<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-22857
SCHEID VINEYARDS INC.
(Exact name of small business issuer as specified in its charter)
Delaware 77-0461833
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13470 Washington Blvd.
Marina del Rey, California 90292
(Address of principal executive offices) (Zip Code)
(310) 301-1555
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
There were 6,107,663 shares outstanding of registrant's Common Stock, par
value $.001 per share, as of May 12, 1999, consisting of 2,733,563 shares of
Class A Common Stock and 3,374,100 shares of Class B Common Stock.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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Page 1 of 13
<PAGE>
SCHEID VINEYARDS INC.
FORM 10-QSB INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
a. Consolidated Balance Sheets at March 31, 1999 and December 31, 1998 3
b. Consolidated Statements of Operations for the three 4
months ended March 31, 1999 and 1998
c. Consolidated Statements of Cash Flows for the three 5
months ended March 31, 1999 and 1998
d. Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
</TABLE>
Page 2 of 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCHEID VINEYARDS INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 705 $ 5,031
Accounts receivable, trade.................................................. 200 728
Accounts receivable, other.................................................. -- 398
Inventories................................................................. 2,249 742
Supplies, prepaid expenses and other current assets......................... 291 614
Deferred income taxes....................................................... 38 38
Current portion of long-term receivable..................................... 485 --
------------ ---------
Total current assets................................................... 3,968 7,551
PROPERTY, PLANT AND EQUIPMENT, NET............................................. 38,697 32,937
LONG-TERM RECEIVABLE........................................................... 4,365 5,572
OTHER ASSETS, NET.............................................................. 474 472
------------ ---------
$ 47,504 $ 46,532
------------ ---------
------------ ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt........................................... $ 900 $ 275
Accounts payable and accrued liabilities.................................... 3,216 716
Accrued interest payable.................................................... 142 197
Income taxes payable........................................................ -- 2,480
------------ ---------
Total current liabilities.............................................. 4,258 3,668
LONG-TERM DEBT, NET OF CURRENT PORTION......................................... 13,265 11,562
DEFERRED INCOME TAXES.......................................................... 585 867
------------ ---------
Total liabilities..................................................... 18,108 16,097
------------ ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 2,000,000 shares authorized; no
shares issued and outstanding............................................. -- --
Common stock,
Class A, $.001 par value; 20,000,000 shares authorized;
3,325,313 issued at March 31, 1999 and December 31, 1998; 2,733,563 and
2,872,950 shares outstanding at March 31, 1999 and December 31, 1998,
respectively
Class B, $.001 par value; 10,000,000 shares authorized;
3,374,100 shares issued and outstanding at March 31, 1999
and December 31, 1998.................................................. 7 7
Additional paid-in capital.................................................. 21,868 21,868
Retained earnings........................................................... 10,513 10,936
Less: treasury stock; 591,750 Class A shares at cost at
March 31, 1999 and 452,050 at December 31, 1998 ........................... (2,992) (2,376)
------------ ---------
Total stockholders' equity............................................. 29,396 30,435
------------ ---------
$ 47,504 $ 46,532
------------ ---------
------------ ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
Page 3 of 13
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SCHEID VINEYARDS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1999 1998
---- ----
<S> <C> <C>
REVENUES:
Sales........................................................... $ 250 $ 307
Vineyard management, services and other fees.................... 187 213
------------ -------------
Total revenues............................................... 437 520
COST OF SALES......................................................... 158 131
------------ -------------
GROSS PROFIT.......................................................... 279 389
General and administrative expenses................................ 992 1,202
Interest expense (income), net..................................... (8) (15)
------------ -------------
LOSS BEFORE INCOME TAX BENEFIT........................................ (705) (798)
INCOME TAX BENEFIT ................................................... 282 320
------------ -------------
NET LOSS.............................................................. $ (423) $ (478)
------------ -------------
------------ -------------
BASIC AND DILUTED NET LOSS PER SHARE ................................. $ (0.07) $ (0.07)
------------ -------------
------------ -------------
WEIGHTED AVERAGE SHARES OUTSTANDING................................... 6,116 6,700
------------ -------------
------------ -------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
Page 4 of 13
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION> Three Months Ended
March 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................................. $ (423) $ (478)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and abandonments......................................... 370 459
Deferred compensation............................................................... -- 22
Noncash compensation................................................................ -- 75
Deferred income taxes............................................................... (282) --
Changes in operating assets and liabilities:
Accounts receivable, trade......................................................... 528 81
Accounts receivable, other......................................................... 398 406
Inventories........................................................................ (1,507) (1,480)
Supplies, prepaid expenses and other current assets................................ 323 167
Accounts payable and accrued liabilities........................................... 607 288
