GOLDEN STATE VINTNERS INC, 424B1, 1998-07-22

GOLDEN STATE VINTNERS INC
424B1, 1998-07-22
MALT BEVERAGES

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<PAGE>
Filed Pursuant to Rule 424(b)(1)

4,300,000 SHARES

[LOGO]

GOLDEN STATE VINTNERS, INC.
CLASS B COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------------

Of the 4,300,000 shares of Class B Common Stock offered hereby, 2,150,000
shares are being sold by the Company and 2,150,000 shares are being sold by the
Selling Stockholders. See "Principal and Selling Stockholders". The Company will
not receive any proceeds from the sale of the shares being sold by the Selling
Stockholders.

The Company has two classes of authorized Common Stock, Class B Common
Stock, which is offered hereby, and Class A Common Stock. Holders of Class B
Common Stock generally have identical rights to holders of Class A Common Stock,
except that holders of Class B Common Stock are entitled to one vote per share
and holders of Class A Common Stock are entitled to 10 votes per share on all
matters submitted to a vote of stockholders. Class A Common Stock is convertible
at any time into Class B Common Stock on a share-for-share basis. Immediately
upon completion of this offering, the shares of Class B Common Stock sold in
this offering will represent 8.9% of the combined voting power of all classes of
voting stock and 45.4% of the economic interest (or rights of holders of common
equity to participate in distributions in respect of common equity) in the
Company (10.0% and 48.8%, respectively, if the Underwriters' over-allotment
option is exercised in full).

Prior to this offering, there has been no public market for the Class B
Common Stock. For factors considered in determining the initial public offering
price, see "Underwriting".

SEE "RISK FACTORS" COMMENCING ON PAGE 8 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS B COMMON STOCK.

The Class B Common Stock has been approved for listing on the Nasdaq
National Market under the symbol "VINT".
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS(2)
-------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C>
Per Share.................................. $17.00 $1.19 $15.81 $15.81
Total(3)................................... $73,100,000 $5,117,000 $33,991,500 $33,991,500
</TABLE>

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

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting".

(2) Before deducting expenses of the Company and the Selling Stockholders
estimated at $1,600,000. The Company has agreed to pay the offering expenses
of the Selling Stockholders, other than the Underwriting Discount.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 645,000 shares of Class B Common Stock at the initial public
offering price per share, less the Underwriting Discount, solely to cover
over-allotments. If such option is exercised in full, the total Initial
Public Offering Price, Underwriting Discount and Proceeds to Company will be
$84,065,000, $5,884,550 and $44,188,950, respectively. See "Underwriting".
------------------

The shares of Class B Common Stock offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that certificates for the shares of Class B Common Stock will be ready
for delivery in New York, New York, on or about July 27, 1998, against payment
therefor in immediately available funds.

GOLDMAN, SACHS & CO.

HAMBRECHT & QUIST

J.P. MORGAN & CO.
----------

The date of this Prospectus is July 21, 1998.
<PAGE>
[PHOTOS OF THE COMPANY'S VINEYARDS, FACILITIES, OPERATIONS AND PRODUCTS]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS B COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION CONCERNING THE COMPANY AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO OF GSV APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM
"COMPANY" OR "GSV" WHEN USED IN THIS PROSPECTUS REFERS TO GOLDEN STATE VINTNERS,
INC., A DELAWARE CORPORATION, AND ITS CONSOLIDATED SUBSIDIARIES AND
PREDECESSORS. EXCEPT AS SET FORTH IN THE CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO OR AS OTHERWISE SPECIFIED HEREIN, ALL INFORMATION IN THIS
PROSPECTUS ASSUMES (I) THE CHANGE OF THE NAME OF GSV FROM "GOLDEN STATE
ACQUISITION CORP." TO "GOLDEN STATE VINTNERS, INC.", (II) THE CREATION BY GSV OF
A NEW CLASS A COMMON STOCK AND A NEW CLASS B COMMON STOCK, (III) THE CONVERSION
OF ALL OF GSV'S OUTSTANDING SHARES OF OLD CLASS B COMMON STOCK ON A ONE-FOR-ONE
BASIS INTO SHARES OF THE COMPANY'S NEWLY-CREATED CLASS A COMMON STOCK, (IV) THE
CONVERSION OF ALL OF GSV'S OUTSTANDING SHARES OF OLD CLASS E COMMON STOCK AND
OLD CLASS K COMMON STOCK ON A ONE-FOR-ONE BASIS INTO SHARES OF THE COMPANY'S
NEWLY-CREATED CLASS B COMMON STOCK, (V) A 2.9-FOR-1 STOCK SPLIT FOR EACH OF
GSV'S OUTSTANDING SHARES OF NEWLY-CREATED CLASS A COMMON STOCK AND NEWLY-CREATED
CLASS B COMMON STOCK, (VI) THE CONVERSION OF ALL OF GSV'S OUTSTANDING SHARES OF
JUNIOR EXCHANGEABLE PREFERRED STOCK (THE "JUNIOR PREFERRED STOCK") INTO 130,343
SHARES OF THE COMPANY'S NEWLY-CREATED CLASS B COMMON STOCK (COLLECTIVELY, WITH
THE EVENTS DESCRIBED IN (II) THROUGH (V), THE "RECAPITALIZATION"), (VII) THE
CONVERSION OF 1,526,084 SHARES OF THE COMPANY'S NEWLY-CREATED CLASS A COMMON
STOCK ON A ONE-FOR-ONE BASIS INTO SHARES OF THE COMPANY'S NEWLY-CREATED CLASS B
COMMON STOCK IMMEDIATELY PRIOR TO THE SALE OF SUCH SHARES BY CERTAIN SELLING
STOCKHOLDERS IN THIS OFFERING, (VIII) THE COMPANY'S FISCAL YEAR PERIODS RUNNING
FROM JULY 1 TO JUNE 30 OF EACH YEAR REFERENCED AND (IX) NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION. AS USED IN THIS PROSPECTUS, THE TERM
"PREMIUM WINE" REFERS TO WINE THAT RETAILS FOR $3.00 OR MORE PER 750 MILLILITER
(ML) BOTTLE OR THE EQUIVALENT PRICE FOR DIFFERENT SIZED BOTTLES, IN ACCORDANCE
WITH INDUSTRY CUSTOM.

THE COMPANY

GSV is one of the largest suppliers of premium bulk wines, wine processing
and storage services, wine grapes and case goods in the United States.
Management believes that the Company is a contract supplier of choice for many
of the leading branded wineries in California because of its reputation for
quality and service, extensive vineyard holdings, strategically located
facilities and ability to tailor a full range of products and services to meet
the particular needs of its customers. The Company believes that its strong
customer relationships, low-cost operations and ability to successfully
integrate vineyard and facility acquisitions have enabled GSV to capitalize on
recent wine industry trends, including the growth of the premium wine market and
the trend by many of the leading branded wineries to outsource wine production.
Over the last five years, GSV has increased its revenues at a compounded annual
rate of 19% from $47.0 million in fiscal 1993 to $95.8 million in fiscal 1997.

The Company provides a broad range of high quality winemaking and processing
services, barrel fermentation and bottling and storage services to many of the
largest branded wineries in California and to a number of international
wineries. The Company supplies premium bulk wine pursuant to long-term supply
agreements with Sutter Home Winery ("Sutter Home"), Canandaigua Wine Company
("Canandaigua"), Sebastiani Vineyards ("Sebastiani"), IDV North America
("Heublein"), Vincor International, Inc. ("Vincor"), and other wineries. The
Company also delivers contract wine processing, barrel fermentation and storage
services under contracts with, among others, The Wine Group, Robert Mondavi
Winery ("Mondavi") and Beringer Wine Estates ("Beringer"). The Company also
sells wine grapes, primarily to EJ Gallo Winery ("Gallo").

GSV produces private label case goods for a number of clients, such as
Archer Daniels Midland Co. ("ADM"), JC Boisset USA ("Boisset") and Trader Joe's.
The Company is the largest exporter of bulk wine from California, according to
Gomberg, Fredrikson & Associates ("Fredrikson"), a wine industry consulting
firm, and, in fiscal 1997, the Company derived approximately 12% of its revenues
from the sale of bulk wine and case goods outside of the United States. The
Company also supplies brandy (a

3
<PAGE>
distilled derivative of wine) to Heublein pursuant to a long-term agreement and
is the second largest brandy producer in the United States.

The combination of GSV's extensive vineyard holdings and five strategically
located facilities has enabled the Company to become what management believes is
one of California's low-cost producers of premium bulk wine. The Company's 9,600
acres of vineyard properties in California's San Joaquin Valley allow the
Company to source high quality wine grapes at a competitive cost. The Company's
wine processing facilities are generally modern, efficient and automated, and
allow for large scale, low-cost production of premium bulk wine and case goods
and the delivery of a full line of winemaking, processing and storage services.
Over the last four years, the Company has greatly expanded its presence in the
California wine industry by acquiring vineyards and wine and brandy processing
facilities and quickly integrating these assets into GSV's winemaking
operations.

Management believes that the growth in the Company's sales is attributable
in part to the growth of the premium wine market. Over the past 10 years, there
has been a shift in consumer preferences in the United States from generic or
"jug" wines to high quality, branded premium varietal wines sold primarily in
750ml bottles. Since 1987, sales of premium California table wines have
increased at a 15% compounded annual rate, from approximately $932 million in
1987 to approximately $3.8 billion in 1997, according to Fredrikson. In 1997,
premium table wines accounted for 78% of the $4.8 billion California table wine
market (expressed in winery sales revenues), compared to 52% of the $1.8 billion
California table wine market in 1987. The Company believes that this major shift
in consumer preferences has occurred due to (1) the maturing "baby-boomer"
generation entering its prime wine consumption period; (2) a growing consumer
interest in premium wines in general; (3) a growing interest in and
sophistication about food that lends itself to expanded consumption of premium
wines; and (4) the improving quality and reputation of California premium wines.

Management believes that the Company's recent financial performance has also
benefited from the increasing trend by a number of California's leading branded
wineries to outsource various steps in the winemaking process. With the growth
in demand for premium wines, these wineries have focused on the marketing of
their brands and have invested significant financial resources in building brand
awareness and loyalty through marketing and distribution. Additionally, the
growing demand for premium wine has strained the winemaking capacity of a number
of leading branded wineries. These wineries have demonstrated a strategic
preference towards focusing their resources on brand building as opposed to
facility expansion. Management believes that these and other factors in the wine
industry have resulted in an increasing need for California's large, branded
wineries to outsource the production of premium wine. As a quality-oriented,
low-cost provider of contract winemaking and processing services, management
believes that the Company is well positioned to continue to capitalize on these
wine industry trends.

BUSINESS STRENGTHS

GSV's key business strengths include:

LOW-COST PROVIDER. To position the Company advantageously among its bulk
wine processing competitors, GSV seeks to be the low-cost provider of bulk wine
and contract winemaking and processing services. The economies of scale of the
Company's large, efficient vineyards and facilities and GSV's expertise in
managing its winemaking facilities translate into low production costs, which
allow the Company to price its winemaking products and services at prices that
may be lower than the marginal production costs of these products and services
to its customers.

4
<PAGE>
FULL RANGE OF PRODUCTS AND SERVICES. The Company offers customers an array
of wine products in most of the California appellations and provides a full
complement of wine-related services, from grape growing to the shipment of case
goods. Consequently, the Company's customers can use GSV's products and services
in any step of the winemaking process, while focusing the use of their resources
to leverage their particular strengths.

LARGE, COST EFFECTIVE VINEYARDS. The Company is one of the largest vineyard
owners in California in terms of total acreage. GSV's 9,600 acres of vineyard
properties are large and highly productive, which results in lower grape
production costs. For example, in 1997 the average cost of grape production at
the Company's vineyards was well below the 1997 market price for such grapes.
The Company's ownership of extensive vineyards also allows GSV to control the
varieties of grapes it grows, enabling the Company to tailor its product
offerings to the changing needs of its branded winery customers.

STRATEGICALLY LOCATED FACILITIES. The location of the Company's five
wineries in or adjacent to most of California's primary wine growing regions
allows the Company to offer its customers winemaking, processing and storage
services at several conveniently located facilities. In addition, the size of
the Company's facilities enables GSV to aggregate the winemaking needs of
several customers, producing wine at a lower marginal cost than each customer
could at their own facilities and reliably delivering large quantities of
quality wine.

STRONG CUSTOMER RELATIONSHIPS. The Company has developed relationships with
many of the largest branded wineries in California as well as with a number of
international branded wineries. The Company has used long-term contracts to
create and maintain business relationships with such customers as Gallo,
Heublein, Sutter Home, Canandaigua, Sebastiani, The Wine Group, Mondavi,
Beringer, and Vincor. As competition among the major wineries in California
intensifies, management believes that a number of these wineries will continue
to outsource the production of a major portion of their premium wines.

GROWTH STRATEGY

GSV's strategic objective is to strengthen its position as a leading
supplier of premium bulk wine, wine processing and storage services and case
goods to the leading branded wineries in California and to a number of
international winemakers. In addition to building on its business strengths, the
Company's strategy for achieving this goal has the following key elements:

UPGRADE AND EXPAND WINEMAKING OPERATIONS. The Company recently authorized
capital expenditures of up to $20 million, primarily to upgrade, maintain and
expand its existing winemaking facilities in Fresno and Monterey over the next
two years. In addition, the Company will continue to evaluate opportunities to
make strategic greenfield investments in selected wine regions of California.

PURSUE STRATEGIC ACQUISITIONS. The Company's recent acquisitions have
enabled it to expand the range of premium winemaking and processing services
that it offers to its branded winery customers. Additionally, the Company has
often been able to quickly generate revenues from acquired assets that have been
integrated into GSV operations. While the Company has found it increasingly
difficult to identify attractive acquisition opportunities, GSV will continue to
examine acquisition opportunities that make sense financially and can be
integrated efficiently with the Company's existing operations.

EXPAND INTERNATIONALLY. The Company will seek to strengthen its position as
the leading bulk wine exporter from California and will continue to market its
winemaking and processing services to leading international wineries. The
Company also plans to further leverage its relationships with leading
international winemakers to internationally source bulk wine for the Company's
customers in North America. Finally, the Company believes there are significant
growth opportunities in a variety of international winemaking regions, including
Australia, South America and Southern Europe, and that the premium bulk wine
processor and contract service provider models that the Company has successfully
implemented in California can be applied internationally.

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The Company (referred to as "New GSV" below) was incorporated for the
purpose of acquiring all of the outstanding capital stock of Golden State
Vintners, currently one of the Company's consolidated subsidiaries (referred to
as "Old GSV" below), on April 27, 1995. The Company constitutes the successor
company to Old GSV and is reflected in the statement of operations data
beginning on April 27, 1995 and the balance sheet data beginning on June 30,
1995. The statement of operations data and the balance sheet data through April
26, 1995 are the results of Old GSV. The information contained in the tables
below should be read in conjunction with and is qualified in its entirety by
"Selected Consolidated Financial Data", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited and unaudited
Consolidated Financial Statements of Old GSV and the Company and the Notes
thereto, each of which is included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NEW GSV
OLD GSV -------------------------------------------
--------------------------------- NINE
MONTHS
YEAR ENDED JUNE 30, JULY 1, APRIL 27, YEAR ENDED JUNE 30, ENDED
1994 TO 1995 TO MARCH 31,
-------------------- APRIL 26, JUNE 30, -------------------- ---------
1993 1994 1995 1995 1996 1997 1997
--------- --------- ----------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $ 47,048 $ 44,063 $ 42,851 $ 4,037 $ 71,755 $ 95,785 $ 88,678
Cost of sales (1).............................. 38,713 34,241 34,772 3,949 58,468 71,662 66,846
Gross profit................................... 8,335 9,822 8,079 88 13,287 24,123 21,832
Selling, general, and administrative expenses
(2).......................................... 1,676 2,768 3,364 951 5,042 7,408 5,315
Income (loss) from operations.................. 6,659 7,054 4,715 (863) 8,245 16,715 16,517
Interest expense............................... 2,813 3,189 2,797 920 5,344 5,880 4,480
Income (loss) before income taxes.............. 3,846 3,828 1,874 (1,784) 2,507 10,158 11,360
Net income (loss).............................. 6,618 3,503 1,874 (1,784) 1,924 6,170 6,896

Redeemable preferred stock dividends........... -- -- -- -- (1,290) (1,314) (679)
Redemption of Junior Preferred Stock........... -- -- -- -- -- (405) (405)
--------- --------- ----------- ---------- --------- --------- ---------
Income (loss) available to common
stockholders................................. $ 6,618 $ 3,503 $ 1,874 $ (1,784) $ 634 $ 4,451 $ 5,812
--------- --------- ----------- ---------- --------- --------- ---------
Earnings (loss) per common share (3):
Basic........................................ $ (.26) $ .09 $ .65 $ .85
---------- --------- --------- ---------
---------- --------- --------- ---------
Diluted...................................... $ (.26) $ .09 $ .65 $ .83
---------- --------- --------- ---------
---------- --------- --------- ---------
OTHER FINANCIAL DATA:
Depreciation and amortization.................. $ 1,946 $ 2,279 $ 1,926 $ 755 $ 3,319 $ 4,207 $ 3,525
Capital expenditures........................... 1,007 3,639 3,222 8,967 3,536 4,778 2,676
OTHER DATA:
Tons of grapes crushed (4)..................... 128,022 110,285 119,103 156,722 163,521 163,521
Vineyard property (in acres)................... 7,850 7,850 9,600 9,600 9,600 9,600

<CAPTION>
1998
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $ 101,675
Cost of sales (1).............................. 75,625
Gross profit................................... 26,050
Selling, general, and administrative expenses
(2).......................................... 13,066
Income (loss) from operations.................. 12,984
Interest expense............................... 5,203
Income (loss) before income taxes.............. 7,616
Net income (loss).............................. 4,738
Redeemable preferred stock dividends........... (636)
Redemption of Junior Preferred Stock........... --
---------
Income (loss) available to common
stockholders................................. $ 4,102
---------
Earnings (loss) per common share (3):
Basic........................................ $ .60
---------
---------
Diluted...................................... $ .57
---------
---------
OTHER FINANCIAL DATA:
Depreciation and amortization.................. $ 3,768
Capital expenditures........................... 5,524
OTHER DATA:
Tons of grapes crushed (4)..................... 197,841
Vineyard property (in acres)................... 9,600
</TABLE>
<TABLE>
<CAPTION>
OLD GSV NEW GSV
-------------------- ---------------------------------------------------------
JUNE 30, JUNE 30, MARCH 31, 1998
-------------------- ------------------------------- ------------------------
1993 1994 1995 1996 1997 ACTUAL PRO FORMA(5)
--------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................... $ 5,755 $ 10,011 $ 8,735 $ 9,335 $ 9,386 $ 8,245 $ 8,245
Total assets......................... 45,741 53,537 80,941 90,435 102,111 124,640 124,640
Total long-term debt................. 27,119 30,900 44,322 42,973 49,781 48,023 48,023
Redeemable preferred stock........... -- -- 9,978 10,034 8,813 8,915 8,192
Stockholders' equity................. 10,286 13,789 10,037 10,670 12,574 16,676 17,399

<CAPTION>
AS ADJUSTED(6)
---------------
<S> <C>
BALANCE SHEET DATA:
Working capital...................... $ 12,836
Total assets......................... 124,640
Total long-term debt................. 30,223
Redeemable preferred stock........... --
Stockholders' equity................. 47,982
</TABLE>

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

(1) In accordance with purchase accounting rules applied to the Company's
acquisition of Old GSV, inventory was increased to estimated fair value. The
inventory step-up increased cost of sales for the period April 27, 1995 to
June 30, 1995 and the year ended June 30, 1996 by $471 and $1,563,
respectively.

(2) Management incentives relating to stock appreciation rights and bonuses
increased selling, general and administrative expenses by $33, $930, $2,141,
$1,567 and $8,800 for the period April 27, 1995 to June 30, 1995, the years
ended June 30, 1996 and 1997 and the nine months ended March 31, 1997 and
1998, respectively.

(3) See Note 2 of the Notes to Consolidated Financial Statements for an
explanation of the basic and diluted earnings per share computations.

(4) It is industry custom to convert one ton of wine grapes to 170 gallons of
wine, and to convert gallons of wine into cases of twelve 750ml bottles at
the rate of 2.3775 gallons per case. All grapes crushed in the twelve month
period ended June 30, 1995 are shown under New GSV.

(5) Stockholders' equity increased, and redeemable preferred stock decreased, by
the $723 carrying value of 178,105 shares of Junior Preferred Stock to be
converted into 130,343 shares of Class B Common Stock pursuant to the
certificate of designations governing the Junior Preferred Stock, assuming
that such conversion occurred on March 31, 1998.

(6) Assumes that the issuance and sale of the 2,150,000 shares of Class B Common
Stock offered by the Company hereby at an initial public offering price of
$17.00 per share and the application of the estimated net proceeds
therefrom, including a $1,800 decrease to stockholders' equity resulting
from the redemption of the 12% Senior Redeemable Exchangeable Preferred
Stock (the "Senior Preferred Stock"), occurred on March 31, 1998.

6
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Class B Common Stock Offered:
The Company..................... 2,150,000 shares
The Selling Stockholders........ 2,150,000 shares
Total......................... 4,300,000 shares
Common Stock to Be Outstanding
After the Offering (1):
Class A Common Stock............ 4,342,528 shares
Class B Common Stock............ 5,136,733 shares
Voting Rights:
Class A Common Stock............ Ten votes per share
Class B Common Stock............ One vote per share
Use of Proceeds................... Repayment of certain outstanding indebtedness,
repurchase of senior preferred stock, working capital
and other general corporate purposes. Certain Selling
Stockholders intend to use a portion of the net proceeds
they receive from the sale of shares of Class B Common
Stock to redeem outstanding participating securities
issued to the U.S. Small Business Administration. See
"Use of Proceeds".
Nasdaq National Market Symbol..... VINT
</TABLE>

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

(1) Based on an aggregate of 9,479,261 shares of Class A Common Stock and Class
B Common Stock outstanding as of April 30, 1998, after giving effect to (a)
the exercise by certain officers of the Company of options covering 307,600
shares of Class A Common Stock and 29,617 shares of Class B Common Stock on
April 29, 1998, (b) the Recapitalization, (c) the conversion of 1,526,084
shares of Class A Common Stock into a like number of shares of Class B
Common Stock immediately prior to the sale of such shares by certain selling
stockholders in the offering and (d) the offering, and assumes no exercise
of the Underwriters' over-allotment option. Excludes (x) 362,833 shares of
Class A Common Stock and 223,491 shares of Class B Common Stock reserved for
issuance pursuant to the Company's 1996 Stock Option Plan (the "1996 Option
Plan") of which options to purchase 362,833 shares of Class A Common Stock
and 159,500 shares of Class B Common Stock are outstanding at an average
exercise price of $5.01, (y) 348,000 shares of Class B Common Stock reserved
for issuance pursuant to the Company's 1998 Director Stock Option Plan (the
"Director Plan") of which options to purchase 59,982 shares of Class B
Common Stock are outstanding at an average exercise price of $12.08 and (z)
764,729 shares of Class B Common Stock reserved for issuance pursuant to
outstanding options with an exercise price of $12.07 issued outside of the
Company's option plans. See "Capitalization", "Description of Capital Stock"
and "Management--Stock Option Plans".

RISK FACTORS

See "Risk Factors" beginning on page 8 for a description of certain risks
relevant to an investment in the Class B Common Stock.

TRADEMARK INFORMATION

The Company's trademarks include GOLDEN STATE VINTNERS, and the proprietary
labels EDGEWOOD ESTATE, SUMMERFIELD, SUMMERFIELD RESERVE, MONTHAVEN, CUTLER
CREEK, BOUNTY, J. WILE, MUIRFIELD, WESTON and LEBLANC. This Prospectus also
contains trademarks and trade names of other companies.

THE COMPANY

The Company was incorporated in Delaware in 1995 as Golden State Acquisition
Corp. The Company changed its name to Golden State Vintner's, Inc. on April 22,
1998. The Company's principal executive offices are located at 500 Drake's
Landing Road, Greenbrae, California 94904, and its telephone number at that
location is (415) 461-4400.

7
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS PROSPECTS BEFORE PURCHASING SHARES OF CLASS B COMMON STOCK
OFFERED BY THIS PROSPECTUS. EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN,
THE MATTERS DISCUSSED IN THIS PROSPECTUS CONTAIN FORWARD-LOOKING STATEMENTS THAT
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING WITHOUT LIMITATION,
THE RISKS DESCRIBED BELOW.

CONCENTRATION OF CUSTOMERS

During fiscal 1997, five customers accounted for more than 56.0% of the
Company's revenues, with Gallo and Heublein accounting for approximately 17.1%
and 15.7%, respectively. For fiscal 1998, the Company estimates that five
customers will account for approximately 50% of the Company's revenues, with
Gallo and Heublein accounting for approximately 17% and 13%, respectively. The
Company's revenues from brandy production during fiscal 1997 accounted for
approximately 12% of total revenues and were derived primarily from sales to one
customer, Heublein. While many of the Company's largest customers have entered
into some form of long-term contract with the Company, there can be no assurance
that each of these relationships will continue following the expiration of these
contracts or that the volume of business the Company is currently conducting
with such customers will continue at such levels. The loss of any one of the
Company's major customers or a significant reduction in the volume of their
business with the Company could have a material adverse effect on GSV's
business, financial condition and results of operations.

In the Company's 1997 and 1998 fiscal years, approximately 87.0% and 86.0%,
respectively, of the Company's grape production (on a per ton basis) were
contracted for sale to Gallo. Such grape sales accounted for more than 17.0% of
the Company's revenues in fiscal 1997 and are estimated to account for
approximately 17% of its revenues in fiscal 1998. However, the Company has
restructured its grape supply arrangements with Gallo, and as the Company goes
into the 1998 summer harvest, most of its grape production will not be subject
to guaranteed purchase contracts with Gallo or with any other customer. As a
result of these restructuring efforts, GSV will experience a significant decline
in grape sale revenues and may experience a decline in total revenues for the
Company's 1999 fiscal year. Further, if the wine industry were to experience a
significant decline in the price of premium varietal grapes, there can be no
assurance that the Company could profitably use or sell such grapes, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company continues to have long-term grape supply
contracts with Gallo, covering Zinfandel and Chardonnay grapes.

AGRICULTURAL RISKS

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. In 1995 and 1996, variability in production yields in
California's Central Valley contributed to a significant decline in the tonnage
of grapes produced by virtually all vineyards, including those of the Company.
Additionally, in January 1997, severe flooding in the San Joaquin River Basin
destroyed a number of protective levees, damaging a portion of the Company's
Gravelly Ford vineyards, which damage was not entirely insured. There can be no
assurance that inclement weather in the future will not affect a substantial
portion of the Company's vineyards in any year and have a material adverse
effect on the Company's business, financial condition and results of operations.

Vineyards are also susceptible to certain diseases, insects and pests, which
can increase operating expenses, reduce yields 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 producing
regions of California, causing grape yields to decrease. Phylloxera infestation
has been widespread

8
<PAGE>
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 the Company's vineyards are planted on their own
rootstock that is not phylloxera-resistant. In the fall of 1997, phylloxera was
discovered in certain acres of the Company's vineyards. The Company believes
that the scope of this phylloxera infestation is modest, though there can be no
assurance in that regard. Additionally, GSV believes the climate, soil and water
conditions in California's San Joaquin Valley slow the development of phylloxera
in vineyard roots. Further, in the 1997 harvest, the yields from the Company's
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, 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.

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 virus 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 the Company's vineyards. None of
these infestations or infections currently poses a major threat to the Company's
vineyards, although they could do so in the future and could subject the
vineyards to severe damage, which could have a material adverse effect on the
Company.

RISKS RELATING TO THE PRODUCTION OF BULK WINE

While the Company has substantial experience in producing and processing
bulk wine, the Company may still experience production difficulties and delays
with respect to the delivery of finished wine. The Company generally guarantees
the quality of the wine produced, which could result in the Company bearing
financial responsibility for wine that fails to meet agreed upon quality
standards. From time to time, the Company has received claims from customers
based on alleged defects in wine produced by the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations". Such
production difficulties could have a material adverse effect on the Company's
business, results of operations and financial condition.

DEPENDENCE ON CONSUMER DEMAND

The growth of the wine industry and the success of the Company's business
depend to a significant extent on a number of factors relating to discretionary
consumer spending, including the general condition of the economy, federal,
state and local taxation, the deductibility of business entertainment expenses
under federal and state tax laws and general levels of consumer confidence.
Imposition of excise or other taxes on wine could negatively impact the wine
industry by increasing wine prices for consumers. The wine industry is also
subject to changes in consumer tastes and preferences. To the extent wine
consumers reduce consumption of wine in favor of other beverages, or if there
should be any significant decline in general economic conditions or
uncertainties regarding future economic prospects that adversely affect
discretionary consumer spending generally, or purchases of wine specifically,
demand for wine and for the Company's products and services could decline.

