<PAGE> 1


		      U.S. Securities and Exchange Commission
			     Washington, D.C.  20549
				  Form 10-KSB

(Mark One)
  [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the fiscal year ended December 31, 1999

  [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from ____ to ______

		       Commission File No. 0-26276
			   R.H. PHILLIPS, INC.
			   -------------------
	    (Name of small business issuer in its charter)

	   California                                68-0313739
  (State or other jurisdiction of                (I.R.S. Employer
   incorporation or organization)               Identification No.)


26836 County Road 12A, Esparto, California             95627
(Address of principal executive offices)            (Zip Code)


		Issuer's telephone number:  (530) 662-3215

   Securities registered under Section 12(b) of the Exchange Act:  None

      Securities registered under Section 12(g) of the Exchange Act:

			   No Par Common Stock
--------------------------------------------------------------------------
			     (Title of Class)

Check whether the issuer  (1) filed  all reports required to be filed
by Section 13 or 15(d) of  the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes  X   No
   ----     ----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]

Issuer's revenues for its most recent fiscal year:  $25,604,000

Aggregate market value of the voting stock held by non-affiliates based
on the closing price at which the stock was sold on the Nasdaq National
Market as of March 15, 2000 was approximately $12,887,000.

Number of shares outstanding of each of the issuer's classes of common
equity as of March 15, 2000: 6,695,331

Documents incorporated by reference:  Proxy Statement for the 2000
Annual Meeting of Shareholders

Transitional Small Business Disclosure Format:  Yes      No  X
						    ----    ----
<PAGE> 2

	PART I

Item 1. Description of Business

General

R.H. Phillips, Inc. ("R.H. Phillips") produces and sells premium varietal
table wines.  R.H. Phillips' vineyard, winery and corporate headquarters
are located in the Dunnigan Hills region of California, approximately 30
miles northeast of the Napa Valley wine region.  R.H. Phillips' wines are
sold throughout the United States and in several other countries, and
sales have increased from 4,500 cases in 1984 to 434,000 cases in 1999.

For purposes of the following discussion, a "case" means a nine liter
case of wine.  All numbers are approximate.

Business of Issuer

Strategy

R.H. Phillips, a leading California producer of super premium and
popular premium wines, specializes in the production of Chardonnay,
the Rhone Valley varietals Syrah and Viognier, and Zinfandel.  R.H.
Phillips owns or leases approximately 1,364 acres of producing vineyards
in the Dunnigan Hills viticultural region.  The combination of low
cost fruit production from the Dunnigan Hills and high quality
viticultural and enological practices common to Napa and Sonoma
has enabled R.H. Phillips to create wines that compete on a quality
basis with those produced from California's coastal regions.  R.H.
Phillips has made substantial investments in its vineyard and winery
over the past six years, and has used the new facilities to increase
the production and sale of higher profit super premium wines.

Products

R.H. Phillips produces and markets wines in the category known in the
wine industry as "table wines."  Table wines contain 7% to 14% alcohol
by volume, and are generally consumed with foods.  Table wines that
retail for less than $6 per 750 ml (milliliter) bottle are generally
referred to as "fighting varietals".  Table wines which retail in
the $6 to $10 range are referred to as "premium" or "popular premium"
wines.  Wines which retail between $10 and $15 per bottle are considered
"super premium" wines and those which retail above $15 per bottle are
considered "ultra premium" wines.

R.H. Phillips has developed a diverse line of products including popular
premium, super premium and ultra premium varietal table wines.  R.H.
Phillips markets its products under five brands, each of which is
defined by a type of wine and price structure.


EXP(r).  The EXP brand consists of a Syrah and an estate bottled
Viognier, which are varietals traditionally grown in  France's
southern Rhone Valley.  Rhone Valley varietals adapt well to the
warm Dunnigan Hills climate.  The EXP super premium wines are
fermented using several yeast strains to
<PAGE> 3
encourage a broad range of flavor development.  Warm fermentation
temperatures are employed to aid in the development of soft tannins
and intense color.  The wine is aged in oak barrels for up to 16 months.
EXP Viognier is estate bottled.  After pressing and cold settling,
the Viognier juice is fermented at cool temperatures, creating slow
fermentation in barrels and tanks.  The wine is left in contact
with fermentation lees to encourage yeasty, toasty characteristics.
Approximately 50% of the wine is aged in oak barrels for up to
eight months.  EXP wines have a suggested retail price of $14.

Toasted Head(r).  The Toasted Head brand consists of several super
and ultra premium wines.  Barrel coopers use toasting to alter the
impact of wood barrel aging on the quality of  wine.  Woody aromas
are subdued by toasting, while spicy, sweet, burnt and vanilla aromas
are increased by the process.  For Toasted Head wines, the barrel
staves and heads are moderately toasted.  This series includes a
100% Chardonnay which is fermented in French and American oak barrels
and is allowed to age sur lie to develop richness.  Toasted Head
Chardonnay is aged up to ten months in oak barrels.  The Cabernet
Sauvignon/Syrah blend is aged up to 23 months in French and American
oak barrels.  The wines are kept in small individual lots until the
final blend is assembled.  R.H. Phillips introduced its Toasted Head
Merlot and Malbec during 1999.  These wines are blended with other
Bordeaux varietals and aged in oak barrels to increase balance and
flavor.  Toasted Head Wines have suggested retail prices between
$14 and $16.

Kempton Clark(r). R.H. Phillips' two Zinfandel products are sold under
the Kempton Clark label.  Lopez Ranch Zinfandel is an ultra premium
wine produced from grapes grown on Lopez Ranch, a southern California
vineyard.  R.H. Phillips introduced MAD ("Multiple Appellation Designate)
Zin in 1999.  MAD Zin utilizes grapes grown throughout California,
including the Dunnigan Hills.  Kempton Clark Zinfandels are aged up
to 18 months in oak barrels and have suggested retail prices between
$14 and $18.

R.H. PhillipsTM.  R.H. Phillips markets several varietals under the
R.H. Phillips label.  R.H. Phillips has produced Chardonnay and
Cabernet Sauvignon for several years, and is a recognized quality
leader for Chardonnay and Cabernet Sauvignon priced under $10 per
bottle.  Approximately 40% of R.H. Phillips Chardonnay is either
fermented or aged in a combination of French and American oak barrels
for up to nine months.  The wine is left in contact with fermentation
lees in order to encourage yeasty, toasty characteristics.  The
Cabernet Sauvignon is barrel aged up to 12 months to increase
complexity and flavors.  R.H. Phillips Chardonnay and Cabernet
Sauvignon are bottled in 750 ml and 1.5 liter bottles.  The R.H.
Phillips Syrah and Merlot were introduced during 1999 and are
packaged in a 750 ml bottle.  These R.H. Phillips wines each
have a suggested retail price of under $10 for the 750 ml bottle.

The R.H. Phillips Night Harvest(r) Series consists of Sauvignon
Blanc, Mistura(r) and White Zinfandel products.  Sauvignon Blanc
is fermented and aged in stainless steel tanks to preserve maximum
fruit flavors.  Mistura is a blend produced from several Rhone
Valley varietals from the Dunnigan Hills and other select areas
of California.  R.H. Phillips' White Zinfandel is cold fermented
to preserve its fruity flavors.  Night Harvest wines are bottled
in 750 ml and 1.5 liter bottles.  The 750 ml bottle has a suggested
retail price of $6 to $8 per bottle.  Management plans to reduce
production of Mistura and White Zinfandel over the next few years
to increase emphasis on higher margin products.
<PAGE> 4

Chateau St. Nicholas(r).   The Chateau St. Nicholas products are sold
only during the holiday season, and consist of Chardonnay and White
Zinfandel.  The wines are sold primarily in 750 ml bottles, and have
a suggested retail price of under $7.

Product Sales By Brand

Product sales have been dominated by the R.H. Phillips brand, which
generated 76% of 1999 sales.  EXP sales totaled 30,200 cases in 1999,
an increase from 16,800 cases in 1998.  Sales of Toasted Head wines
increased from 37,300 cases in 1998 to 41,600 cases in 1999.  R.H.
Phillips plans to emphasize sales of its higher priced EXP, Toasted
Head, and Kempton Clark products in the future.  Chardonnay, which
historically has been R.H. Phillips' largest selling varietal,
accounted for 52% of 1999 sales.  Cabernet Sauvignon was the next
largest varietal, with 11% of sales.

Distribution

R.H. Phillips' sales strategy has focused on the creation, retention
and expansion of a large, nationwide distributor network supported by
sales personnel and commissioned brokers.  R.H. Phillips' wines are
distributed nationwide by a network of over 90 unrelated distributors
who purchase from R.H. Phillips at wholesale prices.  R.H. Phillips
employs eleven sales managers who work with certain distributors,
and a national sales manager.  R.H. Phillips also uses independent
wine brokers.  The brokers, who are paid a commission based on sales
revenue, accounted for 54% of 1999 sales.  Each sales representative
and broker is responsible for managing the wholesale network in their
region by educating the wholesalers' sales forces, facilitating
communication, managing product promotions and campaigns, and
monitoring sales performance.

R.H. Phillips' largest customers in 1999 were Young's Market, a
California wine distributor, and Lauber Imports and M.S. Walker,
which distribute wines in the northeastern United States.  Young's
Market, Lauber Imports and M.S. Walker accounted for 12%, 12% and
7% of R.H. Phillips' sales in 1999, respectively.

R.H. Phillips' wines are sold throughout the United States and in
several other countries.  The northeastern United States, which is
R.H. Phillips' largest region, accounted for 29% of 1999 sales.
The  northern Midwest was the second largest region with 15% of
sales.  R.H. Phillips' exported 3% of its 1999 sales,  primarily
to Canada.

R.H. Phillips' standard sales terms provide that payments are due 30
to 60 days after shipment at prices set forth on R.H. Phillips' price
lists.  R.H. Phillips does not have contracts with any of its
distributors which obligate them to purchase any specified amount
of wine over any defined period.  It is therefore possible for a
distributor, including one of R.H. Phillips' major distributors,
to cease purchases of R.H. Phillips' wines at any time.
<PAGE> 5

Sales and Marketing

R.H. Phillips' advertising and promotional activities occur at both
the distributor and consumer levels.  Distributor level programs
include promotional allowance rebates and volume discounts.  Consumer
level activities include media advertising, point of sale materials,
a tasting room, and various educational and promotional events.
Management believes that promotional allowances are the most cost
effective means of increasing sales volumes, while advertising and
other consumer level activities may provide increased name recognition.

