**SECURITIES
      AND EXCHANGE COMMISSION**




**Washington,
      D.C. 20549**




**FORM
      10-Q**




X
            Quarterly
                Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
                Act of
                1934. For the quarterly period ended September 30, 2006
                or




Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934. For the transition period from _________ to
                _________.




Commission
      File Number 01912




**SONOMAWEST
      HOLDINGS, INC.**


(Exact
      name of registrant as specified in its charter)




**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:





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer  ___  Accelerated
      filer  ___   Non-accelerated
      filer X





Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).




YES:    NO: X




As
      of
      November 10, 2006, there were 1,155,257 shares of common stock, 0.0001 par
      value, outstanding.




-1-




**SONOMAWEST
      HOLDINGS, INC.**




**TABLE
      OF CONTENTS**







PART
                I. FINANCIAL INFORMATION
            PageItem
                1.
            Financial
                StatementsBalance
                Sheets at September 30, 2006 andJune
                30, 2006 (unaudited)
            3Statements
                of Income - Three monthsended
                September 30, 2006 and 2005 (unaudited)
            4Statement
                of Changes in Shareholders’ Equity -Three
                months ended September 30, 2006 (unaudited)
            5Statements
                of Cash Flows - Three months endedSeptember
                30, 2006 and 2005(unaudited)
            6Notes
                to Financial Statements (unaudited)
            7Item
                2.
            Management's
                Discussion and Analysis of Financial Conditionand
                Results of Operations
            11Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            15Item
                4.
            Controls
                and Procedures
            15PART
                II. OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            16Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            16Item
                3.
            Defaults
                Upon Senior Securities
            16Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            16Item
                5.
            Other
                Information
            16Item
                6.
            Exhibits
            16Signature
            
            18EXHIBIT
                INDEX
            19


-2-


**PART
      I. FINANCIAL INFORMATION**


**Item
      1. Financial Statements**





**SONOMAWEST
      HOLDINGS, INC.**


**BALANCE
      SHEETS**


**(AMOUNTS
      IN THOUSANDS)**


**(unaudited)**





ASSETS
            
            
            September
                30, 2006
            
            
            June
                30, 2006CURRENT
                ASSETS:Cash
            
            $
            2,417
            
            $
            3,851Accounts
                receivable
            
            
            179
            
            
            160Other
                receivables
            
            
            11
            
            
            16Prepaid
                income taxes
            
            
            -
            
            
            73Prepaid
                expenses and other assets
            
            
            128
            
            
            134Current
                deferred income taxes, net
            
            
            46
            
            
            55Total
                current assets
            
            
            2,781
            
            
            4,289RENTAL
                PROPERTY, net
            
            
            1,360
            
            
            1,412INVESTMENT,
                at cost
            
            
            2,401
            
            
            2,401DEFERRED
                INCOME TAXES
            
            
            199
            
            
            190PREPAID
                COMMISSIONS AND OTHER ASSETS
            
            
            148
            
            
            181Total
                assets
            
            $
            6,889
            
            $
            8,473LIABILITIES
                AND SHAREHOLDERS’ EQUITYCURRENT
                LIABILITIES:Current
                maturities of long-term debt
            
            $
            -
            
            $
            80Accounts
                payable
            
            
            115
            
            
            248Accrued
                payroll and related liabilities
            
            
            14
            
            
            77Income
                taxes payable
            
            
            41
            
            
            -Accrued
                expenses
            
            
            125
            
            
            176Unearned
                rents
            
            
            197
            
            
            193Tenant
                deposits
            
            
            309
            
            
            310Total
                current liabilities
            
            
            801
            
            
            1,084LONG-TERM
                DEBT, net of current maturities
            
            
            -
            
            
            1,472Total
                liabilities
            
            
            801
            
            
            2,556SHAREHOLDERS’
                EQUITY:Preferred
                stock: 2,500 shares authorized; no shares outstanding
            
            
            -
            
            
            -Common
                stock: 5,000 shares authorized, 0.0001 par value; 1,124 and 1,124
                shares outstanding on September 30, 2006and
                June 30, 2006, respectively
            
            
            2,912
            
            
            2,912Retained
                earnings
            
            
            3,176
            
            
            3,005Total
                shareholders’ equity
            
            
            6,088
            
            
            5,917Total
                liabilities and shareholders’ equity
            
            $
            6,889
            
            $
            8,473




The
      accompanying notes are an integral part of these statements .


