WILLAMETTE VALLEY VINEYARDS INC

Previous wording

The foregoing discussion and analysis of the Company’s financial condition and results of operations are based upon our unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed financial statements requires the Company’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to revenue recognition, collection of accounts receivable, valuation of inventories, and amortization of vineyard development costs. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. A description of the Company’s critical accounting policies and related judgments and estimates that affect the preparation of the Company’s financial statements is set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Such policies were unchanged during the six months ended June 30, 2025.

Current wording

The foregoing discussion and analysis of the Company’s financial condition and results of operations are based upon our unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed financial statements requires the Company’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to revenue recognition, collection of accounts receivable, valuation of inventories, and amortization of vineyard development costs. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. A description of the Company’s critical accounting policies and related judgments and estimates that affect the preparation of the Company’s financial statements is set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Such policies were unchanged during the nine months ended September 30, 2025.

Previous wording

The Company sold 83,968 and 91,102 cases of produced wine during the six months ended June 30, 2025 and 2024, respectively, a decrease of 7,134 cases, or 7.8% in the current year period over the prior year period. The decrease in wine case sales was the result of decreased case sales through distributors.

Current wording

The Company sold 124,254 and 135,424 cases of produced wine during the nine months ended September 30, 2025 and 2024, respectively, a decrease of 11,170 cases, or 8.2% in the current year period over the prior year period. The decrease in wine case sales was the result of decreased case sales through distributors.

Previous wording

At June 30, 2025, wine inventory included 244,252 cases of bottled wine and 497,066 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 93,462 cases during the six months ended June 30, 2025.

Current wording

At September 30, 2025, wine inventory included 231,368 cases of bottled wine and 612,224 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 146,176 cases during the nine months ended September 30, 2025.

Previous wording

James Suckling rated the 2023 Whole Cluster Pinot Noir 92 points, and the 2023 White Pinot Noir 91 points.

Current wording

James Suckling rated the 2023 Founders’ Reserve Pinot Noir and Chardonnay 93 points. National Sales’ 2023 White Pinot Noir received 91 points and 2023 Pinot Gris 90 points.

Previous wording

Sales revenue for the three months ended June 30, 2025 and 2024 were $10,195,763 and $10,332,358, respectively, a decrease of $136,595, or 1.3%, in the current year period over the prior year period. This decrease was caused bya decrease in direct sales of $223,199, partly offset by an increase in sales through distributors of $86,604 in the current year three-month period over the prior year period. The decrease in revenue from direct sales was primarily related to lower internet and telephone sales. Sales revenue for the six months ended June 30, 2025 and 2024 were $17,737,346 and $19,135,438, respectively, a decrease of $1,398,092, or 7.3%, in the current year period over the prior year period. This decrease was caused bya decrease in revenues from direct sales of $198,880 and a decrease in revenues from sales through distributors of $1,199,212 in the current year period over the prior year period. The decrease in revenues from sales through distributors was primarily the result of lower case sales in the current year.

Current wording

Sales revenue for the three months ended September 30, 2025 and 2024 were $8,353,200 and $9,370,713, respectively, a decrease of $1,017,513, or 10.9%, in the current year period over the prior year period. This decrease was caused bya decrease in direct sales of $384,420, and a decrease in sales through distributors of $633,093 in the current year three-month period over the prior year period. The decrease in revenue from direct sales was primarily related to lower internet and telephone sales. Sales revenue for the nine months ended September 30, 2025 and 2024 were $26,090,546 and $28,506,151, respectively, a decrease of $2,415,605, or 8.5%, in the current year period over the prior year period. This decrease was caused bya decrease in revenues from direct sales of $583,300 and a decrease in revenues from sales through distributors of $1,832,305 in the current year period over the prior year period. The decrease in revenues from sales through distributors was primarily the result of lower case sales in the current year.