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.

9
<PAGE>
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 the Company's business, financial condition and results of operations.

DEMAND FOR BULK WINE

Bulk wine and related services accounted for approximately 52.0% of GSV's
revenues in its 1997 fiscal year and is estimated to account for approximately
51% of revenues in its 1998 fiscal year. Recently, the Company has focused its
resources on the expansion of this portion of its business. Any loss of a major
bulk wine customer would reduce GSV's bulk wine revenues, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

CASE GOODS SALES

Sales of case goods and related services accounted for approximately 17.0%
of the Company's revenues in its 1997 fiscal year and is estimated to account
for approximately 19% of revenues in its 1998 fiscal year. A significant portion
of the Company's case goods revenues consisted of short-term private label case
goods sales. Additionally, the Company's higher margin proprietary case goods
revenues resulted from sales of the Company's relatively unknown proprietary
brands of premium wines. 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 the Company's case goods sales.

WINE GRAPE SUPPLY; PRICING

As recently as the 1996 harvest, the California wine industry experienced a
shortage of grapes due to insufficient plantings of premium varieties in the
early 1990s, acreage taken out of production due to phylloxera infestation and
reduced yields due to poor weather. The Company believes that the demand for
wine grapes has also increased substantially over recent years and has generally
outpaced grape supply. As a result, prices for premium California wine grapes
were at historically high levels following the 1996 harvest and through the 1997
harvest. A number of recent developments, including (1) plantings of new
vineyards, (2) yield enhancements through technological advances, (3) denser
plantings of vines, (4) availability of wine from foreign sources and (5)
excellent weather in the 1997 growing season, have resulted in a greatly
increased grape supply, resulting in downward price pressure following the 1997
harvest. In addition, the supply of wine grapes is expected to increase
significantly in the near future as the vines from recent plantings mature and
their grapes become marketable. Such increases in supply may cause California
premium wine grape prices and wine prices to decline significantly, which could
have a material adverse effect on the Company's business, financial condition
and results of operations.

ENVIRONMENTAL RISKS

The Company's current operations emit ethanol and require the periodic usage
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. The Company believes
that its properties and 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 the Company's
properties, the Company could be subject to material liability arising from the
remediation of such potential harm.

10
<PAGE>
SEASONALITY OF BUSINESS; QUARTERLY REVENUES; FLUCTUATING RESULTS

The wine grape business is extremely seasonal and the Company recognizes the
vast majority of its revenues in the first six months of its fiscal year. GSV is
not positioned to maximize quarter-to-quarter results, and its quarterly results
should not be considered indicative of those to be expected for a full year. The
Company recorded 79.4% of its 1997 fiscal year revenues during the first six
months of the Company's 1997 fiscal year. It is expected that GSV's revenues of
$89.5 million for the six months ended December 31, 1997 will account for a
similar percentage of the Company's revenues for its 1998 fiscal year. GSV has
historically operated at a loss in the last two fiscal quarters due to limited
sales during such quarters. Seasonality of revenues also affects the Company's
cash flow requirements. In the past, GSV has borrowed funds under lines of
credit beginning in February or March to finance crop production costs through
harvest and repaid such borrowings from the proceeds of each harvest. GSV also
borrows substantial sums from late summer through the fall to finance inventory
build-up during the fall crush season. Such seasonality in revenues and
borrowings may lead to significant fluctuations in the Company's reported
quarterly results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

COMPETITION; INDUSTRY FRAGMENTATION

The wine industry is extremely competitive. The Company competes with
several well-capitalized companies in the production of bulk wine. Further, many
of the Company's current and prospective competitors have substantially greater
financial, production, personnel and other resources than the Company. 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 and the higher prices of grapes in California, especially in
comparison to the prices of years past, 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, have launched marketing
campaigns to increase their sales in the United States. Foreign competition can
be expected to continue and increase. In addition, the Company's 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.

FACILITY EXPANSION

The Company is currently operating a number of its wine processing
facilities at close to full capacity. The Company recently authorized capital
expenditures of up to $20 million, primarily to upgrade, maintain and expand its
facilities over the next two years. The Company intends to increase the annual
processing capacity at its Fresno facility by approximately 20,000 tons of
grapes and to expand Fresno wine cooperage capacity by approximately four
million gallons. GSV will also expand its Monterey wine processing facility's
annual capacity by approximately 15,000 tons of grapes and increase annual
barrel fermentation capacity by approximately 18,000 barrels. GSV's efficient
use of capital resources in the next two years to expand wine production will be
important for the Company to maintain its position as one of the leading
suppliers of premium bulk wine and related wine processing services in the
United States. The Company's ability to complete this and subsequent expansions
may be subject to substantial delays due to shortages of stainless steel tanks
and other important materials and equipment, delays that the marketplace
periodically experiences. Other factors that may delay such improvements are
higher than anticipated expenditures, adverse weather and delays in construction
by contractors. The Company has already encountered such delays in its proposed
expansion and upgrade of its Monterey facility. Failure to deploy such capital
resources successfully or complete any expansion of the Company's operations on
a timely basis or underestimating the costs and time required to improve the

11
<PAGE>
Company's facilities could have a material adverse effect on the Company's
results of operations and prospects.

GROWTH THROUGH ACQUISITION

In the last three years the Company has virtually doubled the size of its
operations through the acquisition of vineyard acres and wine and brandy
production facilities. These acquisitions have created additional winemaking
capacity and grape supply sources, which have contributed to significant growth
in revenues and net income for the Company on a year-to-year basis. In the
future, there can be no assurance that acceptable acquisition opportunities will
be available to the Company or that the Company will be able to profitably
integrate any such future acquisition. Thus, it is unlikely that GSV's previous
level of acquisition-related activity will continue in the Company's 1998 and
1999 fiscal years and beyond.

FIXED FARMING COSTS

The Company incurs 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 profitability.

RELIANCE ON KEY PERSONNEL

The Company believes its continued success depends on the active involvement
of Jeffrey B. O'Neill, the Company's Chief Executive Officer, and Brian R.
Thompson, the Company's Chief Financial Officer. There can be no assurance that
these persons will remain in their management positions with the Company, and
the loss of the services of either of these persons could have an adverse effect
on the Company's business, financial condition and results of operations.

CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER MEASURES

The Company has two classes of Common Stock: Class A Common Stock, which is
entitled to 10 votes per share, and Class B Common Stock, which is entitled to
one vote per share. The Class A Common Stock and Class B Common Stock vote
together on substantially all matters. Following this offering, SBIC Partners,
L.P. ("SBIC Partners"), Exeter Equity Partners, L.P. ("EE Partners") and Exeter
Venture Lenders, L.P. (individually, "EV Lenders", and, collectively with EE
Partners, "Exeter") and Mr. O'Neill will own or control together 4,342,528
shares of Class A Common Stock. In addition, Mr. O'Neill will own or control
24,381 shares of Class B Common Stock. Such ownership will represent 100% of the
outstanding Class A Common Stock and an insignificant percent of the Class B
Common Stock. Nevertheless, following the offering, the voting power of such
Class A Common Stock will represent 89.4% of the combined voting power of both
classes of Common Stock, and such persons, acting together, will be able to
decide substantially all matters submitted to a stockholder vote, including the
election of members of the Company's Board of Directors, proxy contests, mergers
and tender offers, thereby ensuring that they will continue to direct the
business, policies and management of the Company.

In addition, the Company and certain stockholders have entered into a
Stockholders Agreement (as defined herein) pursuant to which SBIC Partners,
Exeter and Mr. O'Neill, have agreed to vote their shares of Common Stock for
each other's nominees to the Company's Board of Directors. The Stockholders
Agreement also provides, among other things, that the prior written consent of
SBIC Partners, which

12
<PAGE>
consent is subject to the sole discretion of SBIC Partners, is required with
respect to all material transactions relating to the Company. Such voting
control by SBIC Partners, Exeter and Mr. O'Neill may discourage certain
transactions involving an actual or potential change of control of the Company,
including transactions in which the holders of Class B Common Stock may receive
a premium for their shares over the then-prevailing market price, and may have a
depressive effect on the market price for Class B Common Stock. The Stockholders
Agreement will terminate upon the consummation of this offering if the offering
results in gross proceeds to the Company of at least $35 million. See "Principal
and Selling Stockholders", "Certain Transactions" and "Description of Capital
Stock".

Furthermore, following this offering, the Company's Second Amended and
Restated Certificate of Incorporation will authorize the issuance and sale of
5,000,000 shares of so-called "blank check" Preferred Stock with rights,
preferences and privileges to be fixed by the Board of Directors in its
discretion, without further approval of or action by the stockholders. The
rights of the holders of the Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company, thereby delaying, deferring or preventing a change in control of the
Company. Furthermore, such Preferred Stock may have other rights, including
economic rights senior to the Common Stock, and, as a result, the issuance
thereof could have a material adverse affect on the market value of the Common
Stock. The Company has no present plans to issue shares of Preferred Stock.

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, the statue prohibits
a publicly held Delaware corporation from engaging in a business combination
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved by the Board of Directors and the holders of at
least 66 2/3% of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder). The application of Section 203 and
other provisions of the Company's Certificate of Incorporation, its Bylaws and
Delaware corporate law may have the effect of deterring hostile takeovers or
delaying or preventing changes in control or management of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices.

GOVERNMENT REGULATION

GSV is subject to a broad range of federal and state regulatory requirements
regarding its 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 the Company's 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 the Company's business, financial
condition and results of operations.

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

13
<PAGE>
DILUTION

The initial public offering price is substantially higher than the book
value per share of Class B Common Stock. Investors purchasing shares of Class B
Common Stock in this offering will therefore incur immediate, substantial
dilution in the net tangible book value of their shares. In addition, investors
purchasing shares of Class B Common Stock in this offering will incur additional
dilution upon exercise of stock options by Company officers and employees and
issuances of Class B Common Stock in public offerings and in connection with
acquisitions in the future. See "Dilution".

ABSENCE OF TRADING MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY OF STOCK
PRICE

Prior to this offering, there has been no public market for the Class B
Common Stock. Although the Class B Common Stock has been approved for listing on
the Nasdaq National Market, there can be no assurance that an active trading
market will develop, or if one does develop, that it will be sustained. The
initial public offering price of the Class B Common Stock was established by
negotiation among the Company, the Selling Stockholders and the Underwriters and
may not be indicative of the market price of the Class B Common Stock after this
offering. See "Underwriting". 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 the Class B Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Class B Common Stock in the public market
following this offering could adversely affect the market price of the Class B
Common Stock. Although only the 4,300,000 shares being sold in this offering
will be available for sale in the public market immediately after the offering,
substantially all of the remaining shares of Class B Common Stock and Class A
Common Stock, which are convertible into shares of Class B Common Stock at any
time on a share-for-share basis, will be eligible for sale in the public market
beginning 90 days from the date of this offering, subject to the volume and
manner of sale limitations imposed by Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act"), and to certain contractual limitations. See
"Shares Eligible for Future Sale".

YEAR 2000 COMPLIANCE

A significant percentage of the software that runs most of the computers in
the United States relies on two digit date codes to perform a number of
computation and decision making functions. Commencing on January 1, 2000, these
computer programs may fail from an inability to interpret date codes properly,
misreading "00" for the year 1900 instead of the year 2000. The Company believes
that its operating systems and application software programs are Year 2000
compliant, though there can be no assurance in that regard. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements regarding the Company's
financial position, business strategy, prospects and other related matters.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Actual results could differ materially
from the Company's expectations as a result of a number of factors, including
without limitation, agricultural risks, the Company's ability or inability to
implement its growth strategy and the possibility of a significant shift in
consumer wine drinking preferences.

14
<PAGE>
USE OF PROCEEDS

THE COMPANY

The net proceeds to the Company from the sale of the 2,150,000 shares of
Class B Common Stock offered by it hereby will be approximately $32.4 million
($42.6 million if the Underwriters' over-allotment option is exercised in full),
based on an initial public offering price of $17.00 per share and after
deducting underwriting discounts and estimated offering expenses payable by the
Company.

The Company intends to use approximately $17.8 million of the net proceeds
from the offering to repay certain long-term debt obligations, comprised of: (a)
a variable rate bank term loan of $5.0 million, at an interest rate of 7.84%,
due March 5, 2005; (b) a variable rate bank term loan of $5.4 million, at an
interest rate of 7.84%, due March 5, 2005; (c) an insurance company note of $2.5
million, at an interest rate of 11.6%, due October 2002; (d) a bank term loan of
$2.0 million, at an interest rate of 8.0%, due January 15, 2000; (e) a note
payable of $0.5 million, at an interest rate of 10.0%, due May 5, 2000; (f) a
note payable of $0.5 million, at an interest rate of 8.0%, due December 20,
1998; (g) a note payable of $0.5 million, at an interest rate of 8.0%, due
January 1, 2003; and (h) capital lease obligations and other loans aggregating
$1.4 million, at interest rates of 7.75% to 8.1%, due at various dates. The
Company also intends to use approximately $10 million of the net proceeds to
redeem all outstanding shares of its Senior Preferred Stock. Initially, the
Company intends to use the balance of the net proceeds to pay down a portion of
GSV's revolving credit facility, which, as of March 31, 1998, had $18.3 million
in outstanding balances thereunder. The remainder of the proceeds of this
offering, if any, and the Company's renewed borrowing capacity are expected to
be used for capital expenditures, working capital and other general corporate
purposes. Specifically, the Company recently authorized capital expenditures of
up to $20 million, primarily to upgrade, maintain and expand its existing
winemaking facilities in Fresno and Monterey. The cost, timing and amount of any
additional funds required by the Company cannot be precisely determined at this
time and will be based upon numerous factors. The Board of Directors has broad
discretion in determining how the proceeds of the offering will be applied.
Pending such uses, the Company intends to invest the net proceeds of the
offering in short-term, investment grade, interest-bearing obligations. The
Company will not receive any proceeds from the sale of shares of Class B Common
Stock by the Selling Stockholders.

THE SELLING STOCKHOLDERS

Each of SBIC Partners and Exeter intends to use a portion of the net
proceeds it receives from the offering, approximately $24.1 million, at an
initial public offering price of $17.00 per share, to redeem certain outstanding
participating securities issued to the U.S. Small Business Administration
("SBA"). Such redemption will be made in accordance with all applicable rules
and regulations of the SBA.

DILUTION

The pro forma net tangible book value of the Company as of March 31, 1998
was approximately $17.0 million, or $2.43 per share of Common Stock based upon
an aggregate of 6,992,044 shares of Class A Common Stock and Class B Common
Stock outstanding. Net tangible book value per share represents the amount of
the Company's total tangible assets (total assets less deferred financing costs)
less total liabilities, divided by the number of shares of Common Stock
outstanding after giving effect to (i) the conversion of all outstanding shares
of the Company's old Class B Common Stock on a one-for-one basis into shares of
the Company's newly-created Class A Common Stock; (ii) the conversion of 178,105
shares of Junior Preferred Stock into 130,343 shares of the Company's
newly-created Class B Common Stock and (iii) the conversion of all outstanding
shares of the Company's Class E Common Stock and Class K Common Stock on a
one-for-one basis into shares of GSV's newly-created Class B Common Stock. After
giving effect to the sale by the Company of 2,150,000 shares of Class B Common
Stock offered hereby (assuming that the Underwriters' over-allotment option is
not exercised) at the

15
<PAGE>
initial public offering price of $17.00 per share, and the application of
estimated net proceeds therefrom (after deducting the Underwriters' discount and
estimated offering expenses), the pro forma net tangible book value of the
Company as of March 31, 1998 would have been approximately $5.20 per share of
Common Stock based upon an aggregate of 9,142,044 shares of Class A Common Stock
and Class B Common Stock outstanding. This represents an immediate increase in
pro forma net tangible book value of $2.77 per share to existing stockholders
and an immediate dilution in pro forma net tangible book value of $11.80 per
share to new investors purchasing shares of Class B Common Stock in the
offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $ 17.00
Pro forma net tangible book value per share before
offering................................................ $ 2.43
Increase in pro forma net tangible book value per share
attributable to new investors in offering............... 2.77
---------
Pro forma net tangible book value per share after
offering.................................................. 5.20
---------
Dilution per share to new investors in offering (1)......... $ 11.80
---------
---------
</TABLE>

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

(1) Assumes no exercise of any outstanding stock options to purchase shares of
Class A Common Stock or Class B Common Stock. As of March 31, 1998, the
Company had granted options covering 670,433 shares of Class A Common Stock
and 933,547 shares of Class B Common Stock under the Company's option plans
and other outstanding stock option agreements at a weighted average exercise
price of approximately $8.39 per share. To the extent that these outstanding
options would have been exercised, the dilution in pro forma net tangible
book value after giving effect to the offering would have been $11.32 per
share to new investors. See "Management--Stock Option Plans" and
"Description of Capital Stock".

The following table summarizes, on an as adjusted basis as of March 31,
1998, the differences between the number of shares of Common Stock purchased
from the Company, the total consideration paid (before deducting the
Underwriters' discount and estimated offering expenses), and the average price
per share paid by the existing stockholders and by the new investors purchasing
shares of Class B Common Stock in this offering (at an initial public offering
price of $17.00 per share and that the Underwriters' over-allotment option is
not exercised);

<TABLE>
<CAPTION>
SHARES PURCHASED (1) TOTAL CONSIDERATION AVERAGE
------------------------- ---------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------------ -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............................. 6,992,044 76% $ 9,590,460 20% $ 1.37
New investors...................................... 2,150,000 24 $ 36,550,000 80 $ 17.00
----------- --- -------------- ---
Total.......................................... 9,142,044 100% $ 46,140,460 100% $ 5.05
----------- --- -------------- --- -----------
----------- --- -------------- --- -----------
</TABLE>

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

(1) See Footnote 1 to the preceding table regarding certain assumptions.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its outstanding
shares of Common Stock. The Company currently intends to retain future earnings
to finance its operations, and therefore does not anticipate paying any cash
dividends on the shares of Class A Common Stock or of Class B Common Stock in
the foreseeable future. In addition, negative covenants contained in the
Company's senior credit facility currently prohibit the Company from paying cash
dividends on such shares without the prior approval of the lender. See Note 6 of
Notes to Consolidated Financial Statements.

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<PAGE>
CAPITALIZATION

The following table sets forth the actual capitalization of the Company at
March 31, 1998 and the pro forma capitalization of the Company at such date,
after giving effect to the Recapitalization. The table also sets forth the
capitalization of the Company at March 31, 1998 as adjusted to reflect the
issuance and sale by the Company of 2,150,000 shares of Class B Common Stock,
the conversion of 1,526,084 shares of the Company's newly-created Class A Common
Stock on a one-for-one basis into shares of the Company's newly-created Class B
Common Stock immediately prior to the sale of such shares by certain Selling
Stockholders in this offering, the receipt by the Company of the estimated net
proceeds therefrom (based on an initial public offering price of $17.00 per
share, assuming that the Underwriters' over-allotment option is not exercised
and after deducting the Underwriters' discount and estimated offering expenses
of both the Company and the Selling Stockholders, all of which is payable by the
Company), and the application of the estimated net proceeds therefrom. This
table should be read in conjunction with the Consolidated Financial Statements
of the Company and Notes thereto. See also "Selected Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Line of credit........................................................ $ 18,300 $ 18,300 $ 13,709
Long-term debt (including current portion)............................ 51,419 51,419 33,619
--------- ----------- -----------
Total debt.......................................................... 69,719 69,719 47,328
Redeemable preferred stock:
12% Senior Preferred Stock, $0.01 par value: 100,000 shares
authorized; 100,000 shares outstanding actual and pro forma; no
shares outstanding as adjusted.................................... 8,192 8,192 --
8% Junior Preferred Stock, $0.01 par value: 200,000 shares
authorized; 178,105 shares outstanding actual; no shares
outstanding pro forma and as adjusted............................. 723 -- --
--------- ----------- -----------
8,915 8,192 --
Stockholders' equity:
Class A Common Stock, $.0034 par value actual and $0.01 par value
pro forma and as adjusted: no shares authorized actual and
6,000,000 shares authorized pro forma and as adjusted; no shares
outstanding actual, 5,561,012 shares outstanding pro forma and
4,034,928 shares outstanding as adjusted (1)...................... -- 56 40
Class B Common Stock, $0.0034 par value actual and $0.01 par value
pro forma and as adjusted: 7,250,000 shares authorized actual and
54,000,000 shares authorized pro forma and as adjusted; 5,561,012
shares outstanding actual, 1,431,032 shares outstanding pro forma
and 5,107,116 shares outstanding as adjusted (1).................. 19 14 51
Class E Common Stock, $0.0034 par value: 2,900,000 shares
authorized; 1,200,829 shares outstanding actual, no shares
outstanding pro forma and as adjusted............................. 4 -- --
Class K Common Stock, $0.0034 par value: 1,450,000 shares
authorized; 99,860 shares outstanding actual, no shares
outstanding pro forma and as adjusted............................. -- -- --
Additional paid-in capital.......................................... 8,845 9,521 41,891
Retained earnings................................................... 7,808 7,808 6,000
--------- ----------- -----------
Total stockholders' equity........................................ 16,676 17,399 47,982
--------- ----------- -----------
Total capitalization............................................ $ 95,310 $ 95,310 $ 95,310
--------- ----------- -----------
--------- ----------- -----------
</TABLE>

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

(1) Excludes 670,433 shares of Class A Common Stock and 933,547 shares of Class
B Common Stock reserved for issuance under GSV's option plans and other
stock option agreements. See "Management--Stock Option Plans" and Notes 9
and 15 to the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus.

17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The statement of operations data for the years ended June 30, 1993 and 1994
and the balance sheet data at June 30, 1993 and 1994 have been derived from
audited financial statements of Old GSV, which financial statements are not
included in this Prospectus. The balance sheet data at June 30, 1995 have been
derived from the audited financial statements of the Company, which financial
statements are not included in this Prospectus. The statement of operations data
for the period from July 1, 1994 to April 26, 1995 have been derived from the
audited financial statements of Old GSV, which have been audited by Deloitte &
Touche LLP and which are included elsewhere in this Prospectus. The statement of
operations data for the period from April 27, 1995 to June 30, 1995, for the
years ended June 30, 1996 and 1997 and for the nine months ended March 31, 1998
and the balance sheet data at June 30, 1996 and 1997 and March 31, 1998 have
been derived from audited financial statements of the Company, which have been
audited by Deloitte & Touche LLP and which are included elsewhere in this
Prospectus. The statement of operations data for the nine months ended March 31,
1997 and the balance sheet data at March 31, 1997 have been derived from the
Company's unaudited consolidated financial statements for such periods, which
are included elsewhere in this Prospectus and which in the opinion of
management, include all material adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results of
operations of the Company for such periods. Results for the interim periods are
not necessarily indicative of results for a full year. The selected consolidated
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company and Notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
OLD GSV NEW GSV
--------------------------- ----------------------------------------------
NINE MONTHS ENDED
YEAR ENDED JULY 1, APRIL 27, YEAR ENDED
JUNE 30, 1994 TO 1995 TO JUNE 30, MARCH 31,
---------------- APRIL 26, JUNE 30, ---------------- -----------------
1993 1994 1995 1995 1996 1997 1997 1998
------- ------- --------- --------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $47,048 $44,063 $42,851 $ 4,037 $71,755 $95,785 $88,678 $101,675
Cost of sales (1)....................... 38,713 34,241 34,772 3,949 58,468 71,662 66,846 75,625
Gross profit............................ 8,335 9,822 8,079 88 13,287 24,123 21,832 26,050
Selling, general, and administrative
expenses (2).......................... 1,676 2,768 3,364 951 5,042 7,408 5,315 13,066
Income (loss) from operations........... 6,659 7,054 4,715 (863) 8,245 16,715 16,517 12,984
Interest expense........................ 2,813 3,189 2,797 920 5,344 5,880 4,480 5,203
Other expense, net...................... -- 37 44 1 394 677 677 165
Income (loss) before income taxes....... 3,846 3,828 1,874 (1,784) 2,507 10,158 11,360 7,616
Net income (loss)....................... 6,618 3,503 1,874 (1,784) 1,924 6,170 6,896 4,738

Redeemable preferred stock dividends.... -- -- -- -- (1,290) (1,314) (679) (636)
Redemption of Junior Preferred Stock.... -- -- -- -- -- (405) (405) --
------- ------- --------- --------- ------- ------- ------- --------
Income (loss) available to common
stockholders.......................... 6,618 3,503 1,874 (1,784) 634 4,451 5,812 4,102
------- ------- --------- --------- ------- ------- ------- --------
Earnings (loss) per common share (3):
Basic................................. $ (.26) $ .09 $ .65 $ .85 $ .60
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
Diluted............................... $ (.26) $ .09 $ .65 $ .83 $ .57
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
Weighted average shares outstanding (3):
Basic................................. 6,856 6,856 6,860 6,859 6,862
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
Diluted............................... 6,856 6,856 6,860 7,080 7,319
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
OTHER FINANCIAL DATA:
Depreciation and amortization......... $ 1,946 $ 2,279 $ 1,926 $ 755 $ 3,319 $ 4,207 $ 3,525 $ 3,768
Capital expenditures.................. 1,007 3,639 3,222 8,967 3,536 4,778 2,676 5,524

OTHER DATA:
Tons of grapes crushed (4)............ 128,022 110,285 119,103 156,722 163,521 163,521 197,841
Vineyard property (in acres).......... 7,850 7,850 9,600 9,600 9,600 9,600 9,600
</TABLE>

<TABLE>
<CAPTION>
OLD GSV NEW GSV
-------------------- -------------------------------------------------------------------------
JUNE 30, JUNE 30, MARCH 31, 1998
-------------------- ------------------------------- ----------------------------------------
1993 1994 1995 1996 1997 ACTUAL PRO FORMA(5) AS ADJUSTED(6)
--------- --------- --------- --------- --------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................... $ 5,755 $ 10,011 $ 8,735 $ 9,335 $ 9,386 $ 8,245 $ 8,245 $ 12,836
Total assets....................... 45,741 53,537 80,941 90,435 102,111 124,640 124,640 124,640
Total long-term debt............... 27,119 30,900 44,322 42,973 49,781 48,023 48,023 30,223
Redeemable preferred stock......... -- -- 9,978 10,034 8,813 8,915 8,192 --
Stockholders' equity............... 10,286 13,789 10,037 10,670 12,574 16,676 17,399 47,982
</TABLE>

- --------------------
(1) In accordance with purchase accounting rules applied to the Company's
acquisition of Old GSV, inventory was increased to fair market value. The
inventory step-up increased cost of sales for the period April 27, 1995 to
June 30, 1995 and the year ended June 30, 1996 by $471 and $1,563,
respectively.
(2) Management incentives relating to stock appreciation rights and bonuses
increased selling, general and administrative expenses by $33, $930, $2,141,
$1,567 and $8,800 for the period April 27, 1995 to June 30, 1995, the years
ended June 30, 1996 and 1997, and the nine months ended March 31, 1997 and
1998, respectively.
(3) See Note 2 of the Notes to Consolidated Financial Statements for an
explanation of the basic and diluted earnings per share computations.
(4) It is industry custom to convert one ton of wine grapes to 170 gallons of
wine, and to convert gallons of wine to cases of twelve 750ml bottles at the
rate of 2.3775 gallons per case. All grapes crushed in the twelve month
period ended June 30, 1995 are shown under New GSV.
(5) Stockholders' equity increased, and redeemable preferred stock decreased, by
the $723 carrying value of 178,105 shares of Junior Preferred Stock to be
converted into 130,343 shares of Class B Common Stock pursuant to the
certificate of designations governing the Junior Preferred Stock, assuming
that such conversion occurred on March 31, 1998.
(6) Assumes that the issuance and sale of the 2,150,000 shares of Class B Common
Stock offered by the Company hereby at an initial public offering price of
$17.00 per share and the application of the estimated net proceeds
therefrom, including a $1,800 decrease to stockholders' equity resulting
from the redemption of Senior Preferred Stock, occurred on March 31, 1998.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED CONSOLIDATED FINANCIAL DATA" AND THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO, EACH OF WHICH IS INCLUDED ELSEWHERE IN THIS
PROSPECTUS. FOR COMPARATIVE PURPOSES ONLY, DATA FOR THE PERIODS JULY 1, 1994 TO
APRIL 26, 1995 AND APRIL 27, 1995 TO JUNE 30, 1995 HAVE BEEN COMBINED AND
REFLECTED BELOW IN ALL REFERENCES TO THE COMPANY'S 1995 FISCAL YEAR.