Income taxes payable............................................................... (2,480) --
------------- -------------
Net cash used in operating activities............................................ (2,466) (460)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Long-term receivable.................................................................. 722 142
Additions to property, plant and equipment............................................ (4,292) (2,466)
Other assets.......................................................................... (2) (167)
------------- -------------
Net cash used in investing activities............................................ (3,572) (2,491)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt............................................................ 3,533 855
Repayment of long-term debt........................................................... (1,205) (997)
Purchase of treasury shares........................................................... (616) --
------------- -------------
Net cash provided by (used in) financing activities.............................. 1,712 (142)
------------- -------------
Decrease in cash and cash equivalents............................................ (4,326) (3,093)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................... 5,031 14,483
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CASH AND CASH EQUIVALENTS, END OF PERIOD................................................. $ 705 $ 11,390
------------- -------------
------------- -------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 5 of 13
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The consolidated financial statements included herein have been
prepared by Scheid Vineyards Inc. (the "Company" or "SVI") without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such SEC rules
and regulations. In the opinion of management of the Company, the foregoing
consolidated statements contain all adjustments necessary to present fairly
the financial position of the Company as of March 31, 1999, and its results
of operations and cash flows for the three-month periods ended March 31, 1999
and 1998. Due to the seasonality of the wine grape business, the interim
results reflected in the foregoing consolidated financial statements are not
considered indicative of the results expected for the full fiscal year. The
Company's consolidated balance sheet as of December 31, 1998 included herein
has been derived from the Company's audited financial statements as of that
date included in the Company's Annual Report on Form 10-KSB. The accompanying
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto filed as part of the Company's
Annual Report on Form 10-KSB.
RECENT DEVELOPMENTS
In December 1998, the Company signed a long-term lease for
approximately 740 acres of undeveloped land suitable for wine grape vineyards
in Greenfield, a few miles from the Company's vineyard headquarters. The
lease is for a term of up to 34 years. The planting of the entire 740-acre
vineyard, including rootstock and irrigation and trellising systems, is on
schedule to be substantially completed by May 31, 1999, with the first
harvest expected in 2001.
In October 1998, the Company instituted a new stock repurchase
program in which the Company may spend up to $2.5 million in open market
transactions to purchase outstanding shares of its Class A Common Stock at
such times, in such amounts or blocks and at such prices as deemed
appropriate. This repurchase program will expire on September 30, 1999.
Through May 12, 1999, the Company had repurchased 387,050 shares under this
program for approximately $1,746,000. In connection with the adoption of the
new stock repurchase program, the Company terminated a prior stock repurchase
program that authorized the purchase of up to 200,000 shares of Class A
Common Stock. Under the prior repurchase program, the Company repurchased
102,600 shares of Class A Common Stock for an aggregate purchase price of
$542,000 from July to October 1998. The Company also made other repurchases
earlier in 1998 of 103,000 shares of Class A Common Stock at an aggregate
purchase price of approximately $708,000.
Page 6 of 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Scheid Vineyards Inc. is a leading independent (I.E., not winery
controlled) producer of premium varietal wine grapes. The Company currently
operates approximately 6,000 acres of wine grape vineyards. Of this total,
approximately 4,400 acres are operated for the Company's own account, and
1,600 acres are operated under management contracts for others. All of the
properties currently operated by the Company are located in Monterey and San
Benito Counties in California, both of which are generally recognized as
excellent regions for growing high quality wine grape varieties.
The Company currently produces 13 varieties of premium wine grapes,
primarily Chardonnay, Merlot, Cabernet Sauvignon and Sauvignon Blanc.
Substantially all of the Company's current wine grape production is
contracted at least through the harvest of 2001, and the majority is
contracted at least through the harvest of 2006.
The wine grape business is extremely seasonal. Similar to most
nondiversified agricultural crop producers, the Company recognizes
substantially all of its crop sales revenues at the time of its annual
harvest in September and October. Because success of the Company's operations
is dependent upon the results of the Company's annual harvest, the first two
quarters have historically resulted in a loss and quarterly results are not
considered indicative of those to be expected for a full year. Profits, if
any, are recognized in the last two fiscal quarters of the year when revenues
from grape sales are recognized. In addition, the timing of the annual
harvest varies each year based primarily on seasonal growing conditions,
resulting in timing differences in the portion of grape revenues recognized
in the third and fourth quarters of any one year. From time to time, the
Company has in the past, and may in the future, convert grapes into bulk wine
for sale in years subsequent to the harvest year, which may impact quarterly
results. These are significant factors in comparing quarterly operating
results between fiscal years.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 AND 1998
REVENUES. SVI derives its revenues from four sources: (i) sales of
wine grapes; (ii) sales of bulk wine; (iii) vineyard management and services
revenues consisting primarily of management and harvest fees and equipment
rentals for services provided to owners of vineyards; and (iv) sales of wine
and wine-related merchandise sold primarily through the Company's tasting
room.