Previous wording

Cost of Sales for the three months ended June 30, 2025 and 2024 were $3,979,145 and $3,860,668, respectively, an increase of $118,477, or 3.1%, in the current period over the prior year period. This change was primarily the result of higher cost products sold in the current quarter compared to the same quarter last year. Cost of Sales for the six months ended June 30, 2025 and 2024 were $6,761,620 and $7,391,026, respectively, a decrease of $629,406 or 8.5%, in the current period over the prior year period. This change was primarily the result of lower case sales in the first six months of 2025 when compared to the same period in 2024.

Current wording

Cost of Sales for the three months ended September 30, 2025 and 2024 were $3,349,228 and $3,562,599, respectively, a decrease of $213,371, or 6.0%, in the current period over the prior year period. This change was primarily the result of lower sales in the current quarter compared to the same quarter last year. Cost of Sales for the nine months ended September 30, 2025 and 2024 were $10,110,848 and $10,953,625, respectively, a decrease of $842,777 or 7.7%, in the current period over the prior year period. This change was primarily the result of lower case sales in the first nine months of 2025 when compared to the same period in 2024.

Previous wording

Gross profit as a percentage of net sales for the three months ended June 30, 2025 and 2024 was 61.0% and 62.6%, respectively, a decrease of 1.6 percentage points in the current year period over the prior year period, mostly as a result of more discounts on products compared to the same quarter of 2024. Gross profit as a percentage of net sales for the six months ended June 30, 2025 and 2024 was 61.9% and 61.4%, respectively, an increase of 0.5 percentage points in the current year period over the prior year period. The increase was primarily the result of higher prices being charged for products in direct sales in the first six months of 2025 compared to the same period in the prior year.

Current wording

Gross profit as a percentage of net sales for the three months ended September 30, 2025 and 2024 was 59.9% and 62.0%, respectively, a decrease of 2.1 percentage points in the current year period over the prior year period, mostly as a result of higher percentage rebates paid to distributors compared to the same quarter of 2024. Gross profit as a percentage of net sales for the nine months ended September 30, 2025 and 2024 was 61.2% and 61.6%, respectively, a decrease of 0.4 percentage points in the current year period over the prior year period. The decrease was primarily the result of higher percentage rebates paid to distributors in the first nine months of 2025 compared to the same period in the prior year.

Previous wording

Selling, general and administrative expenses for the three months ended June 30, 2025 and 2024 was $5,818,454 and $5,934,784 respectively, a decrease of $116,330, or 2.0%, 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 $144,536, or 3.3% being partially offset by an increase in general and administrative expenses of $28,206, or 1.8% in the current quarter compared to the same quarter last year. Selling, general and administrative expense for the six months ended June 30, 2025 and 2024 was $11,447,540 and $11,810,083, respectively, a decrease of $362,543, or 3.1%, in the current year period over the prior year period. This decrease was primarily the result of a decrease in selling and marketing expenses of $204,608, or 2.4% combined with a decrease in general and administrative expenses of $157,935, or 4.6% in the current year period compared to the same period in 2024. General and administrative expenses decreased in the first six months of 2025 compared to the same period in the prior year primarily as a result of lower legal costs.

Current wording

Selling, general and administrative expenses for the three months ended September 30, 2025 and 2024 was $6,217,499 and $5,944,620 respectively, an increase of $272,879, or 4.6%, in the current quarter over the same quarter in the prior year. The increase was primarily the result of an increase in selling and marketing expenses of $117,582, or 2.7% and an increase in general and administrative expenses of $155,297, or 9.6% in the current quarter compared to the same quarter last year. Selling, general and administrative expense for the nine months ended September 30, 2025 and 2024 was $17,665,039 and $17,754,703, respectively, a decrease of $89,664, or 0.5%, in the current year period over the prior year period. This decrease was primarily the result of a decrease in selling and marketing expenses of $87,026, or 0.7% combined with a decrease in general and administrative expenses of $2,638, or 0.1% in the current year period compared to the same period in 2024. General and administrative expenses decreased in the first nine months of 2025 compared to the same period in the prior year primarily as a result of lower legal costs being partly offset by higher administration costs.

