WILLAMETTE VALLEY VINEYARDS INC

Previous wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain forward looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). . These forward-looking statements involve risks and uncertainties that are based on current expectations, estimates and projections about the Company’s business, and beliefs and assumptions made by management. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”, “predicts,” “potential,” “should,” or “will” or the negative thereof and variations of such words and similar expressions are intended to identify such forward-looking statements. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to: availability of financing for growth, availability of adequate supply of high quality grapes, successful performance of internal operations, impact of competition, changes in wine broker or distributor relations or performance, impact of possible adverse weather conditions, impact of reduction in grape quality or supply due to disease or smoke from forest fires, changes in consumer spending, and the reduction in consumer demand for premium wines. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic economic conditions. Many of these risks as well as other risks that may have a material adverse impact on our operations and business, are identified in Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as well as in the Company’s other Securities and Exchange Commission filings and reports. The forward-looking statements in this report are made as of the date hereof, and, except as otherwise required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statements or to update the reasons why the actual results could differ materially from those projected in the forward-looking statements, whether as a result of new information, future events or otherwise.

Current wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that are based on current expectations, estimates and projections about the Company’s business, and beliefs and assumptions made by management. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”, “predicts,” “potential,” “should,” or “will” or the negative thereof and variations of such words and similar expressions are intended to identify such forward-looking statements. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to: availability of financing for growth, availability of adequate supply of high quality grapes, successful performance of internal operations, impact of competition, changes in wine broker or distributor relations or performance, impact of possible adverse weather conditions, impact of reduction in grape quality or supply due to disease or smoke from forest fires, changes in consumer spending, and the reduction in consumer demand for premium wines. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic economic conditions. Many of these risks as well as other risks that may have a material adverse impact on our operations and business, are identified in Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as well as in the Company’s other Securities and Exchange Commission filings and reports. The forward-looking statements in this report are made as of the date hereof, and, except as otherwise required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statements or to update the reasons why the actual results could differ materially from those projected in the forward-looking statements, whether as a result of new information, future events or otherwise.

Previous wording

The Company sold 135,424 and 143,286 cases of produced wine during the nine months ended September 30, 2024 and 2023, respectively, a decrease of 7,862 cases, or 5.5% in the current year period over the prior year period. The decrease in wine case sales was primarily the result of decreased case sales through distributors.

Current wording

The Company sold 33,080 and 43,208 cases of produced wine during the three months ended March 31, 2025 and 2024, respectively, a decrease of 10,128 cases, or 23.5% in the current year period over the prior year period. The decrease in wine case sales was primarily the result of having lower wholesale case sales in the current quarter when compared to the same quarter last year.

Previous wording

At September 30, 2024, wine inventory included 247,003 cases of bottled wine and 304,354 gallons of bulk wine in various stages of the aging process. Case wine is expected to be sold over the next 12 to 24 months and generally before the release date of the next vintage. The Winery bottled 245,193 cases during the nine months ended September 30, 2024.

Current wording

At March 31, 2025, wine inventory included 213,444 cases of bottled wine and 628,019 gallons of bulk wine in various stages of the aging process. Case wine is expected to be sold over the next 12 to 24 months and generally before the release date of the next vintage. The Winery bottled 40,216 cases during the three months ended March 31, 2025.

Previous wording

We continue to receive positive recognition through national magazines, regional publications, local newspapers and online bloggers including the accolades below.

Current wording

Willamette Valley Vineyards continues to receive positive recognition through national magazines, regional publications, local newspapers and online bloggers including the accolades below.

Previous wording

Owen Bargreen rated the Company’s 2023 Pinot Blanc and 2022 Tualatin Estate White Pinot Noir 92 points.

Current wording

James Suckling rated the Company’s 2022 Bernau Estate Pinot Noir 92 points and the 2023 Tualatin Estate Chardonnay 91 points.

Previous wording

Cost of Sales for the three months ended September 30, 2024 and 2023 were $3,562,599 and $3,663,488, respectively, a decrease of $100,889, or 2.8%, in the current period over the prior year period. This change was primarily the result of fewer products sold in the current quarter compared to the same quarter last year. Cost of Sales for the nine months ended September 30, 2024 and 2023 were $10,953,625 and $11,969,630, respectively, a decrease of $1,016,005 or 8.5%, in the current period over the prior year period. This change was primarily the result of a reduction in product sales in the first nine months of 2024 when compared to the same period in 2023.

Current wording

Cost of sales for the three months ended March 31, 2025 and 2024 was $2,782,475 and $3,530,358, respectively, a decrease of $747,883, or 21.2%, in the current period over the prior year period. This change was primarily the result of the lower number of cases sold in the first quarter of 2025 when compared to the same quarter in 2024.