OVERVIEW

The Company's operations can be distinguished among the following: bulk wine
and related services, grape sales, case goods and related services and brandy.
Bulk wine and related services includes the production and sale of bulk wine,
the provision of custom crushing services, the storage of bulk wine in tanks and
barrels and the delivery of bulk wine barreling services, such as racking and
topping. Grape sales consist of the sale of grapes grown at the Company's
vineyards as well as grapes purchased by the Company from third party growers.
Case goods and related services includes the production of proprietary and
private label bottled wine and wine-based beverages and the provision of custom
bottling and storage services. The Company's brandy business includes the
production of brandy and grape spirits and the provision of brandy barrel
storage and related barreling services. See "Business--Company Operations".

In connection with the Golden State Vintners Purchase, as defined, Golden
State Vintners entered into a five-year Employment Agreement (the "Old
Agreement") with Jeffrey B. O'Neill, the Company's President and Chief Executive
Officer. Terms of the Old Agreement provided for, among other things, the
granting to Mr. O'Neill of 504,347 and 145,000 stock appreciation rights (the
"O'Neill SARs") at exercise prices of $1.72 and $0.003 per right, respectively.
Additionally, the Old Agreement provided for a performance-based bonus
calculated as a percentage of operating income, as set forth therein (the
"O'Neill Bonus"). An additional 145,000 stock appreciation rights were issued to
Brian R. Thompson, GSV's Chief Financial Officer, in connection with his
employment in November 1995 at an exercise price of $2.59 per right (the
"Thompson SARs"). The O'Neill SARs, the Thompson SARs and the O'Neill Bonus are
sometimes collectively referred to as the "Management Incentives".

In the fiscal year ended June 30, 1997, Management Incentives of $2.1
million were included in the selling, general and administrative expenses
reported for such periods. For the nine months ended March 31, 1997 and 1998,
such Management Incentives accounted for $1.6 million and $8.8 million,
respectively, of selling, general and administrative expenses. With respect to
the nine months ended March 31, 1998, $1.5 million of such $8.8 million of
Management Incentives arose as a result of the acceleration of certain estimated
bonus amounts due under the Old Agreement. As of December 31, 1997, (a) the Old
Agreement was terminated, eliminating the O'Neill Bonus, and (b) each of the
O'Neill SARs and the Thompson SARs were replaced with a combination of
compensation paid partly in cash and partly with promissory notes and fully
vested non-qualified stock options having an exercise price of $12.07 per share
(the "Replacement Incentives"). Such Replacement Incentives will not have a
material impact on the Company's net income in future periods, but, as a result
of the fully vested nature of the options granted to Messrs. O'Neill and
Thompson, will impact GSV's future earnings per share. None of the Replacement
Incentives contains a formula based bonus. Additionally, the Company does not
anticipate that bonuses paid to Mr. O'Neill will be material under the terms of
his current employment agreement.

In connection with the Replacement Incentives, effective January 1, 1998,
(1) the Company made cash payments of $4.7 million and $0.7 million to Messrs.
O'Neill and Thompson, respectively (the "Executive Cash Payments"), and (2) the
Company issued promissory notes in the amount of $4.7 million and $0.7 million
to Messrs. O'Neill and Thompson, respectively (the "Executive Promissory
Notes").

19
<PAGE>
Messrs. O'Neill and Thompson used their respective Executive Cash Payments to
exercise stock options and to pay certain income taxes due. See "Certain
Relationships and Related Transactions" and Note 15 of Notes to Consolidated
Financial Statements.

The table below sets forth summary statement of operations data for the
three fiscal years ended June 30, 1997 and for the nine months ended March 31,
1997 and 1998:

SUMMARY STATEMENT OF OPERATIONS DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS REPORTED
1995 -------------------------------
AS REPORTED COMBINED
------------------------ PRO FORMA(1) NINE
JULY 1, APRIL 27, ------------- MONTHS
1994 1995 YEAR YEAR ENDED JUNE 30, ENDED
TO TO ENDED MARCH 31,
APRIL 26, JUNE 30, JUNE 30, -------------------- ---------
1995 1995 1995 1996 1997 1997
----------- ----------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................................. $ 42,851 $ 4,037 $ 46,888 $ 71,755 $ 95,785 $ 88,678
Cost of sales........................................ 34,772 3,949 38,721 58,468 71,662 66,846
----------- ----------- ------------- --------- --------- ---------
Gross profit......................................... 8,079 88 8,167 13,287 24,123 21,832
Selling, general and administrative expenses......... 3,364 951 4,314 5,042 7,408 5,315
----------- ----------- ------------- --------- --------- ---------
Income (loss) from operations........................ 4,715 (863) 3,853 8,245 16,715 16,517
Interest expense..................................... 2,797 920 3,716 5,344 5,880 4,480
Other expense, net................................... 44 1 47 394 677 677
----------- ----------- ------------- --------- --------- ---------
Income before income taxes........................... 1,874 (1,784) 90 2,507 10,158 11,360
Income taxes......................................... -- -- -- 583 3,988 4,464
----------- ----------- ------------- --------- --------- ---------
Net income........................................... $ 1,874 $ (1,784) $ 90 $ 1,924 $ 6,170 6,896
----------- ----------- ------------- --------- --------- ---------
----------- ----------- ------------- --------- --------- ---------

<CAPTION>
1998
---------
<S> <C>
Revenues............................................. $ 101,675
Cost of sales........................................ 75,625
---------
Gross profit......................................... 26,050
Selling, general and administrative expenses......... 13,066
---------
Income (loss) from operations........................ 12,984
Interest expense..................................... 5,203
Other expense, net................................... 165
---------
Income before income taxes........................... 7,616
Income taxes......................................... 2,878
---------
Net income........................................... 4,738
---------
---------
</TABLE>

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

(1) Represents the summation of the "As Reported" amounts for the periods ended
April 26, 1995 and June 30, 1995.

The following table reflects summary statement of operations data shown
above, expressed as a percentage of revenues:

PERCENTAGE OF REVENUES
<TABLE>
<CAPTION>
AS REPORTED
1995 -------------------------------
AS REPORTED COMBINED
------------------------ PRO FORMA(1) NINE
JULY 1, APRIL 27, ------------- MONTHS
1994 1995 YEAR YEAR ENDED JUNE 30, ENDED
TO TO ENDED MARCH 31,
APRIL 26, JUNE 30, JUNE 30, -------------------- ---------
1995 1995 1995 1996 1997 1997
----------- ----------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................................... 81.1 97.8 82.6 81.5 74.8 75.4
----------- ----------- ------------- --------- --------- ---------
Gross profit............................................ 18.9 2.2 17.4 18.5 25.2 24.6
Selling, general and administrative expenses............ 7.9 23.6 9.2 7.0 7.7 6.0
----------- ----------- ------------- --------- --------- ---------
Income (loss) from operations........................... 11.0 (21.4) 8.2 11.5 17.5 18.6
Interest expense........................................ 6.5 22.8 7.9 7.4 6.2 5.0
Other expense, net...................................... 0.1 -- 0.1 0.6 0.8 0.8
----------- ----------- ------------- --------- --------- ---------
Income before income taxes.............................. 4.4 (44.2) 0.2 3.5 10.6 12.8
Income taxes (benefit).................................. -- -- -- 0.8 4.2 5.0
----------- ----------- ------------- --------- --------- ---------
Net income.............................................. 4.4 (44.2) 0.2 2.7 6.4 7.8
----------- ----------- ------------- --------- --------- ---------
----------- ----------- ------------- --------- --------- ---------

<CAPTION>
1998
---------
<S> <C>
Revenues................................................ 100.0%
Cost of sales........................................... 74.4
---------
Gross profit............................................ 25.6
Selling, general and administrative expenses............ 12.8
---------
Income (loss) from operations........................... 12.8
Interest expense........................................ 5.1
Other expense, net...................................... 0.2
---------
Income before income taxes.............................. 7.5
Income taxes (benefit).................................. 2.8
---------
Net income.............................................. 4.7
---------
---------
</TABLE>

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

(1) Represents the summation of the "As Reported" amounts for the periods ended
April 26, 1995 and June 30, 1995.

20
<PAGE>
SEASONALITY AND QUARTERLY RESULTS

The Company has experienced and expects to continue to experience seasonal
and quarterly fluctuations in its revenues. Because of the inherent seasonality
of its operations, the Company has reported its highest revenues and net income
in its first and second fiscal quarters, as the Company sells most of its grapes
in the first quarter, immediately after harvest, sells most of its bulk wine in
the second quarter, immediately after crush, and performs many of its wine
processing services in the first and second quarters. As a result, the Company
typically reports lower revenues and net income (loss) in the third and fourth
fiscal quarters.

The following table illustrates the seasonality of the Company's revenues
and net income (loss) for each of the four fiscal quarters of the Company's 1997
fiscal year:

QUARTERLY REVENUES AND NET INCOME (LOSS)

<TABLE>
<CAPTION>
FISCAL 1997 QUARTER ENDED
------------------------------------------
SEPT. 30 DEC. 31 MAR. 31 JUNE 30
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues....................................................... $ 42,211 $ 33,862 $ 12,605 $ 7,107
Percent of revenues for the year ended
June 30, 1997................................................ 44.1% 35.3% 13.2% 7.4%
Net income (loss).............................................. $ 5,072 $ 1,999 $ (175) $ (726)
Percentage of net income (loss)................................ 82.2% 32.4% (2.8)% (11.8)%
</TABLE>

RESULTS OF OPERATIONS

The following table illustrates the Company's revenues by source for the
periods indicated:

REVENUES BY SOURCE
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, NINE MONTHS ENDED
------------------------------------ MARCH 31,
COMBINED PRO ----------------------
FORMA 1995 1996 1997 1997 1998
-------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Bulk wine and related services........... $ 26,082 $ 33,816 $ 50,228 $ 47,401 $ 53,815
Grape sales.............................. 12,875 15,183 18,585 18,585 22,817
Case goods and related services.......... 6,288 11,335 15,829 11,809 15,081
Brandy................................... 1,643 11,421 11,143 10,883 9,962
-------------- --------- --------- --------- -----------
Total revenues......................... $ 46,888 $ 71,755 $ 95,785 $ 88,678 $ 101,675
-------------- --------- --------- --------- -----------
-------------- --------- --------- --------- -----------
</TABLE>

The following table illustrates the Company's revenues by source for the
periods indicated, expressed as a percentage of revenues:

21
<PAGE>
PERCENTAGE OF REVENUES BY SOURCE

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, NINE MONTHS ENDED
------------------------------------- MARCH 31,
COMBINED PRO --------------------
FORMA 1995 1996 1997 1997 1998
--------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Bulk wine and related services........................ 55.6% 47.1% 52.5% 53.5% 53.0%
Grape sales........................................... 27.5 21.2 19.4 20.9 22.4
Case goods and related services....................... 13.4 15.8 16.5 13.3 14.8
Brandy................................................ 3.5 15.9 11.6 12.3 9.8
----- --------- --------- --------- ---------
Total revenues...................................... 100% 100% 100% 100% 100%
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
</TABLE>

NINE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997

REVENUES

Revenues for the first nine months of fiscal 1998 were $101.7 million, an
increase of $13.0 million or 14.7%, as compared to revenues of $88.7 million in
the first nine months of fiscal 1997. As a result of the restructuring of the
Company's grape supply relationship with Gallo, grape sales revenues will
decline significantly in the Company's 1999 fiscal year, though management
believes that such decline in grape sales revenues will be at least partially
offset by increased bulk wine sales.

BULK WINE AND RELATED SERVICES. For the first nine months of the Company's
1998 fiscal year, revenues from bulk wine and related services were $53.8
million, an increase of $6.4 million or 13.5%, as compared to revenues of $47.4
million in the first nine months of fiscal 1997. This increase in revenues is
primarily due to higher customer demands for contracted bulk wines and the
initiation of bulk wine production and processing and storage service operations
at the Company's Monterey facility, along with increases in wine processing
revenues from the Company's Fresno facility and barrel fermentation and storage
fees at the Company's recently purchased Napa warehouse.

GRAPE SALES. In the first nine months of fiscal 1998, revenues from grape
sales were $22.8 million, an increase of $4.2 million or 22.7%, as compared to
revenues of $18.6 million in the first nine months of fiscal 1997. The increase
in revenues for grape sales is primarily due to the significant increase in
grapes harvested at the Company's vineyards, which exceeded historical averages
by more than 20%. Due to the reallocation of a significant portion of GSV's wine
grapes to the internal production of bulk wine, the Company expects revenues
from grape sales to decline significantly in fiscal 1999.

CASE GOODS AND RELATED SERVICES. For the first nine months of fiscal 1998,
revenues from case goods and related services were $15.1 million, an increase of
$3.3 million or 28.0%, as compared to revenues of $11.8 million the first nine
months of fiscal 1997. This increase in case goods and related services revenues
is evidence of the Company's strategy to generate significant case goods sales
and reflects an increase in the sale of private label case goods and an
expansion in GSV's proprietary labels (which tend to have higher margins) in the
popular premium and superpremium segments of the premium wine market.

BRANDY. For the first nine months of fiscal 1998, revenues from the sale of
brandy and grape spirits were $10.0 million, a decline of $0.9 million or 8.3%,
as compared to $10.9 million in revenues from the previous period. This decline
primarily resulted from the reduction in the contracted demand for brandy from
period to period.

22
<PAGE>
COST OF SALES

Cost of sales includes all direct and indirect costs to produce the
Company's marketed products. Bulk wine, case goods and brandy cost of sales
generally include wine grape costs, direct and indirect plant production costs
and certain allocated overhead items such as depreciation and insurance.
Vineyard costs include farming expenses and direct and allocated indirect costs.
For the first nine months of fiscal 1998, total cost of sales was $75.6 million,
an increase of $8.8 million or 13.2%, from $66.8 million in the first six months
of fiscal 1997. As a percentage of revenues, for the first nine months of fiscal
1998, cost of sales was 74.4%, a decrease from 75.4% for the first nine months
of fiscal 1997. Factors contributing to this dollar increase in cost of sales
included an increase in the overall level of Company operations, the impact of
the cost of certain premium varietal grapes used in the production of bulk wine,
start-up costs related to the initiation of operations at the Company's Monterey
facility and the expansion of the Company's case goods sales. In addition, cost
of sales was impacted by amounts reserved by the Company in connection with
disputes with two customers concerning the quality of wine products delivered by
the Company. The increase in cost of sales was partially offset by a reduction
in farming costs per acre, which was largely due to the optimal wine grape
growing and harvesting conditions during calendar 1997.

GROSS PROFIT

Gross profit generally represents revenues less cost of sales. In the first
nine months of fiscal 1998, the Company realized gross profit of $26.1 million,
an increase of $4.3 million or 19.7%, as compared to gross profit of $21.8
million for the first nine months of fiscal 1997. As a percentage of revenues,
in the first nine months of fiscal 1998 gross margin improved to 25.6%, from
24.6% in the first nine months of fiscal 1997. The primary factors contributing
to the improvement in gross profit and gross margin were an increase in yields
at the Company's vineyards, and a decrease with respect to certain grape prices.
Margin growth was adversely affected by declining market prices for certain
premium varietal wine that were not entirely offset by lower grape prices, a
number of operational start up costs associated with the initiation of wine
processing services at the Monterey facility and a reserve for product quality
claims.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include general administrative
items, corporate overhead and expenses relating to the Management Incentives.
For the first nine-months of fiscal 1998, selling, general and administrative
expenses were $13.1 million, an increase of $7.8 million or 147.2%, from $5.3
million for the first nine months of fiscal 1997.

INTEREST EXPENSE

For the first nine months of fiscal 1998, interest expense was $5.2 million,
an increase of $0.7 million or 15.6%, as compared to interest expense of $4.5
million in the first nine months of fiscal 1997. Interest expense increased
primarily due to an increase in long term borrowings used to acquire the
Company's Monterey facility and its Napa warehouse, and, to a lesser extent, by
an increase in inventory and working capital borrowings consistent with the
Company's increased level of revenues.

NET INCOME

For the first nine months of fiscal 1998 net income was $4.7 million, a
decrease of $2.2 million or 31.9%, as compared to net income of $6.9 million for
the first nine months of fiscal 1997. As a percentage of revenues, for the first
nine months of fiscal 1998, net income was 4.7%, as compared to 7.8% for the
first nine months of fiscal 1997. This decrease in net income is attributable to
a substantial increase in selling, general and administrative expenses, which
increase was partially offset by the growth of profit in

23
<PAGE>
the Company's bulk wine and related services, grape sales and case goods and
related services businesses.

EARNINGS PER SHARE

For the first nine months of fiscal 1998, earnings per share were $.60, a
decline of $.25 or 27%, as compared to earnings per share of $.85 for the first
nine months of fiscal 1997. Net earnings available to common shareholders for
the first nine months of fiscal 1998 was impacted by the decrease in net income
described above and by dividends paid on shares of Senior Preferred Stock during
such period. For each of the nine month periods ended March 31, 1997 and 1998
such dividends equalled $0.6 million.

In connection with the redemption of Senior Preferred Stock with proceeds
from this offering, the excess of the redemption value of $10.0 million over the
carrying amount of $8.2 million will be treated similarly to a dividend and will
be a deduction from net earnings in the computation of net earnings available to
common shareholders for use in earnings per share calculations for periods
including such redemption.

THREE FISCAL YEARS ENDED JUNE 30, 1997

REVENUES

For the Company's 1997 fiscal year, revenues were $95.8 million, an increase
of $24.0 million or 33.5%, as compared to revenues of $71.8 million in the 1996
fiscal year, which increased by $24.9 million or 53%, over revenues of $46.9
million in fiscal 1995.

BULK WINE AND RELATED SERVICES. For the Company's 1997 fiscal year,
revenues from bulk wine and related services were $50.2 million, an increase of
$16.4 million or 48.5%, as compared to revenues of $33.8 million in fiscal 1996.
Revenues from bulk wine and related services in fiscal 1996 increased by $7.7
million or 29.7%, from revenues of $26.1 million in fiscal 1995. These increases
in bulk wine and related services revenues are primarily due to a significant
increase in the demand for bulk wine which resulted from the execution of bulk
wine supply contracts with a number of customers, and the increase in wine
processing and storage fees, which resulted from an increase in custom crushing
contracts executed by the Company.

GRAPE SALES. In fiscal 1997, grape sales revenues were $18.6 million, an
increase of $3.4 million or 22.4%, over revenues of $15.2 million in fiscal
1996. Grape sales revenues in fiscal 1996 increased by $2.3 million or 17.9%,
from revenues of $12.9 million in fiscal 1995. These increases in grape sales
revenues are primarily due to an increase in the average sales price per ton of
grapes sold and, in fiscal 1997, an increase in grapes harvested at the
Company's vineyards and the maturation of certain grafted acreage.

CASE GOODS AND RELATED SERVICES. For fiscal 1997, revenues from case goods
and related services were $15.8 million, an increase of $4.5 million or 39.6%,
over case goods and related services revenues of $11.3 million in fiscal 1996.
Case goods and related services revenues in fiscal 1996 increased $5.0 million
or 80.3%, from revenues of $6.3 million in fiscal 1995. These increases in case
goods and related services revenues are evidence of the Company's strategy to
generate additional case goods sales and reflects a significant increase in the
sale of private label case goods and an expansion in GSV's proprietary labels in
the popular premium and superpremium segments of the wine market.

BRANDY. For fiscal 1997, revenues from the sale of brandy were $11.1
million, a decrease of $0.3 million or 2.4%, from revenues of $11.4 million in
fiscal 1996, primarily as a result of a decrease in contracted brandy sales. In
the last quarter of fiscal 1995, the Company acquired its Reedley facility from

24
<PAGE>
Heublein and entered into a long term brandy processing and production contract
with Heublein. Prior to such acquisition, brandy sales constituted approximately
3.5% of the Company's fiscal 1995 revenues.

COST OF SALES

Total cost of sales in fiscal 1997 were $71.7 million, an increase of $13.2
million or 22.6%, over cost of sales of $58.5 million in fiscal 1996. Total cost
of sales in fiscal 1996 increased by $19.8 million or 51.0%, from $38.7 million
in fiscal 1995. As a percentage of revenues, in fiscal 1997, cost of sales was
74.8%, as compared to 81.5% in fiscal 1996 and 82.6% in fiscal 1995. From 1996
to 1997, cost of sales grew primarily due to the growth in the Company's
revenues, principally in bulk wine sales. From 1995 to 1996, cost of sales also
grew due to increased revenues, primarily arising from the Company's newly
acquired Reedley brandy processing facility, and due to the step-up of inventory
acquired in the Golden State Vintners Purchase.

GROSS PROFIT

In fiscal 1997, the Company realized gross profit of $24.1 million, an
increase of $10.8 million or 81.6%, over gross profit of $13.3 million in fiscal
1996, which saw an increase in gross profit of $5.1 million or 62.7%, over gross
profit of $8.2 million in fiscal 1995. As a percentage of revenues, in 1997
gross margin improved to 25.2%, as compared to 18.5% in fiscal 1996 and 17.4% in
fiscal 1995. Gross profit and margin increased from 1996 to 1997 primarily due
to the growth in bulk wine sales, as both bulk wine prices and volumes increased
year-to-year. The increase in gross profit from 1995 to 1996 resulted primarily
from a higher volume of grape sales and from brandy sales that resulted from the
acquisition of the Company's Reedley facility.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In fiscal 1997, selling, general and administrative expenses were $7.4
million, an increase of $2.4 million or 46.9%, over selling, general and
administrative expenses of $5.0 million in fiscal 1996, which increased by $0.7
million or 16.9% over $4.3 million in fiscal 1995. As a percentage of revenues,
in fiscal 1997, selling, general and administrative expenses were 7.7%, as
compared to 7.0% in fiscal 1996 and 9.2% in fiscal 1995.

INTEREST EXPENSE

In fiscal 1997 interest expense was $5.9 million, an increase of $0.6
million or 10.0%, as compared to an interest expense of $5.3 million in fiscal
1996, which saw an interest expense increase of $1.6 million or 43.8% over
interest expense of $3.7 million in fiscal 1995. The growth in interest expense
from fiscal 1995 to fiscal 1996 primarily reflects the expense of increased
borrowings made in connection with the Golden State Vintners Purchase.

NET INCOME

In fiscal 1997, net income was $6.2 million, an increase of $4.3 million or
221.0%, from net income of $1.9 million in fiscal 1996. In fiscal 1996, net
income was $1.9 million, an increase of $1.8 million over net income of $0.1
million in fiscal 1995. As a percentage of revenues, in fiscal 1997 net income
was 6.4%, as compared to 2.7% in fiscal 1996.

EARNINGS PER SHARE

In fiscal 1997, earnings per share were $.65, an increase of $.56 or 622.2%,
over earnings per share of $.09 in fiscal 1996. Net earnings available to common
shareholders for fiscal 1997 was impacted by the increase in net income
described above, which increase was partially offset by dividends paid on

25
<PAGE>
shares of Senior Preferred Stock during such period. For each of fiscal 1996 and
fiscal 1997, such dividends equalled $1.3 million.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital position at March 31, 1998 was $8.2 million,
as compared to $10.3 million at March 31, 1997. The decrease in working capital
is primarily due to the increase in current liabilities reflecting the
recognition of $8.8 million of expenses related to Management Incentives. The
Company maintains 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. Collateral balances are adequate for the Company's working
capital line of credit. Borrowings under the line typically peak in November,
during the Company's second fiscal quarter. Revolving line of credit balances
were $10.5 million and $18.3 million at March 31, 1997 and 1998, respectively.
Unused availability under the line of credit was $4.2 million at March 31, 1998.

Operating cash flow for the nine months ended March 31, 1998 was $5.2
million, as compared to cash flow from operations of $7.4 million for the nine
months ended March 31, 1997. The decrease in operating cash flow for the nine
months ended March 31, 1998 is primarily due to an increase in accrued deferred
compensation expense relating to Management Incentives and an increase in
accounts receivable balances reflective of the Company's revenue growth. The
Company anticipates a substantial increase in operating cash flow during the
fourth quarter of fiscal year 1998 over the fourth quarter of fiscal 1997, as
outstanding receivables from the previous quarter are collected.

Management expects that GSV's working capital requirements will grow as the
business expands and that peak borrowing needs will continue to occur in the
second quarter of the Company's fiscal year. Adequate levels of collateral are
expected to cover any increase in line of credit borrowings needed with respect
to increasing working capital requirements. Management believes that cash from
operations, the net proceeds of this offering and funds available under the
Company's lines of credit will be sufficient to fund operations during the
Company's 1999 fiscal year.

The Company recently authorized capital expenditures of up to $20 million,
primarily to upgrade, maintain and expand its existing winemaking facilities
over the next two years. The Company intends to finance these expenditures
through cash generated from this offering, cash generated from operations and
various other financing sources. On or before November 30, 1998, the Company is
obligated to pay to Messrs. O'Neill and Thompson an aggregate of $5.4 million,
plus interest, pursuant to the Executive Promissory Notes. The Company intends
to satisfy these obligations from cash generated from operations and a portion
of the proceeds from this offering. See Note 9 of Notes to Consolidated
Financial Statements.

The Company currently has reserved amounts that it deems appropriate in
connection with disputes with two customers concerning the quality of wine
products delivered by the Company. The Company believes such reserves are
adequate in the context of such disputes, though there can be no assurances in
that regard. See "Business--Legal Proceedings".

YEAR 2000 COMPLIANCE

The Company has addressed potential Year 2000 difficulties by initiating a
comprehensive evaluation, redesign and upgrade of its information, technology,
manufacturing, accounting and facilities computer software. Many of the
Company's systems include new hardware and packaged software recently purchased
from large vendors who have represented that these systems are Year 2000
compliant. The Company is in the process of obtaining assurances from vendors
that timely updates will be made available to ensure additional purchased
software is Year 2000 compliant. Additionally, GSV has utilized both internal
and external resources to reprogram, replace and test all of its software for
Year 2000 compliance. The estimated cost for this project was approximately
$250,000.

26
<PAGE>
BUSINESS

INTRODUCTION

The Company provides a broad range of high quality winemaking and processing
services, barrel fermentation and bottling and storage services to many of the
largest branded wineries in California and to a number of international
wineries. The Company supplies premium bulk wine pursuant to long-term supply
agreements with Sutter Home, Canandaigua, Sebastiani, Heublein, Vincor and other
wineries. The Company also delivers contract wine processing, barrel
fermentation and storage services under contracts with, among others, The Wine
Group, Mondavi and Beringer. The Company also sells wine grapes, primarily to
Gallo.

GSV produces private label case goods for a number of clients, such as ADM,
Boisset and Trader Joe's. The Company is the largest exporter of bulk wine from
California, according to Fredrikson, and, in fiscal 1997, the Company derived
approximately 12% of its revenues from the sale of bulk wine and case goods
outside of the United States. The Company also supplies brandy (a distilled
derivative of wine) to Heublein pursuant to a long-term agreement and is the
second largest brandy producer in the United States.

27
<PAGE>
Management believes that the Company's recent financial performance has also
benefited from the increasing trend by a number of California's leading branded
wineries to outsource various steps in the winemaking process. With the growth
in demand for premium wines, these wineries have focused on the marketing of
their brands and have invested significant financial resources in building brand
awareness and loyalty through marketing and distribution. Additionally, the
growing demand for premium wine has strained the winemaking capacity of a number
of leading branded wineries. These wineries have demonstrated a strategic
preference towards focusing their resources on brand building as opposed to
facility expansion. Management believes that these and other factors in the wine
industry have resulted in an increasing need for California's large, branded
wineries to outsource the production of premium wine. As a quality-oriented,
low-cost provider of contract winemaking and processing services, management
believes that the Company is well positioned to continue to capitalize on these
wine industry trends.

BUSINESS STRENGTHS

GSV's key business strengths include:

LOW-COST PROVIDER. To position the Company advantageously among its bulk
wine processing competitors, GSV seeks to be the low-cost provider of bulk wine
and contract winemaking and processing services. The economies of scale of the
Company's large, efficient vineyards and facilities and GSV's expertise in
managing its winemaking facilities translate into low production costs, which
allow the Company to price its winemaking products and services flexibly and
competitively. As a result, the Company believes that it can provide high
quality premium bulk wine, wine processing and storage services and case goods
to its customers at prices that may be lower than the marginal production costs
of these products and services to such customers.

FOCUS ON QUALITY. The Company has a consistent record of producing high
quality wine products. For example, three of the top 13 "Best-Value" Chardonnays
(under $10 per 750ml bottle), as ranked in 1997 by WINE SPECTATOR magazine, were
made exclusively from the Company's wine. The Company applies rigorous attention
to quality in all aspects of its grape growing, winemaking and storage
processes. The Company works closely with each customer (who often has its
winemaker on site at the Company's winemaking facilities) to ensure that
finished wines meet applicable quality standards.

FULL RANGE OF PRODUCTS AND SERVICES. The Company offers customers an array
of wine products in most of the California appellations and provides a full
complement of wine-related services, from grape growing to the shipment of case
goods. Consequently, the Company's customers can use GSV's products and services
in any step of the winemaking process, while focusing the use of their resources
to leverage their particular strengths.

