---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

---

FORM 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period September 30, 2003                  
|or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission File Number: 1-14305

---

GOLDEN STATE VINTNERS, INC.(Exact name of registrant as specified in its charter)

|DELAWARE(State or other jurisdiction of
incorporation or organization)                 |  | 77-0412761(I.R.S. Employer Identification No.)
|-------------------------------------------------------------------------------------- |  | ----------------------------------------------
|607 AIRPARK ROAD, NAPA, CALIFORNIA(Address of principal executive offices)             |  | 94558(Zip Code)                               
|(707) 254-4900(Registrant's telephone number,
including area code)                    
|NONE(Former name, former address and former fiscal year,
if changed since last report)

---

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The
number of shares of the Registrant's Class A and Class B Common Stock outstanding as of November 14, 2003 was 4,342,528 and 5,170,459 shares, respectively.

---

---

---



GOLDEN STATE VINTNERS, INC.  TABLE OF CONTENTS

|Item No.                                                                                     |                                                                                                        | Page
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ----
|PART IFINANCIAL INFORMATION                                                                
|Item 1Financial Statements                                                                  |                                                                                                        |     
|                                                                                             | Condensed Consolidated Balance Sheets as of September 30, 2003 and June 30, 2003                       |     
|                                                                                             | Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2003 and 2002 |     
|                                                                                             | Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2003 and 2002 |     
|                                                                                             | Notes to Condensed Consolidated Financial Statements                                                   |     
|Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                        | 11  
|Item 3Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                        | 17  
|Item 4Controls and Procedures                                                               |                                                                                                        | 18  
|PART IIOTHER INFORMATION                                                                   
|Item 6Exhibits and Reports on Form 8-K                                                      |                                                                                                        | 25  

2

---



PART IFINANCIAL INFORMATION

Item 1. Financial Statements

GOLDEN STATE VINTNERS, INC.        CONDENSED CONSOLIDATED BALANCE SHEETS        (UNAUDITED, IN THOUSANDS)

|                                           |                                                                                      | September 30,
2003                                                                                                                                                  |                           | June 30,
2003 |       
|------------------------------------------ | ------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------------- | ------
|ASSETS                                     |                                                                                      |                                                                                                                                                                     |                           |               |       
|CURRENT ASSETS:                            |                                                                                      |                                                                                                                                                                     |                           |               |       
|                                           | Cash and equivalents                                                                 |                                                                                                                                                                     | $                         | 24            |       
|                                           | Trade and other receivablesnet                                                      |                                                                                                                                                                     |                           | 14,048        |       
|                                           | Inventories                                                                          |                                                                                                                                                                     |                           | 35,467        |       
|                                           | Refundable income taxes                                                              |                                                                                                                                                                     |                           |              |       
|                                           | Deferred income taxes                                                                |                                                                                                                                                                     |                           | 2,117         |       
|                                           | Prepaid expenses and other current assets                                            |                                                                                                                                                                     |                           | 592           |       
|                                           |                                                                                      |                                                                                                                                                                     |                           |               |       
|                                           |                                                                                      |                                                                                                                                                                     | Total current assets      |               |       
|PROPERTY, PLANT AND EQUIPMENTNet          |                                                                                      |                                                                                                                                                                     | 59,408                    |               |       
|ASSETS HELD FOR SALE                       |                                                                                      |                                                                                                                                                                     |                          |               |       
|OTHER ASSETS                               |                                                                                      |                                                                                                                                                                     | 1,443                     |               |       
|                                           |                                                                                      |                                                                                                                                                                     |                           |               |       
|TOTAL ASSETS                               |                                                                                      | $                                                                                                                                                                   | 113,099                   |               | $     
|                                           |                                                                                      |                                                                                                                                                                     |                           |               |       
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                      |                                                                                                                                                                     |                           |               |       
|CURRENT LIABILITIES:                       |                                                                                      |                                                                                                                                                                     |                           |               |       
|                                           | Bank line of credit                                                                  |                                                                                                                                                                     | $                         | 7,800         |       
|                                           | Cash management liability                                                            |                                                                                                                                                                     |                           | 2,831         |       
|                                           | Accounts payable                                                                     |                                                                                                                                                                     |                           | 5,053         |       
|                                           | Payable to growers                                                                   |                                                                                                                                                                     |                           | 8,190         |       
|                                           | Payroll and related liabilities                                                      |                                                                                                                                                                     |                           | 1,079         |       
|                                           | Accrued interest                                                                     |                                                                                                                                                                     |                           | 122           |       
|                                           | Other accrued liabilities                                                            |                                                                                                                                                                     |                           | 194           |       
|                                           | Income taxes payable                                                                 |                                                                                                                                                                     |                           | 362           |       
|                                           | Current portion of long-term debt                                                    |                                                                                                                                                                     |                           | 7,031         |       
|                                           |                                                                                      |                                                                                                                                                                     |                           |               |       
|                                           |                                                                                      |                                                                                                                                                                     | Total current liabilities |               |       
|LONG-TERM DEBT                             |                                                                                      |                                                                                                                                                                     | 10,172                    |               |       
|DEFERRED COMPENSATION                      |                                                                                      |                                                                                                                                                                     | 763                       |               |       
|DEFERRED INCOME TAXES                      |                                                                                      |                                                                                                                                                                     | 11,234                    |               |       
|STOCKHOLDERS' EQUITY:                      |                                                                                      |                                                                                                                                                                     |                           |               |       
|                                           | Common Stock:                                                                        |                                                                                                                                                                     |                           |               |       
|                                           |                                                                                      | Class A common stock, par value $.01; 6,000,000 shares authorized; 4,342,528 shares issued and outstanding at September 30, 2003 and at June 30, 2003, respectively |                           |               | 43    
|                                           |                                                                                      | Class B common stock, par value $.01; 54,000,000 shares authorized; 5,192,343 shares issued at September 30, 2003 and at June 30, 2003                              |                           |               | 52    
|                                           | Additional paid-in capital                                                           |                                                                                                                                                                     |                           | 45,058        |       
|                                           | Retained earnings                                                                    |                                                                                                                                                                     |                           | 13,261        |       
|                                           |                                                                                      |                                                                                                                                                                     |                           |               |       
|                                           |                                                                                      | Total common stock, paid-in capital and retained earnings                                                                                                           |                           |               | 58,414
|                                           | Treasury stock (21,884 shares at September 30, 2003 and June 30, 2003, respectively) |                                                                                                                                                                     |                           | (146          | )     
|                                           |                                                                                      |                                                                                                                                                                     |                           |               |       
|                                           |                                                                                      | Total stockholders' equity                                                                                                                                          |                           |               | 58,268
|                                           |                                                                                      |                                                                                                                                                                     |                           |               |       
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                      | $                                                                                                                                                                   | 113,099                   |               | $     
|                                           |                                                                                      |                                                                                                                                                                     |                           |               |       

See accompanying notes to condensed consolidated financial statements.

3

---



GOLDEN STATE VINTNERS, INC.        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)

|                                             |                    | Three Months Ended
September 30, |               
|-------------------------------------------- | ------------------ | -------------------------------- | --------------
|
|REVENUES:                                    |                    |                                  |               
|                                             | Bulk wine          |                                  | $             
|                                             | Wine grapes        |                                  |               
|                                             | Case goods         |                                  |               
|                                             | Brandy and spirits |                                  |               
|                                             |                    |                                  |               
|                                             |                    |                                  | Total revenues
|COST OF SALES                                |                    |                                  | 14,422        
|                                             |                    |                                  |               
|GROSS PROFIT                                 |                    |                                  | 2,940         
|GAIN ON SALE OF ASSETS                       |                    |                                  | 4,244         
|SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES |                    |                                  | (2,710        
|                                             |                    |                                  |               
|INCOME FROM OPERATIONS                       |                    |                                  | 4,474         
|INTEREST EXPENSE                             |                    |                                  | (1,429        
|                                             |                    |                                  |               
|INCOME BEFORE INCOME TAXES                   |                    |                                  | 3,045         
|INCOME TAX EXPENSE                           |                    |                                  | (1,216        
|                                             |                    |                                  |               
|NET INCOME                                   |                    | $                                | 1,829         
|                                             |                    |                                  |               
|EARNINGS PER COMMON SHARE:                   |                    |                                  |               
|                                             | BASIC              |                                  | $             
|                                             |                    |                                  |               
|                                             | DILUTED            |                                  | $             
|                                             |                    |                                  |               
|WEIGHTED AVERAGE SHARES OUTSTANDING:         |                    |                                  |               
|                                             | BASIC              |                                  |               
|                                             |                    |                                  |               
|                                             | DILUTED            |                                  |               
|                                             |                    |                                  |               

See
accompanying notes to condensed consolidated financial statements.