Suppliers

R.H. Phillips purchases packaging materials, bulk wines, grapes and
other raw materials.  Management believes that it has strong
relationships with all of its major suppliers, is not dependent
on any single supplier, and would be able to find substitute
suppliers if necessary.

Because sales of some R.H. Phillips products have exceeded production
of certain grape varietals in the past several years, it has been
necessary to purchase bulk wine and grapes from outside suppliers.
Approximately 18% of R.H. Phillips' 1999 wine production came from
bulk grapes and wine purchased on the open market or through supply
contracts.  Certain R.H. Phillips products rely largely on purchased
grapes and are expected to continue to be produced from outside
sources in the future.  The supply and price of grapes have
historically been subject to considerable fluctuations.  R.H.
Phillips has expanded its vineyards over the past several years
in an effort to improve wine quality and lessen its dependence
on outside sources of bulk wine and grapes.

Research and Development

R.H. Phillips' researchers strive to improve wine quality through
experimentation and analysis of various winemaking and viticultural
techniques.  Viticulture research is directed toward gaining an
understanding of the factors that directly impact the quality of
grapes from R.H. Phillips' Dunnigan Hills vineyards.  Extensive
trials are conducted on crop load, irrigation levels, and
fertilization rates.  Numerous clones, rootstocks and trellis
systems are continuously evaluated in an effort to identify the
vines that produce the highest quality fruit from the numerous
soil conditions and microclimates in R.H. Phillips' vineyards.
Because most of R.H. Phillips' wines are produced using grapes
from vineyards located adjacent to or near the winery, there is
a strong link between vineyard research and management techniques
and the experimentation that takes place in the winery.  The
winemakers build on the vineyard quality efforts by experimenting
with new winemaking techniques developed by the research staff,
private laboratories, universities, and other wineries.  R.H.
Phillips has evaluated new yeast strains not yet commercially
available, and there is ongoing research on enzymes that increase
color extraction from red grapes.  Processing and fermentation
techniques are routinely evaluated as well.  The barrel research
program seeks to increase R.H. Phillips' understanding of the
role numerous barrel sources play in the premium wine program.
<PAGE> 6

R.H. Phillips maintains a close working relationship with the
faculty of the Department of Enology and Viticulture at the
University of California at Davis.  R.H. Phillips has also
exchanged valuable technical information with French, Australian
and South African winemakers and viticulturists.

Competition

The California table wine industry had an estimated $5.3 billion in
1999 sales, according to the December 1999 edition of  WINEDATA
published by  Gomberg, Fredrikson and Associates.  The three
largest wineries, known as "the Big Three," are E. & J. Gallo,
Canandaigua West, and The Wine Group.  The shipment volume of
the Big Three in 1999 accounted for approximately 56% of California
table wine shipments.  R.H. Phillips is the 24th largest shipper
of bottled wines in California, according to the 1999 edition of
WINEDATA.

The California wine industry is extremely competitive.  New wineries
are established on a regular basis which compete to some extent
with R.H. Phillips.  Management believes that competition in the
wine industry will likely increase, which could potentially reduce
future profits.  Plantings of vineyards have increased over the
last several years.  As a result, there may be certain grape
varietals that will be in oversupply in the future as the vineyards
begin to produce crops.  Such an oversupply may result in increased
pressure on wine prices.

Trademarks

R.H. Phillips has adopted a program to establish and protect its
trademarks and trade names.  R.H. Phillips has obtained federal
registrations for its EXP, Toasted Head, Kempton Clark, Night
Harvest, Mistura and Chateau St. Nicholas trademarks from the
U.S. Patent & Trademark Office as well as several registrations
for design trademarks.

Employees

R.H. Phillips has approximately 90 full-time employees.  In addition,
R.H. Phillips employs temporary labor for vineyard development,
pruning and harvest, and winery crush and bottling.  None of R.H.
Phillips' employees are covered by a collective bargaining agreement
and R.H. Phillips is unaware of any labor disputes with its employees.

Agricultural Hazards

Grape growing for wine production is heavily dependent upon favorable
weather conditions.  Drought or excessive rain can adversely affect
production.  Excessive heat or cold, especially near harvest, can
adversely affect grape and wine quality.  Weather has historically
had a large impact on the California wine industry, causing fluctuations
in crop yields and quality.

Diseases

Many California vineyards have been severely damaged by Phylloxera, an
aphid-sized root louse.  The pest lives and propagates in the soil and
feeds on the roots of vines.  Phylloxera is not harmful to humans,
but it can affect grape quality and causes a progressive decline in
grape production.  Chemical insecticides can slow the progress of
vine deterioration, but once a vine is infested it is not possible
to eradicate Phylloxera.  Phylloxera has impacted several grape
growing regions, including Napa, Sonoma, Monterey, Mendocino and
Lake counties.  R.H. Phillips has replaced all rootstock believed
to be susceptible to Phylloxera with rootstock believed in the
industry to be resistant to Phylloxera.

Another disease which affects California vineyards is Pierce's Disease.
Pierce's Disease is caused by a bacterium that kills grapevines by
blocking their water transportation tissue.  The bacterium is spread
by insects known as sharpshooters.  A vine with Pierce's Disease
usually produces no crop and dies within two years.  Although the
wine industry is researching possible methods of preventing and
eradicating Pierce's Disease, there is currently no known prevention
or cure.  Pierce's Disease has been found in vineyards located in
Napa, Sonoma and Riverside counties.  It is not believed to be
present in Yolo County, where R.H. Phillips' vineyards are located.

Grape vines are subject to a variety of other damaging diseases which
have afflicted California vineyards.  Management is unaware of any
diseases in R.H. Phillips' vineyards other than normal grape growing
conditions such as mildew and insect infestation.  R.H. Phillips is
treating these with both chemical treatments and organic methods.

Water Supply

R.H. Phillips has several wells on its property, and has rights to
limited quantities of water from the Yolo County Flood Control and
Water Conservation District.   These resources have historically
supplied sufficient quantities of water for irrigation.  However,
there can be no assurance that the wells will provide sufficient
water during a severe drought, or that county water will be available
in the future.  Future expansion of vineyards in the Dunnigan Hills
region may be limited by the availability of water.

Regulation

The U.S. wine industry is subject to substantial federal, state and
local regulation.  The Bureau of Alcohol, Tobacco and Firearms ("BATF")
is the federal agency primarily responsible for regulating the
production and sale of wine.  The BATF has promulgated numerous
regulations relating to the wine industry.  These regulations include
the licensing of wine producers, limitations on chemical additives
in wines, advertising standards, labeling requirements and numerous
other aspects of wine production and sales.  The BATF also collects
federal excise taxes on wine.  The amount of federal excise tax is
based on the total volume of wine shipped and the alcohol content of
that wine.  The current federal excise tax on wines shipped by R.H.
Phillips is $1.07 per gallon for wines containing less than 14%
alcohol and $1.57 per gallon for wines containing more than 14%
alcohol.  Less than 1% of the wine shipped by R.H. Phillips during
1999 contained more than 14% alcohol.
<PAGE> 8

State governments also regulate the production, shipment and marketing
of wine.  The wine regulatory agency in California is the Department
of Alcoholic Beverage Control.  The California state excise tax is
$0.20 per gallon of wine sold into California.  Missouri and Wisconsin
also collect excise taxes based on the volume of sales into those
states. Although the laws and regulatory requirements of other states
differ, most states require that wineries be licensed by the appropriate
state authorities before they are allowed to ship wine into the state.
R.H. Phillips has obtained licenses from those other states in which
it believes it is necessary to be licensed.  Most states also require
prior state approval of wine labels and set other standards for the
manufacture and sale of wine.  Wineries are subject to periodic
inspections and audits by the BATF and state alcohol regulatory
authorities.

In addition to alcohol-related governmental regulations, grape growers,
wine producers and wine shippers are subject to a broad range of
other regulatory requirements, such as local zoning regulations,
and regulations governing the use, storage and disposition of
pesticides, fuels and other chemicals.  R.H. Phillips believes
it is in substantial compliance with all material applicable laws
and regulations relating to its business.  Management is unaware
of any environmental problems on or near the vineyard or winery
that would have a material adverse effect on the financial condition
of R.H. Phillips.

Seasonality

R.H. Phillips usually experiences substantial seasonal fluctuations
in revenue and expenditures.  Sales volumes generally increase
during the holiday season, which causes a large percentage of
sales to occur during the last three months of each year.  In
1999,  33% of total case sales occurred during the last three
months.  R.H. Phillips' expenditures fluctuate throughout the
year based on vineyard and winery activities.  Expenditures
typically peak during the summer and early autumn due to harvest
and crush activities and  to fund vineyard and winery expansions.

Working Capital

R.H. Phillips typically keeps large amounts of inventories on hand.
Inventories include the current grape crop, bulk wine stored in
tanks and barrels, packaging supplies and bottled wines.  Sufficient
finished products are also kept on hand to allow for rapid turnaround
of wine orders and bottle aging.  Management believes that large
inventories are standard in the wine industry for these reasons.
R.H. Phillips' wine inventories are expected to increase in the
future as its product mix moves toward higher priced super premium
products that require longer aging.

Year 2000


In prior years, R.H. Phillips discussed the nature and progress of
its plans to become Year 2000 ready.  In late 1999, R.H. Phillips
completed its remediation and testing of computer systems.  As a
result of those planning and implementation efforts, R.H. Phillips
experienced no  disruptions in critical information technology and
non-information technology systems, and believes those systems
successfully responded to the Year 2000 date change.  R.H. Phillips
invested approximately $10,000 to upgrade certain non-information
technology systems to Year 2000 compliance.  Costs associated with
system testing were less than $5,000, and were expensed as incurred.
Management is not aware of any material problems resulting
<PAGE> 9

from Year 2000 issues with its products, its internal systems, or the
products and services of third parties.  Management intends to monitor
critical computer applications throughout the Year 2000 to ensure
that any latent Year 2000 issues which might arise are addressed
promptly.

