<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                  FORM 10-KSB

(MARK ONE)

<TABLE>
<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES AND EXCHANGE ACT OF 1934
</TABLE>

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                        COMMISSION FILE NUMBER 000-22857

                            ------------------------

                             SCHEID VINEYARDS INC.

                 (Name of small business issuer in its charter)

<TABLE>
<S>                                            <C>
               DELAWARE                                       77-0461833
    (State or other jurisiction of             (I.R.S. Employer Identification Number)
    incorporation or organization)

        13470 WASHINGTON BLVD.                                  90292
       MARIA DEL REY, CALIFORNIA                              (Zip Code)
    (Address of principal executive
               offices)
</TABLE>

                                 (310) 301-1555
                          (Issuer's telephone number)

                            ------------------------

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

    Securities registered under Section 12(g) of the Exchange Act: Class A
Common Stock, $.001 Par Value

    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 is not contained in this form, and no disclosure will
be contained, to the best of the 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.  / /

    Issuer's revenues for its most recent fiscal year:    $12,844,000

    Aggregate market value of the voting stock held by non-affiliates computed
by reference to the closing price at which the Class A Common Stock was sold on
the Nasdaq Stock Market National Market System on March 8, 2000: $10,108,000.
The voting stock held by non-affiliates on that date consisted of 2,310,463
shares of Class A Common Stock.

    Number of shares outstanding of each of the issuer's classes of common stock
at March 8, 2000:

                    Class A  2,310,463    Class B  3,374,100

    Portions of the registrant's Proxy Statement for its May 18, 2000 Annual
Stockholders Meeting, which has not been filed as of the date of this filing,
are incorporated by reference into Part III of this Report.

    Transitional Small Business Disclosure Format (check one)  Yes / /  No /X/

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                               FORM 10-KSB INDEX

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                         NUMBER
                                                                        --------
<S>       <C>                                                           <C>
Note Concerning Forward-Looking Statements............................      3

                                     PART I

Item 1.   Description of Business.....................................      3

Item 2.   Description of Properties...................................     19

Item 3.   Legal Proceedings...........................................     20

Item 4.   Submission of Matters to a Vote of Security Holders.........     20

                                    PART II

Item 5.   Market for Common Equity and Related Stockholder Matters....     20

Item 6.   Management's Discussion and Analysis or Plan of Operation...     21

Item 7.   Financial Statements........................................     26

Item 8.   Changes In and Disagreements With Accountants on Accounting
          and Financial Disclosures...................................     26

                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control
          Persons; Compliance With Section 16(a) of the Exchange
          Act.........................................................     26

Item 10.  Executive Compensation......................................     26

Item 11.  Security Ownership of Certain Beneficial Owners and
          Management..................................................     26

Item 12.  Certain Relationships and Related Transactions..............     26

Item 13.  Exhibits and Reports on Form 8-K............................     27

Signatures............................................................     32
</TABLE>

                                       2
<PAGE>
                   NOTE CONCERNING FORWARD-LOOKING STATEMENTS

    This Report contains certain forward-looking statements, including the plans
and objectives of management for the business, operations, and economic
performance of the Company. These forward-looking statements generally can be
identified by the context of the statement or the use of words such as the
Company or its management "believes," "anticipates," "intends," "expects,"
"plans" or words of similar meaning. Similarly, statements that describe the
Company's future operating performance, financial results, plans, objectives,
strategies, or goals are forward-looking statements. Although management
believes that the assumptions underlying the forward-looking statements are
reasonable, these assumptions and the forward-looking statements are subject to
various factors, risks and uncertainties, many of which are beyond the control
of the Company. Accordingly, actual results could differ materially from those
contemplated by the forward-looking statements. In addition to the other
cautionary statements relating to certain forward-looking statements throughout
this Report, attention is directed to "Business--Cautionary Information
Regarding Forward-Looking Statements" below for discussion of some of the
factors, risks and uncertainties that could affect the outcome of future results
contemplated by forward-looking statements.

                                     PART 1

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

    Scheid Vineyards Inc., a Delaware corporation ("SVI" or the "Company"), is a
leading independent (I.E., not winery controlled) producer of premium varietal
wine grapes. The Company currently operates approximately 6,000 acres of wine
grape vineyards. Of this total, approximately 4,400 acres are operated for the
Company's own account, and 1,600 acres are operated under management contracts
for others. All of the properties currently operated by the Company are located
in Monterey and San Benito Counties in California, both of which are generally
recognized as excellent regions for growing high quality wine grape varieties.

    The Company currently produces 18 varieties of premium wine grapes,
primarily Chardonnay, Merlot, Cabernet Sauvignon and Sauvignon Blanc. The
Company believes that its customers contract with SVI to assure a consistent,
reliable source of high-quality premium grapes for their wines. The Company's
two largest winery customers are Canandaigua Brands, Inc. ("Canandaigua") and
United Distillers and Vintners North America, a subsidiary of Diageo plc
("UDV"), the second and eighth largest U.S. wineries in terms of 1999 case
shipments, respectively. These customers' labels include GLEN ELLEN, BEAULIEU
VINEYARD, BV COASTAL, BLOSSOM HILL, PAUL MASSON, ALMADEN, DEER VALLEY,
DUNNEWOOD, and MYSTIC CLIFFS. Grape purchase contracts with UDV cover 57% of the
Company's acreage and accounted for approximately 76% and 74% of the Company's
1999 and 1998 total revenues, respectively.

    The Company also has long-term grape purchase agreements with other
well-known producers of ultra premium wines, including Beringer Wine Estates,
Chalone Wine Group, The Hess Collection Winery, David Bruce Winery and
Gundlach-Bundschu Winery. The terms of the Company's long-term grape purchase
contracts extend to between 2001 and 2014, and have "evergreen" provisions
requiring two or three years' prior written notice of termination. These
contracts generally require the customers to purchase substantially all of the
Company's production from specified vineyards at a formula price based upon the
previous harvest year's sales prices in California's leading coastal regions,
including Napa, Sonoma, Mendocino and Monterey Counties.

    The Company believes that selling its production through long-term contracts
allows it to attain reliable sources of revenues and profits not available
through sales on the yearly spot market or short-term contracts with wineries.
This, in turn, has allowed the Company to implement long-term programs

                                       3
<PAGE>
to redevelop and upgrade its older vineyards and develop new vineyard
properties. The Company's ongoing redevelopment and improvement program began in
1993 with the aim of changing low priced, low demand varieties such as Chenin
Blanc and French Colombard to higher priced, high demand varieties such as
Chardonnay, Cabernet Sauvignon and Merlot. In addition, the Company sought to
increase the quality of its wine grapes through innovative farming techniques.
Because it takes from five to six years for a vineyard to reach full production,
the Company anticipates increases in average yields until its redeveloped and
newly developed vineyards reach full maturity, subject to weather conditions and
other agricultural risks. See "--Cautionary Information Regarding
Forward-Looking Statements--Agricultural Risks".

    The Company's executive offices are located at 13470 Washington Blvd.,
Marina del Rey, California 90292, telephone number (310) 301-1555, and its
vineyard headquarters compound is located at 1972 Hobson Avenue, Greenfield,
California 93927.

    The Company's business is conducted through a wholly owned subsidiary,
Scheid Vineyards California Inc., a California corporation ("SVI-Cal").
References in this Report to "SVI-Del" refer only to Scheid Vineyards Inc., the
parent holding company. Unless otherwise required by the context, references in
this Report to "SVI" and the "Company" include SVI-Del and SVI-Cal on a
consolidated basis.

RECENT DEVELOPMENTS

    Due to a prolonged cold spell in the coastal growing regions of California,
the harvest of 1999 was substantially below historical average levels. The
weather conditions throughout most of the summer of 1999 were not favorable and
there was no sustained warming until early October. Consequently, the "sizing
up" of grapes which is promoted by warm weather in the summer months did not
occur and the wine grape harvest was delayed three to four weeks throughout the
coastal regions. As a result, Company revenues decreased 27% to $12.8 million
from $17.5 million in 1998. Net income decreased to $636,000, or $0.11 per
share, for 1999 compared to net income of $3.6 million, or $0.55 per share, for
1998. Overall, tons harvested for the Company's own account decreased by about
30%, with approximately 7,700 tons harvested in 1999 compared to 10,900 tons in
1998. Chardonnay was the variety most impacted by the cool weather patterns of
1999, experiencing an average decrease in yield of about 48% from 1998 and about
a 60% decrease from what the Company would consider an average year. Since about
37% of the Company's producing acreage in 1999 was planted to Chardonnay, the
decrease in Chardonnay yields had a dramatic impact on operating results.

    Based on the Preliminary Grape Crush Report published by the California
Department of Food and Agriculture covering the 1999 harvest (from which the
Company's 2000 grape prices are primarily determined), the Company anticipates
that wine grape prices for the varieties it produces will be moderately
increased from prices received for the same varieties in 1999.

    On September 9, 1999, the Company instituted a stock repurchase program in
which the Company may spend up to $2.5 million in open market transactions to
purchase outstanding shares of its Class A Common Stock at such times, in such
amounts or blocks and at such prices as deemed appropriate. This repurchase
program will expire on December 31, 2000, and replaces a previously existing
repurchase program that was to expire on September 30, 1999. Through December
31, 1999, the Company had repurchased 423,100 shares under this program for
approximately $1,897,000. Under previous stock repurchase programs and other
repurchases, the Company had previously repurchased 592,650 shares for an
aggregate purchase price of approximately $2,997,000. The repurchase plans were
initiated due to management's belief that the Company's stock was undervalued in
the market place. The Company continues to explore a variety of alternatives to
enhance shareholder value.

                                       4
<PAGE>
    On September 7, 1999, the Company entered into a new long-term crop line of
credit agreement with its principal bank. The new crop line expires on June 5,
2001, provides for maximum borrowings totaling $12,000,000, and replaces the
Company's previous crop line of credit.

    In December 1998, the Company signed a long-term lease for approximately 750
acres of undeveloped land suitable for wine grape vineyards in Greenfield, a few
miles from the Company's vineyard headquarters. The lease is for a term of up to
34 years. The planting of the entire 720--net vine acre vineyard, named Mesa del
Rio Vineyard, including rootstock and irrigation and trellising systems, has
been completed, with the first harvest expected in 2001.

COMPANY STRATEGY

    The Company's strategic objective is to become the leading independent
producer of premium varietal wine grapes in California. The Company believes
that its success to date has resulted from execution of a coherent strategy that
includes the following elements:

    PRODUCE HIGH VALUE PREMIUM WINE GRAPES. The Company has consistently
    emphasized production of high value wine grapes that its customers can use
    to produce premium varietal wine. These varieties principally include
    Chardonnay, Cabernet Sauvignon and Merlot, in addition to other varieties
    that command premium prices. Throughout its history, SVI has consistently
    provided its customers with wine grapes that meet demanding specifications
    for quality, as measured by sugar content and other objective
    characteristics. The Company maintains an ongoing program of grafting,
    replanting and new vineyard development to conform its product mix to take
    advantage of trends in the wine industry. The Company believes it has
    developed an excellent reputation in the grape producing industry due to its
    emphasis on quality and performance. See "--The Company's Grape Production
    Operations--Grape Production."

    CONTINUE LONG-TERM RELATIONSHIPS WITH LEADING WINE PRODUCERS. The Company
    has had grape purchase contracts with UDV and its predecessors since 1972
    and with Canandaigua and its predecessors since 1979. More recently, SVI has
    been contracting for grape sales with additional wineries with reputations
    for producing excellent wines such as Beringer Wine Estates, Chalone Wine
    Group and The Hess Collection Winery. Substantially all of the Company's
    production is contracted at least through the harvest of 2001, and the
    majority is contracted at least through the harvest of 2006 with pricing
    arrangements the Company considers favorable. See "--The Company's Grape
    Production Operations--Grape Sales." The Company believes that its
    utilization of long-term contracts allows it to build long-term and mutually
    beneficial relationships with its customers and attain reliable sources of
    revenues not readily available to producers relying on the yearly spot
    market or short-term contracts with wineries.

    MAXIMIZE REVENUES AND PROFITABILITY PER ACRE. The Company invests in new
    equipment and the development of new and improved viticultural practices in
    order to increase the productivity and efficiency of its vineyards. These
    practices include methods of interplanting grape vines to increase vine
    density, new trellising systems designed to support more grape production
    while maintaining quality, and other state-of-the-art vineyard practices
    that facilitate increased production and mechanization. Because increased
    yields per acre do not significantly increase fixed or variable costs of
    operating vineyards, productivity improvements contribute substantially to
    gross profits. Due to its continuing redevelopment and improvement program
    on approximately 2,500 acres since 1993, the Company believes that much of
    its acreage is now capable of producing significantly more higher value and
    better quality grapes. See "--The Company's Grape Production
    Operations--Viticultural Practices".

    ACQUIRE HIGH QUALITY VINEYARD PROPERTIES. The Company has developed a
    disciplined property acquisition strategy in order to increase its
    productive capacity and leverage its available management and equipment
    resources. Due to the significant capital required to own, improve and

                                       5
<PAGE>
    operate vineyards, SVI believes that there may be opportunities to purchase
    or lease undeveloped land suitable for wine grape vineyards and acquire
    existing vineyards. The Company plans to capitalize on the experience and
    reputation of its senior management to pursue this strategy primarily in
    Monterey County. The Company's criteria for land and vineyard acquisitions
    emphasize value concepts intended to maintain long-term rates of return
    within certain ranges, although no assurances can be given regarding the
    profitability of any vineyard development or acquisition. As a result, the
    Company continually evaluates growth opportunities, but it only pursues
    those selected transactions that satisfy the Company's investment criteria.
    See "--New Vineyards and Redevelopment of Existing Vineyards".

    While the Company's long-term strategic objectives remain intact, poor crops
    in 1998 and 1999 have limited the Company's cash flows and thus the ability
    of the Company to expand through vineyard acquisitions.

CALIFORNIA WINE AND GRAPE INDUSTRY

    The market for California premium varietal table wines has grown
significantly over the last 20 years. Since 1980, California premium wine
revenues have increased at an average 17% compound annual rate to approximately
$4.4 billion, or approximately 83% of total California table wine revenues of
approximately $5.3 billion in 1999, according to Gomberg, Fredrikson &
Associates. This growth in California premium wine revenue reflects, among other
things, an increase in U.S. per capita spending on premium California table
wines from $1.82 in 1980 to $32.62 in 1999, and an increase in U.S. per capita
consumption of premium California table wines during the same time period, from
0.07 gallons in 1980 to 0.73 gallons in 1999. In addition, exports of California
wine have grown significantly, increasing over 200% in the last 10 years, from
16 million gallons in 1989 to 50 million gallons in 1999.

THE COMPANY'S GRAPE PRODUCTION OPERATIONS

    VINEYARD OPERATIONS

    SVI currently owns or manages approximately 6,000 acres of wine grape
vineyards in Monterey and San Benito Counties. These properties consist of
approximately 4,400 acres in Monterey County operated for the Company's own
account and approximately 1,600 acres operated under management contracts for
others. Of the Company's approximately 4,050 net vine acres of wine grapes,
approximately 2,290 net vine acres, or 57%, have been contracted for sale to UDV
under long-term grape purchase contracts, approximately 560 net vine acres have
been contracted for sale to other winery clients, approximately 220 net vine
acres represent newly redeveloped acreage planted by the Company in 1997 and
1998 which is not subject to grape purchase contracts, and approximately 980
acres are newly leased land for which development began in 1997, 1998 and 1999.
See "--New Vineyards and Redevelopment of Existing Vineyards".

