    
    
    (635
    )CASH
      AT BEGINNING OF PERIOD
    
    
    1,348
    
    
    1,939CASH
      AT END OF PERIOD
    
    $
    1,843
    
    $
    1,304








Supplemental
Cash Flow Information


2005
    
    2004Interest
      paid
    
    $
    65
    
    $
    84Taxes
      paid
    
    $
    1
    
    $
    1


The
accompanying notes are an integral part of these financial
statements.







-6-





**SONOMAWEST
HOLDINGS, INC. AND SUBSIDIARY**


**NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NINE
MONTHS ENDED MARCH 31, 2005**




****


**Note
1 - Basis of Presentation**




The
accompanying unaudited interim statements have been prepared pursuant to the
rules of the Securities and Exchange Commission. Certain information and
disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations,
although the Company believes these disclosures are adequate to make the
information not misleading. In the opinion of management, all adjustments
necessary for a fair presentation for the periods presented have been reflected
and are of a normal recurring nature. These interim financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company’s Form 10-K for the year ended June 30, 2004. The results of
operations for the periods presented are not necessarily indicative of the
results that will be achieved for the entire year ending June 30,
2005.




**Accounting
Policies**




**Revenue
Recognition**




Revenue
is recognized on a monthly basis, based upon the dollar amount specified in the
related lease. The Company requires that all tenants be covered by a lease. The
Company does not have leases that include provisions that require the lessee to
pay the lessor any additional rent based upon the lessee’s sales or any other
financial performance levels. Reimbursements of certain costs received from
tenants are recognized as tenant reimbursement revenues.




**Valuation
of Investment in MetroPCS Communications, Inc.**





The
investment in MetroPCS Communications, Inc. is accounted for using the cost
method. The Company continues to monitor the financial condition, cash flow,
operational performance and other relevant information, to the extent available,
about MetroPCS Communications, to evaluate the fair value of this investment.
This process is based primarily on information disclosed in MetroPCS Inc.’s
(parent company to MetroPCS Communications, Inc.) periodic filings with the
Securities and Exchange Commission, following MetroPCS Inc.’s recent
registration under the Securities Exchange Act of 1934 (File Number 333-111470).
The most recent financial statements filed with the Securities and Exchange
Commission were for the three months ended March 31, 2004.




It is
currently impracticable for the Company to determine the fair value of its
investment in MetroPCS Communications without incurring excessive costs. The
Company accounts for its investment in MetroPCS Communications under the cost
method, which was $3,001,200 as of March 31, 2005. The Company owns
approximately 0.857% of the total outstanding shares of MetroPCS Communications’
Series D Preferred Stock and approximately 0.33% of its total outstanding
capital stock on an as-converted basis . In its
report on Form 10-K for the year ended December 31, 2003, MetroPCS, Inc.
reported on its consolidated balance sheet total assets of $902,494,000,
revenues of $459,482,000, net income of $1,817,000, total stockholder’s equity
of $84,888,000, and stockholders' equity attributable to the Series D Preferred
Stock of $379,401,000. MetroPCS has yet to file its December 31, 2004 Form 10-K.
If as a result of its review of information available to the Company regarding
MetroPCS Communications, the Company believes its investment should be reduced
to a fair value below its cost, the reduction would be charged to "loss on
investments" on the consolidated statements of operations.