STRATEGICALLY LOCATED FACILITIES. The location of the Company's five
wineries in or adjacent to most of California's primary wine growing regions
allows the Company to offer its customers winemaking, processing and storage
services at several conveniently located facilities. In addition, the size of
the Company's facilities enables GSV to aggregate the winemaking needs of
several customers, producing wine at a lower marginal cost than each customer
could at their own facilities while reliably delivering large quantities of
quality wine. Management periodically upgrades GSV's facilities with many of the

28
<PAGE>
latest technological advances in winemaking, allowing the Company to maintain
high quality and efficiency in its operations.

STRONG CUSTOMER RELATIONSHIPS. The Company has developed relationships with
many of the largest branded wineries in California as well as with a number of
international branded wineries. The Company has used long-term contracts to
create and maintain business relationships with such customers as Gallo,
Heublein, Sutter Home, Canandaigua, Sebastiani, The Wine Group, Mondavi,
Beringer and Vincor. As competition among the major wineries in California
intensifies, management believes that a number of these wineries will continue
to outsource the production of a major portion of their premium wines.
Management believes that the Company's strong relationships with its customers
will enable it to capitalize on the continued growth in the premium wine market
and the continued trend towards outsourcing in the premium wine industry.

GROWTH STRATEGY

UPGRADE AND EXPAND WINEMAKING OPERATIONS. The Company recently authorized
capital expenditures of up to $20 million, primarily to upgrade, maintain and
expand its existing winemaking facilities over the next two years. The Company
intends to increase the annual processing capacity at its Fresno facility by
approximately 20,000 tons of grapes and to expand Fresno wine cooperage capacity
by approximately four million gallons. GSV will also increase its Monterey wine
processing facility's annual capacity by approximately 15,000 tons of grapes and
increase barrel fermentation capacity by approximately 18,000 barrels. In
addition, the Company will continue to evaluate opportunities to make strategic
greenfield investments in selected wine regions of California.

PURSUE STRATEGIC ACQUISITIONS. Over the past four years, GSV has grown
through a series of strategic acquisitions and has expanded through the
integration of these purchased vineyards and winemaking and processing
facilities. The following table sets forth the vineyard and facility assets
acquired by the Company since 1994:

<TABLE>
<CAPTION>
ACQUISITION DATE GENERAL DESCRIPTION
- ----------------------- ------------------- ------------------------------
<S> <C> <C>
Napa Valley Winery May 1994 Winery and bottling line
Lost Hills Vineyards May 1995 Premium varietal vineyard
Reedley Facility May 1995 Brandy production facility
Monterey Winery December 1996 Wine processing facility
Napa Warehouse June 1997 Barrel storage warehouse
</TABLE>

The Company continually seeks to build on its successful acquisition track
record. The Company's acquisition of vineyards, wineries and facilities has
enabled it to expand the range of premium winemaking and processing services
that it offers to its branded winery customers. Additionally, the Company has
often been able to quickly generate revenue from acquired assets that have been
integrated into GSV operations. While the Company has found it increasingly
difficult to identify attractive acquisition opportunities, GSV will continue to
examine acquisition opportunities that make sense financially and can be
integrated efficiently with the Company's existing operations.

29
<PAGE>
international wineries. The Company also plans to further leverage its
relationships with leading international winemakers to internationally source
bulk wine for the Company's customers in North America. Finally, the Company
believes there are significant growth opportunities in a variety of
international winemaking regions, including Australia, South America and
Southern Europe, and that the premium bulk wine processor and contract service
provider models that the Company has successfully implemented in California can
be applied internationally.

THE WINE INDUSTRY

California table wines are categorized by price; wines that retail for less
than $3.00 per equivalent 750ml bottle are generally considered to be "jug" or
"generic" wines and wines that retail for $3.00 or more per equivalent 750ml
bottle are generally considered to be "premium" wines. Fredrikson further
divides the premium wine category into three major segments consisting of
"popular premium" wines, which retail for $3.00 up to $7.00 per equivalent 750ml
bottle; "superpremium" wines, which retail for $7.00 up to $14.00 per equivalent
750ml bottle; and "ultrapremium" wines, which retail for $14.00 or more per
750ml bottle. California produces the vast majority of the premium wine made in
the United States.

GROWTH IN PREMIUM WINE INDUSTRY. Over the past ten years there has been a
shift in consumer preferences in the U.S. from generic wines to high quality,
premium varietal wines sold in 750ml bottles. Since 1987, sales of premium
California wines have increased at a 15% compounded annual rate, from
approximately $932 million in 1987 to approximately $3.8 billion in 1997,
according to Fredrikson. In 1997, premium table wines accounted for 78% of the
$4.8 billion California table wine market (expressed in winery sales revenues),
compared to 52% of the $1.8 billion California wine market in 1987.

TREND TOWARDS OUTSOURCING. The wine industry in the U.S. includes thousands
of wine labels from hundreds of wineries, the vast majority of which are very
small and have limited wine production and finished goods distribution. Despite
the many labels, the industry has become increasingly concentrated, and only
seven wineries accounted for approximately 76% of total California wine
shipments in 1997 by volume. Many of the branded wineries in California do not
own sufficient wine grape vineyards to meet their own needs, have only limited
production or bottling facilities or are operating their current facilities at
or near full capacity.

As the market for California premium wines has grown, the leading branded
California wineries have concentrated on distinguishing their branded wines from
those produced by other wineries by focusing their resources on the marketing
and distribution of their particular brands rather than investing in winemaking
facilities. This allocation of resources away from the expansion of capital
intensive winemaking facilities has resulted, among other things, in an increase
in the need for the outsourcing of wine production in order to satisfy
increasing consumer demand for premium wine. The Company believes that its
business strengths have allowed GSV to capitalize on this trend and to become a
contract supplier of choice for many of the leading branded wineries in
California.

30
<PAGE>
FISCAL 1997 REVENUES
(dollars in millions)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
BULK WINE AND RELATED SERVICES - $50.2 (52%)
<S> <C>
Grape Sales - $18.6 (19%)
Case Goods and Related Services - $15.8 (17%)
Brandy - $11.1 (12%)
</TABLE>

COMPANY OPERATIONS

The Company's operations include the following: bulk wine and related
services, grape sales, case goods and related services and brandy. Bulk wine and
related services includes the production and sale of bulk wine, the provision of
custom crushing services, the storage of bulk wine in tanks and barrels and the
delivery of bulk wine barreling services, such as racking and topping. The
Company's grape sales consist of the sale of grapes grown at the Company's
vineyards as well as grapes purchased by the Company from third party growers.
Case goods and related services includes the production of proprietary and
private label bottled wine and wine-related beverages and the provision of
custom bottling and storage services. The Company's brandy business includes the
production of brandy and grape spirits and the provision of brandy barrel
storage and related barreling services.

BULK WINE AND RELATED SERVICES

The Company generates a majority of its revenues from the sale of premium
bulk wine and the delivery of a broad range of wine processing, barrel
fermentation and storage services to its branded winery customers.

The Company sells premium bulk wine to a number of the largest branded
wineries in California, including Sutter Home, Canandaigua, Sebastiani and
Heublein, and to a number of international wineries, including Vincor. In
response to recent wine industry trends towards an increase in the outsourcing
of premium wine production, GSV has increased its production of premium bulk
wines significantly, from approximately 11.8 million gallons in fiscal 1995 to
approximately 14.0 million gallons in fiscal 1997.

GSV's branded winery customers blend and mix the Company's high quality bulk
wine in the production of their premium varietal wines. For example, wine
produced from the French Colombard grape is often included in Chardonnay wine
and wine produced from the Ruby Cabernet grape is often used in the production
of Cabernet Sauvignon and Merlot. Some of GSV's branded winery customers also
buy GSV's high quality bulk wine to sell under their own brands, which allows
these customers to focus on the marketing of their brands rather than wine
production.

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<PAGE>
The Company's standard bulk wine supply contract establishes the variety of
wine, source of grapes and vintage and generally calls for the delivery of a set
number of gallons of wine or processed grape juice at an agreed upon price per
ton of grapes. Industry practice calls for the delivery of 170 gallons of wine
per ton of grapes crushed. The Company supplies, crushes and processes the
grapes and typically stores the wine for six months or more following
production. Winemaking standards are usually agreed to by the parties in
advance. GSV generally guarantees the quality of the wine produced. Delivery of
bulk wine is usually F.O.B. the particular GSV winery.

Historically, approximately 10% of the grapes grown at the Company's
vineyards have been available for the production of premium bulk wine. The
Company has therefore purchased grapes in the marketplace in order to meet the
needs of its bulk wine customers. The Company typically buys grapes from
numerous growers pursuant to a variety of long-term, evergreen grape purchase
contracts and short-term grape purchase contracts entered into prior to grape
harvest. Additionally, after analyzing anticipated grape yields and grape prices
following a harvest, the Company often elects to purchase needed grape supplies
on the spot market. The Company believes it has expertise in matching the grape
needs for its bulk wine contracts with available grape supplies and carefully
monitors grape quality and prices. As a result of the restructuring of the
Company's relationship with Gallo, beginning in the Company's 1999 fiscal year,
at least a majority of the Company's grape crop will be available for the
production of GSV's premium bulk wine. The Company believes that this use of its
grapes will be a more profitable utilization of the Company's resources.
Additionally, the availability of the Company's grapes will lessen the Company's
exposure to unexpected price variations in the California grape market.

The Company produces more than half of its bulk wine at its most modern and
efficient wine processing facility in Fresno, which has the capacity to handle
100,000 tons of grapes annually (the equivalent of 7.2 million cases), and is
used primarily for the production of premium white wine. At the Company's Cutler
facility approximately 40,000 tons of red wine grapes (the equivalent of 2.9
million cases) are processed annually for the production of bulk red wine. GSV
also processes smaller quantities of premium bulk wine at its St. Helena,
Monterey and Reedley facilities. As is customary in the industry, the Company
engages the services of wine brokers to place bulk wine, at a pre-determined
commission.

As a full service provider, the Company also delivers an array of contract
wine processing, barrel fermentation and storage services under long-term
contracts with, among others, Mondavi and Beringer. GSV is flexible with respect
to providing these services and customizes its products and services to meet the
unique needs of its customers. Wine processing and storage services are
available for all steps of the winemaking process, including crushing grapes,
wine production, fermentation in oak barrels and storage in stainless steel
tanks and oak barrels. Under a typical wine processing and storage contract, a
wine processing customer will deliver grapes for crushing, fermentation and
storage in separately labeled tanks or barrels. Customers often have a winemaker
on site to monitor every step of the winemaking process.

Historically, the Company conducted most of its wine processing and storage
services at its Fresno facility. In December 1996, the Company acquired its
Monterey winery, and, following the 1997 summer harvest, initiated wine
processing and storage operations at Monterey, running the facility at
approximately 50% of its capacity. With GSV's Monterey winery fully operational
in fiscal 1999, the Company anticipates that it will deliver a significant
portion of its wine processing and storage services from Monterey.

GRAPE SALES

For the last twelve years the Company has sold most of its grapes to Gallo
pursuant to long-term grape purchase contracts. In August 1996, GSV began
restructuring its relationship with Gallo, though the Company was still required
to deliver approximately 87% and 86%, respectively, of its grapes to Gallo for
the contract years 1996 and 1997.

32
<PAGE>
In May 1995, the Company entered into new long-term grape supply contracts
with Gallo covering certain Chardonnay and Zinfandel grapes. The terms of these
contracts extend six years to May 2001. These contracts require the Company to
deliver grapes meeting specified sugar levels and other quality measurements.
Substantially all of the contracts call for payment in full within 30 days of
delivery of the crop to Gallo.

Due to the Company's restructuring of its relationship with Gallo, at least
a majority of the Company's grapes from the 1998 harvest will be retained by the
Company for internal use in the production of bulk wine. Thus, revenues from
grape sales will decline significantly in GSV's 1999 fiscal year. Nevertheless,
the Company believes that this use of grapes is a potentially more profitable
allocation of the Company's resources.

Certain of the Company's grape purchase contracts require GSV to purchase
the entire grape production of a number of small vineyards. Thus, the Company
must purchase varieties of grapes that it does not use in its production of bulk
wine. The Company generally sells these grapes into the market at a small margin
over cost.

CASE GOODS AND RELATED SERVICES

The Company produces proprietary and private label products and provides
custom bottling and storage services for its customers and for the Company's own
proprietary brands. These case goods sales are comprised of wine bottled and
sold in a case containing twelve 750ml bottles, or the volume equivalent. The
Company sold more than 935,000 cases of wine and wine related products in its
1997 fiscal year. In fiscal 1997, the sale of case goods produced and bottled
for third parties, or "private" case goods, accounted for more than 66% of total
case goods revenues, while case goods products sold under the Company's
proprietary labels accounted for the remainder of such revenues.

PRIVATE LABEL CASE GOODS. The sale of private label case goods includes the
purchase and processing of grapes, aging and storage of wine and the bottling
and labeling of the finished product. The majority of the Company's private
label case goods revenues in 1997 were derived from two customers based on
short-term arrangements that may terminate at any time. The Company has made a
concerted effort to expand private label case goods sales into higher margin
premium varietal wines. Private label case goods are produced and bottled
primarily at the Company's Cutler facility, although products for the Company's
largest private label case goods customer in its 1997 fiscal year were produced
at GSV's St. Helena winery in the Napa Valley.

PROPRIETARY AND CONTROL BRANDS. The Company sells proprietary wine products
under a variety of brands in the generic and premium wine categories. Generally,
the Company's BOUNTY and LEBLANC labels sell in the generic category, the
Company's GOLDEN STATE VINTNERS, J. WILE, MUIRFIELD, SUMMERFIELD and WESTON
brands sell in the popular premium category, the Company's MONTHAVEN and
SUMMERFIELD RESERVE labels compete in the superpremium category and the
Company's EDGEWOOD ESTATE label is sold in the ultrapremium category. The
Company's proprietary wines include a number of different types of premium
varietal wines, including vintage Cabernet Sauvignon, Chardonnay, Merlot and
Zinfandel. Many of the Company's proprietary wines are produced, processed
and/or bottled at the Company's St. Helena winery. The Company's proprietary
products are sold primarily through third party distributors and directly to
specific wine and general merchandise retailers such as Trader Joe's.

The Company also offers its proprietary brands to retailers, such as large
supermarket chains, for sale on an exclusive basis in certain defined geographic
regions. The terms of the exclusive arrangements for the Company's "control
brands" vary from customer to customer and are negotiated directly with
retailers, rather than through wine wholesalers. The Company intends to expand
the production and sale of proprietary and control brands case goods in its 1999
fiscal year.

33
<PAGE>
BRANDY

Brandy is produced by processing wine grapes into wine, distilling the wine
into brandy and aging the brandy in oak barrels for a minimum of two years. The
Company is the second largest brandy processor in the United States and has a
long-term brandy production agreement with Heublein to produce brandy for sale
under Heublein's CHRISTIAN BROTHERS label. Under the terms of the Company's
relationship with Heublein, GSV is paid for all aspects of the brandy
distillation process, including the purchase of grapes and barrels for brandy
storage and various processing charges. The Company also produces limited
quantities of brandy for other customers.

INTERNATIONAL

Approximately 12% of the Company's revenues in its 1997 fiscal year were
derived from the sale of wine and wine products internationally. The Company
exports bulk wine and case goods to a number of foreign locations, including
Canada, Europe and Asia. Sales to customers in Asia were approximately 7.8% and
4.3% of the Company's revenues from bulk wine and case goods sales in fiscal
1997 and for the first six months of fiscal 1998, respectively. According to
Fredrikson, in 1997 the Company was the largest exporter of bulk wine from
California. The Company also imports bulk wine from South America and Europe for
its customers in North America. The Company also seeks to strengthen its
position as the leading bulk wine exporter from California and will continue to
market its winemaking and processing services to leading international
winemakers. Management believes that the premium bulk wine processor and
contract service provider models that the Company successfully implemented in
California can be expanded internationally.

WINEMAKING FACILITIES

The Company's five winemaking and processing facilities are strategically
located in Fresno, Monterey, Napa and Tulare counties to provide winemaking and
processing services in or adjacent to most of the primary grape growing and
winemaking centers in California. Based on industry data, in 1997, the Company
was among the five largest California wineries in terms of wine cooperage
capacity.

The table below sets forth the name of each of the Company's facilities and
the approximate tonnage of grapes crushed and processed into wine, the number of
gallons of wine or brandy produced and the related case equivalent, and the
number of gallons of wine or brandy cooperage capacity at each facility. The
information presented below relates to activities at the Company's winemaking
facilities following the 1997 harvest, which will be reflected in the Company's
1998 fiscal year.

PRODUCTION AT THE COMPANY'S WINEMAKING FACILITIES

<TABLE>
<CAPTION>
GALLONS OF
TONS OF GRAPES COOPERAGE
FACILITY NAME CRUSHED IN 1997 CASE EQUIVALENT(1) CAPACITY
- ------------------------------------------------------------ ---------------- --------------------- -------------
<S> <C> <C> <C>
(IN MILLIONS)
Fresno...................................................... 99,600 7.1 18.3
Cutler...................................................... 40,500 2.9 10.4
Reedley..................................................... 35,400 2.5(2) 17.4
Monterey.................................................... 16,800 1.2 7.7
Napa Valley................................................. 5,500 0.4 1.7
-------- --- -----
Total................................................... 197,800 14.1 55.5
-------- --- -----
-------- --- -----
</TABLE>

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

(1) It is industry custom to convert one ton of wine grapes into 170 gallons of
wine, and to convert gallons of wine into cases of twelve 750ml bottles at
the rate of 2.3775 gallons per case.

(2) A majority of grapes processed at Reedley were distilled into brandy and
other grape spirits.

34
<PAGE>
FRESNO. The Company's Fresno winery is situated on six acres amidst the
Company's 4,400 acre Fresno vineyard and is located approximately 10 miles
southwest of the City of Fresno. The Fresno winery is an extremely efficient
wine processing facility and serves as the Company's bulk wine processing center
for premium varietal white wines, including Chardonnay, White Zinfandel and
other premium white wines. The Fresno facility contains 75 stainless steel
storage tanks ranging in size from approximately 8,500 gallons to 350,000
gallons.

CUTLER. The Company's Cutler facility is the original and oldest GSV winery
and is located on approximately 120 acres in Tulare County north of the town of
Visalia. In the 1997 fiscal year many of the Company's private label case goods
were processed and produced at Cutler, primarily for varietal bulk red and white
wine customers. The Cutler facility also has bottling lines with a combined
bottling capacity of two million cases and more than 70 stainless steel storage
tanks ranging in size from approximately 2,600 gallons to 350,000 gallons.

REEDLEY. The Company's Reedley facility is located on a 246-acre parcel in
southern Fresno County, northwest of the town of Parlier. The Company uses the
Reedley facility primarily for the production and storage of brandy and the
production of dry and sweet white wines, as well as fortified wines such as
sherry and port. The facility has more than 186 stainless steel storage tanks
ranging in size from approximately 600 gallons to 350,000 gallons.

MONTEREY. The Monterey winery is GSV's most recently acquired winemaking
facility. Located on 21 acres in the town of Soledad, the Monterey facility is
strategically situated near California's growing central coast wine region. The
Company acquired the Monterey facility in the third quarter of fiscal 1997 but
did not commence operations at the winery until the first quarter of fiscal
1998. The Company uses the winery primarily for custom processing of small lots
of popular premium, superpremium and ultrapremium white and red wines for GSV's
wine processing customers. The Company anticipates that, during fiscal 1998, the
facility will crush and process approximately 17,000 tons of grapes. Monterey
contains more than 370 small stainless steel tanks ranging in size from
approximately 500 gallons to 50,000 gallons, which allow for a higher level of
quality control and facilitate the production of a large number of small lots of
high quality premium varietal wine.

NAPA VALLEY WINERY. The Company's Napa Valley winery in St. Helena occupies
approximately 3 acres and is located in the town of St. Helena fronting Highway
29, in the center of the Napa Valley. The Napa Valley winery produces primarily
superpremium and ultrapremium white and red wines for a number of the leading
branded wineries in California. A significant portion of the Company's
proprietary and control label case goods are produced and bottled at the Napa
Valley winery. The facility also has a bottling line with an annual bottling
capacity of up to 1,100,000 cases and has 85 stainless steel storage tanks
ranging in size from approximately 1,160 gallons to 19,500 gallons.

NAPA VALLEY WAREHOUSE. The Company uses the Napa Valley warehouse for wine
fermentation and storage in oak barrels. The Napa Valley warehouse has a
24,000-barrel storage capacity, which was virtually full in 1997.

FACILITY EXPANSION. The Company recently authorized capital expenditures of
up to $20 million primarily to upgrade, maintain and expand its facilities over
the next two years. See "--Strategy".

VINEYARD OPERATIONS

The Company owns more than 9,600 acres of vineyard properties, of which more
than 8,500 acres are permanently planted. The table below sets forth the name of
each of the Company's vineyards and the acres of wine grapes at each vineyard.

35
<PAGE>
THE COMPANY'S VINEYARD PROPERTIES

<TABLE>
<CAPTION>
APPROXIMATE
VINEYARD NAME COUNTY LOCATION ACRES PLANTED
- ------------------------------------------------------------------- ---------------- ---------------
<S> <C> <C>
Fresno Vineyard.................................................... Fresno 3,713
Gravelly Ford Vineyard............................................. Madera 2,136
Lost Hills Vineyard................................................ Kern 1,410
Cawelo Vineyard.................................................... Kern 661
Mazzie Vineyard.................................................... Kern 619
-----
Total.......................................................... 8,539(1)
-----
-----
</TABLE>

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

(1) Includes 159 vineyard acres under development.

GRAPE PRODUCTION. The tonnage per acre and the overall yields of premium
varietal grapes from GSV's vineyards have increased in recent years due to,
among other factors, changes in product mix through vine grafting and
replanting. Generally, newly planted or replanted vines do not produce
significant amounts of fruit for three to four years after planting, while vines
grafted with a different variety of grape may bear a viable grape crop within 18
months of grafting. Replanting, however, allows the Company to plant new
varieties of rootstock, including disease-resistant varieties.

The following table shows GSV's net vine production by grape variety from
the 1994 to 1997 harvest years and the total grape tonnage produced by GSV
following each summer grape harvest.

NET PRODUCTION ACRES OWNED BY GSV AND TONS PRODUCED

<TABLE>
<CAPTION>
NET PRODUCTION ACRES
------------------------------------------
GRAPE VARIETY 1994 1995 1996 1997
- ------------------------------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
French Colombard........................................................ 3,162 3,114 3,114 2,965
Zinfandel (1)........................................................... 135 1,211 1,211 1,211
Chardonnay (2).......................................................... 0 875 875 1,124
Ruby Cabernet........................................................... 941 941 941 941
Merlot (1).............................................................. 125 537 687 687
Barbera................................................................. 379 379 379 379
Carnelian............................................................... 344 344 344 344
Chenin Blanc............................................................ 861 418 418 313
Other................................................................... 1,110 371 416 416
--------- --------- --------- ---------
Total Net Production Acres.......................................... 7,057 8,190 8,385 8,380
Total Tons Produced................................................. 68,311 59,183 72,896 88,209
</TABLE>

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

(1) Grafted in 1995.

(2) Grafted in 1995 and 1996.

Typically, the Company's vineyards yield approximately 8.8 tons per acre.
Due to a bountiful harvest in the summer of 1997, the Company picked a record
harvest of 88,000 tons of grapes, an average of approximately 10.4 tons of
grapes per acre. The Company expects its harvest in the summer of 1998 to return
to lower, more typical levels.

In May 1995, the Company began a major improvement and refurbishment program
and took approximately 2,750 acres, including all of its Lost Hills Vineyard,
temporarily out of production, in order to graft or replant new premium varietal
grape rootstock. This planned decline in grape production resulted in a
significant decline in tonnage produced in 1995 and 1996. The Company's grafted
premium varietal acreage started to mature in the 1997 harvest and the
production of premium varietal grapes increased. Presently, the Company's
vineyards are planted with 35% French Colombard, 14% Zinfandel,

36
<PAGE>
13% Chardonnay, 13% Ruby Cabernet, and 8% Merlot, with the remaining 17% of the
Company's vineyards planted with a number of other grape varieties.

In the Company's 1997 fiscal year, approximately $0.5 million was spent on
vineyard capital improvements, which included primarily Ruby Cabernet vineyard
development costs on approximately 160 acres at the Company's Gravelly Ford
vineyard. In the Company's current fiscal year, approximately $1.7 million will
be spent on the Company's vineyards, primarily on vineyard development costs. In
the future, the Company intends to replant approximately 300 acres each year.
While the Company historically grafted its vineyards to respond to the changing
demands for varietal grapes, the Company believes that replanting is a
preferable alternative, due to an overall increase in long-term yields of
replanted vineyards.

VITICULTURAL PRACTICES. The Company's vineyards and vineyard operations
benefit from above average soil and the availability of an economical and
dependable supply of high quality water. The large, contiguous vineyards are
almost entirely machine harvested, creating significant economies of scale,
especially during periods of larger than normal grape crops, as occurred in the
summer of 1997. Management believes that the Company's farming and harvesting
costs per acre of vineyard are below the average per acre farming cost of a
typical California vineyard.

The Company follows a progressive vineyard management philosophy. Short-term
needs such as pruning, fertilizing, pesticide spraying and harvesting are
competitively contracted to multiple service providers, reducing the Company's
capital equipment and labor costs and expenses. Pest control is managed in an
integrated manner, with the selective application of approved pesticides and the
introduction of beneficial predatory insects to vines.

WATER SUPPLY. The Company's Fresno, Gravelly Ford, Mazzie and Cawelo
Vineyards benefit from deep aquifers that provide a reliable and relatively
inexpensive water source. The Company irrigates these vineyards from wells
located on or near its vineyards. The quality of the water obtained from the
wells is good, and the wells have proven to be a plentiful and reliable source
of water for the Company's operations, even during the drought years of the late
1980s. The Company's Lost Hills Vineyard relies upon area water
district-supplied water, which is allocated among surrounding properties and
uses. The Company believes its sources of water will be available for the
foreseeable future, but various factors such as drought or contamination could
impair the Company's water supply.

AGRICULTURAL HAZARDS. Grape production is subject to many risks common to
agriculture that can materially and adversely affect the quality and quantity of
grapes produced. These hazards include, among other things, adverse weather such
as drought, frost, excessive rain, excessive heat or prolonged periods of cold
weather during the growing season. These weather conditions can materially and
adversely affect the quality and quantity of grapes produced by the Company. In
January 1997, severe flooding in the San Joaquin River Basin destroyed a number
of protective levees, damaging a portion of the Company's Gravelly Ford
vineyards, which damage was not entirely insured.

Vineyards are also susceptible to certain diseases, insects and pests, which
can increase farming expenses, reduce yields or kill vines. In the last ten
years phylloxera, a louse that feeds on the roots of grape vines, has infested
many vineyards in the wine grape producing regions of California and caused
grape yields to decrease. Within a few years of the initial infestation,
phylloxera can leave a vine entirely unproductive. Phylloxera infestation has
been widespread in California, particularly in Napa, Sonoma, Mendocino and
Monterey Counties, and most of the other wine grape producing areas of the state
are affected to some degree. As a result of this widespread problem, 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.

In 1997, GSV discovered a phylloxera infestation in certain acres of the
Company's vineyards. The Company believes that the sandy, porous soil in its
Fresno, Madera and Kern County vineyards, as compared to the clay-like soil in
more northern regions such as Napa and Sonoma Counties, hinders the growth and
spread of phylloxera. Additionally, high soil temperatures and vine vigor in the
Central and

37
<PAGE>
Southern San Joaquin Valley mitigate root damage that can be caused by
phylloxera. Further, the Company has attacked the infestation with improved
irrigation management and soil fertilization. The grape production from the
Company's phylloxera-infested acres in the 1997 harvest did not evidence lower
yields than in other, unaffected acres. Thus, the Company does not believe that
phylloxera will have a material adverse effect on vineyard operations and
production, though there can be no assurances in that regard.

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 virus infections which may cause reduction of yields. The
presence of potentially harmful nematodes in relatively high numbers has been
detected in certain acres of the Company's vineyards. The Company has countered
the infestation with improved irrigation management and soil fertilization. None
of these infestations or infections currently poses a major threat to the
Company's vineyards, although they could do so in the future.

ENVIRONMENTAL MATTERS. The Company's vineyard operations require the
periodic usage of various chemical herbicides, fungicides and pesticides, some
of which contain hazardous or toxic substances. The usage and storage of these
chemicals are, to varying degrees, subject to federal and state regulation.