-3-





**SONOMAWEST
      HOLDINGS, INC.**


**STATEMENTS
      OF INCOME**


**FOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**


**(UNAUDITED)**


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





2006
            
            
            2005RENTAL
                REVENUE
            
            $
            621
            
            $
            476TENANT
                REIMBURSEMENTS
            
            
            207
            
            
            137TOTAL
                REVENUE
            
            
            828
            
            
            613OPERATING
                COSTS
            
            
            569
            
            
            553OPERATING
                COSTS - RELATED PARTY EXPENSES
            
            
            4
            
            
            30TOTAL
                OPERATING COSTS
            
            
            573
            
            
            583OPERATING
                INCOME
            
            
            255
            
            
            30INTEREST
                INCOME
            
            
            34
            
            
            16INTEREST
                EXPENSE
            
            
            (7
            )
            
            (27
            )OTHER
                INCOME
            
            
            2
            
            
            6INCOME
                BEFORE INCOME TAXES
            
            
            284
            
            
            25INCOME
                TAX PROVISION
            
            
            113
            
            
            10NETINCOME
            
            $
            171
            
            $
            15WEIGHTED
                AVERAGE COMMON SHARES AND EQUIVALENTS:Basic
            
            
            1,124
            
            
            1,120Diluted
            
            
            1,166
            
            
            1,142NET
                INCOME PER COMMON SHARE:Basic
            
            $
            0.15
            
            $
            0.01Diluted
            
            $
            0.15
            
            $
            0.01











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


-4-





**SONOMAWEST
      HOLDINGS, INC.**


**STATEMENT
      OF CHANGES IN SHAREHOLDERS’ EQUITY**


**(UNAUDITED)**


**FOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2006**


**(AMOUNTS
      IN THOUSANDS)**






*Common
                Stock*
            
            
            
            
            
            *Total**Number*
            
            
            
            
            
            *Retained*
            
            
            *Shareholders’**of
                Shares*
            
            
            *Amount*
            
            
            *Earnings*
            
            
            *Equity*BALANCE,
                JUNE 30, 2006
            
            
            1,124
            
            $
            2,912
            
            
            3,005
            
            
            5,917Net
                income
            
            
            
            
            
            
            
            
            171
            
            
            171BALANCE,SEPTEMBER
                30, 2006
            
            
            1,124
            
            $
            2,912
            
            $
            3,176
            
            $
            6,088












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





-5-


**SONOMAWEST
      HOLDINGS, INC.**


**STATEMENTS
      OF CASH FLOWS**


**(UNAUDITED)**


**FOR
      THE THREE MONTHS ENDED SEPTEMBER 30 2006 AND 2005**


**(AMOUNTS
      IN THOUSANDS)**




2006
            
            2005CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            171
            
            $
            15Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization expense
            
            
            54
            
            
            54Deferred
                income tax provision
            
            
            -
            
            
            10Changes
                in assets and liabilities:Accounts
                receivable
            
            
            (19
            )
            
            27Other
                receivables
            
            
            5
            
            
            (2
            )Income
                taxes
            
            
            114
            
            
            -Prepaid
                expenses and other assets
            
            
            6
            
            
            33


Prepaid
                commissions and other assets
            
            
            33
            
            
            11Accounts
                   payable
            
            
            (133
            )
            
            (16
            )Accrued
                expenses and other current liabilities
            
            
            (51
            )
            
            12Accrued
                payroll and related liabilities
            
            
            (63
            )
            
            (18
            )Unearned
                rents
            
            
            4
            
            
            20Tenant
                deposits
            
            
            (1
            )
            
            23(51
            )
            
            154Net
                cash provided by operating activities
            
            
            120
            
            
            169CASH
                FLOWS FROM INVESTING ACTIVITIES:Capital
                expenditures
            
            
            (2
            )
            
            (7
            )Net
                cash used in investing activities
            
            
            (2
            )
            