-7-




**Note
2 - Investment**




As of
December 10, 2003, the Company had completely funded its $3 million minority investment in the Series D Preferred
Stock of MetroPCS, Inc., a public reporting telecommunications company (File
Number 333-111470). On March 23, 2004, MetroPCS, Inc. filed a registration
statement with the Securities and Exchange Commission for an initial public
offering of its common stock. On July
13, 2004, a wholly-owned subsidiary of MetroPCS Communications, Inc. was merged
with MetroPCS, Inc. As a result, MetroPCS, Inc. became a wholly-owned subsidiary
of MetroPCS Communications, Inc. and all of the outstanding shares of MetroPCS,
Inc. were exchanged for shares of MetroPCS Communications, Inc., including the
Company's Series D Preferred Stock. On July
28, 2004, MetroPCS Communications announced that it had determined not to
proceed at that time with its planned initial public offering of common stock
pending a review of certain accounting issues that had come to its attention
relating to its previously disclosed financial statements. On August 6, 2004,
MetroPCS, Inc. issued a press release announcing the expected restatement of its
financial statements for the three months ended March 31, 2004. On August 12,
2004, MetroPCS Communications, Inc. formally withdrew its initial public
offering. On October 6, 2004, MetroPCS, Inc., issued a press release announcing
that on October 5, 2004 its audit committee determined that MetroPCS’ previously
issued financial statements for the years ended December 31, 2002 and 2003 and
subsequent interim periods including all earnings releases and other
communications relating to such periods, should not be relied upon. The most
recent financial statements filed with the Securities and Exchange Commission
were for the three months ended March 31, 2004.




The
Company accounts for its investment in MetroPCS Communications under
the cost method. The Company owns approximately 0.857% of MetroPCS
Communications' total outstanding shares of Series D Preferred Stock and
approximately 0.33% of the total outstanding capital stock on an as-converted
basis.




The
Series D Preferred Stock is entitled to receive cumulative annual dividends,
prior to all other securities except the Series C Preferred Stock, equal to 6%
per annum of the liquidation value of the shares (initially equal to $100 per
share and subject to adjustment). No dividends have been declared to date, but
as of March
31, 2005, $517,635 of
unpaid dividends has accrued with respect to the Company's shares of Series D
Preferred Stock.




The
Series D Preferred Stock is convertible at the option of the holders thereof or
automatically upon (i) an initial public offering which results in gross
proceeds of at least $ 50 million
and yields an adjusted equity valuation of two times the liquidation value of
the Series D Preferred Stock; (ii) the trading on a national securities exchange
for a 30-day consecutive period at a price which implies a valuation of the
Series D Preferred Stock in excess of twice the aggregate initial purchase
price; or (iii) a date specified by holders of 66 2/3% of the then outstanding
Series D Preferred Stock. There is a weighted average adjustment to the
conversion price in the event of certain additional issuances of Common Stock
(of any class) or securities convertible into Common Stock (of any
class).




The
Series D Preferred Stock votes together on an as-converted basis with the Class
C Common Stock on most matters. Certain matters affecting the Series D Preferred
Stock require a separate vote of the Series D Preferred Stock. The holders of
Series D Preferred Stock as a class are entitled to nominate one director to the
Board of Directors.




-8-




The
Series D Preferred Stock is entitled to payment along with the Series C
Preferred Stock of its liquidation preference prior to payment to any other
class of securities (other than the Series C Preferred Stock). The per share
liquidation price for the Series D Preferred Stock is $100 per share plus the
greater of accrued and unpaid dividends and the amount that would have been paid
in respect of each share had such share been converted to Common
Stock immediately prior to the liquidation event. Upon the occurrence of certain
events, the Series D Preferred Stock must be redeemed by MetroPCS  Communications at a
price equal to the liquidation value plus accrued and unpaid
dividends.




The
Company has no relationships with MetroPCS  Communications other
than its investment. Two directors of the Company have small direct and indirect
stock interests in MetroPCS Communications and the Company's largest shareholder is a member of the Board of
Directors of MetroPCS Communications .




**Note
3 - Stock Options**




Effective
July 1, 2002, the Company elected to account for all prospective stock options
in accordance with SFAS 123, “Accounting for Stock-Based Compensation”. As a
result, during the first nine months of fiscal 2005 the Company incurred a
charge of $9,600 related to the issuance of 1,700 fully vested stock options to:
two officers, and certain employees of the Company. During the first nine months
of fiscal 2004 the Company incurred a charge of $34,000 related to the issuance
of 24,200 fully vested stock options to the directors, officers and certain
employees of the Company.