COMPETITION

The markets in which the Company operates are highly competitive and are
dominated by companies with substantially greater financial, production,
personnel and other resources than the Company. In the area of bulk wine
production and processing, the Company competes primarily with JFJ Bronco and
Delicato Winery, as well as a number of smaller companies. The Company's
proprietary label case goods compete with the products of branded wineries and
with other alcoholic and, to a lesser degree, nonalcoholic beverages in the
retail stores where the Company's case goods products are sold and in the
beverage market place in general.

The Company also experiences competition from its current and potential
customers. There are an estimated 800 commercial wineries that produce and
market California wine, although, according to Fredrickson, seven wineries
account for approximately 76% of California wine sales, based on total volume of
California wine shipments in 1997. Certain major wineries, including many of the
Company's customers, grow a significant amount of the grapes they need to make
wine and produce wine for their own branded labels. The Company's position as a
low-cost high quality supplier of premium bulk wines and wine processing
services provides incentives to its customers to outsource their grape and wine
production needs to GSV.

Numerous wine producers in Europe, South America, South Africa and Australia
also compete with GSV by exporting their wine into the United States. California
grape and wine supply shortages in 1995, especially in red wines, prompted some
domestic national brand marketers to purchase wine from foreign sources. Most
imports are bottled wines; however, some wineries have imported bulk wine in
large tanks for bottling and sale in the United States. According to Fredrikson,
bulk table wine imports into the United States for these purposes increased from
approximately 605,000 gallons in 1995 to approximately 20.3 million gallons in
1997.

The Company does not believe that it faces a significant competitive threat
from new entrants into the wine grape growing and wine production markets due to
the substantial capital investments and lengthy start-up periods involved in the
development of productive vineyards and winemaking facilities and the
establishment of customer relationships. Rather, the expansion of the Company's
current competitors and the entry of the Company's customers into the bulk wine
business pose a more significant long-term competitive concern for the Company.

38
<PAGE>
CUSTOMERS

The Company's customers are among the leading branded wineries in
California, many of whom have developed lasting business relationships with the
Company. The Company provides premium bulk wine pursuant to long-term supply
agreements to wineries such as Sutter Home, Canandaigua, Sebastiani, Heublein
and Vincor and sells wine grapes to Gallo pursuant to long-term grape purchase
contracts. ADM, Boisset and Trader Joe's are among the Company's private label
case goods customers. The Company also provides various wine processing services
for Mondavi, Beringer and The Wine Group, among other wineries, and brandy
distillation and production for Heublein. The Company exports bulk wine
internationally to Vincor International Inc., Calona Wines Limited and Vin &
Sprit AB.

GOVERNMENT REGULATION

The wine industry is subject to extensive regulation by the Federal Bureau
of Alcohol, Tobacco and Firearms, various foreign agencies and state liquor and
local authorities. These regulations and laws dictate such matters as licensing
requirements, trade and pricing practices, permitted distribution channels,
permitted and required labeling, advertising restrictions and relations with
wholesalers and retailers. Expansion of the Company's existing facilities and
development of new vineyards and wineries may be limited by present and future
zoning ordinances, environmental restrictions and other legal requirements. In
addition, new regulations or requirements or increases in excise taxes, sales
taxes or international tariffs, could materially adversely affect the financial
results of the Company.

TRADEMARKS

EMPLOYEES

The Company has approximately 172 full-time equivalent employees. The
Company believes that its relations with its employees are good. GSV also
periodically employs seasonal and contract labor through independent sources as
needed for vineyard development, pruning, harvesting as well as all wine
processing services and other related tasks, primarily during the late summer
and early fall months.

LEGAL PROCEEDINGS

In June 1998 Treana Winery ("Treana") filed an action in Marin County
Superior Court against Golden State Vintners, a California corporation and
wholly-owned subsidiary of the Company ("Golden State Vintners"), alleging
damages aggregating $2.7 million arising from two breach of contract claims
regarding the preparation of Chardonnay and Cabernet Sauvignon wines by Golden
State Vintners. Golden State Vintners has not yet responded to Treana's
complaint but intends to vigorously defend this action.

Another customer recently disputed the quality of wine products delivered by
the Company, which wine products were subsequently replaced by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

PROPERTIES

CORPORATE HEADQUARTERS. The Company leases approximately 5,130 square feet
for its executive corporate office in Greenbrae, California under a sublease
expiring in May 2000. The Company believes that its existing executive office
facility will be adequate to meet the Company's needs for the foreseeable future
and that additional space will be available as needed at commercially reasonable
rates.

OTHER PROPERTIES. The Company owns all of the vineyards and winemaking
facilities described above under "Vineyard Operations" and "Winemaking
Facilities".

39
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and key employees of the Company are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ------------------------------------------------------------------------
<S> <C> <C>
Jeffrey B. O'Neill (1)........... 41 President, Chief Executive Officer and Director
Brian R. Thompson................ 47 Chief Financial Officer and Secretary
Jeffrey J. Brown (1)(2).......... 37 Chairman of the Board of Directors, Assistant Secretary and Director
Nicholas B. Binkley (2).......... 52 Director
Douglas R. Wolter................ 31 Director
Keith R. Fox (1)................. 44 Director
W. Scott Hedrick................. 52 Director
Peter W. Mullin.................. 57 Director
John G. McDonald................. 61 Director
Gregory J. Forrest............... 52 Director
Lawrence E. Brink................ 51 Vice President, Production Operations
Michael B. Drobnick.............. 41 Vice President, Bulk Sales
Jeffrey L. Dye................... 44 Vice President, Case Goods
Peter M. Byck.................... 35 Vice President, Strategy and Business Development
Donald L. Stanley................ 61 General Manager, Reedley and Director of Wine Grape Procurement
Robert Darby..................... 56 Plant Manager, Fresno
</TABLE>

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

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

JEFFREY B. O'NEILL has been a director of the Company since April 1995 and
has served as the Company's President and Chief Executive Officer since October
1996. From July to October of 1996, Mr. O'Neill served as Executive Vice
President of the Company. Mr. O'Neill joined the predecessor to the Company in
1981 as a grape buyer and has held a number of executive positions with the
Company's predecessor entities, most recently serving as the President and Chief
Executive Officer of Golden State Vintners since 1986. He currently serves on
the Board of Directors of several leading agricultural concerns, including Fresh
International Corp.

BRIAN R. THOMPSON joined the Company in November 1995 as Chief Financial
Officer and Secretary. From 1988 to November 1995, Mr. Thompson served in a
number of executive positions, including Executive Vice President and Chief
Financial Officer, of Sun World International, Inc., a proprietary produce
company, which filed a petition under Federal bankruptcy laws in October 1994.

JEFFREY J. BROWN has been a director of the Company since April 1995 and
became Chairman of the Board and Assistant Secretary in October 1996. Since June
1993, Mr. Brown has been an executive officer and director of Forrest Binkley &
Brown Venture Co. ("Venture Co."), the general partner of Forrest Binkley &
Brown L.P. ("FBB"), the managing partner of SBIC Partners. Prior to the
formation of FBB in June 1993, Mr. Brown was a Senior Vice President of
BankAmerica Venture Capital Corporation, a position he held from April 1992 to
May 1993. He currently serves on the Board of Directors of a number of private
companies.

NICHOLAS B. BINKLEY joined the Company's Board of Directors in October 1996.
Since June 1993, Mr. Binkley has been an executive officer and director of
Venture Co. Prior to the formation of FBB, Mr. Binkley was Vice Chairman of the
Board of Directors of BankAmerica Corporation, a position he held from April
1992 through May 1993. He currently serves on the Board of Directors of Vista
Medical Company, a medical device company, as well as a number of private
companies.

DOUGLAS R. WOLTER joined the Company's Board of Directors in October 1996.
He currently is a principal at Forrest Binkley & Brown Venture Advisor Co.
("Advisor Co."), an affiliate of FBB. Prior to that time, Mr. Wolter had been a
senior analyst at Advisor Co. since August 1994 and prior to joining Advisor

40
<PAGE>
Co., he attended the Graduate School of Business at Stanford University,
graduating with a Masters in Business Administration in June 1994.

KEITH R. FOX has been a director of the Company since April 1995. Since
February 1994, Mr. Fox has been an executive officer of Exeter Venture Advisors,
Inc., Exeter Equity Advisors, Inc. and Exeter Venture Management Corporation.
Mr. Fox serves on the Boards of Directors of a number of private companies and
is an independent trustee of more than 20 Scudder Kemper mutual funds.

W. SCOTT HEDRICK joined the Company's Board of Directors in April 1998.
Since 1979, Mr. Hedrick has served as a general partner of InterWest Partners, a
venture capital firm that he co-founded. Mr. Hedrick also serves on the Board of
Directors of Il Fornaio (America) Corporation and Office Depot, Inc., as well as
a number of private companies.

PETER W. MULLIN joined the Company's Board of Directors in April 1998. Since
1969, Mr. Mullin has served as Chief Executive Officer and Chairman of the Board
of Directors of Mullin Consulting, Inc., a consulting firm specializing in
executive compensation and benefit issues. Mr. Mullin serves on the Board of
Directors of Avery Dennison Corporation, as well as several private companies
and foundations.

JOHN G. MCDONALD joined the Company's Board of Directors in May 1998.
Professor McDonald is the Industrial Bank of Japan Professor of Finance at the
Graduate School of Business at Stanford University. Professor McDonald has
served on the faculty at Stanford's Graduate School of Business since 1968 and
received an endowed chair in 1978. Professor McDonald was elected to the Board
of Governors of the National Association of Securities Dealers, Inc. (the
"NASD") in 1987 and became Vice Chairman of the NASD in 1989. Professor McDonald
serves on the Board of Directors of Varian Associates, Inc., Scholastic Corp.,
and TriNet Corp. Realty Trust Inc. and is an independent trustee of eight mutual
funds managed by The American Funds.

GREGORY J. FORREST joined the Company's Board of Directors in May 1998.
Since June 1993, Mr. Forrest has been an executive officer and director of
Venture Co. Prior to the formation of FBB, Mr. Forrest was Chief Executive
Officer of BankAmerica Venture Capital Corporation, a position he held from
April 1992 to May 1993. Mr. Forrest currently serves on the Board of Directors
of a number of private companies.

LAWRENCE E. BRINK joined GSV in April 1994 as Vice President, Production
Operations. Prior to that time, Mr. Brink served as Executive Vice President,
Winemaking of Joseph E. Seagram & Sons.

MICHAEL B. DROBNICK joined the Company in 1985 and has served as Vice
President, Bulk Sales since January 1996. Prior to joining the Company, Mr.
Drobnick held various sales management positions with different wine
distributors.

JEFFREY L. DYE has served as Vice President, Case Goods of GSV since
November 1992. Prior to joining the Company, Mr. Dye served in various executive
positions for several wineries and wine distributors.

PETER M. BYCK joined GSV in November 1997 as Vice President, Strategy and
Business Development. From 1992 to 1996, Mr. Byck served as Chief Executive
Officer of Applied Scanning Technology, Inc., a proprietary software and
scanning company. From 1990 to 1992, Mr. Byck was a Senior Consultant at the LEK
Partnership.

DONALD L. STANLEY joined the Company in 1989 and is currently the General
Manager at the Company's Reedley facility and Director of Wine Grape
Procurement. Prior to joining the Company, Mr. Stanley served in various
positions at Christian Brothers Winery.

ROBERT DARBY has been with the Company serving in various plant and
operating positions since 1987. Prior to that time, Mr. Darby was the Chief
Winemaker and Plant Manager for the JFJ Bronco Wine Company.

41
<PAGE>
The Board of Directors currently has nine directors. Pursuant to the terms
of the Amended and Restated Stockholders Agreement dated as of October 10, 1996
by and among the Company and the stockholders of the Company (the "Stockholders
Agreement"), the Board currently includes three nominees of SBIC Partners
(Messrs. Brown, Binkley and Wolter), one nominee of Exeter (Mr. Fox), and one
nominee of Mr. O'Neill. The Stockholders Agreement will terminate upon the
consummation of this offering if the offering results in gross proceeds to the
Company of at least $35 million.

Each member of the Board is elected to hold office until the next annual
meeting of stockholders and until his respective successor is elected and
qualified. Officers serve at the discretion of the Board of Directors. There are
no family relationships among any of the directors or executive officers of the
Company.

BOARD COMMITTEES, COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee reviews the results and scope of the annual audit
and the services provided by the Company's independent accountants. The
Compensation Committee makes recommendations to the Board of Directors with
respect to the Company's general and specific compensation policies and
administers the Company's stock option plan.

The Company's Compensation Committee consists of Messrs. Brown, O'Neill and
Fox. During the Company's last completed fiscal year, Mr. O'Neill was an
executive officer of the Company and of Golden State Vintners and Mr. Brown was
an executive officer of the Company. See "Certain Relationships and Related
Transactions" for information regarding the interests of Messrs. O'Neill, Brown
and Fox in certain transactions and arrangements involving the Company.

No executive officer of the Company serves as a member of the Board of
Directors or Compensation Committee of any other entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.

COMPENSATION OF DIRECTORS

Through fiscal year 1998, the Company paid those directors who were
directors at the beginning of the fiscal year, other than Mr. O'Neill, $12,500
per year, plus full reimbursement for certain out-of-pocket expenses incurred in
connection with attendance at board and committee meetings. The Company does not
intend to make such payments to its directors during fiscal year 1999, other
than the reimbursement of out-of-pocket expenses. In October 1996, an affiliate
of Messrs. Brown, Binkley, Wolter and Forrest entered into a management
agreement with the Company, which calls for the payment of $125,000 to such
affiliate for management services rendered to the Company. In April 1998, the
Company adopted the Director Plan. Under the Director Plan, in April 1998,
options to purchase an aggregate of 59,982 shares of Class B Common Stock at an
exercise price of $12.08 were granted to all of the then-current members of the
Board of Directors, other than Mr. O'Neill. In May 1998, options to purchase
14,993 shares of Class B Common Stock were granted to Mr. McDonald at an
exercise price of $12.08. See "Certain Relationships and Related Transactions".

EXECUTIVE COMPENSATION

The following table summarizes all compensation paid to the Company's Chief
Executive Officer and to the Company's most highly compensated officers other
than the Chief Executive Officer whose total annual salary and bonus exceeded
$100,000, for services rendered in all capacities to the Company and to Golden
State Vintners during the fiscal year ended June 30, 1997 (collectively, the
"Named Officers").

42
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(1)
------------------
COMPENSATION OPTIONS TO
------------------------ PURCHASE ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMMON STOCK(2) COMPENSATION
- --------------------------------------------------- ----------- ----------- ------------------ --------------
<S> <C> <C> <C> <C>
Jeffrey B. O'Neill (3) ............................ $ 309,331 $ 802,040 670,433 $ 14,947(4)
President and Chief Executive Officer
Brian R. Thompson ................................. 165,000 40,000 -- --
Chief Financial Officer and Secretary
Lawrence E. Brink ................................. 125,000 20,000 17,400 9,600(5)
Vice President, Production Operations
Jeffrey L. Dye .................................... 75,000 65,000 17,400 --
Vice President, Case Goods
Michael B. Drobnick ............................... 75,000 65,000 17,400 --
Vice President, Bulk Sales
</TABLE>

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

(1) For the period set forth in the table above, no Named Officer received
aggregate Other Annual Compensation in excess of the lesser of $50,000 or
10% of the total of such officer's salary and bonus, nor did any such Named
Officer receive any restricted stock award, stock appreciation right or
payment under any long-term incentive plan.

(2) These options were granted pursuant to the Company's 1996 Option Plan.

(3) This table sets forth all compensation awarded to, earned by or paid to Mr.
O'Neill for services rendered as an officer of the Company and as an officer
of Golden State Vintners during the fiscal year ended June 30,1997, which
compensation was paid by the Company.

(4) Consists of disability insurance premiums and car expenses paid by the
Company.

(5) Consists of a car allowance paid by the Company.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning stock options granted
to the Named Officers of the Company during fiscal 1997. No stock appreciation
rights were granted to such persons during such period.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH)(1) DATE 5% 10%
- ------------------------------------- ------------ ------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey B. O'Neill................... 167,608 20.9 3.62 12/3/06 $ 76,624 $ 481,474
167,608 20.9 4.31 12/3/06 -- 365,882
167,608 20.9 5.17 12/3/06 -- 221,392
167,609 20.9 6.03 12/3/06 -- 76,902
Brian R. Thompson.................... -- -- -- -- -- --
Lawrence E. Brink.................... 17,400 2.0 4.79 1/1/07 -- 29,703
Jeffrey L. Dye....................... 17,400 2.0 4.79 1/1/07 -- 29,703
Michael B. Drobnick.................. 17,400 2.0 4.79 1/1/07 -- 29,703
</TABLE>

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

(1) The exercise price per share of these options was equal to or greater than
the fair market value of the Common Stock on the date of grant.

(2) The potential realizable value is calculated based on the term of the option
at its time of grant. It is calculated assuming that the stock price on the
date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option, and that the option is exercised and sold

43
<PAGE>
on the last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders.

AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

No options or stock appreciation rights were exercised by the Named Officers
for the fiscal year ended June 30, 1997.

STOCK OPTION PLANS

1996 STOCK PLAN. The Company's 1996 Option Plan became effective in
December 1996 upon adoption by the Board of Directors. The 1996 Option Plan
provides for the grant of options in the form of incentive stock options and
nonstatutory stock options to officers, key employees and consultants of the
Company or its subsidiaries and members of the Board of Directors of the
Company. A total of 223,491 shares of Class B Common Stock and 362,833 shares of
Class A Common Stock have been reserved for issuance under the 1996 Option Plan.

Upon consummation of the offering, the 1996 Option Plan will be administered
by a committee (the "Committee") constituted so as to permit the 1996 Option
Plan to comply with Rule 16b-3 of the Exchange Act. The Board of Directors may
amend the 1996 Option Plan and, with the consent of each participant adversely
affected, the Committee may make such changes in the terms and conditions of
granted options as it shall deem advisable.

The purchase price per share of the shares of Common Stock underlying each
option granted under the 1996 Option Plan will be established by the Committee
but shall not be less than 100% of the fair market value of the Common Stock on
the date of grant, provided that if the optionee is a 10% stockholder of the
Company (as defined in Section 422(b)(6) of the Internal Revenue Code of 1986,
as amended) at the time such optionee is granted an incentive stock option, the
purchase price per share of the shares of Common Stock shall be not less than
110% of said fair market value.

The 1996 Option Plan provides that, in the event of the dissolution,
liquidation or sale of the Company, any merger or reorganization of the Company,
or acquisition by any person or group of beneficial ownership of more than 50%
of the Company's then outstanding shares of capital stock, the 1996 Option Plan
and each outstanding option granted thereunder shall terminate. Upon the
happening of such event, each participant under the 1996 Option Plan who is not
tendered a substitute option by the entity surviving such event or who does not
accept any such substituted option, shall have the right to exercise, in whole
or in part, any vested and exercisable options which have not then expired.

As of June 15, 1998, options to purchase a total of 362,833 shares of Class
A Common Stock and 159,500 shares of Class B Common Stock have been granted
under the 1996 Option Plan. Such options have per share exercise prices ranging
from $3.62 to $12.07, or a weighted average per share exercise price of $5.01.

DIRECTOR PLAN. The Company's Director Plan became effective in April 1998
upon adoption by the Board of Directors and approval by the stockholders. The
Director Plan provides for the grant of options in the form of nonstatutory
stock options to the non-employee members of the Board of Directors of the
Company. A total of 348,000 shares of Class B Common Stock have been reserved
for issuance under the Director Plan.

The purchase price per share of the shares of Common Stock underlying each
option granted under the Director Plan shall be the closing sale price of such
shares on the date of grant if the Common Stock is listed on any established
stock exchange or national market system or the price established by the
committee administering the Director Plan, which shall not be less than 100% of
the fair market value of the Common Stock on the date of grant.

44
<PAGE>
The Director Plan provides that, in the event of the dissolution or
liquidation of the Company, the merger or sale of all or substantially all
assets of the Company requiring shareholder approval, or acquisition by any
person or group of beneficial ownership of the securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding shares, any options outstanding under the Director Plan that are not
yet exercisable and vested shall become fully exercisable and vested.

As of June 15, 1998, options to purchase a total of 74,975 shares of Class B
Common Stock have been granted under the Director Plan. Such options have per
share exercise prices of $12.08. None of such options have been exercised.

KEY MAN LIFE INSURANCE

The Company, through Golden State Vintners, currently maintains a life
insurance policy in the amount of $10 million on the life of Mr. O'Neill. The
Company has agreed to assign a $2 million portion of this policy to Mr.
O'Neill's family trust.

EMPLOYMENT AGREEMENT

From April 27, 1995 until December 31, 1997, Mr. O'Neill served as President
and Chief Executive Officer of Golden State Vintners pursuant to the Old
Agreement, which provided him with an annual salary of at least $300,000,
subject to annual increases, and an annual bonus based on a sliding scale of
EBITDA (as defined in the Old Agreement). Effective as of January 1, 1998, the
Company and Mr. O'Neill entered into a new employment agreement (the "New
Employment Agreement"), which provides for Mr. O'Neill to serve as President and
Chief Executive Officer of the Company on the terms and subject to the
conditions set forth therein. Under the New Employment Agreement, Mr. O'Neill
will receive annual compensation of $350,000, a bonus to be paid in the
discretion of the Board and the reimbursement of certain expenses. The New
Employment Agreement also provides for the payment of severance to Mr. O'Neill
equal to two years of his base compensation and for the acceleration of any
unvested options then held by Mr. O'Neill if his employment is terminated for
certain reasons, including any termination of his employment within six months
of a "Change in Control". The New Employment Agreement defines a Change in
Control to include the sale by the Company of all or substantially all of its
capital stock or assets or the consummation of any transaction or series of
related transactions, including any merger, reorganization or recapitalization,
in which any person or group acquires beneficial ownership of more than 50% of
the outstanding capital stock of the Company. The term of the New Employment
Agreement expires June 30, 2001.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Section 145 of the Delaware General Corporation Law ("Delaware Law"),
the Company can indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
The Company's Certificate of Incorporation provides that the Company will
indemnify its directors, officers, employees and other agents to the fullest
extent permitted by law.

The Company has entered into indemnification agreements with each of its
directors and executive officers in addition to the indemnification provided for
in the Company's Certificate of Incorporation. These agreements, among other
things, indemnify the Company's directors and certain of its officers for
certain expenses (including attorneys' fees), judgments, fines and settlement
amounts incurred by such person in any action or proceeding, including but not
limited to any action by or in the right of the Company, on account of services
as a director or officer of the Company, or as a director or officer of any
other company or enterprise to which the person provides services at the request
of the Company. The Company has also purchased liability insurance covering its
directors and officers.

45
<PAGE>
In addition, the Company's Certificate of Incorporation provides that the
Company's directors shall not be liable for monetary damages for breach of such
directors' fiduciary duty of care to the Company and its stockholders except for
liability for breach of the director's duty of loyalty to the Company or its
stockholders, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware Law. This
provision in the Certificate of Incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal or state securities or environmental laws.

There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent.

46
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

INCORPORATION OF THE COMPANY

In connection with the formation and initial capitalization of the Company
in April 1995, the Company issued an aggregate of 1,885,000 shares of its
previously outstanding Class A Common Stock (the "Old Class A Stock") and
3,770,000 shares of its previously outstanding Class B Common Stock (the "Old
Class B Stock"), in each case at $1.72 per share, for an aggregate purchase
price of $9.75 million. Certain of these shares of Old Class B Stock were issued
to the following holders of record of more than five percent of the outstanding
stock of the Company (each, a "5% Stockholder") associated with Jeffrey J.
Brown, an officer and director of the Company, and Gregory J. Forrest, Nicholas
B. Binkley and Douglas R. Wolter, directors of the Company, and to the following
5% Stockholders associated with Keith R. Fox, a director of the Company:

<TABLE>
<CAPTION>
NAME SHARES OF OLD CLASS B STOCK
- ---------------------------------------------------------------- ----------------------------
<S> <C>
SBIC Partners................................................... 1,885,000
EE Partners..................................................... 1,566,000
EV Lenders...................................................... 319,000
</TABLE>

GOLDEN STATE VINTNERS PURCHASE

Pursuant to a Stock Purchase Agreement dated April 27, 1995 (the "Stock
Purchase Agreement"), the Company purchased all of the outstanding capital stock
of Golden State Vintners (the "Golden State Vintners Purchase") from certain
shareholders of Golden State Vintners. Pursuant to the terms of the Stock
Purchase Agreement, the Company paid the purchase price for the Golden State
Vintners Purchase by delivering $20.9 million in cash and 523,980 shares of 6%
Junior Exchangeable Preferred Stock of the Company in the aggregate face amount
of $2.6 million. Certain of the shares of Golden State Vintners were sold to the
Company by Mr. O'Neill and an affiliated entity.

The execution of the Stock Purchase Agreement occurred substantially
contemporaneously with the closing of the refinancing of Golden State Vintners'
then-existing indebtedness. Pursuant to a Securities Purchase Agreement dated
April 21, 1995 (the "Hancock SPA"), the John Hancock Mutual Life Insurance
Company ("John Hancock") purchased for an aggregate consideration of $45 million
(1) senior secured first mortgage notes of Golden State Vintners with an
aggregate principal face amount of $35.0 million and (2) 100,000 shares of the
Company's 12% Senior Redeemable Exchangeable Preferred Stock ("Senior Preferred
Stock") and 1,200,829 shares of the Company's previously outstanding Class E
Common Stock for an aggregate consideration of $10.0 million. The Company
guaranteed the obligations of Golden State Vintners to John Hancock under the
Hancock SPA.

GRAPE GROUP TRANSACTION

In May 1995, the Company acquired the Lost Hills Vineyard, 1,750 acres of
wine grape vineyards located in Kern County, from the Grape Group, Inc. (the
"Grape Group") for a purchase price of approximately $4.6 million, payable via
the assumption of approximately $2.9 million of debt and the delivery of a
non-interest bearing promissory note in the principal amount of $1.7 million.
Mr. O'Neill owned 100% of the Grape Group at the time of the transaction. The
Company believes that the purchase of the Lost Hills Vineyard from the Grape
Group was negotiated at arms' length and that the Company paid a price equal to
the fair market value of such property.

SE VINEYARDS

The Company historically purchased grapes from SE Vineyards, a 300 acre
vineyard located in Kern County. Each of Messrs. Mullin and O'Neill owned 33.33%
of SE Vineyards until October 1996. For the Company's 1995, 1996 and 1997 fiscal
years, the Company purchased approximately $275,000, $400,000 and $1.4 million
of such grapes, respectively. The Company believes such grape purchases were at
competitive market prices negotiated at arms' length.

47
<PAGE>
GSAC RECAPITALIZATION

In October 1996, the Company entered into a series of transactions to effect
the recapitalization of its capital structure (the "1996 Recapitalization").
Pursuant to a Securities Purchase Agreement dated as of August 22, 1996, the
Company acquired from certain stockholders 1,885,000 shares of Old Class A Stock
and 985,156 shares of Old Class B Stock, at a price of $2.50 per share, for an
aggregate purchase price of approximately $7.2 million. Of the entities selling
stock to the Company, the following 5% Stockholders are associated with Mr. Fox:

<TABLE>
<CAPTION>
NAME SHARES OF OLD CLASS B STOCK SOLD
- ------------------------------------------------------- -------------------------------------
<S> <C>
EE Partners............................................ 818,438
EV Lenders............................................. 166,718
</TABLE>

As part of the 1996 Recapitalization, the Company redeemed 345,875 shares of
Junior Preferred Stock for an aggregate purchase price of approximately $1.7
million. Certain of these shares were held by Mr. O'Neill and by the following
entity associated with Mr. O'Neill and with a member of Mr. O'Neill's immediate
family:

<TABLE>
<CAPTION>
NAME SHARES OF JUNIOR PREFERRED STOCK SOLD
- ------------------------------------------------------- -------------------------------------
<S> <C>
Jeffrey B. O'Neill..................................... 42,793
Mid-State Horticultural Company........................ 70,892
</TABLE>

Pursuant to a Stock Purchase Agreement dated October 10, 1996, the Company
sold an aggregate of 2,776,170 shares of Old Class B Stock at $2.50 per share,
for an aggregate purchase price of approximately $6.9 million. These shares were
sold to Mr. O'Neill and to the following 5% Stockholder associated with Messrs.
Forrest, Brown, Binkley and Wolter:

<TABLE>
<CAPTION>
NAME SHARES OF OLD CLASS B STOCK SOLD
- ------------------------------------------------------- -------------------------------------
<S> <C>
Jeffrey B. O'Neill..................................... 599,171
SBIC Partners.......................................... 2,176,998
</TABLE>

OTHER TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS

As compensation for certain investment banking services provided with
respect to the 1996 Recapitalization and certain related credit matters, the
Company paid approximately $400,000 in fees to Exeter Venture Management
Corporation ("EV Management"), which is an affiliate of a 5% Stockholder and
associated with Mr. Fox. The Company paid EV Management $375,000 in fees in
February 1997 as consideration for certain investment banking services.