    GRAPE PRODUCTION

    SVI's acreage of higher value varieties (E.G., Chardonnay, Cabernet
Sauvignon, Merlot, Sauvignon Blanc and Pinot Noir) has increased in recent years
due to changes in product mix through grafting and replanting of the Company's
original vineyards, the acquisition of a vineyard, and the development of new
vineyards. In addition, yield potential has been increased through interplanting
which increases vine density and improvements in wine grape production
technology and know-how. See "--Viticultural Practices." In 1993, the Company
began a major improvement and refurbishment program and took many acres out of
production temporarily in order to graft the original vines or replant new
rootstock. This planned decline in grape production caused grape sales revenues
for 1993 and 1994 to be lower than they otherwise would have been and resulted
in a significant decline in tonnage produced through 1996. In 1996, as replanted
acreage started to mature, production of high value premium varieties

                                       6
<PAGE>
increased. In addition, the Company acquired a 370-acre vineyard in June 1997
and developed into new vineyards approximately 54 acres in 1996, 316 acres in
1997, 322 acres in 1998 and 720 acres in 1999.

    The Company believes that its potential production of high value wine grapes
in these vineyards will increase for the next few years as replanted,
interplanted and newly planted vines continue to mature. However, while
potential production may increase, actual grape production varies according to
the variety of grape produced, vine density, the quality and type of soil, water
conditions, weather and other factors, and no assurances can be given that such
production increases will occur with any predictability or at all. The following
table shows SVI's net vine acres by variety from 1995 to 2000, total tons
produced from 1995 to 1999, and tons produced by variety for 1999:

                 NET VINE ACRES OWNED BY SVI AND TONS PRODUCED

<TABLE>
<CAPTION>
                                                                  NET VINE ACRES                              TONS
                                          ---------------------------------------------------------------   --------
VARIETY                                     1995       1996       1997       1998       1999       2000       1999
-------                                   --------   --------   --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>        <C>        <C>
Chardonnay..............................     656         756        901        881     1,002      1,078      2,114
Merlot..................................     307         454        506        555       555        556      2,404
Cabernet Sauvignon......................     286         274        296        297       441        738      1,536
Sauvignon Blanc.........................     133         133        133        122       238        241        526
Pinot Noir..............................      --          --        102        104       133        151        294
Gewurztraminer..........................     103         103        103         82        82         82        127
White Riesling..........................     103          83         87         87        58         58        217
Zinfandel...............................     107          83         83         83        86         86        231
Syrah...................................      --          --         --         26        64         62        184
Petite Sirah............................      --          --         --         --        --         31         --
Napa Gamay..............................      39          39         39         20        20         20         47
Grenache(1).............................      28          28         28         28         2          2          5
Souzao..................................      --          --         10         11        11         11          8
Semillon................................      --          --         26         --         3          3         --
Chenin Blanc............................     228         187         84         84        --         --         --
Others..................................      13          --         --         --        30         26         --
Replants/Grafts(2)......................     313         164        255        328       295        185         --
New Acreage(3)..........................      --          54        374        632     1,030        720         --
                                           -----      ------     ------     ------     -----      -----
  Total Net Vine Acres..................   2,316       2,358      3,027      3,340     4,050      4,050
                                           =====      ======     ======     ======     =====      =====      -----
  Total Tons Produced...................   8,390      11,241     15,610     10,932        --                 7,693
                                           =====      ======     ======     ======                           =====
</TABLE>

------------------------

(1) Included 28 acres leased to Joseph Phelps Vineyards through December 31,
    1998 and operated by the Company for the account of Joseph Phelps Vineyards.

(2) Replants/grafts are acres which are temporarily taken out of production due
    to grafting or replanting to change varieties. Acres are deemed to be back
    in production in the third crop year.

(3) New acreage represents newly acquired bare ground which is in the
    development stage. The development stage is the first three years of the
    vineyard's life, when the Company expects little or no production.

                                       7
<PAGE>
    GRAPE SALES

    PRIMARY CUSTOMERS.  The wine grape tonnage harvested from the Company's
approximately 2,725 net vine acres in production in 1999 (I.E., excluding
vineyards under development or redevelopment) is largely subject to grape
purchase contracts with a small number of well-known wine producing companies.
The largest set of these contracts, representing approximately 80% of the
Company's 1999 grape sales revenues and 76% of the Company's 1999 total
revenues, is with UDV. UDV is a unit of Diageo plc, one of the world's largest
wine and spirits sales companies, which is headquartered in the United Kingdom.
In 1999, UDV was California's eighth largest wine producing company with sales
of approximately 5.8 million cases of wine. The Company's contractual
relationship with UDV's predecessor began in 1972 and has been continuous since
that time. The Company believes that it is currently the largest supplier of
wine grapes to UDV. The Company has sales contracts for substantially all of the
balance of its wine grape production with other wine producers, including
Canandaigua, Beringer Wine Estates, Chalone Wine Group and The Hess Collection
Winery. The Company also manages, as a contract vineyard operator, an aggregate
of approximately 1,533 acres of wine grapes for UDV and Canandaigua,
representing 96% of the total acres managed by the Company in 1999. See
"--Vineyard Management Contracts."

    The terms of the Company's grape purchase contracts generally require the
customers to purchase substantially all of the Company's production from
specified vineyards at a formula price based upon the previous harvest year's
sales prices for specified districts as reported in the Final Grape Crush Report
published by the California Department of Food and Agriculture ("CDFA"). See
"--Pricing." The contracts generally require the Company to deliver grapes
meeting specified sugar levels and other quality measurements. Substantially all
of the contracts call for payment in full within 30 days of delivery of the crop
to the customer.

    The terms of the Company's long-term grape purchase contracts extend to
between 2001 and 2014. Contracts covering most of SVI's acreage extend to 2006
and have "evergreen" renewal provisions whereby the contracts continue until
either party gives a two or three years' prior written notice of termination.
The Company believes that these evergreen provisions allow it time either to
renegotiate the contract with its contracting customer or to find a new customer
for the grape production before the contract terminates. See "--Cautionary
Information Regarding Forward-Looking Statements--Dependence on Major Customers;
Renewal of Grape Purchase Agreements."

    The Company has enjoyed excellent relationships with its customers that have
been built over many years of satisfying their needs for quality, timely
delivery and service. Long-term supply arrangements benefit customers by
providing a significant, reliable supply of high-quality grapes at predictable
prices, and the Company believes that in many respects UDV and Canandaigua
prefer their supply arrangements with the Company to the purchase of comparable
amounts of grapes on the open market from multiple producers. These contracts
also benefit the Company by providing reliable sources of revenues. SVI believes
that these contracts are one of the major reasons for its past success, and it
plans to rely upon these and similar contracts in the future. While contract
terms are typically a function of market factors and it is not possible to know
what the terms of the Company's future grape purchase arrangements will be, it
is probable that any renewal or replacement of the Company's UDV and Canandaigua
contracts, the majority of which will expire in 2006, and any purchase
agreements covering new vineyards will have different terms. Among other
potential contract terms, the Company intends to consider entering into
long-term grape purchase contracts with generally fixed maximum and minimum
prices per acre instead of prices per ton that are subject to annual variation.
It is anticipated that such acreage contracts would provide for the customer to
bear more of the crop risk than is typically borne by the Company under a
tonnage contract.

    PRICING.  Each year the CDFA publishes the Grape Crush Report on a
preliminary basis on February 10, with a final report published on March 10. The
Grape Crush Report discloses the prices,

                                       8
<PAGE>
tons and certain quality standards of all grapes crushed for wine from each of
California's 17 wine grape producing districts in the grape harvest of the
previous autumn. The report is relied upon heavily by wineries and wine grape
producers to negotiate contracts and establish grape prices, as well as by
financial and other institutions who serve the wine industry.

    SVI's contract grape prices are established each year by formulas which are
different for each of its customers. However, substantially all of its contracts
utilize a formula which is used to calculate a price for each wine grape variety
based on the previous year's prices in several specified CDFA reporting
districts. For example, grapes from the Company's 2000 harvest that are subject
to these contracts will be sold at prices based on the actual prices for the
1999 harvest reported in the Final Grape Crush Report published March 10, 2000.
This enables both the Company and its customers to know final grape prices (on a
per ton basis by variety) approximately eight months in advance of each year's
harvest. These multiple district formula prices, as opposed to sales on the
short-term spot market, tend to moderate year-to-year swings in prices. The
Company's grape purchase contracts typically utilize pricing based in part upon
prices for Napa, Sonoma and Mendocino County grapes, which tend to be higher
than prices for the same varieties produced in Monterey County. Some recent
agreements use pricing formulas that are based more heavily on Monterey County
data, which may also be the case for the renewal or replacement of the UDV and
Canandaigua agreements and additional agreements covering new or replanted
vineyards. The chart below shows the weighted average prices SVI has received,
or expects to receive, per ton of grapes for the primary varieties it has
produced since 1995 based on the pricing formulas of its various tonnage-based
grape purchase contracts.

               WEIGHTED AVERAGE PRICES PER TON RECEIVED BY SVI(1)

<TABLE>
<CAPTION>
VARIETY                                         1995       1996       1997       1998       1999     2000(2)
-------                                       --------   --------   --------   --------   --------   --------
<S>                                           <C>        <C>        <C>        <C>        <C>        <C>
Chardonnay..................................   $1,060     $1,188     $1,444     $1,577     $1,577     $1,649
Cabernet Sauvignon..........................    1,097      1,193      1,425      1,571      1,658      1,764
Pinot Noir..................................       --         --      1,371      1,555      1,727      1,817
Merlot......................................    1,098      1,184      1,432      1,532      1,533      1,545
Zinfandel...................................      623        790        971      1,096      1,217      1,346
Sauvignon Blanc.............................      682        742        902      1,027      1,084      1,124
Gewurztraminer..............................      589        663        825        908        959        989
Napa Gamay..................................      555        603        717        885        858        980
White Riesling..............................      514        624        803        832        847        852
</TABLE>

------------------------

(1) Prices for premium varieties have increased in recent years largely as a
    result of supply and demand conditions. Supply and demand factors will
    change over time and there can be no assurance that the prices received by
    the Company in the future will continue to increase or will match or exceed
    historical prices.

(2) Based upon existing contracts, Company production estimates, and the 1999
    Preliminary Grape Crush Report released February 10, 2000. Although
    historically there have not been significant differences in the pricing data
    reported in the Preliminary and the Final Grape Crush Reports, it is
    possible that there may be some adjustments to the Company's expected 2000
    grape prices when the Final Grape Crush Report is published on March 10,
    2000.

    VITICULTURAL PRACTICES

    The Company continually investigates and experiments to develop enhanced
viticultural practices in order to improve the yields of its vineyards and the
quality of grapes it produces. Innovations developed or employed by SVI over the
past ten years have included new grafting methods,

                                       9
<PAGE>
interplanting, new trellis designs and improved machine harvesting technology
and practices. In addition, the Company has experimented with increased vine
densities in order to improve productivity.

    VINEYARD PRODUCTION CYCLE

    The vineyard production cycle begins each year in December, after completion
of harvest. From December through March vines are pruned and tied to trellises,
and damaged stakes, trellises, irrigation systems and other vineyard components
are repaired or refurbished. After winter rains end, irrigation and cultivation
of the vineyards begin and continue through the harvest season. Herbicides are
applied as needed through the summer. Necessary applications of pesticides and
fertilizer begin in the spring and continue until harvest. Grafting and planting
also generally take place in the first four or five months of the year. As
growth of the vines accelerates beginning in late spring, they are trained and
tied, and excess leaves are sometimes pulled to promote more efficient growth of
vines and fruit. Depending on the rate at which fruit ripens, harvest typically
begins in late-August to mid-September and is completed by the end of October or
early November. Direct farming costs currently range from $2,000 to $3,000 per
acre over the course of the year for vineyards in full production, and revenues
are realized at the time of harvest. Approximately one-half of annual production
costs are incurred by June 30.

    CAPITAL INVESTMENT REQUIREMENT FOR ACQUISITION, DEVELOPMENT AND IMPROVEMENT
     OF VINEYARDS

    Because of the increasing demand for premium wine, the Company's customers
as well as other wineries have been seeking additional long-term sources of
premium wine grapes. Accordingly, part of the Company's strategy has been to
expand its operations and grape production through the development of bare land
into vineyards, the acquisition of existing vineyards, and the redevelopment of
the Company's older vineyards. As discussed below, the Company has implemented
this strategy through the lease in 1998 of approximately 750 acres of bare land
it is developing into vineyards near the Company's vineyard headquarters, the
1997 acquisition of the 370-acre Riverview Vineyard, the lease in 1997 of
approximately 520 acres of bare land in Hames Valley it is developing into
vineyards and the redevelopment of the Company's existing vineyards begun in
1993.

    Generally, significant amounts of fruit are not produced for three years
from newly planted vines and for two years from vines which are grafted to a new
variety. During this time, the Company incurs significant development and
production costs that are not offset by revenues from these vineyards and must
be financed from other sources. Newly planted vines that are four to five years
of age and grafted vines that are three to four years of age generally begin to
produce grapes in sufficient quantities to cover production costs and contribute
to gross profit, subject to some variation due to the effects of factors such as
geographic location, variety of grape grown, vine density, quality and type of
soil, water quality and weather conditions.

    It has been the Company's experience that it currently costs approximately
$15,000 to $18,000 per acre over a three-year period to develop open land into a
producing premium wine grape vineyard, before taking into account the cost of
land. The costs of redeveloping existing vineyards vary depending upon the
condition of the vineyard and the scope of the redevelopment plan.

    Due to the acquisition and development of new vineyards and the
redevelopment of existing vineyards, much of the Company's vineyard acreage has
not yet reached full productive capacity. While there can be no assurance that
the Company's properties will achieve their full productive capacity at the rate
indicated, if at all, the Company believes that its existing acreage under
development or redevelopment represents significant potential for revenue
growth. The following table shows recent and anticipated maturity of the
Company's vineyards.

                                       10
<PAGE>
                   MATURITY LEVELS OF SVI'S NET VINE ACRES(1)

<TABLE>
<CAPTION>
                                                                                    CROP YEAR
                                                         ---------------------------------------------------------------
                                                           1999       2000       2001       2002       2003       2004
                                                         --------   --------   --------   --------   --------   --------
<S>                                                      <C>        <C>        <C>        <C>        <C>        <C>
Acres five or more years old (at or near full
  production)..........................................   2,100      2,215      2,725      3,145      4,050      4,050
Acres three and four years old (partial production)....     625        930      1,325        905         --         --
Acres one and two years old (not in production)........   1,325        905         --         --         --         --
                                                          -----      -----      -----      -----      -----      -----
  Total Acres..........................................   4,050      4,050      4,050      4,050      4,050      4,050
                                                          =====      =====      =====      =====      =====      =====
</TABLE>

------------------------

(1) The net vine acreage shown above is SVI's planted acreage only. It does not
    include acreage devoted to roads, storage areas, equipment yards or uses
    other than vineyards.

    If the Company's vineyards under development mature consistently with
historical experience and no significant problems are encountered, they should
be at or near their full productive capacity in or about 2003. Therefore,
acquisitions of producing vineyards will be required prior to 2003 to achieve
production increases in excess of those anticipated from the Company's existing
vineyards. In addition, acquisitions of producing vineyards or open land
suitable for vineyard development will be required to sustain productivity
increases after 2003 and moderate any productivity losses from the Company's
existing vineyards due to grafting to new varieties and various other factors
that take vineyards out of production from time to time. See "--Uncertainty of
Revenue Growth," "--Capital Requirements," and "--Risks Associated with Business
Expansion and Acquisition Strategy" under "--Cautionary Information Regarding
Forward-Looking Statements" below.