Prior to
July 1, 2002, the Company accounted for stock-based compensation plans in
accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting
for Stock Issued to Employees,” under which compensation cost was recorded as
the difference between the fair value and the exercise price at the date of
grant, and was recorded on a straight-line basis over the vesting period of the
underlying options. Prior to July 1, 2002, the Company had adopted the
disclosure only provisions of Statement of Financial Standards (“SFAS”) No. 123,
“Accounting for Stock Based Compensation”. The Company continues to account for
stock options granted prior to July 1, 2002 in accordance with APB 25; and thus,
continues to apply the disclosure only provisions of SFAS 123 to such options.
No compensation expense has been recognized in the nine months ended March 31,
2005 pursuant to stock options issued prior to July 1, 2002 as the option terms
are fixed and the exercise price equals the market price of the underlying stock
on the date of grant for all options granted by the Company.








-9-





Had
compensation cost for the stock options granted prior to July 1, 2002 been
determined based upon the fair value at grant dates for awards under those plans
consistent with the method prescribed by SFAS 123, the net loss would have been
increased to the pro forma amounts indicated below:




For
      the nine months ended
      March
      31,2005
    
    2004*(in
      thousands, except per share amounts)*Net
      Loss, as reported
    
    $
    (35
    )
    $
    (111
    )Add
      back: Actual Stock Compensation Expense Recognized under APB
      25
    
    $
    --
    
    $
    --Less:
      Pro-forma Stock Compensation Charge—Net of taxes
    
    $
    --
    
    $
    (3
    )Pro-forma
      Net Loss
    
    $
    (35
    )
    $
    (114
    )Loss
      Per Share:Basic
      and diluted - as reported
    
    $
    (0.03
    )
    $
    (0.10
    )Basic
      and diluted - pro-forma
    
    $
    (0.03
    )
    $
    (0.10
    )





The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model, with the following weighted-average
assumptions used for the 2004 and 2003 grants, respectively: weighted average
risk-free interest rates of 3.08 and 3.54 percent; expected dividend yield of 0
percent; expected life of four years for the Plan options; and expected
volatility of 51 and 22 percent.





For
options granted during the nine months ended March 31, 2005, the weighted
average fair value as of the grant date was $ 5.67.




**Note
4 - Related Parties**




On July
1, 2004, Bugatto Investment Company (of which David J. Bugatto, director of the
Company, is the president) entered into a consulting agreement pursuant to which
Bugatto Investment Company provides real estate consulting services to the
Company for an hourly fee of $225.  In addition, in the event either of the
Company’s Sonoma County properties is sold during the term of the agreement,
Bugatto Investment Company will be paid a fee of 2% of the gross sales price
regardless of whether or not a broker is involved.  The termination date of
the agreement is June 30, 2005, or an earlier date specified by either
party.  During the nine months ended March 31, 2005, the Company incurred
$24,779 for real estate consulting services from Bugatto Investment
Company.  These expenses are included in Operating Costs - Related
Party.  As of March 31, 2005, the Company had a payable to David Bugatto of
$2,993.




On August
1, 2004, Thomas R. Eakin, CFO, entered into a consulting agreement with the
Company, under which Mr. Eakin provides financial management and accounting
services to the Company. During the nine months ended March 31, 2005, the
Company incurred $38,023 for financial management and accounting consulting
services from Mr. Eakin. These expenses are included in Operating Costs -
Related Party. As of March 31, 2005 the Company had a payable of $1,719 to Mr.
Eakin. This consulting agreement terminates on July 31, 2005. Under the terms of
the agreement, Mr. Eakin is compensated at an hourly billing rate of $115 per
hour, plus expenses.