4

---



GOLDEN STATE VINTNERS, INC.        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (UNAUDITED, IN THOUSANDS)

|                                            |                                                                               | Three Months Ended
September 30,                          |                                          
|------------------------------------------- | ----------------------------------------------------------------------------- | --------------------------------------------------------- | -----------------------------------------
|
|OPERATING ACTIVITIES:                       |                                                                               |                                                           |                                          
|                                            | Net income                                                                    |                                                           | $                                        
|                                            | Adjustments to reconcile net income to net cash used in operating activities: |                                                           |                                          
|                                            |                                                                               | Depreciation and amortization                             |                                          
|                                            |                                                                               | Gain on sale of assets                                    |                                          
|                                            |                                                                               | Provision for doubtful accounts                           |                                          
|                                            |                                                                               | Change in cash surrender value of life insurance policies |                                          
|                                            |                                                                               | Change in market value of deferred compensation           |                                          
|                                            |                                                                               | Deferred income taxes                                     |                                          
|                                            |                                                                               | Changes in operating assets and liabilities:              |                                          
|                                            |                                                                               |                                                           | Trade and other receivables              
|                                            |                                                                               |                                                           | Inventories                              
|                                            |                                                                               |                                                           | Prepaid expenses and other current assets
|                                            |                                                                               |                                                           | Accounts payable                         
|                                            |                                                                               |                                                           | Payable to growers                       
|                                            |                                                                               |                                                           | Payroll and related liabilities          
|                                            |                                                                               |                                                           | Other accrued liabilities                
|                                            |                                                                               |                                                           | Accrued interest                         
|                                            |                                                                               |                                                           | Deferred compensation                    
|                                            |                                                                               |                                                           | Income taxes refundable/payable          
|                                            |                                                                               |                                                           |                                          
|                                            |                                                                               |                                                           |                                          
|INVESTING ACTIVITIES:                       |                                                                               |                                                           |                                          
|                                            | Purchases of property, plant and equipment                                    |                                                           |                                          
|                                            | Proceeds on sale of property, plant and equipment                             |                                                           |                                          
|                                            |                                                                               |                                                           |                                          
|                                            |                                                                               |                                                           |                                          
|FINANCING ACTIVITIES:                       |                                                                               |                                                           |                                          
|                                            | Borrowings on line of credit                                                  |                                                           |                                          
|                                            | Payments on line of credit                                                    |                                                           |                                          
|                                            | Cash management liability increase (decrease)                                 |                                                           |                                          
|                                            | Proceeds from lease financing                                                 |                                                           |                                          
|                                            | Payments on long-term debt                                                    |                                                           |                                          
|                                            |                                                                               |                                                           |                                          
|                                            |                                                                               |                                                           |                                          
|                                            |                                                                               |                                                           |                                          
|INCREASE (DECREASE) IN CASH AND EQUIVALENTS |                                                                               |                                                           | (45                                      
|CASH AND EQUIVALENTS, BEGINNING OF PERIOD   |                                                                               |                                                           | 69                                       
|                                            |                                                                               |                                                           |                                          
|CASH AND EQUIVALENTS, END OF PERIOD         |                                                                               | $                                                         | 24                                       
|                                            |                                                                               |                                                           |                                          
|OTHER CASH FLOW INFORMATION:                |                                                                               |                                                           |                                          
|                                            | Interest paid                                                                 |                                                           | $                                        
|                                            |                                                                               |                                                           |                                          
|                                            | Income taxes refunded, net                                                    |                                                           | $                                        
|                                            |                                                                               |                                                           |                                          

See
accompanying notes to condensed consolidated financial statements.

5

---



GOLDEN STATE VINTNERS, INC.        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1Basis of Presentation:

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include all normal and recurring
adjustments) necessary to present fairly the Company's financial position at September 30, 2003 and its results of operations for the three-month periods ended September 30,
2003 and 2002 and its cash flows for the three-month periods ended September 30, 2003 and 2002. Certain information and disclosures normally included in the notes to financial statements
prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. The unaudited financial statements set forth in this
quarterly report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K (the "10-K") for the
fiscal year ended June 30, 2003, on file at the Securities and Exchange Commission ("SEC"). The Company's results for the three-months ended September 30, 2003 are not
necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2004.

Certain
reclassifications have been made to the fiscal 2003 amounts in order for them to conform to the fiscal 2004 presentation.

Note 2Inventories:

Inventories consist of the following (in thousands):

September 30,
2003

June 30,
2003(Unaudited)Bulk wine

$
23,418

$
13,837Cased and bottled wine


7,049


6,052Brandy


814


2,422Supplies and other


1,309


1,048Unharvested crop costs


2,877


3,738Total

$
35,467

$
27,097


Note 3Property, Plant and Equipment

In October 2003, the Company entered into an agreement to sell approximately 1,500 acres (approximately 500 acres planted in vineyards) of farmland located in
Madera County, California. Escrow is estimated to close in January 2004. This property collateralizes long-term debt and the lender will require proceeds of $2.5 million to be applied to
the loan principal and to a prepayment penalty. The gain on the sale is estimated at approximately $0.4 million.

Note 4Assets Held for Sale

In June 2002, the Company's Board of Directors approved a plan to sell certain excess assets. Such assets included a bulk wine and bottling facility, a warehouse,
a tasting room and certain vineyards. After operations started at the new American Canyon facility in December 2001, the bulk wine and bottling facility and the other warehouse facility were no longer
necessary for custom crushing, bottling or storage. All such assets were sold except the warehouse located in Napa, California. In October 2003, Company management elected to retain the Napa
Warehouse facility for continuing barrel warehousing activities. Because assets classified as held for sale were not subject to depreciation, the reclassification of this asset required depreciation
expense recognition of approximately $113,000 in the first quarter of fiscal 2004 for the period from July 2002 through September 2003.

6

---

In
July 2003, the Company sold the bulk wine and bottling facility, tasting room and vineyards located in St. Helena, California. The sales price of $11.7 million was
applied to the loan principal due to an insurance company ($10.6 million) and a prepayment penalty ($1.1 million). The sale resulted in a gain before tax of approximately
$4.2 million and is reflected in first quarter results for the period ended September 30, 2003. This transaction including the net effect of the gain on sale less the prepayment penalty
increased net income by approximately $1.9 million.

Assets
held for sale, at the lower of carrying value or fair value, was $9.4 million at June 30, 2003. There were no assets held for sale at September 30, 2003.

Note 5Bank Line of Credit

On September 18, 2003, the Company renewed its revolving line of credit to provide $22.0 million through January 31, 2004,
$14.0 million from February 1, 2004 through March 31, 2004, $10.0 million from April 1, 2004 through June 30, 2004 and $14.0 million thereafter with
variable interest based on interest rate options elected by the Company. The balance outstanding under the line was $7.8 and $5.8 million at September 30, 2003 and June 30, 2003,
respectively. The line expires on October 5, 2004. Management intends and expects to renew the line prior to that time.