Previous wording

Interest expense for the three months ended June 30, 2025 and 2024 was $270,145 and $263,694, respectively, an increase of $6,451 or 2.4%, in the second quarter of 2025 over the same quarter in the prior year. Interest expense for the six months ended June 30, 2025 and 2024 was $568,366 and $493,381, respectively, an increase of $74,985 or 15.2%, in the current year period over the prior year period. The increase in interest expense for the second quarter and first six months of 2025 was primarily the result of increased long term debt compared to the second quarter and first six months of 2024.

Current wording

Interest expense for the three months ended September 30, 2025 and 2024 was $304,957 and $257,192, respectively, an increase of $47,765 or 18.6%, in the third quarter of 2025 over the same quarter in the prior year. Interest expense for the nine months ended September 30, 2025 and 2024 was $873,323 and $750,573, respectively, an increase of $122,750 or 16.4%, in the current year period over the prior year period. The increase in interest expense for the third quarter and first nine months of 2025 was primarily the result of increased long term debt in these periods compared to the third quarter and first nine months of 2024.

Previous wording

The income tax expense for the three months ended June 30, 2025 and 2024 was $37,774 and $79,775, respectively, a decrease of $42,001 or 52.6%, in the second quarter of 2025 over the same quarter in the prior year mostly as a result of the lower pre-tax income in the second quarter of 2025, compared to the same quarter in 2024. The Company’s estimated federal and state combined income tax rate was 28.9% and the three months ended June 30, 2025 and 2024. The income tax benefit for the six months ended June 30, 2025 and 2024 was $258,968 and $132,632, respectively, an increase of $126,336 or 95.3% in the current year period over the prior year period, mostly a result of a higher pre-tax loss in the first six months of 2025, compared to the same period in 2024. The Company’s estimated federal and state combined income tax rate was 28.9% for the six months ended June 30, 2025 and 2024.

Current wording

The income tax benefit for the three months ended September 30, 2025 and 2024 was $444,696 and $115,177, respectively, an increase of $329,519 or 286.1%, in the third quarter of 2025 over the same quarter in the prior year mostly as a result of the higher pre-tax loss in the third quarter of 2025, compared to the same quarter in 2024. The Company’s estimated federal and state combined income tax rate was 28.9% and the three months ended September 30, 2025 and 2024. The income tax benefit for the nine months ended September 30, 2025 and 2024 was $703,664 and $247,809, respectively, an increase of $455,855 or 184.0% in the current year period over the prior year period, mostly a result of a higher pre-tax loss in the first nine months of 2025, compared to the same period in 2024. The Company’s estimated federal and state combined income tax rate was 28.9% for the nine months ended September 30, 2025 and 2024.

Previous wording

Net income for the three months ended June 30, 2025 and 2024 was $92,795 and $195,978, respectively, a decrease of $103,183, or 52.7%, in the second quarter of 2025 over the same quarter in the prior year. Net loss for the six months ended June 30, 2025 and 2024 was $636,186 and $325,827, respectively, an increase of $310,359, or 95.3%, in the current year period over the prior year period. The decrease in net income for the second quarter and increase in net loss for the first half of 2025, compared to the comparable periods in 2024, was primarily the result of lower revenue in 2025.

Current wording

Net loss for the three months ended September 30, 2025 and 2024 was $1,092,450 and $282,945, respectively, an increase of $809,505, or 286.1%, in the third quarter of 2025 over the same quarter in the prior year. Net loss for the nine months ended September 30, 2025 and 2024 was $1,728,636 and $608,772, respectively, an increase of $1,119,864, or 184.0%, in the current year period over the prior year period. The increase in net loss for the third quarter and increase in net loss for the nine months of 2025, compared to the comparable periods in 2024, was primarily the result of lower revenue in 2025.

Previous wording

Net loss applicable to common shareholders for the three months ended June 30, 2025 and 2024 was $470,381 and $367,271, respectively, an increase of $103,110, or 28.1%, in the second quarter of 2025 over the same quarter in the prior year. Net loss applicable to common shareholders for the six months ended June 30, 2025 and 2024 was $1,762,539 and $1,452,253, respectively, an increase of $310,286, or 21.4%, in the current year period over the prior year period. The increase in loss applicable to common shareholders in the second quarter and the first six months of 2025, compared to the same period of 2024, was the result of a higher net loss in the current period.