-10-




During
the nine months ended March 31, 2005, the Company incurred $4,500 for
commissions paid to Gary L. Hess, director and former President and Chief
Executive Officer of the Company, for sales of the Company's remaining Perma-Pak
inventory and equipment. These expenses are included in Operating Costs -
Related Party. The agreement has since terminated. Subsequent to March 31, 2005
the Company received the final payment of $3,000 on the sale of the remaining
Perma-Pak inventory and equipment, plus accrued interest of $3,537. As a result
of this final payment the Company owes Mr. Hess $3,269. No further amounts are
due to Mr. Hess. On August 1, 2004, Gary L. Hess paid in full all principal and
interest owing under the promissory note in the original principal amount of
$400,000 issued to Mr. Hess in connection with his exercise of stock options on
January 28, 2002.  The note bore 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%) and was payable quarterly.  The note receivable
is shown under the Shareholders’ Equity section of the balance sheet as Stock
Subscription Receivable - Related Party as of June 30, 2004.  The interest
receivable on this note is included under Interest Receivable - Related Party,
on the balance sheet as of June 30, 2004.




Roger S.
Mertz, Chairman of the Board, is a partner of the law firm Allen Matkins Leck
Gamble & Mallory LLP, which firm serves as the Company’s outside legal
counsel. During the nine months ended March 31, 2005, the Company incurred
$230,478, for legal services from Allen Matkins. These expenses are included in
Operating Costs - Related Party. As of March 31, 2005, the Company had a payable
to Allen Matkins of $51,118.




Craig
Stapleton, a former director and the Company's largest shareholder, is a member
of the Board of Directors of MetroPCS Communications




**Note
5 - Minimum Lease Income**




The
Company has been leasing warehouse space, generating rental revenues for the
nine months ended March 31, 2005 and March 31, 2004 of $1,371,000 and
$1,176,000, respectively. The leases have varying terms, which range from
month-to-month to expiration dates through 2013. As of March 31, 2005, assuming
none of the existing leases are renewed or no additional space is leased, the
following will be the future minimum lease income (in thousands):





*Year
      Ending*
      *June
      30*Balance
      of 2005
    
    
    3672006
    
    
    1,2882007
    
    
    4712008
    
    
    2022009
    
    
    170Thereafter
    
    
    569Total
    
    $
    3,067









-11-





**Item
2.**  **Management's
Discussion and Analysis of Financial Condition and Results of
Operations**




SonomaWest
Holdings, Inc. (the "Company") 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,
2004 filed on September 28, 2004, and other cautionary statements set forth
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations". There can be no assurance that management’s expectations,
beliefs or projections will be achieved or accomplished, and the Company
expressly disclaims any obligation to update any forward-looking
statements.




The
financial statements herein presented for the three and nine months ending March
31, 2005 reflect all the adjustments that in the opinion of management are
necessary for the fair presentation of the financial position and results of
operations for the periods then ended. All adjustments during the periods
presented are of a normal recurring nature.




**Critical
Accounting Policies**




The
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the Company to
make estimates and assumptions. The Company believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.





The most
critical accounting policies were determined to be those related to: valuation
of the Company’s investment in MetroPCS Communications and the valuation of
deferred tax assets.





Valuation
of investment in MetroPCS Communications, Inc.





The
investment in MetroPCS Communications is accounted for using the cost method.
The Company continues to monitor the financial condition, cash flow, operational
performance and other relevant information, to the extent available, about
MetroPCS Communications, to evaluate the fair value of this investment. This
process is based primarily on information disclosed in MetroPCS Inc.’s (parent
company to MetroPCS Communications, Inc.) periodic filings with the Securities
and Exchange Commission, following MetroPCS Inc.’s recent registration under the
Securities Exchange Act of 1934 (File Number 333-111470). The most recent
financial statements filed with the Securities and Exchange Commission were for
the three months ended March 31, 2004




It is
currently impracticable for the Company to determine the fair value of its
investment in MetroPCS Communications without incurring excessive costs. The
Company accounts for its investment in MetroPCS Communications under the cost
method, which was $3,001,200 as of March 31, 2005 and March 31, 2004. The
Company owns approximately 0.857% of the total outstanding shares of MetroPCS
Communications' Series D Preferred Stock and approximately 0.33% of its total
outstanding capital stock on an as-converted basis . In its
report on Form 10-K for the year ended December 31, 2003, MetroPCS, Inc.
reported on its consolidated balance sheet total assets of $902,494,000,
revenues of $459,482,000, net income of $1,817,000, total stockholder’s equity
of $84,888,000, and stockholders' equity attributable to the Series D Preferred
Stock of $379,401,000. If as a result of its review of information available to
the Company regarding MetroPCS Communications, the Company believes its
investment should be reduced to a fair value below its cost, the reduction would
be charged to "loss on investments" on the consolidated statements of
operations.