Note 6New Accounting Pronouncements

In November 2002, the FASB issued FASB Interpretation No. 45, ("FIN 45")Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation elaborates on the disclosures to be made by a guarantor in its financial statements
regarding its obligations under certain guarantees that it has issued. It also clarifies the recognition of certain liabilities that the guarantor is required to recognize. The provisions related to
the disclosure requirements of this interpretation are effective for financial statements of periods ending after December 31, 2002. The provisions related to recognition and measurement are
applicable prospectively to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a material impact on the Company's consolidated financial position,
results of operations or cash flows.

In
January 2003, the FASB issued FASB Interpretation No. 46, ("FIN 46")Consolidation of Variable Interest Entities. This
interpretation clarifies existing accounting principles related to the preparation of consolidated financial statements when the equity investors in an entity do not have the characteristics of a
controlling financial interest or when the equity at risk is not sufficient for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46
requires a company to evaluate all existing arrangements to identify situations where a company has a "variable interest" (commonly evidenced by a guarantee arrangement or other commitment to provide
financial support) in a "variable interest entity" (commonly a thinly capitalized entity) and further determine when such variable interests require a company to consolidate the variable interest
entities' financial statement with its own. The Company is required to perform this assessment by December 31, 2003 and consolidate any variable interest entities for which it will absorb a
majority of the entities' expected losses or receive a majority of the expected residual gains. Management has not yet performed this assessment; however it is not aware of any variable interest
entity that it may be required to consolidate."

7

---

In
December 2002, the FASB issued SFAS 148,Accounting for Stock-Based CompensationTransition and Disclosure.
This standard amends SFAS 123,Accounting for Stock-Based Compensation, to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS 123 to require prominent disclosure
about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation. In addition, SFAS 148 amends APB Opinion No. 28, Interim Financial
Reporting, to require disclosure about those effects in interim financial information. SFAS 148 is effective beginning in
fiscal 2004. Adoption of this statement did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In
2003 the FASB issued SFAS Nos. 149,Amendments of Statement 133 on Derivative Instruments and Hedging Activities and150, Accounting for Certain Financial Instruments
with Characteristics of Both
Liabilities and Equity. SFAS No. 149 clarifies financial reporting and accounting for certain derivative instruments embedded in other contracts and clarifies the normal
purchases and sales exemption of derivative instruments. SFAS No. 150 establishes standards for the classification and measurement of certain financial instruments, including mandatorily
redeemable shares, obligations to repurchase equity shares or obligations which require the issuance of shares for settlement. These statements are effective beginning in fiscal 2004. Adoption of
these statements did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Note 7Business Segment Information

The Company's chief decision makers evaluate performance based on the gross profit of the following four segments: bulk wine, wine grapes, case goods, and brandy.
The bulk wine segment includes production and sale of bulk wine, custom crushing services, storage of bulk wine in tanks and barrels and delivery of bulk wine barreling services, such as racking and
topping. The Company's wine grapes segment consists of the farming and harvesting of Company owned vineyards and subsequent sales or internal use of produced grapes as well as grapes purchased by the
Company for resale. The case goods segment includes production of proprietary and private label bottled wine, alcoholic beverages and custom bottling and storage services and providing custom bottling
services for malt-based alcoholic beverages to two major customers. The Company's brandy segment includes production of brandy and spirits and brandy barrel storage and related barreling services. The
Company also analyzes information on capital expenditures, depreciation and amortization and assets utilized by each of the four segments.

8

---

Segment
information as of September 30, 2003 and June 30, 2002 and for the three month periods ended September 30, 2003 and 2002 is as follows (unaudited, in thousands):

|                               |             | Three Months Ended
September 30, |  
|------------------------------ | ----------- | -------------------------------- | -
|
|Revenues, net:                 |             |                                  |  
|                               | Bulk wine   |                                  | $
|                               | Wine grapes |                                  |  
|                               | Case goods  |                                  |  
|                               | Brandy      |                                  |  
|                               |             |                                  |  
|                               |             | Total revenues, net              |  
|Cost of Sales:                 |             |                                  |  
|                               | Bulk wine   |                                  |  
|                               | Wine grapes |                                  |  
|                               | Case goods  |                                  |  
|                               | Brandy      |                                  |  
|                               |             |                                  |  
|                               |             | Total cost of sales              |  
|Gross Profit:                  |             |                                  |  
|                               | Bulk wine   |                                  |  
|                               | Wine grapes |                                  |  
|                               | Case goods  |                                  |  
|                               | Brandy      |                                  |  
|                               |             |                                  |  
|                               |             | Total gross profit               |  
|                               |             |                                  |  
|Capital Expenditures:          |             |                                  |  
|                               | Bulk wine   |                                  | $
|                               | Wine grapes |                                  |  
|                               | Case goods  |                                  |  
|                               | Brandy      |                                  |  
|                               | Corporate   |                                  |  
|                               |             |                                  |  
|                               |             | Total                            |  
|                               |             |                                  |  
|Depreciation and amortization: |             |                                  |  
|                               | Bulk wine   |                                  | $
|                               | Wine grapes |                                  |  
|                               | Case goods  |                                  |  
|                               | Brandy      |                                  |  
|                               | Corporate   |                                  |  
|                               |             |                                  |  
|                               |             | Total                            |  
|                               |             |                                  |  
|
|Total Assets:                  |             |                                  |  
|                               | Bulk wine   |                                  | $
|                               | Wine grapes |                                  |  
|                               | Case goods  |                                  |  
|                               | Brandy      |                                  |  
|                               | Corporate   |                                  |  
|                               |             |                                  |  
|                               |             | Total                            |  
|                               |             |                                  |  

9

---

The net book value of assets held for sale as of September 30, 2003 and June 30, 2003 are included in the following business
segments (in thousands):

|            |  | September 30
2003 |   | June 30,
2003
|----------- |  | ----------------- | - | -------------
|Bulk wine   |  | $                 |  |              
|Wine grapes |  |                   |  |              
|Case goods  |  |                   |  |              
|            |  |                   |   |              
|            |  | $                 |  |              
|            |  |                   |   |              

10

---



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

The following discussion and analysis of the financial condition and results of operations of Golden State Vintners, Inc. ("we" or "us" or the "Company") contains
"Forward-Looking Statements," as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-Looking Statements
are statements other than historical information or statements of current condition and relate to future events or the future financial performance of the Company. Some Forward-Looking Statements may
be identified by use of such terms as "believes," "anticipates," "intends" or "expects." Such Forward-Looking Statements involve known and unknown risks, uncertainties and other factors that may cause
our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such Forward-Looking Statements. Our results may
differ materially from those anticipated in such Forward-Looking Statements as a result of a number of factors, including without limitation, (i) difficulties in the bulk wine market;
(ii) loss of key customers or contracts and ability of customers to pay; (iii) competition from various domestic and foreign wine producers; (iv) interest rates and other business
and economic conditions which could increase significantly the costs and risks of projected capital spending; and (v) the effect of weather and other natural forces on growing conditions and,
in turn, the quality and quantity of grapes we produce. Each of these factors, and other risks pertaining to our business, the premium wine industry and general business and economic conditions, are
more fully discussed herein and from time to time in other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, for the year ended June 30,
2003. We undertake no obligation to publicly update or revise any Forward-Looking Statements, whether as a result of new information, future events or otherwise.

Significant Accounting Policies

Critical Accounting Policies

Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K. Our
discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those
related to its revenue recognition policy, the collectibility of accounts receivable, the valuation of inventories, and the valuation of its long-lived assets and deferred tax assets. We base our
estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. In the past, actual results have not been materially different from our
estimates.

Some
of our significant accounting policies involve a higher degree of judgment or complexity than our other accounting policies. The policies described below have been identified as
critical to our business operations and the understanding of our results of operations. The impact and associated risks related to these policies on our business operations are discussed throughout
Management's Discussion and Analysis of Financial Condition and Results of Operations.