Item 2. Description of Property

R.H. Phillips owns or leases 2,811 acres of land in California's
Dunnigan Hills region, located in northern Yolo County.  A total
of 1,364 acres are currently planted in producing vineyards.  R.H.
Phillips' winery facility and administrative headquarters are
located on R.H. Phillips' land.  The winery facility includes
bottling, barrel storage and warehouse buildings, wine storage
and fermentation tanks, and grape processing equipment.  At
December 31, 1999, R.H. Phillips owned or leased 15,200 oak
barrels capable of holding 895,000 gallons.  R.H. Phillips'
wine tank capacity is 2,345,000 gallons, for a total capacity
of 3,240,000 gallons.  The maximum bulk wine on hand at one
time during 1999 was 2,494,000 gallons.  R.H. Phillips leases
an off-site warehouse building with storage capacity of 300,000
cases of wine.  The  maximum number of cases on hand at one time
during 1999 was 212,000.  R.H. Phillips plans to construct another
barrel building and purchase additional barrels during 2000 to
accommodate planned growth.

In May 1997, R.H. Phillips sold 371 acres of land being developed
into vineyard to John Hancock Life Insurance Company ("Hancock").
In connection with that transaction, R.H. Phillips now manages,
operates and leases the land and vineyards from a subtenant of
Hancock, Farmland Management Services, for a term that expires
on December 31, 2012.   The lease requires R.H. Phillips to pay
rent of $161,000 per calendar quarter.

On September 15, 1999, R.H. Phillips purchased 313 acres of land
located near its other vineyards.  On September 29, 1999, R.H.
Phillips sold the land, of which 115 acres were partially developed
into vineyard, to David L. Gemmer and Shirley A. Gemmer ("Gemmer").
R.H. Phillips manages, operates and leases the land and vineyards
from Gemmer for a term that expires on December 31, 2011, and is
required to complete the development of the 115 acre vineyard.
The lease requires R.H. Phillips to pay rent quarterly beginning
January 1, 2002 in an amount equal to 2.8% of (i) development
costs and (ii) finance costs equal to 11.2% per annum of vineyard
development and land costs.

R.H. Phillips has granted to Metropolitan Life Insurance Company
("Metropolitan") a deed of trust on certain real property and a
security interest in certain equipment and other assets as security
for a long term loan R.H. Phillips received from Metropolitan.
R.H. Phillips maintains insurance policies with respect to its
principal properties which, in management's opinion, are adequate
in view of the value of the property and the nature of its business.

Item 3.  Legal Proceedings


Phillips Farms, a partnership operating a winery in Lodi, California,
filed a lawsuit against R.H. Phillips on August 5, 1999 in the Superior
Court of the State of California, County of San Joaquin.  Phillips
Farms is suing R.H. Phillips for trademark infringement, dilution
and unfair competition arising out of R.H. Phillips' use of the name
"Phillips" in connection with the sale of wine.  Phillips Farms also
alleges that R.H. Phillips has publicly disparaged the quality of
the wine Phillips Farms sells.  Phillips Farms is seeking
<PAGE> 10

damages in an amount to be determined by the court at trial, but in
no event less than $500,000, and a preliminary and permanent injunction
prohibiting R.H. Phillips' use of any infringing trademarks among
other relief.

R.H. Phillips believes that it has meritorious defenses to the
claims of Phillips Farms and also has legal claims against Phillips
Farms.  On October 4, 1999, R.H. Phillips filed a cross complaint
against Phillips Farms for infringement of R.H. Phillips' trademarks
and trade dress, among other actions.  If Phillips Farms is
successful in its suit, R.H. Phillips could be required to cease
use of the "R.H. Phillips" trademarks, which could have an adverse
effect upon the business and financial condition of R.H. Phillips.

Item 4.  Submission of Matters to a Vote of Security Holders

None
<PAGE> 11


				 PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

R.H. Phillips' Common Stock is listed on the Nasdaq National Market
under the symbol "RHPS".  As of March 15, 2000, there were 375
holders of record of R.H. Phillips' Common Stock.

The high and low bid prices for the Common Stock by quarter for the
past two years are as follows:

   Year Ended December 31, 1999

      First Quarter...........................  $3.25   $2.63

      Second Quarter..........................  $3.44   $3.00

      Third Quarter...........................  $3.25   $2.81

      Fourth Quarter..........................  $3.00   $2.50

   Year Ended December 31, 1998

      First Quarter...........................  $3.56   $2.50

      Second Quarter..........................  $3.88   $2.88

      Third Quarter...........................  $4.00   $3.00

      Fourth Quarter..........................  $3.38   $2.50

The information concerning the high and low bid prices is based on
information R.H. Phillips obtained from the Nasdaq National Market.

R.H. Phillips has not paid dividends on its Common Stock to date.
Management intends to reinvest earnings in the development of its
business and does not anticipate paying Common Stock  dividends for
the foreseeable future.  The Board of Directors may reevaluate its
policies with respect to the payment of Common Stock dividends in
the future.  Payment of dividends on the Common Stock is subject
to certain limitations under R.H. Phillips' loan agreements with
Metropolitan Life Insurance Company and U.S. Bank National Association.

Item 6.  Management's Discussion and Analysis of Financial Condition
and Results of Operations.

In reviewing the following management's discussion and analysis, the
reader should refer to the historical financial statements of R.H.
Phillips, Inc.  The discussion of the results and trends does not
necessarily imply that these results and trends will continue.
For the following discussion,  a "case" means a 9-liter case of
wine.  All numbers are approximate.
<PAGE> 12


Forward-Looking Statements

R.H. Phillips provides in this report and elsewhere from time to time
forward-looking statements regarding R.H. Phillips, its products,
the wine business, and general business and economic conditions.
Examples of forward-looking statements include projections regarding
future expansion, trends in the wine industry, sources of supply,
costs of production, profit margins, and availability and sources
of financing.  The actual results of R.H. Phillips may vary due to
a variety of factors, including the following:

Availability of Future Financing.  R.H. Phillips may continue to
heavily depend upon its ability to raise additional debt or equity
financing for its working capital and capital expansion needs.  The
ability to raise financing is in turn dependent upon a variety of
factors, some of which are outside the control of R.H. Phillips.
These factors include, but are not limited to, interest rates, the
availability of financing sources, and general economic conditions.
If interest rates increase or other financing becomes unavailable
or more costly to obtain, R.H. Phillips may not be able to raise
sufficient capital to supply its needs.

Costs of Expansion.  Management has based its assumptions concerning
the costs of expansion on assumptions which it believes are reasonable.
However, there can be no assurance that R.H. Phillips' estimates will
prove to be correct.  If costs are higher than anticipated, R.H.
Phillips may be required to raise an even greater amount of financing
or reduce the rate of facility expansion.

Costs of Production.  Statements with respect to R.H. Phillips'
general cost of production are based on management's assumptions
concerning the likely levels of future sales by R.H. Phillips,
projected yields from R.H. Phillips' vineyards and the cost and
availability of purchased bulk wine and grapes.  For example, if
R.H. Phillips' sales increase at a faster rate than anticipated
or R.H. Phillips' grape production is lower than projected, R.H.
Phillips could be forced to make additional purchases of grapes
and wine on the spot market.  Management believes that such events
could increase R.H. Phillips' costs of production.

Market Conditions.  Assumptions as to the desirability of expansion
are based to a great extent on management's beliefs concerning the
current status of and trends within the wine industry.  Market
conditions in the wine industry have changed substantially from
time to time.  To the extent market conditions change substantially
in the future, the rate at which R.H. Phillips deems it advisable
to expand its vineyard and winery facilities may be adjusted.

Other Factors.  A variety of other factors could affect the actual
results of R.H. Phillips.  These include changes in economic
conditions, unexpected adverse weather or growing conditions,
reduction or increases in consumer demand, changes in governmental
regulation concerning the production and sale of wine, and
increased competition from foreign or domestic wine producers.

Costs of Production


 R.H. Phillips' vineyards produced 9,500 tons of grapes in 1999,
 compared to 7,700 tons in 1998.  The increase was primarily due
 to production from vineyards planted in recent years.  R.H. Phillips
 has expanded its vineyards to lessen its dependence on outside
 sources of bulk wines and grapes and reduce
 <PAGE> 13

 its wine costs.  Management believes the full benefit of the
 vineyard expansion should continue to be realized over the next
 few years as the vines mature.

Results of Operations

Year Ended December 31, 1999

Net Sales

Net sales in 1999 were $25,604,000, an 18% increase over net sales
of $21,720,000 during 1998.   The average selling price per case
increased from $51.28 in 1998 to $55.26 in 1999, due to increased
sales of higher priced super premium products and price increases
on many R.H. Phillips products.  Sales of super premium wines
increased from 56,000 cases in 1998 to 79,000 cases in 1999.
R.H. Phillips sold 434,000 cases in 1999, an increase of 7%
from 405,000 cases in 1998.  Management believes that the higher
sales volume was primarily due to sales and marketing activities
and increased product availability, and reflects growing wine
consumption in the United States.  Excluding the sales of bulk
wines and other non-wine items, net sales were $23,969,000 in
1999, a 15% increase over net sales of $20,791,000 in 1998.

Gross profit

Gross profit was $13,715,000 in 1999, a 31% increase over $10,442,000
in 1998.   Gross margins were 54% in 1999, compared to 48% in 1998.
The higher gross margin in 1999 was primarily due to higher average
case prices.  Excluding gross profit on bulk wine sales of $123,000
and other items of $315,000, and inventory write downs of $100,000,
gross profit was $13,377,000 in 1999, compared to $11,115,000 in 1998.

Selling Expenses

Selling expenses were $6,351,000, or 25% of sales, in 1999, an
increase from $4,747,000, or 22% of sales, in 1998.  The $1,604,000
increase is primarily due to higher sales promotion and labor costs.
R.H. Phillips is significantly expanding its sales force in an effort
to continue its shift into super premium wines.  Consequently,
selling expenses are expected to increase in 2000.

General and Administrative Expenses

General and administrative expenses in 1999 were $1,046,000, an
increase from $962,000 in 1998.  The $84,000 increase is primarily
due to higher facility maintenance, legal and accounting expenses.
As a percentage of net sales, general and administrative expenses
were 4% in both 1998 and 1999.