Sales (which is comprised of revenue from sales of wine grapes, bulk
wine and wine and wine-related merchandise) decreased to $250,000 in the
three months ended March 31, 1999 from $307,000 in the 1998 period, a
decrease of $57,000. Sales for the three months ended March 31, 1999 is
comprised of $215,000 in bulk wine sales and $35,000 from the sale of wine
and wine-related merchandise. Sales for the three months ended March 31, 1998
is comprised of $283,000 in bulk wine sales and $24,000 from the sale of wine
and wine-related merchandise.
Page 7 of 13
<PAGE>
Revenue from vineyard management, services and other fees decreased
by 12% to $187,000 for the three months ended March 31, 1999 from $213,000 in
the 1998 period, a decrease of $26,000. The decrease was primarily due to the
elimination of a 68-acre vineyard management contract and a reduction in
equipment rentals from 1998 to 1999.
GROSS PROFIT. Gross profit for the three months ended March 31, 1999
was $279,000 compared to $389,000 for the three months ended March 31, 1998,
a decrease of $110,000 or 28%. This decrease resulted primarily from the
reductions in sales of bulk wine and the decrease in management and other
fees from 1998 to 1999.
Costs associated with the provision of management services are
reimbursed by the Company's clients, therefore, no cost of sales is deducted
in determining gross profit on these services.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
decreased by 17% to $992,000 for the three months ended March 31, 1999 from
$1,202,000 in the 1998 period, a decrease of $210,000. The decrease was due
primarily to reductions in executive salaries, professional fees and vineyard
write-downs.
INTEREST EXPENSE (INCOME), NET. Net interest income was $8,000 for
the three months ended March 31, 1999 and $15,000 in the 1998 period, a
decrease of $7,000, and is comprised of the following:
<TABLE>
<CAPTION>
1999 1998
----- ----
<S> <C> <C>
Interest expense......................................................... $ 129,000 $ 293,000
Less capitalized interest................................................ (105,000) (122,000)
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Net interest expense..................................................... 24,000 171,000
Interest income.......................................................... (32,000) (186,000)
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Net interest expense (income)............................................ $ (8,000) $ (15,000)
------------ -------------
------------ -------------
</TABLE>
Total interest expense decreased primarily as a result of lower
interest rates in the 1999 period and the repayment of amounts borrowed under
the Company's long-term revolving credit facilities in the fourth quarter of
fiscal 1998. The decrease in interest income in 1999 was due to the decrease
in cash holdings of the Company from 1998 to 1999, primarily as the result of
the continued development of Company-owned vineyards, the repayment of
amounts borrowed on long-term revolving credit facilities and the repurchase
of the Company's Class A Common Stock in the fourth quarter of fiscal 1998.
INCOME TAX BENEFIT. The income tax benefit decreased to $282,000 for
the three months ended March 31, 1999 from $320,000 in the 1998 period.
NET LOSS. As a result of the above, the Company had a net loss for
the three months ended March 31, 1999 of $423,000 as compared to $478,000 in
the 1998 period.
Page 8 of 13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
SVI's primary sources of cash have historically been funds provided
by internally generated cash flow and bank borrowings. The Company has made
substantial capital expenditures to redevelop its existing vineyard
properties and acquire and develop new acreage, and the Company intends to
continue these types of expenditures. Cash generated from operations has not
been sufficient to satisfy all of the Company's working capital and capital
expenditure needs. As a consequence, the Company has depended upon and
continues to rely upon, both short and long-term bank borrowings. The Company
had a working capital deficit at March 31, 1999 of $290,000 as compared to
working capital of $3,883,000 at December 31, 1998, a decrease in working
capital of $4,173,000. The reduction in working capital was primarily due to
the expenditures of current working capital to fund vineyard development,
repay certain long-term credit facilities and repurchase shares of the
Company's Class A Common Stock.
Under the Company's historical working capital cycle, working
capital is required primarily to finance the costs of growing and harvesting
its wine grape crop. The Company normally delivers substantially all of its
crop in September and October, and receives the majority of its cash from
grape sales in November. In order to bridge the gap between incurrence of
expenditures and receipt of cash from grape sales, large working capital
outlays are required for approximately eleven months each year. Historically,
SVI has obtained these funds pursuant to credit lines with banks.