Revenue Recognition

Sales of bulk wine, juice and brandy are recognized at the time the product specifications of the purchase contract are met and the product has been accepted by
the buyer, title has passed to the buyer, and there is no right of return in the contract. In certain cases the contract requirements specify that we store such product after it has been sold and
require the buyer to pay a storage fee. Sales of wine grapes and cased goods are recognized at the time of delivery by the customer. Wine processing and storage fees are recognized as those services
are provided.

11

---

Trade Receivables

Substantially all accounts receivable are due from wine distributors and major wineries located in California. We perform periodic credit evaluations of our
customers' financial condition and generally do not require collateral for our sales. We maintain an allowance for doubtful accounts to reflect expected credit losses resulting from the inability of
customers to make required payments on such accounts. A considerable amount of judgment is required to assess the ultimate realization of the customer accounts receivable and the credit-worthiness of
each customer. Furthermore, these judgments must be continually updated and evaluated. Estimates of potential losses are based on historical as well as current data, including the aging of the
receivables, recent bankruptcy trends, delinquency rates, historical charge-off patterns, recovery rates and other data. Other factors, including the general economic environment in the wine industry,
are also considered. Historically, our credit losses on receivables have been consistent and within expectations. However, if the financial condition of our customers were to deteriorate, resulting in
an impairment of their ability to make payment, adjustment to those estimates may be required.

Inventories

Bulk wine, case goods and brandy are stated at the lower of average cost or net realizable value. Inventories of supplies are stated at the lower of the first-in,
first-out method or market. Costs associated with the current year's unharvested grape crop are deferred and recognized in the subsequent year when the grapes are harvested. Wine inventories are
classified as current assets in accordance with recognized trade practice although some products will not be sold in the following year. We review our inventory for estimated obsolescence or
unmarketable inventory based upon assumptions about historical usage, future demand and market conditions. If required, the inventory is written down to estimated market value less costs to sell.

Our
bulk wine inventory at September 30, 2003 is approximately $23.4 million and substantially in excess of committed sales contracts. Although our case goods inventory
quantities at September 30, 2003 are consistent with a year ago at this time, we have reduced pricing on certain labels and implemented various sales discount and incentive programs given
current challenging market conditions. Although management believes that excess inventory can be sold on the spot market at prices at or above the carrying value, no assurance can be given that the
Company will not experience losses on the sale or disposition of a portion of the inventory, and such losses could be material.

Impairment of Long-Lived Assets

Our long-lived assets consist primarily of property and equipment, assets held for sale and other assets. Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. With respect to vineyards, we perform an evaluation of whether an impairment charge should be
made whenever particular vineyards experience unfavorable operating results. A vineyard's assets are evaluated for impairment by comparing its estimated undiscounted cash flows over its estimated life
to its carrying value. If the cash flows are not sufficient to recover the carrying value, a loss equal to the difference between the carrying value and the discounted future cash flows of the
vineyard is recognized. Estimates of future cash flows are based on a variety of factors, including historical experience with yields and expected grape sales prices. Various uncertainties, including
but not limited to bad weather, pests and diseases, and excess inventory levels in the industry could adversely impact the expected cash flows to be generated by a vineyard. If actual performances of
the remaining vineyards are less favorable than our projections, future asset impairment charges may be necessary. Similar procedures are used when analyzing other corporate assets for impairment. In
fiscal 2002, we recognized an impairment reserve of approximately $1.9 million to reflect the anticipated loss on the sale of Lost Hills Vineyard. This loss was partially offset by a reversal
of a contingent note payable to a related party of $0.9 million. Also, in 2002, an impairment charge of approximately $5.6 million was recorded as the Company elected not to

12

---

implement
the bulk wine module of its new enterprise-wide technology platform due to significant remaining programming and training costs and additional ongoing resources needed to operate
the bulk wine module. We are currently pursuing our options to recover funds expended on this module from the implementation vendor, however, no assurances can be given whether any such efforts will
be successful. In fiscal 2003, an impairment charge of $8.0 million was recorded in connection with our RTD facility. In June 2002 the Company's Board of Directors approved a plan to sell
certain excess assets. These assets, which included a bulk wine and bottling facility, a warehouse, a tasting room and certain vineyards, were included in the accompanying financial statements as
assets held for sale. We sold the bulk wine and bottling facility, tasting room and vineyards located in St. Helena, California in July 2003 as more fully discussed under "Recent
Developments." In October 2003, we elected to retain the warehouse located in Napa, California for continuing barrel warehousing activities.

Deferred Tax Assets

We record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. While we consider future taxable income
and ongoing and prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event that we were to determine that they would not be able to realize all or
part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

Recent Developments

On
September 12, 2003, we announced that our Board of Directors had approved a 1 for 5,900 reverse split of each of our shares of Class A and Class B common stock.
The reverse split is intended to take us private and is subject to approval by a majority of the voting power of our outstanding common stock at our next annual meeting scheduled to be held in
November 2003, with exact timing dependent on the completion and review of necessary filings by the Securities and Exchange Commission. If our stockholders approve the proposed reverse split,
each stockholder owning fewer than 5,900 shares of existing Class A and Class B common stock will receive cash in the amount of $3.25 for each pre-split share of common stock held by
that stockholder. Each stockholder owning more than 5,900 shares of Class A and Class B common stock, but not a number of shares evenly divisible by 5,900, will receive new shares of
common stock, as well as cash in the amount of $3.25 per pre-split share in lieu of any fractional shares resulting from the reverse split. The $3.25 per share cash consideration represents a 56.3%
premium over the $2.08 closing price for our common stock on September 11, 2003, the last day of trading prior to our announcement of the proposed reverse split.

The
reverse split is subject to various conditions, including approval by our primary lenders and stockholders. It is anticipated that shares controlled directly or indirectly by our
directors will be voted in favor of the transaction which together account for at least 80% of the total votes entitled to be cast.

Management
proposed, a special committee of outside independent directors reviewed and recommended to our Board of Directors, and our Board authorized the reverse split. Adams,
Harkness & Hill, Inc. provided an opinion to the special committee as to the fairness, from a financial point of view, of the cash consideration to be paid to the holders of our
Class A and Class B common stock who will hold fractional shares immediately following the reverse split.

If
stockholders approve the reverse split, we will become a privately-held company. Accordingly, the listing of our Class B Common Stock on the NASDAQ National Market will
terminate, the registration of the Class B Common Stock under the Securities Exchange Act of 1934 will terminate, and we will cease filing reports with the SEC.

The
foregoing description of the proposed reverse split transaction is not a solicitation of a proxy. We have filed preliminary proxy materials and will make other necessary filings with
the SEC for the annual meeting of the stockholders to vote on the proposed transaction. Upon completion of the SEC's

13

---

review
of the preliminary proxy materials, we intend to hold our annual meeting of stockholders to vote on the necessary amendments to our Certificate of Incorporation, and will file with the SEC and
mail to our stockholders definitive proxy materials. The definitive proxy materials will contain important information regarding the transaction, including, among other things, the recommendation of
our Board of Directors and the Special Committee regarding the transaction. Stockholders of the company are advised to read the definitive proxy materials when made available, including the proxy
statement, before making any decisions regarding the transaction. Copies of the definitive proxy materials, and any amendments or supplements thereto, will be available without charge at the SEC's
website at www.sec.gov or from us when they are mailed to stockholders.

Our
core business products include serving as an outsourcer to bulk wine and spirits industry and a producer of propriety and private label case goods. To focus on core business segments
and products, we have been in the process of selling assets which either had marginal operating results or were no longer considered strategic to future operations, including certain vineyards and a
bulk wine and bottling facility.

Bulk
wine and case goods industry trends continue to indicate downward pressure on sales volumes and margins resulting in surplus domestic and international bulk wine and case goods
inventories and a reduction in the number of long-term bulk wine sales contracts relative to previous years. Consistent with such trends, our bulk wine inventory at September 30, 2003 continues
to be substantially in excess of committed sales contracts. Total cases included in our case goods inventories are consistent with September 30, 2003 a year ago at this time, however remain in
excess of optimum inventory levels. Although we believe that this excess inventory can be sold on the spot market at sales prices at or above the carrying value, no assurance can be given that we will
not experience losses on the sale or disposition of a portion of the inventory, and such losses could be material.