Other Operating Expense


Other operating expense was $203,000 in 1999, compared to $146,000 in 1998.
The expense in both years was due to charges resulting from the removal
of nonperforming vineyards.  In October 1999,
<PAGE> 14

R.H. Phillips removed 85 acres of vineyard inflicted with Phylloxera.
Management determined that the low yields from these vineyards due
to Phylloxera made them uneconomical to farm.  The carrying value
of the vineyards and the cost of removal totaled $191,000.  In
addition, R.H. Phillips recorded an asset impairment charge of $12,000
in 1999 to record the removal of seven additional acres of Phylloxera
infested vineyards in February 2000. As of February 2000, R.H. Phillips
had removed or replaced all Phylloxera infested or susceptible vines
with rootstock believed in the industry to be resistant to Phylloxera.
In November 1998, R.H. Phillips removed 23 acres of vineyard which had
been producing inferior quality grapes. The vineyard had a carrying
value of $146,000.

Interest Expense

Interest expense in 1999 was $2,106,000, compared to $1,271,000 in the
prior year.   The increase in total interest in 1999 is primarily due
to the conversion of $2,500,000 of redeemable preferred stock to
subordinated debt in March 1999, and borrowings to fund winery and
vineyard expansion and working capital increases.  R.H. Phillips
capitalized $229,000 of additional interest pertaining to vineyard
and winery development during 1999, and $420,000 during 1998.

Other Income, net

Other income was $172,000 in 1999, compared to $163,000 in 1998.
The income in both years was primarily from crop subsidies and
vineyard management fees.

Provision for Income Taxes

Income tax expense for the year ended December 31, 1999 was $1,591,000,
an increase of $203,000 over 1998.  The increase in income tax expense
is primarily due to higher income in 1999 as compared to 1998.

Net Income Applicable to Common Shareholders

R.H. Phillips generated net income applicable to common shareholders
of $2,487,000 in 1999, compared to $1,748,000 in 1998.  The $739,000
or 42% increase was primarily due to higher gross profit, which was
partially offset by increased selling expenses and interest expense.

Year Ended December 31, 1998

Net Sales


Net sales in 1998 were $21,720,000, a 26% increase over net sales of
$17,258,000 during 1997.  Excluding the sales of bulk wines and other
items, net sales were $20,791,000 in 1998, a 28% increase over net sales
of $16,245,000 in 1997.  The average selling price per case increased
from $43.73 in 1997 to $51.28 in 1998, due to increased sales of higher
priced super premium products and price increases on most of R.H.
Phillips' products.  Sales of R.H. Phillips' super premium wines
increased from 15,000 cases in 1997 to 56,000 cases in 1998. R.H.
Phillips sold 405,000 cases in 1998, an increase of 9% from
<PAGE> 15

371,000 cases in 1997.  The increase in sales volume was primarily
due to more favorable  weather conditions during 1997 as compared
to 1996, which increased wine available for sale in 1998.

Gross Profit

Gross profit was $10,442,000 in 1998, a 45% increase over $7,204,000 in
1997.  Excluding the sales of bulk wines and other items, and inventory
write downs, gross profit was $11,115,000 in 1998, compared to
$7,046,000 in 1997.  Gross margins were 48% in 1998, compared to
42% in 1997. The higher gross margin in 1998 as compared to 1997
was primarily due to the higher average price per case.  Excluding
inventory write downs, the cost per case was substantially the same
in 1998 as 1997.

During 1998 R.H. Phillips wrote down inventory by $597,000.  The
adjustment was largely due to a reduction of the carrying value
of 399,000 gallons of bulk wine inventory.  During 1998, management
determined that it was uneconomical to continue production of two
low margin products, and decided to sell surplus bulk wines used
in these products in 1999.  Consequently, R.H. Phillips wrote down
the bulk wine inventory to its estimated market value.  Market value
was determined based on the then current selling price of bulk wines
for similar varieties and quality.  In addition, management recorded
a $123,000 charge associated with purchase commitments for bulk wines
used in these products.

Selling Expenses

Selling expenses were $4,747,000, or 22% of sales, in 1998, an increase
from $3,359,000, or 19% of sales, in 1997.  The $1,388,000 increase is
primarily due to higher sales promotion and labor costs.
General and Administrative Expenses

General and administrative expenses in 1998 were $962,000, an increase
from $918,000 in 1997.  The $44,000 increase is primarily due to higher
labor costs.  As a percentage of net sales, general and administrative
expenses declined from 5% in 1997 to 4% in 1998.

Other Operating Expenses

Other operating expenses were $146,000 in 1998.  In November 1998,
R.H. Phillips removed a 23 acre vineyard management believed to be
uneconomical to farm due to inferior grape quality.  The vineyard had
a carrying value of $146,000.

Interest Expense

Interest expense in 1998 was $1,271,000, compared to $908,000 in the
prior year.   The increase in total interest in 1998 is primarily due
to borrowings to fund winery and vineyard expansion and working
capital increases.  R.H. Phillips capitalized $420,000 of additional
interest pertaining to vineyard and winery development during 1998,
and $624,000 during 1997.
<PAGE> 16


Other Income, net

Other income was $163,000 in 1998, compared to $105,000 in 1997.
The income in both years was primarily from vineyard management fees.

Provision for Income Taxes

Income tax expense for the year ended December 31, 1998 was $1,388,000,
an increase of $598,000 over 1997.  The increase in income tax expense
is primarily due to higher income in 1998 as compared to 1997.  R.H.
Phillips' effective income tax rate also increased from 37% in 1997
to 40% in 1998.  The increase in the effective rate is due to a
decrease during 1998 in the state manufacturer's investment tax
credit available to R.H. Phillips as a percent of taxable income.

Net Income

R.H. Phillips generated net income of $2,091,000 in 1998, compared
to $1,334,000 in 1997.  The $757,000 or 57% increase was primarily
due to higher gross profit, which was partially offset by increased
selling expenses.

Liquidity and Capital Resources

R.H. Phillips has financed its working capital and capital expansion
needs through internally generated funds, bank credit facilities,
equity financing, long term debt, and the sale and leaseback of
certain assets.  R.H. Phillips has made substantial capital
expenditures to expand its vineyards and winery facilities in
order to obtain production efficiencies through vertical integration
and to increase product sales.  R.H. Phillips' cash flows from
operations have not been sufficient to satisfy all of the working
capital and capital expenditure requirements needed to keep pace
with its growth.  Consequently, R.H. Phillips has depended upon debt,
equity, and lease financing for its expansion needs.

R.H. Phillips had cash totaling $263,000 on December 31, 1999, an
increase from $151,000 on December 31, 1998.  Sources of cash during
1999 included cash from operations of $1,173,000  and proceeds from
long-term debt of $16,948,000.  Cash used during 1999 included
$6,290,000 invested in plant, equipment and vineyards, and
$11,874,000 to repay long-term debt.

Current assets increased by $6,134,000 during 1999, primarily due
to an increase in inventories from $12,674,000 on December 31, 1998
to $17,465,000 on December 31, 1999.  The increase is primarily due
to larger quantities of bulk and case wine.  Current liabilities
increased by $1,401,000 during 1999, primarily due to the timing
of payments on accounts payable.  These factors caused net working
capital to increase $4,733,000, from $12,785,000 on December 31, 1998
to $17,518,000 on December 31, 1999.


R.H. Phillips has several long-term loans, one of which was obtained
from Metropolitan Life Insurance Company ("Metropolitan").
R.H. Phillips borrowed $7,500,000 from Metropolitan in January 1995.
In December 1997, R.H. Phillips refinanced the loan at a lower
interest rate and borrowed
<PAGE> 17

additional funds from Metropolitan, increasing the total principal
amount to $11,000,000.  The unpaid principal under the loan accrues
interest at an annual rate of 8.04%.  R.H. Phillips is required to
make monthly principal payments of $60,000 plus accrued interest.
The loan matures in January 2013, at which time R.H. Phillips will
be required to make a balloon payment of $200,000.

R.H. Phillips has a line of credit of $15,000,000 with U.S. Bank
National Association ("U.S. Bank") to help finance its working
capital requirements.  The line of credit is secured by accounts
receivable, inventory and unencumbered farm equipment, and matures
in April 2001.  The annual interest rate on the line is either
U.S. Bank's prime rate or LIBOR plus 150 basis points, at R.H.
Phillips' option.  The balance on the line at December 31, 1999
was $11,562,000.

In May 1997, R.H. Phillips sold 371 acres of land being developed
into vineyard to John Hancock Life Insurance Company ("Hancock").
In connection with that transaction, R.H. Phillips now manages,
operates and leases the land and vineyards from a subtenant of
Hancock, Farmland Management Services, for a term that expires
on December 31, 2012.  R.H. Phillips received proceeds from the
sale of $5,384,000, and pays rent of $161,000 per calendar quarter.
The lease is accounted for as an operating lease.

On September 15, 1999, R.H. Phillips purchased 313 acres of land
for $490,000, and immediately began development of 115 acres of
the land into vineyard.  On September 29, 1999, R.H. Phillips
sold the land and improvements to David L. Gemmer and Shirley
A. Gemmer ("Gemmer") for $989,000, and entered into a Vineyard
Development and Lease Agreement (the "Agreement") with Gemmer.
Mr. Gemmer is a shareholder of R.H. Phillips, attends meetings
of the Board of Directors, and serves as an advisor.  Under the
terms of the Agreement, R.H. Phillips is required to complete
the development of the 115 acre vineyard.  The development period
begins September 29, 1999 and ends December 31, 2001 (the
"Development Period").  Subject to certain limitations, Gemmer
is required to reimburse all costs incurred by R.H. Phillips
during the Development Period.  R.H. Phillips is required to
lease and operate the vineyards for the ten year period ended
December 31, 2011, and is entitled to all crop produced during
this period.  Rent payments are due quarterly beginning January
1, 2002, and are equal to 2.8% of the sum of (i) development costs
and (ii) finance costs incurred by Gemmer during the Development
Period equal to 11.2% per annum of vineyard development and land costs.