-12-


Valuation
of Deferred Taxes




The
Company records deferred tax assets and/or liabilities based upon its estimate
of the taxes payable in future years, taking into consideration any change in
tax rates and other statutory provisions. The Company continues to post losses
from its continuing operations. The losses have generated federal tax net
operating losses ("NOLs"), some of which have been carried back to offset prior
years’ taxable income. As of June 30, 2002, the Company carried back all of its
remaining allowable NOLs. After the carryback of the June 30, 2002 federal NOL
the Company cannot carryback any more net losses, and as a result all taxable
losses incurred subsequent to June 30, 2002 will be carried forward to offset
future taxable income. California does not allow corporations to carry back
their NOLs but does allow corporations to carry forward the NOLs to future years
to offset net operating profits. The Company’s California NOLs will begin to
expire in fiscal 2012.  As of
June 30, 2004, all existing valuation allowance against state net operating
losses was reversed, as the Company believes that the market value of the
Company’s property is well in excess of the carrying value of such property. At
March 31, 2005, the Company had recorded, net deferred tax assets of $510,000,
which compares to $494,000 of net deferred tax assets as of June 30,
2004.




**OVERVIEW**




The
Company’s business consists of its real estate management and rental operations
and its minority investment in the Series D preferred stock of MetroPCS
Communications, Inc.




In 2000
and 2001, the Company liquidated its fruit processing operations, but continued
to hold its real estate and other assets. Thereafter, an opportunity was made
available to the Company to invest in MetroPCS, Inc., a telecommunications
company with operations, in part, in Northern California. The Company believed
that such an investment was a good investment, which provided a diversification
of its assets.




As of
March 31, 2005, the Company continues to hold its real estate assets in
Sebastopol, California and has completely funded its $3 million minority
investment in the Series D preferred stock of MetroPCS Communications, Inc.
(following the merger and exchange of securities of MetroPCS, Inc. for
securities of MetroPCS Communications, Inc.). In accordance with APB Opinion 18,
the Company accounts for its investment in MetroPCS Communications under the
cost method. The Company’s interest in the Series D offering is approximately
0.857% (30,012 shares of 3,500,987) and on an as converted basis is
approximately 0.33% (638,576 shares of 193,513,851).








-13-





**RESULTS
OF OPERATIONS**




**Results
of Operations**





The
Company leases warehouse, production, and office space as well as outside
storage space at both of its properties. The two properties are located on 82
acres of land and have a combined leaseable area under roof of 391,000 square
feet. As of March 31, 2005 and 2004, the Company had a total of 30 and 26
tenants respectively. The tenants have varying original lease terms ranging from
month-to-month to ten years with options to extend the leases. As of March 31,
2005, the tenants occupied approximately 272,000 square feet under roof, or 70%
of the leasable area under roof. This compares to 235,000 square feet under
roof, or 60% of the leasable area under roof as of March 31, 2004. Of this
increase in square footage under lease of 37,000, all of the increase is a
result of leases on a month-to-month basis. In addition to the area under roof,
the Company had 57,000 square feet of outside area under lease as of March 31,
2005 and 70,000 as of March 31, 2004.