The Company currently has credit lines that provide both short-term
and long-term funds. The short-term "crop" line has maximum credit available
of $10,500,000 and is intended to finance the Company's anticipated working
capital needs. This crop line expires June 5, 2000, and is secured by crops
and other assets of the Company. There were no amounts outstanding under this
line at March 31, 1999.
SVI also has long-term credit facilities which expire through July
2008 and provide for maximum borrowings totaling $10,885,000, which diminish
annually through the expiration dates to a maximum allowable commitment of
$5,412,000. At March 31, 1999, the outstanding amount owed by the Company
under these facilities was $3,050,000. The interest rate on each of these
lines is based on the bank's "reference" or "cost of funds" rate. At March
31, 1999, the weighted average per annum interest rate on these lines was
7.06%. These credit lines are secured by deeds of trust on underlying
vineyard property.
The Company also has other long-term notes payable which, as of
March 31, 1999, totaled approximately $6,265,000. The interest rate on each
of these notes is based on the bank's "reference" or "cost of funds" rate. At
March 31, 1999, the weighted average per annum interest rate on these notes
was 7.06%. These notes are secured by deeds of trust on underlying vineyard
property.
The Company also has a bank line of credit with an original maximum
loan commitment of $7,500,000, the proceeds of which are being used to
develop a vineyard owned by a major client and managed under a long-term
contract by the Company. Any amount borrowed on the line, even if repaid
before the end of the availability period, permanently reduces the remaining
available line of credit. At March 31, 1999, the maximum available and
outstanding balances on this line of credit were $5,297,000 and $4,850,000,
respectively. This line bears interest at the bank's reference rate (5.46% at
March 31, 1999)
Page 9 of 13
<PAGE>
and is repayable in six annual installments beginning January 2000. The note
is secured by a letter of credit provided by the client and by the Company's
management contract. The management contract provides for the Company's
client to make payment of the annual principal installments under this line
as and when they become due.
The Company's principal credit facilities and notes payable bind the
Company to a number of affirmative and negative covenants, including
requirements to maintain certain financial ratios within certain parameters
and to satisfy certain other financial tests. At March 31, 1999, the Company
was in compliance with these covenants.
Although no assurances can be given, management believes that the
Company's anticipated working capital levels and short-term borrowing
capabilities will be adequate to meet the Company's currently anticipated
liquidity needs during the fiscal year ending December 31, 1999. At March 31,
1999, the Company had $17,521,000 in borrowing availability under its
long-term revolving credit facilities and crop line of credit.
Management expects that capital requirements will expand
significantly to support expected future growth and that this will result in
the expenditure of the Company's available cash and additional borrowing
under credit lines and/or new arrangements for term debt. The Company's
planned new vineyard developments are expected to require approximately $16
million in capital investment over the next three years, and continued
improvements and redevelopments of existing vineyards are expected to require
approximately $7 million. In addition, the Company expects to invest
approximately $3 million in equipment purchases. Management believes it
should be able to obtain long-term funds from its present principal lender,
but there can be no assurance that the Company will be able to obtain
financing when required or that such financings will be available on
reasonable terms.
Cash used in operating activities was $2,466,000 for the three
months ended March 31, 1999, compared to $460,000 for the same period in
1998, an increase of $2,006,000. The increase was primarily due to the timing
of the payment of 1998 income tax liabilities.
Cash used in investing activities was $3,572,000 for the three
months ended March 31, 1999, compared to $2,491,000 for the same period in
1998, an increase of $1,081,000. The increase was principally the result of
expenditures for the ongoing development of approximately 1,300 acres of new
vineyards and improvements in the Company's existing vineyards.
Cash provided by financing activities was $1,712,000 for the three
months ended March 31, 1999, compared to cash used by financing activities of
$142,000 for the same period in 1998. Net borrowings under the Company's
long-term credit lines were $2,328,000 in 1999 as compared to net repayments
in 1998 of $142,000. The borrowings in 1999 were used primarily to fund the
development of the Company's new 740-acre vineyard which the Company began
developing in the fourth quarter of 1998. In addition, the Company
repurchased shares of its Class A Common Stock in the amount of $616,000 in
1999. There were no such stock repurchases during the three months ended
March 31, 1998.