In March 1996, R.H. Phillips sold 500,000 shares of Senior Redeemable
Preferred Stock (the "Senior Preferred Stock") and warrants to
purchase up to 1,346,788 shares of Common Stock to Hancock.
The net proceeds R.H. Phillips derived from the sale of the
Senior Preferred Stock and the warrants, after payment of offering
expenses, were $4,785,000. The Senior Preferred Stock bore a
cumulative annual dividend of $1.20 per share, payable semiannually.
During the first four years after issuance, 50% of the dividend
was payable in cash and 50% of the dividend was payable in shares
of Common Stock at a price equal to the lower of the average daily
market price over a period of twenty consecutive trading days before
the dividend payment date or $4.00 per share.
<PAGE> 18

In March 1999, R.H. Phillips exchanged, at par, all shares of the
Senior Preferred Stock for unsecured subordinated debt with a
principal amount of $2,500,000 and 250,000 shares of Redeemable
Exchangeable Preferred Stock ("Exchangeable Preferred").  The
subordinated debt carries an annual interest rate of 14%, payable
semi-annually.  The Exchangeable Preferred bore a cumulative
annual dividend of $1.20 per share payable semiannually in shares
of Common Stock at a price equal to the lower of the average
daily market price over a period of twenty consecutive trading
days before the dividend payment date or $4.00 per share.
In March 2000, R.H. Phillips converted the Exchangeable Preferred
to unsecured subordinated debt at an annual interest rate of 14%.
The subordinated debt can be paid, at R.H. Phillips' option, after
March 15, 2001.  R.H. Phillips is required to make principal
payments of $1,666,666 in 2004, $1,666,667 in 2005 and $1,666,667
in 2006.

R.H. Phillips expanded its winery production facilities in 1999 at
a cost of $4,999,000.  Equipment purchased included stainless steel
storage and fermentation tanks, refrigeration equipment, and barrels.
R.H. Phillips also finished constructing a tasting room and conference
facility during 1999.  Management plans to invest an estimated
$4,600,000 in barrels, a barrel storage facility and other equipment
during 2000.  Additional winery expansion projects are anticipated
for the future to handle the production of higher quality wines and
anticipated production increases from R.H. Phillips' owned and
leased vineyards. R.H. Phillips invested $868,000 in 1999 to
continue development of vineyards, and plans to invest an estimated
$800,000 during 2000.  R.H. Phillips financed 1999 capital projects
primarily with proceeds from an increase in the U.S. Bank line of
credit, long-term debt and capital lease financing, and plans to
fund 2000 capital projects with lease financing, long term debt and
cash flow from operations.

Phylloxera infestation has had a negative impact on R.H. Phillips'
grape production.  Phylloxera is a root louse which feeds on grape
roots, causing reduced production and eventual vine death.  Many of
R.H. Phillips' first vineyards contained rootstock which was
susceptible to Phylloxera.  R.H. Phillips has removed or replaced
all Phylloxera infested or susceptible vines with rootstock believed
in the industry to be resistant to Phylloxera.

Item 7.  Financial Statements

The audited financial statements of R.H. Phillips are set forth in
this report beginning at page F-1.

Item 8.  Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

Form 8-K. Item 4. Changes in Registrant's Certifying Accountants, dated
November 30, 1998, was filed with the Securities and Exchange Commission
on December 3, 1998, and is incorporated herein by reference.

<PAGE> 19


				    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act

Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act is presented in R.H. Phillips'
Proxy Statement for the 2000 Annual Meeting of Shareholders, and is
incorporated by reference herein.

Item 10.  Executive Compensation

Executive Compensation is presented in R.H. Phillips' Proxy Statement for
the 2000 Annual Meeting of Shareholders, and is incorporated by reference
herein.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners and Management is
presented in R.H. Phillips' Proxy Statement for the 2000 Annual Meeting
of Shareholders, and is incorporated by reference herein.

Item 12.  Certain Relationships and Related Transactions

Certain Relationships and Related Transactions is presented in R.H.
Phillips' Proxy Statement for the 2000 Annual Meeting of Shareholders,
and is incorporated by reference herein.

Item 13.  Exhibits and Reports on Form 8-K

(a)  Audited Financial Statements of R.H. Phillips are attached to
this annual report beginning on page F-1.  Other exhibits attached to
this annual report are as follow:

(a)  Exhibits

Exhibit No.     Description
-----------     -------------------------------------------------
 3.1 (A)        Articles of Incorporation

 3.2 (B)        Bylaws

 4.1 (B)        Form of Common Stock Certificate

10.1 (I)        Loan Agreement between R.H. Phillips and
		Metropolitan Life Insurance Company and Related
		Agreements, dated December 22, 1997

10.2 (F)        Loan Agreement between R.H. Phillips and U.S. Bank
		and Related Agreements, dated May 1, 1999.

10.3 (A)        Loan Agreement between R.H. Phillips and Heller
		Financial and Related Documents, dated October 20, 1995

<PAGE> 20

10.4 (B)        Promissory Note, dated December 31, 1993, by RHP Vineyards,
		Inc., payable to R.H. Phillips Partners

10.5 (C)        R.H. Phillips, Inc. 1995 Stock Option Plan and Forms of
		Incentive Stock Option and Nonstatutory Stock Option
		Agreements

10.6 (B)        Securities Purchase Agreement between R.H. Phillips and
		John Hancock Life Insurance Company, dated March 27, 1996

10.7 (B)        Form of Common Stock Purchase Warrant issued to John
		Hancock Life Insurance Company, dated March 27, 1996

10.8 (G)        Common Stock Purchase Warrant, dated July 30, 1996,
		issued to Van Kasper & Company

10.9(E)         Description of Compensation Arrangements with Victor
		Motto, director of R.H. Phillips

10.10(G)        Loan agreement between R.H. Phillips and U.S. Bancorp
		and Related  Agreements, dated December 31, 1996

10.11(H)        Real Estate Purchase Contract, Agricultural Sublease
		and Related Agreements between R.H. Phillips and Farmland
		Management Services, dated January 24, 1997

10.12(H)        Amendment to the Real Estate Purchase Contract,
		Agricultural Sublease and Related Agreements between
		R.H. Phillips and Farmland Management Services, dated
		January 24, 1997

10.13(I)        Employment Agreement between R.H. Phillips and John
		Giguiere, dated March 3, 1998

10.14(I)        Employment Agreement between R.H. Phillips and Karl
		Giguiere, dated March 3, 1998

10.15(J)        Securities Exchange Agreement between R.H. Phillips and
		John Hancock Life Insurance Company, dated March 12, 1999

10.16(J)        Form of Subordinated Note between R.H. Phillips and
		John Hancock Life Insurance Company, dated March 15, 1999

10.17(F)        R.H. Phillips 1999 Employee Stock Purchase Plan

<PAGE> 21

10.18(K)        Vineyard Development and Lease Agreement, dated September
		29, 1999, between R.H. Phillips and David L. and Shirley
		A. Gemmer, and related agreements

10.19           Securities Exchange Agreement between R.H. Phillips and
		John Hancock Life Insurance Company, dated March 15, 2000

10.20           Subordinated Promissory Note, dated March 15, 2000, issued
		to John Hancock Life Insurance Company

23.1            Consent of Ernst and Young LLP, Independent Auditors

27.1            Financial Data Schedule

(A) Filed as an exhibit to R.H. Phillips' Quarterly Report on Form 10-QSB
for the three month period ended March 31, 1999, and incorporated by
reference herein.

(B) Filed as an exhibit to R.H. Phillips' Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1994 and incorporated by reference
herein.

(C) Filed as an exhibit to R.H. Phillips' Quarterly Report on Form
10-QSB for the nine month period ended September 30, 1995 and
incorporated by reference herein.

(E) Filed as an exhibit to R.H. Phillips' Registration Statement
on Form SB-2, Amendment No. 2, dated July 16, 1996, and incorporated
by reference herein.

(F) Filed as an exhibit to R.H. Phillips' Quarterly Report on Form
10-QSB for the six month period ended June 30, 1999, and incorporated
by reference herein.

(G) Filed as an exhibit to R.H. Phillips' Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996 and incorporated
by reference herein.

(H) Filed as an exhibit to R.H. Phillips' Quarterly Report on
Form 10-QSB for the six month period ended June 30, 1997 and
incorporated by reference herein.

(I) Filed as an exhibit to R.H. Phillips' Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997 and incorporated
by reference herein.

(J) Filed as an exhibit to R.H. Phillips' Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998, and incorporated
by reference herein.
<PAGE> 22

(K) Filed as an exhibit to R.H. Phillips' Quarterly Report on
Form 10-QSB for the nine month period ended September 30, 1999,
and incorporated by reference herein.

(b) Current Reports on Form 8-K.

Form 8-K, Item 4. Changes in Registrant's Certifying Accountants, dated
November 30, 1998, was filed with the Securities and Exchange Commission
on December 3, 1998 and is incorporated by reference.
<PAGE> 23

				 SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




R.H. PHILLIPS, INC.

By://s// John E. Giguiere
-----------------------------
John E. Giguiere, Co-President and
 Co-Chief Executive Officer





			    Power of Attorney


KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below appoints John E. Giguiere and Michael J. Motroni, substitution,
for them in any and all capacities, to sign any amendments to other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and conferring all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.


In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

     Signature                 Title                     Date
     ---------                 -----                     ----


//s//John E. Giguiere    Co-President, Co-Chief          3/29/00
---------------------    Executive Officer,  Director    -------
John E. Giguiere         (Principal Executive Officer)

//s// Karl E. Giguiere   Co-President, Co-Chief          3/29/00
----------------------   Executive Officer, Director     -------
Karl E. Giguiere         (Principal Executive Officer)

//s// Michael J. Motroni Vice President, Finance         3/29/00
------------------------ (Principal Financial            -------
Michael J. Motroni       Officer)

//s//Richard A. Pierce   Controller (Principal           3/29/00
----------------------   Accounting Officer)             -------
Richard A. Pierce

//s//Lane C. Giguiere    Vice President,                 3/29/00
---------------------    Secretary, Director             -------
Lane C. Giguiere
<PAGE> 24

//s//Victor L. Motto     Director                        3/27/00
----------------------                                   -------
Victor L. Motto

<PAGE> 25





			    R.H. PHILLIPS, INC.


			    FINANCIAL STATEMENTS

		  YEARS ENDED DECEMBER 31, 1999 AND 1998


				   with

		       REPORT OF INDEPENDENT AUDITORS

<PAGE>26











			     R.H. Phillips, Inc.