**Rental
Revenue** . For the
nine months ended March 31, 2005 rental revenue increased $195,000 or 17% as
compared to the corresponding period in the prior year. The increase in rental
revenue is attributable to an increase in leased square footage. Of the $195,000
increase, $157,000 was primarily a result of expansion by the existing tenants
under short-term leases. This increase in demand was not anticipated and was
primarily a result of an increase in a tenant’s business volume. The balance of
$38,000 was a result of a decrease in revenue in the quarter ended March 31,
2004 due to a reversal of the rental revenue recorded in the quarter for one
tenant due to the probability that this revenue would not be collectible. In
addition, the accounts receivable balance of $37,000 for this tenant was charged
against bad debt during the quarter ended March 31, 2004. This same tenant is
current on its rents during fiscal 2005, and thus related revenue has been
recognized. Apart from expansion by current tenants, overall demand for the
Company’s available space remained relatively flat.




For the
three months ended March 31, 2005 rental revenue increased $97,000 or 27% as
compared to the three months ended March 31, 2004. Of this increase in rental
revenue, $59,000 is attributable to an increase in leased square footage. This
increase is primarily a result of expansion by existing tenants referred to
above. The balance of $38,000 in the increase in rental revenue was a result of
the decrease in revenue in the quarter ended March 31, 2004 as described in the
proceeding paragraph




**Tenant
Reimbursements.** For the
nine months ended March 31, 2005 **** tenant
reimbursements increased $20,000 or 6% as compared to the nine months ended
March 31, 2004. Such reimbursements typically fluctuate based upon the increase
or decrease in utility costs and the amount of space occupied by tenants. Of the
$20,000 increase, $8,000 resulted from non-utility related reimbursements and
the balance resulted from increased utility usage by the tenants. Occupancy
levels do not always correlate to the level of utilities usage. For the nine
months ended March 31, 2005 the occupancy level increased 16% from March 31,
2004, yet the utilities usage only increased 4%. There are varying levels of
utilities usage by current tenants.




For the
three months ended March 31, 2005 **** tenant
reimbursements decreased $2,000 or 2% as compared to the three months ended
March 31, 2004. This decrease was a result of the decreased utility usage by
tenants during the quarter. The increased occupancy of 5% during the three
months ended March 31, 2005 was primarily related to a tenant that uses very
little utilities. The increase in utilities during the quarter is a result of
increased comparable activity by three of the tenants that are large users of
utilities. We anticipate this level of comparable usage between periods will
continue.




**Operating
Costs.** For the
nine months ended March 31, 2005 total operating costs increased $127,000 or 8%
compared to the nine months ended March 31, 2004. Of this increase, there was a
decrease of $21,000 from Related Party expenses and the balance of $148,000 was
primarily a result of increases in repairs and maintenance of $109,000,
increased usage of utilities by tenants of $21,000 and increases in various
other operating line items of $79,000. These increases were partially offset by
a decrease in Non-Cash Stock Compensation expense of $24,000 and a decrease in
bad debts of $37,000. The large increase in repairs and maintenance is a result
of significant painting; roof repairs and storm drain maintenance, which we do
not expect to recur in the near future. The increased usage of utilities by the
current tenants is anticipated to be an ongoing cost of operations; however such
costs are recovered through tenant reimbursements. We anticipate that the
majority of the increases in the other operating line items will continue. The
decrease in the Non-Cash Stock Compensation expense is a function of the fair
value of stock options issued. The decrease in bad debt expense of $37,000
resulted from the increase in the allowance for doubtful accounts in the quarter
ended March 31, 2004. This adjustment was a result of a collection problem with
one of the tenants that was resolved in the subsequent quarter ended June 30,
2004.




-14-




The
Company’s total operating costs exceeded the tenant rental revenue for the nine
months ended March 31, 2005 and 2004. The Company continues to closely
scrutinize all discretionary spending. In addition, the Company continues to
actively search for additional tenant revenue to eliminate these negative
operating results. The Company continues to market the properties to prospective
tenants. There can be no assurance that tenants will be found in the near term
or at rates comparable with existing leases. As a result, the Company’s
operating results will be negatively impacted as long as the tenant rental
revenue stream fails to cover existing operating costs .