Current wording

Net loss applicable to common shareholders for the three months ended September 30, 2025 and 2024 was $1,655,627 and $846,195 respectively, an increase of $809,432, or 95.7%, in the third quarter of 2025 over the same quarter in the prior year. Net loss applicable to common shareholders for the nine months ended September 30, 2025 and 2024 was $3,418,166 and $2,298,448, respectively, an increase of $1,119,718, or 48.7%, in the current year period over the prior year period. The increase in loss applicable to common shareholders in the third quarter and the first nine months of 2025, compared to the same period of 2024, was the result of a higher net loss in the current periods.

Previous wording

At June 30, 2025, the Company had a working capital balance of $27.3 million and a current working capital ratio of 4.07:1.

Current wording

At September 30, 2025, the Company had a working capital balance of $25.8 million and a current working capital ratio of 3.12:1.

Previous wording

At June 30, 2025, the Company had a cash balance of $350,643. At December 31, 2024, the Company had a cash balance of $320,883.

Current wording

At September 30, 2025, the Company had a cash balance of $372,566. At December 31, 2024, the Company had a cash balance of $320,883.

Previous wording

Total cash used for operating activities in the six months ended June 30, 2025 was $27,768. Cash used in operating activities for the six months ended June 30, 2025 was primarily associated with a net loss, as well as reduced grapes payable and accrued expenses, being partially offset by depreciation and amortization.

Current wording

Total cash used for operating activities in the nine months ended September 30, 2025 was $1,445,702. Cash used in operating activities for the nine months ended September 30, 2025 was primarily associated with a net loss, as well as reduced grapes payable and increased inventory, being partially offset by depreciation and amortization and a reduction in accounts receivable.

Previous wording

Total cash used in investing activities in the three months ended June 30, 2025 was $209,533. Cash used in investing activities for the six months ended June 30, 2025 consisted of cash used on equipment and vineyard development costs.

Current wording

Total cash used in investing activities in the three months ended September 30, 2025 was $312,548. Cash used in investing activities for the nine months ended September 30, 2025 consisted of cash used on equipment and vineyard development costs.

Previous wording

Total cash generated from financing activities in the six months ended June 30, 2025 was $267,061. Cash generated from financing activities for the six months ended June 30, 2025 primarily consisted of proceeds from long-term debt being partially offset by the repayment of long-term debt and the line of credit.

Current wording

Total cash generated from financing activities in the nine months ended September 30, 2025 was $1,809,933. Cash generated from financing activities for the nine months ended September 30, 2025 primarily consisted of proceeds from long-term debt and investor deposits for preferred stock partially offset by the repayment of long-term debt and 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 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 $446,882 at June 30, 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%.

Current wording

In December of 2005, the Company entered into a revolving line of credit agreement with Columbia 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 November 2022, the Company increased the borrowing line up to $5,000,000. In July 2025, the Company renewed the credit agreement until July 31, 2026. The Company had an outstanding line of credit balance of $1,164,558 at September 30, 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, 2024, the Company was in compliance with these financial covenants. In July 2025, the Company renewed the credit agreement until July 31, 2026.

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 June 30, 2025, the Company had a 15-year installment note payable of $940,314, due in quarterly payments of $42,534, associated with the purchase of property in the Dundee Hills AVA.

Current wording

As of September 30, 2025, the Company had a 15-year installment note payable of $913,103, due in quarterly payments of $42,534, associated with the purchase of property in the Dundee Hills AVA.

Previous wording

As of June 30, 2025, the Company had a total long-term debt balance of $16,584,054, including the portion due in the next year, owed to AgWest, exclusive of debt issuance costs of $168,333. 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.

Current wording

As of September 30, 2025, the Company had a total long-term debt balance of $15,428,093, including the portion due in the next year, owed to AgWest, exclusive of debt issuance costs of $163,586. 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.