In October 1996, the Company agreed to pay an annual fee of $125,000 to
Forrest Binkley & Brown Partners L.P., an affiliate of SBIC Partners, a 5%
Stockholder, and of Messrs. Forrest, Brown, Binkley and Wolter, as compensation
for management services to be provided with respect to the Company's operations.

In December 1996, the Compensation Committee of the Board of Directors
granted to Mr. O'Neill options to purchase an aggregate of 670,433 shares of Old
Class B Stock. The options are exercisable for up to 167,608 shares at a price
of $3.62 per share up to an additional 167,608 shares at a price of $4.31 per
share, up to an additional 167,608 shares at a price of $5.17 per share, and up
to an additional 167,609 shares at a price of $6.03 per share. The options vest
in four equal annual installments commencing October 10, 1997.

In connection with the Golden State Vintners Acquisition, the Board of
Directors granted to Mr. O'Neill stock appreciation rights with respect to
145,000 shares of Old Class B Stock at a base price of $.003 per stock
appreciation right and 504,347 shares of Old Class B Stock, at a base price of
$1.72 per stock appreciation right. In November 1995, the Board of Directors
granted Mr. Thompson stock

48
<PAGE>
appreciation rights with respect to 145,000 shares of Old Class B Stock at a
base price of $2.59 per stock appreciation right. Effective as of December 31,
1997, the Company and Messrs. O'Neill and Thompson agreed to terminate such
stock appreciation rights in exchange for certain compensation and the grant of
non-qualified stock options. Pursuant to such agreement, Messrs. O'Neill and
Thompson were entitled to receive $6.97 million and $1.38 million, respectively.
In connection with the issuance of the Replacement Incentives, Messrs. O'Neill
and Thompson received their respective portions of the Executive Cash Payments,
as well as their respective Executive Promissory Notes. Messrs. O'Neill and
Thompson also received options to purchase 649,347 and 145,000 shares of Class B
Common Stock, respectively. The stock options were fully-vested on the date of
grant and are exercisable at $12.07 per share of Common Stock. Further, in
connection with the issuance of the Replacement Incentives, (1) the Company
accelerated the vesting of 139,991 options to purchase shares of Class A Common
Stock held by Mr. O'Neill, (2) Mr. O'Neill used his Executive Cash Payment to
immediately exercise options with respect to an aggregate of 307,600 shares of
Class A Common Stock and to pay certain income tax amounts arising from such
exercises and (3) Mr. Thompson used his Executive Cash Payment to exercise
options with respect 29,617 shares of Class B Common Stock.

In April 1998, SBIC Partners and Exeter agreed to certain co-sale rights and
rights of first refusal and Mr. O'Neill agreed not to seek to participate in the
next registered sale of Class B Common Stock by SBIC Partners and Exeter, if
any.

The Company's directors, other than Messrs. O'Neill and Forrest, have been
granted nonqualified stock optons under the Director Plan. See
"Management--Stock Option Plans--Director Plan".

Prior to the consummation of the offering, the Company anticipates filing
its Second Amended and Restated Certificate of Incorporation which, among other
things, will result in the conversion of all outstanding shares of Old Class B
Stock into shares of Class A Common Stock and the conversion of all outstanding
shares of Class K Common Stock and Class E Common Stock into shares of the
Company's newly-created Class B Common Stock.

The following table sets forth, with respect to each holder of common stock
of the Company who is an officer, director or 5% Stockholder, as of March 31,
1998, the aggregate price paid by such holder for the shares of Common Stock of
the Company held by such holder, and the aggregate value of such Common Stock
(based upon an initial public offering price of $17.00 per share for the Common
Stock):

<TABLE>
<CAPTION>
AGGREGATE
CONSIDERATION AGGREGATE VALUE OF
NAME OF HOLDER PAID FOR STOCK COMMON STOCK
- --------------------------------------------------------- -------------- -------------------
<S> <C> <C>
SBIC Partners............................................ $ 8,700,728 $ 69,053,966
EE Partners.............................................. 1,288,900 12,708,554
EV Lenders............................................... 262,555 2,588,777
John Hancock............................................. 2,070,395 20,414,093
Jeffrey B. O'Neill....................................... 1,499,996 10,185,907
</TABLE>

The Company has entered into indemnification agreements with each of its
directors and executive officers. The agreements require the Company to
indemnify such individuals for certain liabilities to which they may be subject
as a result of their affiliation with the Company, to the fullest extent
permitted by Delaware Law.

Additionally, in April 1998, in connection with its participation in the
offering, John Hancock agreed to waive all prepayment penalties due with respect
to the Company's repurchase of the shares of Senior Preferred Stock held by John
Hancock.

The Company believes that the foregoing transactions were in its best
interests and on terms no less favorable to the Company than could be obtained
from unaffiliated third parties.

49
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Class A and Class B Common Stock as of June 30, 1998,
and as adjusted to reflect the sale by the Company and the Selling Stockholders
of the shares of Class B Common Stock offered hereby, by: (1) each person who is
known by the Company to beneficially own more than 5% of the Company's Class A
and Class B Common Stock, (2) each of the Company's directors, (3) each of the
Named Officers, (4) each of the Selling Stockholders and (5) all directors and
Named Officers of the Company, as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING CLASS B OWNED AFTER OFFERING
------------------------------------- SHARES ------------------------------------
NUMBER OF NUMBER OF PERCENT OF OFFERED IN NUMBER OF NUMBER OF PERCENT OF
CLASS A CLASS B TOTAL VOTING THE CLASS A CLASS B TOTAL VOTING
BENEFICIAL OWNERS SHARES SHARES POWER(1) OFFERING SHARES SHARES POWER(1)
- ------------------------------------ ---------- ---------- ------------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
SBIC Partners, L.P. ............... 4,061,998 -- 67.5% 1,061,998 3,000,000 -- 61.8%
201 Main Street, Suite 2302
Fort Worth, TX 76102
Jeffrey B. O'Neill(2) ............. 906,771 673,728 16.2% -- 906,771 673,728 20.1%
500 Drake's Landing Road
Greenbrae, CA 94904
John Hancock Mutual Life
Insurance Company ................ -- 1,200,829 2.0% 542,234 -- 658,595 1.4%
John Hancock Place
200 Clarendon Street
Boston, MA 02117
Exeter (3) ......................... 899,843 -- 15.0% 464,086 435,757 -- 9.0%
10 East 53rd Street
New York, NY 10022
BankAmerica Investment
Corporation (4) .................. -- 38,510 * 38,510 -- -- --
231 South La Salle Street Chicago,
IL 60697
Massachusetts Mutual Entities (5) -- 43,172 * 43,172 -- -- --
1295 State Street
Springfield, MA 01111-001
Jeffrey J. Brown (6) ............... 4,061,998 -- 67.5% -- 3,000,000 -- 61.8%
Nicholas B. Binkley (6) ............ 4,061,998 -- 67.5% -- 3,000,000 -- 61.8%
Douglas R. Wolter (6) .............. 4,061,998 -- 67.5% -- 3,000,000 -- 61.8%
Keith R. Fox (3) ................... 899,843 -- 15.0% -- 435,757 -- 9.0%
W. Scott Hedrick ................... -- -- -- -- -- -- --
Peter W. Mullin .................... -- 19,972 * -- -- 19,972 *
John G. McDonald ................... -- -- -- -- -- -- --
Gregory J. Forrest (6) ............. 4,061,998 -- 67.5% -- 3,000,000 -- 61.8%
Brian R. Thompson (7) .............. -- 144,999 * -- -- 144,999 *
Lawrence E. Brink (8) .............. -- 4,350 * -- -- 4,350 *
Jeffrey L. Dye (8) ................. -- 4,350 * -- -- 4,350 *
Michael B. Drobnick (8) ............ -- 4,350 * -- -- 4,350 *
All Directors and Named Officers as
a group (13 persons) (9) ......... 5,868,612 851,749 99.0% 2,150,000 4,342,528 851,749 91.2%
</TABLE>

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

* Represents beneficial ownership of less than 1% of the outstanding voting
power of all shares of Common Stock.

(1) Percent ownership is based on (i) before the offering, 7,329,261 shares of
Common Stock outstanding plus any shares issuable pursuant to options held
by the person in question which may be exercised within 60 days after

50
<PAGE>
June 30, 1998; and (ii) after the offering, an additional 2,150,000 shares
of Class B Common Stock issued by the Company in the offering. In
calculating the percent of total voting power, the voting power of shares of
Class A Common Stock (ten votes per share) and Class B Common Stock (one
vote per share) have been aggregated.

(2) Includes 906,771 shares of Class A Common Stock owned by Mr. O'Neill,
649,347 shares of Class B Common Stock issuable upon the exercise of stock
options exercisable within sixty days of June 30, 1998, and 24,381 shares of
Class B Common Stock issuable on conversion of shares of the Company's
Junior Preferred Stock held by Mr. O'Neill.

(3) Represents 747,562 and 152,281 shares of Class A Common Stock held by EE
Partners and EV Lenders, respectively. Keith R. Fox, a director of the
Company, is an executive officer of Exeter Equity Advisors, Inc., which is
the general partner of Exeter Equity Advisors, L.P., the general partner of
EE Partners. Mr. Fox is also an executive officer of Exeter Venture
Advisors, Inc., which is the general partner of EV Lenders, and an executive
officer of Exeter Venture Management Corporation, which is an affiliate of
EV Partners and EV Lenders. Mr. Fox disclaims beneficial ownership of the
shares held by EV Partners and EV Lenders, except to the extent of his
pecuniary interest therein.

(4) Represents shares of Class B Common Stock issuable upon conversion of shares
of the Company's Junior Preferred Stock.

(5) Represents 7,401, 3,700 and 32,071 shares of Class B Common Stock issuable
upon conversion of shares of the Company's Junior Preferred Stock held by
MassMutual Corporate Investors, MassMutual Participation Investors and
Massachusetts Mutual Life Insurance Company, respectively.

(6) Represents 4,061,998 shares of Class A Common Stock held by SBIC Partners.
Gregory J. Forrest and Nicholas B. Binkley, each a director of the Company,
and Jeffrey J. Brown, an officer and director of the Company, are each
executive officers, directors and shareholders of Venture Co. Messrs.
Forrest, Binkley and Brown collectively hold all of the outstanding limited
partnership interests in FBB. Mr. Wolter is a principal of Advisor Co., an
affiliate of each of SBIC Partners, FBB and Venture Co. Each of Messrs.
Forrest, Binkley, Brown and Wolter disclaims beneficial ownership of the
shares held by SBIC Partners, except to the extent of his pecuniary interest
therein, if any.

(7) Includes 29,617 shares of Class B Common Stock held by Mr. Thompson and
115,382 shares of Class B Common Stock issuable upon the exercise of stock
options exercisable within sixty days of June 30, 1998.

(8) Includes 4,350 shares of Class B Common Stock issuable upon the exercise of
stock options exercisable within sixty days of June 30, 1998.

(9) Includes shares held by SBIC Partners and Exeter, and 777,779 shares of
Class B Common Stock issuable under stock options exercisable within 60 days
of June 30, 1998.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have outstanding 4,342,528
shares of Class A Common Stock and 5,136,733 shares of Class B Common Stock (or
4,342,528 and 5,781,733 shares, respectively, if the Underwriters'
over-allotment option is exercised in full), assuming no exercise of outstanding
options under the Company's option plans or other stock option agreements.

The shares of Class B Common Stock sold in the offering will be freely
tradeable without restriction or limitation under the Securities Act, except for
any such shares held by "affiliates" of the Company, as such term is defined
under Rule 144 of the Securities Act, which shares will be subject to the resale
limitations under Rule 144. The remaining shares of Common Stock are "restricted
securities" within the meaning of Rule 144 and were issued and sold by the
Company in private transactions and may be publicly sold only if registered
under the Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
for at least one year, including an affiliate of the Company, would be entitled
to sell, within any three-month period, that number of shares that does not

51
<PAGE>
exceed the greater of 1% of the then outstanding shares of Class B Common Stock
(approximately 51,367 shares) and the average weekly trading volume in the Class
B Common Stock during the four calendar weeks immediately preceding the date on
which the notice of sale is filed with the Commission, provided certain manner
of sale and notice requirements and requirements as to the availability of
current public information about the Company are satisfied. Under Rule 144(k), a
holder of "restricted securities" who is not deemed an affiliate of the issuer
and who has beneficially owned shares for at least two years would be entitled
to sell shares under Rule 144(k) without regard to the limitations described
above. As defined in Rule 144, an "affiliate" of an issuer is a person who
directly or indirectly through the use of one or more intermediaries controls,
or is controlled by, or is under common control with, such issuer. Substantially
all of the shares of Class A Common Stock are eligible for sale under Rule 144,
subject to lock-up arrangements with the Underwriters described below.

The Company, the Selling Stockholders, the Company's executive officers and
directors and certain other stockholders of the Company have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) that are substantially similar to the shares of
Class B Common Stock or which are convertible or exchangeable into securities
which are substantially similar to the shares of Class B Common Stock, without
the prior written consent of the Representatives of the Underwriters, except for
the shares of Class B Common Stock offered hereby and certain gift transactions.

The Company intends to file a registration statement under the Securities
Act following the date of this Prospectus to register the future issuance of up
to approximately 1.7 million shares of Class B Common Stock under the option
plans and options issued to employees, directors or consultants outside of the
option plans. Shares issued pursuant to such options after the effective date of
such registration statement will be freely tradable in the open market, subject
to the lock-up agreements with the Representatives described above and, in the
case of sales by affiliates, to certain requirements of Rule 144.

The Company is unable to estimate the number of shares that may be sold in
the future by its existing stockholders or the effect, if any, that sales of
shares by such stockholders will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Class B Common
Stock, or the prospect of such sales, could adversely affect the market price of
the Class B Common Stock.

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

Upon consummation of this offering, the authorized capital stock of the
Company will consist of 6,000,000 shares of Class A Common Stock, par value $.01
per share, 54,000,000 shares of Class B Common Stock, par value $.01 per share,
and 5,000,000 shares of undesignated Preferred Stock, par value $.01 per share
(the "Preferred Stock"). Of the 54,000,000 shares of Class B Common Stock
authorized, 6,000,000 shares have been reserved for issuance upon conversion of
outstanding Class A Common Stock.

The following summary description of the capital stock of the Company does
not purport to be complete and is qualified in its entirety by reference to the
Company's Second Amended and Restated Certificate of Incorporation to be filed
prior to the consummation of the offering, the Certificate of Designations of
12% Senior Redeemable Exchangeable Preferred Stock (the "Senior Preferred
Certificate of Designations"), and the Certificate of Powers, Designations,
Preferences and Relative, Participating, Optional and Other Special Rights of
Junior Exchangeable Preferred Stock and Qualifications,

52
<PAGE>
Limitations and Restrictions Thereof (the "Junior Preferred Certificate of
Designations"), copies of which are filed as exhibits to the Registration
Statement of which this Prospectus is a part.

COMMON STOCK

Each share of Class A Common Stock is entitled to ten votes and each share
of Class B Common Stock is entitled to one vote on all matters submitted to a
vote of the stockholders of the Company. Generally, all matters to be voted upon
by stockholders must be approved by a majority of the votes cast or entitled to
be cast by all shares of Class A Common Stock and Class B Common Stock, voting
together as a single class. Class A Common Stock is convertible at any time into
Class B Common Stock on a one-for-one basis. Subject to preferences that may be
applicable to any then outstanding Preferred Stock, holders of Class A Common
Stock and Class B Common Stock are entitled to receive ratably such dividends,
if any, as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy". Dividends payable in shares of Common
Stock or in options or similar rights to acquire shares of Common Stock or in
securities convertible into or exchangeable for shares of Common Stock may be
paid only in shares of or in options or similar rights to the Company's Class B
Common Stock. In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding Preferred Stock or any class or series of stock ranking prior
to the Common Stock. There are no redemption or sinking fund provisions
applicable to the shares of Common Stock. All outstanding shares of Common Stock
are, and the Class B Common Stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable.

The Class A Common Stock is convertible at any time at the option of the
holder, on a one-for-one basis, into shares of Class B Common Stock.
Additionally, shares of Class A Common Stock will automatically convert into
Class B Common Stock, on a one-for-one basis, (a) upon the transfer of record or
beneficial ownership of such shares of Class A Common Stock to an entity or
person other than (i) Jeffrey B. O'Neill, SBIC Partners or Exeter (the "Original
Holders"), or (ii) an affiliate, beneficiary, family member or trust related to
the Original Holders, or (b) immediately following the date that the Original
Holders directly own an aggregate of less than 15% of the outstanding equity
interest of GSV.

PREFERRED STOCK

SENIOR PREFERRED STOCK

Following the consummation of this offering, pursuant to discussions between
the Company and the holder of the Senior Preferred Stock, the Company intends to
use a portion of the proceeds generated from the offering to repurchase all
outstanding shares of the Senior Preferred Stock. See Note 8 of Notes to
Consolidated Financial Statements for a description of the Senior Preferred
Stock.

JUNIOR PREFERRED STOCK

Upon consummation of the offering, the shares of Junior Preferred Stock will
automatically convert into shares of the Company's Class B Common Stock. See
Note 8 of Notes to Consolidated Financial Statements for a description of the
Junior Preferred Stock.

53
<PAGE>
UNDESIGNATED PREFERRED STOCK

The Company's Second Amended and Restated Certificate of Incorporation
authorizes 5,000,000 shares of undesignated Preferred Stock. The Board of
Directors will have the authority, without further action by the stockholders,
to issue from time to time the Preferred Stock in one or more series and to fix
the number of shares, designations, preferences, powers, and relative
participating, optional or other special rights and the qualifications or
restrictions thereof. The preferences, powers, rights and restrictions of
different series of Preferred Stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions and other matters. The issuance of Preferred
Stock could decrease the amount of earnings and assets available for
distribution to holders of Common Stock or affect adversely the rights and
powers, including voting rights, of the holders of Common Stock, and may have
the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of Preferred Stock.

STOCKHOLDERS AGREEMENT

Pursuant to the terms of the Stockholders Agreement by and among the Company
and several stockholders (each, a "Stockholder"), SBIC Partners is entitled to
nominate three members of the Company's Board of Directors, and each of (i) Mr.
O'Neill and (ii) Exeter is entitled to nominate one member of the Company's
Board of Directors. Under certain circumstances more fully described in the
Senior Preferred Certificate of Designations, John Hancock is entitled to
nominate up to three members of the Company's Board of Directors, in which case
the size of the Board of Directors will be increased to provide for such
additional members. All committees of the Board of Directors and each board of
directors of each of the Company's subsidiaries must contain at least a majority
of members designated by SBIC Partners. The prior written consent of SBIC
Partners, which consent shall be subject to the sole discretion of SBIC
Partners, is required with respect to the following actions by the Company or
any of its subsidiaries:(i) any merger, consolidation, sale of assets or stock,
dissolution or liquidation; (ii) any amendment to the Certificate of
Incorporation or Bylaws; (iii) the acquisition or investment in any business
entity; (iv) any material change in the business presently conducted by the
Company or any subsidiary; (v) any loan, guaranty or material increase in
indebtedness; and (vi) certain transactions with Affiliates (as defined in the
Stockholders Agreement). The rights of each of SBIC Partners, Mr. O'Neill,
Exeter and John Hancock with respect to elections to the Board of Directors and
SBIC Partners' approval rights with respect to certain transactions terminate
with respect to a Stockholder once such Stockholder and its permitted
transferees hold in the aggregate less than 10% of the shares of Common Stock or
Junior Preferred Stock, as the case may be, initially held by such Stockholder
on October 10, 1996.

Subject to certain exceptions, if the Company authorizes the issuance or
sale of any equity securities of the Company or any securities containing
options or rights to acquire any equity securities of the Company, the Company
must first offer to sell to each Stockholder, at the same price and on the same
terms, a certain amount of such securities, options or rights corresponding to
each Stockholder's ownership of Class A Common Stock and Junior Preferred Stock.
The Stockholders Agreement also contains certain restrictions on the
Stockholders' ability to transfer their shares of Common Stock and Junior
Preferred Stock, as well as a provision pursuant to which SBIC Partners may
require the Stockholders and their Affiliates to sell all of the shares of
Common Stock and/or Junior Preferred Stock owned by them to any person or entity
to whom SBIC Partners proposes to transfer all of the Common Stock held by it.

The Stockholders Agreement provides that at the request of SBIC Partners,
the Company will solicit interests in and initiate discussions with potential
purchasers of the assets or capital stock of the Company and/or Golden State
Vintners or reorganize, recapitalize or refinance the senior or subordinated
debt or the equity of the Company in a manner reasonably acceptable to SBIC
Partners. In

54
<PAGE>
connection with such an event, the Stockholders agree to take all necessary
actions requested by SBIC Partners subject to certain conditions.

The Stockholders Agreement will terminate upon the consummation of this
offering if the offering results in gross proceeds to the Company of at least
$35 million.

REGISTRATION RIGHTS

In connection with the Company's incorporation in April 1995, the holders of
5,868,612 shares of Class A Common Stock and the holders of 1,956,239 shares of
Class B Common Stock received certain rights with respect to the registration
under the Securities Act of shares of GSV's capital stock (the "April
Registrable Securities"). If the Company proposes to register any of its
securities under the Securities Act, holders of April Registrable Securities are
entitled to notice of such registration and are entitled to include, at the
Company's expense, such shares therein, provided among other conditions, that
any underwriters involved in the registration have the right to limit the number
of April Registrable Securities included in such registration. In addition,
commencing April 27, 2000, subject to certain conditions and limitations, the
holders of at least 15% of the April Registrable Securities have the right on
six occasions to require the Company to file a registration statement under the
Securities Act to register all or part of their April Registrable Securities.

Pursuant to a Registration Rights Agreement dated October 10, 1996, the
holders of 4,968,769 shares of Class A Common Stock and 99,860 shares of Class B
Common Stock were granted certain rights with respect to the registration under
the Securities Act of shares of GSV's capital stock (the "October Registrable
Securities"). If the Company proposes to register any October Registrable
Securities (or securities convertible into or exchangeable or exercisable for
shares of such series and class) under the Securities Act, either for its own
account or for the account of other security holders, holders of the October
Registrable Securities are entitled to notice of such registration and are
entitled to include, at the Company's expense, such shares therein. Such
"piggyback rights" take priority over any similar rights held by any other
stockholder of the Company, including those stockholders holding April
Registrable Securities, provided among other conditions, that the underwriters
have the right to limit the number of October Registrable Securities included in
such registration to 25% of the aggregate number of shares registered thereby.
Additionally, commencing 180 days after the closing of this Offering, and
subject to certain conditions and limitations, holders of the October
Registrable Securities have the right to require on two occasions the Company to
file a registration statement under the Securities Act to register at least 15%
of the October Registrable Securities. Further, the holders of October
Registrable Securities may require the Company to register all or any portion of
such shares on Form S-3, when such form becomes available to the Company,
subject to certain conditions and limitations. SBIC Partners may, at any time,
require the Company to engage a reputable, nationally-recognized underwriter
reasonably acceptable to the Board of Directors to register shares of the
Company's Common Stock under the Securities Act and to include in such
registration that number of shares of Common Stock that equal up to 20% of the
aggregate number of shares of the capital stock of the Company held by SBIC
Partners and its affiliates.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to the provisions of Section 203 of the Delaware Law,
an anti-takeover law. In general, the statue prohibits a publicly held Delaware
corporation from engaging in a business combination with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved by the Board of Directors and the holders of at least
66 2/3% of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder). A "business combination" includes a merger,
asset sale or other transaction resulting in financial benefit to the
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within the three prior years, did

55
<PAGE>
own) 15% or more of the corporation's voting stock. This statutory prohibition
does not apply if, upon consummation of the transaction in which any person
becomes an interested stockholder, the interested stockholder owns at least 85%
of the outstanding voting stock of the corporation (excluding shares held by
persons who are both directors and officers or by certain stock option plans).

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Class B Common Stock is U.S. Stock
Transfer Corporation, 1745 Gardena Avenue, Glendale, California 91204, and its
telephone number is (818) 502-1404.

LISTING

The Class B Common Stock has been approved for listing on the Nasdaq
National Market under the symbol "VINT". The Company has not applied to list its
shares of Class B Common Stock on any other exchange or quotation system.

LEGAL MATTERS

Certain legal matters with respect to the Class B Common Stock offered
hereby will be passed upon for the Company by Riordan & McKinzie, a Professional
Corporation, Los Angeles, California. Certain principals of Riordan & McKinzie
own an aggregate of 59,916 shares of Class B Common Stock. The validity of the
Class B Common Stock offered hereby will be passed upon for the Underwriters by
Sullivan & Cromwell, Los Angeles, California.

EXPERTS

The financial statements of Golden State Vintners, Inc. as of June 30, 1996
and 1997 and March 31, 1998 and for the period April 27, 1995 to June 30, 1995,
for the years ended June 30, 1996 and 1997 and for the nine months ended March
31, 1998 and the financial statements of Golden State Vintners ("Predecessor")
for the period July 1, 1994 to April 26, 1995 included in this prospectus and
the related financial statement schedule included elsewhere in the registration
statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the registration
statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.

The statements in this Prospectus on page three in the second sentence of
the fourth paragraph, on page four in the third and fourth sentences of the
second paragraph, on page twenty-seven in the third and fourth sentences of the
fifth paragraph, on page thirty in the first and second sentences of the first
paragraph, the second and third sentences of the second paragraph and the second
sentence of the third paragraph, on page thirty-four in the fourth sentence of
the second paragraph, and on page thirty-eight in the second sentence of the
fourth paragraph and the fourth sentence of the fifth paragraph have been
reviewed and approved by Gomberg, Fredrikson & Associates, a wine industry
consulting firm.

56
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the Class B Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Class B Common Stock offered hereby, reference is
hereby made to such Registration Statement, exhibits and schedules. Statements
contained in this Prospectus regarding the contents of any contract or other
document are not necessarily complete; with respect to each such contract or
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. A
copy of the Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549; the New York
Regional Office located at 7 World Trade Center, 13th Floor, New York, New York
10048; and the Chicago Regional Office located at Citicorp Center, Chicago,
Illinois 60661. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the Commission. In addition, the
Commission maintains a World Wide Web site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.

The Company intends to furnish to its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three fiscal quarters of each fiscal year of
the Company.

57
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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

Consolidated Balance Sheets as of June 30, 1996 and 1997 and March 31, 1998........... F-3

Consolidated Statements of Operations for the Period July 1, 1994 to April 26, 1995
(Predecessor), for the Period April 27, 1995 to June 30, 1995, for the Years Ended
June 30, 1996 and 1997, and for the Nine Months Ended March 31, 1997 (Unaudited) and
1998................................................................................ F-4

Consolidated Statements of Stockholders' Equity for the Period July 1, 1994 to April
26, 1995 (Predecessor), for the Period April 27, 1995 to June 30, 1995, for the
Years Ended June 30, 1996 and 1997, and for the Nine Months Ended March 31, 1998.... F-5

Consolidated Statements of Cash Flows for the Period July 1, 1994 to April 26, 1995
(Predecessor), for the Period April 27, 1995 to June 30, 1995, for the Years Ended
June 30, 1996 and 1997, and for the Nine Months Ended March 31, 1997 (Unaudited) and
1998................................................................................ F-6

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

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors
of Golden State Vintners, Inc.

We have audited the accompanying consolidated balance sheets of Golden State
Vintners, Inc. and subsidiaries (the "Company") as of June 30, 1996 and 1997 and
March 31, 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the period from April 27, 1995 to June
30, 1995, for the years ended June 30, 1996 and 1997 and for the nine-month
period ended March 31, 1998. We also audited the consolidated statements of
operations, stockholders' equity and cash flows of Golden State Vintners
("Predecessor") for the period from July 1, 1994 to April 26, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at June 30, 1996
and 1997 and March 31, 1998, and the results of its operations and its cash
flows for the period from April 27, 1995 to June 30, 1995, for the years ended
June 30, 1996 and 1997 and for the nine-month period ended March 31, 1998, in
conformity with generally accepted accounting principles. Further, in our
opinion, the Golden State Vintners financial statements present fairly, in all
material respects, the results of its operations and its cash flows for the
period from July 1, 1994 to April 26, 1995 in conformity with generally accepted
accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for certain inventories in 1996 and in 1997.