			     Financial Statements

		   Years Ended December 31, 1999 and 1998




Report of Ernst & Young LLP, Independent Auditors........................F2

Audited Financial Statements
  Balance Sheet..........................................................F3
  Statements of Income...................................................F4
  Statements of Shareholders' Equity.....................................F5
  Statements of Cash Flows...............................................F6
  Notes to Financial Statements..........................................F7

<PAGE>27

	       Report of Ernst & Young LLP, Independent Auditors



The Board of Directors and Shareholders
R.H. Phillips, Inc.

We have audited the accompanying balance sheet of R.H. Phillips, Inc. as
of December 31, 1999, and the related statements of income, shareholders'
equity, and cash flows for the years ended December 31, 1999 and 1998.
These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred  to above present
fairly, in all material respects, the financial position of
R.H. Phillips, Inc. at December 31, 1999, and the results of its
operations and its cash flows for the years ended December 31, 1999
and 1998 in conformity with accounting principles generally accepted
in the United States.

					      //s//ERNST & YOUNG LLP


Sacramento, California
March 15, 2000

<PAGE> 28

			     R.H. Phillips, Inc.

			       Balance Sheet

		   (In thousands, except share information)
																       December
							    December
    			    31, 1999
							    --------
Assets
Current assets:
   Cash                                                     $   263
   Accounts receivable                                        4,121
   Inventories                                               17,465
   Prepaid expenses and other current assets                  1,209
							    -------
Total current assets                                         23,058

Property, plant and equipment, net                           37,349

Other assets                                                    731
							    -------
							    $61,138
							    =======

Liabilities and shareholders' equity
Current liabilities:
   Current maturities of long-term debt                     $ 2,247
   Accounts payable                                           1,592
   Accrued payroll and related                                  392
   Accrued selling expenses                                     753
   Other accrued liabilities                                    556
							    -------
Total current liabilities                                     5,540

Long-term debt                                               27,690
Subordinated debt                                             2,301
Deferred income taxes                                         2,670
Deferred gain and vineyard development costs                     16

Commitments and contingencies (Note 7)                            -

Redeemable exchangeable preferred stock, redeemable
  at $2,500,000                                               2,301

Shareholders' equity:
   Non-redeemable preferred stock, no par value,
      4,500,000 shares authorized, none issued
      and outstanding                                             -
   Common stock, no par value, 12,500,000 shares
      authorized, 6,633,137 shares issued
      and outstanding                                        14,641
   Additional paid-in capital                                   337
   Retained earnings                                          5,642
							    -------
Total shareholders' equity                                   20,620
							    -------
							    $61,138
							    =======
See accompanying notes.

<PAGE> 29

			     R.H. Phillips, Inc.

			     Statements of Income

		   (In thousands, except share information)


							  Year Ended
							  December 31,
							  ------------
						      1999         1998
						      ----         ----
<TABLE>
<S>                                                 <C>          <C>
Net sales                                           $25,604      $21,720

Cost of sales                                        11,889       11,278
						    -------      -------
Gross profit                                         13,715       10,442

Selling expenses                                      6,351        4,747

General and administrative expenses                   1,046          962

Other operating expenses                                203          146
						    -------      -------
Operating income                                      6,115        4,587

Interest expense                                     (2,106)      (1,271)

Other income, net                                       172          163
						    -------      -------
Income before provision for income taxes              4,181        3,479

Provision for income taxes                           (1,591)      (1,388)
						    -------      -------
Net income and comprehensive income                 $ 2,590      $ 2,091
						    =======      =======

Net income and comprehensive income                 $ 2,590      $ 2,091

Dividends and accretion on Redeemable
   Preferred Stock                                     (103)        (343)
						    -------      -------
Net income applicable to Common Shareholde          $ 2,487      $ 1,748
						    =======      =======

Net income per share - basic and diluted            $   .37      $   .26
						    =======      =======

Shares used in per share calculations:
 - Basic                                          6,689,175    6,689,175
 - Diluted                                        6,689,316    6,689,721


</TABLE>




See accompanying notes.

<PAGE> 30
<TABLE>
		     R.H. Phillips, Inc.

		    Statements of Shareholders' Equity

		  Years ended December 31, 1999 and 1998

		  (In thousands, except share information)




<CAPTION>
					     Common Stock      Additional  Retained  Total
					     ------------        Paid-in   Earnings
					    Shares    Amount     Capital
					    ------    ------    ---------  -------  -------
<S>                                       <C>         <C>       <C>        <C>
Balance at December 31, 1997              6,433,182   $14,041   $     337  $ 2,007  $16,385

Accretion of Redeemable Preferred Stock           -         -           -      (43)     (43)

Dividend on Redeemable Preferred Stock            -         -           -     (300)    (300)

Issuance of stock dividend                   98,649       300           -     (300)       -

Net income and comprehensive income               -         -           -    2,091    2,091
					  ---------   -------   ---------  -------  -------
Balance at December 31, 1998              6,531,831    14,341         337    3,455   18,133

Accretion of Redeemable Preferred Stock           -         -           -      (28)     (28)

Dividend on Redeemable Preferred Stock            -         -           -      (75)     (75)

Issuance of stock dividend                  101,306       300           -     (300)       -

Net income and comprehensive income               -         -           -    2,590    2,590
					  ---------   -------   ---------  -------  -------
Balance at December 31, 1999              6,633,137   $14,641   $     337  $ 5,642  $20,620
					  =========   =======   =========  =======  =======

</TABLE>





See accompanying notes.

<PAGE>31
<TABLE>


			       R.H. Phillips, Inc.

			    Statements of Cash Flows

				 (In thousands)
																			       Year ended
																			       December 31,

<CAPTION>
								Year ended
								December 31,
								------------
							       1999      1998
							       ----      ----
<S>                                                           <C>     <C>
Cash flows from operating activities:
Net income and comprehensive income                           $ 2,590 $ 2,091
Adjustments to reconcile net income to net cash
   provided by operating activities:
   Deferred income taxes                                          588     485
   Depreciation and amortization                                2,887   2,206
   Loss on disposal of property, plant and equipment              191     136
   Net changes in assets and liabilities:
      Accounts receivable                                      (1,139)   (469)
      Inventories                                              (4,791) (2,746)
      Prepaid expenses and other current assets                   (92)    (85)
      Other assets                                                (85)   (101)
      Accounts payable                                            534     241
      Accrued payroll and related                                  59      64
      Accrued selling expenses                                    272     258
      Other accrued liabilities                                   159      39
							       ------ -------
Net cash provided by operating activities                       1,173   2,119
Cash flows from investing activities:
Purchase of property, plant and equipment                      (6,290) (6,603)
Proceeds from sale of property, plant and equipment             1,000      14
							       ------  ------
Net cash used in investing activities                          (5,290) (6,589)

Cash flows from financing activities:
Cash dividends paid                                              (150)   (300)
Proceeds from long-term debt and notes payable                 16,948  17,450
Principal payments on long-term debt and notes payable        (11,874)(11,954)
Payment for development of leased vineyards and related costs    (695)   (680)
Other financing activities                                         --      (4)
							      ------- -------
Net cash provided by financing activities                       4,229   4,512

Increase in cash                                                  112      42
Cash at beginning of year                                         151     109
							      ------- -------
Cash at end of year                                           $   263 $   151
							      ======= =======
Other cash flow information:
Interest paid (including capitalized interest of
$229 and $420 in 1999 and 1998, respectively)                 $ 2,203 $ 1,520
Income taxes paid                                             $   905 $ 1,118
Noncash transactions:
Issuance of notes payable to finance property, plant and
  equipment purchased                                         $ 1,182 $     4
Issuance of stock dividend                                    $   300 $   300
Accretion of redeemable preferred stock                       $    28 $    43
Conversion of redeemable preferred stock to subordinated debt $ 2,281 $     -
</TABLE>
See accompanying notes.
<PAGE> 32



			     R.H. Phillips, Inc.

		       Notes to Financial Statements

			     December 31, 1999


1. Organization, Basis of Presentation and Summary of Significant
   Accounting Policies

R.H. Phillips, Inc. (the "Company"), a California corporation, was
formed in February 1994.  The predecessor to the Company, a family
farm operation, began farming grapes during 1981 and sold its first
wine during 1984.  The predecessor formed a limited partnership during
1989, which was merged into the Company in 1994.  R.H. Phillips produces,
markets, and sells popular premium and super premium California table
wines.  R.H. Phillips also farms vineyards which supply most of its
annual grape requirements.  R.H. Phillips sells most of its products
to distributors for resale to restaurants, wine shops, independent
liquor stores and grocery stores.

Inventories

Inventories are stated at the lower of  FIFO (first-in, first-out) cost
or market.  Cost includes the cost of grown and purchased grapes and
wines, processing and aging costs, and packaging materials.  Wine
inventories are classified as current assets in accordance with
recognized trade practice although certain inventories are aged for
periods longer than one year.  Crop costs associated with farming
vineyards prior to the harvest are deferred and recognized in the
year the wine is sold.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and are depreciated
using the straight-line method over the estimated useful lives of the
assets.  Vineyard lives are 25 years, buildings and improvements lives
range from 12 to 45 years, and equipment lives range from 5 to 30 years.

Costs of planting new vines and ongoing cultivation costs for vines not
yet bearing, including interest, are capitalized.  Depreciation commences
in the first year the vineyard yields a commercial crop, generally in
the third year after development began.

R.H. Phillips' long-lived assets and certain identifiable intangibles
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to future net cash flows expected
to be generated by the asset.  If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceed the estimated fair
value of the assets.  Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.

Estimates and Certain Risks

The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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.

The Company's three largest customers accounted for 12%, 12% and 7% of
sales in 1999 and 13%, 8% and 6% in 1998. Accounts receivable in the
aggregate from these distributors on December 31, 1999 was $1,198,000.
<PAGE> 33

			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)

1. Organization, Basis of Presentation and Summary of Significant
Accounting Policies (continued)

R.H. Phillips' wines are sold throughout the United States and in
several other countries.  The northeastern United States, which is
the Company's largest region, accounted for 29% of sales in 1999.
The northern Midwest was the second largest sales region with 15%
of sales.

R.H. Phillips employs eleven sales managers who work with certain
distributors to sell the Company's products.  In addition, R.H.
Phillips uses independent wine brokers.  R.H. Phillips' largest
sales volume is attributable to a broker whose organization generated
$10,329,000, or 40% of total sales, in 1999 and $9,803,000, or 45%
of total sales,  in 1998.