            (7
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Principal
                payments of long term debt
            
            
            (1,552
            )
            
            (14
            )Exercise
                of stock options
            
            
            -
            
            
            62Net
                cash provided by (used in) financing activities
            
            
            (1,552
            )
            
            48NET
                INCREASE (DECREASE) IN CASH
            
            
            (1,434
            )
            
            210CASH
                AT BEGINNING OF PERIOD
            
            
            3,851
            
            
            1,879CASH
                AT END OF PERIOD
            
            $
            2,417
            
            $
            2,089





Supplemental
      Cash Flow Information




2006
            
            
            2005Interest
                paid
            
            $
            18
            
            $
            27Taxes
                paid
            
            $
            -
            
            $
            1




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




-6-


**SONOMAWEST
      HOLDINGS, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**THREE
      MONTHS ENDED SEPTEMBER 30, 2006**




**Note
      1 - Basis of Presentation**




The
      accompanying unaudited interim
      financial 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.
      Because all of the disclosures required by accounting principles generally
      accepted in the United States of America are not included in the accompanying
      financial statements and related notes, they should be read in conjunction
      with
      the audited financial statements and related notes included in the Company’s
      Annual Report on Form 10-K for the year ended June 30, 2006.. The results of
      operations for the three-month period ended September 30, 2006 are not
      necessarily indicative of the results that will be achieved for the entire
      year
      ending June 30, 2007.




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires the Company to make estimates and assumptions
      that affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements,
      and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.




**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.
      Lease incentives and construction allowances provided by the Company to certain
      of its tenants are amortized as an offset to revenue on a straight-line basis
      over the term of the respective 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.




**Note
      2 - New Accounting Pronouncements**




In
      July
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation Number 48, “Accounting for Uncertainty in Income Taxes,”
(“FIN48”) an Interpretation of SFAS No. 109, “Accounting for Income
      Taxes”.  FIN 48 prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken in a tax return. The Company must determine whether it is
“more-likely-than-not” that a tax position will be sustained upon examination,
      including resolution of any related appeals or litigation processes, based
      on
      the technical merits of the position.  Once it is determined that a
      position meets the more-likely-than-not recognition threshold, the position
      is
      measured to determine the amount of benefit to recognize in the financial
      statements. FIN 48 applies to all tax positions related to income taxes subject
      to SFAS No. 109.  The interpretation clearly scopes out income tax
      positions related to SFAS No. 5, “Accounting for Contingencies” *.* The Company will adopt the provisions of this statement beginning in fiscal
      2008. The Company is currently evaluating the effect the adoption of this
      statement will have on its financial condition and results of operations.




-7-




In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements,” (“SAB
      No. 108”).  SAB No. 108 provides guidance regarding the
      consideration of the effects of prior year misstatements in quantifying current
      year misstatements for the purpose of materiality assessments. The method
      established by SAB No. 108 requires each of the Company’s financial
      statements and the related financial statement disclosures to be considered
      when
      quantifying and assessing the materiality of the misstatement.  SAB No. 108
      is effective for fiscal years ending after November 15, 2006 and will apply
      to
      the Company’s financial statements for the fiscal year ended June 30,
      2007.  The Company is currently assessing the impact of SAB No. 108,
      but does not expect that it will have a material effect on its financial
      condition, or results of operations. ****




**Note
      3 - Investment**




The
      Company holds an investment in MetroPCS Communications ,
      Inc.
      (“ ***MetroPCS*** ”),
      a
      privately held telecommunications company. The Company owns less than one
      percent of the total outstanding shares of Series D Preferred Stock and less
      than one percent of the total outstanding capital stock of MetroPCS on an
      as-converted basis. The Company accounts for its investment in MetroPCS under
      the cost method.