Fresno, California
June 17, 1998
(July 20, 1998 as to Note 15)

DELOITTE & TOUCHE LLP

F-2
<PAGE>
GOLDEN STATE VINTNERS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
----------------------------- --------------
1996 1997 1998
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents.......................................... $ 1,212,161 $ 1,218,525 $ 3,425,138
Trade receivables............................................. 7,486,944 5,640,252 10,086,418
Inventories................................................... 18,318,978 23,424,008 31,155,832
Refundable income taxes....................................... -- -- 3,709,491
Deferred income taxes......................................... 151,744 219,154 846,091
Refundable deposits and prepaid expenses...................... 1,380,410 869,996 658,350
------------- -------------- --------------
Total current assets........................................ 28,550,237 31,371,935 49,881,320
PROPERTY, PLANT AND EQUIPMENT -- Net.............................. 61,280,738 70,193,214 74,326,787
DEFERRED FINANCING COSTS.......................................... 603,758 546,186 431,809
------------- -------------- --------------
TOTAL ASSETS...................................................... $ 90,434,733 $ 102,111,335 $ 124,639,916
------------- -------------- --------------
------------- -------------- --------------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit............................................. $ 9,000,000 $ 12,800,000 $ 18,300,000
Accounts payable................................................ 5,566,840 2,526,870 3,729,756
Payable to growers.............................................. 936,107 1,063,049 1,196,764
Payroll and related liabilities................................. 758,280 1,391,004 11,467,829
Other accrued liabilities....................................... 284,638 282,869 2,629,275
Income taxes payable............................................ -- 547,612 --
Current portion of long-term debt............................... 2,036,976 2,773,984 3,396,085
Accrued interest................................................ 632,648 600,486 916,324
------------- -------------- --------------
Total current liabilities..................................... 19,215,489 21,985,874 41,636,033
LONG-TERM DEBT.................................................... 42,973,404 49,780,591 48,022,914
DEFERRED INCOME TAXES............................................. 6,891,009 6,968,737 9,390,126
DEFERRED COMPENSATION............................................. 650,606 1,989,112 --
REDEEMABLE PREFERRED STOCK........................................ 10,033,987 8,813,415 8,914,630
COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)...................
STOCKHOLDERS' EQUITY:.............................................
Common stock:
Class A common stock; 1,885,000 shares issued and outstanding
at June 30, 1996............................................ 6,500 -- --
Class B common stock; 3,770,000 shares issued and outstanding
at June 30, 1996 and 5,561,012 at June 30, 1997 and March
31, 1998.................................................... 13,000 19,176 19,176
Class E common stock; 1,200,829 shares issued and
outstanding................................................. 4,141 4,141 4,141
Class K common stock; 99,860 shares issued and outstanding at
June 30, 1997 and March 31, 1998............................ -- 344 344
Additional paid-in capital...................................... 11,796,754 8,844,136 8,844,136
Retained earnings (deficit)..................................... (1,150,157) 3,705,809 7,808,416
------------- -------------- --------------
Total stockholders' equity.................................. 10,670,238 12,573,606 16,676,213
------------- -------------- --------------
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
EQUITY.......................................................... $ 90,434,733 $ 102,111,335 $ 124,639,916
------------- -------------- --------------
------------- -------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
GOLDEN STATE VINTNERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR ---------------------------------------------------------------------------------
-------------- NINE MONTHS ENDED MARCH 31,
JULY 1, 1994 YEAR ENDED JUNE 30,
TO APRIL 26, APRIL 27, 1995 TO ------------------------------ ------------------------------
1995 JUNE 30, 1995 1996 1997 1998
-------------- ----------------- -------------- -------------- 1997 --------------
--------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES, net:
Bulk wine.................. $ 23,741,308 $ 2,340,399 $ 33,816,249 $ 50,227,982 $ 47,400,845 $ 53,815,223
Wine grapes................ 12,874,703 -- 15,183,028 18,585,126 18,585,126 22,817,042
Case goods................. 4,591,784 1,696,304 11,335,407 15,829,183 11,808,908 15,080,553
Brandy and spirits......... 1,642,710 334 11,420,661 11,142,534 10,883,548 9,961,874
-------------- ----------------- -------------- -------------- -------------- --------------
Total revenues........... 42,850,505 4,037,037 71,755,345 95,784,825 88,678,427 101,674,692
COST OF SALES................ 34,771,874 3,948,872 58,468,362 71,661,816 66,846,120 75,624,507
-------------- ----------------- -------------- -------------- -------------- --------------
GROSS PROFIT................. 8,078,631 88,165 13,286,983 24,123,009 21,832,307 26,050,185
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.... 3,363,255 950,808 5,042,425 7,408,179 5,314,977 13,066,398
-------------- ----------------- -------------- -------------- -------------- --------------
INCOME (LOSS) FROM
OPERATIONS................. 4,715,376 (862,643) 8,244,558 16,714,830 16,517,330 12,983,787
INTEREST EXPENSE............. (2,796,664) (919,590) (5,343,637) (5,879,945) (4,480,655) (5,203,209)
OTHER EXPENSE, net........... (45,020) (1,512) (394,370) (676,701) (677,130) (165,350)
-------------- ----------------- -------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE INCOME
TAXES...................... 1,873,692 (1,783,745) 2,506,551 10,158,184 11,359,545 7,615,228
INCOME TAXES................. -- -- 583,000 3,988,000 4,464,000 2,877,000
-------------- ----------------- -------------- -------------- -------------- --------------
NET INCOME (LOSS)............ $ 1,873,692 $ (1,783,745) $ 1,923,551 $ 6,170,184 $ 6,895,545 $ 4,738,228
-------------- ----------------- -------------- -------------- -------------- --------------
-------------- ----------------- -------------- -------------- -------------- --------------
REDEEMABLE PREFERRED STOCK
DIVIDENDS.................. -- -- (1,289,962) (1,314,218) (678,597) (635,621)
REDEMPTION OF JUNIOR
PREFERRED STOCK............ -- -- -- (404,682) (404,682) --
-------------- ----------------- -------------- -------------- -------------- --------------
INCOME/(LOSS) AVAILABLE TO
COMMON STOCKHOLDERS........ -- $ (1,783,745) $ 633,589 $ 4,451,284 $ 5,812,266 $ 4,102,607
-------------- ----------------- -------------- -------------- -------------- --------------
EARNINGS (LOSS) PER SHARE:
BASIC $ (.26) $ .09 $ .65 $ .85 $ .60
----------------- -------------- -------------- -------------- --------------
DILUTED $ (.26) $ .09 $ .65 $ .83 $ .57
----------------- -------------- -------------- -------------- --------------
WEIGHTED AVERAGE SHARES
OUTSTANDING
BASIC...................... -- 6,855,829 6,855,829 6,860,237 6,859,746 6,861,701
-------------- ----------------- -------------- -------------- -------------- --------------
DILUTED.................... -- 6,855,829 6,855,829 6,860,237 7,080,333 7,318,583
-------------- ----------------- -------------- -------------- -------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
GOLDEN STATE VINTNERS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------------------- -------------------------------------------------
SERIES A SERIES B SERIES C CLASS A CLASS B CLASS E CLASS K
--------- ----------- --------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
BALANCE, JULY 1, 1994.............. $ 122,951 $ 77,049 $ -- $ -- $ -- $ -- $8,882,572
Conversion of warrants to
preferred stock................ -- -- $ 363,258 -- -- -- --
Capital stock redemptions........ -- -- (80,097) -- -- -- (11,404)
Net income....................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, APRIL 26, 1995............ $ 122,951 $ 77,049 $ 283,161 $ -- $ -- $ -- $8,871,168
--------- ----------- --------- ----------- ----------- ----------- ----------
--------- ----------- --------- ----------- ----------- ----------- ----------
- -------------------------------------------------------------------------------------------------------------------------
SUCCESSOR:
BALANCE, APRIL 27, 1995............ $ -- $ -- $ -- $ 6,500 $ 13,000 $ 4,141 $ --
Net loss......................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, JUNE 30, 1995............. -- -- -- 6,500 13,000 4,141 --
Dividends paid................... -- -- -- -- -- -- --
Net income....................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, JUNE 30, 1996............. -- -- -- 6,500 13,000 4,141 --
Repurchase of common stock....... -- -- -- (6,500) (3,397) -- --
Issuance of common stock......... -- -- -- -- 9,573 -- 344
Redemption of Junior Preferred
Stock.......................... -- -- -- -- -- -- --
Dividends paid................... -- -- -- -- -- -- --
Net income....................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, JUNE 30, 1997............. -- -- -- -- 19,176 4,141 344
Dividends paid................... -- -- -- -- -- -- --
Net income....................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, MARCH 31, 1998............ $ -- $ -- $ -- $ -- $ 19,176 $ 4,141 $ 344
--------- ----------- --------- ----------- ----------- ----------- ----------
--------- ----------- --------- ----------- ----------- ----------- ----------

<CAPTION>
ADDITIONAL RETAINED
PAID-IN EARNINGS
CAPITAL (DEFICIT) TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
PREDECESSOR:
BALANCE, JULY 1, 1994.............. $ -- $ 4,706,406 $13,788,978
Conversion of warrants to
preferred stock................ -- (363,258) --
Capital stock redemptions........ -- -- (91,501)
Net income....................... -- 1,873,692 1,873,692
----------- ----------- -----------
BALANCE, APRIL 26, 1995............ $ -- $ 6,216,840 $15,571,169
----------- ----------- -----------
----------- ----------- -----------
- -----------------------------------
SUCCESSOR:
BALANCE, APRIL 27, 1995............ $11,796,754 $ -- $11,820,395
Net loss......................... -- (1,783,745) (1,783,745)
----------- ----------- -----------
BALANCE, JUNE 30, 1995............. 11,796,754 (1,783,745) 10,036,650
Dividends paid................... -- (1,289,963) (1,289,963)
Net income....................... -- 1,923,551 1,923,551
----------- ----------- -----------
BALANCE, JUNE 30, 1996............. 11,796,754 (1,150,157) 10,670,238
Repurchase of common stock....... (9,738,013) -- (9,747,910)
Issuance of common stock......... 7,190,077 -- 7,199,994
Redemption of Junior Preferred
Stock.......................... (404,682) -- (404,682)
Dividends paid................... -- (1,314,218) (1,314,218)
Net income....................... -- 6,170,184 6,170,184
----------- ----------- -----------
BALANCE, JUNE 30, 1997............. 8,844,136 3,705,809 12,573,606
Dividends paid................... -- (635,621) (635,621)
Net income....................... -- 4,738,228 4,738,228
----------- ----------- -----------
BALANCE, MARCH 31, 1998............ $ 8,844,136 $ 7,808,416 $16,676,213
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
GOLDEN STATE VINTNERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
(SUCCESSOR)
(PREDECESSOR) --------------------------------------------------------------------
-------------- NINE MONTHS ENDED
JULY 1, 1994 APRIL 27, YEAR ENDED JUNE 30, MARCH 31,
TO APRIL 26, 1995 TO JUNE -------------------------- --------------------------
1995 30, 1995 1996 1997 1998
-------------- ------------ ------------ ------------ 1997 ------------
------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................. $ 1,873,692 $ (1,783,745) $ 1,923,551 $ 6,170,184 $ 6,895,545 $ 4,738,228
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization... 1,926,064 754,557 3,319,119 4,206,932 3,524,704 3,767,650
Loss on disposal of assets...... -- -- 583,885 25,629 43,956 24,687
Accrual for deferred
compensation.................. -- -- 650,606 1,338,506 889,758 --
Accrual for incentive
compensation.................. -- -- -- -- -- 8,800,000
Deferred income taxes........... -- -- 172,476 10,319 -- 1,794,452
Changes in assets and
liabilities, net of effects of
acquisition of GSV:
Trade receivables............. (3,058,165) 3,421,309 (4,405,082) 1,846,692 60,010 (4,446,166)
Inventories................... 2,402,322 (1,738,448) (3,892,132) (5,198,884) (2,760,258) (8,046,682)
Prepaid expenses.............. (114,304) 107,336 (150,065) (216,586) 40,631 (509,907)
Accounts payable.............. (540,652) (987,514) 2,868,362 (3,039,970) (3,132,387) 1,202,886
Payable to growers............ (324,446) -- 693,674 126,942 227,288 133,715
Accrued interest.............. (53,806) 510,771 204,232 (32,162) (116,183) 315,838
Payroll and related
liabilities................. (41,792) (30,546) 519,755 632,724 445,289 (712,287)
Other accrued liabilities..... 106,926 (79,494) 185,632 (1,769) (155,582) 2,346,406
Income taxes payable.......... -- -- -- 547,612 1,423,662 (4,257,103)
-------------- ------------ ------------ ------------ ------------ ------------
Net cash provided by operating
activities.................. 2,175,839 174,226 2,674,013 6,416,169 7,386,433 5,151,717
-------------- ------------ ------------ ------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment....................... (3,221,612) (8,967,237) (3,535,887) (4,777,797) (2,675,934) (5,524,230)
Acquisition of GSV................ -- (20,852,119) -- -- -- --
Refund (payment) of deposits...... -- (210,000) (117,000) 727,000 167,000 142,000
-------------- ------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities.................... (3,221,612) (30,029,356) (3,652,887) (4,050,797) (2,508,934) (5,382,230)
-------------- ------------ ------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
Borrowings on line of credit...... 21,404,853 700,000 25,102,910 24,708,097 19,788,097 52,000,000
Payments on line of credit........ (20,054,853) (950,000) (19,602,910) (20,908,097) (18,325,000) (46,500,000)
Cash overdraft.................... 18,403 392,154 (410,557) -- -- --
Borrowings on long-term debt...... 345,147 40,975,000 -- 2,568,922 611,442 --
Payments on long-term debt........ (526,909) (30,078,898) (1,765,407) (3,022,213) (2,659,245) (2,417,253)
Payment of financing costs........ (869,637) (735,880) (40,284) (114,208) (106,572) (10,000)
Payment of dividends.............. -- -- (1,289,963) (1,314,218) (678,597) (635,621)
Issuance of capital stock......... -- 19,750,000 -- 7,199,994 7,199,994 --
Repurchase of common stock........ (11,404) -- -- (9,747,910) (9,747,910) --
Redemption of preferred stock..... (80,097) -- -- (1,729,375) (1,729,375) --
-------------- ------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities.......... 225,503 30,052,376 1,993,789 (2,359,008) (5,647,166) 2,437,126
-------------- ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................... (820,270) 197,246 1,014,915 6,364 (769,667) 2,206,613
CASH AND EQUIVALENTS, BEGINNING OF
PERIOD............................ 820,270 -- 197,246 1,212,161 1,212,161 1,218,525
-------------- ------------ ------------ ------------ ------------ ------------
CASH AND EQUIVALENTS, END OF
PERIOD............................ $ -- $ 197,246 $ 1,212,161 $ 1,218,525 $ 442,494 $ 3,425,138
-------------- ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

1. ORGANIZATION AND OPERATIONS

Golden State Vintners, Inc. (the "Company"), formerly Golden State
Acquisition Corp., a Delaware corporation, was formed on April 26, 1995 for the
purpose of acquiring and holding for investment all of the outstanding capital
stock of Golden State Vintners ("GSV"), a California corporation. Such
acquisition occurred on April 27, 1995 (see Note 3). The Company constitutes the
successor company (Successor). The historical results of operations for the
period July 1, 1994 to April 26, 1995 are the results of GSV (Predecessor).

The Company processes and bottles wine, brandy and juice for sale, primarily
in bulk, to other wineries and processors located principally in California. The
Company experiences seasonal fluctuations in its revenues. Due to the inherent
seasonality of its grape harvesting and crushing operations, the Company
generally reports its highest revenues and net income in its first and second
fiscal quarters.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the Company, its wholly owned
subsidiary, GSV, and an 80% owned partnership, GSV International Trading
Company. All significant intercompany transactions and accounts have been
eliminated.

INTERIM FINANCIAL INFORMATION

The financial information as of March 31, 1997 and 1998 and for each of the
nine-months then ended includes all adjustments (consisting only of normal
recurring accruals) that the Company considers necessary for a fair presentation
of the financial position at such date and the operating results and cash flows
for those periods. Operating results for any quarter are not necessarily
indicative of the results for any future period. The financial information as of
March 31, 1997 and for the nine months then ended is unaudited.

ACCOUNTING ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of certain financial instruments, including cash,
receivables, accounts payable, and other accrued liabilities, approximate the
amounts recorded in the balance sheet because of the relatively short-term
maturities of these financial instruments. The fair value of bank, insurance
company and other long-term financing at March 31, 1998 approximate the amounts
recorded in the balance sheet based on information available to the Company with
respect to current interest rates and terms for similar debt instruments. It is
not practicable to estimate the fair value of the redeemable preferred stock
because it is not traded in the open market and hence its value is not readily
determinable.

F-7
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS

For purposes of reporting cash flows, the Company considers cash equivalents
to include all short-term investments with an original maturity of three months
or less.

RECEIVABLES

Substantially all accounts receivable are due from major wineries and wine
distributors located principally in California. The Company performs periodic
credit evaluations of its customers' financial condition and generally does not
require collateral. Trade and other receivables at June 30, 1996 and 1997 and
March 31, 1998 are net of an allowance for doubtful accounts of $180,000,
$100,000 and $188,000, respectively.

INVENTORIES

The Company changed its method of costing wine inventories effective July 1,
1995 from the first-in, first-out ("FIFO") method, to the last-in, first-out
("LIFO") method. The Company also changed to the LIFO method for brandy
inventory effective July 1, 1996. Management believes that the LIFO method
matches current costs with current revenues and more clearly reflects the
Company's results of operations. Inventories at June 30, 1996 and 1997 and March
31, 1998 would have been higher by $135,525, $1,694,299 (including $519,997 for
brandy inventories) and $1,622,302 (including $751,689 for brandy inventories),
respectively, had the Company used FIFO cost rather than LIFO cost for valuation
of its inventories. The cumulative effect of these changes to the LIFO method on
the operating results as of the beginning of 1996 and 1997 and the pro forma
effects on the operating results of prior years have not been presented as the
effects are not readily determinable. Juice is stated at the lower of average
cost or net realizable value. Inventories of supplies are stated at the lower of
FIFO cost 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.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over the estimated
lives of the related assets, as follows:

<TABLE>
<S> <C>
Land Improvements................................... 30 years
Vineyards........................................... 20 years
Buildings........................................... 7 to 48 years
Cooperage........................................... 10 to 30 years
Equipment........................................... 7 to 20 years
</TABLE>

Costs incurred in developing vineyards are capitalized until the vineyards
become commercially productive. Maintenance and repairs are charged to operating
costs as incurred. The cost of betterments is capitalized. Gains or losses on
the disposition of assets are included in income. Amortization of assets held
under capital leases is included in depreciation expense.

F-8
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In the year ended June 30, 1997, the Company adopted Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." The standard requires impairment losses to
be recorded on long-lived assets and certain intangible assets when the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Adoption of this standard had no impact on the
Company's financial statements.

DEFERRED FINANCING COSTS

Financing costs incurred to obtain new financing are deferred and amortized
over the term of the related loan. At June 30, 1996 and 1997 and March 31, 1998,
such costs were $603,758, $546,186 and $431,809, respectively, which were net of
accumulated amortization of $171,704, $316,138 and $447,180, respectively.

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 of the product. In certain cases the contract requirements may specify
that the Company store such product after it has been sold and may require the
buyer to pay a storage fee. Sales of wine grapes and cased goods are recognized
at the time of delivery to the customer. Wine processing and storage fees are
recognized as those services are provided. At June 30, 1996 and 1997 and at
March 31, 1998 revenues relating to product owned by others but held by the
Company were approximately $14,022,000, $27,646,000 and $46,774,000,
respectively.

MAJOR CUSTOMERS

Wine grape sales are primarily to one customer that accounted for
approximately 24% of revenues in the period July 1, 1994 to April 26, 1995
(Predecessor), approximately 15% and 17% of revenues in the years ended June 30,
1996 and 1997, respectively, and approximately 19% of revenues in each of the
nine-months ended March 31, 1997 and 1998, respectively. A significant portion
of the Company's wine grape sales contracts with this customer expires in 1998
such that revenues from sales of wine grapes to such customer after 1998 will
not be significant. The Company plans to use the remaining wine grape tonnage
for the production of bulk wine or cased goods.

The Company's brandy sales are primarily to one customer. Such sales,
together with bulk wine and case goods sales to such customer, accounted for
approximately 19% and 16% of revenues in the years ended June 30, 1996 and 1997,
respectively, and approximately 17% and 14% of revenues in each of the
nine-months ended March 31, 1997 and 1998, respectively.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("FAS 109"),
and provides deferred income taxes for the differences between the tax bases of
assets and liabilities and their related financial statement amounts using
current income tax rates.

F-9
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION

The Company accounts for stock-based awards using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), and recognizes compensation expense for certain
stock-based awards granted to employees as required by APB 25. Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), became effective in fiscal year 1997 and requires
disclosure of certain pro forma information as if the Company adopted the fair
value method of accounting for stock-based compensation prescribed by FAS 123
(see Note 9).

EARNINGS (LOSS) PER SHARE

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128").
This Statement simplifies the standards for computing earnings per share ("EPS")
and makes them comparable to international EPS standards. FAS 128 replaces the
presentation of primary EPS with a presentation of basic EPS. In addition,
entities with complex capital structures are required to provide disclosure of
diluted EPS. Basic earnings (loss) per share is computed by dividing income
(loss) available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings (loss) per share is
computed by dividing income (loss) available to common stockholders adjusted for
the effects of preferred stock dividends, interest on convertible debt, and
other changes in income or loss resulting from the presumed conversion of
potential common shares, if any, by the weighted average common shares
outstanding during the period plus potential common shares outstanding. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
Company.

F-10
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic and fully diluted earnings per share ("EPS") are determined as
follows:

<TABLE>
<CAPTION>
SUCCESSOR
---------------------------------------------------------------
APRIL 27, NINE MONTHS ENDED
1995 TO YEAR ENDED JUNE 30, MARCH 31,
JUNE 30, ------------------------ -----------------------
1995 1996 1997 1998
------------ ----------- ----------- 1997 ----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BASIC EPS COMPUTATION
Numerator:
Net income (loss)........................... $(1,783,745) $ 1,923,551 $ 6,170,184 $6,895,545 $4,738,228
Less: Redeemable preferred stock
dividends................................. -- (1,289,962) (1,314,218) (678,597) (635,621)
Redemption of Junior Preferred Stock... -- -- (404,682) (404,682) --
------------ ----------- ----------- ----------- ----------
Income (loss) available to common
stockholders.............................. $(1,783,745) $ 633,589 $ 4,451,284 $5,812,266 $4,102,607
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
Denominator:
Weighted average common shares.............. 6,855,829 6,855,829 6,860,237 6,859,746 6,861,701
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
Basic EPS..................................... $ (.26) $ .09 $ .65 $ .85 $ .60
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
DILUTED EPS COMPUTATION
Numerator:
Income available to common stockholders..... $(1,783,745) $ 633,589 $ 4,451,284 $5,812,266 $4,102,607
Add: Junior Preferred Stock dividends....... -- -- -- 78,597 35,621
------------ ----------- ----------- ----------- ----------
Income available to common stockholders and
assumed conversions....................... $(1,783,745) $ 633,589 $ 4,451,284 $5,890,863 $4,138,228
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
Denominator:
Weighted average common shares outstanding.. 6,855,829 6,855,829 6,860,237 6,859,746 6,861,701
Junior Preferred Stock...................... -- -- -- 220,587 130,343
Stock options............................... -- -- -- -- 326,539
------------ ----------- ----------- ----------- ----------
Adjusted weighted average common shares..... 6,855,829 6,855,829 6,860,237 7,080,333 7,318,583
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
Diluted EPS................................... $ (.26) $ .09 $ .65 $ .83 $ .57
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
</TABLE>

Options to purchase 800,933 and 1,603,980 shares of common stock at various
prices per share were outstanding at June 30, 1997 and March 31, 1998,
respectively, but were not included in diluted EPS computations because the
exercise prices were greater than the estimated fair values of the common shares
for the period then ended.

EPS for the period July 1, 1994 to April 26, 1995 (Predecessor) has not been
presented as it is not considered meaningful in light of the significant changes
in capital structure resulting from the Company's acquisition of GSV. All share
and per share amounts related to the EPS computations have been adjusted
retroactively to give the effect of the stock split described in Note 15.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board (the "Board') adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," which requires that an

F-11
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
enterprise report, by major components and as a single total, the change in its
net assets during the period from nonowner sources. In June 1997, the Board also
adopted Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise or Related Information," which requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Adoption of these statements will not impact the
Company's consolidated financial position, results of operations or cash flows;
however, the Company is assessing the impact of such statements on the
disclosures made in the notes to its consolidated financial statements. These
statements are effective for the Company's fiscal year beginning July 1, 1998.

3. ACQUISITION

On April 27, 1995, pursuant to a stock purchase agreement, the Company
purchased substantially all of the outstanding common and preferred stock of GSV
for cash consideration of $20,852,119. In addition, 523,980 shares of junior
exchangeable preferred stock (value of $2,024,502) were issued in connection
with this acquisition. The total value of the purchase transaction, including
transaction costs of $1,763,258, was $24,639,879.

The Company financed the purchase of GSV stock by issuing a combination of
debt and equity securities as follows:

- 100,000 shares of Senior Redeemable Exchangeable Preferred Stock (value,
$7,929,605)

- 1,200,829 shares of Class E common stock (value, $2,070,395)

- 1,885,000 shares of Class A common stock (value, $3,250,000)

- 3,770,000 shares of Class B common stock (value, $6,500,000)

- 523,980 shares of 6% Junior Exchangeable Preferred Stock (value,
$2,024,502)

- $35,000,000 Senior Secured First Mortgage Notes

- $8,000,000 revolving bank line of credit

Proceeds from the Senior Secured First Mortgage Notes and the revolving bank
line of credit were used to pay off existing GSV debt and certain transaction
costs.

The acquisition of GSV has been accounted for under the purchase accounting
method whereby the purchase price has been allocated to the assets acquired and
liabilities assumed based on their fair values at the date of acquisition. The
excess of estimated fair value of the net assets acquired over the purchase
price (approximately $11,517,000) was used to reduce the valuation assigned to
property, plant and equipment. Application of purchase accounting resulted in a
net increase in the recorded amount of net assets acquired of approximately
$7,826,000 at the acquisition date.

F-12
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

4. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1997 MARCH 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Bulk wine................................... $ 7,069,599 $ 12,033,151 $ 19,591,608
Cased and bottled wine...................... 1,333,063 964,418 4,133,731
Brandy...................................... 1,324,502 1,198,129 2,375,826
Juice, supplies and other................... 1,336,385 2,849,394 1,025,895
Unharvested crop costs...................... 7,255,429 6,378,916 4,028,772
-------------- -------------- --------------
Total..................................... $ 18,318,978 $ 23,424,008 $ 31,155,832
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1997
-------------- --------------
MARCH 31, 1998
--------------
<S> <C> <C> <C>
Land and improvements....................... $ 10,467,504 $ 11,657,660 $ 12,378,800
Vineyards................................... 25,813,207 26,167,912 26,203,023
Buildings................................... 6,511,391 10,008,507 11,092,317
Cooperage................................... 11,227,413 14,188,452 14,853,039
Equipment................................... 9,674,693 11,840,733 14,911,188
Construction in progress.................... 1,306,011 3,778,531 5,413,779
-------------- -------------- --------------
Total..................................... 65,000,219 77,641,795 84,852,146
Less accumulated depreciation and
amortization.............................. 3,719,481 7,448,581 10,525,359
-------------- -------------- --------------
Property, plant and equipment--net.......... $ 61,280,738 $ 70,193,214 $ 74,326,787
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

In December 1996, the Company purchased a wine processing facility,
including land, buildings, improvements, equipment and related personal
property, located near Soledad, California, for total consideration of
approximately $4,500,000. The Company financed approximately $3,800,000 and
$500,000 in two new debt agreements with a bank and the previous owner,
respectively.

In May 1997, the Company purchased a wine warehouse located near the
Company's Napa processing facility. The purchase price approximated $2,200,000
which included land, building, improvements and personal property. In connection
with this acquisition, GSV assumed two existing notes of $1,994,000 and $62,000.

F-13
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

6. BANK LINE OF CREDIT AND LONG-TERM DEBT

The Company has a revolving bank line of credit which provides for loans of
up to $22,500,000 with variable interest based on interest rate options elected
by the Company (8.85%, 7.46% and 8.50% at June 30, 1996 and 1997 and March 31,
1998, respectively). Borrowings on the line were $9,000,000, $12,800,000 and
$18,300,000 at June 30, 1996 and 1997 and March 31, 1998, respectively. Unused
availability under the line of credit was $4,200,000 at March 31, 1998. The
agreement expired in March 1998, however the Company renewed the line under
substantially the same terms in April 1998 (see Note 15).