Previous wording

Selling, general and administrative expenses for the three months ended September 30, 2024 and 2023 were $5,944,620 and $5,967,346 respectively, a decrease of $22,726, or 0.4%, in the current quarter over the same quarter in the prior year. This decrease was primarily the result of a decrease in selling and marketing expenses of $25,028, or 0.6% being partially offset by an increase in general and administrative expenses of $2,302, or 0.1% in the current quarter compared to the same quarter last year. Selling, general and administrative expense for the nine months ended September 30, 2024 and 2023 were $17,754,703 and $17,362,498, respectively, an increase of $392,205, or 2.3%, in the current year period over the prior year period. This increase was primarily the result of an increase in selling and marketing expenses of $7,302, or 0.1% combined with an increase in general and administrative expenses of $384,903, or 8.2% in the current year period compared to the same period in 2023. General and administrative expenses increased in the first nine months of 2024 compared to the same period in the prior year primarily as a result of higher legal costs.

Current wording

Selling, general and administrative expenses for the three months ended March 31, 2025 and 2024 was $5,629,086 and $5,875,299, respectively, a decrease of $246,213, or 4.2%, in the current quarter over the same quarter in the prior year. This decrease was primarily the result of a decrease in selling expenses of $60,072, or 1.5% and a decrease in general and administrative expenses of $186,141, or 10.1% in the current quarter compared to the same quarter last year. General and administrative expenses decreased in the first quarter of 2025 compared to the same quarter of 2024 primarily as a result of lower legal costs.

Previous wording

Interest expense, net for the three months ended September 30, 2024 and 2023 were $257,192 and $171,272, respectively, an increase of $85,920 or 50.2%, in the third quarter of 2024 over the same quarter in the prior year. Interest expense, net for the nine months ended September 30, 2024 and 2023 were $750,573 and $460,309, respectively, an increase of $290,264 or 63.1%, in the current year period over the prior year period. The increase in interest expense for the third quarter and first nine months of 2024 was primarily the result of increased debt compared to the third quarter and first nine months of 2023.

Current wording

Interest expense for the three months ended March 31, 2025 and 2024 was $298,221 and $229,678, respectively, an increase of $68,543 or 29.8%, in the first quarter of 2025 over the same quarter in the prior year. The increase in interest expense for the first quarter was primarily the result of higher debt compared to the first quarter of 2024.

Previous wording

The income tax benefit for the three months ended September 30, 2024 and 2023 was $115,177 and $123,344, respectively, a decrease of $8,167 or 6.6%, in the third quarter of 2024 over the same quarter in the prior year mostly as a result of the lower pre-tax loss in the third quarter of 2024, compared to the same quarter in 2023. The Company’s estimated federal and state combined income tax rate was 28.9% and 27.4% for the three months ended September 30, 2024 and 2023, respectively. The income tax benefit for the nine months ended September 30, 2024 and 2023 was $247,809 and $363,396, respectively, a decrease of $115,587 or 31.8% in the current year period over the prior year period, mostly a result of the lower pre-tax loss in the first nine months of 2024, compared to the same period in 2023. The Company’s estimated federal and state combined income tax rate was 28.9% and 27.4% for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

The income tax benefit for the three months ended March 31, 2025 and 2024 was $296,742 and $212,407, respectively, an increase of $84,335 or 39.7%, in the first quarter of 2025 over the same quarter in the prior year, primarily as a result of a higher pre-tax loss in the first quarter of 2025, compared to the same quarter in 2024. The Company’s estimated federal and state combined income tax rate for the three months ended March 31, 2025 and 2024 was 28.9% and 28.9% respectively.

Previous wording

Net loss applicable to common shareholders for the three months ended September 30, 2024 and 2023 was $846,195 and $838,701, respectively, an increase of $7,494, or 0.9%, in the third quarter of 2024 over the same quarter in the prior year, mostly as a result of a lower net loss being more than offset by a higher accrued preferred stock dividend in the third quarter of 2024 compared to the same period of 2023. Net loss applicable to common shareholders for the nine months ended September 30, 2024 and 2023 was $2,298,448 and $2,498,510, respectively, a decrease of $200,062, or 8.0%, in the current year period over the prior year period. The decrease in loss applicable to common shareholders in the first nine months of 2024, compared to the same period of 2023, was the result of a lower net loss being partially offset by a higher accrued preferred stock dividend in the current period.

Current wording

Net loss applicable to common shareholders for the three months ended March 31, 2025 and 2024 was $1,292,158 and $1,084,982, respectively, an increase of $207,176, or 19.1%, in the first quarter of 2025 over the same quarter in the prior year. The increase in loss applicable to common shareholders in the first quarter of 2025, compared to the same period of 2024, was the result of a higher net loss in the current period.

Previous wording

At September 30, 2024, the Company had a working capital balance of $22.6 million and a current working capital ratio of 2.85:1.

Current wording

At March 31, 2025, the Company had a working capital balance of $26.7 million and a current working capital ratio of 3.60:1.

Previous wording

At September 30, 2024, the Company had a cash balance of $303,195. At December 31, 2023, the Company had a cash balance of $238,482.

Current wording

At March 31, 2025, the Company had a cash balance of $332,889. At December 31, 2024, the Company had a cash balance of $320,883.