In
October 2003, the Company entered into an agreement to sell approximately 1,500 acres (approximately 500 acres of which are vineyards) of farmland located in Madera County,
California. Escrow is estimated to close in January 2004. This property collateralizes long-term debt and the lender will require estimated proceeds of $2.5 million to be applied to the
loan principal and to a prepayment penalty. The gain on the sale is estimated at approximately $0.4 million before prepayment penalty and income taxes.

We
sold the bulk wine and bottling facility, tasting room and vineyards located in St. Helena, California in July 2003. Proceeds of $11.7 million were applied to the loan
principal due to an insurance company ($10.6 million) and a prepayment penalty ($1.1 million). The sale resulted in a gain of approximately $4.2 million and was reflected in our
first quarter results for the period ended September 30, 2003.



We have experienced and expect to continue to experience seasonal and quarterly fluctuations in our revenues. Because of the inherent seasonality of our
operations, we have historically reported our highest revenues and net income in our second fiscal quarter as we sell most of our bulk wine in the second quarter, immediately after crush, and perform
many of our wine processing services in the first and second quarters. As a result, we typically report lower revenues and net income (loss) in the third and fourth fiscal quarters. In the current
fiscal year, we continue to anticipate decreased bulk wine revenues as a result of a reduced number of long-term bulk wine sales contracts relative to previous years. We believe such decrease in
long-term bulk sales contracts is attributable to 1) plantings of new vineyards 2) current and anticipated lower bulk wine market prices 3) higher levels of wine inventory held by
our customers and 4) increased international competition. We anticipate that these market pressures will continue.

14

---



Approximately 15% of our revenues in fiscal 2003 were derived from the sale of wine and wine products internationally. We export bulk wine and case goods to
Europe, Canada and Asia.

Three Months Ended September 30, 2003 and 2002



Total revenues for the first quarter of fiscal 2004 were $17.4 million, a decrease of $0.4 million or 2.2%, as compared to revenues of
$17.8 million for the first quarter of 2003. The overall decrease in revenues is due to decreases in bulk wine, wine grapes and case goods revenues as partially offset by increased brandy
revenues.

Bulk Wine and Related Services.For fiscal 2004, revenues from bulk wine and related services were $9.1 million, a
decrease of $0.6 million or 6.2%, as compared to revenues of $9.7 million in the first quarter of 2003. The period to period decrease was a result of decreased bulk wine contract and
spot sales average prices per gallon totaling approximately $1.6 million. Also, bulk custom wine processing and storage revenues decreased approximately $0.6 million. Together, these
decreases were partially offset by increased gallons sold of 0.8 million gallons or approximately $1.8 million.

Case Goods and Related Services.For the first quarter of fiscal 2004, revenues from case goods and related services were
$5.2 million, a decrease of $1.4 million or 21.2%, as compared to revenues of $6.6 million in the first quarter of fiscal 2003. The period to period decrease was a result of
decreased RTD production revenues of $2.5 million which included a $1.4 million termination settlement to buy out the remaining contract production requirement of a certain customer and
a $0.5 million excise tax small brewers credit, each recognized in the first quarter of fiscal 2003. Additionally, case goods revenues decreased due to lower average sales prices per
case totalling approximately $2.2 million and decreased custom bottling services of approximately $0.6 million. Such decreases were partially offset by increased sales volume of
$4.0 million.

BrandyFor the first quarter of fiscal 2004, revenues from the sale of brandy and grape spirits were $2.8 million, an
increase of $1.8 million or 180.0%, as compared to revenues of $1.0 million for the first quarter of fiscal 2003. The period to period increase was due to additional brandy sales
volume of $1.1 million and increased sales prices per proof gallon of $0.2 million . In addition, custom processing increased approximately $0.5 million.

Wine Grapes.Our wine grapes business segment realized only a modest amount of revenues in the first quarter of fiscal 2004
consistent with seasonal trends.



For the first quarter of fiscal 2004, total cost of sales was $14.4 million, an increase of $1.3 million or 9.9%, from $13.1 million for the
first quarter of fiscal 2003. As a percentage of revenues, cost of sales for the third quarter of fiscal 2003 was 83.1%, an increase from 73.6% for the first quarter of fiscal 2003. In the first
quarter of fiscal 2003, a termination settlement with an RTD customer of $1.4 million and a $0.5 million excise tax credit were included in revenues which resulted in cost of sales as a
percentage of revenues to be decreased from 82.4% to 73.6% as there were no associated costs of sales associated with these revenues. Bulk wine segment costs of sales as a percentage of revenues
increased in the current quarter due to product mix and were partially offset by brandy revenues at increased prices and at lower costs.



In the first quarter of fiscal 2004, we realized gross profit of $2.9 million, a decrease of $1.8 million or 38.3%, as compared to
$4.7 million in the first quarter of fiscal 2003. As a percentage

15

---

of
revenues, gross profit for the first quarter of fiscal 2004 was 16.9%, a decrease from 26.4% in the first quarter of fiscal 2003, for reasons discussed above under "Cost of Sales."



In July 2003, we sold the bulk wine and bottling facility, tasting room and vineyards located in St. Helena, California. The sales price of
$11.7 million was applied to the loan principal due to an insurance company ($10.6 million) and a prepayment penalty ($1.1 million). The sale resulted in a gain of approximately
$4.2 million and is reflected in first quarter results for the period ended September 30, 2003. This transaction including the net effect of the gain on sale less the prepayment penalty
(included in interest expense) increased net income by approximately $1.9 million.



For the first quarter of fiscal 2004, selling, general and administrative expenses were $2.7 million, an increase of $0.2 million or 8.0%, from
$2.5 million in the first quarter of fiscal 2003. The period to period increase was due principally to increased payroll, related expenses and legal expenses partially offset by decreased bad
debt expenses.



For the first quarter of fiscal 2004, interest expense was $1.4 million, an increase of $0.4 million or 40.0%, as compared to interest expense of
$1.0 million in the first quarter of fiscal 2003. The period to period increase resulted from a prepayment penalty of $1.1 million that was incurred in the first quarter of fiscal 2004
due to lender requirement to pay down long-term debt with proceeds on sale of certain assets located in St. Helena, California. Such increase was partially offset by decreased average
borrowings on our line of credit and long-term debt at lower overall interest rates. We did not capitalize any interest in the first quarters of fiscal 2004 and 2003, respectively.



The effective tax rate of our income tax expense was 39.9% and 34.1% for the first quarters of fiscal 2004 and fiscal 2003 respectively. The increase in the rate
is due to the effect of the manufacturer's investment tax credit.



For the first quarter of fiscal 2004, net income was $1.8 million an increase of $1.0 million, as compared to net income of $0.8 million in
the first quarter of fiscal 2003. Net income for the first quarter of fiscal 2004 was impacted by factors covered above.



For the first quarter of fiscal 2004, diluted earnings per share was $0.19 compared to diluted earnings per share of $0.09 for the first quarter of fiscal 2003.



Our working capital position at September 30, 2003 was $19.6 million, compared to $22.5 million at June 30, 2003. The decrease in working
capital is due to increased liabilities and increased current portion of long-term debt. We maintain a revolving line of credit for working capital purposes which is secured by inventory, accounts
receivable, the current year's wine grape crop and other collateral. Borrowings under the line typically peak in November, during our second fiscal quarter. The revolving line of credit balance was
$7.8 million at September 30, 2003 and $5.8 million at June 30, 2003. Unused availability under the line of credit was $14.2 million at September 30, 2003. On
September 18, 2003, we renewed the revolving bank line of credit to provide $22.0 million through January 31, 2004, $14.0 million from February 1, 2004 through
March 31, 2004, $10.0 milion from April 1, 2004 through

16

---

June 30,
2004 and $14.0 million thereafter. The line expires on October 5, 2004. Our existing line of credit and long-term debt financing agreements contain restrictive financial
covenants. These covenants require us, among other things, to maintain specified levels of net income, working capital, tangible net worth and financial ratios. We were out of compliance as of
June 30, 2003 with certain financial covenants. We received waivers on events of non-compliance of such covenants in August and September 2003, as well as an amendment to our loan
agreement with an insurance company to modify a financial covenant effective for each quarter beginning September 30, 2003.