On
      September 26, 2005, the Company tendered approximately 20% of the shares of
      MetroPCS Series D Preferred Stock that it held in response to a tender offer
      by
      certain third parties to purchase shares of MetroPCS Series D Preferred Stock
      and common stock. The price per share offered in the tender offer was
      approximately three times the original investment amount per share paid by
      the
      Company for its MetroPCS shares, including the cumulative unpaid dividends
      as of
      December 31, 2005. All shares tendered by the Company were accepted. The gross
      proceeds to the Company from the tender offer of $1,800,000 were received
      November 1, 2005, resulting in a net gain of $1,090,000 on sale of investments,
      and dividend income of $122,000. The Company’s existing net operating loss
      carryforwards offset much of the gain recognized for federal and state tax
      purposes from the sale of the MetroPCS shares.




The
      Company accounts for its investment in MetroPCS under the cost method, which
      amounted to $2,401,000 as of September 30, 2006. The Company continues to
      monitor the financial condition, cash flow, operational performance and other
      relevant information about MetroPCS, for purposes of reflecting the investment
      on the Company’s financial statements. This process is based primarily on such
      information as the Company may request and that MetroPCS may provide to the
      Company. The Company also tracks MetroPCS information available to the general
      public. Since MetroPCS is, as of the date of this Report, not subject to public
      disclosure requirements, the basis for our evaluation is subject to the timing,
      accuracy and disclosure of the data received. If the Company had, in September
      2005, tendered the remaining MetroPCS shares that it currently holds, the
      Company would have received gross proceeds of approximately $7,200,000 from
      the
      tender of such shares (in addition to the proceeds from the shares actually
      tendered). There can be no assurance that the Company will be able to achieve
      liquidity for its remaining MetroPCS shares in the future at the price offered
      in the tender offer or at any other price.




**Note
      4 - Long-term debt**




As
      of
      September 30, 2006, the Company had no long-term debt. On July 21, 2006 the
      Company paid all of the outstanding amounts owed under its Credit Agreement
      with
      Wells Fargo in the amount of $1,552,000, thus terminating both the term loan
      and
      a related line of credit.


-8-




**Note
      5 - Earnings Per Share**




Basic
      earnings per share (“EPS”) is computed as net income divided by the weighted
      average number of shares of common stock outstanding for the period. Diluted
      EPS
      is computed as net income divided by the weighted average number of shares
      outstanding of common stock and common stock equivalents for the period,
      including the dilutive effects of stock options and other potentially dilutive
      securities. Common stock equivalents result from dilutive stock options computed
      using the treasury stock method and the average share price for the reported
      period. The effect of dilutive options on the weighted average number of shares
      for the three months ended September 30, 2005 and September 30, 2006 was 22,000
      and 42,000, respectively. The calculation of diluted earnings per share for
      the
      three months ended September 30, 2005 and September 30, 2006 excluded stock
      options to purchase 1,700 and zero shares, respectively because the effect
      would
      have been anti-dilutive.





**Note
      6 - Stock-Based Compensation**




Effective
      July 1, 2005, the Company adopted Statement of Financial Accounting
      Standard (“SFAS”) No. 123(R), Share-Based Payment, using the modified
      prospective transition method. Because the fair value recognition provisions
      of
      SFAS No. 123, Stock-Based Compensation (which was previously followed by
      the Company), and SFAS No. 123(R) were materially consistent under our
      equity plans, and because all of the Company’s stock options were fully vested
      as of July 1, 2005, the adoption of SFAS No. 123(R) did not have an impact
      on our financial position or our results of operations. Prior to our adoption
      of
      SFAS No. 123(R), benefits of tax deductions in excess of recognized
      compensation costs were reported as operating cash flows. SFAS No. 123(R)
      requires excess tax benefits be reported as a financing cash inflow rather
      than
      as a reduction of taxes paid.




Our
      net
      income for the three months ending September 30, 2005 and September 30, 2006
      includes no compensation costs or income tax benefits related to our stock-based
      compensation arrangements.