For the
three months ended March 31, 2005 total operating costs decreased $32,000 or 6%
as compared to the three months ended March 31, 2004. Of this decrease, $26,000
was from Related Party expenses, primarily legal expenses and the balance of the
decrease or $6,000 was composed of a large decrease in bad debt expense of
$37,000, which was offset by increases in various operating expenses of $41,000.
The large bad debt expense of $37,000 in the three months ended March 31, 2004
was due to the probability that the account balance from one of the Company’s
tenants would not be collectible. In addition to the large bad debt expense, the
Company’s legal expenses were higher in the three months ended March 31, 2004 as
compared to the three months ended March 31, 2005 as a result of the costs
associated in collecting the outstanding amounts due to the Company. The offset
of these decreases was a result of various increases in operating expenses
totaling $41,000. Of this increase, $12,000 was from waste water processing,
$4,000 from repairs and maintenance, $6,000 in depreciation, in addition to
various other smaller increases.




**Interest
Income.** The
Company generated
$24,000 of interest income on its
cash balances for the nine months ended March 31, 2005 and $18,000 for the nine
months ended March 31, 2004. The interest income increased as a result of the
increase in the cash balance of $494,000 and due to the increase in interest
rates between years. As of March 31, 2005 and March 31, 2004, the respective
interest rates on the invested cash balances was 2.49% and .92%.




**Interest
Expense.** Historically,
interest expense has consisted primarily of interest expense on mortgage debt
and the changes in the value of the Company’s interest rate swap contract.
However, as of December 1, 2003, the Company’s swap contract with its bank
terminated. As a result, interest expense of $65,000 for the nine months ended
March 31, 2005, consists solely of interest on the Company’s outstanding
mortgage debt. This compares to $79,000 of interest expense, offset by a
positive swap contract adjustment of $37,000 for the corresponding period in the
prior year.




**Other
Income** **and Expense** **.** The
Company incurred
a net increase in other income and expense of $ 24,000 as
compared to the prior year. This
increase is primarily a result of the loss on the sale of fixed assets of
$24,000 in the nine months ended March 31, 2004. The other income of $21,000 and
$20,000 for the nine months ended March 31, 2005 and March 31, 2004,
respectively, was very comparable.




**Income
Taxes.** The
effective tax rate for the nine months ended March 31, 2005 increased to 30%
from 23% for the nine months ended March 31, 2004. State income taxes and the
effect of permanent differences on a small taxable loss accounted for the
difference between the effective tax rate of 30% for the nine months ended March
31, 2005 and the combined statutory income tax rate of 40%. The change
in the effective tax rates between periods is due to
the fact that until the
fourth quarter of fiscal 2004, the Company had provided a valuation allowance
for all state net operating losses due to uncertainty as to their realizability. As of
June 30, 2004, all existing valuation allowance against state net operating
losses was reversed, as the Company believes that the market value of the
Company’s property is well in excess of the carrying value of such property.




-15-





**Liquidity
and Capital Resources**




The
Company had cash of $1.8 million at March 31, 2005 (all of which was
unrestricted), and current maturities of long-term debt of $1.6 million. As of
December 31, 2004, the Company’s long-term debt was reclassified to a current
liability as the $1.6 million note is due to the bank on December 1, 2005. The
Company is reviewing its alternatives relative to the maturity of this debt.
Although the Company incurred a net loss of $35,000 for the nine months ended
March 31, 2005, it generated $206,000 of positive cash flow from operations. The
Company experienced positive operating cash flow despite a decrease in cash from
the payment of $142,000 of accrued expenses previously reserved on the books, of
which $100,000 was for the repair of storm damage in a prior fiscal year. For
the nine months ended March 31, 2005, the Company generated a total increase in
cash of $495,000. This increase was primarily a result of the receipt of the
stock subscription receivable of $400,000. This increase was partially offset by
a decrease of $42,000 for principal payments on long-term debt and $69,000 of
capital expenditures. The Company anticipates that its cash commitments for the
next twelve months will consist of approximately $50,000 of capital expenditures
and approximately $60,000 of principal debt reduction assuming the long-term
debt is refinanced, and on comparable terms. The Company anticipates funding
these expenditures through its cash from operating activities and its current
cash balances. The Company is reviewing its alternatives relative to the
December 1, 2005 maturity of the $1.6 million note.