Net
cash used in operating activities for the first quarter of fiscal 2004 was $3.1 million, compared to net cash used in operations of $3.5 million for fiscal 2003. The
decrease in cash used by operations resulted from increased net income relative to the prior year.

We
sold the bulk wine and bottling facility, tasting room and vineyards located in St. Helena, California in July 2003. Proceeds of $11.7 million from the St. Helena
sale were applied to the loan principal ($10.6 million) and a prepayment penalty ($1.1 million).

Capital
expenditures for the first quarter of fiscal 2004 were $0.7 million, compared to $0.4 million in fiscal 2003. We have funded these expenditures in 2004 from our
working capital line. We intend to finance future major capital expenditures through long-term financing arrangements. We believe that cash flows from operations and the line of credit are sufficient
to cover operating needs and costs associated with the reverse split of our common stock for the year.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We can choose from several variable rate options on certain of our debt. All of our balance sheet items and sales are in U.S. dollars, therefore we have no
foreign currency exchange rate risk related to these financial data. We do not use financial instruments for trading purposes.

Certain
of our debt is subject to variable interest rate options. The following chart indicates our fixed and variable rate long and short-term debt at September 30, 2003, and
estimates the balances of such debt in future periods assuming no additional debt will be obtained or required. This analysis does not, therefore, constitute in any way our forward plan and should not
be used by investors as such ($ millions):

|                                        |                |                                  |  | June 30, |     
|--------------------------------------- | -------------- | -------------------------------- |  | -------- | ----
|
|
|Bank line of credit and long-term debt: |                |                                  |  |          |     
|                                        | Variable Rate: |                                  |  |          |     
|                                        |                | Average Outstanding*             |  | $        | 10.2
|                                        |                | Weighted average rate per period |  |          | 2.9 
|                                        |                |                                  |  |          |     
|Long-term Debt:                         |                |                                  |  |          |     
|                                        | Fixed Rate:    |                                  |  |          |     
|                                        |                | Average Outstanding              |  | $        | 20.9
|                                        |                | Weighted average rate per period |  |          | 8.0 

---

During our annual business cycle, we utilize a variable interest rate working capital line at various borrowing levels. Our existing working
capital loan agreement offers interest rate options at spreads over LIBOR and/or lender cost of funds, at maturities we selected. For the first quarter of fiscal 2004, the average outstanding balance
under this line was approximately $6.7 million, with a weighted average interest rate of approximately 2.5%.

At
September 30, 2003, the balance on our fixed rate long-term debt was $14.8 million and carried a weighted average interest rate of approximately 7.6%. The weighted
average interest rate for fiscal 2003 for all our debt was approximately 6.9%.

17

---

For
strategic reasons, we enter into forward product sales and material supply contracts, most of which have staggered maturity dates. Under SFAS 133 and related pronouncements,
these contracts qualify as normal sales and purchases contracts, under which we expect to take physical delivery. Of our four primary lines of business, bulk wine, grape sales and brandy production
are subject to multi-year contracts, while case goods sales occur on a short-term basis. The primary raw material component for most of our products is wine grapes. We enter into long and short-term
grape purchase contracts to ensure an adequate and cost effective source of raw material for production. We currently have several contracts to purchase grapes at costs anticipated to exceed market
for the 2003 crush. We are in the process of renegotiating such contracts but no assurance can be given that such efforts will be successful. Product sales contracts are substantially fixed over the
term of the contract as to quantity and price. Wine grape contract terms are similarly fixed at inception for the term of the contract, although a portion of these contracts contains annual harvest
market price adjustment clauses, including individual harvest year minimum pricing. For fiscal 2003, or the 2002 harvest year, we did not adjust wine grape purchase contracts upward against contract
minimum prices following the harvest.

A
certain portion of our annual wine and brandy production is committed under sales contracts. Bulk wine sold under long-term contracts decreased from 10.0 million gallons in
fiscal 2002 to 4.1 million gallons in fiscal 2003. At June 30, 2003, our reported inventory value of bulk wine and brandy was approximately $16.3 million, of which
approximately $7.6 million, or 47%, is committed to sales contracts. We generally match preproduction contractual sales with contracted material supply agreements. Uncommitted inventory of
approximately $8.7 million, or 53% is reserved for future case goods sales and for spot market bulk wine sales. We maintain a certain amount of uncommitted product inventory to meet customer
demand.

Item 4.    Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be disclosed in our periodic reports filed
with or submitted to the SEC. There have been no significant changes in our internal or other factors that could significantly affect these controls subsequent to the evaluation date, including any
corrective actions with regard to significant deficiencies and material weaknesses.

18

---



RISK FACTORS

In evaluating the Company, its business, operations and financial position, the following risk factors should be carefully considered, in
addition to the other information contained in Form 10-K/A. The following factors, among others, could affect the Company's actual future operating results and could cause such results to
differ from the results discussed elsewhere in Form 10-K/A.

Much of Our Revenues Are Derived From Only a Few Customers, the Loss of Any One of Which Would Harm Our Business

During fiscal 2003, five of our customers accounted for approximately 39% of our revenues, with Diageo and Heaven Hill accounting for approximately 14% and 10%,
respectively. While some of our largest customers have entered into some form of long-term contract with us, there can be no assurance that each of these relationships will continue following the
expiration of these contracts or that the volume of business we are currently conducting with such customers will continue at such levels. The loss of any one of our major customers or a significant
reduction in the sales prices or volume of their business with us could have a material adverse effect on our business, financial condition and results of operations.

Loss of a Major Bulk Wine Customer Could Adversely Affect Our Operations

Bulk wine and related services accounted for approximately 59% of our revenues in fiscal 2003. We continue to provide resources for expanding this portion of our
business. Any loss of a major bulk wine customer could reduce our bulk wine revenues, which could have a material adverse effect on our business, financial condition and results of operations.

Our Customers Inability to Pay Would Adversely Affect Our Revenues and Operating Results

From time to time we have provided extended payment terms to certain of our customers subject to the credit risks of such customers. If one of these customers
fails to pay amounts owed us, or does not pay such amounts on time, our revenue, operating results and/or liquidity would suffer.

Inability to Sell Our Inventory Would Harm Our Business

Due to continued surplus domestic and international bulk wine and case goods inventories and a reduction in the number of our long-term bulk wine sales contracts
compared to previous years, our bulk wine inventory is substantially in excess of committed sales contracts. In addition, our case goods inventories, including private label inventories, have remained
at higher than optimal quantities over the past year. There can be no assurance that we will be able to sell this excess inventory on the spot market at prices at or above our carrying value. As a
result, we may experience losses on the disposition of this inventory which would have an adverse affect on the results of our operations.

Decreasing Amounts of Our Bulk Wine Revenues Are Derived From Long-Term Contracts

We continue to experience decreasing gallons sold under long-term contracts. In fiscal 2001, approximately 11.7 million gallons were sold under long-term
contracts. In fiscal 2003, only 4.1 million gallons were sold under long-term contracts. As a result of our decreasing reliance on long-term contracts, our ability to accurately predict our
future revenues, required inventory levels and the volume of our business has declined. Furthermore, our operating expenses are relatively fixed and cannot be reduced on short notice to compensate for
unanticipated variation in the demand of bulk wine and related services. As a result, any termination, significant reduction or modification of our business relationships with any of our significant
customers, or with a number of smaller customers, could have a material adverse effect on our business, financial condition or results of operations.