On
      July
      31, 2002, the Company's Board of Directors approved the SonomaWest Holdings,
      Inc. 2002 Stock Incentive Plan (the "2002 Plan"). The 2002 Plan is designed
      to
      benefit the Company and its shareholders by providing incentive based
      compensation to encourage officers, directors, consultants and other key
      employees of the Company and its affiliates to attain high performance and
      encourage stock ownership in the Company. The maximum number of shares of common
      stock issuable over the term of the 2002 Stock Option Plan is 150,000 shares.
      No
      participant in the 2002 Plan may be granted stock options, direct stock
      issuances and share right awards for more than 15,000 shares of common stock
      in
      total in any calendar year. The exercise price of all incentive stock options
      granted under the 2002 Plan must be at least equal to the fair market value
      of
      the Common Stock on the date of grant. The exercise price of non-statutory
      stock
      options must at least be equal to 85% of the fair market value of the Common
      Stock on the date of grant. The contractual life of the options is ten years.
      To
      date, all options issued under this plan have been issued fully vested.




Prior
      to
      adoption of the 2002 Plan, the Company administered the 1996 Stock Option Plan
      (the "1996 Plan"). As amended, the 1996 Plan provided for the issuance of
      options to employees and non-employee consultants exercisable for an aggregate
      of 275,000 shares of common stock. In connection with adoption of the 2002
      Plan,
      no future options will be granted under the 1996 Plan.




A
      summary
      of the status of the Company’s stock option plans at September 30, 2006 with
      changes during the three months ended September 30, 2006 are presented in the
      table below:




*Options
                (in
                thousands)*
            
            
            *Weighted
                Average Exercise Price*
            
            
            Average
              Remaining
              Contractual
              Term
                (years)
            
            
            Aggregate
              Intrinsic
              Value
              (in
                thousands)Balance,
                June 30, 2006
            
            
            96
            
            $
            7.12Granted
            
            
            -
            
            
            -Cancelled
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Balance,
                September 30, 2006
            
            
            96
            
            $
            7.12
            
            
            5.51
            
            $
            686Exercisable,
                September 30, 2006
            
            
            96
            
            $
            7.12
            
            
            5.51
            
            $
            686





-9-




The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option pricing model, with the following assumptions used for
      the
      fiscal 2006 grants: risk-free interest rate of 4.37 percent; expected dividend
      yield of 0 percent; expected life of two years for the plan options; and
      expected volatility of 49 percent. All outstanding options were fully vested
      as
      of September 30, 2006; and thus, there was no unrecognized compensation cost
      related to stock options.




**Note
      7 - Related Parties**





On
      June
      29, 2006, following approval by the Board of Directors of the Company, with
      David J. Bugatto (a current board member) not participating or voting, the
      Company entered into a new consulting agreement with Bugatto Investment Company
      (the “New Agreement”). The New Agreement became effective July 1, 2006,
      immediately after expiration of the term of the existing 2005 Agreement
      described below. Under the New Agreement, Bugatto Investment Company has agreed
      to provide real estate consulting services, as reasonably requested by the
      Company, for a one-year term, at the same hourly rate of $225 per hour as is
      contained in the 2005 Agreement. The New Agreement modifies the 2005 Agreement
      to provide that Bugatto Investment Company will not receive any additional
      payments or compensation upon the occurrence of a sale of either of the
      Company’s Sonoma County properties.





In
      consideration for Bugatto Investment Company’s willingness to enter into the New
      Agreement and in light of Mr. Bugatto’s contributions over the past years to
      increasing the tenant occupancy rate of the Company’s properties and achieving
      certain land use entitlement modification approvals, the Company paid Bugatto
      Investment Company the sum of $100,000 upon execution of the New Agreement.
      In
      addition, the Company will pay Bugatto Investment Company an additional $50,000
      upon the satisfaction, during the term of the agreement (or within one year
      thereafter) of certain conditions and actions specified by Sonoma County in
      connection with approval of certain land use entitlement changes. If the
      Company’s business is sold in a merger, consolidation, tender offer or similar
      transaction, or if the Company’s north property is sold, and the acquiring
      person or entity does not agree to assume the New Agreement, then the $50,000
      payment becomes payable in connection with the transaction.




On
      July
      1, 2005, Bugatto Investment Company (of which David J. Bugatto, a 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. The agreement replaced a similar agreement
      entered into on July 1, 2004. Under the agreement, if either of the Company’s
      Sonoma County properties were sold during the term of the agreement, Bugatto
      Investment Company would have been entitled to receive a fee equal to 1.5%
      of
      the sales prices regardless of whether or not a broker is involved, and Bugatto
      Investment Company would have been entitled to receive a fee equal to the
      greater of 1.5% of the gross value of the real estate or $150,000 upon any
      transaction that would have resulted in the Company becoming a private
      company.  The agreement was through July 30, 2006, and was replaced by the
      June 29, 2006 agreement referred to above.