F-14
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

6. BANK LINE OF CREDIT AND LONG-TERM DEBT (CONTINUED)
Long-term debt as of June 30, 1996 and 1997 and March 31, 1998 is as
follows:

<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------------------ --------------
1996 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Insurance company Senior Secured First Mortgage Notes, principal
and interest (9.69% through April 2000 and at 2.75% above the
short-term U.S. Treasury Note rate thereafter) payable
$370,000 monthly, balance of $18,845,000 due April 1, 2005.... $ 34,192,371 $ 33,020,446 $ 32,064,217
Bank term loan at variable market interest rate options elected
by the Company (7.84% at June 30, 1997), interest payable
monthly, annual principal payments of $325,000 in 1996 and
1997 and $413,000 thereafter, balance of $2,984,000 due on
March 5, 2005................................................. 4,550,000 5,875,000 5,462,000
Bank term loan at variable interest rate options elected by the
Company (7.84% at June 30, 1997), interest payable monthly,
annual principal payments of $560,000, balance of $1,680,000
due on March 5, 2005.......................................... -- 5,600,000 5,040,000
Insurance company note payable, interest at 11.6% payable
annually, annual principal payments of $200,000, balance of
$1,724,000 due on October 1, 2002............................. 2,724,156 2,724,156 2,524,156
Bank term loan, interest payable monthly at 8%, principal and
interest payable $19,790 monthly, balance of $1,926,000 due
January 15, 2000.............................................. -- 1,992,521 1,968,874
Unsecured loan due to related party, non-interest bearing,
discounted (at 10%) to present value, payable based on excess
cash flows (as defined)....................................... 847,929 828,750 829,848
Note payable, interest at 10%, payable semi-annually, principal
due May 5, 2000............................................... 500,000 500,000 500,000
Note payable, interest at 8% payable annually, principal due
December 20, 1998............................................. -- 500,000 500,000
Bank term loan, paid in 1997.................................... 1,350,000 -- --
Capital lease obligations and other loans, interest principally
at 8%......................................................... 845,924 1,513,702 2,529,904
-------------- -------------- --------------
Total......................................................... 45,010,380 52,554,575 51,418,999
Less current portion............................................ (2,036,976) (2,773,984) (3,396,085)
-------------- -------------- --------------
Long-term portion............................................... $ 42,973,404 $ 49,780,591 $ 48,022,914
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

F-15
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

6. BANK LINE OF CREDIT AND LONG-TERM DEBT (CONTINUED)
Substantially all of the Company's assets are pledged as collateral for
revolving bank loans and long-term debt. The insurance company loan agreement,
as amended, and bank credit agreements include various financial covenants
which, among other things, require that the Company maintain certain specified
financial ratios and restrict the amount of capital expenditures, additional
indebtedness and certain investments. Further, dividends may not be declared and
paid without prior approval. The Company was not in compliance with the capital
expenditures limitations of its bank credit agreements as of June 30, 1997, but
a waiver dated November 21, 1997 was subsequently obtained.

Under the terms of the insurance company Securities Purchase Agreement (the
"Agreement") dated April 21, 1995, the Company may, at its option, prepay the
outstanding Senior Secured First Mortgage Notes (the "Notes") in whole or in
part, after April 1, 1998 at a price equal to the aggregate principal amount of
the Notes being redeemed plus accrued interest thereon to the date of
redemption, plus a premium equal to the net present value of the excess of the
originally scheduled principal and related interest payments through the
original maturity date over the corresponding payments that would have been made
using the U.S. Treasury Notes rate (or the U.S. Treasury Note rate plus .75% if
redemption occurs after April 21, 2000), discounted at the U.S. Treasury Note
rate plus .75%. Prepayment of all outstanding Notes and accrued interest thereon
is required on the occurrence of certain events, as defined in the Agreement.

Scheduled annual maturities of long-term debt as of March 31, 1998 for years
ending June 30, are as follows:

<TABLE>
<S> <C>
1998.................................................. $ 455,132
1999.................................................. 3,506,389
2000.................................................. 5,586,359
2001.................................................. 3,161,772
2002.................................................. 3,505,569
Thereafter............................................ 35,203,778
-----------
Total............................................... $51,418,999
-----------
-----------
</TABLE>

F-16
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN

ENDED IS UNAUDITED)

7. INCOME TAXES

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR ------------------------------------------------------------------
--------------- APRIL 27, 1995 YEAR ENDED JUNE 30,
JULY 1, 1994 TO TO --------------------------- NINE MONTHS ENDED
APRIL 26, 1995 JUNE 30, 1995 1996 1997 MARCH 31, 1998
--------------- ---------------- ------------ ------------- -------------------
<S> <C> <C> <C> <C> <C>
Current:
Federal.................. $ -- $ -- $ 113,736 $ 3,114,991 $ 832,556
State.................... -- -- 296,788 862,690 249,992
--------------- ---------------- ------------ ------------- -------------------
-- -- 410,524 3,977,681 1,082,548
Deferred:
Federal.................. -- -- 347,074 126,599 1,599,863
State.................... -- -- (174,598) (116,280) 194,589
--------------- ---------------- ------------ ------------- -------------------
-- -- 172,476 10,319 1,794,452
--------------- ---------------- ------------ ------------- -------------------
$ -- $ -- $ 583,000 $ 3,988,000 $ 2,877,000
--------------- ---------------- ------------ ------------- -------------------
--------------- ---------------- ------------ ------------- -------------------
</TABLE>

The Company's income tax provision differs from the amount determined by
applying the statutory federal income tax rate, due to the following:

<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR -----------------------------------------------------------------
--------------- APRIL 27, 1995 YEAR ENDED JUNE 30,
JULY 1, 1994 TO TO ------------------------- NINE MONTHS ENDED
APRIL 26, 1995 JUNE 30, 1995 1996 1997 MARCH 31, 1998
--------------- ---------------- ------------ ----------- --------------------
<S> <C> <C> <C> <C> <C>
Federal statutory tax
(benefit) rate............. 35.00 % (35.00)% 35.00% 35.00% 35.00 %
Permanent items.............. 0.43 (39.65) .78 .29 .19
State income taxes, net of
federal.................... -- -- 3.22 4.85 3.85
Rate differential............ (1.00) 1.00 (1.00) (1.00) (1.00)
Change in valuation
allowance.................. (32.29) 75.01 8.62 -- (4.44)
Purchase accounting.......... -- -- (19.79) -- --
Other........................ (2.14) (1.36) (3.57) .12 4.18
------- ------- ------------ ----------- -------
-- % -- % 23.26% 39.26% 37.78 %
------- ------- ------------ ----------- -------
------- ------- ------------ ----------- -------
</TABLE>

F-17
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN
ENDED IS UNAUDITED)

Deferred income taxes at June 30, 1996 and 1997 and March 31, 1998 consist
of the following:

<TABLE>
<CAPTION>
JUNE 30 MARCH 31
-------------------------- ------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Current assets (liabilities):.........................................
Inventory costing................................................... $ (418,570) $ (373,872) $ (309,151)
State franchise taxes............................................... 84,122 270,579 75,670
Compensation and benefits........................................... 173,200 61,263 59,976
Capitalized interest................................................ 160,207 128,852 77,760
Reserves............................................................ -- -- 856,800
Other............................................................... 152,785 132,332 85,036
------------ ------------ ------------
Total............................................................. $ 151,744 $ 219,154 $ 846,091
------------ ------------ ------------
------------ ------------ ------------
Long-term assets (liabilities):
Purchase accounting................................................. $ (5,033,711) $ (4,885,216) $ (4,737,735)
Accelerated depreciation............................................ (5,770,169) (5,949,469) (6,907,041)
Operating loss carryforwards........................................ 5,162,329 4,651,121 3,481,759
Tax credit carryforwards............................................ 572,274 450,246 450,246
Compensation and benefits........................................... 281,712 861,286 --
Other............................................................... 69,562 76,158 157,599
Valuation allowance................................................. (2,173,006) (2,172,863) (1,834,954)
------------ ------------ ------------
Total............................................................. $ (6,891,009) $ (6,968,737) $ (9,390,126)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The Company's tax returns for years 1992 through 1997 have not been examined
by the taxing authorities. In the opinion of management, adequate accruals have
been made for taxes due in those years. A valuation allowance has been provided
for the tax benefits of operating loss and tax credit carryforwards which may
not be realizable, due to certain limitations under section 382 of the Internal
Revenue Code, as well as uncertainty related to future taxable income.

As of March 31, 1998, the Company has federal operating loss carryforwards
which expire as follows:

<TABLE>
<S> <C>
2002.................................................. $ 3,082,000
2003.................................................. 3,623,000
2004.................................................. 3,214,000
2005.................................................. 321,000
2010.................................................. 2,024,000
-----------
Total............................................... $12,264,000
-----------
-----------
</TABLE>

Use of these operating loss carryforwards in any one year is limited to
approximately $1,400,000.

8. REDEEMABLE PREFERRED STOCK

The Company's redeemable preferred stock as of March 31, 1998 is as follows:

<TABLE>
<CAPTION>
AUTHORIZED ISSUED OUTSTANDING
PAR VALUE SHARES SHARES SHARES
----------- ----------- --------- ------------
<S> <C> <C> <C> <C>
8% Junior Preferred Stock......................................... $ .01 200,000 178,105 178,105
12% Senior Preferred Stock........................................ $ .01 100,000 100,000 100,000
</TABLE>

F-18
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN
ENDED IS UNAUDITED)

8. REDEEMABLE PREFERRED STOCK (CONTINUED)
The Junior Preferred shares have no voting rights, have liquidation
preferences to all classes of the Company's common stock, and are entitled to
cumulative dividends at the rate of 8% per year, payable semi-annually.
Effective October 1, 1996, the rate was increased to 8% from 6%. Shares
remaining at March 31, 1998 that were issued in connection with the Company's
acquisition of GSV are exchangeable at any time into 130,349 shares of Class B
common stock. The Junior Preferred Stock is subject to mandatory redemption of
89,052 and 89,053 shares on December 31, 2001 and 2002, respectively, or earlier
if a change in control of the Company occurs. On October 10, 1996, 345,875
shares were redeemed for $1,729,375 ($5 per share). At June 30, 1996, June 30,
1997 and March 31, 1998, the balance outstanding, less unamortized discounts,
was $2,006,831, $697,721 and $722,663, respectively.

In the event of liquidation, dissolution or winding up of the Company,
Junior Preferred stockholders shall be entitled to receive out of the assets of
the Company an amount in cash equal to $5 per share plus accrued but unpaid
dividends.

The Senior Preferred shares have no voting rights, have liquidation
preferences to other shareholders, are subject to mandatory redemption beginning
in 2005 and are entitled to cumulative dividends at the rate of 12% payable
semiannually. Under certain circumstances, the Senior Preferred Stock is
redeemable, at a premium, beginning in 2000. The carrying value of the Senior
Preferred Stock is being increased ratably to its redemption value of
$10,000,000. The shares are also exchangeable at any time, at the Company's
option, into 13.2% notes due 2007. At June 30, 1996, June 30, 1997 and March 31,
1998, the balance outstanding, less unamortized discounts, was $8,027,156,
$8,115,694 and $8,191,967, respectively.

In the event of liquidation, dissolution or winding up of the Company,
Senior Preferred stockholders shall be entitled to receive out of the assets of
the Company, before Junior Preferred stockholders, the amount of dividends
accrued and unpaid thereon to the date of final distribution to such holders,
whether or not declared to the date of such final distribution, $100 per share
plus a premium.

9. SHAREHOLDERS' EQUITY

COMMON STOCK

The Company's authorized capital stock is as follows at March 31, 1998:

<TABLE>
<CAPTION>
AUTHORIZED
PAR VALUE SHARES
----------- -----------
<S> <C> <C>
Class B.................................................... $ .003 7,250,000
Class E.................................................... $ .003 2,900,000
Class K.................................................... $ .003 1,450,000
</TABLE>

F-19
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN
ENDED IS UNAUDITED)

9. SHAREHOLDERS' EQUITY (CONTINUED)
Changes in the Company's common stock outstanding during the period April
27, 1995 to June 30, 1995 and the years ended June 30, 1996 and 1997 and nine
months ended March 31, 1998 are as follows:

<TABLE>
<CAPTION>
A B E K
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Shares outstanding, April 27, 1995 1,885,000 3,770,000 1,200,829 --
------------ ----------- ----------- ---------
Shares outstanding, June 30, 1995........ 1,885,000 3,770,000 1,200,829 --
------------ ----------- ----------- ---------
Shares outstanding, June 30, 1996........ 1,885,000 3,770,000 1,200,829 --
Issuance of stock........................ -- 2,776,169 -- 99,860
Repurchase of stock...................... (1,885,000) (985,157) -- --
------------ ----------- ----------- ---------
Shares outstanding, June 30, 1997........ -- 5,561,012 1,200,829 99,860
------------ ----------- ----------- ---------
Shares outstanding, March 31, 1998....... -- 5,561,012 1,200,829 99,860
------------ ----------- ----------- ---------
</TABLE>

Class E and K common stock have no voting rights, except that effective
April 21, 2000, the Class E common stockholders will be entitled to vote. Upon
dissolution, liquidation or winding up of the Company, and subject to the
liquidation preferences of the senior and junior preferred stock, liquidation
proceeds will be divided equally among the Class B, E, and K shareholders.

INCENTIVE STOCK AND STOCK OPTION PLANS

An incentive stock plan (terminated in 1996) provided for grants of stock
appreciation rights ("SARs") to officers, directors and certain key employees.
The SARs entitle the holder to receive cash payments equal to the excess of the
fair market value of the rights over the base price for such rights. SARs
outstanding as of June 30, 1997 have an unlimited term and generally become
exercisable over a two year period. Compensation expense recognized pursuant to
the Company's incentive stock plans was $650,606 and $1,338,506 for the years
ended June 30, 1996 and 1997, respectively, and $889,758 and $6,300,000 for the
nine months ended March 31, 1997 and 1998, respectively. During the nine months
ended March 31, 1998, the Company and the holders of the 794,347 SARs then
outstanding agreed to terminate such SARs in exchange for compensation in an
amount equal to the SARs obligation at December 31, 1997 of $8,289,110 and fully
vested non-qualified options to purchase 794,347 shares of the Company's common
stock at $12.07 per share. In connection with the SAR termination and the
president's bonus restructuring, which bonus restructuring equaled a net present
value of $2,500,000, such key employees received cash of approximately $5.4
million, during April 1998, and 7.5% promissory notes aggregating approximately
$5.4 million payable upon mutual agreement between the parties. Payroll and
related liabilities at March 31, 1998 includes $10.8 million related to such
items. Such cash received was utilized to exercise a total of 337,217
outstanding stock options as of April 29, 1998. In connection with a prior GSV
stock appreciation rights agreement, the president of GSV (and the Company) was
paid $1,162,384 at the time of GSV's acquisition. The Company's 1996 Stock
Option Plan covers 893,925 shares of authorized but unissued Class B common
stock. The Plan provides for the grant of incentive and nonstatutory stock
options to officers, key employees and others,

F-20
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN
ENDED IS UNAUDITED)

9. SHAREHOLDERS' EQUITY (CONTINUED)
at prices not less than fair value. Options granted generally become exercisable
25% annually and expire after 10 years. A summary of SAR and stock option
activity is as follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
STOCK EXERCISE PRICE
OPTIONS SARS PER RIGHT/OPTION
----------- --------- -----------------
<S> <C> <C> <C>
Outstanding at April 27, 1995..................... -- --
Granted......................................... -- 649,347 $ 1.34
----------- ---------
Outstanding at June 30, 1995...................... -- 649,347 $ 1.34
Granted......................................... -- 145,000 $ 2.59
----------- ---------
Outstanding at June 30, 1996...................... -- 794,347 $ 1.57
Granted......................................... 800,933 -- $ 4.79
----------- ---------
Outstanding at June 30, 1997...................... 800,933 794,347 $ 3.19
Granted ($3.00 weighted average fair value per
option)....................................... 803,047 -- 11.99
Terminated...................................... -- 794,347 1.57
Outstanding at March 31, 1998..................... 1,603,980 -- 8.39
----------- ---------
----------- ---------
Exercisable at March 31, 1998..................... 994,580 -- $ 10.60
----------- ---------
----------- ---------
Available for grant at March 31, 1998............. 84,291 --
----------- ---------
----------- ---------
</TABLE>

FAS 123 requires the disclosure of pro forma net income amounts had the
Company adopted the fair value method prescribed by that statement. Under FAS
123, the fair value of stock-based awards to employees is calculated using
option pricing models, even though such models were developed to estimate the
fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models require certain subjective assumptions which greatly affect the
calculated values. The Company's calculations were made using the Black-Scholes
option pricing model with the following weighted average assumptions: expected
life, 6.3 years and 5 years as of June 30,1997 and March 31, 1998, respectively;
risk free interest rates, 5.9% and 6.0% as of June 30, 1997 and March 31, 1998,
respectively; no expected volatility, and no dividends during the expected term.
The Company's calculations are based on a multiple option valuation approach and
forfeitures are recognized as they occur. Pro forma net income for the nine
months ended March 31, 1998 would have been $119,400 less than net income as
reported if the computed fair values of the stock option awards had been
amortized to expense over the vesting period of the awards (no effect on net
income for the year ended June 30, 1997). Pro forma earnings per share for the
nine months ended March 31, 1998 would have been as follows: basic--$.58 and
fully diluted--$.55.

10. RETIREMENT PLANS

The Company's 401(k) plan provides retirement benefits to full-time
employees that meet certain eligibility requirements, was established in 1996.
Under the 401 (k) plan, employees may elect to have up to 15% of their annual
eligible compensation, subject to certain limitations, deferred and deposited

F-21
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN
ENDED IS UNAUDITED)

10. RETIREMENT PLANS (CONTINUED)
with a qualified trustee. The Company may elect to make an annual discretionary
contribution to the Plan of up to 25% of each participant's eligible
compensation, subject to certain limitations. Participants' voluntary
contributions to the Plan vest immediately and Company contributions are 100%
vested (20% per year after two years of service) after six years of continuous
service. The Company also contributes to a winery workers' retirement plan which
provides retirement benefits for union employees. Pension costs charged to
operations were $75,118 for the period July 1, 1994 to April 26, 1995
(Predecessor) and $2,505 for the period April 27, 1995 to June 30, 1995
(Successor). Retirement plan costs charged to operations were $36,704 and
$68,009 for the years ended June 30, 1996 and 1997, and $54,132 and $55,828 for
the nine-month periods ended March 31, 1997 and 1998 respectively.

11. LEASES

The Company leases cooperage and equipment under both capital and operating
lease arrangements. Future minimum payments by fiscal year and in aggregate
under such capital leases and noncancellable operating leases with terms of one
year or more consist of the following at March 31, 1998:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------------- -----------
<S> <C> <C>
1998.............................................................. $ 142,133 $ 78,573
1999.............................................................. 518,373 252,898
2000.............................................................. 534,572 230,091
2001.............................................................. 353,475 111,140
2002.............................................................. 311,762 101,770
Thereafter........................................................ 715,502 16,962
------------- -----------
Total minimum lease payments...................................... 2,575,817 $ 791,434
-----------
-----------
Amount representing interest...................................... 541,761
-------------
Net present value of minimum lease payments....................... 2,034,056
Less current maturities........................................... 530,913
-------------
$ 1,503,143
-------------
-------------
</TABLE>

The following is a summary of cost and accumulated amortization on
capitalized cooperage and equipment leases:

<TABLE>
<CAPTION>
JUNE 30 MARCH 31
-------------------------- -------------
1996 1997 1998
----------- ------------- -------------
<S> <C> <C> <C>
Cooperage.......................................... $ 317,624 $ 678,785 $ 1,265,614
Equipment.......................................... 210,301 598,924 1,269,031
Less accumulated amortization...................... 59,958 151,731 274,791
----------- ------------- -------------
$ 467,967 $ 1,125,978 $ 2,259,854
----------- ------------- -------------
----------- ------------- -------------
</TABLE>

F-22
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN
ENDED IS UNAUDITED)

11. LEASES (CONTINUED)
Rent expense totaled approximately $99,794 for the period July 1, 1994 to
April 26, 1995 (Predecessor), $40,461 for the period April 27, 1995 to June 30,
1995 (Successor) $381,107 and $667,616 for the years ended June 30, 1996 and
1997, and $572,092 and $455,070 for the nine-month periods ended March 31, 1997
and 1998, respectively.

12. COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENT

The Company has an employment agreement with its president which extends to
June 30, 2001 and specifies that the president receive a fixed salary and an
annual bonus determined by the Board of Directors. The agreement extends
automatically on a year-to-year basis thereafter unless terminated by either
party.

GRAPE PURCHASE COMMITMENTS

The Company has certain grape purchase contracts with independent growers
that generally extend through 1998. Prices to be paid for grapes fluctuate with
prevailing market prices at the time of purchase. In certain cases, the Company
has contracted with its customers to sell a portion of these grapes at
prevailing market prices at the time of sale.

EQUIPMENT AND COOPERAGE PURCHASE COMMITMENTS

As of March 31, 1998, the Company has entered into contracts aggregating
approximately $5.6 million for the purchase of processing equipment and
cooperage.

CLAIMS

The Company is a party to claims aggregating approximately $3,500,000
arising from alleged negligent performance of services. The Company and its
legal counsel are in the preliminary stages of investigating the merits of such
claims and the availability of insurance coverage, if needed. As of March 31,
1998, the Company has accrued, based on its preliminary investigation, an amount
presently believed to be adequate to resolve these claims. Such amount is
substantially less than the aggregate of the amounts claimed.

13. RELATED PARTY TRANSACTIONS

In May 1995, the Company purchased a 1,750 acre vineyard located in Kern
County, California, from a company owned by the Company's president for
$4,590,000. In connection with this acquisition, the Company assumed two
existing promissory notes of $2,441,000 and $452,791 and executed a non-interest
bearing promissory note for $1,700,000 (discounted at 10% to $774,523) payable
to the seller.

The Company paid approximately $2,400,000 to affiliates of certain
stockholders during the year ended June 30, 1997 for investment banking and
financial advisory services related to certain capital stock repurchases.

During the period July 1, 1994 to April 26, 1995 and the years ended June
30, 1996 and 1997, the Company made grape purchases aggregating approximately
$275,000, $400,000 and $1,400,000, respectively, from a vineyard partially owned
by the Company's president.

F-23
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE NINE MONTHS THEN
ENDED IS UNAUDITED)

14. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is as follows:

<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR ----------------------------------------------------------
------------- APRIL 27, NINE MONTHS ENDED
JULY 1, 1994 1995 TO YEAR ENDED JUNE 30 MARCH 31
TO APRIL 28, JUNE 30, ---------------------- ----------------------
1995 1995 1996 1997 1997 1998
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest paid............................. $ 2,672,874 $ 408,820 $4,938,618 $5,578,895 $4,278,328 $4,640,920
Income taxes paid......................... 166,109 40,441 388,250 3,206,000 3,040,000 5,340,000
Notes issued to acquire property, plant
and equipment........................... -- 4,168,314 -- 7,238,071 5,181,078 --
Property acquired under capital lease..... -- -- 407,503 778,593 242,126 1,280,578
Conversion of warrants to preferred
stock................................... 363,258 -- -- -- -- --
</TABLE>

15. SUBSEQUENT EVENTS

On April 1, 1998, the Company granted options to purchase 20,300 shares of
Class B Common Stock at $12.08 to certain employees.

On April 21, 1998, the Company renewed its revolving bank line of credit.
The renewal provides for borrowings up to $22,500,000 with variable interest
rate options, at the Company's election. The line of credit agreement expires on
March 5, 1999.

On April 24, 1998, the Company adopted the 1998 Director Stock Option Plan
(the "Plan"), which covers 348,000 shares of authorized but unissued Class K
Common Stock. Under the terms of the Plan, options may be granted to
non-employee members of the Company's Board of Directors at prices not less than
fair market value (as defined), are fully vested after one year and expire after
ten years. On April 24, 1998 and May 1, 1998 grants were made to non-employee
directors of options to purchase 59,982 and 14,993, respectively, shares of
Common Stock at fair market value on the date of grant. The Plan also provides
for annual grants of options to purchase an additional 10,005 shares of common
stock on May 1 of each year commencing May 1, 1999 to each non-employee director
who has remained in continuous service.

On April 23, 1998 and April 28, 1998, the Board of Directors and the
Company's stockholders, respectively, approved a recapitalization and stock
split, which resulted in each share of the Company's common stock being split
into 2.9 shares of common stock. The recapitalization and stock split was
effected by the filing of the Amended and Restated Certificate of Incorporation
of the Company with the Delaware Secretary of State on July 20, 1998. The
recapitalization was in the form of (i) the creation by the Company of a new
Class A Common Stock and a new Class B Common Stock, (ii) the conversion of all
of the Company's outstanding shares of old Class B Common Stock on a one-for-one
basis into shares of Company's newly-created Class A Common Stock, (iii) the
conversion of all of the Company's outstanding shares of old Class E Common
Stock and old Class K Common Stock on a one-for-one basis into shares of the
Company's newly-created Class B Common Stock, (iv) a 2.9-for-1 stock split for
each of the Company's outstanding shares of newly-created Class A Common Stock
and newly-created Class B Common Stock, and (v) the conversion of all of the
Company's outstanding shares of Junior Preferred Stock into 130,343 shares of
the Company's newly-created Class B Common Stock. All common stock related data
in the accompanying financial statements of the Company reflect the stock split
for all periods presented.

F-24
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., Hambrecht & Quist LLC and J.P. Morgan Securities Inc. are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Class B Common Stock
set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS B COMMON
UNDERWRITER STOCK
- --------------------------------------------------------------------------- -----------------
<S> <C>
Goldman, Sachs & Co........................................................ 1,935,000
Hambrecht & Quist LLC...................................................... 967,500
J.P. Morgan Securities Inc................................................. 967,500
Advest, Inc................................................................ 32,500
BT Alex. Brown............................................................. 50,000
Credit Lyonnais Securities (USA) Inc....................................... 50,000
Donaldson, Lufkin & Jenrette Securities Corporation........................ 50,000
Edward D. Jones & Co., L.P................................................. 32,500
NationsBanc Montgomery Securities LLC...................................... 50,000
The Robinson-Humphrey Company, LLC......................................... 32,500
Schroder & Co. Inc......................................................... 50,000
Van Kasper & Company....................................................... 32,500
Wasserstein Perella Securities, Inc........................................ 50,000
-----------------
Total.................................................................... 4,300,000
-----------------
-----------------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The Underwriters propose to offer the shares of Class B Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $.70 per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $.10 per share to certain
brokers and dealers. After the shares of Class B Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 645,000
additional shares of Class B Common Stock to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 4,300,000 shares of Class B
Common Stock offered.

The Company and the Selling Stockholders have agreed that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 days after the date of the Prospectus, they will not offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of Class B Common
Stock or which are convertible into or exchangeable for securities which are
substantially similar to the shares of Class B Common Stock without the prior
written consent of the representatives, except for the shares of Class B Common
Stock offered in connection with the offering.

U-1
<PAGE>
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Class B Common Stock offered by them.

Prior to this offering, there has been no public market for the shares. The
initial public offering price was negotiated among the Company, the Selling
Stockholders and the representatives. Among the factors considered in
determining the initial public offering price of the Class B Common Stock, in
addition to prevailing market conditions, were the Company's historical
performance, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and the consideration of the
above factors in relation to market valuation of companies in related
businesses.

The Class B Common Stock has been approved for listing on the Nasdaq
National Market under the symbol "VINT".

In connection with the offering, the Underwriters may purchase and sell the
shares in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicated short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the shares; and syndicate short positions involve the
sale by the Underwriters of a greater number of shares than they are required to
purchase from the Company and the Selling Stockholders in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers in respect of the securities sold
in the offering for their account may be reclaimed by the syndicate if such
shares are repurchased by the syndicate in stabilizing or covering transactions.
These activities may stabilize, maintain or otherwise affect the market price of
the shares, which may be higher than the price that might otherwise prevail in
the open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.

U-2
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
Use of Proceeds........................................................... 15
Dilution.................................................................. 15
Dividend Policy........................................................... 16
Capitalization............................................................ 17
Selected Consolidated Financial Data...................................... 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 19
Business.................................................................. 27
Management................................................................ 40
Certain Relationships and Related Transactions............................ 47
Principal and Selling Stockholders........................................ 50
Shares Eligible for Future Sale........................................... 51
Description of Capital Stock.............................................. 52
Legal Matters............................................................. 56
Experts................................................................... 56
Additional Information.................................................... 57
Index to Consolidated Financial Statements................................ F-1
Underwriting.............................................................. U-1
</TABLE>

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

THROUGH AND INCLUDING AUGUST 15, 1998 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS B COMMON STOCK IN
THE UNITED STATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

4,300,000 SHARES

GOLDEN STATE
VINTNERS, INC.

CLASS B COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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[LOGO]

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

GOLDMAN, SACHS & CO.

HAMBRECHT & QUIST

J.P. MORGAN & CO.

REPRESENTATIVES OF THE UNDERWRITERS

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