    NEW VINEYARDS AND REDEVELOPMENT OF EXISTING VINEYARDS

    GREENFIELD.  In December 1998, the Company entered into a lease for a term
of 24 years of approximately 750 acres of undeveloped land suitable for wine
grape vineyards located near the Company's vineyard headquarters. The Company
has two options to extend the term of the lease for successive five-year terms
(for a total of ten years). The Company completed the planting of the entire 750
acres in May 1999, with the first harvest expected in 2001. The Company intends
to seek long-term grape purchase contracts for the grape production from this
new vineyard.

    HAMES VALLEY.  In 1997, the Company acquired an option to lease, for a term
of up to 50 years, approximately 520 acres of undeveloped land suitable for wine
grape vineyards in Hames Valley, which is located approximately 45 miles south
of the Company's vineyard headquarters. The Company exercised its option and
began development on approximately 200 acres in 1997 and, in the first quarter
of 1998, exercised its option and began development on the remaining
approximately 320 acres. This acquisition has allowed the Company to leverage
its existing resources, and it establishes SVI in a region where it believes
additional property suitable for premium wine grape production is available. The
Company is currently in the process of seeking long-term grape purchase
contracts for the grape production from these new vineyards. There can be no
assurance, however, that the Company will be successful in finding a winery or
wineries which will agree to such long-term grape purchase contracts for newly
developed or acquired vineyards, including those under development in Greenfield
and Hames Valley.

    After negotiating its own Hames Valley lease, SVI arranged for Canandaigua
to lease an additional approximately 445 acres in Hames Valley. Pursuant to a
long-term management contract with Canandaigua, in 1997 SVI began to manage and
develop this acreage into vineyards. Under the contract, SVI receives monthly
fees, equipment rental income and, when the vineyard begins to produce wine
grapes, harvest fees. The Company has no investment in the vineyard because
development money and working capital are provided by Canandaigua.

                                       11
<PAGE>
    RIVERVIEW VINEYARD.  In June 1997, the Company acquired the 370-acre
Riverview Vineyard located approximately 12 miles north of SVI's vineyard
headquarters. The purchase price was approximately $5.5 million. The vineyard is
planted with several varieties, including approximately 175 acres of Chardonnay
and 130 acres of Pinot Noir. In 1998, the Company secured long-term grape
purchase contracts for the majority of the grape production from this vineyard.

    REDEVELOPMENT OF EXISTING VINEYARDS.  In 1993, SVI began a major improvement
and refurbishment program at its vineyards in order to increase production and
to upgrade its variety mix to those grapes that were expected to be in greater
demand and sell at higher prices. From 1993 through 1999, the Company made
capital expenditures on its vineyards of over $16 million, and the improvement
and refurbishment program is continuing. From 1993 through 1999, the Company
replanted or regrafted approximately 1,330 acres to higher value varieties and
interplanted an additional 1,200 acres. In 2000 and 2001, the Company will be
replanting approximately 135 acres. See "--Net Vine Acres Owned by SVI and Tons
Produced."

    WATER SUPPLY

    The Company's vineyards are located in the Salinas Valley through which
flows the Salinas River. The watershed of the Salinas Valley is from the Ventana
Wilderness in the Los Padres National Forest and Santa Lucia range of coastal
mountains. The Salinas River supplies a large aquifer which is tapped by
agricultural users. In addition, the Salinas River is fed by two large
reservoirs, Lake Nacimiento and Lake San Antonio, which were built primarily for
agricultural water supply purposes to serve the Salinas Valley. These reservoirs
are maintained by the Monterey County Water Resource Agency. The Company drip
irrigates all of its vineyards from wells located on or near its vineyards. The
quality of the water obtained from the wells is good, and the wells have proven
to be a plentiful and reliable source of water for the Company's operations,
even during the drought years of the late 1980's. See "--Cautionary Information
Regarding Forward-Looking Statements--Water."

VINEYARD MANAGEMENT CONTRACTS

    The Company manages, as a contract vineyard operator, approximately 1,600
acres in Monterey and San Benito Counties for three vineyard owners in 1999,
including approximately 1,533 acres managed for UDV and Canandaigua. Pursuant to
its management and harvest contracts, budgeted costs of labor and equipment are
advanced to the Company on a monthly basis and the Company receives management
fees based on the acreage managed and harvested. The Company's vineyard
management contracts generally expire no earlier than the completion of harvest
in years ranging from 2004 to 2012, and otherwise may be terminated by either
party with one or two years' advance notice. In certain cases the Company has
also received fees for financing vineyard improvements, securing property and
designing vineyards. The Company may enter into similar arrangements for other
vineyard properties in the future.

WINE PRODUCTION AND SALES

    SVI began limited production of its own ultra premium varietal wines under
the SCHEID VINEYARDS and SAN LUCAS VINEYARD labels in 1991. The Company has
contracted for its wine production with Storrs Winery, a small producer of award
winning wines located in Santa Cruz, California, approximately 50 miles from the
Company's vineyard headquarters compound. The Company currently subleases space
in a 1,600 square foot building from Storrs Winery, including certain space
dedicated for the Company's exclusive use in connection with its winemaking
activities. In 1996, the Company obtained a winery license, and a tasting room
was opened in April 1997 at the Company's vineyard headquarters compound located
on U.S. Highway 101 (a major north-south thoroughfare between San Francisco and
Los Angeles) just south of Greenfield and north of King City in Monterey County.

                                       12
<PAGE>
    Production and sales have been limited to date. SVI produced approximately
4,000 and 5,000 cases in 1998 and 1999, respectively, of ultra premium varietal
wines, including Chardonnay, Cabernet Sauvignon, Merlot, Pinot Noir and
Sauvignon Blanc, using Company-grown grapes. While its actual wine production
will depend on various factors, the Company currently plans to maintain its
annual production at approximately 5,000 cases for 2000. As it increases wine
production, the Company intends to distribute directly through its tasting room,
restaurants, clubs and a few selected retailers. Since 1997, the Company has
offered an annual "wine dividend" to holders of at least 100 shares of its Class
A Common Stock, whereby such shareholders were entitled to a $0.50 per share
credit for use in making purchases of the Company's wine at up to a 50% discount
from the retail price. The Company intends to offer another "wine dividend" in
2000. SVI has not yet earned a profit on its wine business and cannot predict
when, or if, these operations will become profitable. Further, SVI does not
expect its wine business to have a material impact on sales or earnings in the
foreseeable future. No assurances can be given that wine production and sales
ever will be a major source of profit for the Company.

COMPETITION

    Wine grape growing and wine production are extremely competitive. There are
an estimated 800 commercial wineries which produce and market California table
wine, approximately half of which produce fewer than 5,000 cases per year. The
top eight wineries account for approximately 76% of sales based on total
California wine shipments in 1999. In addition, there are many sources of supply
of wine grapes in California and in countries outside the United States. At the
end of 1997, approximately 407,000 acres were planted to wine grapes in
California according to the California Agricultural Statistics Service, and the
number of planted acres is growing. Most wine grape producers have small,
privately owned operations and sell their production to wineries, often at spot
market prices from year to year. Quality of production and yields can vary
widely from vineyard to vineyard in the same geographic area. To supplement the
grapes they buy from independent producers, many wineries also own or lease
vineyards to supply some of their grape needs. Certain major wineries, such as
Kendall-Jackson and Robert Mondavi, are large wine grape producers and produce a
significant proportion of the grapes they need to make wine. Substantial
vineyard acreage is also owned by other wineries and more is being developed.
There are no published data regarding the size of the wine grape production
industry in California, and holdings of properties are not publicly reported.
However, the Company believes it is one of the largest independent producers of
premium wine grapes in California, and that there are approximately four or five
independent producers of comparable size in terms of acreage.

    In addition, there are numerous wine producers in Europe, South America,
South Africa, Australia and New Zealand. All of these regions export wine into
the United States. California grape and wine supply shortages, especially in red
wines, have prompted some domestic national brand marketers to purchase wine
from foreign sources. Most imports are bottled wines; however, some wineries
have imported bulk table wine in large tanks for bottling and sale in the United
States. Imports to California for these purposes decreased from approximately
20.3 million gallons in 1997 to approximately 4.9 million gallons in 1999.

ENVIRONMENTAL ISSUES

    SVI currently maintains 17 above-ground fuel storage tanks on its own
vineyard properties to provide fuel to its various vehicles and machinery. These
tanks have capacities ranging from approximately 500 to 10,000 gallons and are
installed on concrete slabs with catch basins to protect the ground surface from
any inadvertent release. No underground storage tanks are located on the
Company's properties.

    The Company's current operations require the periodic usage of various
chemical herbicides, fungicides and pesticides, some of which contain hazardous
or toxic substances. The usage and storage

                                       13
<PAGE>
of these chemicals are, to varying degrees, subject to federal and state
regulation. To the extent that the Company stores such chemicals, they are
contained in a secured storage facility at the Company's vineyard headquarters
compound. The most toxic pesticide used by the Company, Furadan-TM-, is not
stored on-site, but is delivered as needed by an unaffiliated company and
applied to the vineyard under the supervision of a state-licensed applicator.
The Company also maintains a comprehensive safety program supervised by the
Company's human resources safety director and a licensed pest control advisor.

TRADEMARKS AND LABELS

    The Company has registered a trademark relating to a specific slogan which
the Company uses on souvenirs and paraphernalia sold at the Company's
wine-tasting room. The Company also has wine labels approved by the Bureau of
Alcohol, Tobacco and Firearms ("BATF"), including the SCHEID VINEYARDS and SAN
LUCAS VINEYARD brand names.

EMPLOYEES AND LABOR RELATIONS

    The Company has approximately 75 full-time employees and employs seasonal
and contract labor for vineyard development, pruning, harvesting and other
related tasks during peak seasons. Field labor needs are seasonal, normally
peaking at approximately 400 field workers at harvest, and dropping to a low of
approximately 50 immediately after harvest. The Company also uses contracted
labor for specialized work, such as grafting, and otherwise when necessary.

    The United Farm Workers, AFL-CIO ("UFW") has represented the Company's farm
workers since 1993. In 1998, the Company completed the negotiation of a new
four-year contract with the UFW that will expire at the end of 2001. The Company
believes its labor relations are satisfactory. The Company has never had a
walk-out, sit-down, slow-down or strike, and the existing contract has a "no
strike" clause. The Company has, however, been picketed, particularly during the
organizing effort by the UFW and during negotiation of the first contract in
1995. See "Cautionary Information Regarding Forward-Looking Statements--Labor
Regulations and Union Contract."

CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

    AGRICULTURAL RISKS

    Wine grape production is subject to many risks common to agriculture that
can materially and adversely affect the quality and quantity of grapes produced.
These hazards include, among other things, adverse weather such as drought,
frost, excessive rain, excessive heat or prolonged periods of cold weather.
These weather conditions can materially and adversely affect the quality and
quantity of grapes produced by the Company and its profitability. To the extent
a grape producer's properties are geographically concentrated, the effects of
local weather can be material. The vineyards owned by SVI are spread over a
distance of approximately 70 miles, north to south, close to Highway 101 in
Monterey County. Accordingly, adverse weather in the future could affect a
substantial portion of the Company's vineyards in any year and have a material
adverse effect on the Company's business, financial condition and results of
operations.

    Vineyards are also susceptible to certain diseases, insects and pests, which
can increase operating expenses, reduce yields or kill vines. In recent years
phylloxera, a louse that feeds on the roots of grape vines, has infested many
vineyards in the wine grape producing regions of California and caused grape
yields to decrease. Within a few years of the initial infestation, phylloxera
can leave a vine entirely unproductive. Phylloxera infestation has been
widespread in California, particularly in Napa, Sonoma, Mendocino and Monterey
Counties, and most of the other wine grape producing areas of the state are
affected to some degree. Phylloxera infestation can be reduced through use of
the chemical pesticides Furadan-TM- and Enzone-TM-. While Furadan-TM- is still
approved for use in Monterey County, its use is no

                                       14
<PAGE>
longer legal in certain other viticultural regions of California, including
Napa, Sonoma and Mendocino Counties. Furadan-TM- is currently under
investigation by the Environmental Protection Agency which may result in the
prohibition of its use. There can be no assurance that Furadan-TM- will continue
to be available as a method of controlling phylloxera for the Company and, if
its use is prohibited in Monterey County, the Company will rely more on the use
of Enzone-TM-. If the use of Enzone-TM- is prohibited in Monterey County,
however, there can be no assurance that the Company will be able to find a safe,
cost-effective alternative.

    As a result of this widespread problem, thousands of vineyard acres
throughout California have been replanted with phylloxera-resistant rootstock
or, in some cases, taken out of production completely. It takes approximately
four to five years for a replanted vineyard to bear grapes in quantities
sufficient for profitable operations. The Company estimates that it currently
costs approximately $15,000 to $18,000 per acre to replant vineyards. Of the
Company's approximately 4,050 net vine acres (I.E., excluding acreage devoted to
roads, storage areas, equipment yards or uses other than vineyards) of wine
grapes, approximately 3,940 net vine acres, or 97%, are planted or interplanted
with phylloxera-resistant rootstock. The remaining approximately 140 acres are
planted on non-resistant rootstock and are, therefore, potentially susceptible
to phylloxera infestation. The Company is managing the non-resistant acres
through application of Furadan-TM- and a program of selective replantings.

    Another potentially devastating pest is the glassy-winged sharpshooter
("GWSS"). GWSS poses a significant threat to viticulture throughout California
due to its ability to transmit XYLELLA FASTIDIOSA, the bacterium that causes
Pierce's Disease. Pierce's Disease, a deadly vine disorder, has been present in
California for more than a century, vectored by the blue-green sharpshooter. It
now presents a much more significant threat because the GWSS is a new and far
stronger disease carrier than the blue-green sharpshooter. The GWSS recently
became established in the Temecula region of southern California and, as a
result, Pierce's Disease is so widespread that the future viability of the
Temecula region to produce wine grapes is in doubt. The February 2000 issue of
WINES & VINES quoted Ed Weber, Napa County viticulture farm advisor for
University of California Cooperative Extension: "Currently, glassy-winged
sharpshooters are found throughout the southern California basin in Los Angeles,
Orange, Riverside, San Bernardino and San Diego counties. They also occur in
Ventura and parts of Santa Barbara counties. Additionally, Kern County, at the
southern end of the San Joaquin Valley has populations well-established in one
area. Single insects also have been captured near Lodi and in Berkeley." The
Company has seen no evidence of the GWSS or Pierce's Disease in its own
vineyards but views the spread of the GWSS throughout California's grape growing
regions as a significant threat.

    Other pests that may infest vineyards include leafhoppers, thrips,
nematodes, mites, insects, orange tortrix, twigbore, microflora and various
grapevine diseases. Pesticides and the selection of resistant rootstocks reduce
losses from these pests, but do not eliminate the risk of such loss. Gophers,
rabbits, deer, wild hogs and birds can also pose a problem for vineyards, and
wine grape vines are also susceptible to certain virus infections which may
cause reduction of yields. None of these currently poses a major threat to the
Company's vineyards, although they could do so in the future and, at that time,
will have the potential to subject the vineyards to severe damage.

    DEPENDENCE ON MAJOR CUSTOMERS; RENEWAL OF GRAPE PURCHASE AGREEMENTS

    The majority of SVI's current grape production is contracted for sale to UDV
which accounted for approximately 76% of the Company's total revenues in 1999.
The terms of the long-term grape purchase contracts with UDV extend to between
2001 and 2014. The majority of the contracts extend to 2006 and have an
"evergreen" renewal provision whereby the contract continues unless either party
gives a three-year advance written notice of termination. Although these
contracts do not specifically provide for termination prior to expiration of
their stated terms, it is possible that they could be terminated under various
circumstances, including material breach. If these contracts are terminated,

                                       15
<PAGE>
there can be no assurance that the Company will be able to replace UDV as
significant a purchaser of its grape production or that the Company will be able
to enter into agreements with other purchasers on similar terms. Termination of
these contracts with UDV could have a material adverse effect on the Company's
business, financial condition and results of operations.