Page 10 of 13
<PAGE>
YEAR 2000
The Year 2000 issue is the result of computer systems, including
information technology ("IT") and non-IT systems, which have the inability to
process date sensitive information with respect to the Year 2000 and
thereafter. Computers or other equipment with date-sensitive software may
recognize "00" as 1900 rather than 2000. If not corrected, many computer
systems could fail or produce erroneous results. If the Company, or its
significant customers, suppliers, lenders, or other third parties fail to
correct Year 2000 issues, the Company's ability to operate its business could
be materially affected.
The Company is currently in the process of upgrading its accounting
and financial software, and, in conjunction with the upgrade, any known Year
2000 issues will be corrected. This upgrade is anticipated to be completed by
mid-1999. In the event that this upgrade is not completed by December 31,
1999, the most likely worst-case scenario would be that the majority of the
Company's accounting functions would have to be performed manually.
The Company is also evaluating its non-IT systems with respect to
the Year 2000 issue. These non-IT systems include phones and security
systems. The cost to the Company of evaluating its own systems is not
expected to be material.
In addition, there are also risks associated with key suppliers,
including utility companies and financial institutions, and customers over
which the Company has little or no control. The Company has begun making
inquiries of certain of its principal suppliers and customers with respect to
their Year 2000 readiness and its potential effects on the Company. However,
the Company does not yet know the status of Year 2000 compliance of major
vendors that are integral to the Company's business and the Company is
therefore not able to currently assess the risk to the Company of third party
failures.
Although no assurances can be given, the Company currently believes
that through its ongoing upgrade of its accounting and financial systems and
its evaluation of non-IT systems, as well as ongoing correspondence with
suppliers and customers, the Year 2000 issue will not materially impair the
Company's ability to conduct business. In addition, in addressing the Year
2000 issue, the Company has thus far not expended a material amount, and does
not anticipate future expenditures regarding this issue to be material. To
the extent the Company is not able to address any of its Year 2000 issues,
the Company believes that it could revert to manual processes previously
employed with minimal costs.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Management's Discussion and
Analysis of Financial Condition and Results of Operations are
"forward-looking statements". These forward-looking statements can generally
be identified as such because the context of the statement will include such
words as the Company "believes," "anticipates," "expects," or words of
similar import. Similarly, statements that describe the Company's future
operating performance, financial results, plans, objectives or goals are also
forward-looking statements. Such forward looking statements are subject to
certain factors, risks and uncertainties which could cause actual
Page 11 of 13
<PAGE>
results to differ materially from those currently anticipated. Such factors,
risks and uncertainties include, but are not limited to, (i) success in
planting, cultivating and harvesting of existing and new vineyards, including
the effects of weather conditions (ii) success in, and the timing of, future
acquisitions, if any, of additional properties for vineyard development and
related businesses as well as variability in acquisition and development
costs, (iii) consumer demand and preferences for the wine grape varieties
produced by the Company, (iv) general health and social concerns regarding
consumption of wine and spirits, (v) the size and growth rate of the
California wine industry, (vi) seasonality of the wine grape producing
business, (vii) increases or changes in government regulations regarding
environmental impact, water use, labor or consumption of alcoholic beverages,
(viii) competition from other producers and wineries, (ix) proposed expansion
of the Company's wine business, (x) effects of variances in grape yields and
prices from harvest to harvest due to agricultural, market and other factors
and relatively fixed farming costs, (xi) the Company's dependence on a small
number of clients for the purchase of a substantial portion of the Company's
grape production, (xii) the availability of financing on terms acceptable to
the Company, and (xiii) the Company's labor relations. These and other
factors, risks and uncertainties are discussed in greater detail under the
caption "Business - Cautionary Information Regarding Forward Looking
Statements" in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission on March 24, 1999. Stockholders, potential
investors and other readers are urged to consider these factors carefully in
evaluating the forward-looking statements and are cautioned not to place undo
reliance on such forward-looking statements. The forward-looking statements
made herein are only made as of the date of this Form 10-QSB and the Company
undertakes no obligation to publicly update such forward-looking statements
to reflect subsequent events or circumstances.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Page 12 of 13
<PAGE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herewith:
27.1 Financial Data Schedule (electronically filed herewith)
(b) The Company did not file any reports on Form 8-K
during the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 1999 SCHEID VINEYARDS INC.
/s/ Heidi M. Scheid
----------------------
Heidi M. Scheid
Vice President Finance and Chief Financial Officer
(Duly Authorized Officer and Principal Financial
and Accounting Officer
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET OF SCHEID VINEYARDS INC. AS OF MARCH 31, 1999 AND THE STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 INCLUDED ON FORM 10-QSB FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 705
<SECURITIES> 0
<RECEIVABLES> 200
<ALLOWANCES> 0
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0
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