Previous wording

Total cash used for operating activities in the nine months ended September 30, 2024 was $2,159,828. Cash used in operating activities for the nine months ended September 30, 2024 was primarily associated with reduced grapes payable and increased inventories, being partially offset by depreciation and amortization.

Current wording

Total cash used for operating activities in the three months ended March 31, 2025 was $1,337,263. Cash used in operating activities for the three months ended March 31, 2025 was primarily associated with reduced grapes payable and increased inventories, being partially offset by depreciation and amortization and lower receivables.

Previous wording

Total cash used in investing activities in the three months ended September 30, 2024 was $1,655,152. Cash used in investing activities for the nine months ended September 30, 2024 consisted of cash used on property and equipment and vineyard development costs.

Current wording

Total cash used in investing activities in the three months ended March 31, 2025 was $115,344. Cash used in investing activities for the three months ended March 31, 2025 consisted of cash used for equipment and vineyard development costs.

Previous wording

Total cash generated from financing activities in the nine months ended September 30, 2024 was $3,879,693. Cash generated from financing activities for the nine months ended September 30, 2024 primarily consisted of proceeds from the issuance of Preferred Stock and proceeds from long and short debt, being partially offset by the repayment of long-term debt.

Current wording

Total cash generated from financing activities in the three months ended March 31, 2025 was $1,464,613. Cash generated from financing activities for the three months ended March 31, 2025 primarily consisted of proceeds from long-term debt, being partially offset by the repayment on the line of credit.

Previous wording

In December of 2005, the Company entered into a revolving line of credit agreement with Umpqua Bank (the “Credit Agreement”) that allows borrowing up to $2,000,000 against eligible accounts receivable and inventories as collateral, as defined in the agreement. The revolving line bears interest at prime less 0.5%, with a floor of 3.25%, is payable monthly, and is subject to renewal. In July 2021, the Company renewed the Credit Agreement until July 31, 2023. In November 2022, the Company increased the borrowing line up to $5,000,000. In July 2023 the line of credit was renewed for an additional two years. The Company had an outstanding line of credit balance of $3,460,004 at September 30, 2024, at an interest rate of 8.0%, and an outstanding line of credit balance of $2,684,982 at December 31, 2023, at an interest rate of 8.0%.

Current wording

In December of 2005, the Company entered into a revolving line of credit agreement with Umpqua Bank (the “Credit Agreement”) that allows borrowing up to $2,000,000 against eligible accounts receivable and inventories, as defined in the agreement. The revolving line bears interest at prime less 0.5%, with a floor of 3.25%, is payable monthly, and is subject to renewal. In July 2021, the Company renewed the Credit Agreement until July 31, 2023. In November 2022, the Company increased the borrowing line up to $5,000,000. In July 2023 the line of credit was renewed for an additional two years. The Company had an outstanding line of credit balance of $1,203,983 at March 31, 2025, at an interest rate of 7.0%, and an outstanding line of credit balance of $2,405,815 at December 31, 2024, at an interest rate of 7.0%.

Previous wording

The line of credit agreement includes various covenants, which among other things, requires the Company to maintain minimum amounts of tangible net worth, debt-to-equity, and debt service coverage, as defined, and limits the level of acquisitions of property and equipment. As of December 31, 2023, the Company was out of compliance with a debt covenant. The Company has received a waiver from Umpqua Bank waiving this violation until the next measurement date of December 31, 2024.

Current wording

The line of credit agreement includes various covenants, which among other things, requires the Company to maintain minimum amounts of tangible net worth, debt-to-equity, and debt service coverage, as defined, and limits the level of acquisitions of property and equipment. As of December 31, 2024, the Company was in compliance with these financial covenants.

Previous wording

As of September 30, 2024, the Company had a 15-year installment note payable of $1,022,778, due in quarterly payments of $42,534, associated with the purchase of property in the Dundee Hills AVA.

Current wording

As of March 31, 2025, the Company had a 15-year installment note payable of $968,348, due in quarterly payments of $42,534, associated with the purchase of property in the Dundee Hills AVA.

Previous wording

As of September, 2024, the Company had a total long-term debt balance of $10,701,405, including the portion due in the next year, owed to AgWest, exclusive of debt issuance costs of $96,054. As of December 31, 2023, the Company had a total long-term debt balance of $7,590,659, exclusive of debt issuance costs of $105,989.

Current wording

As of March 31, 2025, the Company had a total long-term debt balance of $16,818,597, including the portion due in the next year, owed to AgWest, exclusive of debt issuance costs of $173,801. As of December 31, 2024, the Company had a total long-term debt balance of $14,042,910, exclusive of debt issuance costs of $178,908.

Previous wording

The Company believes that cash flow from operations and funds available under the Company’s existing credit facilities will be sufficient to meet the Company’s short-term needs.

Current wording

The Company believes that cash flow from operations and funds available under the Company’s existing credit facilities and through preferred stock sales will be sufficient to meet the Company’s long-term needs.