During
      the three months ended September 30, 2006 and September 30, 2005, the Company
      incurred $4,000 and $6,000 respectively, for real estate consulting services
      from Bugatto Investment Company.  These expenses are included in Operating
      Costs - Related Party.  As of September 30, 2006, the Company had a payable
      to Bugatto Investment Company of $1,372.




In
      consideration for Bugatto Investment Company's
      willingness to enter into New Agreement and in light of Mr. Bugatto's
      contributions over the past years to increasing the tenant occupancy rate of
      the
      Company's properties and achieving the land use entitlement approvals discussed
      above, upon execution of the New Agreement the Company paid Bugatto Investment
      Company the sum of $100,000 on July 3, 2006. In addition, the Company will
      pay
      Bugatto Investment Company an additional $50,000 upon the satisfaction, during
      the term of the agreement (or within one year thereafter) of certain conditions
      and actions specified by Sonoma County in connection with approval of the land
      use entitlement changes.





-10-


**Note
      8 - Minimum Lease Income**




The
      Company leases warehouse space, generating rental revenues for the three months
      ended September 30, 2006 and September 30, 2005 of $621,000 and $476,000,
      respectively. The leases have varying terms, which range from month-to-month
      to
      expiration dates through 2013. As of September 30, 2006, assuming that all
      current month-to-month leases continue unchanged throughout the periods
      presented in the table, and that there are no changes to the other leases other
      than expiration of the leases at the end of their stated terms and no additional
      space is leased, the following will be the future minimum lease income (in
      thousands):




*Year
                Ending**June
                30*
            
            
            *Amounts
                in Thousands*Balance
                of 2007
            
            
            1,3292008
            
            
            1,4322009
            
            
            5112010
            
            
            4012011
            
            
            344Thereafter
            
            
            405Total
            
            $
            4,422





















-11-




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




SonomaWest
      Holdings, Inc. (the "Company" or "Registrant") is including the following
      cautionary statement in this Quarterly Report to make applicable and take
      advantage of the safe harbor provisions of the Private Securities Litigation
      Reform Act of 1995 for any forward-looking statements made by, or on behalf
      of,
      the Company. The statements contained in this Report that are not historical
      facts are "forward-looking statements" (as such term is defined in Section
      27A
      of the Securities Act of 1933 and section 21E of the Securities Exchange Act
      of
      1934), which can be identified by the use of forward-looking terminology such
      as
      "estimated," "projects," "anticipates," "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. 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 on Form 10-K for the fiscal year ended June 30,
      2006
      and other cautionary statements set forth therein and in this Report 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 included herein are presented as of, and for the three
      months ending September 30, 2006 and 2005 and 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 and recurring
      nature.




OVERVIEW
  The
        Company’s business consists of its real estate management and rental operations.
        The Company also owns a minority investment in the Series D Preferred Stock
        of a
        private telecommunications company, MetroPCS . 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 ,
        which
        has operations, in part, in Northern California.
  The
        Company's rental operations include industrial/agricultural property, some
        of
        which was formerly used in its discontinued businesses. This commercial property
        is now being rented to third parties. The Company’s primary business revenue is
        generated from the leasing of its two properties, located in Sebastopol,
        California.
  The
        properties are leased to multiple tenants with leases varying in length from
        month-to-month to ten years. Revenue from lease rental is recognized on a
        monthly basis, based upon the dollar amount specified in the related lease.
        Lease incentives and construction allowances provided by the Company to certain
        of its tenants are amortized as an offset to revenue on a straight-line basis
        over the term of the respective 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. The Company has no
        tenant related reimbursements that are not part of tenant lease
        agreements.




CRITICAL
      ACCOUNTING POLICIES




The
      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.




Valuation
      of investment in MetroPCS Communications, Inc.