    UNCERTAINTY OF REVENUE GROWTH

    In 2000, approximately 55% of the Company's net vine acres are at or near
full production, and it is anticipated that a certain portion of the Company's
vineyards will always be out of production or below maximum production due to
initial development, replanting, regrafting and various other factors. While
some productivity increases may be expected from further development of vineyard
acreage not yet in full production or from enhancements of fully productive
vineyards, the growth potential of the Company's existing properties is limited
and the Company's ability to increase revenue depends ultimately upon its
ability to acquire, develop and operate more vineyard properties. There can be
no assurance that suitable properties will be available to the Company at prices
that would make the Company's growth plans viable. Revenues are also
substantially dependent on grape yields and prices, both of which are subject to
variation as discussed elsewhere in this section and can have an effect on
revenue growth unrelated to the number of acres in full production.

    FIXED COSTS AND REVENUE FLUCTUATIONS; UNCERTAINTY OF PROFITABILITY

    The Company incurs annual farming costs currently averaging approximately
$2,000 to $3,000 per acre in production. These costs are incurred throughout the
year preceding harvest and are relatively fixed. Revenues from grape sales are
not realized until harvest and vary depending upon yields and prices. Vineyard
productivity varies from year to year depending upon a number of factors, and
significant variations in annual yields should be expected from time to time.
Furthermore, grape prices have fluctuated significantly in the past and should
be expected to continue to fluctuate from year to year and to decrease at times
in the future. Because production costs are not significantly adjustable in
light of productivity or revenue levels, weak harvests or lower grape prices
cannot be mitigated by cost reductions and should be expected to have
significant adverse effects upon profitability.

    CAPITAL REQUIREMENTS

    The farming of vineyards in production requires substantial amounts of
working capital. Historically, the Company has relied heavily on short-term
credit to finance its working capital requirements. Working capital requirements
are expected to increase to support the expansion anticipated by the Company.
There can be no assurance that the Company will be able to obtain financing when
required or that such financing will be available on reasonable terms, and lack
of access to adequate lines of credit or other capital sources could impair the
Company's ability to grow and adversely affect the Company's business, financial
condition and results of operations.

    Substantial capital expenditures are required to develop and acquire new
vineyards and improve existing vineyards. The Company has made and intends to
continue to make such expenditures to finance its expansion, and has incurred
and plans to continue to incur indebtedness. As a consequence, (i) the Company
has and will continue to have significant interest and principal repayment
obligations, (ii) the Company's earnings and cash flows will be adversely
affected by increases in interest rates, and (iii) the presence of this debt
will limit the Company's ability to pay dividends on its common stock.

    RISKS ASSOCIATED WITH BUSINESS EXPANSION AND ACQUISITION STRATEGY; LONG-TERM
     STRATEGIES

    As part of its long-term strategy, SVI continually evaluates expanding its
business through (i) the purchase or lease of undeveloped land suitable for wine
grape vineyards and (ii) acquisitions of developed vineyard properties. There
can be no assurance that the Company will be able to locate

                                       16
<PAGE>
suitable properties to buy or lease at viable prices, and any undeveloped
properties acquired by the Company will require significant capital investment
and several years of development before becoming productive. The Company does
not expect to receive the full benefit from any newly planted vineyards for at
least five to six years after planting due to the time required for the vines to
mature and produce economic yields. In addition, the Company's ability to
increase profits through acquisitions depends to a significant degree upon the
prices at which properties can be purchased or leased. Furthermore, increased
acreage under management will create additional demands on Company management
and may require the Company to hire and integrate more employees. Accordingly,
the Company's strategies are long-term strategies designed to increase the
Company's production capacity and expand the Company's business. As a result,
the full economic impact in terms of projected earnings and other beneficial
effects of the Company's expansion program will not be fully realized for
several years, if at all. The Company has also recently pursued a strategy of
repurchasing its own shares of common stock. To the extent the Company continues
its repurchase program, the capital available to expand the business through
additional vineyard development and acquisitions is reduced.

    WINE GRAPE SUPPLY AND DEMAND; PRICING

    Prices for premium California wine grapes are at historically high levels
due to (i) a shortage of grapes due to a variety of factors and (ii) an increase
in demand. Recent plantings of new vineyards, yield enhancements through
technological advances, foreign competition and other factors are expected to
increase supply. Furthermore, there can be no assurance that demand will not
decline. Increases in supply or reductions in demand may cause California
premium wine grape prices to decline significantly, and there can be no
assurance that the prices received by the Company will continue to increase.
Some declines in prices received by the Company should be expected, and these
declines may be significant.

    COMPETITION; INDUSTRY FRAGMENTATION

    The wine grape industry is extremely competitive. Many of the Company's
current and prospective competitors have substantially greater financial,
production, personnel and other resources than the Company. The Company competes
with many other producers of premium wine grapes in California, including a few
thousand small independent (I.E., not winery controlled) wine grape producers
who sell their production to wineries. Moreover, to a significant extent, wine
grapes of a particular variety are fungible, and the ability of foreign
producers to compete with the Company on the basis of price due to their lower
production costs may have a negative impact upon the Company's profitability. In
addition, the Company's principal winery customers compete with each other and
with other wineries located in the United States and abroad.

    POSSIBLE TERMINATION OF VINEYARD MANAGEMENT AGREEMENTS

    Substantially all of the Company's vineyard management agreements may be
terminated in the event that Alfred G. Scheid, Kurt J. Gollnick and certain
members of their families cease to maintain specified shareholdings in the
Company. Sales to the public by members of the Scheid or Gollnick families or
further public offerings by the Company may result in a change of control of the
Company, which could result in termination of these agreements.

    LABOR REGULATIONS AND UNION CONTRACT

    California has many laws and regulations concerning labor in general and
farm labor in particular. The Agricultural Labor Relations Board has promulgated
many regulations concerning farm labor and a body of court decisions has
developed. SVI is subject to many of these regulations, laws and precedents.

                                       17
<PAGE>
    The UFW is the major union representing farm labor and has represented SVI's
farm workers since 1993. In 1998, the Company completed the negotiation of a new
four-year contract with the UFW that will expire at the end of 2001. Although
the Company historically has had satisfactory labor relations, it has been
picketed from time to time during the initial organization of its employees and
during contract negotiations. No assurance can be given that the Company's
satisfactory labor relations will continue or that the UFW will not engage in,
picketing, walk-outs, sit-downs, slow-downs or strikes or the threat of these
actions. The Company's business is heavily dependent upon farm labor, and the
failure of the Company to maintain adequate labor relations on terms acceptable
to the Company could have a material adverse effect upon the Company's business,
financial condition and results of operations.

    DEPENDENCE ON CONSUMER DEMAND

    Trends in consumer spending and changes in consumer tastes have a
substantial impact on the wine industry and the Company's business. To the
extent that wine purchases are negatively impacted by economic and other
factors, or wine consumers reduce consumption of wine in favor of other
beverages, demand for wine grapes could decrease.

    GOVERNMENT REGULATION; TAXES

    SVI is subject to a broad range of federal and state regulatory requirements
regarding its operations and practices. The Company's current operations and
future expansion are subject to regulations governing the storage and use of
fertilizers, fungicides, herbicides, pesticides, fuels, solvents and other
chemicals. These regulations are subject to change and conceivably could have a
significant impact on operating practices, chemical usage, and other aspects of
the Company's business.

    Wine production and sales are subject to extensive regulation by the Federal
Bureau of Alcohol, Tobacco and Firearms, the California Department of Alcohol
Beverage Control and other state and federal governmental authorities that
regulate licensing, trade and pricing practices, labeling, advertising and other
activities. In recent years, federal and state authorities have required warning
labels on beverages containing alcohol. Restrictions imposed by government
authorities on the sale of wine could increase the retail price of wine, which
could have an adverse effect on demand for wine in general. Increases in excise
taxes on wine, if enacted, could reduce demand for wine and wine grapes, which
could materially and adversely effect the Company's business, financial
condition and results of operations.

    RELIANCE ON KEY PERSONNEL

    The Company believes its continued success depends to a significant extent
on the active involvement of certain members of the Scheid family and the
retention of its senior non-family executives. There can be no assurance that
the key persons will remain in their management positions with the Company, and
the loss of the services of any of the key persons could have a material adverse
effect on the Company's business, financial condition and results of operations.

    ENVIRONMENTAL RISKS

    Ownership of real property creates a potential for environmental liability
on the part of the Company. If hazardous substances are discovered on or
emanating from any of the Company's vineyards and the release of hazardous
substances (including fuels and chemicals kept by the Company on its properties
for use in its business) presents a threat of harm to public health or the
environment, the Company may be held strictly liable for the cost of remediation
of these hazardous substances. See "--Enviromental Issues."

                                       18
<PAGE>
    WATER

    The Company is dependent upon wells located on or near its vineyards for
water to irrigate the vineyards, which wells are supplied by aquifers fed by the
Salinas River and reservoirs operated by Monterey County. Although historically
the quality of water from these wells has been good and the wells have
consistently supplied a plentiful and reliable source of water, even during the
drought years of the late 1980's, and the Company believes its sources of water
will be available for the foreseeable future, it is possible that the Company's
water supplies could be impaired in the future due to drought, contamination or
other circumstances. An impairment in the Company's water supplies could
adversely affect the business, financial condition and results of operations of
the Company.

    YEAR 2000

    The Year 2000 issue is the result of computer systems, including information
technology ("IT") and non-IT systems, which have the inability to process date
sensitive information with respect to the Year 2000 and thereafter. Computers or
other equipment with date-sensitive software may recognize "00" as 1900 rather
than 2000. If not corrected, many computer systems could fail or produce
erroneous results. If the Company, or its significant customers, suppliers,
lenders, or other third parties fail to correct Year 2000 issues, the Company's
ability to operate its business could be materially affected.

    The Company has completed the upgrading of its accounting and financial
software, and, in conjunction with the upgrade, the Company believes that any
known Year 2000 issues have been corrected.

    In addition, there are also risks associated with key suppliers, including
utility companies and financial institutions, and customers over which the
Company has little or no control. The Company has made inquiries of certain of
its principal suppliers and customers with respect to their Year 2000 readiness
and its potential effects on the Company. In addressing the Year 2000 issue, the
Company has thus far not expended a material amount, and does not anticipate
future expenditures regarding this issue to be material.

    Although no assurances can be given, based on currently available
information and discussions with the Company's customers and suppliers,
management does not believe that the Year 2000 issues discussed above will have
a material impact on the Company's ability to conduct its business.

ITEM 2. DESCRIPTION OF PROPERTIES

    CORPORATE HEADQUARTERS.  The Company's executive corporate office occupies
approximately 6,400 square feet in Marina del Rey, California under a five-year
lease with Tesh Partners, L.P., a limited partnership of which SVI is the
general partner and four members of the Scheid family are limited partners. Each
of these members of the Scheid family is a principal stockholder of the Company.
See the information incorporated by reference under "Item 12--Certain
Relationships and Related Transactions." The lease expires in June 2004. The
Company believes that its existing facilities will be adequate to meet the
Company's needs for the foreseeable future. Should the Company need additional
space, management believes it will be able to secure additional space at
commercially reasonable rates.

    VINEYARDS.  The Company currently owns approximately 1,800 acres of land and
leases approximately 2,600 acres of land underlying its vineyards, all of which
are located in Monterey County, California. The five leases to which the Company
is a party were entered into in 1973, 1979, 1996, 1997 and 1998, respectively,
and each of the land leases has an initial term of 24 to 30 years and options to
extend for up to an additional 10 to 20 years. Substantially all of the
Company's property, plant and equipment serves as collateral for long-term debt.

                                       19
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

    The Company is not a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    There were no matters submitted to a vote of security holders during the
Company's fourth quarter ended December 31, 1999.

                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR CLASS A COMMON STOCK; RELATED INFORMATION

    The Company's Class A Common Stock is traded on the Nasdaq National Market
System under the symbol "SVIN". The following table sets forth, for the fiscal
quarter indicated, the high and low closing price per share sales prices for the
Class A Common Stock, as reported by Nasdaq:

<TABLE>
<CAPTION>
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
1998
  First quarter.............................................  $11.500     $6.750
  Second quarter............................................  $12.000     $6.750
  Third quarter.............................................  $ 7.438     $3.938
  Fourth quarter............................................  $ 5.938     $3.938
1999
  First quarter.............................................  $ 6.125     $4.500
  Second quarter............................................  $ 5.750     $4.813
  Third quarter.............................................  $ 5.063     $4.063
  Fourth quarter............................................  $ 5.000     $3.500
</TABLE>

    On March 3, 2000, there were 87 holders of record of the Company's Class A
Common Stock and 14 holders of record of the Company's Class B Common Stock. On
that date, the Company believes that the number of beneficial owners of its
Class A Common Stock was approximately 1,300. For information concerning
historical dividends and the Company's dividend policy, see "Item 6--
Management's Discussion and Analysis or Plan of Operation--Dividends and
Distributions."

                                       20
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
  OPERATIONS

    THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES THERETO, AND OTHER FINANCIAL
INFORMATION INCLUDED HEREIN. THE INFORMATION IN THIS REPORT INCLUDES
FORWARD-LOOKING STATEMENTS. IN ADDITION, PAST OPERATING RESULTS ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR FUTURE PERIODS. SEE
"NOTE CONCERNING FORWARD-LOOKING STATEMENTS" AND "ITEM 1--BUSINESS--CAUTIONARY
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS".

OVERVIEW

    Scheid Vineyards Inc. is a leading independent (I.E., not winery controlled)
producer of premium varietal wine grapes. The Company currently operates
approximately 6,000 acres of wine grape vineyards. Of this total, approximately
4,400 acres are operated for the Company's own account, and 1,600 acres are
operated under management contracts for others. All of the properties currently
operated by the Company are located in Monterey and San Benito Counties in
California, both of which are generally recognized as excellent regions for
growing high quality wine grape varieties.

    The Company currently produces 18 varieties of premium wine grapes,
primarily Chardonnay, Merlot, Cabernet Sauvignon and Sauvignon Blanc.
Substantially all of the Company's current wine grape production is contracted
at least through the harvest of 2001, and the majority is contracted at least
through the harvest of 2006. The Company's two largest winery customers are
United Distillers and Vintners North America ("UDV"), a subsidiary of Diageo plc
and the eighth largest U.S. winery in terms of 1999 case shipments, and
Canandaigua Brands, Inc. ("Canandaigua"), the second largest U.S. winery. Grape
purchase contracts with UDV covered 57% of the Company's acreage as of December
31, 1999 and accounted for approximately 76% and 74% of the Company's 1999 and
1998 total revenues, respectively. Thus, the Company is substantially dependent
on UDV, and termination of these contracts could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company has had grape purchase contracts with UDV and its predecessors since
1972.