19

---

Increased Environmental Requirements Could Adversely Affect Our Business

Ownership of real property creates a potential for environmental liability. There is an increasing trend toward more stringent guidelines and regulation. If
hazardous substances are discovered to have emanated from our properties, we could be subject to material liability arising from the remediation of such potential harm. We believe that our properties
have been and continue to be in a material compliance with relevant environmental regulations. Currently, water board audits are being conducted at two of our facilities. Although results of these
audits have not been finalized, excess nitrates were identified in the ground water at one of the facilities. This may require drilling a new well at an estimated cost of approximately $100,000. As
environmental regulations tighten we cannot be assured our real property will continue to meet such standards.

We Use Pesticides and Other Hazardous Substances in Our Business

Our current operations emit ethanol and require the periodic use of various chemical herbicides, fungicides and pesticides, some of which contain hazardous or
toxic substances. The emission and usage of these chemicals are, to varying degrees, subject to federal and state regulation. We believe that our operations have been and continue to be in material
compliance with relevant environmental regulations. At the same time, if hazardous substances are discovered to have emanated from such operations, we could be subject to material liability arising
from the remediation of such potential harm. As environmental regulations tighten we cannot be assured our current operating practices will meet such standards.

Decreased Demand for Our Case Goods Could Harm Our Business

Sales of case goods and related services accounted for approximately 27% of revenues in fiscal 2003. A significant portion of our case goods revenues consists of
short-term private label case goods sales. There is generally no contractual obligation for our private label customers to deplete all produced inventories. Accordingly, alternative market
possibilities would have to be identified at possibly lower sales prices or destruction of such cases could become necessary. Additionally, our higher margin proprietary case goods revenues resulted
from sales of our relatively unknown proprietary brands of premium wines. We have reduced pricing on certain labels and implemented various sales discount and incentive programs given current
challenging market conditions. Any significant increase in the supply of premium wine in the California wine market that is not met by a corresponding demand could adversely affect our case goods
sales. See "Recent Developments" in Management's Discussion and Analysis where we discuss the effect of reduced demand in our case goods business.

Wine Grape and Bulk Wine Price Declines Would Harm Our Business

Recent market developments resulted in oversupply and declining prices for certain wine grapes and bulk wine categories, which could have a material adverse
effect on our business, financial condition and results of operations. Such developments include (1) plantings of new vineyards, (2) yield enhancements through technological advances and (3)
denser plantings of vines. Anticipated high levels of grape production will continue to exert pressure on our bulk wine sales volume and margins. As a result, we may experience lower than expected
revenues and increased inventories which would materially adversely affect our business and future results. See "Recent Developments" in Management's Discussion and Analysis where we discuss the
effect of current difficulties in the bulk wine market on our business.

20

---

A Decrease in Customer Spending Would Harm Our Business

The growth of the wine industry and the success of our business depend to a significant extent on a number of factors relating to discretionary consumer spending,
including the general condition of the economy, general levels of consumer confidence, federal, state and local taxation, and the deductibility of business entertainment expenses under federal and
state tax laws. The current economic downturn both in the U.S. and abroad could adversely affect discretionary consumer spending generally, or purchases of wine specifically, which could have a
material adverse effect on our business. Current market pressures could negatively impact our lower of cost or market reserves for inventories. In addition, reduced sales could result in increased
inventories on hand and possible deterioration of inventory quality.

Decreased Cash Flow Could Limit Our Ability to Service Our Debt

As a result of incurring debt, we are subject to the risks normally associated with debt financing, including the risk that cash flow from operations will be
insufficient to meet required payments of principal and interest. Our ability to satisfy our obligations to pay interest and to repay debt is dependent on our future performance. Our performance
depends, in part, on prevailing economic conditions and financial, business and other factors, including factors beyond our control. To the extent we use a substantial portion of our cash flow from
operations to pay the principal and interest on our indebtedness, that cash flow will not be available to fund future operations and capital expenditures. Our debt level may also limit our ability to
obtain additional financing to fund future capital expenditures, debt service, working capital and other general corporate requirements. It could also make us more vulnerable to general economic
downturns and competitive pressures. We can give no assurances that our operating cash flow will be sufficient to fund our future capital expenditure and debt service requirements or to fund future
operations. In addition, our debt is secured by substantially all of our assets. If we are unable to meet our debt service obligations due to adverse economic conditions, we risk the loss of some or
all of our assets to foreclosure. See "Liquidity and Capital Resources" in Management's Discussion and Analysis where we discuss our existing line of credit.

Our Debt Financing Agreements Contain Restrictive Covenants with Which We May Not Be Able to Comply

Our ability to comply with restrictive financial covenants depends upon our future operating performance. Our future operating performance depends, in part, on
general industry conditions and other factors beyond our control. We can give no assurance that we will be able to comply with these covenants. If we fail to comply with these covenants in the future,
we may not succeed in renegotiating our debt financing agreements or otherwise obtaining relief from the covenants. If we default under some or all of our debt financial agreements, our lenders may
require that we immediately repay the full outstanding amount we owe them. In such event, we may have to pursue alternative financing arrangements. If we are not in compliance with financial covenants
at the end of any compliance period, our future results of operations and liquidity could be materially adversely affected.

Bad Weather, Pests and Diseases Could Adversely Affect Our Business

Grape production is subject to a variety of agricultural risks. Extreme weather conditions can materially and adversely affect the quality and quantity of grapes
produced. There can be no assurance that inclement weather in the future will not affect a substantial portion of our vineyards in any year and have a material adverse effect on our business,
financial condition and results of operations.

Vineyards
are also susceptible to certain diseases, insects and pests, which can increase operating expenses, reduce yields and damage or kill vines. In recent years phylloxera, a louse
that feeds on and may ultimately destroy the roots of grape vines, has infested many vineyards in the wine grape

21

---

producing
regions of California, causing grape yields to decrease. Phylloxera infestation has been widespread in California, particularly in Napa, Sonoma, Mendocino and Monterey Counties, where the
soil and climate provide an ideal environment for the pest. As a result of this widespread infestation, thousands of vineyard acres throughout the State of California have been replanted with
phylloxera-resistant rootstock or, in some cases, taken out of production completely. The cost of controlling this pest was significant to affected vineyard owners.

Substantially
all of our vineyards are planted on their own rootstock that is not phylloxera-resistant. In the fall of 1997, phylloxera was discovered in certain acres of our vineyards
located in Fresno County. We believe that the scope of this phylloxera infestation is modest, though there can be no assurance in that regard. Additionally, we believe the climate, soil and water
conditions in California's San Joaquin Valley slow the development of phylloxera in vineyard roots. Further, recent harvest yields from our phylloxera-infested acres were not notably lower than
yields from surrounding, non-infested acreage. There can, however, be no assurance that phylloxera will not spread throughout adjoining vineyard acres, or infest any of our other vineyards which could
reduce yields and require a significant investment in replanting with disease-resistant root stock, all of which would have a material adverse effect on the Company.

In
recent years the Glassy-Winged Sharpshooter ("GWSS") has emerged as an efficient vector of Pierce's disease. Pierce's disease is a serious threat to wine grapes and combined with
large GWSS populations can destroy vineyards over a several year period. The GWSS has been discovered in low populations throughout many of California's grape regions. A number of vineyards in a small
grape growing region in Southern California have been destroyed by Pierce's disease. We have engaged a consultant to monitor the pest and advise regarding the latest research developments. To date,
the GWSS has not been found on our vineyards and we believe there is no immediate Pierce's threat. While the grape industry is hopeful the spread of Pierce's disease can be controlled, an infestation
of our vineyards would have a materially adverse effect on our operations and profitability.