The
      Company accounts for its investment in MetroPCS under the cost method, which
      amounted to $2,401,000 as of September 30, 2006. The Company continues to
      monitor the financial condition, cash flow, operational performance and other
      relevant information about MetroPCS, for purposes of reflecting the investment
      on the Company’s financial statements. This process is based primarily on such
      information as we may request and that MetroPCS may provide to us. The Company
      also tracks MetroPCS information available to the general public. Since MetroPCS
      is not, as of the date of this Report, subject to public disclosure
      requirements, the basis for our evaluation is subject to the timing, accuracy
      and disclosure of the data received. If the Company had, in September 2005,
      tendered the remaining MetroPCS shares that it currently holds, the Company
      would have received gross proceeds of approximately $7,200,000 from the tender
      of such shares (in addition to the proceeds from the shares actually tendered).
      There can be no assurance, however, that the Company will be able to achieve
      liquidity for its remaining MetroPCS shares in the future at the price offered
      in the tender offer or at any other price. See Note 2 above for further
      information.




The
      Company owns less than one percent of the total outstanding shares of MetroPCS’
Series D Preferred Stock and less than one percent of its total outstanding
      capital stock on an as-converted basis. If as a result of its review of
      information available to the Company regarding MetroPCS, the Company believes
      its investment should be reduced to a fair value below its cost, the reduction
      would be charged to “loss on investments” in the statements of
      operations.





-12-




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 437,000 square
      feet (375,000 under roof and 62,000 outside). The tenants have varying original
      lease terms ranging from month-to-month to ten years with options to extend
      the
      leases. As of September 30, 2006, there were 33 tenants with leases comprising
      426,000 square feet of leasable space (364,000 under roof and 62,000 outside)
      or
      97% of the total leasable area. As of the end of September 30, 2005 there were
      31 tenants with leases that comprised 361,000 square feet of leasable space
      (304,000 under roof and 57,000 outside) or 83% of the total leasable area.





Rental
      Revenue .
      For the
      three months ended September 30, 2006 rental revenue increased $145,000 or
      30%
      as compared to the corresponding period in the prior year. This increase was
      primarily a result of increased revenues from expansion by six existing tenants
      under term leases of $76,000 and the addition of seven new tenants of $77,000.
      This increase in tenant demand was not anticipated and was primarily a result
      of
      an increase in tenants’ business volume. The increase was partially offset by
      vacating tenants and decreases in rented space by certain tenants.




Tenant
      Reimbursements .
      For the
      three months ended September 30, 2006 tenant reimbursements increased $70,000
      or
      51% as compared to the three months ended September 30, 2005. Such
      reimbursements typically fluctuate based upon the increase or decrease in
      utilities rates and the amount of space occupied by tenants. The increase was
      primarily a result of increased utility rates and usage by existing and new
      tenants.




-13-





Operating
      Costs .
      For the
      three months ended September 30, 2006 total operating costs increased $10,000
      or
      3% compared to the three months ended September 30, 2005. Of this increase,
      operating costs—related party decreased $26,000 and operating costs increased
      $16,000. The decrease in related party expenses was primarily the result of
      reduced legal expenses ($9,000), along with a reduction in accounting ($15,000).
      The increase of $16,000 in non-related party operating costs was primarily
      a
      result of utility cost increases of $62,000 due to the increase in tenants.
      These increases were offset primarily by decreases in non-related party legal
      expenses ($30,000). The Company continues to closely scrutinize all
      discretionary spending. Efforts to reduce and/or maintain expenses continue
      to
      be an important focus of the Company. Total operating expenses are expected
      to
      remain relatively consistent over the remainder of fiscal 2007.




Interest
      Income .
      For the
      three months ended September 30, 2006, the Company generated
      $34,000 of interest income on its
      cash balances as compared to $16,000 in the three months ended September 30,
      2005. The sale of a portion of the Company’s MetroPCS stock in November 2005 has
      increased the invested cash accounts which were then reduced in July 2006 by
      the
      payoff of the credit line with Wells Fargo.




Interest
      Expense. Interest
      expense consists solely of interest expense on mortgage debt. Interest expense
      decreased to $7,000 for the three months ended September 30, 2006, compared
      to
      $27,000 for the corresponding period in the prior year due primarily to the
      payoff of the credit line with Wells Fargo.