Income taxes

R.H. Phillips uses the liability method to account for income taxes.
Deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are
expected to reverse.  General business tax credits will be accounted
for as a reduction of federal income taxes payable under the
flow-through method.

Net income per share

Basic net income per share for the years ended December 31, 1999
and 1998 was computed using the weighted average number of common
shares outstanding during each period.  Diluted net income per
share was computed using the weighted average number of common
shares and dilutive potential common shares from common stock
options and warrants.  There were 141 dilutive potential common
shares outstanding at December 31, 1999.  Potential common shares
outstanding which could have a dilutive effect in the future,
but were anti-dilutive for the year ended December 31,  1999,
totaled 2,229,296.  Basic and diluted net income per share and
the weighted average number of common shares outstanding for the
year ended December 31, 1998 have been restated to reflect stock
dividends of 50,578 shares issued in September 1999 and 56,038
shares issued in March 2000.

Fair value of financial instruments

The following methods and assumptions were used to estimate the
fair value of each class of financial instruments.  The carrying
amounts of cash, notes receivable from shareholders, accrued
liabilities and notes payable approximate fair value because of
the short maturity of those instruments. The fair value of the
Company's long-term debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities,
and is approximately the same as the carrying value.

Stock-based compensation

As permitted under the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation", R.H.
Phillips has elected to account for stock-based compensation using

<PAGE> 34

			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)


1. Organization, Basis of Presentation and Summary of Significant
Accounting Policies (continued)

the intrinsic value method prescribed by Accounting Principles Board's
Opinion No. 25, "Accounting for Stock Issued to Employees".  Under
the intrinsic value method, compensation cost is the excess, if any,
of the quoted market price or fair value of the stock at the grant
date or other measurement date over the amount an employee must pay to
acquire the stock.

Prospective accounting developments

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities".  The Statement establishes certain
accounting and reporting standards of derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities.  In July 1999, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133", which
deferred the effective date until the first fiscal quarter of the
fiscal year beginning after June 15, 2000.  Management believes that
the adoption of the Statement will not have a material impact on
the Company's financial position, results of operations, or cash flows.

Reclassifications

Certain amounts in the 1998 financial statements have been reclassified
to conform with the current year's presentation.

Revenue recognition

Revenue from product sales is recognized when title passes to the customer.

2. Inventories

Inventories consist of the following at December 31, 1999:  (In thousands)
<TABLE>
	      <S>                                                <C>
	      Bulk wine                                          $12,459
	      Bottled wine                                         3,017
	      Bottling supplies and other                            649
	      Deferred crop costs                                  1,340
								 -------
	      Total                                              $17,465
								 =======
</TABLE>

<PAGE> 35

			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)


3. Property, plant and equipment

Property, plant and equipment consists of the following at December 31, 1999:
<TABLE>
<CAPTION>
							     (In thousands)
	      <S>                                                <C>
	      Land                                               $  2,619
	      Vineyards                                            14,487
	      Buildings and improvements                            6,733
	      Machinery and equipment                              22,236
	      Vehicles and office fixtures                          1,204
								 --------
	      Total                                                47,279

	      Less accumulated depreciation                        10,728
								 --------
	      Total                                                36,551

	      Vineyard and equipment construction in progress         798
								 --------
	      Property, plant, and equipment - net               $ 37,349
								 ========
</TABLE>

Total depreciation expense during the years ended December 31, 1999
and 1998 was approximately $2,802,000 and $2,114,000, respectively.

Plant and equipment under capital leases as of December 31, 1999 are
as follow:
<TABLE>
<CAPTION>
							     (In thousands)
		 <S>                                            <C>
		 Machinery and equipment                        $  4,060
		 Less accumulated depreciation                       265
								--------
								$  3,795
								========
</TABLE>

Depreciation expense for machinery and equipment under capital leases
was approximately $212,000 and $93,000 for the years ended December 31,
1999 and 1998, respectively.

<PAGE> 36
			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)


4. Long-term debt
<TABLE>
<CAPTION>
								(In thousands)
Long-term debt consists of the following at December 31, 1999:
  <S>
  Note payable to insurance company, interest at 8.04%,
     principal and interest payable monthly through January 2013,     <C>
     secured by various assets of the Company                         $ 9,560

  Note payable to bank, interest at prime or LIBOR plus 150
     basis points, principal due April 2001, interest payable monthly,
     collateralized by accounts receivable and inventory *             11,562

  Note payable to bank, interest at one month LIBOR plus 330 basis
     points, principal and interest due in 42 monthly payments of
     $19,911 followed by 42 monthly payments of $29,867,
     balance due December 2003, secured by certain equipment            1,375

  Notes payable to finance company, interest between 6.66% and 8.06%,
     principal and interest payable in monthly payments totaling
     $78,759 per month, balance due December 2002 through
     June 2006, secured by certain equipment                            3,285

  Note payable to finance company, payable in sixty monthly
     installments of $10,744 plus interest at one month LIBOR plus 332
     basis points, due November 2000, secured by certain equipment        102

  Capital lease obligations, interest between 4.77% and 10.03%,
     monthly payments totaling $63,285, balance due December 2000 through
     December 2007                                                      3,925

  Other                                                                   128
								      -------
								       29,937

  Less current maturities                                               2,247
								      -------
  Long-term portion                                                   $27,690
								      =======
 </TABLE>
*Maximum amount that can be borrowed on the note is $15,000,000.
The amount outstanding as of December 31, 1999 consists of $10,871,000
borrowed against the note and $691,000 in outstanding checks.  $3,438,000
was available to borrow at December 31, 1999.

The long-term debt agreements contain certain restrictive and financial
covenants, all of which R.H. Phillips was in compliance with as of
December 31, 1999. Payment of dividends on Common Stock is also subject
to certain limitations under some of these loan agreements.

<PAGE> 37
			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)


3.  Long-term debt (continued)

Principal payments required on long-term debt (other than capital leases)
for each of the next five years ending December 31, are as follows:
<TABLE>
<CAPTION>
							      (In thousands)
		   <S>                                           <C>
		   2000                                          $  1,773
		   2001                                            13,347
		   2002                                             1,856
		   2003                                             1,906
		   2004                                               918
		   Thereafter                                       6,212
								  -------
		   Total                                          $26,012
								  =======
</TABLE>

The $13,347,000 due in 2001 consists primarily of $11,562,000 payable
on the bank line of credit.

The Company leases certain winery and other equipment under noncancellable
capital leases.  Future minimum lease payments under these leases for
each of the next five years ending December 31 are as follows:
<TABLE>
<CAPTION>
							      (In thousands)
		   <S>                                             <C>
		   2000                                            $  690
		   2001                                               755
		   2002                                               737
		   2003                                               723
		   2004                                               727
		   Thereafter                                       1,204
								   ------
		   Total                                            4,836
		   Less amounts representing interest                 911
								   ------
		   Net minimum lease payments                      $3,925
								   ======
</TABLE>

5. Income taxes

The provision for income taxes consists of the following for the years
ended December 31:
<TABLE>
<CAPTION>
						       (In thousands)

						      1999         1998
		<S>                                  <C>          <C>
		Current:
		   Federal                           $1,017       $  903
		   State                                123            -
						     ------       ------
		       Total current provision        1,140          903
		Deferred:
		   Federal                              339          284
		   State                                112          201
						     ------       ------
		       Total deferred provision         451          485
						     ------       ------
						     $1,591       $1,388
						     ======       ======
</TABLE>
<PAGE> 38
			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)

5.  Income taxes (continued)

Deferred income taxes included in the balance sheet at December 31, 1999
are as follows:
<TABLE>
<CAPTION>
								(In thousands)
      <S>                                                            <C>
      Current deferred tax assets:
	  Nondeductible reserves and difference between
	     book and tax basis of inventory                         $   872
      Noncurrent deferred tax assets:
	  Difference between book and tax basis of intangible assets      65
								     -------
	  Total deferred tax assets                                      937

     Noncurrent deferred tax liability:
	 Difference between book and tax basis
	    of property, plant and equipment                           2,735
								      ------
     Net deferred tax liability                                       $1,798
								      ======
</TABLE>

Management believes that it is likely that all the deferred tax assets as
of December 31, 1999 will be realized and, therefore, no allowance for
deferred tax assets was made as of December 31, 1999 or December 31, 1998.

The provision for income taxes is at an effective rate different from
the statutory tax rate of 34% when applied to the pretax income of
$4,181,000 and $3,479,000 for the years ended December 31, 1999 and
1998, respectively, as a result of the following:
<TABLE>
<CAPTION>
							   1999       1998
     <S>                                                   <C>        <C>
     Expected U.S. Federal income tax                       34%        34%

     State franchise tax, net of federal benefit             6%         6%
     Permanent difference in basis of assets                 -          2%
     State manufacturer's investment credit                 (2%)       (2%)
							   ---        ---
	 Total                                              38%        40%
							   ===        ===
</TABLE>

R.H. Phillips utilized state manufacturer's investment credits of $150,000
and 235,000 for the years ended December 31, 1999 and 1998, respectively.

6.  Deferred gain and vineyard development costs

In May 1997, R.H. Phillips sold 371 acres of land being developed into
vineyard to John Hancock Mutual Life Insurance Company ("Hancock").
In connection with that transaction, R.H. Phillips now manages, operates
and leases the land and vineyards from a subtenant of Hancock, Farmland
Management Services, for a term that expires on December 31, 2012.
R.H. Phillips received proceeds from the sale of $5,384,000, and pays
rent of $161,000 per calendar quarter. The lease is accounted for as
an operating lease.

R.H. Phillips recognized deferred gain and vineyard development costs
of $1,529,000 at the time of closing, which consisted of the difference
between the actual costs of the property sold and the funds received
by R.H. Phillips.  R.H. Phillips expended $1,512,000 after the date
of closing to complete the vineyards that were still under development,
decreasing the deferred gain to $17,000.  This amount is being amortized
to income over the remaining life of the lease.
<PAGE> 39
			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)


7. Commitments and contingencies

Lease commitments

R.H. Phillips leases certain vineyards, facilities and vehicles under
operating leases.  Aggregate future minimum lease payments as of
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
							   (In thousands)
		   <S>                                        <C>
		   2000                                       $   822
		   2001                                           733
		   2002                                           647
		   2003                                           645
		   2004                                           645
		   Thereafter                                   5,160
							      -------
		   Total                                      $ 8,652
							      =======
</TABLE>

Total rent expense for all operating leases amounted to $813,000 and
$103,000 for the years ended December 31, 1999 and 1998, respectively.