The
Company has completely funded its $3 million minority investment in the Series D
preferred stock of MetroPCS Communications, Inc.




****


-16-


****


**Item
3. Quantitative and Qualitative Disclosures About Market
Risk**




The
Company currently has no derivative financial instruments that expose the
Company to market risk. The Company is exposed to cash flow and fair value risk
due to changes in interest rates with respect to its notes payable and in
changes in the fair value of its investment in MetroPCS Communications, Inc. As
of March 31, 2005, the Company believes that the carrying amounts for cash,
accounts receivable and accounts payable approximate their fair value. The
Company believes the note payable approximates fair market value as the term to
maturity is short (December 2005) and as a result of this short term maturity,
the Company believes its exposure to market risk for significant changes in the
variable interest rate (prime + .25%) will not be significant. It is
impracticable for the Company to determine the fair value of the Company’s
investment in MetroPCS Communications without incurring excessive costs. The
Company accounts for its investment in MetroPCS Communications under the cost
method, which was $3,001,200 as of March 31, 2005. The Company owns
approximately 0.857% of the total outstanding shares of MetroPCS Communications'
Series D Preferred Stock and approximately 0.33% of its total outstanding
capital stock on an as-converted basis.




**Item
4. Controls and Procedures**




As of
March 31, 2005, the Company carried out an evaluation, under the supervision and
with the participation of the Company's management, including the Company's
Chairman of the Board of Directors and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures (as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e)).
Based upon that evaluation, the Company's Chairman of the Board of Directors and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective at a reasonable level in timely alerting them to
material information relating to the Company that is required to be included in
the Company's periodic filings with the Securities and Exchange Commission.
There has been no change in the Company's internal control over financial
reporting that occurred during the Company’s most recent fiscal quarter that has
materially affected or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.




The
Company's management, including the Chairman of the Board of Directors and Chief
Financial Officer, do not expect that the Company's disclosure controls or our
internal control over financial reporting will prevent all error and all fraud.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met due to numerous factors, ranging from errors to conscious acts of an
individual, or individuals acting together. In addition, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error and/or fraud may occur and not be detected.




-17-




**PART
II. OTHER INFORMATION**





**Item
1. Legal Proceedings**




None




**Item
2. Unregistered Sales of Equity 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**




3.1
    
    Certificate
      of Incorporation of SonomaWest Holdings, Inc. dated September 10, 2004
      (1)Bylaws
      of SonomaWest Holdings, Inc. dated September 21, 2004 (1)10.1
    
    Agreement
      and Plan of Merger dated November 15, 2004 by and between SonomaWest
      Holdings, Inc., a California corporation and SonomaWest Holdings, Inc., a
      Delaware corporation (2)31.1
    
    Chairman
      of the Board Certification of Periodic Financial Report Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    Chief
      Financial Officer Certification of Periodic Financial Report Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*32.1
    
    Chairman
      of the Board Certification Pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
    +32.2
    
    Chief
      Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
      +








(1)
    Incorporated
      by reference from the registrant's Quarterly Report on Form 10-Q (File No.
      000-01912) filed February 14, 2005.


(2)
    Incorporated
      by reference from the registrant's Current Report on Form 8-K (File No.
      000-01912) filed November 17, 2004.


*
    Filed
      herewith.


+
    Furnished
      herewith.





-18-




**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:  May 12,
2005







/s/
Thomas R. Eakin


Thomas R.
Eakin, Chief Financial Officer








-19-







**EXHIBIT
      INDEX**  Exhibit
      No.
    
    Document
      Description31.1
    
    Chairman
      of the Board Certification of Periodic Financial Report Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    Chief
      Financial Officer Certification of Periodic Financial Report Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*32.1
    
    Chairman
      of the Board Certification Pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to section 906 of the Sarbanes-Oxley Act of 2002
  +32.2
    
    Chief
      Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
      +
  
 *Filed
      herewith
      +Furnished
      herewith










-20-