    Due to a prolonged cold spell in the coastal growing regions of California,
the harvest of 1999 was substantially below historical average levels. The
weather conditions throughout most of the summer of 1999 were not favorable and
there was no sustained warming until early October. Consequently, the "sizing
up" of grapes which is promoted by warm weather in the summer months did not
occur and the wine grape harvest was delayed three to four weeks throughout the
coastal regions. As a result, Company revenues decreased 27% to $12.8 million
from $17.5 million in 1998. Net income decreased to $636,000, or $0.11 per
share, for 1999 compared to net income of $3.6 million, or $0.55 per share, for
1998. Overall, tons harvested for the Company's own account decreased by about
30%, with approximately 7,700 tons harvested in 1999 compared to 10,900 tons in
1998. Chardonnay was the variety most impacted by the cool weather patterns of
1999, experiencing an average decrease in yield of about 48% from 1998 and about
a 60% decrease from what the Company would consider an average year. Since about
37% of the Company's producing acreage in 1999 was planted to Chardonnay, the
decrease in Chardonnay yields had a dramatic impact on operating results.

    The wine grape business is extremely seasonal. Similar to most
nondiversified agricultural crop producers, the Company recognizes substantially
all of its crop sales revenues at the time of its annual harvest in September
and October. Because success of the Company's operations is dependent upon the
results of the Company's annual harvest, the first two quarters have
historically resulted in a loss and quarterly results are not considered
indicative of those to be expected for a full year. Profits, if any, are
recognized in the last two fiscal quarters of the year when revenues from grape
sales are recognized. In addition, the timing of the annual harvest varies each
year based primarily on seasonal growing conditions, resulting in timing
differences in the portion of grape revenues recognized in the

                                       21
<PAGE>
third and fourth quarters of any one year. This is a significant factor in
comparing quarterly operating results. From time to time, the Company has in the
past, and may in the future, convert grapes into bulk wine for sale in years
subsequent to the harvest year, which may impact quarterly results.

RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1999 AND 1998

    The following table sets forth certain statement of operations data for the
years ended December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                             DECEMBER 31,
                                                    -------------------------------
                                                         1999             1998
                                                    --------------   --------------
                                                    (IN THOUSANDS)   (IN THOUSANDS)
<S>                                                 <C>              <C>
Revenues:
  Sales...........................................     $11,804          $16,436
  Vineyard management, services and other fees....       1,040            1,037
                                                       -------          -------
                                                        12,844           17,473
Cost of sales.....................................       8,219            7,911
                                                       -------          -------
Gross profit......................................       4,625            9,562
General and administrative expenses...............       3,572            4,274
                                                       -------          -------
Operating income..................................       1,053            5,288
Reversal of deferred compensation.................          --             (706)
Interest income, net..............................         (33)             (46)
                                                       -------          -------
Income before provision for income taxes..........       1,086            6,040
Provision for income taxes........................         450            2,421
                                                       -------          -------
Net income........................................     $   636          $ 3,619
                                                       =======          =======
</TABLE>

    REVENUES.  SVI derives its revenues from four sources: (i) sales of wine
grapes; (ii) sales of bulk wine; (iii) vineyard management and services revenues
consisting primarily of management and harvest fees and equipment rentals for
services provided to owners of vineyards; and (iv) sales of wine and
wine-related merchandise sold primarily through the Company's tasting room.
Sales (which is comprised of revenue from sales of wine grapes, bulk wine, and
wine and wine-related merchandise) decreased to $11,804,000 in the year ended
December 31, 1999 from $16,436,000 in the 1998 period, a decrease of $4,632,000
or 28%.

    Revenue from grape sales decreased by 26% to $11,347,000 for the year ended
December 31, 1999 from $15,260,000 in 1998, a decrease of $3,913,000. Overall,
tons harvested for the Company's own account decreased by about 30%, with
approximately 7,700 tons harvested in 1999 compared to 10,900 tons in 1998.
Chardonnay was the variety most impacted by the cool weather patterns of 1999,
experiencing an average decrease in yield of about 48% from 1998. Since about
37% of the Company's producing acreage in 1999 was planted to Chardonnay, the
decrease in Chardonnay yields had a dramatic impact on fiscal 1999 revenues.

    Revenue from sales of bulk wine decreased 78% to $216,000 for the year ended
December 31, 1999 from $982,000 in the 1998 period, a decrease of $766,000.

    Revenue from the sale of wine and wine-related merchandise increased by 24%
to $241,000 for the year ended December 31, 1999 from $194,000 in the 1998
period, an increase of $47,000.

    Revenue from vineyard management, services and other fees increased to
$1,040,000 for the year ended December 31, 1998 from $1,037,000 in the 1998
period, an increase of $3,000. The increase was

                                       22
<PAGE>
primarily due to equipment rentals and harvest fees charged to management
clients, which was partially offset by the elimination of a 68-acre vineyard
management contract.

    GROSS PROFIT.  Gross profit for the year ended December 31, 1999 was
$4,625,000 compared to $9,562,000 for the year ended December 31, 1998, a
decrease of $4,937,000 or 52%. This decrease resulted primarily from decreases
in grape sales and sales of bulk wine from 1998 to 1999.

    Gross margin on grape sales decreased to 30% in 1999 as compared to 52% in
1998. The decrease in gross margin on grape sales is primarily the result of
substantially lower yields per acre in 1999 than in 1998, partially offset by an
increase in the prices received by the Company from 1998 to 1999.

    Costs associated with the provision of management services are reimbursed by
the Company's clients, therefore, no cost of sales is deducted in determining
gross profit on these services.

    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
decreased by 16% to $3,572,000 for the year ended December 31, 1999 from
$4,274,000 in the 1998 period, a decrease of $702,000. The decrease in general
and administrative expenses was primarily due to reductions in executive
salaries and bonuses and professional fees.

    REVERSAL OF DEFERRED COMPENSATION.  During the year ended December 31, 1998,
the Company reversed an accrual of deferred compensation in the amount of
$706,000. The deferred compensation liability was due to an arrangement whereby
the Company would make annual payments to a certain employee commencing upon his
retirement. The employee passed away in August 1998 negating the need for the
provision.

    INTEREST INCOME, NET.  Net interest income was $33,000 for the year ended
December 31, 1999 and $46,000 in the 1998 period, a decrease of $13,000, and is
comprised of the following:

<TABLE>
<CAPTION>
                                                          1999         1998
                                                       -----------   ---------
<S>                                                    <C>           <C>
Interest expense.....................................  $ 1,185,000   $ 977,000
Less capitalized interest............................   (1,185,000)   (641,000)
                                                       -----------   ---------
  Interest expense, net of amount capitalized........           --     336,000
Interest income......................................      (33,000)   (382,000)
                                                       -----------   ---------
  Interest (income), net.............................  $   (33,000)  $ (46,000)
                                                       ===========   =========
</TABLE>

    Total interest expense increased primarily as a result of increased
borrowings in 1999 and are partially offset by lower interest rates in 1999.
Capitalized interest increased in the 1999 period due to increased expenditures
for vineyard acreage being improved or developed. The decrease in interest
income in 1999 was due to the decrease in cash holdings of the Company from 1998
to 1999.

    PROVISION FOR INCOME TAXES.  The provision for income taxes decreased to
$450,000 for the year ended December 31, 1999 from $2,421,000 in 1998.

    NET INCOME.  The Company had net income for the year ended December 31, 1999
of $636,000 as compared to $3,619,000 in the 1998 period.

                                       23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

    SVI's primary sources of cash have historically been funds provided by
internally generated cash flow and bank borrowings. The Company has made
substantial capital expenditures to redevelop its existing vineyard properties
and acquire and develop new acreage, and the Company intends to continue these
types of expenditures. Cash generated from operations has not been sufficient to
satisfy all of the Company's working capital and capital expenditure needs. As a
consequence, the Company has depended upon and continues to rely upon, both
short and long-term bank borrowings. Working capital at December 31, 1999 was
$90,000 as compared to $3,883,000 at December 31, 1998, a decrease of
$3,793,000. The reduction in working capital from 1998 to 1999 was primarily due
to the expenditures of current working capital to fund vineyard development,
repay balances of certain long-term revolving credit facilities and repurchase
shares of the Company's Class A Common Stock.

    Under the Company's historical working capital cycle, working capital is
required primarily to finance the costs of growing and harvesting its wine grape
crop. The Company normally delivers substantially all of its crop in September
and October, and receives the majority of its cash from grape sales in early
November. Due to the three to four week delay in the start of the 1998 and 1999
harvests, the crops for each of the past two years were delivered in October and
November, and the majority of cash from grape sales was received in late
November. In order to bridge the gap between incurrence of expenditures and
receipt of cash from grape sales, large working capital outlays are required for
approximately eleven months each year. Historically, SVI has obtained these
funds pursuant to credit lines with banks.

    The Company currently has credit lines that provide both short-term and
long-term funds. The short-term "crop" line has maximum credit available of
$12,000,000 and is intended to finance the Company's anticipated working capital
needs. This crop line expires June 5, 2001 and is secured by crops and other
assets of the Company. The interest rate on this line is based on the bank's
"reference" or "cost of funds" rate. At December 31, 1999, the weighted average
interest rate on borrowings under this line of $2,700,000 was 7.91%.

    SVI also has long-term credit facilities which expire through June 2008 and
provide for maximum borrowings totaling $9,506,000, which diminish annually
through the expiration dates to a maximum allowable commitment of $5,412,000. At
December 31, 1999, the outstanding amount owed by the Company under these
facilities was $9,506,000. The interest rate on each of these lines is based on
the bank's "reference" or "cost of funds" rate. At December 31, 1999, the
weighted average interest rate on these lines was 7.97%. These credit lines are
secured by deeds of trust on underlying vineyard properties.

    The Company also has other long-term notes payable which, as of December 31,
1999, totaled approximately $5,990,000. The interest rate on these notes is
based on the bank's "reference" or "cost of funds" rate. At December 31, 1999,
the weighted average per annum interest rate on these notes was 7.97%. These
notes are secured by deeds of trust on underlying vineyard properties.

    The Company also has a bank line of credit with an original maximum loan
commitment of $7,500,000, the proceeds of which were used to develop a vineyard
owned by a major client and managed under a long-term contract by the Company.
Any amount borrowed on the line, even if repaid before the end of the
availability period, permanently reduces the remaining available line of credit.
At December 31, 1999, the maximum available balance and outstanding balance on
this line of credit was $5,249,000. This line bears interest at the bank's
reference rate (6.97% at December 31, 1999) and is repayable in six annual
installments beginning January 2000. The note is secured by a letter of credit
provided by the client and by the Company's management contract. The management
contract provides for the Company's client to make payment of the annual
principal installments under this line as and when they become due.

                                       24
<PAGE>
    The Company's principal credit facilities and notes payable bind the Company
to a number of affirmative and negative covenants, including requirements to
maintain certain financial ratios within certain parameters and to satisfy
certain other financial tests. At December 31, 1999, the Company was in
compliance with all covenants except for the current ratio covenant. The Company
received a waiver from the bank regarding the noncompliance with its current
ratio covenant at December 31, 1999, and expects to be in compliance with all
covenants at December 31, 2000.

    Although no assurances can be given, management believes that the Company's
anticipated working capital levels and short-term and long-term borrowing
capabilities will be adequate to meet the Company's currently anticipated
liquidity needs during the fiscal year ending December 31, 2000. At December 31,
1999, the Company had $9,300,000 in borrowing availability under its crop line
of credit.

    Management expects that capital requirements will expand significantly to
support expected future growth and that this will result in the expenditure of
the Company's available cash and additional borrowing under credit lines and/or
new arrangements for term debt. The Company's planned new vineyard developments
are expected to require approximately $6.0 million in capital investment over
the next three years, and continued improvements and redevelopments of existing
vineyards are expected to require approximately $6.5 million. In addition, the
Company expects to invest approximately $2.5 million in equipment purchases.
Management believes it should be able to obtain long-term funds from its present
principal lender, but there can be no assurance that the Company will be able to
obtain financing when required or that such financings will be available on
reasonable terms.

    Cash provided by operating activities was $992,000 for the year ended
December 31, 1999, compared to $8,021,000 for the same period in 1998, a
decrease of $7,029,000. The decrease was primarily due to the decrease in net
income from $3,619,000 in 1998 to $636,000 in 1999, and the timing of the
payments of 1998 income tax liabilities which affected the change in cash
provided by operating activities in the amount of $4,663,000 from 1998 to 1999.

    Cash used in investing activities was $14,706,000 for the year ended
December 31, 1999, compared to $8,419,000 for the same period in 1998, an
increase of $6,287,000. The increase was principally the result of expenditures
for the ongoing development of approximately 1,300 acres of new vineyards and
improvements to the Company's existing vineyards.

    Cash provided by financing activities was $9,094,000 for the year ended
December 31, 1999, compared to cash used in financing activities of $9,054,000
for the same period in 1998. Net borrowings under the Company's long-term credit
lines were $11,608,000 in 1999 as compared to net repayments in 1998 of
$6,674,000. The borrowings in 1999 were used primarily for expenditures to fund
vineyard development, primarily on the Company's new 750-acre vineyard which the
Company began developing in the fourth quarter of 1998. In addition, the Company
repurchased shares of its Class A Common Stock in the amount of $2,514,000 in
1999, as compared to $2,380,000 in 1998.

YEAR 2000

    The Year 2000 issue is the result of computer systems, including information
technology ("IT") and non-IT systems, which have the inability to process date
sensitive information with respect to the Year 2000 and thereafter. Computers or
other equipment with date-sensitive software may recognize "00" as 1900 rather
than 2000. If not corrected, many computer systems could fail or produce
erroneous results. If the Company, or its significant customers, suppliers,
lenders, or other third parties fail to correct Year 2000 issues, the Company's
ability to operate its business could be materially affected.

    The Company has completed the upgrading of its accounting and financial
software, and, in conjunction with the upgrade, the Company believes that any
known Year 2000 issues have been corrected.

                                       25
<PAGE>
    In addition, there are also risks associated with key suppliers, including
utility companies and financial institutions, and customers over which the
Company has little or no control. The Company has made inquiries of certain of
its principal suppliers and customers with respect to their Year 2000 readiness
and its potential effects on the Company. In addressing the Year 2000 issue, the
Company has thus far not expended a material amount, and does not anticipate
future expenditures regarding this issue to be material.

    Although no assurances can be given, based on currently available
information and discussions with the Company's customers and suppliers,
management does not believe that the Year 2000 issues discussed above will have
a material impact on the Company's ability to conduct its business.

DIVIDENDS AND DISTRIBUTIONS

    The Company intends to retain its future earnings, if any, and does not
anticipate paying cash dividends on either class of its Common Stock in the
foreseeable future. In addition, the Company's principal bank credit facilities
prohibit the payment of cash dividends without the consent of the lender.

ITEM 7. FINANCIAL STATEMENTS

    The audited financial statements of the Company are set forth in this Report
beginning on page F-1.

                                       26
<PAGE>
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <S>
    2.1                 Exchange and Contribution Agreement, dated as of July 29,
                        1997, among Registrant and certain affiliated entities and
                        stockholders of Registrant (incorporated by reference to
                        Exhibit number 2.1 to Registrant's Report on Form 10-KSB for
                        the fiscal year ended December 31, 1997 filed March 30,
                        1998).

    3.1a                Certificate of Incorporation (incorporated by reference to
                        Exhibit number 3.1a to Registrant's Report on Form 10-KSB
                        for the fiscal year ended December 31, 1998 filed March 24,
                        1999).

    3.1b                Certificate of Amendment of Certificate of Incorporation
                        (incorporated by reference to Exhibit number 3.1b to
                        Registrant's Report on Form 10-KSB for the fiscal year ended
                        December 31, 1998 filed March 24, 1999).

    3.2                 Amended and Restated Bylaws (incorporated by reference to
                        Exhibit number 3.2 to Registrant's Report on Form 10-KSB for
                        the fiscal year ended December 31, 1998 filed March 24,
                        1999).