Litigation

Phillips Farms, a partnership operating a winery in Lodi, California,
filed a lawsuit against R.H. Phillips on August 5, 1999 in the Superior
Court of the State of California, County of San Joaquin.  Phillips
Farms is suing R.H. Phillips for trademark infringement, dilution
and unfair competition arising out of R.H. Phillips' use of the name
"Phillips" in connection with the sale of wine.  Phillips Farms also
alleges that R.H. Phillips has publicly disparaged the quality of the
wine Phillips Farms sells.  Phillips Farms is seeking damages in an
amount to be determined by the court at trial, but in no event less
than $500,000, and a preliminary and permanent injunction prohibiting
R.H. Phillips' use of any infringing trademarks among other relief.

R.H. Phillips believes that is has meritorious defenses to the claims
of Phillips Farms and also has legal claims against Phillips Farms.
On October 4, 1999, R.H. Phillips filed a cross complaint against
Phillips Farms for infringement of R.H. Phillips' trademarks and
trade dress, among other actions.  If Phillips Farms is successful
in its suit, R.H. Phillips could be required to cease use of the
"R.H. Phillips" trademarks, which could have an adverse effect upon
the business and financial condition of R.H. Phillips.

8. Redeemable preferred stock and subordinated debt

In March 1996, R.H. Phillips completed a private placement sale of
500,000 shares of Senior Preferred Redeemable Stock ("Senior Preferred
Stock") and warrants to purchase up to 1,346,788 shares of Common Stock.
The net proceeds R.H. Phillips derived from the sale of the Senior
Preferred Stock and the warrants, after offering expenses, totaled
$4,785,000.  The Senior Preferred Stock bore a 12% cumulative annual
dividend, payable semiannually.  During the first four years after
issuance, 50% of the dividend was payable in cash and 50% of the
dividend was payable in shares of Common Stock at a price
equal to the lower of the average daily market price over a period
of 20 consecutive trading days before the dividend payment date or
$4.00 per share.  Thereafter, the dividend was payable in cash.
The carrying value of the Senior Preferred Stock was originally
$4,449,000, net of offering expenses and the estimated value of
the warrants.  In connection with this transaction, the holder of
R.H. Phillips's Senior Preferred Stock received warrants to purchase
1,381,321 shares of Common Stock at a price of $3.90.

In March 1999, R.H. Phillips exchanged, at par, all shares of the Senior
Preferred Stock for  unsecured subordinated debt with a principal
amount of $2,500,000 and 250,000 shares of Redeemable Exchangeable
Preferred Stock ("Exchangeable Preferred") redeemable at $2,500,000.
The subordinated
<PAGE> 40
			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)

8.  Redeemable preferred stock and subordinated debt (continued)

debt carries an annual interest rate of 14%, payable semi-annually.
The Exchangeable Preferred bore a cumulative annual dividend of $1.20
per share, payable semiannually in shares of Common Stock at a price
equal to the lower of the average daily market price over a period of
twenty consecutive trading days before the dividend payment date or
$4.00 per share.  The carrying values of the Exchangeable Preferred
and the subordinated debt were both $2,301,000 at December 31, 1999.
The difference between the carrying value and the redemption value
and principal amount is being accreted over the life of the Exchangeable
Preferred and subordinated debt using the interest method. 250,000
shares of Exchangeable Preferred were issued and outstanding as of
December 31, 1999.


In March 2000, R.H. Phillips converted the 250,000 shares of Exchangeable
Preferred to unsecured subordinated debt in the principal amount of
$2,500,000 at an annual interest rate of 14%, making the total
subordinated debt principal amount $5,000,000.  The difference
between the carrying value and principal amount will continue to
be accreted over the life of the subordinated debt using the interest
method.  R.H. Phillips has the option to pay the subordinated debt
after March 15, 2001, and is required to make principal payments of
$1,666,666 in 2004, $1,666,667 2005 and $1,666,667 in 2006.

9.  Shareholders' equity

In 1997, R.H. Phillips converted subordinated promissory notes in the
aggregate amount of $1,500,000 into 387,077 shares of Common Stock.
The notes became automatically convertible into Common Stock at a price
of $3.875 when the average of the closing bid and ask price for the
Common Stock exceeded $3.50 for five consecutive trading days subsequent
to December 6, 1996.  All outstanding interest and fractional shares
were paid in cash at the same time.  In connection with the conversion,
R.H. Phillips charged the remaining deferred issuance costs of $105,000
resulting in a net value of $1,395,000 being recorded in the Statement
of Shareholders' Equity.

In 1996, R.H. Phillips issued warrants to purchase 122,000 shares of
Common Stock at a price of $5.25 to the underwriter of its secondary
public offering.  The holder of R.H. Phillips's Exchangeable Preferred
and subordinated debt received warrants to purchase 1,381,321 shares of
Common Stock at a price of $3.90. The warrants held by the underwriter
of R.H. Phillips' secondary public offering and the holder of R.H.
Phillips's Exchangeable Preferred and subordinated debt are currently
exercisable.  The total number of warrants outstanding as of December
31, 1999 was 1,503,321.

Payment of dividends on the Common Stock is subject to certain limitations
under R.H. Phillips' loan agreements.

10. Stock compensation plan

Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123, and
has been determined as if R.H. Phillips had accounted for its employee
stock options under the fair value method of that Statement.  For
purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods.
<TABLE>
<CAPTION>
							  1999      1998
		  <S>                                    <C>       <C>
		  Net income (in thousands):
		    As reported                          $2,590    $2,091
		    Pro forma                            $2,507    $1,943
		  Earnings per share:
		    As reported                          $ 0.37    $ 0.26
		    Pro forma                            $ 0.36    $ 0.24
</TABLE>
<PAGE> 41
			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)



10. Stock compensation plan (continued)

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model.  The fair value of options
granted during the year ended December 31, 1999 assumed  a dividend yield
of 0%, an expected volatility of 33%, a risk-free interest rate of 5.68%
and an expected term of six years.  The fair value of options granted
during the year ended December 31, 1998 assumed a dividend yield of 0%,
an expected volatility of 36%, a risk free interest rate of 5.16% and
an expected term of six years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable.  In addition, option valuation
models require the input of highly subjective assumptions including
the expected stock price volatility.  Because R.H. Phillips's employee
stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.

Fixed Stock Option Plan - Under the 1995 Employee Stock Option Plan,
R.H. Phillips may grant options to its employees for up to 815,000
shares of Common Stock.  The exercise price of each option is no less
than the market price of R.H. Phillips's stock on the date of the grant
and an option's maximum term is ten years.  Options generally vest
ratably over the four years following the date of grant.

A summary of the status of R.H. Phillips' stock option plan as of
December 31, 1999 and 1998 and changes during the years ended on those
dates is presented below:

<TABLE>
					   1999                1998
				    ------------------  ------------------
					      Weighted           Weighted
					       Average             Average
					      Exercise            Exercise
				    Shares      Price     Shares    Price
				    ------- ----------  -------  ---------
<S>                                 <C>     <C>         <C>      <C>
Outstanding at beginning of year    731,564 $     4.29  561,564  $    4.01
Granted                               5,448       3.06  170,000       5.25
Exercised                                 -          -        -          -
Forfeited                           (12,258)      3.61        -          -
				    ------- ----------  -------  ---------
Outstanding at end of year          724,754 $     4.30  731,564  $    4.29
				    ======= ==========  =======  =========
Options exercisable at year end     644,194 $     4.34  447,901  $    4.27
				    ======= ==========  =======  =========
Weighted average fair value of
   options granted during year              $     1.47           $     .80
					    ==========           =========
</TABLE>
<PAGE> 42
			      R.H. Phillips, Inc.
		  Notes to Financial Statements (continued)


10. Stock compensation plan (continued)

The following summarizes information about fixed options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
						     Number outstanding at
						       December 31, 1999
						     ---------------------
	<S>
	Range of exercise prices:                           <C>
	 $2.97 - $3.99                                      213,232
	 $4.00 - $4.99                                      361,522
	 $5.00 - $6.05                                      150,000
											 724,754
	Options outstanding:
	   Weighted average remaining contractual life      7 years
	   Weighted average exercise price                    $4.30
	Options exercisable:
	   Number exercisable at December 31, 1999          644,194
	   Weighted average exercise price                    $4.34
</TABLE>

Stock Purchase Plan - R.H. Phillips established a stock purchase plan
in July 1999 (the "1999 Plan"), under which most employees may
participate.  A total of 150,000 shares of common stock have been
reserved for issuance under the 1999 Plan.  The 1999 Plan is
administered by the Board of Directors or by a committee appointed
by the Board of Directors.  Employees can elect to have from two
to ten percent of their monthly gross salary deducted during each
offering period and applied to the purchase of common stock.  The
purchase price is an amount equal to 85% of the fair market value
of a share of common stock on the purchase date.  The first offering
period commenced in September 1999 and ended in March 2000.  During
the year ended December 31, 1999, no shares of common stock were
sold under the 1999 Plan.

11.  Vineyard development

On September 15, 1999, R.H. Phillips purchased 313 acres of land for
$490,000, and immediately began development of 115 acres of the land
into vineyard.  On September 29, 1999, R.H. Phillips sold the land
and improvements to David L. Gemmer and Shirley A. Gemmer ("Gemmer")
for $989,000, and entered into a Vineyard Development and Lease
Agreement (the "Agreement") with Gemmer.  Mr. Gemmer is a shareholder
of R.H. Phillips, attends meetings of the Board of Directors, and
serves as an advisor.  Under the terms of the Agreement, R.H. Phillips
is required to complete the development of the 115 acre vineyard.
The development period began September 29, 1999 and ends December
31, 2001 (the "Development Period").  Subject to certain limitations,
Gemmer is required to reimburse all costs incurred by R.H. Phillips
during the Development Period.  R.H. Phillips is required to lease
and operate the vineyards for the ten year period ended December 31,
2011, and is entitled to all crop produced during this period.  Rent
payments are due quarterly beginning January 1, 2002, and are equal
to 2.8% of the sum of (i) development costs and (ii) finance costs
during the Development Period equal to 11.2% per annum of vineyard
development and land costs.