Other
      Income and
      Expense .
      For the
      three months ended September 30, 2006, the Company incurred
      a net increase in other income of $ 2,000,
      compared to the three months ended September 30, 2005 of $6,000, which included
      $5,000 from  the
      sale
      of a dust collection system and other equipment.




Income
      Taxes .
      The
      effective tax rate for the three months ended September 30, 2006 increased
      to a
      provision of 39.8% from a provision of 37% for the three months ended September
      30, 2005. The increase in the effective tax rate is primarily due to the impact
      of permanent differences on taxable income.




Liquidity
      and Capital Resources




The
      Company had cash of $2,417,000 and $3,851,000 at September 30, 2006, and June
      30, 2006, respectively. The decrease in cash and cash equivalents of $1,434,000
      since June 30, 2006 was primarily a result of the principal payment on long-term
      debt of $1,552,000 and capital expenditures of $2,000. This was offset by cash
      provided by operating activities of $152,000.




In
      October 2005, the Company, entered into a credit agreement with Wells Fargo
      Bank, National Association. The credit agreement replaced the Company’s previous
      credit agreement with the bank and, in part, refinanced approximately $1,600,000
      of indebtedness under the previous agreement. The credit agreement provided
      for
      a line of credit, which was available through September 1, 2010. The line of
      credit provided for advances not to exceed at any time an aggregate principal
      amount of $500,000. The term note bore interest at the bank’s prime rate plus
      .25% (or, at the Company’s election, the LIBOR rate, as defined, plus 3.25%),
      with monthly principal payments of approximately $7,000 beginning November
      1,
      2005. Unpaid principal and interest is due on the maturity date of October
      1,
      2010. The note was secured by a first deed of trust on the Company’s property
      located at 2064 Gravenstein Highway North, Sebastopol, California .
      On July
      21, 2006 the Company paid all of the outstanding amounts owed under its term
      loan with Wells Fargo in the amount of $1,552,000 thus terminating both the
      term
      loan and line of credit.




Cash
      flows from operating activities are expected to remain positive and relatively
      consistent given current tenant occupancy and rental agreements in
      place.




-14-


The
      Company believes that its existing resources, together with anticipated cash
      from operating activities, will be sufficient to satisfy its current and
      projected cash requirements for at least the next twelve months. The Company
      holds certain cash and cash equivalents for non-trading purposes that are
      sensitive to changes in the interest rate market. The Company does not believe
      that changes in the interest rate market affecting these financial instruments
      will have a material impact, either favorable or unfavorable, on its financial
      position or results of operations.




The
      Company does not have any off-balance sheet arrangements.




**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 the fair value of its investment in MetroPCS Communications,
      Inc. As of September 30, 2006, the Company believes that the carrying amounts
      for cash, accounts receivable and accounts payable approximate their fair value.
      Based on the price per share offered in the October 2005 tender offer, the
      Company believes that the investment in MetroPCS Communications exceeds its
      carrying amount.







-15-




**Item
      4. Controls and Procedures**




As
      of
      September 30, 2006, the Company carried out an evaluation, under the supervision
      and with the participation of the Company's management, including the Company's
      Chief Executive Officer 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 Chief Executive Officer 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 Chief Executive and Chief Financial Officer,
      do not expect that the Company's disclosure controls or internal
      controls 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 inherent
      limitations in a cost-effective control system, misstatements due to error
      and/or fraud may occur and not be detected.




**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







-16-


**Item
      6.**  **Exhibits**





31.1
            Chief
                Executive Officer and Chief Financial Officer Certification of Periodic
                Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act
                of
                2002*32.1
            Chief
                Executive Officer and 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.






-17-




SIGNATURES




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




Date:  November
      14, 2006







/s/
      Walker R.
      Stapleton


Walker
      R.
      Stapleton, Chief Financial Officer










-18-





EXHIBIT
                INDEXExhibit
                No.
            Document
                Description31.1
            Chief
                Executive Officer and Chief Financial Officer Certification of Periodic
                Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act
                of
                2002*32.1
            Chief
                Executive Officer and 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








-19-