    4.1                 Warrant Agreement, dated as of July 30, 1997, by and among
                        the Company, Cruttenden Roth Incorporated, Laidlaw Equities,
                        Inc. and Rodman & Renshaw, Inc (incorporated by reference to
                        Exhibit number 4.1 to Registrant's Report on Form 10-KSB for
                        the fiscal year ended December 31, 1997 filed March 30,
                        1998).

    4.2                 Form of Certificate Evidencing Ownership of Class A Common
                        Stock of Scheid Vineyards Inc (incorporated by reference to
                        Exhibit number 4.2 to Registrant's Report on Form 10-KSB
                        for the fiscal year ended December 31, 1997 filed March 30,
                        1998).

    4.3                 Form of Certificate Evidencing Ownership of Class B Common
                        Stock of Scheid Vineyards Inc. (incorporated by reference to
                        Exhibit number 4.3 to Amendment No. 1 to Registrant's
                        Registration Statement on Form SB-2 filed July 3, 1997).

   10.1                 1997 Stock Option/Stock Issuance Plan, as amended and
                        restated through March 10, 1998 (incorporated by reference
                        to Exhibit number 10.1 to Registrant's Report on
                        Form 10-KSB for the fiscal year ended December 31, 1997
                        filed March 30, 1998).(2)

   10.2a                Lease, dated as of January 1, 1997, by and among Sam Avila
                        and Margaret J. Avila, as trustees under declaration of
                        trust dated August 16, 1989, and Margaret J. Avila and
                        Valarie Bassetti successor co-trustees of the testamentary
                        trust of Joseph Laberere, and Sam Avila, and Margaret J.
                        Avila, and Scheid Vineyards and Management Co. (incorporated
                        by reference to Exhibit number 10.3 to Registrant's
                        Registration Statement on Form SB-2 filed May 28, 1997).(1)

   10.2b                First Amendment to Lease as of March 31, 1998, by and
                        between Sam Avila and Margaret J. Avila, as Trustees Under
                        Declaration of Trust dated August 16, 1989; Margaret J.
                        Avila and Valarie Bassetti (also known as Valerie Bassetti),
                        as Successor Co-Trustees of the Testamentary Trust of Joseph
                        Laberere, Deceased; and Sam Avila (also known as Samuel R.
                        Avila, Jr.) and Margaret J. Avila, husband and wife, (all of
                        the above persons and entities are collectively called
                        "Lessor"); and Scheid Vineyards California Inc. (formerly
                        known as Scheid Vineyards and Management Co.), a California
                        corporation ("Lessee")(incorporated by reference to Exhibit
                        number 10.1 to Registrants Form 10-QSB for the quarterly
                        period ended June 30, 1999 filed August 12, 1999).
</TABLE>

                                       27
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <S>
   10.3                 Lease, dated as of January 1, 1996, by and between Echenique
                        Ranch and Scheid Vineyards and Management Co., as amended by
                        a Letter Agreement dated March 27, 1996 (incorporated by
                        reference to Exhibit number 10.4 to Registrant's
                        Registration Statement on Form SB-2 filed May 28, 1997).(1)

   10.4                 Land Lease by and between William McHenry Bland and Monterey
                        Farming Corporation and Addendum to Land Lease, dated
                        September 26, 1973, by and between William McHenry Bland and
                        Monterey Farming Corporation (incorporated by reference to
                        Exhibit number 10.5 to Registrant's Registration Statement
                        on Form SB-2 filed May 28, 1997).(1)

   10.5                 Lease, dated September 27, 1979, by and among Luis
                        Echenique, Francis D. Echenique, Ricardo Echenique and
                        Monterey Farming Corporation, as amended by (i) a Memorandum
                        of Lease, dated September 27, 1979, (ii) an Amendment to
                        Memorandum of Lease, dated September 4, 1987, (iii) a First
                        Amendment to Lease, dated September 4, 1987, and (iv) a
                        Second Amendment of Lease, dated September 4, 1987
                        (incorporated by reference to Exhibit number 10.6 to
                        Registrant's Registration Statement on Form SB-2 filed
                        May 28, 1997).(1)

   10.6+                Vineyard Management Agreement, dated as of January 1, 1997,
                        by and among Scheid Vineyards and Management Co.,
                        Canandaigua West, Inc. and Canandaigua Wine Company, Inc.
                        (incorporated by reference to Exhibit number 10.7 to
                        Registrant's Registration Statement on Form SB-2 filed
                        May 28, 1997).(1)

   10.7+                Vineyard Management Agreement, dated as of January 1, 1996,
                        by and among Scheid Vineyards and Management Co.,
                        Canandaigua West, Inc. and Canandaigua Wine Company, Inc.
                        (incorporated by reference to Exhibit number 10.8 to
                        Registrant's Registration Statement on Form SB-2 filed
                        May 28, 1997).(1)

   10.8+                Grape Purchase Agreement, dated April 15, 1998, between
                        Scheid Vineyards California Inc. and International
                        Distillers and Vintners North America, Inc. (incorporated by
                        reference to Exhibit numbers 10.1 and 99 to Registrant's
                        Report on Form 10-QSB for the quarterly period ended June
                        30, 1998 filed August 13, 1998).

   10.9                 Collective Bargaining Agreement, for the period April 9,
                        1998 to December 31, 2001, between Scheid Vineyards Inc. and
                        The United Farm Workers of America, AFL-CIO. (incorporated
                        by reference to Exhibit number 10.23a to Amendment No. 1 to
                        Registrant's Registration Statement on Form SB-2 (File
                        No. 333-51055) filed May 8, 1998).

   10.10a+              Vineyard Development and Management Agreement, dated as of
                        December 1, 1995, by and between Heublein, Inc. and Scheid
                        Vineyards and Management Co. (incorporated by reference to
                        Exhibit number 10.12 to Registrant's Registration Statement
                        on Form SB-2 filed May 28, 1997).(1)

   10.10b               Amendment No. 1 to Vineyard Development and Management
                        Agreement, dated as of March 28, 1997, by and between
                        Heublein, Inc. and Scheid Vineyards and Management Co.
                        (incorporated by reference to Exhibit number 10.11b to
                        Registrant's Report on Form 10-KSB for the fiscal year
                        ended December 31, 1997 filed March 30, 1998).(1)

   10.11                Agricultural Credit Agreement (General Term Loan), dated
                        October 6, 1994, between Vineyard Investors 1972 and Sanwa
                        Bank California (incorporated by reference to Exhibit
                        number 10.15 to Registrant's Registration Statement on
                        Form SB-2 filed May 28, 1997).(1)

   10.12                Business Loan Agreement, dated as of March 28, 1997, between
                        Scheid Vineyards and Management Co. and Bank of America
                        National Trust and Savings Association (incorporated by
                        reference to Exhibit number 10.20 to Registrant's
                        Registration Statement on Form SB-2 filed May 28, 1997).(1)
</TABLE>

                                       28
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <S>
   10.13+               Long Term Grape Purchase Contract, dated February 12, 1973,
                        between Monterey Farming Corporation and Almaden Vineyards,
                        Inc., as amended by (i) a Memorandum of Understanding, dated
                        August 6, 1987, (ii) a Letter Agreement, dated May 14, 1990,
                        and (iii) an Amendment to Long Term Grape Purchase Contract,
                        dated as of March 12, 1993, between Scheid Vineyards and
                        Management Co. and Heublein, Inc. (incorporated by reference
                        to Exhibit number 10.21 to Registrant's Registration
                        Statement on Form SB-2 filed May 28, 1997).(1)

   10.14+               Long Term Grape Purchase Contract, dated December 21, 1972,
                        between Vineyard Investors 1972 and Almaden Vineyards, Inc.,
                        as amended by (i) a Memorandum of Understanding, dated
                        August 6, 1987, (ii) an Amendment to Long Term Grape
                        Purchase Contract, dated April 19, 1988, between Vineyard
                        Investors 1972 and Heublein, Inc., (iii) a Second Amendment
                        to Long Term Grape Purchase Contract, dated June 2, 1988,
                        (iv) a Third Amendment to Long Term Grape Purchase Contract,
                        dated as of March 12, 1993 and (v) a letter agreement, dated
                        April 6, 1990 (incorporated by reference to Exhibit
                        number 10.22 to Registrant's Registration Statement on
                        Form SB-2 filed May 28, 1997).(1)

   10.15+               Long Term Grape Purchase Contract, dated February 12, 1973,
                        between Monterey Farming Corporation, as General Partner on
                        behalf of Vineyard 405, and Almaden Vineyards, Inc., as
                        amended by (i) a certain Memorandum of Understanding, dated
                        August 6, 1987, and (ii) an Amendment to Long Term Grape
                        Purchase Contract, dated as of March 12, 1993, between
                        Vineyard 405 and Heublein, Inc. (incorporated by reference
                        to Exhibit number 10.23 to Registrant's Registration
                        Statement on Form SB-2 filed May 28, 1997).(1)

   10.16+               Long Term Wine Grape Purchase Agreement, dated as of
                        March 12, 1993, by and between Scheid Vineyards and
                        Management Co. and Heublein, Inc. (incorporated by reference
                        to Exhibit number 10.24 to Registrant's Registration
                        Statement on Form SB-2 filed May 28, 1997).(1)

   10.17+               Grape Purchase Agreement, dated as of April 1, 1996, by and
                        between Scheid Vineyards and Management Co. and The Hess
                        Collection Winery (incorporated by reference to Exhibit
                        number 10.25 to Registrant's Registration Statement on
                        Form SB-2 filed May 28, 1997).(1)

   10.18+               Grape Purchase Agreement, dated July 1, 1996, by and among
                        Scheid Vineyards and Management Co., Stephen Dooley Wine
                        Co., Inc. and The Chalone Wine Group, Ltd. (incorporated by
                        reference to Exhibit number 10.26 to Registrant's
                        Registration Statement on Form SB-2 filed May 28, 1997).(1)

   10.19                Alternating Winery Agreement, dated November 30, 1995, by
                        and between Scheid Vineyards and Management Co. and Storrs
                        Winery (incorporated by reference to Exhibit number 10.27
                        to Registrant's Registration Statement on Form SB-2 filed
                        May 28, 1997).(1)

   10.20                Winery Services Agreement, dated January 1, 1996, by and
                        between Scheid Vineyards and Management Co. and Storrs
                        Winery (incorporated by reference to Exhibit number 10.28 to
                        Registrant's Registration Statement on Form SB-2 filed
                        May 28, 1997).(1)

   10.21*               Standard Office Lease, dated July 1, 1999, by and between
                        Scheid Vineyards California Inc. and Tesh Partners, L.P.

   10.22+               Lease, dated as of October 18, 1998 between Scheid Vineyards
                        California Inc. and California Orchard Company.

   10.23                Amended and Restated Buy-Sell Agreement, dated as of
                        December 31, 1997, by and among Scheid Vineyards Inc. and
                        holders of Class B Common Stock (incorporated by reference
                        to Exhibit number 10.24 to Registrant's Report on
                        Form 10-KSB for the fiscal year ended December 31, 1997
                        filed March 30, 1998).
</TABLE>

                                       29
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <S>
   10.24                Joint Agreement, dated as of November 7, 1997, by and among
                        Samuel R. Avila (also known as Sam Avila) and Margaret J.
                        Avila, individually and as trustees under declaration of
                        trust dated August 19, 1989, and Margaret J. Avila and
                        Valarie Bassetti (also known as Valerie Bassetti), as
                        successor co-trustees of the testamentary trust of Joseph
                        Labarere, deceased, Central Coast Federal Land Bank
                        Association, FLCA, Scheid Vineyards and Management Co.,
                        Canandaigua Wine Company, a New York corporation, successor
                        by merger to Canandaigua Wine Company, Inc., a Delaware
                        corporation, and Canandaigua West, Inc. (incorporated by
                        reference to Exhibit numbers 10.27a and 99.1 to Amendment
                        No. 1 to Registrant's Registration Statement on Form SB-2
                        (File No. 333-51055) filed May 8, 1998).(1)

   10.25                Water Supply Agreement, dated as of January 1, 1997, by
                        Scheid Vineyards and Management Co. and Canandaigua West,
                        Inc. (incorporated by reference to Exhibit number 10.36 to
                        Registrant's Registration Statement on Form SB-2 filed
                        May 28, 1997).(1)

   10.26                Agreement Regarding Water, dated as of January 1, 1996, by
                        Luis Echenique, Ricardo Echenique and Margaret Echenique,
                        Executrix of the Estate of Francis D. Echenique, in favor of
                        each of Scheid Vineyards and Management Co. and Canandaigua
                        West, Inc. (incorporated by reference to Exhibit
                        number 10.37 to Registrant's Registration Statement on
                        Form SB-2 filed May 28, 1997).(1)

   10.27                Easement Agreement, dated January 1, 1997, by Sam Avila and
                        Margaret J. Avila, as trustees under declaration of trust
                        dated August 16, 1989, and Margaret J. Avila and Valarie
                        Bassetti successor co-trustees of the testamentary trust of
                        Joseph Labarere and Sam Avila and Margaret J. Avila and
                        Scheid Vineyards and Management Co., in favor of Canandaigua
                        West, Inc. (incorporated by reference to Exhibit
                        number 10.38 to Registrant's Registration Statement on
                        Form SB-2 filed May 28, 1997).(1)

   10.28                Credit Agreement (Crop Line of Credit) dated September 7,
                        1999, by and between Sanwa Bank California and Scheid
                        Vineyards Inc. and Scheid Vineyards California
                        Inc.(incorporated by reference to Exhibit number 10.1 to
                        Registrants Form 10-QSB for the quarterly period ended
                        September 30, 1999 filed November 12, 1999).

   10.29+               Grape Purchase Agreement, dated as of May 9, 1997, by and
                        between Scheid Vineyards Inc. and The Hess Collection Winery
                        (incorporated by reference to Exhibit number 10.42 to
                        Registrant's Registration Statement on Form SB-2 filed
                        May 28, 1997).(1)

   10.30+               Grape Purchase Agreement, dated as of April 1, 1997, by and
                        between Vineyard Investors 1972 and Stephen Dooley Wine Co.,
                        Inc. (incorporated by reference to Exhibit number 10.43 to
                        Registrant's Registration Statement on Form SB-2 filed
                        May 28, 1997).(1)

   10.31                Employment Agreement, dated as of July 19, 1997, by and
                        between Scheid Vineyards Inc. and Alfred G. Scheid
                        (incorporated by reference to Exhibit number 10.44 to
                        Amendment No. 2 to Registrant's Registration Statement on
                        Form SB-2 filed July 21, 1997).(2)

   10.32                Employment Agreement, dated as of July 19, 1997, by and
                        between Scheid Vineyards Inc. and Scott D. Scheid
                        (incorporated by reference to Exhibit number 10.45 to
                        Amendment No. 2 to Registrant's Registration Statement on
                        Form SB-2 filed July 21, 1997).(2)

   10.33                Employment Agreement, dated as of July 19, 1997, by and
                        between Scheid Vineyards Inc. and Heidi M. Scheid
                        (incorporated by reference to Exhibit number 10.46 to
                        Amendment No. 2 to Registrant's Registration Statement on
                        Form SB-2 filed July 21, 1997).(2)

   10.34                Employment Agreement, dated as of July 19, 1997, by and
                        between Scheid Vineyards Inc. and Kurt J. Gollnick
                        (incorporated by reference to Exhibit number 10.47 to
                        Amendment No. 2 to Registrant's Registration Statement on
                        Form SB-2 filed July 21, 1997).(2)
</TABLE>

                                       30
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <S>
   10.35                Form of Indemnification Agreement (incorporated by reference
                        to Exhibit number 10.48 to Amendment No. 1 to Registrant's
                        Registration Statement on Form SB-2 filed July 3, 1997).(2)

   21.1                 List of Subsidiaries (incorporated by reference to Exhibit
                        number 21.1 to Amendment No. 1 to Registrant's Registration
                        Statement on Form SB-2 filed July 3, 1997).