Other
pests that may infest vineyards include leafhoppers, thrips, nematodes, mites, insects, orange tortrix 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 and birds can also pose a problem for vineyards, and wine grapevines are also susceptible
to certain viral infections which may cause reduction of yields. In addition, the presence of potentially harmful nematodes in relatively high numbers has been detected in certain acres of our
vineyards. While we believe that none of these infestations or infections currently poses a major threat to our vineyards, they could do so in the future and could subject our vineyards to severe
damage, which could have a material adverse effect on our business, financial position and results of operations.

Intense Competition in the Wine Industry Could Adversely Affect Our Business

The wine industry is extremely competitive. We compete with several well-capitalized companies in the production of bulk wine. Further, many of our current and
prospective competitors have substantially greater financial, production, personnel and other resources than us. In order to meet near-term shortfalls in supply, a number of wineries have commenced
purchases of wine from foreign sources. Because of higher production costs in the United States some wineries can achieve significant cost savings, even after taking into account shipping costs, by
importing bulk wine from abroad. Some countries, such as France and Australia, have launched marketing campaigns to increase their sales in the United States. Foreign competition can be expected to
continue and increase. In addition, our principal winery customers compete with each other and with other wineries located in the United States, Europe, South America, South Africa and Australia. Wine
also competes with other alcoholic, and to a lesser degree, nonalcoholic beverages, and to the extent wine consumers reduce consumption of wine in favor of such other beverages, demand for wine and
the Company's products and services could decline.

22

---

Vineyard Removal and Replacement Could Affect Our Financial Condition

We currently own 4,270 acres of vineyards in a number of grape varieties. From time to time, we remove underperforming vineyards due to age, variety and/or
harvest yield trends. As all of our vineyards currently carry remaining net book value, removals incurred in the near term will result in loss recognition including removal costs. The development
period for newly planted vineyards can range from 3-5 years and capital requirements are substantial. Historically, we have financed vineyard plantings through issuance of debt and internally
generated funds. We anticipate finalizing a long-term vineyard strategy plan within the next twelve to twenty-four months resulting in identification of vineyards for removal, replacement and/or sale.
For those vineyards designated for removal and/or replacement, depreciation will be accelerated for the revised remaining useful lives of those assets. In addition, possible external and/or internal
capital sources will be identified to meet vineyard development cost requirements. As a result, our vineyard strategy will likely have a material effect on our business, results of operations and our
financial condition.

Difficulties in Production of Bulk Wine Could Affect Our Financial Condition

While we have substantial experience in producing and processing bulk wine, we may still experience production difficulties and delays with respect to the
delivery of finished wine. We generally guarantee the quality of the wine produced, which could result in our bearing financial responsibility for wine that fails to meet agreed upon quality
standards. From time to time, we have received claims from customers based on alleged defects in wine we produce. Such production difficulties could have a material adverse effect on our business,
results of operations and financial condition.

Adverse Public Opinion About Alcohol May Harm Our Business

In recent years there has been substantial publicity regarding the possible health benefits of moderate wine consumption. The results of a number of studies
suggest that moderate consumption of wine (or other alcoholic beverages) could result in decreased mortality and other health benefits. Alternatively, anti-alcohol groups have, in the past,
successfully advocated more stringent labeling requirements and other regulations designed to discourage consumption of alcoholic beverages, including wine. More restrictive regulations, negative
publicity regarding alcohol consumption, publication of studies that indicate a significant health risk from moderate consumption of alcohol or changes in consumer perceptions of the relative
healthfulness or safety of wine generally could adversely affect the sale and consumption of wine and the demand for wine and wine grapes and could have a material adverse effect on our business,
financial condition and results of operations.

The Seasonality of Our Business Could Cause Our Stock Price to Fluctuate

The wine grape business is extremely seasonal and we recognize the vast majority of our revenues in the first six months of our fiscal year. We are not positioned
to maximize quarter-to-quarter results, and our quarterly results should not be considered indicative of those to be expected for a full year. We recorded 61% of our revenues during the first six
months of our 2003 fiscal year. We have historically operated at a loss in the last two fiscal quarters due to limited sales during such quarters. Seasonality of revenues also affects our cash flow
requirements. In the past, we have borrowed funds under lines of credit from late summer through the fall to finance inventory build-up during the fall crush season. We also historically borrow funds
through the spring and summer to finance crop production costs through harvest. Such seasonality in revenues and borrowings may lead to significant fluctuations in our reported quarterly results. See
"Management's Discussion and Analysis of Financial Condition and Results of Operations."

23

---

Because We Have Fixed Farming Costs, a Weak Harvest Would Reduce Our Profit

We incur relatively fixed annual farming costs per vineyard acre. Revenues from grape sales and wine processing and production are not realized until harvest and
vary depending upon numerous factors. Vineyard productivity varies from year to year depending upon weather and other factors, and significant variations in annual yields should be expected from time
to time. Because production costs are not significantly variable in light of productivity or revenue levels, weak harvests or lower grape prices cannot be fully mitigated by cost reductions and could
have an adverse effect upon our profitability.

Loss of Key Personnel Could Harm Our Operations

We believe our continued success depends on the active involvement of Jeffrey B. O'Neill, the Company's Chief Executive Officer, and our key personnel,
including John G. Kelleher, the Company's Chief Financial Officer. There can be no assurance that these persons will remain in their management positions, and the loss of the services of any of
these persons could have an adverse effect on our business, financial condition and results of operations.

New or Changed Regulations Could Significantly Impact Our Business

We are subject to a broad range of federal and state regulatory requirements regarding our operations and practices. These regulations are subject to change and
conceivably could have a significant impact on operating practices, chemical usage and other aspects of our business. There can be no assurance that new or revised regulations pertaining to the wine
grape production industry will not have a material adverse effect on our business, financial condition and results of operations.

Wine
production and sales are subject to extensive regulation by the Federal Alcohol and Tobacco Tax and Trade Bureau, the California Department of Alcohol Beverage Control and other
state, local 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. In addition, imposition of excise or other taxes on wine could also negatively impact the wine industry by increasing wine prices for consumers. There can be no
assurance that there will not be new or revised laws or regulations pertaining to the wine industry which could have a negative impact on our business.

Our Stock Price May Be Volatile

The market price of the shares of our Class B Common Stock has declined sharply since our initial public offering in late July 1998. The market price for
such shares could continue to be volatile and may be significantly affected by factors such as actual or anticipated fluctuations in our operating results, industry consolidation, conditions and
trends in the wine industry, changes in recommendations and estimates by security analysts, general market conditions and other factors. There can be no assurance that an active trading market of our
Class B Common Stock will be sustained. In addition, stock markets from time to time have experienced price and volume fluctuations that have affected the market price for many companies and
that frequently have been unrelated to the operating performance of those companies. Such market fluctuations may adversely affect the market price of our Class B Common Stock.

Our Stock Could Be Delisted from the Nasdaq National Market

Due to the volatility of our stock price, we could be subject to delisting from The Nasdaq National Market. To maintain the listing of our Class B Common
Stock on The Nasdaq National Market, we are required to meet certain listing requirements, including a minimum bid price of $1.00 per share, however, if our stock price fell below that level for an
extended period, we could be subject to delisting from The Nasdaq National Market. On October 14, 2002, our stock price traded at an intraday low of $1.00 and closed at $1.08. Delisting could
materially affect the market price and market liquidity of our capital stock and our ability to raise necessary capital.

24

---



PART IIOTHER INFORMATION

Item 6. Exhibits and Reports On Form 8-K.

|Exhibit Number |  |                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------
|11             |  | Statement Regarding Computation of Per Share Earnings (Loss)                                     
|31.1           |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.         
|31.2           |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act.         
|32.1           |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350.)
|32.2           |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350.)

25

---



SIGNATURES

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

|                      |  |  |  | Golden State Vintners, Inc.
(Registrant)                                                
|--------------------- |  |  |  | ----------------------------------------------------------------------------------------
|November 14, 2003Date |  |  |  | /S/ JOHN G. KELLEHERJohn G. Kelleher Duly Authorized Officer and
Chief Financial Officer

26

---

QuickLinks