   23.1*                Independent Auditors' Consent.

   27.1*                Financial Data Schedule.
</TABLE>

------------------------

*   Electronically filed herewith.

+   Portions of this Exhibit have been deleted pursuant to the Registrant's
    requests for confidential treatment pursuant to Rule 406 promulgated under
    the Securities Act or Rule 24b-2 promulgated under the Securities Exchange
    Act.

(1) The contracting party is a predecessor in interest to Scheid Vineyards
    California Inc., Registrant's wholly owned subsidiary.

(2) Indicates a management contract or compensating plan or arrangement required
    to be filed as an exhibit to this Form 10-KSB.

(b) Current Reports on Form 8-K

    None.

                                       31
<PAGE>
                                   SIGNATURES

    In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

<TABLE>
<S>                                                    <C>  <C>
                                                       SCHEID VINEYARDS INC.

                                                       By:             /s/ ALFRED G. SCHEID
                                                            -----------------------------------------
                                                                         Alfred G. Scheid
                                                                     CHIEF EXECUTIVE OFFICER
                                                                  (PRINCIPAL EXECUTIVE OFFICER)
</TABLE>

    In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                  SIGNATURE                                    TITLE                       DATE
                  ---------                                    -----                       ----
<C>                                            <S>                                     <C>
            /s/ ALFRED G. SCHEID               Chairman of the Board and Chief
    ------------------------------------         Executive Officer (Principal          March 8, 2000
              Alfred G. Scheid                   Executive Officer)

                                               Vice President Finance, Chief
             /s/ HEIDI M. SCHEID                 Financial Officer, Secretary,
    ------------------------------------         Treasurer and Director (Principal     March 8, 2000
               Heidi M. Scheid                   Financial Officer)

             /s/ SCOTT D. SCHEID
    ------------------------------------       Vice President, Chief Operating         March 8, 2000
               Scott D. Scheid                   Officer and Director

              /s/ JOHN L. CRARY
    ------------------------------------       Director                                March 8, 2000
                John L. Crary

           /s/ ROBERT P. HARTZELL
    ------------------------------------       Director                                March 8, 2000
             Robert P. Hartzell
</TABLE>

                                       32
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Independent Auditors' Report................................    F-2

Consolidated Balance Sheets.................................    F-3

Consolidated Statements of Operations.......................    F-4

Consolidated Statements of Cash Flows.......................    F-5

Consolidated Statements of Stockholders' Equity.............    F-6

Notes to Consolidated Financial Statements..................    F-7
</TABLE>

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Scheid Vineyards Inc.:

    We have audited the accompanying consolidated balance sheets of Scheid
Vineyards Inc. and subsidiary (the "Company") as of December 31, 1999 and 1998,
and the related consolidated statements of operations, cash flows, and
stockholders' equity for the years then ended. 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 of America. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.

/s/ DELOITTE & TOUCHE LLP
------------------------------------
Los Angeles, California
February 18, 2000

                                      F-2
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                               NOTES       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
                                           ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................        2    $   411    $ 5,031
  Accounts receivable, trade................................               1,177        728
  Accounts receivable, other................................                 581        398
  Inventories...............................................        3        673        742
  Supplies, prepaid expenses and other current assets.......                 384        614
  Deferred income taxes.....................................        8         --         38
  Current portion of long-term receivable...................        5        525         --
                                                                         -------    -------
    Total current assets....................................               3,751      7,551
PROPERTY, PLANT AND EQUIPMENT, NET..........................      4,7     46,170     32,937
LONG-TERM RECEIVABLE........................................        5      4,724      5,572
OTHER ASSETS, NET...........................................                 575        472
                                                                         -------    -------
                                                                         $55,220    $46,532
                                                                         =======    =======
                            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current portion of long-term debt.........................        7    $ 1,530    $   275
  Accounts payable and accrued liabilities..................               1,365        716
  Accrued interest payable..................................                 409        197
  Income taxes payable......................................        8        297      2,480
  Deferred income taxes.....................................        8         60         --
                                                                         -------    -------
    Total current liabilities...............................               3,661      3,668
LONG-TERM DEBT, NET OF CURRENT PORTION......................        7     21,915     11,562
DEFERRED INCOME TAXES.......................................        8      1,087        867
                                                                         -------    -------
    Total liabilities.......................................              26,663     16,097
                                                                         -------    -------
COMMITMENTS AND CONTINGENCIES...............................       10
STOCKHOLDERS' EQUITY:.......................................  6,11,12
  Preferred stock, $.001 par value; 2,000,000 shares
    authorized; no shares issued and outstanding............                  --         --
  Common stock,
    Class A, $.001 par value; 20,000,000 shares authorized;
      2,310,463 and 2,872,950 shares outstanding in 1999 and
      1998, respectively
    Class B, $.001 par value; 10,000,000 shares authorized;
      3,374,100 shares issued and outstanding in 1999 and
      1998..................................................                   7          7
  Additional paid-in capital................................              21,868     21,868
  Retained earnings.........................................              11,572     10,936
  Less: treasury stock; 1,014,850 and 452,050 Class A Common
    Stock at cost in 1999 and 1998, respectively............              (4,890)    (2,376)
                                                                         -------    -------
    Total stockholders' equity..............................              28,557     30,435
                                                                         -------    -------
                                                                         $55,220    $46,532
                                                                         =======    =======
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                             YEAR ENDED
                                                                            DECEMBER 31,
                                                                         -------------------
                                                               NOTES       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
REVENUES:
  Sales.....................................................             $11,804    $16,436
  Vineyard management, services and other fees..............               1,040      1,037
                                                                         -------    -------
    Total revenues..........................................              12,844     17,473
COST OF SALES...............................................               8,219      7,911
                                                                         -------    -------
GROSS PROFIT................................................               4,625      9,562
  General and administrative expenses.......................               3,572      4,274
  Reversal of deferred compensation.........................        9         --       (706)
  Interest income (net of interest expense of $0 in 1999 and
    $336 in 1998)...........................................                 (33)       (46)
                                                                         -------    -------
INCOME BEFORE PROVISION FOR INCOME TAXES....................               1,086      6,040
PROVISION FOR INCOME TAXES..................................        8        450      2,421
                                                                         -------    -------
NET INCOME..................................................             $   636    $ 3,619
                                                                         =======    =======
BASIC AND DILUTED EARNINGS PER SHARE........................        2    $  0.11    $  0.55
                                                                         =======    =======
WEIGHTED AVERAGE SHARES OUTSTANDING.........................        2      5,996      6,611
                                                                         =======    =======
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                      F-4
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                                1999           1998
                                                              ---------      ---------
<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................  $    636       $  3,619
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Depreciation, amortization and abandonments...........     1,693          2,148
      Deferred compensation.................................        --           (662)
      Noncash compensation..................................        --             75
      Deferred income taxes.................................       318             88
  Changes in operating assets and liabilities:
    Accounts receivable, trade..............................      (449)          (379)
    Accounts receivable, other..............................      (183)            14
    Inventories.............................................        69            360
    Supplies, prepaid expenses and other current assets.....       230            199
    Accounts payable and accrued liabilities................       861             79
    Income taxes payable....................................    (2,183)         2,480
                                                              --------       --------
      Net cash provided by operating activities.............       992          8,021
                                                              --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Long-term receivable......................................       323           (893)
  Proceeds from sale of property, plant and equipment.......        --            710
  Additions to property, plant and equipment................   (14,926)        (8,000)
  Other assets..............................................      (103)          (236)
                                                              --------       --------
      Net cash used in investing activities.................   (14,706)        (8,419)
                                                              --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in long-term debt................................    21,103          4,440
  Repayment of long-term debt...............................    (9,495)       (11,114)
  Repurchase of common stock................................    (2,514)        (2,380)
                                                              --------       --------
      Net cash provided by (used in) financing activities...     9,094         (9,054)
                                                              --------       --------
      Decrease in cash and cash equivalents.................    (4,620)        (9,452)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................     5,031         14,483
                                                              --------       --------
CASH AND CASH EQUIVALENTS, END OF YEAR......................  $    411       $  5,031
                                                              ========       ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                      F-5
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                   (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                COMMON STOCK OUTSTANDING
                                            ---------------------------------
                                            NUMBER OF   NUMBER OF               ADDITIONAL
                                             CLASS A     CLASS B                 PAID-IN     RETAINED   TREASURY
                                             SHARES       SHARES      AMOUNT     CAPITAL     EARNINGS    SHARES
                                            ---------   ----------   --------   ----------   --------   --------
<S>                                         <C>         <C>          <C>        <C>          <C>        <C>
BALANCE, JANUARY 1, 1998..................  2,300,000    4,400,000      $7        $21,797    $ 7,317         --
  Conversion of Class B shares to
    Class A shares (Note 11)..............  1,025,000   (1,025,000)     --             --         --         --
  Repurchase of common stock (Note 11)....   (452,050)        (900)     --             --         --    $(2,380)
  Shares cancelled........................         --           --      --             (4)        --          4
  Stock issued for compensation...........         --           --      --             75         --         --
  Net income..............................         --           --      --             --      3,619         --
                                            ---------   ----------      --        -------    -------    -------
BALANCE, DECEMBER 31, 1998................  2,872,950    3,374,100       7         21,868     10,936     (2,376)
  Repurchase of common stock (Note 11)....   (562,800)          --      --             --         --     (2,514)
  Stock options exercised (Note 12).......        313           --      --             --         --         --
  Net income..............................         --           --      --             --        636         --
                                            ---------   ----------      --        -------    -------    -------
BALANCE, DECEMBER 31, 1999................  2,310,463    3,374,100      $7        $21,868    $11,572    $(4,890)
                                            =========   ==========      ==        =======    =======    =======
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                      F-6
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

1. ORGANIZATION AND BASIS OF PRESENTATION

    ORGANIZATION--The principal business of the Company is the production of
premium varietal wine grapes. The Company currently operates approximately 6,000
acres of premium wine grape vineyards in Monterey and San Benito Counties,
California.

    The Company has long-term grape purchase agreements with several wineries
whereby the wineries agree to purchase substantially all of the Company's
current grape production. These contracts generally expire no earlier than the
completion of harvest in years ranging from 2001 to 2014 and are extended if
neither party cancels two or three years before the expiration date. The largest
set of these winery contracts with a single customer covers approximately 57% of
the Company's acreage at December 31, 1999 and accounted for approximately 76%
and 74% of the Company's total revenues in 1999 and 1998, respectively.

    BASIS OF PRESENTATION--The Company conducts all of its business through its
wholly owned subsidiary, Scheid Vineyards California Inc., a California
corporation. All significant intercompany balances have been eliminated in
consolidation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. At December 31, 1999 and 1998, substantially all cash balances
were on deposit with the Company's major bank.

    INVENTORIES--Inventories are stated at the lower of FIFO (first-in,
first-out) cost or market. Cost includes the cost of grown grapes, harvesting,
production, aging and bottling, and tasting room merchandise. Wine inventories
are classified as current assets in accordance with recognized trade practice
although certain inventories will be 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 grapes are harvested. On a quarterly basis, the
Company evaluates the cost of its inventories and reduces such inventories to
market if required.

    PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost and are depreciated using straight-line and accelerated methods over the
estimated useful lives of the assets. Vineyards generally have estimated
depreciable lives of 25 to 30 years, buildings 30 years, and furniture and
equipment 5 to 7 years. Development costs incurred during the development period
of a vineyard including related interest are capitalized. Depreciation commences
in the initial year the vineyard becomes commercially productive, generally in
the fourth year. Any revenue generated prior to a vineyard becoming commercially
productive reduces the capitalized cost of the vineyard. Capitalized costs were
reduced by revenues totaling $184,000 and $0 in 1999 and 1998, respectively. The
Company capitalized interest totaling $1,185,000 and $641,000 in 1999 and 1998,
respectively.

    REVENUE RECOGNITION--The Company recognizes revenue from grape sales when
the grapes are delivered to the winery. The Company does not have any allowance
for returns because grapes are tested and accepted upon delivery. Vineyard
management and other services are recognized as provided. All revenues of the
Company are derived from customers within the United States.

                                      F-7
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

    FAIR VALUE OF FINANCIAL INSTRUMENTS--The fair values of accounts receivable
and accounts payable approximate book value because of their short duration.
Long-term receivables and long-term debt approximate book value because such
financial instruments have variable, market driven, interest rates.

    IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF--Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" requires that long-lived assets and certain identifiable intangibles to be
held and used by the Company be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. For the year ended December 31, 1998 the Company wrote down
vineyard acres it intends to remove and redevelop by $555,000. The write-down of
the acres being redeveloped was based upon a comparison of net book values to
total estimated revenues less estimated operating costs of the acres prior to
removal. There were no such write-downs for the year ended December 31, 1999.

    USE OF ESTIMATES--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 revenues and expenses during the reporting period.
Actual results could differ from reported assets, liabilities, revenues and
expenses.

    EARNINGS PER SHARE AND CLASSES OF COMMON STOCK--Weighted average shares
outstanding includes both Class A and Class B Common Stock outstanding for the
periods presented (Note 11). The effect of outstanding stock options and
warrants on the weighted average shares was immaterial for the periods
presented.

    NEW FINANCIAL ACCOUNTING STANDARD--In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instrument and
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
for derivative instruments. It requires the recognition of all derivatives as
either assets or liabilities in the statement of position and measurement of the
instruments at fair value. The Company plans to adopt SFAS No.133 on January 1,
2001 and is currently evaluating the impact on the financial statements.

3. INVENTORIES

    Inventories consist of the following:

<TABLE>
<CAPTION>
                                                            1999       1998
                                                          --------   --------
<S>                                                       <C>        <C>
Deferred crop costs.....................................  $354,000   $376,000
Bulk and bottled wine...................................   291,000    339,000
Tasting room merchandise................................    28,000     27,000
                                                          --------   --------
  Total.................................................  $673,000   $742,000
                                                          ========   ========
</TABLE>

                                      F-8
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

4. PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
                                                        1999          1998
                                                     -----------   -----------
<S>                                                  <C>           <C>
Land and buildings.................................  $ 6,535,000   $ 5,843,000
Vineyard improvements..............................   22,910,000    15,452,000
Vineyard improvements under development............   21,464,000    16,201,000
Machinery and equipment............................    5,520,000     4,030,000
                                                     -----------   -----------
  Total............................................   56,429,000    41,526,000
Less accumulated depreciation and amortization.....   10,259,000     8,589,000
                                                     -----------   -----------
Property, plant and equipment--net.................  $46,170,000   $32,937,000
                                                     ===========   ===========
</TABLE>

5. LONG-TERM RECEIVABLE

    The Company has a contract to redevelop and manage certain vineyards owned
or controlled by a major client. The contract originally called for the
expenditure of approximately $7,500,000 over a three-year period. The funds for
this project have been borrowed, as an accommodation to the client, by the
Company under a line of credit (see Note 7). The interest rate and payment terms
of this receivable are the same as the related note payable. The note payable to
the bank is secured by a letter of credit provided by the client and by the
management contract. The contract calls for the payment of this receivable by
the client's payment of the six annual principal installments under the line,
beginning January 5, 2000. At December 31, 1999, the receivable was due as
follows: $525,000 in 2000, $525,000 in 2001, $525,000 in 2002, $525,000 in 2003,
$525,000 in 2004, and $2,624,000 in 2005. The redevelopment of the property was
completed in 1999 and the Company will continue to manage the operations of the
vineyard for the client.

6. CROP LINE OF CREDIT

    The Company has a crop line of credit with a bank which currently provides
for maximum borrowings of $12,000,000 through June 5, 2001. Borrowings are
secured by crops and other assets with interest due quarterly at the bank's
reference rate. At December 31, 1999, the weighted average interest rate on
outstanding borrowings under this line of $2,700,000 was 7.91%. No amounts were
outstanding under the Company's crop line of credit at December 31, 1998.

    The crop line prohibits the payment of dividends without the consent of the
lender and contains various financial covenants, including minimum tangible net
worth amounts, and current and total debt to net worth ratios. At December 31,
1999, the Company was in compliance with all covenants except for the current
ratio covenant. The Company has received a waiver from the bank regarding the
noncompliance of the current ratio covenant at December 31, 1999, and expects to
be in compliance with all covenants at December 31, 2000.

                                      F-9
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

7. LONG-TERM DEBT

    Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                 1999          1998
                                                              -----------   -----------
<S>                                                           <C>           <C>
Revolving/Declining Line of Credit Agreement with a bank
  which provided for a maximum borrowing of $3,000,000
  diminishing annually to a maximum allowable commitment of
  $1,071,000, which is due on July 5, 2005. The line of
  credit is secured by a leasehold interest in 707 vineyard
  acres. Interest is payable quarterly at the lower of a
  bank-quoted fixed rate or 3/4% over the bank's reference
  rate (7.97% at December 31, 1999).........................  $ 2,143,000   $        --

Revolving/Declining Line of Credit Agreement with a bank
  which provided for a maximum borrowing of $2,835,000
  diminishing annually to a maximum allowable commitment of
  $1,775,000, which is due on June 5, 2007. The line of
  credit is secured by a deed of trust on 405 vineyard
  acres. Interest is payable quarterly at the lower of a
  bank-quoted fixed rate or 1/4% over the bank's reference
  rate (7.97% at December 31, 1999).........................    2,685,000            --

Revolving/Declining Line of Credit Agreement with a bank
  which provided for a maximum borrowing of $1,450,000
  diminishing annually to a maximum allowable commitment of
  $586,000, which is due on June 5, 2007. The line of credit
  is secured by a leasehold interest in 352 vineyard acres.
  Interest is payable quarterly at the lower of a
  bank-quoted fixed rate or 1/4% over the bank's reference
  rate (7.97% at December 31, 1999).........................    1,258,000            --

Revolving/Declining Line of Credit Agreement with a bank
  which provided for a maximum borrowing of $3,600,000
  diminishing annually to a maximum allowable commitment of
  $1,980,000, which is due on June 5, 2008. The line of
  credit is secured by a deed of trust on 370 vineyard
  acres. Interest is payable quarterly at the lower of a
  bank-quoted fixed rate or the bank's reference rate (7.97%
  at December 31, 1999).....................................    3,420,000            --

Note payable to bank, with interest at the lower of a
  bank-quoted fixed rate or the bank's reference rate plus
  3/4% (7.97% at December 31, 1999), principal due in annual
  installments through July 5, 2005, secured by a trust deed
  on 707 vineyard acres.....................................    1,200,000     1,275,000

Note payable to bank, with interest at the lower of a
  bank-quoted fixed rate or the bank's reference rate plus
  3/4% (7.97% at December 31, 1999), principal due in annual
  installments through October 5, 2004, secured by a first
  deed of trust on 1,063 acres of real property.............    4,650,000     4,850,000

Note payable, with interest at 1% over a bank's reference
  rate (9% at December 31, 1999), secured by deeds of trust,
  due January 10, 2000......................................      140,000       140,000
</TABLE>

                                      F-10
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

7. LONG-TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                                 1999          1998
                                                              -----------   -----------
<S>                                                           <C>           <C>
Note payable to bank represents borrowings on a $7,500,000
  line of credit, which bears interest at the bank's
  reference rate (6.97% at December 31, 1999). The note is
  secured by a letter of credit provided by a major client,
  and is used for costs incurred for the development of
  certain vineyards owned by the client (see Note 5).
  Principal due in six annual installments beginning January
  5, 2000...................................................    5,249,000     5,572,000
                                                              -----------   -----------
    Total...................................................   20,745,000    11,837,000
Less current maturities.....................................    1,530,000       275,000
                                                              -----------   -----------
Long-term portion...........................................  $19,215,000   $11,562,000
                                                              ===========   ===========
</TABLE>

    Principal payments required on long-term debt (including the crop line of
credit--Note 6) for each of the next five years ending December 31 are as
follows:

<TABLE>
<S>                                                           <C>
2000........................................................  $ 1,530,000
2001........................................................    4,178,000
2002........................................................    1,478,000
2003........................................................    1,478,000
2004........................................................    4,846,000
Thereafter..................................................    9,935,000
                                                              -----------
Total.......................................................  $23,445,000
                                                              ===========
</TABLE>

    Substantially all of the Company's property, plant and equipment serves as
collateral for long-term debt. In addition, the credit facilities and notes
contain various financial covenants, including minimum tangible net worth
amounts, and current and total debt to net worth ratios. At December 31, 1999,
the Company was in compliance with all covenants except for the current ratio
covenant. The Company has received a waiver from the bank regarding the
noncompliance of the current ratio covenant at December 31, 1999, and expects to
be in compliance with all covenants at December 31, 2000.

                                      F-11
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

8. INCOME TAXES

    Significant components of the Company's net deferred income tax assets and
liabilities at December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                          1999         1998
                                                       -----------   ---------
<S>                                                    <C>           <C>
Current deferred income tax assets:
  State income taxes.................................  $    34,000   $ 169,000
  Miscellaneous reserves.............................       86,000      86,000
Current deferred income tax liabilities:
  Prepaid expenses...................................     (180,000)   (217,000)
                                                       -----------   ---------
Net current deferred income tax (liability) asset....  $   (60,000)  $  38,000
                                                       ===========   =========
Long-term deferred income tax assets:
  State income taxes.................................  $    75,000   $  73,000
Long-term deferred income tax liabilities:
  Depreciation.......................................   (1,162,000)   (940,000)
                                                       -----------   ---------
Net long-term deferred income tax liability..........  $(1,087,000)  $(867,000)
                                                       ===========   =========
</TABLE>

    The provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                          1999        1998
                                                        --------   ----------
<S>                                                     <C>        <C>
Current:
  Federal.............................................  $ 77,000   $1,797,000
  State...............................................    55,000      536,000
                                                        --------   ----------
Total.................................................   132,000    2,333,000
                                                        --------   ----------
Deferred:
  Federal.............................................   273,000       87,000
  State...............................................    45,000        1,000
                                                        --------   ----------
Total.................................................   318,000       88,000
                                                        --------   ----------
Total provision for income taxes......................  $450,000   $2,421,000
                                                        ========   ==========
</TABLE>

    The Company's effective income tax rate differs from the federal statutory
income tax rate due to the following:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Federal statutory rate......................................    34.0%      34.0%
State taxes, net of federal benefit.........................     6.0        5.9
Other.......................................................     1.4        0.2
                                                                ----       ----
Total.......................................................    41.4%      40.1%
                                                                ====       ====
</TABLE>

                                      F-12
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

9. DEFERRED COMPENSATION

    The Company had a non-qualified deferred compensation arrangement with an
employee. The arrangement provided for annual payments of $100,000 commencing
upon the employee's retirement. The employee passed away in August 1998 negating
the need for the accrued liability which totaled $706,000. Compensation expense
related to the arrangement was $44,000 for the year ended December 31, 1998.

10. COMMITMENTS AND CONTINGENCIES

    LEASE OBLIGATIONS--The Company has various operating lease agreements for
office space and farm land. The lease for office space is with a related
partnership and runs until June 2004. The rent is currently $119,000 annually.

    Farm land leases cover approximately 2,600 acres with initial terms ranging
from 24 to 30 years. The land leases provide for options to renew ranging from
10 to 20 years and contain provisions for rent adjustments based upon the
prevailing market rate, Consumer Price Index, or revenue generated by the
property, and also provide for payments of taxes, insurance and maintenance
costs.

    Aggregate minimum rental payments for each of the next five years ending
December 31 are as follows:

<TABLE>
<S>                                                     <C>          <C>
2000..................................................  $  931,000
2001..................................................     945,000
2002..................................................     945,000
2003..................................................     832,000
2004..................................................     772,000
Thereafter............................................  11,183,000
</TABLE>

    Rent charged to operations was $466,000 and $429,000 for the years ended
December 31, 1999 and 1998, respectively. Rent capitalized into vineyard
development was $481,000 and $151,000 for the years ended December 31, 1999 and
1998, respectively.

    PENSION PLANS--The Company has two 401(k) Profit Sharing Plans. The first
plan is for the benefit of the Company's employees who are covered by the United
Farm Workers of America Collective Bargaining Agreement. All union employees of
the Company are eligible to participate after having worked 500 hours within a
one-year period. The Company contributes 15 cents for each hour worked by
eligible employees, subject to the limitations imposed by the Internal Revenue
Code. The Company's contribution to the union employees' plan amounted to
$79,000 and $62,000 for the years ended December 31, 1999 and 1998,
respectively.

    The second plan covers the Company's non-union employees. All non-union
employees of the Company are eligible to participate in the plan after one year
of employment. Employees may contribute between 1% and 15% of their annual
compensation. The Company matches 50 cents for every dollar of employee
contributions up to 6% of their annual salaries, subject to the limitations
imposed by the Internal Revenue Code. The Company's contribution to this plan
amounted to $37,000 and $36,000 for the years ended December 31, 1999 and 1998,
respectively.

    OTHER--The Company was committed to the purchase of vineyard materials at
December 31, 1999 in the amount of $668,000.

                                      F-13
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

11. COMMON STOCK

RIGHTS--

    Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to five votes on all matters submitted to a
vote of the stockholders. The holders of the Class A Common Stock, voting as a
separate class, elect 25% of the total Board of Directors, rounded up to the
nearest whole number, of the Company and the holders of the Class B Common
Stock, voting as a separate class, elect the remaining directors. Each share of
Class B Common Stock is convertible into one share of Class A Common Stock at
the option of the holder or automatically upon transfer to a person other than
certain specified persons. Except for the differing voting rights, the shares of
Class A and Class B common stock have substantially identical rights,
preferences and privileges. In 1998, the Company's Chairman/Chief Executive
Officer and his wife sold and gifted a total of 1,025,000 shares of Class B
Common Stock which were automatically converted to an equal number of shares of
Class A Common Stock at the time of gift or transfer.

WARRANTS--

    The Company granted the representative of the underwriters of its initial
public offering in 1997 warrants to purchase 200,000 shares of common stock. The
warrants are exercisable at $14.00 per share any time between July 24, 1998
through July 24, 2002.

STOCK REPURCHASES--

    On September 9, 1999, the Company instituted a stock repurchase program in
which the Company may spend up to $2.5 million in open market transactions to
purchase outstanding shares of its Class A Common Stock at such times, in such
amounts or blocks and at such prices as deemed appropriate. This repurchase
program will expire on December 31, 2000, and replaces a previously existing
repurchase program that was to expire on September 30, 1999. Through December
31, 1999, the Company had repurchased 423,100 shares under this program for
approximately $1,897,000. Under previous stock repurchase programs and other
repurchases, the Company had previously repurchased 592,650 shares for an
aggregate purchase price of approximately $2,997,000.

12. STOCK OPTION PLAN

    In 1997, the Board of Directors of the Company adopted the 1997 Stock
Option/Stock Issuance Plan authorizing the issuance of qualified or
non-qualified stock options to directors, officers, employees, consultants and
others to purchase up to 200,000 shares of the Company's Class A Common Stock at
prices equal to the fair value of the Company's stock at the date of grant.
Options granted to date under the Plan vest one-quarter each year, beginning one
year after the grant date or a specified vesting commencement date and expire
ten years after the earlier of the grant date and the vesting commencement date.

    On October 8, 1998, the Board of Directors approved the cancellation of
71,000 options, excluding those stock options granted to Directors, and
regranted such options at $4.00 per share, the then fair market value of the
Class A Common Stock of the Company. All other terms of the options remained
identical.

                                      F-14
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

12. STOCK OPTION PLAN (CONTINUED)

    The following summarizes stock option activity for the periods presented:

<TABLE>
<CAPTION>
                                                                WEIGHTED AVERAGE
                                                      SHARES    EXERCISE PRICES
                                                     --------   ----------------
<S>                                                  <C>        <C>
Outstanding, January 1, 1998.......................   162,000        $10.00
  Granted..........................................    76,000        $ 4.29
  Cancelled........................................  (102,000)       $10.00
                                                     --------        ------
Outstanding, December 31, 1998.....................   136,000        $ 6.81
  Granted..........................................    15,000        $ 4.76
  Cancelled........................................   (10,687)       $ 4.14
  Exercised........................................      (313)       $ 4.00
                                                     --------        ------
Outstanding, December 31, 1999.....................   140,000        $ 6.80
                                                     ========        ======
</TABLE>

<TABLE>
<CAPTION>
                                                                 RANGE OF
                                                            EXERCISE PRICES AT
                                                             DECEMBER 31, 1999
                                                          -----------------------
                                                          $4.00-$5.06    $10.00
                                                          -----------   ---------
<S>                                                       <C>           <C>
Options outstanding.....................................      80,000       60,000
Weighted average exercise price of options
  outstanding...........................................       $4.40       $10.00
Options exercisable.....................................      37,917       36,250
Weighted average exercise price of options
  exercisable...........................................       $4.23       $10.00
Weighted average fair value of options granted in
  1999..................................................       $2.55         None
Weighted average remaining contractual life.............   8.0 years    7.5 years
</TABLE>

    The Company accounts for its stock-based awards using the intrinsic value
method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and its related interpretations.
Accordingly, no compensation expense has been recognized in the financial
statements for employee stock arrangements.

    SFAS No. 123, "Accounting for Stock-Based Compensation", requires the
disclosure of pro forma net income and net income per share. Under SFAS
No. 123, the fair value of stock-based awards to employees is calculated through
the use of options pricing models, even though such models were developed to
estimate the fair value of freely-tradable, fully transferable options without
vesting restrictions, which significantly differ from the Company's stock option
awards. These models also require subjective assumptions, including future stock
price volatility and expected time to exercise, which greatly affect the
calculated values. The Company's calculations were made using the Black-Scholes
option pricing model with the following weighted average assumptions: expected
life, 5 years following vesting; 54% and 62% stock price volatility in 1999 and
1998, respectively; weighted average risk free rate of return of 6.0%; and no
dividends during the expected term. Forfeitures are recognized as they occur.

                                      F-15
<PAGE>
                      SCHEID VINEYARDS INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 1999 AND 1998

12. STOCK OPTION PLAN (CONTINUED)
    If the computed fair values of the Company's stock option awards had been
amortized to expense over the vesting period of the awards, net income for the
years ended December 31, 1999 and 1998 would have been reduced to the pro forma
amounts indicated below.

<TABLE>
<CAPTION>
                                                          1999        1998
                                                        --------   ----------
<S>                                                     <C>        <C>
Net income:
  As reported.........................................  $636,000   $3,619,000
  Pro forma...........................................  $544,000   $3,466,000

Net income per share:
  As reported.........................................  $   0.11   $     0.55
  Pro forma...........................................  $   0.09   $     0.52
</TABLE>

13. SUPPLEMENTAL CASH FLOW INFORMATION

    Supplemental disclosures to the statements of cash flows are as follows:

<TABLE>
<CAPTION>
                                                          1999         1998
                                                       ----------   ----------
<S>                                                    <C>          <C>
Interest paid (net of amount capitalized)............  $       --   $  454,000
Income taxes paid....................................  $2,550,000   $       --
</TABLE>

                                      F-16